Assignment 2: Writing Assignment
In this assignment, you will be assessed based on the following Course Outcomes:
MT217-1: Explain how financial markets operate and are essential for a healthy economy and economic growth.
GEL-1.03: Demonstrate college-level communication through the oral delivery of original materials in Standard English.
GEL-6.05: Adapt research skills to discover and sort relevant sources to complete tasks.
Making effective financial decisions is determined by how much information one can gather on different markets and their conditions. By using effective research skills, you will be able to identify how a market operates, and you will be able to forecast the sustainability and strength of the economy.
Read through the whole assignment to understand the topics that must be covered in the selection of your article.
There are three parts to this assignment. Parts 1 and 2 will be written in a Microsoft® Word® document. In Part 1, you will look for a scholarly article from the Purdue Global Library and write about the process you used in locating the article to help with the assignment. For Part 2, you will be assessed on writing a summary of the article focusing on the questions asked. For Part 3, you will do a PowerPoint® presentation with audio. It is important for you to be able to communicate with supervisors or management the details of your research. Using PowerPoint is one way to communicate your information and to show details of the research.
Part 1: Locate a High-Quality Library Article
You will need to locate one or more scholarly articles from the Purdue Global Library that explain how financial markets operate and are essential for a healthy economy and economic growth. The article(s) should provide you with information to answer Part 2 of your assignment. You will write about the process you went through to locate your article(s), thoroughly covering the topics below.
You must follow the following criteria for your research:
· Explain how your search terms were refined.
· Identify your choice of databases (for example: EBSCO or ProQuest ABI/Inform).
· Identify the range of dates used.
· Identify the experts.
· Identify how you sorted the relevant topics.
Locating scholarly articles:
Scholarly articles must be current and of high quality. These include peer-reviewed academic articles, articles published in journals, and other library resources found in the Purdue Global Library.
How to access the ABI/Inform database, selecting peer-reviewed journal articles:
1. Locate the Library link from Academic Tools.
2. Scroll midway down the page and locate “ProQuest ABI/Inform Collection.”
3. Make sure “Full text” and “Peer Reviewed” are checked.
4. Enter your keyword(s) in the search area and select the search button.
5. Under Source Type, select Scholarly Journals.
In Course Resources under Course Documents, you will find an interactive tutorial on “How to Access the ABI/Inform Database” to learn more on how to access and search using the database along with additional resources.
Part 2: Research Financial Markets
Write a summary of the article(s), answering the following questions:
1. Why are financial markets essential for a healthy economy and economic growth?
2. What are financial institutions?
3. Describe each and give an example of who may use them:
a. Investment banks
b. Commercial banks
c. Financial services corporations
d. Pension funds
e. Mutual funds
Note: You may use your textbook as an additional resource; however, the majority of your content must come from your article(s).
Part 3: Research on Markets: PowerPoint Presentation With Audio
It is important to be able to communicate and share with supervisors or management the information received to help determine informed financial decisions. An effective tool to inform and communicate this information is a PowerPoint presentation. Please see the criteria required in the Components section below for the oral delivery of this presentation.
Create your oral presentation by creating a digital recording; some options to record are Screencastify, a
narrated PowerPoint
, or a direct computer recording (
PC
or
Mac
).
You will create a PowerPoint presentation with audio covering the following topics:
1. Explain capital transfers.
2. What are the three primary ways in which capital is transferred between savers and borrowers? Describe each one.
3. What is a financial market?
4. Differentiate between the following markets:
a. Physical asset markets versus financial asset markets
b. Spot markets versus futures market
c. Money markets versus capital markets
d. Primary asset markets versus secondary markets
e. Public markets versus private markets
Components
· Part 1 and Part 2 must be submitted in one Microsoft Word document, in APA format, and must include a title page and reference page.
· Part 3 must be submitted as a Microsoft PowerPoint presentation and should be a minimum of 7 slides, in addition to the title slide and reference slide. Each slide is required to also include a script of what is being said in the audio at that point in the presentation. The slides should be easy to read; use Times New Roman in 18-point font.
· Oral delivery requirements: Your narration must use Standard English, proper word choice and oral expressiveness, and a highly developed and sustained viewpoint and purpose, and display exceptional content, organization, and style, while leading the audience to a dynamic and supported conclusion. Your communication must be highly ordered, logical, and unified. You must clearly enunciate, deliver your narration in an academic/professional tone, and minimize background noise.
· All Parts to the assignment must include correct grammar, punctuation, and spelling.
· Your paper must be written in Standard English and demonstrate exceptional content, organization, style, grammar, and mechanics.
· Your paper should provide a clearly established and sustained viewpoint and purpose.
· Your writing should be well ordered, logical, and unified, as well as original and insightful.
· A separate page at the end of your paper should contain a list of references. Your sources should follow proper current APA formatting. Review APA format found in the Writing Center, accessed through the Academic Success Center within the Academic Tools area of the course.
· Ensure you are properly paraphrasing from your sources. For a refresher on paraphrasing, view this short
video on paraphrasing
and explore the additional resources prior to starting your assignment. You can access tutorials, how-to videos, tutoring services, and more by visiting the Academic Success Center.
· You must use at least one scholarly, high-quality, and current Purdue Global Library source in addition to your course materials. Peer-reviewed academic articles, articles published in journals, textbooks, and library resources found in the “ProQuest ABI/Inform Collection” database from the Library are examples of high-quality resources.
· Review the rubric to ensure you incorporate all the criteria in your assignment.
Directions for Submitting Your Assignment
Compose your assignment as a Microsoft Word document and save it as UsernameMT217-AssignmentUnit# x (Example: TAllenMT217-AssignmentUnit1 x). Submit your file by selecting the Unit 1 Assignment Dropbox by the end of the unit.
BOOK PROOF – OMAROVA1 (DO NOT DELETE) 3/1/2020 10:42 PM
WHAT KIND OF FINANCE SHOULD
THERE BE?
SAULE T. OMAROVA*
I
INTRODUCTION
In recent decades, most developed economies around the world have been
increasingly exhibiting a particular structural trend popularly labeled
“financialization.”1 On the most general level, this capacious term refers to the
“increasing role of financial motives, financial markets, financial actors and
financial institutions in the operation of the domestic and international
economies.”2 Although academics working in various disciplines began exploring
the many facets of financialization well before the global financial crisis of 2008,
the crisis gave these efforts a new sense of urgency.3 The crisis vividly
demonstrated the far-reaching and devastating socioeconomic and political
consequences of allowing the financial system to grow increasingly large, risky,
and complex.
In the economic literature, the crisis has revived a long-standing debate on
the causal link between growth of the financial system, on the one hand, and
broader economic growth, on the other.4 As an influential paper by Arcand,
Berkes, and Panizza put it, the crisis “raised concerns that some countries may
Copyright © 2020 by Saule T. Omarova.
This Article is also available online at http://lcp.law.duke.edu/.
* Saule T. Omarova is the Beth and Marc Goldberg Professor of Law at Cornell University. I would like
to thank Anna Gelpern and Adam Levitin, the organizers of the Law and Macroeconomics Conference
at Georgetown Law on September 27–28, 2019. Special thanks to Heather Boushey for her detailed and
thoughtful comments on an earlier draft of this Article and to Bob Hockett, my frequent co-author and
co-conspirator.
1. For a succinct analysis of the current debate on, and the underlying dynamics of, financialization,
see Robert C. Hockett & Saule T. Omarova, The Finance Franchise, 102 CORNELL L. REV. 1143, 1211–
15 (2017) [hereinafter Finance Franchise].
2. GERALD A. EPSTEIN, FINANCIALIZATION AND THE WORLD ECONOMY 3 (2005).
3. See, e.g., id.; GRETA R. KRIPPNER, CAPITALIZING ON CRISIS 27–28 (2011); Ken-Hou Lin &
Donald Tomaskovic-Devey, Financialization and U.S. Income Inequality, 1970–2008, 118 AM. J. SOC.
1284 (2013); Thomas I. Palley, Financialization: What It Is and Why It Matters (The Levy Econ. Inst.,
Working Paper No. 525, Dec. 2007), http://papers.ssrn.com/sol3/papers.cfm/ ?abstract_id=1077923
[https://perma.cc/FTU2-EFVA]; Ing-Haw Cheng & Wei Xiong, The Financialization of Commodity
Markets (Nat’l Bureau of Econ. Reeach, Working Paper No. 19642, Oct. 2013), http://papers./
ssrn.com/sol3/papers.cfm?abstract_/ id=2350243 [https://perma.cc/2JJP-MUUZ].
4. For examples of the pre-crisis economic literature on this subject, see generally Robert G. King
& Ross Levine, Finance and Growth: Schumpeter Might Be Right, 108 Q.J. ECON. 717 (1993); Ross Levine
et al., Financial Intermediation and Growth: Causality and Causes, 46 J. MONETARY ECON. 31 (2000);
Raghuram G. Rajan & Luigi Zingales, Financial Dependence and Growth, 88 AM. ECON. REV. 559
(1998).
https://perma.cc/2JJP-MUUZ
http://papers
https://perma.cc/FTU2-EFVA
http://papers.ssrn.com/sol3/papers.cfm
http://lcp.law.duke.edu
https://perma.cc/2JJP-MUUZ
http://papers
https://perma.cc/FTU2-EFVA
http://papers.ssrn.com/sol3/papers.cfm
http://lcp.law.duke.edu
BOOK PROOF – OMAROVA1 (DO NOT DELETE) 3/1/2020 10:42 PM
196 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
have financial systems which are ‘too large’ compared to the size of the domestic
economy.”5 Provocatively titled Too Much Finance?, their paper shows that there
can be “too much” finance, insofar as excessive growth of total private-sector
credit has a negative effect on economic growth.6 The paper generated a great
deal of public interest and discussion,7 as well as subsequent research supporting
and elaborating its findings.8
This Article takes the economic literature on the relationship between the
size of the financial sector and economic growth as a starting point for broadening
and deepening the inquiry into the qualitative aspects of their relationship.
Adopting a deliberately law and policy oriented perspective, it shifts the
discussion beyond the economists’ question “Can there be too much finance?” to
the bigger and more complicated question, “What kind of finance should there
be?” This Article’s purpose is to engage in a high-level exploration of an effective
macro-systemic approach to financial markets and regulation, which explicitly
ties together the traditionally technical issues of financial stability and innovation
and the broader issues of sustainable and structurally-balanced socioeconomic
development.
The Article proceeds as follows. Part II provides a conceptual framing for the
discussion by shifting its focus from quantitative to qualitative aspects of the
complex interrelationship between finance and macro-economy. It accordingly
defines the core inquiry not in terms of measuring the size of the financial sector
vis-à-vis total economic output, but in terms of unpacking the complex
interdependency between the internal dynamics of finance and the levels of
socioeconomic development enabled by it. Applying this macro-systemic
approach, Part III examines the popular but under-theorized concept of financial
innovation from the perspective of its potential impact on productive economic
enterprise. Tracing the flow of causality from macro-economy back to finance,
Part IV then explores the potential impact of a well-designed strategy of
economic development on the long-term stability and resilience of the financial
system.
5. Jean-Louis Arcand, Enrico Berkes & Ugo Panizza, Too Much Finance? 4 (Int’l Monetary Fund,
Working Paper WP/12/161, June 2012), https://www.imf.org/external/pubs/ft/wp/2012/wp12161
[https://perma.cc/PH6Q-GCQM].
6. Specifically, their paper finds that “finance starts having a negative effect on output growth when
credit to the private sector reaches 100% of GDP.” Id. at 1.
7. See, e.g., Joe Pinsker, Does Finance Do Any Good For Society? THE ATLANTIC (Feb. 5, 2015),
https://www.theatlantic.com/business/archive/2015/02/does-finance-benefit-society/385176/ [https://
perma.cc/934U-L86J]; Martin Wolf, Why Finance Is Too Much of a Good Thing, FT. COM (May 26, 2015),
https://www.ft.com/content/64c2f03a-03a0-11e5-a70f-00144feabdc0 [https://perma.cc/9KQX-C3LY].
8. See, e.g., Ratna Sahay et al., Rethinking Financial Deepening: Stability and Growth in Emerging
Markets, (Int’l Monetary Fund Staff Discussion Note SDN/15/08, May 2015), https://www.imf.org/
external/pubs/ft/sdn/2015/sdn1508 [https://perma.cc/42NA-F3Y4]; Luigi Zingales, Does Finance
Benefit Society? (Nat’l Bureau of Econ. Research, Working Paper 20894, Jan. 2015), https://www.nber/
.org/papers/w20894 [https://perma.cc/YR4S-SDTD].
https://perma.cc/YR4S-SDTD
https://www.nber
https://perma.cc/42NA-F3Y4
https://www.imf.org
https://perma.cc/9KQX-C3LY
https://www.ft.com/content/64c2f03a-03a0-11e5-a70f-00144feabdc0
https://www.theatlantic.com/business/archive/2015/02/does-finance-benefit-society/385176
https://perma.cc/PH6Q-GCQM
https://www.imf.org/external/pubs/ft/wp/2012/wp12161
https://perma.cc/YR4S-SDTD
https://www.nber
https://perma.cc/42NA-F3Y4
https://www.imf.org
https://perma.cc/9KQX-C3LY
https://www.ft.com/content/64c2f03a-03a0-11e5-a70f-00144feabdc0
https://www.theatlantic.com/business/archive/2015/02/does-finance-benefit-society/385176
https://perma.cc/PH6Q-GCQM
https://www.imf.org/external/pubs/ft/wp/2012/wp12161
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No.1 2020] WHAT KIND OF FINANCE? 197
II
FINANCE AND THE ECONOMY: A MACRO-SYSTEMIC PERSPECTIVE
A. Asking the Right Question: From “How Much?” to “What Kind?”
Answering the question in the title of this Article requires a conceptual
framework: a coherent narrative of what the financial system is and how it
functions. The currently dominant narrative defines the essential function and
dynamics of the financial system in terms of “financial intermediation.” In this
orthodox picture, the financial system enables the flow of scarce funds from one
group of private actors (“savers” or “surplus units”) to another group of private
and public actors (“users” or “deficit units”), with the risk-mitigating assistance
of professional “intermediaries.”9 Government instrumentalities are relegated to
performing “mainly secondary functions, regulating and otherwise supporting
the operation of the essentially private financial marketplace from the outside.”10
Its ubiquity notwithstanding, this financial intermediation orthodoxy
provides only a partial—and unavoidably distorted—view of what actually
happens in the financial system. In fact, the modern financial system is more
accurately described as a public-private franchise arrangement, in which private
financial institutions—“franchisees”—are licensed to manage the distribution of
the sovereign public’s—the “franchisor’s”—full faith and credit.11 The
fundamental purpose of this franchise arrangement is to supply the macro-
economy with sufficient credit to support productive enterprise. That involves
both “(1) maintaining appropriate aggregates of credit, and (2) allocating that
credit—in each case, to ensure full utilization of the economy’s productive
capacity.”12 Because of its superior ability to take a macro-level view, the
sovereign public, acting primarily through the central bank, performs the task of
modulating the credit supply. The task of allocating capital to specific uses,
however, is reserved for private actors, with their ostensibly superior ability to
gather and process vital market information at the micro level.13
From this perspective, “financialization” emerges as a dysfunctional mode of
interaction between the financial system and the real (that is, non-financial)
economy, in which an ever-greater proportion of capital flows is continuously re-
absorbed by the former rather than flowing to the latter. Causally, it reflects both
9. For textbook versions of this narrative, see ZVI BODIE & ROBERT C. MERTON, FINANCE 22–
23 (2000); BARBARA CASU ET AL., INTRODUCTION TO BANKING 18 (2006); RICHARD SCOTT CARNELL
ET AL., THE LAW OF FINANCIAL INSTITUTIONS 37 (5th ed. 2013); STEPHEN G. CECHETTI & KERMIT
SCHOENHOLTZ, MONEY, BANKING, AND FINANCIAL MARKETS 39 (3d ed. 2008); STUART I.
GREENBAUM & ANJAN V. THAKOR, CONTEMPORARY FINANCIAL INTERMEDIATION 55–58 (2007);
KENT MATHEWS & JOHN THOMPSON, THE ECONOMICS OF BANKING 33 (2005).
10. Finance Franchise, supra note 1, at 1145.
11. For a comprehensive theoretical account of the structure and operation of the U.S. financial
system as a public-private franchise arrangement, see id.
12. Id. at 1213.
13. Id. For more on the modulation task, see generally Robert C. Hockett, A Fixer-Upper for
Finance, 87 WASH. U. L. REV. 1213 (2010).
https://level.13
https://credit.11
https://level.13
https://credit.11
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198 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
(1) the failure of the central bank to modulate credit aggregates in a manner that
prevents excess private credit-generation; and (2) the systematic misallocation of
credit by private financial institutions diverting it to uses other than investment
in productive enterprise.
These interrelated and mutually-reinforcing dysfunctionalities provide a
conceptual explanation for why there can be “too much finance.” Most obviously,
it would happen in situations where the relevant monetary authorities are unable
or unwilling to impose effective constraints on the growth of private credit
beyond what is needed to ensure full utilization of the economy’s productive
capacity. This over-generation of credit is a major cause of financial instability
and, ultimately, slower economic growth. The financial crisis of 2008, followed by
an economic recession and political turmoil, is a vivid example of these dynamics.
The intimate interconnection between credit modulation and credit
allocation, however, renders this quantity-focused explanation inherently
incomplete. In practice, systemically destabilizing asset price booms stem directly
from—and reinforce—socially suboptimal allocative decisions by private
financial market participants. It is well known, for example, that one of the
principal causes of the 2008 financial crisis was the unrestrained flow of
speculative investment into the U.S. housing sector. By allowing this systematic
misallocation of credit and the concomitant accumulation of hidden leverage to
continue unabated until the market could no longer sustain it, the Federal
Reserve effectively abandoned its modulatory function and ceded control over
credit supply to private actors.14 The inevitable market collapse in the fall of 2008,
in effect, exposed these dysfunctional dynamics on both sides of the public-
private division of roles in today’s financial system.
Yet, in the post-2008 world, both the actual regulatory reforms in the financial
sector and the academic debate on financial stability and crisis prevention
continue to focus almost entirely on one side of this dual-track problem: how to
modulate credit aggregates more effectively. Thus, the bulk of post-crisis
regulatory reforms aim principally to reduce the danger of over-leveraging—and
thus excessive risk-taking—on the part of individual banks and other financial
institutions.15 In this sense, the evolving arsenal of post-crisis solutions to the
financial system’s dysfunctions consists mainly of traditional microprudential
regulatory tools—such as capital adequacy ratios, liquidity requirements, and
consolidated oversight—strengthened and repurposed as post-crisis tools of
macroprudential regulation and supervision.16
14. See Finance Franchise, supra note 1, at 1214.
15. For an overview of these reforms, see Saule T. Omarova, The “Too Big To Fail” Problem, 103
MINN. L. REV. 2495, 2504–10 (2019).
16. For background information on macroprudential regulation, see generally INT’L MONETARY
FUND, MACROPRUDENTIAL POLICY: AN ORGANIZING FRAMEWORK (2011), https://www.imf.org/ext/
ernal/np/pp/eng/2011/031411 [https://perma.cc/Q5LG-8TQF]; Robert C. Hockett, The
Macroprudential Turn: From Institutional ‘Safety and Soundness’ to Systematic ‘Financial Stability’ in
Financial Supervision, 9 VA. L. & BUS. REV. 201 (2015); Gabriele Galati & Richhild Moessner,
https://perma.cc/Q5LG-8TQF
https://www.imf.org/ext
https://supervision.16
https://institutions.15
https://actors.14
https://perma.cc/Q5LG-8TQF
https://www.imf.org/ext
https://supervision.16
https://institutions.15
https://actors.14
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No.1 2020] WHAT KIND OF FINANCE? 199
The newly-intensified academic debate on the proper scope and tools of
monetary policy represents another aspect of the post-crisis push to improve
central banks’ ability to modulate credit on an economy-wide basis. To great
extent, the current resurgence of interest in this notoriously technical subject is a
reaction to the dramatic growth of central banks’ balance sheets as a result of
their crisis containment and rescue actions, as well as the continuing expansion
of their de facto mandates in the post-crisis era. The post-crisis attempts to
stimulate economic growth by keeping interest rates at or even below zero
further escalated and politicized these discussions.17
A closely related strand in the ongoing reform debate focuses on the proper
methods of backstopping the financial system in the event central banks’ and
other regulators’ modulation efforts prove ineffective. These include, for
example, the post-crisis creation of special “orderly liquidation” regimes and
creditor “bail-in” requirements for systemically important financial institutions
(SIFIs). However, the key method of “panic-proofing” the system seems to
require some form of extended guaranteed access to central banks’ liquidity
backup and other infrastructural support facilities.18
In sum, preventing excess accumulations of leverage in the financial system—
or the modulation task—remains the primary driver of the post-crisis process of
debating, devising, and implementing regulatory reforms. By contrast, to date,
there has been no meaningful debate on improving the system-wide allocation of
financial resources to productive enterprise.19 In most, if not all, post-crisis
discussions on financial regulation, the underlying presumption remains that
private market actors are inherently better at assessing financial risks and
spotting potentially beneficial investment opportunities “on the ground.”
Accordingly, the existing dysfunctions in the process of system-wide credit
allocation are framed predominantly in terms of specific private incentive
misalignments or more general political- economy frictions.20
This one-sided approach to making the financial system “safer” invisibly and
inevitably undermines the efficacy of the post-crisis regulatory reform process.
Despite the ongoing efforts to strengthen macroprudential oversight of financial
Macroprudential Policy⎯A Literature Review (Bank for Int’l Settlements, Working Paper No. 337, 2011),
www.bis.org/publ/work337 [https://perma.cc/VGG2-W4AR].
17. See, e.g., Bill Dudley, Fed Shouldn’t Enable Donald Trump, BLOOMBERG (Aug. 27, 2019),
https://www.bloomberg.com/opinion/articles/2019-08-27/the-fed-shouldn-t-enable-donald-
trump?srnd=opinion [https://perma.cc/DK5G-4YW7].
18. See, e.g., PERRY MEHRLING, THE NEW LOMBARD STREET: HOW THE FED BECAME THE
DEALER OF LAST RESORT (2010); HAL S. SCOTT, CONNECTEDNESS AND CONTAGION (2016); Kathryn
Judge, The Guarantor of Last Resort, 97 TEX. L. REV. 707 (2019).
19. Thus, a recent strand in the corporate governance literature, advocating the so-called
“stakeholder” theory of a business corporation, could be viewed as dealing with issues of allocative
efficiency, but only indirectly and principally on a micro-level. See, e.g., THE CAMBRIDGE HANDBOOK
OF STAKEHOLDER THEORY (Jeffrey S. Harrison et al. ed., 2019) (providing a broad view of recent
scholarship in this area).
20. “Financial inclusion” and “access to credit” are perhaps the most representative themes in the
latter category.
https://perma.cc/DK5G-4YW7
https://www.bloomberg.com/opinion/articles/2019-08-27/the-fed-shouldn-t-enable-donald
https://perma.cc/VGG2-W4AR
www.bis.org/publ/work337
https://frictions.20
https://enterprise.19
https://facilities.18
https://discussions.17
https://perma.cc/DK5G-4YW7
https://www.bloomberg.com/opinion/articles/2019-08-27/the-fed-shouldn-t-enable-donald
https://perma.cc/VGG2-W4AR
www.bis.org/publ/work337
https://frictions.20
https://enterprise.19
https://facilities.18
https://discussions.17
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200 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
institutions and markets, persistent economy-wide misallocation of credit
continues to play a critical role in destabilizing the financial system. In fact, the
failure to recognize and remedy the deep-seated problems in the dynamics of
credit allocation keeps resurfacing in various contexts, feeding the anti-
regulatory rhetoric of “unanticipated consequences” of post-crisis reforms. For
example, one of the most frequently and successfully used deregulatory
arguments of the banking industry is that post-crisis macroprudential rules
constrain banks’ ability to extend credit to businesses, which directly impedes
economic growth. While obviously self-serving, this argument nevertheless hits
at a very real and systematic set of problems in the process of credit allocation.21
The recent rollback or significant softening of various provisions of the Dodd-
Frank Act—including, in particular, the evolving regime of enhanced prudential
oversight of large bank holding companies and nonbank SIFIs—shows how
successfully this rhetoric is used in financial industry lobbying efforts.22
Instead of reversing the partial regulatory reforms already under way,
however, we should redirect our attention to this missing half of the solution to
the financial system’s fundamental problems. It means we need to start looking
at the interplay of financial stability and economic growth through the lens of
system-level capital allocation. In other words, we have to shift the policy debate
from the familiar question “Is there too much finance?” to the more meaningful
query: “What kind of finance should there be?”
B. Focusing the Inquiry: From “Growth” to “Development”
In order to focus this qualitative inquiry into the nature of finance, it is
important to define the other variable in the equation. The economic literature,
discussed above, examines the causal link between the size of the financial system
and economic growth, measured generally in quantitative terms. Purely
quantitative growth measures such as GDP, however, do not capture many
qualitative aspects of society’s material well-being, nor do they reflect key
structural factors that shape the relevant economy’s operation and determine its
ability to sustain growth in the long run.23 These factors include, among other
things, persistent sectoral imbalances, geographic concentrations of economic
activity, patterns of employment and related income levels, environmental
sustainability, population mobility, and access to and quality of public goods.
Financial resources may be allocated in ways that maintain, amplify, or
counteract these structural trends—and thus ultimately determine not only the
21. See Omarova, supra note 15, at 2519–21.
22. See Economic Growth, Regulatory Relief, and Consumer Protection Act, Pub. L. 115-174, 132
Stat. 1296 (May 24, 2018), https://www.congress.gov/115/plaws/publ174/PLAW-115publ174
[https://perma.cc/597W-SWVE] (repealing or significantly weakening various provisions of the Dodd-
Frank Act).
23. See, e.g., Mijin Cha, What’s Missing From GDP?, DEMOS.ORG (Jan. 2013), https://www.demos./
org/sites/default/files/publications/GDP-Explainer [https://perma.cc/SB3G-S92Y]; Trouble With
GDP, THE ECONOMIST (Apr. 30, 2016), https://www.economist.com/briefing/2016/04/30/the-trouble-
with-gdp [https://perma.cc/S5FC-YDQQ].
https://perma.cc/S5FC-YDQQ
https://www.economist.com/briefing/2016/04/30/the-trouble
https://perma.cc/SB3G-S92Y
https://www.demos
https://DEMOS.ORG
https://perma.cc/597W-SWVE
https://www.congress.gov/115/plaws/publ174/PLAW-115publ174
https://efforts.22
https://allocation.21
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No.1 2020] WHAT KIND OF FINANCE? 201
quantity of wealth but also the pattern of wealth distribution in the polity. In that
sense, “getting finance right” is not merely a technocratic exercise: it involves
fundamental normative choices regarding the principal purposes and social
functions of finance.
It is, therefore, critical to focus the inquiry on the more expansive and multi-
layered concept of economic development, instead of the narrower notion of
growth. The difference, of course, is not merely semantic. Economic
development is not a static end-state but a continuous project. Development is a
conscious collective pursuit of qualitative—as opposed to purely quantitative—
growth and adaptation to new environments. Thus, any “developed” nation that
does not strive to develop risks losing its global competitive edge.24 In this sense,
economic development is not merely an aggregate outcome of the myriad of
micro-level transactions in private markets—it is an inherently political project.
Furthermore, this national developmental project is a fundamentally public-
private enterprise. Contrary to an orthodox presumption, micro-optimizing by
private actors does not automatically lead to optimal macro-benefits for the
public; delivering such benefits requires an active pursuit of a coherent strategy.
As the ultimate public, collective actor, the government is in the best position to
formulate such a national developmental strategy.25 Successful implementation
of this strategy, moreover, would require the government to utilize, deliberately
and systematically, the tools of modern finance. Finance is the principal link
connecting the state and the market: it is both the lifeblood of the economy and
“the nerves of the state.”26 It is a universal productive input that can be moved
and deployed for a multitude of purposes.27 All of this makes finance a
particularly potent lever of economic and political power. It also makes it critical
that public instrumentalities act directly within the financial markets, as
endogenous market participants, as opposed to purely exogenous market
regulators.28
Of course, shifting the focus from quantitative growth metrics to qualitative
developmental factors immediately complicates the inquiry. What does, and what
does not, constitute a desirable developmental outcome in any particular context
is bound to be a contestable issue.29 This Article, however, neither advances a
comprehensive political agenda nor advocates any specific economic program.
The purpose here is to outline some of the core principles and constitutive
elements of an effective macro-systemic approach to financial markets and
24. Robert C. Hockett & Saule T. Omarova, Public Actors in Private Markets: Toward a
Developmental Finance State, 93 WASH. U. L. REV. 103, 115 (2015) [hereinafter Public Actors].
25. Id.
26. Meredith Woo-Cumings, Introduction: Chalmers Johnson and the Politics of Nationalism and
Development, in DEVELOPMENTAL STATE 10 (1999) (quoting Jean Bodin).
27. See JOHN ZYSMAN, GOVERNMENTS, MARKETS, AND GROWTH: FINANCIAL SYSTEMS AND THE
POLITICS OF INDUSTRIAL CHANGE 76–77 (1983) (discussing the “universality” of finance as a policy
tool).
28. For an in-depth argument, see generally Public Actors, supra note 24.
29. See generally sources cited supra notes 24–27.
https://issue.29
https://regulators.28
https://purposes.27
https://strategy.25
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202 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
regulation. It is inherently a meta-level exploration, an intellectual exercise in
framing—or reframing—the research agenda in the evolving area of law and
finance.
Three general points are worth emphasizing in this connection.
First, in order to uncover and examine the deeply complex structural and
relational linkages and interdependencies between the financial system and the
non-financial economy, it is crucial to shift the focus from the predominantly
micro-level, transactional phenomena to the more explicitly macro-level,
structural ones. Today, much of the academic and policy law-and-finance
discourse is methodologically and substantively grounded in, and revolves
around, fundamentally micro-level, transactional dynamics.
Even in the post-crisis era, the core tools of financial regulation—capital
adequacy rules, stress testing, resolution plans, limits on bank portfolio
concentrations, and even activity restrictions—continue to target individual
financial firms’ solvency and liquidity. In this sense, as noted above, the post-
crisis emphasis on macro-prudential regulation is an incremental adjustment of
the familiar micro-prudential regulatory regime.30 An implicit—and erroneous—
assumption behind this approach is that “getting it right” on the micro-
transactional level will more or less automatically produce the right macro-
systemic outcome. To correct this bias, regulators and academics must recognize
and target the macro-level structural factors in their own right, directly and
explicitly.
Second, focusing the inquiry on the role of finance as the engine of
structurally-balanced and socially-inclusive economic development both
necessitates and enables a fundamental shift in the underlying philosophy of
financial regulation. The currently dominant model of financial regulation is
deeply technocratic in character.31 Its preferred methods of operation are based
on identifying and isolating discrete micro-level phenomena and decision points,
and using minimally-invasive technical tools to address specific market
inefficiencies. It systematically prioritizes regulatory solutions based on, and
explicitly justified by reference to, economic theory or empirical data. In this
context, “good” financial regulation reflects judgments that are not only carefully
limited but also facially objective, politically neutral, and technically expertized.
Even decisions with obvious distributional effects are typically framed in the
sterile language of economic efficiency or necessity.32 This implicit bias against
normativity renders financial regulators inherently uneasy with any potential
choices that involve overtly political determinations or require taking aggressive
30. See supra notes 15–16 and accompanying text.
31. For a discussion of the currently dominant technocratic model of financial regulation and its key
implications, see generally Saule T. Omarova, Technology v. Technocracy: Fintech as a Regulatory
Challenge, 6 J. FIN. REG. (forthcoming 2020).
32. Formal cost-benefit rule analysis required or expected from regulatory agencies reflects and
reinforces these dynamics. See generally John C. Coates, IV, Cost-Benefit Analysis of Financial
Regulation: Case Studies and Implications, 124 YALE L.J. 882 (2015).
https://necessity.32
https://character.31
https://regime.30
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normative stands. By contrast, re-asserting the fundamental significance of
capital allocation, both as a matter of financial stability and as a matter of
economic development, places normativity at the heart of the regulatory process.
This shift away from the technocratic model of financial regulation, with its built-
in micro-transactional bias, creates the vital intellectual space for the emergence
of a more normatively embedded and socially beneficial financial system.
Finally, focusing the academic and policy debate on the dynamic interaction
between finance and economic development, defined in deliberately qualitative
and normatively-grounded terms, brings to the forefront the central role of law—
a macro-level phenomenon—in shaping financial and economic outcomes. It is
difficult to overestimate the potential significance of this shift. Standard
economic concepts and narratives heavily dominate today’s discourse on finance
and its regulation. By recasting legal problems and solutions as mere subsets of
micro-economic ones, the mainstream law and economics scholarship
presumptively subordinates law to economics—thus effectively denying law its
place as a functionally and normatively distinct social sphere.
Recognizing and prioritizing the macro-systemic, structural determinants of
financial and economic development on the regulatory agenda flips this artificial
hierarchy. It highlights the role of law as the principal channel for transmitting
key political and normative judgments, derived through the process of
democratic deliberation, into economic policy. Once we stop relying on an
erroneous assumption that targeting micro-economic transactions is the best
method of achieving macro-economic objectives, it is easy to see why law, in
many ways, comes before economics in both (1) defining these objectives, and
(2) channeling society’s financial resources toward the achievement of these
objectives.
Accordingly, it is now possible to rephrase the title question of this Article in
more explicitly functional terms: “How can we ensure that the financial system
consistently allocates capital to productive non-financial enterprises, for
purposes of facilitating structurally-balanced and socially-inclusive economic
development?”
This core question should drive not only policy-making but also the academic
research agenda in law and finance. Although framing the problem in this way is
bound to generate a wide range of potentially competing answers and policy
prescriptions, it nevertheless establishes an important normative baseline for the
debate. It unifies the debate around a simple but powerful intuition that a
functionally healthy financial system and the healthy functioning of the real
economy are two sides of the same coin.
The rest of this Article unpacks and concretizes this deep interdependency
between finance and macro-economy by focusing on two of its most conspicuous
manifestations. Part III examines the basic dynamics of financial innovation as a
macro-systemic, as opposed to micro-transactional, phenomenon. Then, Part
I
V
explores the untapped potential of a more proactive developmental strategy to
double as a critically important tool for safeguarding financial stability.
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204 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
III
FROM FINANCE TO MACRO-ECONOMY: FINANCIAL INNOVATION AND
PRODUCTIVE ENTERPRISE
A. The Unbearable Lightness of Financial Innovation
Financial innovation is a familiar—and in many ways, overused—term in both
academic and popular discussions of finance. A great deal of what is going on in
today’s financial markets is routinely explained and celebrated in terms of
innovative approaches to financial services, processes, and interactions. In a
sense, finance is the epitome of Western capitalist culture’s “ongoing romantic
relationship with innovation.”33 Thanks to continuous innovation, the story goes,
financial markets are growing deeper, faster, more liquid, and more
accommodating of various market participants’ increasingly granular needs and
preferences. Yet, private innovation can (and often does) act as a double-edged
sword that destroys economic value instead of creating it—and undermines the
financial system’s resilience instead of strengthening it.
Complex financial derivatives and structured products are vivid examples of
both the good and bad sides of financial innovation.34 On the one hand, these
sophisticated financial instruments enable far more effective pricing and hedging
of risk. On the other hand, they allow market participants to incur too much
leverage and take on too much risk, often without understanding the full extent
of their exposures. To make things even more complicated, both the socially-
destructive and socially-beneficial consequences of innovation in derivatives and
securitization markets flow ultimately from the same basic characteristics of these
products. What matters is the context, the structural shifts in the markets in which
these products are created and traded. This is one of the key lessons of the 2008
financial crisis.
Another complicating factor in assessing the impact of financial innovation
on the economy is that many so-called innovative financial products and services
are not actually novel. Instead of meeting any real market demand for new
products or services, these financial instruments and technologies simply
rearrange existing solutions for purposes of regulatory arbitrage, tax avoidance,
or private over-leveraging. This is what the former Chairman of the Federal
Reserve, Paul Volcker, meant when he famously remarked that the most
important financial innovation in the last twenty years was an ATM.35
In short, the phenomenon of financial innovation seems to defy bright-line
definitions and to confound policy judgment. One consistently ignored reason for
33. CRISTIE FORD, INNOVATION AND THE STATE: FINANCE, REGULATION, AND JUSTICE 51
(2017).
34. See generally id. at 27–31; ERIK GERDING, LAW, BUBBLES, AND FINANCIAL REGULATION
(2013).
35. Paul Volcker, The Only Thing Useful Banks Have Created in 20 Years is the ATM, N.Y. POST
(Dec. 13, 2009), https://nypost.com/2009/12/13/the-only-thing-useful-banks-have-invented-in-20-years-is-
the-atm/ [https://perma.cc/QU4T-4EJR].
https://perma.cc/QU4T-4EJR
https://nypost.com/2009/12/13/the-only-thing-useful-banks-have-invented-in-20-years-is
https://innovation.34
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this apparent lack of normative clarity is the fact that the mainstream debate on
financial innovation approaches innovation as primarily, if not entirely, a micro-
level, transactional phenomenon. The analysis is always rooted in the technical
features of individual innovations: how a particular new product is structured,
how it reduces users’ and counterparties’ transaction costs or renders specific
market interactions more efficient for the participants, and so forth. Even the
broader policy-oriented discussions of financial innovation—which gained steam
in the post-2008 era—are typically framed by reference to specific risk-related
consequences and attributes of individual innovative products or transaction
technologies.
As a result, there remains a significant gap in these discussions. After 2008, it
is safe to say that we all generally agree that financial innovation should not
undermine systemic stability and increase the likelihood of another major
financial crisis. We generally agree, therefore, that regulators should take
financial innovation very seriously and engage with this phenomenon in a far
more thoughtful and careful manner than they did before 2008.36
Past that point, however, things get fuzzy, both normatively and analytically.
We do not know exactly what does, and what does not, constitute proper
innovation in financial markets from a purely functional perspective. Was
Volcker’s quip about the ATM right on point? Or is Bitcoin to be celebrated as
the revolutionary breakthrough for all of humankind? Some of us are with Paul
Volcker, and others with Satoshi Nakamoto.37 We do not have a coherent
framework for deciding whether, or under what circumstances, any novel
financial product or technology is likely to be more socially beneficial than
harmful. Accordingly, we do not have a clear basis for developing a coherent set
of regulatory principles for engaging with—that is, understanding, evaluating,
and managing—financial innovation in the public interest.
In order to develop such a set of principles, it is essential that we move away
from the micro-level frame of reference, which emphasizes technical aspects of
individual innovations and obscures potentially difficult macro-level choices and
trade-offs these innovations necessitate. The first step in this intellectual
enterprise is to deconstruct the reigning micro-transactional narrative of financial
innovation.
This dominant notion of financial innovation is an integral part of the broader
narrative of finance as intermediation of scarce private capital, discussed above.38
That standard narrative uses primary markets as the archetypal setting in which
financial intermediation takes place. In this setting, the “savers” of funds—
presumably, real-economy actors who earned and accumulated surplus capital by
producing and selling various non-financial goods and services—are said to
extend loans or invest in the equity of the “users” of funds—presumably, real-
36. For an insightful post-crisis treatment of the regulatory engagement angle, see generally FORD,
supra note 33.
37. Satoshi Nakamoto is a pseudonym used by the original inventor, or inventors, of Bitcoin.
38. See supra note 10 and accompanying text.
https://above.38
https://Nakamoto.37
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206 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
economy entrepreneurs or households that need capital to generate or stimulate
production of additional non-financial goods and services. Financial
“intermediaries”—banks, securities brokers, or investment funds—are viewed as
mere middlemen whose sole task is to “transform” all or some of the key risk
attributes embedded in these transactions.39
The key assumption built into this standard narrative of finance—that the
typical user is seeking funds for some legitimate economic use and not for a
speculative financial reinvestment—has profound implications for how we view
financial innovation. It quietly supplies a rigid normative framing for the
discourse on innovation. In this framing, any new financial products or
transaction methods are presumptively good, because they facilitate greater or
better flow of financial capital to the most deserving projects in the real
economy.40
In practice, however, by far the largest proportion of financial exchanges
takes place in secondary markets for trading previously issued financial
instruments. In today’s world, secondary markets in financial assets are far
bigger, more complex, and more systemically important than primary markets.41
And, in the vast majority of real-life financial transactions, market players
borrow and issue various financial claims in order to invest in other financial
claims. In short, unlike one-off primary-market issuances by companies seeking
to fund investments in operating assets, secondary-market transactions are
designed to fund investments in financial assets.42
It is not surprising, therefore, that today’s secondary markets in financial
instruments are the principal sites of both relentless transactional “innovation”
and chronic over-generation of systemic risk. This is both a structural and a
functional imbalance. In theory, secondary markets’ main function is to support
and facilitate primary capital markets by providing liquidity, price discovery, and
risk-shifting opportunities for primary market participants. In reality, secondary
market trading often determines the terms and volumes of primary issuances of
financial claims. A clear example of these inverted dynamics is the explosive
growth of risky subprime mortgage lending in the early 2000s, in response mainly
to the rising demand for such loans as the raw material for mortgage-backed
securities and other sophisticated structured products.43
39. This is what is typically described as maturity, liquidity, or credit risk transformation: a set of
functions typically performed by banks, the quintessential “intermediaries,” and replicated in part by
non-bank financial institutions.
40. This is, of course, a simplification of the standard intermediation narrative, meant to expose its
underlying logic.
41. Saule T. Omarova, New Tech v. New Deal: Fintech as a Systemic Phenomenon, 36 YALE J. REG.
735, 758 (2019) [hereinafter New Tech v. New Deal]; see, e.g., WORLD FED’N OF EXCH,, 2017 FULL YEAR
MARKET HIGHLIGHTS (2018), https://www.world-exchanges.org/storage/app/media/research/Market%
20high/lights/WFE%20FY%202017%20Market%20Highlights [https://perma.cc/5RML-NWEK]
(providing a statistical breakdown of annual trading volumes on global exchanges).
42. New Tech v. New Deal, supra note 41, at 757.
43. Id. at 758. See generally GARY B. GORTON, SLAPPED BY THE INVISIBLE HAND: THE PANIC OF
2007 (2008).
https://perma.cc/5RML-NWEK
https://www.world-exchanges.org/storage/app/media/research/Market
https://products.43
https://assets.42
https://markets.41
https://economy.40
https://transactions.39
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This example also underscores the distorting effect of the orthodox narrative
on our understanding of, and policy stance toward, financial innovation as a
macro-level phenomenon. To overcome the hardy mix of incapacitating
confusion and awe that financial innovation seems to instill in us, we need to
redirect our attention from an idealized picture of capital-raising in primary
markets to the actual dynamics of financial asset-trading in secondary markets—
and to examine these dynamics from the perspective of the financial system and
the broader economy.
B. Financial Innovation Through the Macro-Systemic Lens
The starting point for analyzing financial innovation as a systemic
phenomenon is the fact that most of today’s “innovative” financial products are
produced for reasons that have little to do with capital formation (that is,
canonical capital allocation) in primary markets.44 They are bundles of financial
risks and returns manufactured by financial institutions for sale to other market
participants, such as portfolio investors or managers. From a micro-level
transactional perspective, this is typically viewed as a valuable financial service.
The standard economic vocabulary conveys this normative assessment in terms
of “providing liquidity,” “completing markets,” “discovering prices,” “enabling
diversification and risk management,” or “creating portfolio-enhancement
opportunities”—the familiar language of financial innovation.
From a macro-level systemic perspective, this continuous manufacturing of
financial products results in the continuous injection of privately-created
financial risk into the system. What is missing, however, is the vocabulary for
articulating this systemic perspective as a valid counterpoint to the dominant
transactional view of financial innovation. Developing such a vocabulary requires
a new narrative that explains how, and through which mechanisms, secondary
markets in financial instruments are able to grow and proliferate.
At the most abstract level, the growth of financial markets is best understood
by reference to two interrelated practices: (1) synthesizing financial assets, and
(2) scaling up transactional activity. In other words, both the scope and the scale
of financial markets increase when more products can be purchased and sold, and
more trades can be made in these markets.
The practice of synthesizing financial assets typically involves creating new
types of financial claims out of the existing ones. Common examples include
creating tradable stock indices, writing options on gold, securitizing loans, and
even setting up mutual funds. Here, a relatively small range of traditional
financial assets—common stock, corporate bonds, loans, or commodities—serve
as the base on which a potentially unlimited number of new types of financial
claims are created. Importantly, the standard economic logic of supply and
demand does not constrain this process. An increasing supply of tradable assets
44. This discussion adapts and condenses the argument originally formulated in New Tech v. New
Deal, supra note 41, at 756–70.
https://markets.44
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208 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
generates an increasing demand for them, which in turn incentivizes more asset-
synthesizing. Leverage plays the critical role in enabling this iterative supply-
demand pattern.45
The related practice of “scaling up” trading activities further enables the
continuous growth of financial markets. While there are numerous means of
scaling up secondary trading, the development of new transactional technologies
and market infrastructures plays a particularly important role in this process.
Thus, the emergence of sufficiently capacious trading platforms, clearinghouses,
and payment networks enables a far greater number of counterparties to
consummate a far greater number of trades at far greater speeds than they
otherwise could. Standardizing the terms of specific types of financial instrument
is another potent tool for increasing the volume and velocity of trading in these
instruments. Perhaps the best-known example of these dynamics is the success of
the International Swaps and Derivatives Association (ISDA) in developing
industry-wide documentation standards for over-the-counter derivatives, which
effectively unlocked the explosive growth of the global derivatives market.46
Working in tandem, these fundamentally systemic practices of synthesizing
financial assets and scaling up financial transactions profoundly affect the
structure and operation of financial markets. As I have previously observed,
creation of new financial products often leads to the emergence of new specialized
markets. New actors may enter these newly created markets, while the incumbent
institutions may assume new roles in them. New patterns of market concentration and
systemic interdependencies emerge. Via the multitude of specific transactional channels
through which the twin imperatives of synthesizing and scaling up operate, the financial
market grows not only bigger and faster but also more structurally complex.47
So, how exactly do market participants synthesize financial assets and scale
up trading activity? In other words, how do private actors “innovate?”
There are four principal mechanisms that enable financial markets’
continuous reproduction and expansion: what I call “pooling,” “layering,”
“acceleration,” and “compression.” These loosely delineated categories refer not
to any particular type of product or transaction but rather to system-level
operational principles, or embedded system functionalities supporting a wide
variety of individual applications.
45. In that sense, today’s high finance operates very much like a Starbucks coffee shop. The
Starbucks business model is based on the constant invention and marketing of new, intentionally and
carefully differentiated, products that create their own demand. Just like the Starbucks designer
beverages, most complex financial products are manufactured from the same basic ingredients—with
leverage functioning as caffeine that keeps everyone coming back for more. See id. at 761 n.106.
46. See, e.g., Frank Partnoy, Second-Order Benefits from Standards, 48 B.C. L. REV. 169 (2007)
(discussing the role of standardized ISDA documentation in the development of global derivatives
markets); Steven L. Schwarcz & Ori Sharon, The Bankruptcy-Law Safe Harbor for Derivatives: A Path-
Dependence Analysis, 71 WASH. & LEE L. REV. 1715 (2014) (detailing ISDA’s successful campaign to
secure preferential treatment of derivatives under the U.S. Bankruptcy Code, as well as under many
other jurisdictions’ insolvency laws).
47. New Tech v. New Deal, supra note 41, at 761–62.
https://complex.47
https://market.46
https://pattern.45
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Pooling describes the well-established market practice of combining multiple
financial assets that share certain key characteristics, in order to create “a new
set of financial claims backed by, or determined by reference to, the resulting
asset pool.”48 This is perhaps the most ubiquitous technique in finance. Mutual
funds and other collective investment vehicles are products of explicit pooling of
other financial instruments—corporate stocks, bonds, and other claims issued in
primary markets—in a portfolio used to back the issuance of fund shares to
investors. Shares issued by individual funds, in turn, can be pooled in a fund-of-
funds (FoF) portfolio backing the issuance of the FoF shares.49 Benchmarking
and creation of indices constitute similarly ubiquitous, albeit less directly visible,
system-level methods of pooling securities issued in primary markets for
purposes of synthesizing new tradable assets in secondary markets.50 Among
other things, major stock indices, like S&P 500 or Wilshire 5000, are used as
benchmarks for—and therefore enable the emergence of—a wide variety of
mutual and exchange-traded funds that track their benchmark index values.
A closely related term, layering refers to the technique of synthesizing
financial assets in a manner that creates a chain of hierarchically linked claims,
so that the performance of each new asset layer is determined by reference to the
combined performance of pooled financial assets underlying it. The layering
technique often involves pooling, which makes these categories difficult to
separate neatly. Nevertheless, as pooling is repeated in several consecutive
rounds, the distinct systemic implications of the resulting multi-layered structure
built on the same set of underlying claims become increasingly pronounced.
Examples of layering include FoF and indices, mentioned above, as well as
securitizations and derivatives. In a typical securitization, for example, a special
purpose vehicle (SPV), which holds a portfolio of loans or other revenue-
producing assets, issues tradable asset-backed bonds (ABS). These ABS are then
re-bundled with other ABS in the next-layer securitization, such as a
collateralized debt obligation (CDO), which issues several tranches of its own
bonds. These bonds are then used as collateral to back bonds issued in the next-
level securitization, so-called CDO-squared, followed by CDO-cubed, and so
on.51
Derivatives provide another canonic example of how the layering mechanism
is used both to synthesize new assets and to scale up market trading. Because the
underlying asset is merely a reference point for calculating contractual payouts,
there is no theoretical limit on counterparties’ ability to enter into as many
derivatives contracts as they desire, on any terms that they choose. This makes
48. Id.
49. See, e. g., Fund of Funds, MANAGED FUNDS ASS’N, https://www.managedfunds.org/hedge-
fund-investors/fund-of-funds/ [https://perma.cc/23LP-HY65].
50. For a discussion of the systemic function of benchmark prices and indices, see Robert C. Hockett
& Saule T. Omarova, Systemically Significant Prices, 2 J. FIN. REG. 1 (2016) [hereinafter Systemically
Significant Prices].
51. For more on securitizations, see, for example, GERDING, supra note 34.
https://perma.cc/23LP-HY65
https://www.managedfunds.org/hedge
https://markets.50
https://shares.49
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derivatives the ultimate tool for synthesizing a potentially infinite number of
tradable financial products on top of any single underlying asset.
Acceleration occurs whenever the speed of transacting is increased, thus
allowing more trades to be executed. Algorithmic, or high-frequency, trading
(HFT)—a strategy that uses complex algorithms to execute trades at speeds far
exceeding human ability—is an easy example of acceleration. But the
acceleration mechanism also works in less obvious ways, often in conjunction
with the pooling and layering mechanisms. Thus, the very act of synthesizing a
new tradable asset may help to increase the aggregate volume and velocity of
market transactions. The creation of a new asset eliminates potentially significant
transactional costs of placing multiple trades that would otherwise be required in
order to achieve the same economic exposure. It makes trading faster and
cheaper relative to trading in the underlying assets themselves, which in turn
leads to surging levels of trading activity. Indexing, derivatives, securitizations,
and many other financial instruments and market practices exemplify these
dynamics.
Finally, compression refers to the general technique of aggregating and
compacting risk exposures and payment obligations arising under multiple trades
between the same counterparties, thus effectively turning these trades into a
single economic transaction.52 A classic example of this mechanism is netting, a
common practice of offsetting mutual payment obligations of transacting parties
in order to facilitate the back-office process of clearing and settlement of multiple
trades between them.53 By eliminating unnecessary flows of funds and associated
frictions in the process, netting optimizes and reduces counterparties’ risk. By
replacing multiple gross transfers due throughout the day with a single net
transfer at the end of it, netting also enables a far greater amount of trading to
take place. From that perspective, the widespread use of netting and trade
compression has an important, and routinely under-appreciated, systemic effect:
it empowers financial market participants to engage in secondary-market trading
on a far greater scale, and at far greater speeds, than would be sustainable in the
less forgiving world of gross settlement of trading obligations. In this sense,
compression is more than simply a risk-reducing micro-level application—it is a
system-level functionality for scaling up secondary markets in financial
instruments.
In sum, the combined operation of these four transaction meta-
technologies—pooling, layering, acceleration, and compression—enables and
explains both the continuous quantitative growth and the ever-increasing
qualitative complexity of modern financial markets. Importantly, these are also
the core mechanisms of financial innovation. Much of what is routinely labeled
52. New Tech v. New Deal, supra note 41, at 765–66. In that sense, it is broader than “trade
compression,” a term of art denoting a common practice in derivatives trading that involves reducing the
number of derivatives contracts while keeping the same net economic exposure. See id. at 766.
53. Netting is also used to offset other obligations, such as those related to posting of collateral
under derivatives or repo agreements.
https://transaction.52
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No.1 2020] WHAT KIND OF FINANCE? 211
as “innovation” in financial markets is, in fact, a product of creative deployment
of pooling, layering, acceleration, and compression techniques in a particular
context or with the help of a particular technology.54 Accordingly, much of it is
fundamentally self-referential: it is innovation in financial markets for the sake of
financial markets.
The “innovative” nature of newly-created financial products and market
practices, therefore, should not be confused with, or reduced to, their narrowly
technical or micro-level transactional aspects. Such an approach produces only a
superficial understanding of what a particular market innovation signifies. To the
contrary, the social value of individual innovations in financial markets should be
determined on normative grounds, by reference to their macro-level impact—that
is, their impact not only on the financial system but, importantly, on the real
economy.55
As the above examples show, most financial “innovations” in recent decades
successfully sought to blunt, or even eliminate, the fundamental structural
constraint on the growth of secondary financial markets: the exogenously limited
volume of instruments issued in the primary markets. Financial innovation
helped to sever the key functional link between finance and non-financial
economic enterprise. Ignoring this macro-level consequence of the unchecked
growth and complexification of secondary financial markets, in effect, enables
the self-perpetuating entrapment of financial resources inside the increasingly
bloated and self-serving financial system.
It follows, therefore, that the task of evaluating and regulating financial
innovation from a systemic perspective requires explicit prioritization of the
potential macro-level benefits (or losses) over private counterparties’ micro-level
transactional gains. In fact, it is easy to stipulate that new financial products or
technologies are designed to produce specific benefits to the transacting parties.
The critical unknown element of any such innovation is whether it would improve
the flow of capital from the financial system to the productive enterprise in the
real economy. Putting system-wide capital allocation at the center of the inquiry
brings into sharp relief the fact that financial innovation is not simply a matter of
financial markets’ internal operation but also a matter of the nation’s long-term
economic development.
Giving financial regulators a clear conceptual and normative framework for
understanding individual financial instruments and markets would help them to
exercise an independent and properly contextualized judgment in their daily
encounters with specific problems in financial markets. Stripping the notion of
financial innovation of its mystique would significantly lessen the potential for a
54. New Tech v. New Deal, supra note 41, at 767.
55. In this sense, the proposed approach deliberately broadens the analytic focus beyond the
familiar discussion of regulatory arbitrage and its role in spurring such innovations as money market
mutual funds, complex derivatives and securitized products, and so forth.
https://economy.55
https://technology.54
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212 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
particularly insidious form of regulatory capture, known as cultural or intellectual
capture.56
A potentially more radical method of operationalizing this explicitly macro-
structural approach to financial innovation would be to introduce a system of
mandatory pre-approval of financial products.57 Among other things, a properly
designed product approval regime would provide a procedural mechanism for
ensuring that financial innovation and the creation of complex financial
instruments do, in fact, advance productive economic enterprise and offer real
public benefits—as opposed to merely fueling financial speculation and
regulatory arbitrage.
For example, such a regime could require private firms to demonstrate to the
regulators that each financial product they intend to bring to the market meets
three statutory tests. First, the applicant-firm would have to show that its
proposed offering meets an “economic purpose” test that would focus on the
social and commercial utility of the proposed financial product or service.
Meeting this requirement would involve, among other things, identifying the
actual gap in the existing market that the new offering would fill and the intended
users whose unmet needs this new offering would serve. Second, the applicant-
firm would have to pass an “institutional capacity” test that would require a
review of its ability to manage the risks associated with the proposed offering and
to monitor relevant market dynamics on an ongoing basis. Finally, the proposal
would have to pass a broad “systemic effects” test, which would require a finding
that approving the new product offering would not significantly reduce the
overall resilience of the financial system or otherwise raise significant public
policy concerns.58
In essence, this approach would function as a simple burden-shifting device,
by imposing the duty to provide information necessary for evaluating potential
macro-systemic risks and benefits of a specific financial product on the party that
has the best access to such information.59 While not limited solely to licensing of
innovative financial products, this regime would create a critical institutional
space for ongoing collective deliberation on the social function of financial
innovation. Of course, designing a workable regime of financial product approval
is a complex undertaking bound to raise multiple legal, economic, and political
questions. For the purposes of this Article, however, the key is simply to show
how law can serve as a potent tool of restoring a healthy functional relationship
between the financial system and the real economy.
56. See, e.g., James Kwak, Cultural Capture and the Financial Crisis, in PREVENTING REGULATORY
CAPTURE: SPECIAL INTEREST INFLUENCE AND HOW TO LIMIT IT 71 (Daniel Carpenter & David A.
Moss eds., 2014).
57. For a detailed proposal, see Saule T. Omarova, License to Deal: Mandatory Approval of
Complex Financial Products, 90 WASH. U. L. REV. 64 (2012).
58. Id. at 67.
59. For an in-depth discussion of various operational and institutional design issues raised by this
proposal, see id. at 113–40.
https://information.59
https://concerns.58
https://products.57
https://capture.56
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Importantly, this relationship can also be restored or enhanced through
policies and institutional reforms directly targeting the process of credit
allocation. In particular, properly designed and implemented measures spurring
and supporting a structurally balanced economic development can have a direct
salutary effect on the financial system.
IV
FROM MACRO-ECONOMY TO FINANCE: DEVELOPMENTAL POLICY AND
FINANCIAL STABILITY
A. Individual Rationality, Collective Irrationality
Expanding the focus of the inquiry into the nature of modern finance to
encompass its functional relationship to the macro-economy helps to elucidate
fundamental dynamics that currently impede efforts both to stabilize the financial
system and to stimulate economic growth. It brings into sharp relief the basic fact
that the persistent lack of success in achieving both of these policy goals is rooted
ultimately in our failure to effectively address the underlying collective action
problems.
Generally, the term “collective action problems” denotes situations in which
the multitude of individually rational actions ultimately produce a suboptimal—
collectively irrational—outcome.60 Financial markets, in particular, are rife with
collective action problems that have a recursive quality.61 Financial asset bubbles,
fueled by short-term speculation and followed by devastating busts, exemplify
this phenomenon. While it is individually rational for each market player to
purchase assets during the bubble phase and sell them during the bust phase,
these mutually reinforcing, individually rational decisions aggregate into
collectively dysfunctional outcomes: financial crises.62
These dysfunctional dynamics directly contribute to the pattern of systematic
under-provision of critical public infrastructure and other public—or, more
precisely, collective—goods necessary to support economic development.63 One
such collective good is so-called “patient capital,” deployed to finance long-term
productive projects like power grids, railway networks, large-scale manufacturing
ventures, and so forth. In effect, the patient capital problem is a special case of
the “speculative-versus-productive-investment” problem. In both cases, the
worry is that investors do not part with their money long enough to allow certain
60. See generally Public Actors, supra note 24.
61. For more on market procyclicality as a recursive collective action problem, see generally Robert
C. Hockett, Recursive Collective Action Problems: The Structure of Procyclicality in Financial and
Monetary Markets, Macroeconomies, and Formally Similar Contexts, 3 J. FIN. PERSP. 1 (2015)
[hereinafter Recursive Collective Action Problems].
62. Id. at 17–22.
63. For a detailed discussion of the distinction between what the orthodox economic literature
typically refers to as “public goods” and the more capacious concept of “collective goods,” see Robert C.
Hockett & Saule T. Omarova, Private Wealth and Public Goods: A Case for a National Investment
Authority, 43 J. CORP. L. 437, 444–48 (2018) [hereinafter National Investment Authority].
https://development.63
https://crises.62
https://quality.61
https://irrational�outcome.60
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214 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
projects to be brought to completion. The chronic shortage of patient capital,
which hinders the healthy growth of the real economy, is simply a version of the
same problem in the context of particularly long-term projects.64 Understanding
the factors underlying this problem, therefore, is the key to correcting it.
For individual investors, committing to being “patient” in terms of getting
their payoff involves significant risks. The longer the time horizon of the project
in question, the more uncertainty private investors face. That uncertainty comes
from two principal sources.
First, in order to make a long-term investment rational for the investors, they
have to be able to rely on the stability of the macro-environment, which they
cannot control in their individual capacities. This includes not just the prevailing
interest rates, but also a wide range of other systemically important prices and
indices, or SIPIs: commodity and energy prices, wage levels, housing prices, and
so on.65
Second, private investors are rationally averse to investing in long-term
projects whose benefits cannot be fully captured by private investors, partly
because they are yielded over time-horizons that exceed biological lifespans.
Certain kinds of public infrastructure that take a long time to develop or
construct, technological advances rooted in long-term investment in research and
development, the long-term synergistic knowledge and cultural benefits of
widespread higher education, and ultra-long-term projects as space exploration
or medical research are some examples of such projects.
Under these circumstances, it is rational for private investors to withhold their
money and divert it into shorter-term investments, especially if they offer higher
returns. Both of these factors—the non-controllability of the macro-environment
and the non-capturability of the benefits—effectively discourage long-term
productive investment in primary markets and instead encourage short-term
investments in secondary markets for tradable financial instruments.66 This is the
essence of the collective action problems pervading decentralized market
economies.
Drawing these collective action problems out exposes the crucial link
between the growing structural imbalances in the capital-starved real economy
and the concomitant growth of systemically destabilizing speculative trading in
financial markets. A self-referential financial system, in which disproportionate
growth on the part of secondary markets encourages heavy speculative trading in
financial instruments, is bound to experience socially destructive asset price
bubble-and-bust cycles. By contrast, reorienting the financial system toward its
64. Id. at 450 n.53.
65. For a detailed analysis of SIPIs as a financial market phenomenon, see Systemically Significant
Prices, supra note 50.
66. For a detailed discussion of non-controllability and non-capturability in the context of the
collective goods provision (or, rather, under-provision), see National Investment Authority, supra note
62, at 448–54.
https://instruments.66
https://projects.64
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primary social function—allocating credit to its most productive and beneficial
long-term non-financial uses—will likely alter its present dysfunctional dynamics.
Understanding this fundamental connection enables us to focus on devising
systemic solutions to the systemic speculative-versus-productive-investment
problem—and do so both as a matter of developmental strategy and for purposes
of maintaining financial stability. Avoiding this collective irrationality necessarily
requires coherent collective agency, exercised counter-cyclically.67 It requires a
particular kind of a market actor: one whose actions are not constrained by the
same dictates of individual rationality that make everyone else herd into the same
type of hot speculative investment, and who is both able and willing to take the
opposite side of that collectively irrational bet. This market contrarian role is
essential to the stable functioning of the financial market, as it effectively
operates as the internal mechanism of dynamic countercyclical self-regulation.
Moreover, it shapes the structural conditions in the financial market in ways that
make such speculative investments not only collectively but also individually
irrational for private market participants.
In theory, private entities can act in a collective agent capacity. In practice,
however, “only public instrumentalities acting directly within financial markets
are fully equipped to perform this critical function.”68 Public instrumentalities’
unique built-in advantages—large size, access to public funding, long-term
investment horizon, legal and regulatory privileges—enable them to take on
greater risk at times when no private market actor is able to do so.69 In this sense,
public instrumentalities are the true “natural” market contrarians. Even the
biggest private firms are inherently incapable of performing this role reliably and
consistently.
So, what might the collective agent capable of correcting the presently
dysfunctional pattern of system-wide capital allocation look like?
B. Developmental Policy as a (Real) Macroprudential Tool
One potential approach to remedying the problems discussed above is to
organize the provision of currently under-provided collective goods as a hybrid
public-private project. Two elements are crucial to the success of such a strategy:
(1) a dedicated public institution, capable of actively managing and channeling
privately-supplied capital into projects that require the patience of a perpetual
transgenerational investor; and (2) a distinct kind of financial engineering that
synthesizes individually capturable returns on investment in collective goods
whose benefits otherwise cannot be captured individually.70
An example of a policy combining both of these elements would involve an
establishment of a new federal instrumentality—what may be called a National
67. See generally Recursive Collective Action Problems, supra note 61, at 23–32.
68. Omarova, supra note 15, at 2523 (citing Recursive Collective Action Problems, supra note 61, at
24).
69. See Public Actors, supra note 24, at 138.
70. See National Investment Authority, supra note 63, at 451.
https://individually.70
https://counter-cyclically.67
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216 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
Investment Authority (NIA)—charged with developing and implementing a
comprehensive strategy of national economic development.71 This new
instrumentality would operate as a true hybrid public-private market actor,
enabling private investors to overcome currently insurmountable collective
action problems that render investment in long-term public infrastructure
projects individually irrational.
In highly simplified and abbreviated terms, the NIA would function much like
a typical Wall Street asset manager. It would set up a series of collective
investment funds (structured similarly to traditional private equity funds),
actively solicit private investors to purchase passive equity stakes in its funds, and
act as the sponsor and general partner of each individual fund it sets up.72 As with
many private funds, it would require private partners to lock up all or some part
of their investment dollars with the fund for some set minimum period of time.
The NIA would manage the resultant pool of assets much as any private fund
manager would do, assembling a diversified portfolio of promising investment
projects.73
Reversing the fundamental logic of a traditional public-private partnership
model, this new entity would channel the enormous amounts of private capital
held by pension funds, insurance companies, university endowments, banks,
foreign sovereign wealth funds, and other institutional investors into the
coordinated construction and maintenance of large-scale, economic growth-
boosting infrastructures. Examples of such transformative public infrastructures
would include nationwide networks of clean energy provision and state-of-the-
art transportation, regional air and water cleaning and preservation programs,
systems of ongoing adult education and technical training, and networks of mixed
public-private startup finance funds.
As discussed above, private investors are often unwilling to finance such
socially beneficial projects, primarily because of the longer time horizons and
higher private risks associated with the provision of collective goods. The NIA
would act directly and proactively to alleviate these risks. By deliberately
exploiting the unique advantages of the federal government—its vast scale, high
risk tolerance, lengthy investment horizons, and direct backing by the full faith
and credit of the United States—the NIA would enable private investors to
capture reasonable gains from the provision of currently under-provided,
transformative collective goods.74
The key to achieving this goal is the NIA’s ability to synthesize privately
payable “equity strips” that reflect otherwise non-capturable public gains from
the provision of collective goods.75 Reaping the benefits of scale economies and
71. For a detailed proposal, see National Investment Authority, supra note 63.
72. See id. at 475–80 (outlining the general structure and functions of the NIA as an asset manager).
73. For a discussion of the project selection process, see id. at 484–85.
74. Id. at 446–58.
75. For a detailed discussion of the specific methods and techniques of financial and legal
engineering the NIA could adapt to this end, see id. at 469–90.
https://goods.75
https://goods.74
https://projects.73
https://development.71
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recapturing positive externalities associated with the nation-wide provision of
collective goods—including the positive effects of the NIA-financed
infrastructure projects on employment and income tax revenues—would
augment the federal government’s ability to offer or guarantee stipulated returns
to private investors in NIA funds.
These synthetic equity payouts would vary depending on the estimates of
local, regional, or national macroeconomic impacts of NIA funds’ projects.76 If,
for example, experts calculate that a particular fund’s investments would
generate an additional three percent in local or regional economic growth over a
certain period of time, the NIA would translate that projected gain into a
corresponding added return for the fund’s limited partners. This method of
synthesizing privately capturable profits would add another potentially
significant source of revenues—on top of project-specific user-payment schemes
for projects amenable to this form of cost-recovery. It would allow the
government to compensate, and further incentivize, those private parties who
assist in the funding of the nation’s economic development.77
In this sense, the NIA would also perform the critical role of an endogenous
financial market stabilizer. By offering yield-hungry private institutional
investors a flexible new safe asset class, the NIA would diffuse potentially
destabilizing demand for privately-issued substitutes and channel it into non-
speculative, longer-term productive investments.78 The availability of this new
asset class can significantly alter the dynamics of contemporary financial markets.
By draining large institutional investors’ demand away from riskier and more
speculative assets, the NIA would dissipate, at least in part, a powerful structural
incentive for private financial institutions to supply such risky assets. In that
sense, the NIA would function as a critically important institutional mechanism
for enhancing systemic financial stability, which is itself a fundamental collective
good.79
76. Of course, the NIA funds’ portfolios would also include projects that, upon completion, would
generate sufficient user-fee revenues to serve as a source of investor returns. The ability to replicate
private returns from the provision of systemically important collective goods, however, is critical for
financing forward-looking infrastructure projects that are not likely to generate sufficient user fee
revenues, or are otherwise not amenable to imposition of such fees.
77. See National Investment Authority, supra note 63, at 477–78.
78. For examples of the growing economic literature on “safe assets,” and government liabilities as
“safest of the safe,” see generally MARCUS BRUNNERMEIER & VALENTIN HADDAD, FED. RESERVE
BANK OF N.Y., Safe Assets, (Oct. 17, 2014), https://www.newyorkfed.org/medialibrary/media/
aboutthefed/pdf/FAR_Oct2014 [https://perma.cc/P7Z2-YGEZ]; GARRY J. SCHINASI ET AL., INT’L
MONETARY FUND, FINANCIAL IMPLICATIONS OF THE SHRINKING SUPPLY OF U.S. TREASURY
SECURITIES (Mar. 20, 2001), https://www.imf.org/external/pubs/ft/supply/2001/eng/032001.PDF
[https://perma.cc/7M4N-P2ML]; Gary Gorton et al., The Safe-Asset Share, 102 AM. ECON. REV. 101
(2012); Arvind Krishnamurthy & Annette Vissing-Jorgensen, The Aggregate Demand for Treasury Debt,
120 J. POL. ECON. 233 (2012); Pierre-Olivier Gourinchas & Olivier Jeanne, Global Safe Assets, (Bank for
Int’l Settlements Working Paper No. 399, 2012), http://www.bis.org/events/conf120621/gourinchas/
_presentation_new [https://perma.cc/7VXN-KGBE].
79. Systemic financial stability is a public good insofar as it addresses the non-controllability
problem, discussed above. See supra note 66 and accompanying text.
https://perma.cc/7VXN-KGBE
http://www.bis.org/events/conf120621/gourinchas
https://perma.cc/7M4N-P2ML
https://www.imf.org/external/pubs/ft/supply/2001/eng/032001.PDF
https://perma.cc/P7Z2-YGEZ
https://www.newyorkfed.org/medialibrary/media
https://investments.78
https://development.77
https://projects.76
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218 LAW AND CONTEMPORARY PROBLEMS [Vol. 83:195
Of course, such an ambitious and far-reaching institutional reform raises a
wide range of complex legal, economic, and political issues.80 Developing detailed
solutions to these problems is beyond the scope of this Article. For present
purposes, the key takeaway is much broader. If thoughtfully designed and
implemented, this innovative reform would open new opportunities for a more
effective channeling of financial capital into productive economic enterprise, as
opposed to socially harmful speculation in financial instruments. In this sense, it
would significantly enhance the long-term stability and resilience of the U.S.
financial system—and blunt some of the key underlying systemic factors that
currently hinder the ability of traditional regulatory solutions to deliver their
intended results in practice. In a holistic fashion, an effective structural
rebalancing of the nation’s real economy would also help to rebalance, both
structurally and functionally, its financial system.
V
CONCLUSION
This Article sought to shift the academic and policy discussions from the
familiar question “Can there be too much finance?” to the bigger and more
complicated question: “What kind of finance should there be?” As the first step
toward answering this multi-faceted question, this Article engaged in an
intellectual experiment, an attempt to explore what a truly effective macro-
systemic approach to financial markets and regulation might look like. It argued
that, to be effective, such an approach has to address, in a holistic and direct
manner, both (1) the traditionally technical issues of financial stability and
innovation, and (2) the broader, normatively salient issues of sustainable and
structurally balanced socioeconomic development.
Adopting this approach, however, requires a fundamental rethinking of the
core concepts and assumptions that currently preclude us from recognizing the
deep structural linkages between these two policy challenges—and thus hinder
our ability to formulate a coherent, normatively unified strategy of overcoming
them. This Article outlined an alternative framework for devising such a macro-
level strategy. Of course, there is much more work to be done in order to flesh
out and operationalize in greater detail the ideas laid out in this Article—and to
find definitive answers to the question in its title. It is undoubtedly challenging
but also exciting and necessary work.
80. For an in-depth discussion of the institutional design and implementation issues in connection
with this proposal, see National Investment Authority, supra note 63, at 480–90.
https://issues.80
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POWER
100
POWER
100
L
et me introduce you to 100 powerful people.
And by powerful, I mean individuals who
hold positions that give them the ability to
shape our communities and infl uence our quality
of life. To identify them, the editorial staff of Central
Penn Business Journal considered those who make
our laws, build our homes and highways, protect
our health and safety, educate our children, support
the vulnerable, and provide the spark that inspires
innovation and economic growth. Th is is not a
ranking. Th ere is no score. Our intent is to introduce
our readers to the people who make the decisions.
To do that, we asked them to introduce themselves,
and share something personal, because no matter
how high up the ladder they are, they’re all human.
Garry Lenton
Managing Editor
7
POWER
100
8 POWER
100
POWER
100
BARBARA K. ALTMANN
President
Franklin & Marshall College
AAs the chief executive offi cer of the col-lege, Altmann’s
primary duties in-
clude championing
the value of a liberal
arts education, deliv-
ering a world-class
education in a resi-
dential environment,
building connections between the college,
Lancaster and the wider world, raising re-
sources and visibility, strategic planning, and
– especially these days – crisis management.
She has served as president for two and
a half years. Altmann is the college’s 16th
president.
“I’m very proud that we have worked hard
to reconnect the college with the great city
of Lancaster. We also led a residential liberal
arts college in the midst of a pandemic while
staying true to our mission. Th e world needs
Diplomats more than ever,” she said, refer-
ring to the student body’s nickname.
Her most important life lessons: the im-
portance of adaptability, perseverance, re-
silience, interconnectedness and generos-
ity of spirit. “We have also been reminded
dramatically that colleges are a part of the
larger world, not apart from it, and have to
model how we can operate as a community
to work on acute and urgent problems,”
Altmann said.
She enjoys reading really, really old
books, a passion that comes with being a
scholar of the Middle Ages. “I delight in fol-
lowing the adventures of my young-adult
children as they navigate this diffi cult world.
Gardening also grounds me. Otherwise, free
time isn’t usually in the presidential job
description,” she said.
TOM BALDRIGE
President & CEO
Lancaster Chamber
Founded in 1872, the Lancaster Chamber is a network of
employees and em-
ployers invested in
what’s best for Lan-
caster. Th e organi-
zation aims to build
Lancaster County
into a model of pros-
perity for 21st century America.
In his position as president and CEO, Bal-
drige leads the chamber while equipping,
representing and serving business. He has
been with the chamber since January 2000.
He is proud of being part of the resur-
gence of downtown Lancaster.
He said his life lessons are “short sayings
that defi ne my actions”: Rise above it. Be a
thermostat, not a thermometer. Presume
good intent.
For fun he is hiking the Appalachian Trail
in sections with a friend. Th ey hope to com-
plete the 2,190-mile journey by 2027.
TROY BANKERT, AIA
CEO/Director of Architecture
LSC Design Inc. dba Warehaus AE
Bankert serves as lead representative for the fi rm, driving
strategic communi-
cations and leading
client relationship
management. While
overall fi rm man-
agement is his main
focus, he also over-
sees a team as director of architecture and
manages projects as a registered architect.
Bankert has held many roles throughout
his 32 years at Warehaus. He has served in
the CEO role for the past two years.
“When I look at our fi rm today, I am most
proud of the part I’ve played in assembling
the group of talented people that inspire
me daily with their innovative, outstanding
work,” he said.
Most important life lesson: it takes a
lifetime to build a reputation and minutes
to lose it. “I was taught early in my career to
treat every client, employee and project with
honesty and integrity,” Bankert said.
“My biggest escapes have been tougher to
do this past year, but I enjoy travelling with my
family and attending Penn State and Phila-
delphia Eagles football games,” Bankert said.
STEVEN L. BARBER
Senior Vice President and Offi ce Executive
Michael Baker International Inc.
Michael Baker International provides engine er ing,
design, planning and
construction services
for its clients’ most
complex challenges
worldwide. In his role
as senior vice presi-
dent and Harrisburg
offi ce executive, Barber is a fi nancial executive
responsible for diverse business lines from
traditional engineering to innovative project
fi nancial alternative delivery mechanisms. He
has extensive experience managing a diverse
workforce to deliver diametric goals of profi t-
ability and client deliverables.
He joined the fi rm as vice president op-
erations and Harrisburg offi ce executive in
June 2012. He was named senior vice presi-
dent in March 2020.
GENE BARR
President & CEO
Pennsylvania Chamber
of Business and Industry
The Pennsylvania Chamber of Business and Industry is
the largest broad-
based business as-
sociation in the
state with over 9,700
member businesses.
Th ese include busi-
nesses of all sizes
and industry sectors, from sole proprietors
to Fortune 100 companies, representing 50
percent of the private workforce in the state.
As president and CEO, Barr is responsible
for the operation of the state’s largest pro-
business advocacy group as its for-profi t
entity, PA Chamber Insurance.
Barr joined the PA Chamber in February
2003. He served for more than eight years as
vice president of government and public aff airs
before being elected president in October 2011.
Th e professional accomplishment of
which he is most proud is “working with an
incredible team of people here at the Cham-
ber to keep our organization stable during
the most tumultuous time in recent his-
tory while assisting Pennsylvania’s business
community to endure these diffi culties.”
Th e most important life lesson he’s
learned is to treat everyone with respect.”
It is the smart thing to do but more impor-
tantly it is the right thing to do,” he said.
He has a strong interest in American his-
tory, particularly the Civil War. He’s written
a book on that subject, “A Civil War Captain
and His Lady: Love, Courtship, and Combat
from Fort Donelson through the Vicksburg
Campaign”. “I enjoy researching the period,
and visiting those sites that are so critical to
understanding our nation’s history is an on-
going activity. I’ve also appeared as an extra
in four movies about the period including
‘Gettysburg’ and ‘Glory’,” he said.
CHARLES H. BEAUDUY
President
Gannett Fleming Architects Inc.
As president, Beauduy has several key responsibilities,
including manag-
ing the architectural
practice in the mid-
Atlantic region. He
also leads the fi rm’s
federal market sec-
tor, which deals with
military design and construction.
He started with the fi rm in 1980, became
a vice president in 1998 and was named
president in 2014.
He is proud of being named a Fellow by
the Construction Specifi cations Institute.
After serving the iInstitute for more than 20
years at the chapter, region and national lev-
el, Beauduy was elevated to Fellow in 2007.
He said one of the most important life les-
sons he’s learned is to recognize individuals
for their hard work and dedication and giving
of their time. “Early in my career and while
serving as president of a local professional
organization, I decided to only recognize
those board and committee members who
went above and beyond. Some volunteers
felt slighted, which made me realize the im-
portance of recognition,” he said.
For fun Beauduy plays golf: “It’s good
exercise and I enjoy the camaraderie with
my fellow golfers.” He also loves to cook. “It
has become a second passion of mine. Just
hearing my wife or adult children say ‘Dad,
this is so good!’ warms the heart,” he said.
JENNIFER BERRIER
Acting Secretary, Pennsylvania
Department of Labor & Industry
Commonwealth of Pennsylvania
Berrier oversees unemployment and workers’ com-
pensation benefi ts
administration, vo-
cational rehabilita-
tion programs for
individuals with
disabilities, and
economic develop-
ment across the commonwealth.
She’s been in her current position since
December and has been with the agency
for 15 years.
In her 15 years as a public servant at the
Department of Labor & Industry, she has
worked in a variety of diff erent roles that
have allowed her to improve life for Penn-
sylvanians in many ways. Key accomplish-
ments include working to address fair wages
and overtime issues, improving workplace
safety and promoting safe learning spaces
for Pennsylvania children.
Berrier said learning to really listen has
served her well, especially as a supervi-
sor and a leader. Her colleagues, both
inside and outside the agency, have vastly
diff erent backgrounds that provide them
with unique perspectives. “Listening to
their thoughts, gathering facts and avoid-
ing snap judgements has allowed me to
be impartial and a critical thinker during
decision-making,” she said.
She loves spending time in nature and
hiking trails across the commonwealth.
“We’re very fortunate to live in such a
beautiful state with so many natural trea-
sures to explore. Since the pandemic be-
gan almost a year ago, I’ve been even more
thankful to unplug and unwind while
enjoying Pennsylvania’s natural beauty,”
Berrier said.
NICHOLAS BERTRAM
President & CEO
The GIANT Company
As with any chief executive, Bertram’s top responsi-
bility is to ensure the
health and longev-
ity of the company.
Th e way he has cho-
sen to do that is by
evolving GIANT to
being purpose-led.
“Our purpose, ‘Connecting Families for a
Better Future’, is the unifying rally cry for all
we do commercially, operationally, strate-
gically and externally,” he said.
He was appointed president in June 2017
and formally took the reins in January 2018.
Bertram said he’s most proud of GI-
ANT being named the Supermarket News
Retailer of the Year in 2019. It’s the top
national award in the grocery industry. “It
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10 POWER
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was a thrilling experience for our team,
some of which have more than 40 years of
service. It built the foundation that we’re
now innovating from,” he said.
Th e most important life lesson he’s
learned is never think you’re better than
someone else, or that there’s any work that
is beneath your own hands. “My dad and
grandfather taught me this as we worked in
a family plumbing business, and it shaped
my views on diversity, my disdain for hi-
erarchy and my passion for winning as a
team.” Bertram said.
Th e greatest joys in his life are his wife
and their four sons. “Anything we do to-
gether is always fun, often loud, usually
messy and occasionally hard. We really
enjoy doing life with our church as well
and put a lot of energy and time into serv-
ing there. It keeps me balanced and full of
hope,” Bertram said.
DANIEL BETANCOURT
President & CEO
Community First Fund and FINANTA
Betancourt is responsible for the over-all success of
Community First
Fund and is focused
on advancing the
organization’s mis-
sion by building and
maintaining vital
relationships with
corporate, government and philanthropic
partners in its targeted communities. Un-
der Betancourt’s leadership, Community
First Fund has grown into a regional Com-
munity Development Financial Institu-
tion (CDFI), attracting multimillion-dollar
investments and with nearly $200 million
under management.
Betancourt has been president and CEO
of Community First Fund since 1999 and of
FINANTA since the two CDFIs merged in
July 2020. He has more than 25 years of ex-
perience in small business and community
economic development lending.
DAVID E. BLACK
President & CEO
Harrisburg Regional Chamber & CREDC
The 130-year-old organization de-fines itself as
a catalyst for dy-
namic job creation,
policy change and
economic growth
that enhances the
quality of life in the
region it serves –
Cumberland, Dauphin and Perry coun-
ties. As president and CEO, Black engages
in economic development work and pol-
icy advocacy. He also works with the or-
ganization’s boards and is responsible for
establishing strategic goals and objectives
for the chamber. Another responsibility
is building talented staff who coordinate
events and projects, facilitate volunteer
efforts and administer programs that en-
hance the region’s business, community
and economic development efforts.
Black has been with the chamber for
20 years. CREDC stands for Capital Re-
gion Economic Development Corporation,
and Black is proud of the chamber and
CREDC’s support of the Hershey Center
for Applied Research and Dura-Bond’s
acquisition of Bethlehem Steel’s idle pipe
manufacturing facility in Steelton. Dur-
ing his tenure, the chamber and CREDC
have also been involved with several other
projects including Harrisburg’s recovery,
the Murata business incubator and Ama-
zon’s HQ2 proposal. Other key accom-
plishments include an advocacy program,
a communications program, the Catalyst
Awards and the VIBE event.
Th e most important life lesson he’s
learned during his career: “No matter how
old you are, how long you have worked,
you’re never done learning. You learn some-
thing new each and every day.” Black said
his career has benefi tted from the accumu-
lation of experiences and lessons over the
course of many jobs, many experiences and
many interactions with folks.
Black enjoys hanging out with his
grandkids, playing golf and doing things
with his wife. He said he likes working and
hopes to continue doing so, even if it’s a
little bit, in the years ahead. Other favorite
pastimes are reading a good biography or
political history or watching a good west-
ern, a political drama, or Star Trek : “Live
long and prosper!”
CHIP BROWN
President
McClure Company
McClure Company is a mechanical e n g i n e e r i n g
and contracting fi rm
working throughout
Pennsylvania. It de-
signs, builds and
services mechanical
systems for build-
ings and industry.
Brown was named McClure’s president
in 2001. He joined McClure in 1984 after
working for two years in the general con-
tracting business. He started at McClure as a
project manager and continued as manager
of engineering and vice president of busi-
ness development.
For several years he also served as
president of McCarl’s, Inc. an industrial
contractor headquartered in Pittsburgh.
McCarl’s was a sister company of Mc-
Clure at the time and is focused on the
shale, power and industrial markets,
working primarily in Pennsylvania, Ohio
and West Virginia.
MICHELE BUCK
Chair, President & CEO
The Hershey Company
Michele Buck brings more than 25 years of consumer
packaged goods ex-
perience to her role
as Hershey’s chair-
man of the board of
directors and 12th
president and CEO.
She has two impor-
tant roles, mom and business leader, that
fulfi ll her life and she’s motivated by har-
nessing others’ strengths, expertise and
perspectives.
Buck has held several senior leadership
roles within the company. Most recently,
she served as CEO, leading Hershey’s day-
to-day North American operations and
overseeing Hershey’s operations in Central
and South America. Before joining Hershey
in 2005, Buck served 17 years at Kraft/
Nabisco in numerous senior positions and
at the Frito-Lay division of PepsiCo.
ART CAMPBELL
President
Campbell Commercial Real Estate Inc.
“As with all small business owners, my job is to make
sure the company is
fi nancially success-
ful and our team is
educated and rel-
evant in changing
times. Additionally,
it’s my job to make
sure coworkers are treated well and clients
are represented fairly and to the best of our
abilities,” he said.
After being in property management and
development, he founded Campbell Commer-
cial Real Estate in 1984. He has served as presi-
dent and broker since the company’s inception.
Campbell is proud of having many of
the same clients since the 1980s and says
providing services to second- and third-
generation members of the same family is
especially rewarding. Another proud ac-
complishment : being recognized by his
peers with the Greater Harrisburg Associa-
tion of Realtors Top Producer, Professional
Merit and Realtor of the Year awards as well
as the West Shore Chamber of Commerce’s
Business Achievement Award.
“I am still learning life lessons, so I hope
I can work and live a productive life long
enough to put those lessons in practice. If
there is one most important lesson I have
learned, it is to treat others as I want to be
treated,” Campbell said.
He enjoys seeing his grandkids, playing golf,
taking long walks with the family dog, reading,
telling jokes and listening to music. He’s also
recently renewed his acquaintance with his
old guitar. “Fun is to never stop learning. When
combined with traveling to new places it is
especially rewarding,” Campbell said.
SHERRY CAPELLO
Mayor
City of Lebanon
The mayor is the chief executive and admin-istrative offi cer of
the city and the offi cial
head of the Lebanon
City Government. Th e
mayor supervises and
directs each depart-
ment, executes and
enforces ordinances,
prepares the annual budget and recommends
legislative action in the best interest of the city.
Capello was sworn in as Lebanon’s 31st
mayor on Jan. 4, 2010 and has served the
city for more than 11 years.
She’s proud of the eff orts to relocate city
operations downtown. Capello said that
although the move is not yet completed, all
the documents have been signed to relocate
city operations to the fi rst two fl oors of the
building that houses Harrisburg Area Com-
munity College. She said several elements
precipitated the relocation. Th e community
college did not need all the space at its facil-
ity, the county needed additional space in
the joint building, and the city wanted to
boost revitalization eff orts in the urban core.
Capello started working with her dad in
his construction business when she was 12.
“Although I was mainly a gofer, he shared
with me that the client deserves an honest
day’s work and to never be idle, regardless
of your position or title. Th at work ethic has
carried me far,” Capello said.
For fun she lifts weights and does cardio
at the Lebanon Valley Family YMCA. “I’m
not sure that is fun (wink wink), but I love the
people and staff there,” she wrote. “! I also
love to dance, paint, write poetry and spiri-
tually meditate. It keeps me grounded. And
of course, spending time with my family.!”
LAURIE CARTER
President
Shippensburg University
As Shippensburg’s president, Carter said, her number one responsibility and pri-
ority is student suc-
cess. Areas of focus
include building re-
lationships with the
community as a re-
gional economic de-
velopment engine,
working closely with
the state system in optimizing operations
and balancing the university’s budget. Open-
ing the Raider Rapid Results COVID-19 test-
ing program to enhance campus activities
was an unanticipated duty this past year.
Carter was named Shippensburg’s 17th
president in 2017. On March 4, she an-
nounced that she will be transitioning this
summer to Lawrence University in Apple-
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12 POWER
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CONGRATULATIONS!
GEORGE NAHODIL
CONGRATULATIONS TO ALL 100 POWER PLAYERS!
POWER
PLAYERS
President & CEO
SELECTED AS ONE OF CENTRAL
PENN BUSINESS JOURNAL’S
You are leading Central
Pennsylvania into the future by
making decisions that impact
lives, inspiring success and
sparking innovation.
GEORGE NAHODIL
SELECTED AS ONE OF CENTRAL
Pennsylvania into the future by
making decisions that impact
ton, WI to become the next president.
“Reopening Shippensburg University
during the pandemic was challenging and re-
warding. It involved so many facets that each
needed to be orchestrated precisely.” Carter
said. “I am proud to have led the charge and
am grateful for the many team members who
made it possible to provide quality academic
and social experiences, as well as health and
wellbeing support services.”
Her most important life lesson: To de-
velop comfort with discomfort. Growth is
uncomfortable.
For fun, Carter rides her bicycle or walks
along the rail trail. “Th e scenic beauty and recre-
ational opportunities of our region are majestic.
Being surrounded by nature reminds me of the
richness and diversity of our region,” she said.
DONALD M. CASEY JR.
Dentsply Sirona Inc.
CEO
Casey has more than 30 years of glob-al health care
experience and an
outstanding track
record in identify-
ing and commer-
cializing medical
innovations.
He joined Dentsply Sirona as CEO in
February 2018. Previously he served as
CEO of the medical segment of Cardinal
Health, a manufacturer and provider of
medical products and supply chain ser-
vices to hospitals, laboratories, physician
offi ces, surgery centers and other sites of
care across the health care continuum.
Under Casey’s leadership as the CEO of the
medical segment, he repositioned it and
delivered consistent revenue and operat-
ing income growth and meaningful margin
expansion and helped position the segment
for sustainable growth going forward.
ROBERT “BOB” CASEY JR.
United States Senator
Casey represents the people of the C o m m o n –
wealth of Pennsyl-
vania in the U.S.
Senate. He works
to support Penn-
sylvania families by
advocating for poli-
cies that improve
the health care and early learning of chil-
dren, and policies that will raise wages for
the middle class. A Democrat, he serves
on four Senate committees, including
Finance, HELP (Health, Education, Labor
and Pensions) and the Select Committee
on Intelligence. He is the chairman of
the Special Committee on Aging, which
focuses on policies that support seniors
and individuals with disabilities.
Casey has served as senator for 14 years.
He is proud to have been the lead Sen-
ate sponsor of the bipartisan ABLE Act,
which was enacted into law in 2014. The
act supports people with disabilities by
allowing states to create tax-free savings
accounts for people who acquired their
disability before their 26th birthday. Many
people with disabilities have been able to
save for their current disability expenses
and for their future with ABLE accounts.
The accounts can be used for needs such
as health care, housing, assistive tech-
nology or education, and can provide
people with disabilities with a measure
of economic security and peace of mind.
For someone with a disability, the ABLE
Act also means that they can work and
earn money without fear of losing critical
Social Security, Medicaid benefits and
other federal benefits. This legislation has
allowed many Americans with disabilities
to attain a new level of economic security
and independence.
Casey’s parents taught him and his sev-
en siblings to treat people with respect, to
serve their community and to be honest.
He tries to read as much as possible about
Pennsylvania history, especially political
history. “Twenty years ago, my answer to
this question would have been playing
basketball!” he said.
DAVID L. CROSS
President/Owner
Mowery Construction
As the owner of Mowery Construction, he considers
his primary duty to
be setting the vision
for the near- and
long-term future of
the business. Th is
includes defining
the culture of the
company and developing and facilitating
systems that reinforce that culture. Cross
has worked in the construction and real
estate business for over 30 years. He joined
the 96-year-old construction company as
president in November 2015 as part of a
leadership succession plan.
Cross is proud of helping the company
grow by more than 40 percent in the last
three years and managing it through a
global pandemic. He’s also proud that the
company has ranked high on the Journal’s
list of Fastest Growing Companies four of
the last fi ve years. He has led a manage-
ment transition, implemented a success-
ful rebranding and brought innovative
technologies and approaches to Mowery.
Another accomplishment that’s he’s proud
of is starting a new division of Mowery, the
special projects group.
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13POWER
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Congratulations to Jay Sidhu, named to the Power 100.
Throughout his career and during these challenging times, Jay has encouraged
innovation and provided outstanding vision, guidance and decisions that propel
Customers Bank forward to become the very best it can be.
His commitment doesn’t end there. Customers Bank continues to demonstrate
unsurpassed dedication with vital services and support for customers, businesses
and the communities it serves through the global pandemic.
We salute you Jay, for everything you do.
customersbank.com
Reinventing the future, every day.
Th e most important life lesson he’s
learned: What others think about you is
none of your business!
Cross and his wife have fi ve children
and most of their time is spent with family.
He enjoys time at the beach with activities
that include boating and spending time on
jet skis. He also enjoys home renovation
projects.
JOY DANIELS
Broker/Owner
Joy Daniels Real Estate Group Ltd.
Daniels is a listing specialist who works with sellers to
achieve their real
estate goals while
helping them to
understand their
home’s value and
the current local
market. She negoti-
ates contracts and contingencies, includ-
ing inspections, fi nancing and appraisal
issues. Daniels is also involved with video
blogging, marketing, and mentoring and
training others.
She became a licensed real estate agent in
1988 and a full time agent in 1992.
Joy Daniels Real Estate was launched
in 2010. Daniels is proud that she’s built a
brand with a unique concept: all the agents
have a specialty. Th rough its Joy Cares ini-
tiative, the company supports numerous
community organizations. Th e real estate
group recently launched a new division,
Team Select.
Th e most important life lessons Daniels
has learned include realizing that every ad-
versity carries with it the seed of an equal or
greater benefi t. “I choose joy in disappoint-
ing situations, and I know to speak calmly to
a frustrated client or vendor,” she said.
She loves the beach, boating and sun as
well as bike riding, puzzles and snuggling
with her cats. However, spending time and
dinner with her husband is always a fi rst
choice.
DENNIS DAVIN
Secretary
Pennsylvania Department of Community
and Economic Development
As DCED secretary, Davin leads the c o m m o n –
wealth’s efforts to
support business
growth, strengthen
the workforce and
revitalize commu-
nities across Penn-
sylvania. He over-
sees DCED’s $1.6 billion investment in
community and economic development
projects since 2015, serving nearly 13
million Pennsylvanians. He also serves
as chairman for several authorities and
boards including the Ben Franklin Tech-
nology Development Authority (BFTDA),
the Commonwealth Financing Authority
(CFA), Pennsylvania Industrial Develop-
ment Authority (PIDA), and the Pennsyl-
vania Economic Development Financing
Authority (PEDFA).
Davin was appointed to serve as DCED’s
secretary in January 2015 by Gov. Tom Wolf.
MARK X. DISANTO
CEO
Triple Crown Corporation Inc.
Triple Crown is a builder, land develop-er and property
management com-
pany. It was found-
ed in 1977 by Alex
DiSanto, who later
sold the company to
his sons John and
Mark. As CEO, Mark
DiSanto is responsible for acquisitions and
community approvals to achieve the com-
pany’s vision of expanding its markets as a
high quality, best value real estate services
provider. DiSanto also guides the company
using the strategic growth plan. Other areas
of responsibility include focusing on the
company’s current strengths and looking
for tomorrow’s opportunities to ensure
continued growth, enjoyable careers and
fi nancial success.
DiSanto has worked with Triple Crown
for 30 years. His career at the company
began after he graduated from Villanova
University. He worked for a year at Triple
Crown, then went back to school to earn a
law degree from University of Toledo Col-
lege of Law. He later earned a master’s from
Columbia in real estate development.
DiSanto is proud of Triple Crown
for winning the Tri-County Regional
Planning Commission’s Dauphin County
Premier Project Award for Blue Ridge
Village, a mixed-use redevelopment of
the former Blue Ridge Country Club
on Linglestown Road in Lower Paxton
Township. The project provides housing,
retail, medical and work opportunities
and was the winner in the “Growing Our
Communities” category.
He shared several life lessons. If you plan
to build a tall house of virtues, you must
fi rst lay deep foundations of humility. Be
humble and listen, really listen. Don’t start
formulating your answer when another
person starts talking. Listen, take it in,
digest the information, and then respond.
You learn more by listening than talking.
Work hard, always stand by your word, stay
positive, and good things will happen to
you and your company.
DiSanto enjoys working out, playing ten-
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14 POWER
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Success is defined by hard work and tireless
commitment. It’s measured by achievements that
go beyond the bottom line. And it’s rewarded by the
recognition of your peers for a job well done.
Baker Tilly congratulates John Nealon on being
named to this year’s Central Penn Business
Journal’s Power 100 list.
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nis and ping pong and riding a bicycle. He
rode a bike across the United States in 45
days. Traveling, fi shing and hunting are
some of his favorite hobbies. “I work hard
and play hard. Most of all, I love spending
time with my family, especially my grand-
children,” he said.
FRANK E. DITTENHAFER II
President
Murphy & Dittenhafer Architects
As president of Murphy & Dittenhafer, he is respon-
sible for the design
and management of
the fi rm’s projects
focused on adap-
tive reuse, historic
preservation, higher
education, housing,
faith-based structures, interiors and plan-
ning. Under Dittenhafer’s leadership, the
fi rm’s design excellence has been recog-
nized every year since 1993 by American
Institute of Architects chapters in Pennsyl-
vania and Maryland.
Dittenhafer, whose professional qualifi –
cations include FAIA and LEED AP, was one
of the founders of Murphy & Dittenhafer
Architects in 1985.
DAVID DIX
Co-founder & CEO
Luminous Strategies
Dix leads the strategic visioning as well as the day-to-
day operations of the
firm’s government
relations division. At
both the state and
federal level, he man-
ages client needs by
advising corporate,
non-profi t, educational and governmental
stakeholders how to navigate the political
and legislative process. He strives daily to de-
velop innovative approaches to civic engage-
ment, advocacy and government relations.
He has been with the fi rm since its incep-
tion in 2010.
HEYWARD DONIGAN
CEO
Rite Aid Corporation
Donigan joined Rite Aid as CEO in S e p t e m b e r
2019. Previously she
served as president
and CEO of Sapphire
Digital (formerly Vi-
tals), which provides
consumers, health
plans and providers
with a full suite of tools, including provider
selection/provider reviews and cost cal-
culators, that help consumers make smart
health decisions. Before that she was presi-
dent and CEO of ValueOptions, an inde-
pendent behavioral health improvement
company. Donigan also served as executive
vice president and chief marketing offi cer at
Premera Blue Cross.
EUGENE J. DRAGANOSKY
President & CEO
York Traditions Bank
Draganosky provides leadership for the bank’s strate-
gic, operational and
fi nancial activities.
He works closely
with the board of
directors and ex-
ecutive team to ac-
complish the bank’s
goals and objectives for employee engage-
ment, client experiences, shareholder val-
ue, community support and risk manage-
ment. “It is a true privilege to serve our many
stakeholders,” he said.
He has served as president since 2015 and
as CEO since 2017.
“While much has changed in my 35-plus-
year career, the fi nancial services sector con-
tinues to serve as the lifeblood of commerce.
It is gratifying to know that I have played some
role in helping to make a diff erence in the lives
of many personal and business households in
central Pennsylvania,” Draganosky said.
He said he’s learned that happiness and
fulfi llment drive success. “Th e Happiness
Advantage” author Shawn Achor notes,
“Happiness is the precursor to success,
not merely the result.” “I periodically fall
into the trap of cynicism and have to re-
evaluate my mindset, but I always come
back to believing in the power of positivity.”
Draganosky said.
He enjoys outdoor activities, especially
hiking, fi shing and hunting. Over the past
few years, he’s also spent more free time
off -road driving and navigating over rough
terrain. “I love exploring new places, the
challenge of overcoming physical and men-
tal barriers, and the ultimate experience of
participating in nature,” Draganosky said.
FRANK EICHELBERGER
President & CEO
Lobar Inc.
Eichelberger began his career at Lo-bar as a project
manager in 1993.
He was named cor-
porate secretary in
2002 and president
in January 2011.
Lobar was found-
ed as a commercial
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15POWER
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building contractor by Lloyd and Barbara
Eichelberger. It continues to be a family
owned and operated business with fi rst-,
second- and third-generation family mem-
bers serving at the company.
MARGEE M. ENSIGN
President
Dickinson College
Ensign became Dickinson’s 29th presi-dent on July 1,
2017. Before com-
ing to Dickinson
she served for seven
years as president of
the American Uni-
versity of Nigeria
(AUN), a young, pri-
vate university in Yola, Nigeria based on the
U.S. model of university education. Th ere,
she oversaw the building of the university’s
sustainable campus, the creation of the fi n-
est digital library on the continent and a very
active program of community engagement
and humanitarian assistance.
Ensign has been internationally recog-
nized for her pioneering work at AUN. She
received the 2011 African Leadership Award
in Educational Excellence, granted by Lon-
don-based African Leadership Magazine.
Rotary International made her a Paul Harris
Fellow in 2012. In 2014, Ensign received the
African Leadership Award from the World
Centre for Corporate Social Responsibility.
In 2015, the Women of Jama’atu Nasril Islam
in Nigeria recognized her for her contribu-
tions to leadership, philanthropy and the
education of women and girls in northeast
Nigeria. She also received honorary degrees
from the American University of Paris and
her alma mater New College for her peace-
building and humanitarian work.
GARY R. ERB
President
Ira G. Steff y & Son
Ira G. Steff y has been providing depend-able, quality steel
fabrication and
erection since 1976.
Th e Ephrata-based
company originally
off ered general re-
pair and industrial
welding but has ex-
panded to provide structural steel and mis-
cellaneous metals for projects of all sizes
including schools, hospitals, offi ce build-
ings, retail stores and warehouses.
As president, Erb’s primary duties are to
provide Ira G. Steff y with customers with
quality service and a quality product on
every project. Th e company is also commit-
ted to providing its employees with steady
work with competitive wages and “the best
benefi t package in our industry.”
Erb has been with the company for 24
years, the last 10 as president. He’s proud
of maintaining a high level of integrity in an
industry where that can be very challenging.
“Put God fi rst in all you do and everything
else will take care of itself ” is the most im-
portant life lesson he’s learned.
His favorite pastime is hunting mature
whitetail buck. “Most of the time they out-
smart me, but every now and then I get
lucky,” Erb said.
JOHN FETTERMAN
Lieutenant Governor
Commonwealth of Pennsylvania
Fetterman’s duties as lieutenant gov-ernor include
oversight of the
Pennsylvania Board
of Pardons and pre-
siding over the Sen-
ate of Pennsylvania.
He has been in
the position for two
years. He was sworn in as the common-
wealth’s 34th lieutenant governor Jan.
15, 2019.
Fetterman is most proud of two profes-
sional accomplishments while serving as
lieutenant governor, both involving the state
Board of Pardons: “Th at Dennis Horton and
Lee Horton will not die in prison as innocent
men, and that Reid Evans and Wyatt Evans
will not needlessly die in prison, and that
their freedom is allowing the victim’s family
to fi nally heal,” he said. Both sets of brothers
were serving life sentences for murder. Th eir
sentences were commuted by Governor
Wolf on Feb. 11. A commutation of a life
sentence means a reduction of the sentence
to life on parole.
Fetterman said the most important life
lesson he’s learned is that compassion is
always the right side of history.
For fun he spends as much time as pos-
sible with his family. “It’s by far the most
important thing in my life,” Fetterman said.
SCOTT E. FRITZ
President & CEO
Pennian Bank
His duties include strategic leader-ship of Pen-
nian Bank and First
Community Finan-
cial Corp.; finan-
cial management ;
strategic planning;
strategic thinking,
leadership and di-
rection; executive leadership and people
management, and business development
and customer agenda/value propositions.
Fritz is also responsible for audit, risk man-
POWER 100
Continued from page 14
See POWER 100 on page 16
Congratulations David Holmberg for being named to the
Central Penn Business Journal’s Power 100 list.
You lead. You inspire. You change lives.
Highmark Blue Shield is an independent licensee of the Blue Cross and Blue Shield Association.
16 POWER
100
POWER
100
From: The Dedicated Strategic
Consulting Partners Team
To: Monica Gould, CMC, MBA
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Central Penn Business Journal Power 100
CONGRATULATIONSCONGRATULATIONSCONGRATULATIONS
RiverviewBankPA.com | 1-888-765-7551
Member FDIC
INSPIRING OTHERS
THROUGH LEADERSHIP
BRETT D. FULK
President and CEO
agement and compliance, and corporate
and social responsibility.
Fritz has been with Pennian Bank for 14
years and has served as president and CEO
for the last nine.
He is proud that the 157-year-old com-
munity bank has tripled in assets since
he joined it in 2007. “We have been able to
successfully grow in an organic, sustainable
manner while never losing sight of our ob-
ligations to our stakeholders, who include
our shareholders, employees, customers
and community,” Fritz said.
Important life lesson he’s learned:
Failure is good. “We try so hard in life to
avoid failure, but it is real evidence that
we’ve had the courage to try. If you avoid
failure, you avoid taking action. Expect
and accept that failing is part of life’s ex-
perience. Learn from it, grow from it and
move on,” he said.
Fritz enjoys traveling. “Travel expands
you. Travel makes life more interesting.
It is an experience that I can share with
my family and friends. It expands you,
enlightens you and teaches you about
the variety of people, lifestyles and cul-
tures across our nation and around the
world,” he said.
BRETT FULK
President & CEO
Riverview Bank
Fulk is the president and CEO and a direc-tor of Riverview
Financial Corp. and
Riverview Bank.
He was appoint-
ed CEO in January
2019. Fulk has been
the president and a
director of Riverview
Financial and Riverview Bank since 2015.
He joined the bank as chief operations of-
fi cer in 2011. Fulk is a fi nancial services
veteran with over 29 years of experience in
the banking industry.
BRIAN FUNKHOUSER
President & CEO
Buchart Horn Inc.
Funkhouser manages overall operations of the architec-
tural and engineer-
ing fi rm’s domestic
offi ces in seven states
and its offi ce in Ger-
many. He is respon-
sible for policy and
operational activities
and guidance and for leading the company in
providing high-quality, responsive engineer-
ing and architectural services to a wide range
of governmental, industrial, institutional,
commercial and private clients.
He has been with Buchart Horn for 40 years.
ROXANNA GAPSTUR
President & CEO
WellSpan Health
As president and CEO, shaping organi-zational culture
and driving strat-
egy rise to the top of
the list of duties. “At
WellSpan, we are rei-
magining healthcare
as a trusted partner
leading in value, and
each day, this vision is brought to life by
inspiring 20,000 talented team members to
achieve our goals,” Gapstur said.
She is in her third year serving as presi-
dent and CEO at WellSpan. She has over 25
years of healthcare leadership experience
working in group practice, academic and
integrated healthcare systems, including
health plan operations.
Gapstur said becoming the leader of
south-central Pennsylvania’s most compre-
hensive care delivery system has been the
highlight of her career. “I am immensely
proud of the way WellSpan has served the
needs of our communities during the CO-
VID-19 pandemic while our physicians and
teams remain committed to excellent clinical
care and exceptional experience,” she said.
An optimist, she sees challenges as op-
portunities. During diffi cult times, Gapstur
said, she channels advice from her mom
and grandmother: “Never give up.” “It has
guided me to persevere, both personally
and professionally. It has shaped who I am
and the lens I use to evaluate situations. I
have a strong sense of resiliency because of
my internal compass,” she said.
She enjoys hiking the beautiful trails in Penn-
sylvania, reading and traveling. She and her
husband have four daughters and three grand-
children who live in Minnesota and Tennessee;
even though the family is separated by distance,
they use technology to stay connected. Gapstur
said she starts and ends her day playing with the
family’s miniature pinscher, Jack.
CHARLIE GEROW
CEO
Quantum Communications
Gerow says he’s honored to lead a team of seasoned com-
munications experts
who promote good
public policy in en-
ergy, transportation
and health care.
He has been with
the company more
than 20 years.
POWER 100
Continued from page 15
See POWER 100 on page 17
17POWER
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POWER
100
©PSECU 21301940 0321
CONGRATULATIONS TO
GEORGE RUDOLPH
POWER 100
George, we are proud to work alongside of you. Your commitment to the
credit union’s philosophy of “people helping people” is why our members
– and our communities – achieve more. Thank you for serving both the
membership and the places in which we live. You are an inspiration to us all.
F R O M Y O U R T E A M A T P S E C U
Gerow has appeared on CBS-21 WHP-
TV several times each week for more than
20 years. “In television, just a few years is
a lifetime, so my longevity in television
broadcasting is something of which I am
proud,” he said.
Important life lessons: To always tell the
truth, even when it’s uncomfortable to do.
Building trust is essential in all of life. Trust
is hard to build and easy to lose.
As a former athlete Gerow still loves
sports, both as a spectator and participant.
“Until my body told me ‘no more’, I played
basketball and ran competitive 5K and 10K
races,” he said. He also loves to read and
travel. “Visiting all 50 states has been an
amazing experience,” he said.
MONICA GOULD
President and Founder
Strategic Consulting Partners
Gould oversees the management con-sulting firm’s
operations, busi-
ness development
and client relations.
She also serves as
the project sponsor
and project lead-
er on some of the
firm’s client engagements.
She founded the company in 1994. She
said for the fi rst decade, she was a “solopre-
neur and the sole contributor to our fi rm.
Demand for its services precipitated the
growth of the fi rm.”
Gould is proud that Strategic Consult-
ing Partners was named SBA Woman-
Owned Business of the Year for Eastern
Pennsylvania in 2018. Gould said this
honor solidified the company as a nation-
ally recognized, award-winning manage-
ment consulting firm.
Life lessons she would like to share: If
at first you don’t succeed, try, try, again.
She said perseverance, tenacity and grit
are required of small business owners
to ensure success and longevity. Gould
added that hard work, excellent service
and care for its clients and a commitment
to quality are what set Strategic Consult-
ing Partners apart. “Our firm has grown
and evolved over time the past 26 years
by learning and adapting our services to
meet the current market and industry
needs,” she said.
She enjoys gardening and taking long
walks on the family’s farm. “Being out-
doors, getting my hands in the dirt,
watching plants grow, and enjoying the
fruits of our labor is invigorating. My
walks center me and provide me with a
connection to the earth that is truly spiri-
tual,” Gould said.
FRANKLIN GREINER JR.
President
Greiner Industries, Inc.
In April 1976, Frank Greiner started his own welding business in a one-car
garage in Mount Joy. Th e business was
initially named Frank Greiner Welding
& Fabricating. Th anks to his talent and
unwavering commitment to making qual-
ity products, Greiner’s business quickly
grew. Within two years, he constructed a
30,000-square-foot shop along PA Route
230 near Elizabethtown. It housed welding,
custom metal fabrication and millwright-
ing operations. Blasting and painting facili-
ties soon followed.
Greiner purchased his first crane in
1978 to provide turnkey service to his
customers. The hydraulic crane, a 15-ton
Galion, allowed the company to greatly
expand its millwrighting capabilities. In
August 1979, the company was incor-
porated and the name was changed to
Greiner Industries Inc.
By 1986, the company was again on the
move. Greiner Industries purchased more
than 45 acres along PA Route 283 between
Mount Joy and Elizabethtown. An offi ce,
machine shop and 60,000-square-foot fab-
rication shop were erected. Th is was soon
followed by another steel bay to fabricate
girders, duct work, pressure vessels, stor-
age silos and countless other customer
products. In 1989, a separate blasting and
painting facility and a vehicle maintenance
garage were added. Th roughout the 1990s
and early 2000s, Greiner Industries con-
tinued to expand its capabilities and grow
its number of loyal clients. Today, Greiner
Industries is the largest job-shop structural
steel fabrication company in the area.
PHILIP GUARNESCHELLI, FACHE
President
UPMC Pinnacle
Guarneschelli’s primary duties include e n c o u r a g i n g ,
supporting and
leading employ-
ees in achieving
UPMC’s mission,
vision and values.
He also has the vi-
tal job of listening to
patients, their family members, and people
in the community to ensure that UPMC is
meeting their needs.
He’s been in his current position since
2017, but he’s seen the system grow from
Capital Health System days to UPMC.
Guarneschelli said he is most proud of the
successful integration with UPMC, “allowing
us to bring UPMC’s world-class, life-chang-
ing medicine to the communities we serve.”
Th rough the integration, the medical services
POWER 100
Continued from page 16
See POWER 100 on page 18
18 POWER
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POWER
100
For sponsorship information, contact shuettner@bridgetowermedia.com
cpbj.com/event/diversity-inclusion-summit
Panelists include:
Kimberly Brister, Wellspan Health, Senior Director of Talent Acquisition, Diversity and Inclusion
Aaysha Noor, Head of Diversity and Inclusion, The GIANT Company
Lynette Chappell Williams, Penn State Health, Chief Diversity Officer
Robert Weishaar, Jr. Co-Chair, McNees Energy & Environmental Law Practice Group
8:45 Welcome
11:30 Wrap Up
9:00 Keynote Sara Taylor, President and CEO
Positive Steps Consulting and Taylor-Jones Enterprises
Includes small group breakouts and Q&A.
10:30 Panel Discussion, local business leaders sharing
their Diversity, Equity and Inclusion strategy and
experience.
Diversity, Equity
& InclusioN
The Central Pennsylvania community has a critical role in the space of Diversity, Equity and
Inclusion.
At te n d t h i s o n l i n e s u m m i t to t a ke t h e f i r s t s te p s i n c re at i n g yo u r co m p a ny ’s D E I b u s i n e s s s t r ate g y a n d m a ki n g e q u i t a b l e
a c t i o n a p r i o r i t y to i m p rove b u s i n e s s o u tco m e s.
The keynote and panel will focus on the 4 A’s:
Action, Authenticity, Accountability and Acknowledgement.
Eve r yo n e h a s a ro l e, t a ke t h e f i r s t s te p to co m m i t t i n g to yo u r s
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Sara Taylor
Lynette Chappell WilliamsKimberly Brister
Aaysha Noor
K E Y N O T E S P E A K E R :
F E AT U R I N G :
Robert Weishaar, Jr.
Capital Blue Cross
First National Bank
Penn State Harrisburg
Presenting Sponsor: Leadership Sponsor: Suppor ting Sponsors: Patron Sponsors:
The Conservative
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congratulations
CHARLIE
GEROW
provider has been able to expand services,
upgrade facilities and add providers to better
serve central Pennsylvania residents.
He shared several life lessons: “I try to
model a positive mood and tone for every-
one to follow. If things go off track, as they
will, I return to the basics and set a solid
direction. It’s also important to make time
for the people you care about.”
In addition to spending time with his fam-
ily, Guarneschelli enjoys coin collecting, clay
shooting, and fi shing. “I fi nd that I am very
present and relaxed when I’m engaged with my
hobbies. It’s a great way to recharge,” he said.
PAMELA GUNTER-SMITH
President
York College of Pennsylvania
Gunter-Smith provides vision and lead-ership to all ar-
eas of York College
of Pennsylvania. Th e
private, four-year
college is known for
its focus on experi-
ential learning and
community engage-
ment. It serves 4,000 undergraduate and
300 graduate students in more than 70
baccalaureate majors and 20 graduate and
professional programs.
She has served as president since July
1, 2013.
Gunter-Smith is very proud of the relation-
ship York College has established with the local
community. “We have created programs – for
instance, through our Center for Community
Engagement and the Knowledge Park – that
broaden our students’ education by providing
experiential learning opportunities and impact
the community in positive ways,” she said.
Success in anything requires the follow-
ing three ingredients, which she refers to as
CPR: courage, passion, and resilience.
“I enjoy the many activities that are off ered
on our beautiful campus, particularly those
that allow me to spend time with students. I
also maintain my physical fi tness and mental
health by working out several times a week
with a personal trainer and being part of the
Peloton community,” Gunter-Smith said.
NORA HABIG
Regional President, Central
and Western Pennsylvania
M&T Bank
As regional president, Habig directly oversees bank-
ing in the central and
western Pennsylva-
nia region, where
the bank has more
than 700 employees.
She represents M&T
Bank to local non-
profi ts, industry groups and government.
She said M&T is committed to positively
impacting the communities it serves and
the lives of its customers.
Habig has been with M&T for 29 years
and has served as regional president since
October 2020.
She said she was proud and excited to be
named regional president. “It felt awesome
to achieve this goal, especially as a woman
in banking. My journey helps me under-
stand, even more, the importance of being
your best self every day – not just for me, but
for my whole team,” Habig said.
“To say that I was thrilled would be a to-
tal understatement.! What made this news
even more exciting is when I called to tell
my dad about my promotion. He was so
proud that he cried. I am eternally grateful
that he lived long enough to share in this
experience with me … I will cherish that
moment, always.”
She said life lessons happen every day,
and here are a few to consider: Never
underestimate the power of “please” and
“thank you,” and you attract more with
honey than with vinegar. It’s important
to remember that success and failure are
great teachers and provide the opportunity
to be the best version of yourself. “I want to
learn to always be my authentic self and be
open to learning from all the great people
that surround me,” Habig said.
She loves spending time with her family,
especially when they can spend time to-
gether in Bethany Beach, DE. “I have spent
33 wonderful trips around the sun with my
husband, Michael, and we are extremely
proud of our grown children, Erin and Wil-
liam. Our black lab, Casey, holds a special
place in all our hearts. When I’m not taking
in the salt air, I fi nd happiness in craft related
hobbies, and notably quilting,” Habig said.
MATTHEW HARTZLER
President
Warfel Construction
As president, Hartzler sets the direc-tion for Warfel
Construction and
provides leadership
for its team.
He has worked at
Warfel for 25 years
and served as presi-
dent for the last nine.
Hartzler is extremely proud of Warfel’s
commitment to safety, and the care that
everyone on the team takes to ensure their
coworkers are also safe. From October 2008
through June 2015, Warfel Construction did
not have a single lost time incident – a total
of 2,417 days.
An important life lesson he’s learned:
Your word is gold. Do what you say, say
what you do.
POWER 100
Continued from page 17
See POWER 100 on page 19
19POWER
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Hartzler enjoys activities with his family, in-
cluding vacations, hunting, fi shing, shopping
and attending sporting events. “I realize life is
short and I work a lot, so when I have free time,
I enjoy having fun with my family,” he said.
ERIC HAUSER, RPH
President
Organic Remedies
Hauser’s primary duties involve support-ing the Organic
Remedies team in
their eff orts to im-
prove the overall
wellness of patients
by cultivating, man-
ufacturing and dis-
pensing aff ordable
high quality medical marijuana products,
while continuing the advancement of medi-
cal marijuana research through innovations
in genetics, dosage form development, col-
laborative research and patient care.
Organic Remedies was founded in 2017
by a small group of Pennsylvania industry
leaders, and he was named president of the
company at that time.
He said the entire leadership team at
Organic Remedies is extremely proud of
the company’s passionate team, whose
sole purpose focuses on helping patients
improve their lives through the medicinal
benefi ts of medical marijuana, while also
advancing the therapeutic science of can-
nabis. To date, the company has provided a
fulfi lling livelihood for 160 employees who
are supporting more than 20,000 patients.
Hauser said the most important life les-
sons were instilled in him at an early age by
his parents. “I did not know it at the time,
but looking back on it now, they supplied me
with the blueprints for success. Success not
defi ned by popularity or fi nancial means, but
rather measured by a person’s character, em-
pathy and willingness to help those in need.
My passion is working with my team as we
help people improve their health and well-
ness through medical marijuana,” he said.
“For me, this is my fun. But when I do take
time to relax, I enjoy spending time with my
family, friends, and my ‘fur babies’, Cooper
and Trinity,” Hauser said.
MICHAEL HELFRICH
Mayor
City of York
Helfrich was elected mayor on Nov. 8, 2017 and took
the oath of office
Jan. 2, 2018. Previ-
ously, he served as
a council member,
beginning in Janu-
ar y 2012. During
his tenure on the
council, he served as vice president and
obtained the presidency on Nov. 9, 2016
following the resignation of the seated
council president.
A local historian, Helfrich is living in the
oldest owner-occupied home in the City of
York, the Cookes House, also known as the
Tom Paine House, which was built in 1761.
Th e research he completed on his house,
and Th omas Paine’s time in York in 1778,
developed into a published work titled “Th e
Question of Th omas Paine at York Town,”
and was published in the Journal of York
County Heritage, vol. 2, 2011.
In his spare time Helfrich enjoys spend-
ing time with his young daughter, Lily,
fi shing in Codorus Creek, eating at Central
Market, and listening to and playing music
around the community.
TIM HENRY
President & CEO
F&M Trust
Headquartered in Chambersburg, F&M Trust was
founded in 1906.
Henry joined the
community bank
as president and
CEO in February
2016. He previously
served for nearly
three years as senior vice president at
Susquehanna Bank/BB&T.
JOHN J. HERMAN
CEO
Penn Medicine Lancaster General Health
Herman joined Penn Medicine Lancaster General Health
as its CEO March 1,
2021. He brings a deep
appreciation for both
Penn Medicine and
LG Health’s historic
legacies as pioneering
healthcare organiza-
tions. He also has a commitment to community
care and experience developing high reliability
organizations and productive partnerships to
provide personalized care alongside options
for the most advanced medicine.
Herman previously served as CEO of the
North Shore Region for the Ochsner Health
system in New Orleans, LA. He also served as
CEO for the 767-bed Ochsner Medical Cen-
ter, Ochsner’s fl agship academic Magnet-
designated hospital in New Orleans. He had
been with Ochsner Health since 2014.
“As I start at LG Health, I fi nd myself im-
mensely proud to be part of the Penn Medi-
cine Lancaster General Health family. LG
Health’s long-standing traditions of provid-
ing exceptional patient care, while keeping a
keen eye to continuous improvement, have
built an impressive roadmap for LG Health’s
journey to high reliability,” Herman said.
POWER 100
Continued from page 18
See POWER 100 on page 20
®
Mid Penn Bank extends its thoughts and prayers
to all of those affected both profesionally and
personally by the COVID-19 pandemic.
®
Mid Penn Bank extends its thoughts and prayers
to all of those affected both profesionally and
personally by the COVID-19 pandemic.
®
Mid Penn Bank extends its thoughts and prayers
to all of those affected both profesionally and
personally by the COVID-19 pandemic.
®
Mid Penn Bank extends its thoughts and prayers
to all of those affected both profesionally and
personally by the COVID-19 pandemic.
®
Mid Penn Bank extends its thoughts and prayers
to all of those affected both profesionally and
personally by the COVID-19 pandemic.
20 POWER
100
POWER
100
RONALD L. HERSHNER
Managing Partner
Stock and Leader LLP
In his role as managing partner, Hershner’s duties include
inspiring and moti-
vating colleagues to
achieve their best in
serving the fi rm’s cli-
ents and its commu-
nity. Other duties are
to constantly think
strategically, and to focus on the long term and
prepare the fi rm for changes and challenges.
He has been with the fi rm for 10 years and
has focused his practice in the areas of busi-
ness transactions, estate and business plan-
ning, and commercial real estate acquisitions,
leasing and fi nance. Although he is stepping
down from the managing partner role Feb. 28
and returning to full-time practice, he will re-
main on the fi rm’s management committee.
Th ere are many professional accomplish-
ments that he’s proud of: Counseling entre-
preneurs from start-up to sale or succession,
some through three generations. Supporting
the York County Industrial Development Au-
thority (YCIDA) and York County Economic
Alliance (YCEA) in the Yorktowne Hotel
project. Numerous downtown development
projects for public and private developers.
He said the most important life lesson
is “what George Bailey learned in ‘It’s a
Wonderful Life’: You never fully realize how
many lives you touch and infl uence.” “Th e
greatest reward comes from mentoring and
helping others and then seeing them suc-
ceed. So always model the behavior you
wish to see in others,” Hershner said.
For fun he enjoys traveling to new places
(can’t do that now); staying in historic hotels
(can’t do that now); eating in great restaurants
(can’t do that now). But reading, writing and
instructing on topics of American history – can
do that now! “I am passionate about history,
love to write and love to teach,” Hershner said.
DAVID HOLMBERG
President & CEO
Highmark Health
Holmberg is helping to shape the future of the fast-evolving
health care industry.
He has proactively
and regularly engaged
with trade associa-
tions, regulators, peer
organizations, strate-
gic partners, and gov-
ernment entities, both regional and national,
to resolve critical health care issues and ensure
the equitable treatment of Highmark Health’s
patients, policyholders and business customers.
Holmberg joined Highmark Health in
2007 and was named president and CEO
in May 2014.
Unlike many of his peers, who are ten-
ured doctors or career health care executives,
Holmberg is applying his retail industry exper-
tise and proven customer-centric concepts to
the health care experience, all designed to
disrupt the industry by delivering lowercost,
higher quality care on consumers’ terms.
PATRICIA A. “PATTI” HUSIC
President & CEO
Centric Bank/Centric Financial Corp.
Her chief goal continues to be hiring di-verse, motivat-
ed, ambitious people
who believe in the
culture of the “Th e
Centric Bank Way”
and are focused on
delivering personal-
ized, customer-fi rst
solutions for the small business community.
Husic also leads the bank’s executive team,
whose goals are strategic vision, organic
growth and community impact, and is an
unrelenting voice for small business.
She has served as president and CEO
since February 2007, when she and three
others founded the bank.
Husic is one of a handful of female bank
founders in the country. “Starting a bank
requires the DNA of an entrepreneur and
the grit of a mountain climber. Th at’s why
I’m passionate about fi nancing our entrepre-
neurial ecosystems. In a bold move, I risked
my fi nances and my future to found and grow
Centric Bank from a de novo bank in 2007 to
a $1.3 billion community champion and Best
Banks to Work For in 2021,” she said.
Her mantra is “Never give in,” from a
speech by Winston Churchill. “My immi-
grant grandmother’s strength and resilience
are an inspiration to me. Th e pandemic has
reinforced that it’s essential for a leader to be
fearless and navigate challenging moments
with courage and faith,” Husic said.
When it’s time to recharge, nothing beats
a sun-soaked day by the ocean with a new
book at her fi ngertips. “If I can’t travel with
my loved ones to a tropical destination,
then I relax in my backyard oasis. I also love
a good workout on my Peloton,” she said.
BRIAN F. JACKSON
Chair
McNees Wallace & Nurick LLC
Jackson said he is privileged to lead an organization of
230 team members
working across three
states and nine of-
fi ces. Th e organiza-
tion, founded upon
the provision of legal
services, also off ers a
variety of other professional services to cli-
ents through various ancillary businesses.
Jackson has been with McNees for 26 years
LEADERSHIP SPONSOR:FOUNDING PARTNERS: PROGRAM PARTNER:
REGISTER YOUR COMPANY TODAY!
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great place to work?
We want to know!
Registration Deadline: June 25, 2021 • Visit cpbj.com/event/best-places-work-pa to register.
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kroberts@bridgetowermedia.com
# Bes t Pla ces PA
Save the date for our online awards celebration:
December 2, 2021
The Best Companies to Work for in Pennsylvania is a survey and
awards program dedicated to identifying and recognizing the state’s best
employers and providing organizations with valuable employee feedback.
POWER 100
Continued from page 19
See POWER 100 on page 21
21POWER
100
POWER
100
OUR POWER IS IN OUR PEOPLE
Bob Scaer, PE
Chairman and CEO, Gannett Fleming, Inc.
Charlie Beauduy, AIA, FCSI, CCS, CCCA, LEED AP
President, Gannett Fleming Architects, Inc.
From your friends at
Proudly Headquartered in Camp Hill, Pennsylvania
800.233.1055 | Offices Worldwide | gannettfleming.com
Proud to salute Bob and Charlie
for their vision, leadership, and ability
to inspire success and spark innovation.
and has served as chair for two years. He is the
ninth person to serve as managing partner/
chair since the fi rm’s inception in 1935.
“2020 was a crazy year for the world, our
team members and our organization. I’m
most proud that we were able to successfully
navigate these challenges by continuing to
serve clients eff ectively and pragmatically
and that our bonds with our clients and with
each other grew stronger,” Jackson said.
“As an attorney and as a servant leader, the
two most important questions that you can ask
your clients and your team are ‘How are you
doing?’ and ‘What can I do to help you?’, he said.
Jackson has coached youth basketball
for the past decade. “While I very much
enjoy the game of basketball, the true joy of
coaching is the small impact that you may
have on a player’s growth and development
as a good teammate and a disciplined and
confi dent individual,” he said.
BRADLEY JONES
President & CEO
Harristown Development Corporation
Founded in 1974, the nonprofi t de-
velops and manages
new and existing real
estate development
projects designed to
revitalize downtown
Harrisburg. Since its
inception, Harristown has been involved in
projects totaling more than $500 million in the
core of downtown that paid over $200 million
in real estate taxes to the various jurisdictions.
As president and CEO, Jones oversees the
management of the fi rm’s multifaceted real
estate development enterprises, which include
more than 2 million square feet of real estate in
Harrisburg’s downtown.
Jones has been with Harristown for over
20 years in multiple roles and has been
president since the beginning of 2015.
He is most proud of the organization’s
team of more than 120 employees. All of
them, he says, emphasize customer service,
quality development projects and a com-
mitment to excellence every day.
Th e most important life lesson he’s
learned is to be passionate and enthusiastic
about your work.
Jones said he enjoys the outdoors, includ-
ing hiking, biking, running, kayaking and
swimming. “I love to stay active but also
enjoy travelling, discovering new places,
and reading,” he said.
JONATHAN KINSLEY
President & CEO
Kinsley Construction
Founded in the 1970s, Kinsley
Construction is a
diversified master
builder operating
throughout the mid-
Atlantic region. Th e
company’s divisions include building con-
struction, steel fabrication and erection, high-
way and bridge, industrial services, materials
and site work. As president, Kinsley sets the
company’s vision and strategic directives.
He’s been with the company for 35 years, 25 as
president and 3 as president and CEO.
He is proud of creating a company culture
that encourages people to develop their
skills and achieve their career goals.
He said his most important life lesson is
“always do what you say you’re going to do”.
For fun, he enjoys fl y fi shing. “It’s the
only thing I’ve ever done where I lose track
of time,” he said.
JIM KOURY
CEO and Commercial/Residential Realtor
RSR, Realtors LLC
He said RSR has a business model w h e re t h e
existing partners
share in the deci-
sion making and
leadership of the
firm. The partners’
responsibilities in-
clude overseeing
the day-to-day operations in addition to
helping agents reach their goals and be
as successful as possible. Additionally,
members of the leadership team have
their own books of business to maintain
and strengthen.
Koury joined RSR in 2000 as an agent.
Named a partner in 2007, he was selected
as the fi rm’s new CEO in 2018.
He said naming a professional accom-
plishment that he was proud of is easy,
since he is highly motivated, especially in
the last 10 years, to be a mentor to the fi rm’s
agents. “It gives me no better pleasure to
see new agents enter into our business and
see them produce with the same love and
enthusiasm that I have for the real estate
business. Th is certainly includes both my
sons, Jimmy and Jeff , who joined RSR right
out of college,” he said.
“There is an old saying that one does
not appreciate their good health until they
lose it. Well, this certainly hit home for
me after my health setback in 2000. I have
a much deeper appreciation for those
battling health issues and how it affects
their life and the lives of their family and
friends,” he said about the most important
life lesson he’s learned.
Koury plans on hitting the pool again af-
ter COVID-19 is gone, since swimming laps
has always been a pleasure and a great stress
reliever. “However, with most athletic activi-
ties behind me, my real enjoyment is simply
being among family and friends. Whether
vacationing or at simple local gatherings –
the more smiles the better.”
POWER 100
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22 POWER
100
POWER
100
J. GARY LANGMUIR
President & CEO
Wohlsen Construction Company
Langmuir leads Wohlsen’s strategic initiatives and
provides guidance
to the management
team. His passion is
to drive Wohlsen’s
vision of “a relent-
less pursuit of ex-
cellence, ser vice
and results for our clients.”
He joined Wohlsen in 1980 and has
served as president and CEO since 1990. He
has been chairman of the board since 1995.
Langmuir’s dedication and charac-
ter have been recognized with personal
awards. In 2008, he was awarded the Busi-
ness Ethics Award by the Samaritan Coun-
seling Center. In 2017, he was honored with
Lancaster Chamber’s Exemplar Award for
his contributions to the local business com-
munity and his help in improving Lancaster
County’s quality of life.
MARK LAURIELLO
Chairman & CEO
RETTEW
Founded in 1969, RETTEW is a provider of comprehen-
sive integrated engi-
neering and related
consulting services.
Lauriello’s primary
role consists of facili-
tating the creation of
a compelling vision
with corresponding
stretch goals and then inspiring people to
achieve the vision and exceed the goals. “To
be successful at this, it’s paramount to always
be coaching, developing people and creating a
culture that folks embrace,” he said.
Lauriello joined the RETTEW team in
1989 as a project engineer. He became
president in 2004, CEO in 2015 and chair-
man in 2019.
The professional accomplishments
he’s most proud of : helping people suc-
ceed; helping individuals reach heights
they never realized they could reach.
Lauriello shared several life lessons: Al-
ways be honest, especially when it’s hard.
Stay humble and grounded. Treat every-
one with respect and dignity. Remember
that a helping hand or an encouraging
word or just listening means a lot when
people are battling difficult times.
Recently, he said, he and his wife
enjoyed long winter hikes with Captain,
their rambunctious German shepherd.
“It’s a great way to spend time together,
clear the mind, help the body feel pro-
ductive, and to just get outside. Plus, it
keeps Captain from unleashing his en-
ergy in the house,” he said.
DYLAN LISSETTE
CEO
Utz
Lissette’s responsibilities include lead-ing corporate
strategy, directing
operations, inspiring
an action-oriented
culture, and aligning
resources. A focus
throughout his ten-
ure has been driving
growth through inno-
vation and strategic acquisitions. Dylan is also
the main contact for the board of directors and
serves as the public face of the organization.
Lissette has served as CEO for eight years.
He has been with the century-old company
for over 25 years after starting out running
Utz’s outlet store and mail order area.
He is proud of leading a great team of
associates for the last 10 years and ac-
complishing so much together, including
transitioning the family-owned business to
a publicly traded company in August 2020.
“While not always easy to do, fi nd bal-
ance in your life and choose your time
wisely,” he said of the most important life
lesson he’s learned.
For fun Lissette enjoys getting outside
and enjoying sunset cruises with the family.
JEFFREY D. LOBACH
Managing Partner
Barley Snyder LLP
Lobach said he devotes equal time to his two roles. As Bar-
ley Snyder managing
partner, he is the
fi rm’s CEO, respon-
sible for strategic
direction and all op-
erations. He is also a
transactional lawyer
providing counsel to businesses, nonprofi ts
and individuals. He enjoys both jobs.
He has been with Barley Snyder for more
than 30 years and is in his eighth year serving
as the fi rm’s managing partner.
One highlight of his career was the pro
bono asylum project for the “Golden Ven-
ture” refugees – survivors of a shipwreck –
while he was serving as president of the York
County Bar Association. “We helped hun-
dreds of refugees (some of whom are now
part of my family), unifi ed diverse elements
in the community and showcased compas-
sion in central Pennsylvania,” Lobach said.
Th e most important life lesson he’s
learned: It is not about you. It is not about
me. It is about us.
Lobach’s favorite pastimes include
travel and outdoor activities such as
camping, hiking, backpacking and skiing.
He and his family have been fortunate to
have traveled to six continents, 40-some
countries, 50 states and nearly all U.S. na-
tional parks. “These experiences provide
the perfect antidote to any professional
challenges,” he said.
MATT MADDEN
Keller Williams of Central Pennsylvania
Operating Principal
Madden has been in his position for three years. He said
his job is to provide
and support the real
estate fi rm’s associ-
ates with the most in-
novative tools, tech-
nology and resources
to give their clients
the greatest possible
consumer experience. “I ensure our associ-
ates receive the training, tools and opportuni-
ties they need to optimize their business and
enrich the lives of their families,” he said.
He said his proudest accomplishments
are the daily accomplishments. “I am hon-
ored to be a part of a truly collaborative or-
ganization in a highly competitive industry.
We are empowering our associates to think
diff erently and grow their business, and then,
the awesome part of witnessing them paying
it forward to those who follow,” Madden said.
“We become the average of the people
we surround ourselves with. So we must
choose our mentors and those who we go
into business with wisely,” he said of the
most important life lesson he has learned.
For fun, he enjoys spending time with his
family. He and his wife, Katie, are busy with their
three-year-old daughter, Olivia, and the family’s
adopted golden retriever, Amelia. “We enjoy
outdoor adventures, and (in a normal world)
trying new restaurants and travel,” he said.
STEVE MASSINI
CEO
Penn State Health
As the CEO of Penn State Health, Massini has responsibil-
ity for overseeing all
the clinical opera-
tions and adminis-
trative operations
necessary to support
the organization and
its employees.
He’s been CEO
for 18 months and has been with Penn
State Health for six years. Other positions
he has held at Penn State Health include
CFO and CAO.
Massini is proud of being part of a team
that has navigated through a pandemic and
continued to serve patients, employees and
the broader community with minimal dis-
ruption. “I am especially proud of how our
frontline and support staff have managed
through this very diffi cult time,” he said.
An important life lesson he’s learned: that
paying attention to and following simple val-
ues such as kindness, compassion, empathy,
integrity and teamwork can get you through the
tough times. “Practicing the golden rule and
treating people as you would like to be treated
has always served me well,” Massini said.
“Family is very important in my life and I
absolutely love spending time with my grow-
ing family including our newest grandchild.
We love spending time outdoors, especially
time at the beach, fi shing and boating. We are
also big Penn State fans and enjoy football
weekends up at Happy Valley,” he said.
PATRICK MCDONNELL
Secretary
Pennsylvania Department
of Environmental Protection
DEP’s mission is to protect Pennsylvania’s air, land and
water from pollution
and to provide for the
health and safety of
its citizens through a
cleaner environment.
McDonnell has
served as DEP secre-
tary since being nominated by Gov. Tom Wolf
in 2016. His career with DEP spans several
decades, beginning in 1998. Before becom-
ing secretary, he served as the department’s
director of policy.
ED MONBORNE
CEO
RKL LLP
As CEO of RKL LLP, he develops, manages and implements
the fi rm’s strategic di-
rectives. Th is includes
RKL’s strategic plan-
ning process, guided
by the fi rm’s commit-
ment to the collective
success and benefi t of
its team, clients and communities.
Monborne took the helm as CEO on July
1, 2011 and was recently reelected to anoth-
er fi ve-year term, which starts September 1.
He said it has been a privilege to help build
three dynamic businesses over the past 16
years: RKL LLP, RKL eSolutions and RKL Wealth
Management. “I’m most proud of the oppor-
tunity I get as CEO to support and nurture the
team’s innovation, because none of this would
be possible without them,” Monborne said.
“You will get knocked down at times in life,
but when you do, never ever quit. Get up, dust
yourself off and get back in the game,” he said
of the most important life lesson he’s learned.
For fun, Monborne makes hot sauce to
give to friends and family every fall. He has
a special recipe and his own logo. “My recipe
has evolved over years of tweaking diff erent
seasoning and peppers, and everyone tells
me I have reached a perfect blend of heat
and fl avor,” he said.
ROBERT J. MURPHY,
CPA/ABV, CVA
Principal and CEO
Boyer & Ritter LLC
Murphy’s responsibilities are primar-ily threefold:
focusing on con-
tinuing to meet
Boyer & Ritter’s
clients’ needs and
distinguishing the
firm in the market,
POWER 100
Continued from page 21
See POWER 100 on page 23
23POWER
100
POWER
100
Congratulations
Dr. Pamela
Gunter-Smith
for being chosen as one of
100 Influential
POWER PLAYERS
who are leading Central
Pennsylvania into the future.
Your continued commitment
to our college and community
is an example for us all!
strategically steering the firm to sustained
growth in the short and long term, and
leading and managing day-to-day activi-
ties. “By concentrating on clients’ success,
we fortify our own,” he said.
Murphy said the firm’s partners vote
every four years on its leadership. “With
my partners’ support, I have been privi-
leged to lead Boyer & Ritter for 11 years,”
he said. He has more than 30 years of
experience with the firm providing audit,
accounting, tax and consulting services
to clients in a variety of industries includ-
ing automobile dealerships, land devel-
opment and other for-profit, closely held
commercial enterprises.
“I am immensely proud of how we
are meeting our clients’ needs through-
out the pandemic, establishing Boyer
& Ritter as a go-to source throughout
the country for information about the
Paycheck Protection Program and other
business relief programs. We also hon-
ored our commitment to our employees,
pledging no layoffs, pay cuts, or fur-
loughs,” Murphy said.
He shared several life lessons. Ap-
plying “listen first” is a life skill and is
equally critical in business and social set-
tings, he believes. Good leaders know to
gather information, then provide the best
guidance possible. “We have talented
professionals throughout our firm, and I
learned early on the importance of giving
people the opportunity to be heard and
share their ideas,” he said.
Murphy enjoys golfi ng and boating;
however, he said his greatest joy comes
from spending time with his family. “No
matter what you do professionally, it is
critical to have a way to destress. Quality
time with my loved ones helps me recharge
my batteries and reminds me what is im-
portant in life,” he said.
GEORGE NAHODIL
President & CEO
Members 1st Federal Credit Union
Nahodil was named president and CEO by the credit
union’s board in
October 2017 after
being named acting
president/CEO on
the death of the for-
mer president/CEO,
Bob Marquette, in July 2017. Nahodil previ-
ously served as executive vice president in
charge of retail delivery, public relations
and marketing. He has been with Members
1st since 2001.
PAUL J. NAVARRO, PE
President & CEO
Navarro & Wright Consulting Engineers
As co-founder/owner since 1996, he guides Navarro
& Wright’s direction
to adhere to its mis-
sion. He said he is
fortunate to be able
to rely on a great
management team
to implement the
fi rm’s strategic plan so he can focus on
entering new markets, establishing new
business and being active in community
and professional organizations.
As co-founder, he held the title of
president until 2013 and then became
president and CEO.
Navarro says he is very proud to have
seen the firm grow from humble begin-
nings to one of the largest multi disci-
plined engineering companies in central
Pennsylvania. Navarro & Wright has a
team of more than 200 professionals ser-
vicing various markets and committed to
delivering high-quality services. He said
he is very proud of all the staff.
He said if he had to choose one lesson
over other important ones, it would be per-
severance. “Th e road to success has many
pitfalls and/or failures. Each failure pro-
vides an opportunity to learn but you must
stay on the road and persevere as you pursue
your goals and vision,” he said.
Navarro enjoys tennis, golf, traveling and
spending time with his family. He also
enjoys involvement with non-profi t and
professional organizations to give back and
continue to learn. “I strive to pass on my
experience to those that are around me or
that will come after me,” he said.
JOHN NEALON
Team Leader
Baker Tilly Advantage Pennsylvania
As team leader for Baker Tilly Ad-vantage Penn-
sylvania, Nealon
is responsible for
ensur ing Baker
Tilly delivers all the
firm’s capabilities
and resources to its
clients. He also de-
velops and grows the fi rm’s Pennsylvania
client accounting services practice, which
includes full outsourcing of clients’ ac-
counting departments.
He took over the position in June 2020,
transitioning from managing partner of
Baker Tilly’s Greater Pennsylvania prac-
tice. He has been with the fi rm more than
36 years.
POWER 100
Continued from page 22
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24 POWER
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POWER
100
During his tenure with Baker Tilly, Ne-
alon is proud of helping family-owned busi-
nesses protect and enhance their value. His
eff orts have been recognized by Th e Wall
Street Journal and Th e Washington Post.
“Th e economic impact of these businesses
is critical to our local economy. I am proud
to have helped them,” he said.
Life lessons he’s learned: Challenges are
going to come your way. Face them head on.
Work the problem. Stay calm and work it in
steps. Use your support system/network;
there is no need to go it alone.
For fun, he enjoys anything that involves
his family. “In the spring, we get together
for the annual Scranton St. Patrick’s Day
Parade. During the summer, we love spend-
ing time in Stone Harbor, NJ. In the fall, we
take in a Notre Dame football game. In the
winter, we’re all together for the holidays,”
Nealon said.
LELAND J. NELSON
President
African- American Chamber
of Commerce of Central Pennsylvania
The African-American Chamber of Commerce of
Central Pennsylva-
nia is a membership
organization serv-
ing businesses, non-
profi ts, individuals
and other agencies
committed to sup-
porting the economic empowerment and
growth of minority-owned businesses in
the region.
Nelson has served as the organization’s
president since May 2011. He is also co-
founder of Dirty Dog Hauling, a professional
junk removal service that helps customers
save time and gain space.
ROBERT A. ORTENZIO
Co-Founder & Executive Chairman
Select Medical
Ortenzio is responsible for the over-all strategy
that guides Select
Medical’s national
post-acute care net-
work. Th e network
includes more than
100 critical illness
recovery hospitals,
30 inpatient rehabilitation hospitals, 1,700
outpatient physical therapy centers and
525 occupational medicine clinics that treat
82,000 patients daily across 47 states and
Washington, D.C.
Ortenzio co-founded the company in
1997. He has served as executive chairman
since 2014 and previously held the posts of
CEO, president and COO.
He is proud that Select Medical, which
is headquartered in Central Pennsylvania,
has grown to become a world-class com-
pany with revenues of $5.5 billion. He said
three of Select Medical’s divisions are the
largest providers of post-acute care in the
country, and a fourth division is ranked as
the second largest post-acute care provider
in the country.
Ortenzio shared several life lessons: To
be an exceptional leader, you need to be
genuine, authentic and have humility. Hu-
mility, in particular, is the number one de-
terminant of great leadership and a strong
company culture. Self-awareness, trust,
transparency and openness to embrace
diff erent viewpoints are critical to success.
For fun, he enjoys any kind of fi tness
or exercise and traveling in the U.S. and
abroad.
ERIC PAPENFUSE
Mayor
City of Harrisburg
The mayor is the chief executive offi cer of Harrisburg’s
government. It is
an elected full-time
position. Th e mayor
appoints the may-
or’s offi ce staff and
is the sole appoint-
ing authority of all
department and offi ce directors.
Papenfuse took the oath of offi ce as
mayor Jan. 6, 2014.
TROY A. PETERS
President & CEO
Jonestown Bank & Trust Co.
Peters oversees the strategic direction and execution
of the 147-year-old
community bank
and its policies to
best serve its cli-
ents, employee and
communities and
to create value for
the bank’s shareholders.
He has been in banking for 30 years and
in his current position for 10.
Peters is proud to have served as the
chairperson of the state trade group, the
Pennsylvania Association of Community
Bankers. “Th rough that organization, I
infl uenced the passage of the Economic
Growth, Regulatory Relief, and Consumer
Protection Act (S.2155) that balanced regu-
latory relief and consumer protections,” he
said. Th e act was passed by the U.S. Congress
and became law in 2018.
Peters said the most important life lesson
he’s learned is “you’ll never regret working
hard and doing your best.”
He enjoys riding motorcycles, both lo-
cally and on longer trips. Peters currently
owns three bikes, and each provides a dif-
ferent riding experience. “Riding is freeing
and relaxing while at the same time a very
focused activity and one that you can always
improve upon,” he said.
KATHY PHILLIPS
Owner and CEO
Primitives by Kathy
Phillips, whose duties include product d e v e l o p m e n t
director, started the
home decor and gift
business in 1997 out
of her basement. She
handmade the fi rst
“primitive candle
box,” taking care over
every detail. From the sanded edges to the
type of ribbon tied on the wire handles, each
was a work of passion. As demand grew, she
enlisted the people at Goodwill Services to
help the company fulfi l demand. Th e partner-
ship with Goodwill Services continues today.
Phillips is proud of the growth and part-
nerships she has built with her valued
customers.
True success for Phillips is giving back and
remembering the organizations and individ-
uals who supported her in the beginning. She
has made giving part of the corporate strategy,
creating products for her Benefi t Collection
that not only look good, but do good.
JORDAN PISCIONERI
General Manager
Century 21 Realty Services
Piscioneri began his career with Century 21 Realty Services
in May 2008 as an as-
sociate broker. He was
named general man-
ager of the Camp Hill
realty offi ce in January
2016. His father, Dan
Piscioneri, founded
the fi rm in 1982. Jordan and his brother Dan
are continuing the family tradition as the third
generation to serve the community.
KRISTEN PUCCI
Founder and Partner
KRAE Consulting
Pucci describes her role in the consult-ing fi rm as “to
keep the ship afl oat
and the passengers
happy.” Launched in
April 2020, the mul-
tifaceted fi rm focuses
on the architectural,
engineering and con-
struction industry. Its goal is to help local
construction-related companies in areas such
as brand awareness and lead generation.
Starting her company after being laid off
at the beginning of the pandemic is one of
several professional accomplishments Pucci
is proud of. So are two related achievements:
hiring multiple employees and taking on nu-
merous clients, all in less than a year.
Pucci says she’s learned that the woman
you’re becoming will cost you people, re-
lationships, spaces and material things.
“Choose her over everything,” she advises.
For fun, Pucci enjoys cooking, listening to
music, hanging out with friends and family,
watching movies, running, playing with her
dog, redoing furniture and thrifting. “I do it
because it makes me happy,” she said.
THOMAS R. QUINN JR.
President & CEO
Orrstown Bank
Quinn assumed the role as Orrstown Bank’s presi-
dent and CEO in
April 2009.He has
more than 28 years
of experience in the
banking industry.
The community
bank was founded
in 1919, and until 1981 it had only had one
branch offi ce. Since then, Orrstown Bank
has grown to 26 banking offi ces and seven
loan production centers located throughout
11 counties in Pennsylvania and Maryland.
RORY G. RITRIEVI
President & CEO
Mid Penn Bank/Mid Penn Bancorp Inc.
Ritrievi’s duties include developing a world-class cul-
ture in a company
that aims to deliver
best- in- class cus-
tomer service and
best-in-class returns.
Mid Penn operates
39 branches in 12
Pennsylvania counties: Berks, Bucks, Ches-
ter, Cumberland, Dauphin, Fayette, Lancast-
er, Luzerne, Montgomery, Northumberland,
Schuylkill and Westmoreland.
He has been with Mid Penn for 12 years
and has more than 34 years of experience in
the fi nancial services industry.
Ritrievi is proud of being part of the team
that turned a $25 million company into a
$200 million company in 12 years – while
doing it the right way, he says.
He shares several life lessons. He said culture
beats strategy every day of the week. “Want
spectacular results? Build a spectacular team
and put them in a spectacular environment
that provides spectacular rewards for winning.”
Ritrievi has fun at work doing what he
loves. Outside? He says he spends time with
loved ones.
DARMAYNE ROBERTSON
President & CEO
Sweet Confections Cakes
R obertson started Sweet Confections as a home-
based business in
1993. A decade later,
the business, which
is owned by Dar-
mayne and husband
Will, had graduated
to a storefront. Th e
POWER 100
Continued from page 23
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25POWER
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and all of the inaugural
Power 100 honorees!
Congratulations
Ken Wolfe!
BSSF is a premier advisory firm providing
accounting, assurance, tax and consulting
services across the Mid-Atlantic region.
Learn more at www.bssf.com.
couple and their staff work closely with
their customers to create stunning edible
centerpieces and cakes made with all-
natural ingredients. Darmayne Robertson
competed on Season Six of Food Network’s
“Halloween Wars.”
G. DOUGLAS ROHRBAUGH
Chairman
Crabtree, Rohrbaugh & Associates
In 1984, Tom Crabtree and Doug R o h r b a u g h
founded Crabtree,
Rohrbaugh & Asso-
ciates with a single
philosophy: to pro-
vide a client-orient-
ed approach to ar-
chitectural design.
As a co-founder, Rohrbaugh has led the
firm’s marketing efforts, focusing on cli-
ent relationships, establishing a position
in new market sectors and implementing
strategy to support the long-range plan
and future of the firm. He is credited with
launching Crabtree, Rohrbaugh’s long-
standing professional relationship with
Cabela’s Retail, Inc. and establishing its
first flagship destination store located in
Hamburg, PA.
GEORGE RUDOLPH
President & CEO
Pennsylvania State Employees Credit Union
dba PSECU
Alongside a team of more than 800 pro-fessionals, Ru-
dolph ensures that
as a not-for-profi t fi –
nancial cooperative,
PSECU is delivering
high-quality prod-
ucts and services
to its more than
475,000 member-owners. “Above all, our
goals are to help our members achieve their
goals, and serve as their trusted fi nancial
partner,” he said.
Rudolph joined PSECU in April 2019
and is most proud of his current role. “I’ve
long believed that the credit union model,
through which fi nancial cooperatives exist
solely to support the well-being of their
member-owners, is extremely important.
I feel fortunate to play a part in infl uenc-
ing the strategy that ensures our ongoing,
shared success,” Rudolph said.
An important lesson he’s learned is that
with focus and a positive outlook, you can
accomplish almost anything. “In my role at
PSECU, I try to bring these qualities to my
work each and every day, and I encourage
others to do the same,” he said.
In Rudolph’s free time, he looks for new
experiences to broaden his horizons. “I do
this through travel, meeting new people,
trying new foods, etc. I also enjoy jogging,
particularly in nice weather. Th ese activities
help me appreciate the variety that life has to
off er, relax and stay healthy,” he said.
JAMES W. SAXTON, ESQ.
CEO
Saxton & Stump
Saxton’s role is developing the strate-gic vision for the
fi rm of lawyers and
consultants, ensur-
ing that everything
fits together and
that the fi rm reach-
es both its long- and
short-term goals. He
works closely with managers and depart-
ment chairs to execute that strategy while
maintaining the fi rm’s business discipline.
Further, he works to instill a critically im-
portant culture of creativity and innovation.
Saxton has been involved in law fi rm
leadership in various positions for more
than 20 years and has been the CEO of Sax-
ton & Stump since 2015.
He said creating the fi rm was a true joy.
“My longtime law partner and friend Chris
Stump and many of our colleagues started
this fi rm with friendship, great chemistry and
mutual respect. It is very rewarding to see it
more than triple in six years while preserving
that desired culture of excellence, collabora-
tion and client-centric service,” Saxton said.
He shared some life lessons. Hard work
really does pay off . It is tedious; progress
is often incremental, but it’s remarkable
what you can accomplish by working hard
towards a goal you truly care about. Be bold.
Dream (which is the fun part) but remember
that execution makes it a reality. Th e dreams
you don’t try never happen.
“Spending time with my wonderful wife,
Sally, as well as our fi ve grown children and
four grandchildren is a real blessing. A great
day is winning a few games on the tennis court
against the much better player – Sally! Fitness
is fun for us and extraordinarily important to
keep up a busy schedule,” Saxton said.
ROBERT M. SCAER, PE
Chairman of the Board/CEO
Gannett Fleming Inc.
As chairman and CEO, he formulates and i m p l e m e n t s
the strategic plan
that guides Gannett
Fleming and drives
the fi rm’s continued
growth and expan-
sion into new mar-
kets. Scaer said the
fi rm is committed to “our continued diversifi –
cation of services, being an employer of choice,
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Continued from page 24
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26 POWER
100
POWER
100
and being a thought leader across our industry”.
He’s been chairman and CEO since Janu-
ary 2017 but had fi ve other careers during
his time at Gannett Fleming.
From 2002 to 2009, Scaer served as presi-
dent of GeoDecisions, Gannett Fleming’s
geospatial and IT solutions division. During
that time, he testifi ed before Congress on the
use of geospatial technology in homeland
security, and the company built an applica-
tion that integrates transportation, logistics,
in-transit visibility and infrastructure data
in a single, secure application.
Life lessons he’s learned: All of life is so
precious; it can change in a moment. You can
never take anything for granted and need to
make sure you enjoy the ride. No matter what
happens, you must be willing to change and
adapt and see the blessings in every day.
Scaer loves to hike, and most weekends
you can fi nd him on a local trail. “I’ve trav-
eled to some pretty amazing places with
Gannett Fleming, so I take advantage of the
local scenery when I can. Some of my favor-
ite hikes include the Grand Canyon, Sedona
and Colorado Springs,” he said.
KEVIN SCHREIBER
President & CEO
York County Economic Alliance
Schreiber’s duties include overseeing the strategic direc-
tion of York County’s
chief economic de-
velopment organiza-
tion, driving wide-
spread, shared and
inclusive prosperity,
and working among
an amazing and dynamic team of profession-
als and leaders who wake up daily committed
to make things happen in York County.
York County Economic Alliance was
founded in 2012. Schreiber has served as
its president since Dec. 1, 2016.
He said he’s living his most important life
lesson daily “making a positive diff erence serv-
ing the community I love”. “My career has been
dedicated to public service, fi rst to our City of
York, then our commonwealth’s House of Rep-
resentatives, and now leading an incredible
organization and team striving to make a dif-
ference. For this, I am grateful,” Schreiber said.
“If you have the chance to photobomb
a U.S. senator on national television to tell
your spouse you love them, do it. Brownie
points forever. We’ve no clue how many
spins on this Earth we are granted, so make
as much of a positive impact for others in the
time you’re given,” he said.
His personal passion: being married to
Jen and a puppy father to Stella Blue. “When
that grants me time, I am a backyard bee-
keeper, novice guitarist, feral cat rescuer,
verbose writer, Dead Head, astrophile, hu-
manist, and a promoter of the Oxford com-
ma,” Schreiber said.
RICK SEITZ
Senior Director, Business Development
Alexander Building Construction Company
Seitz represents the company in the com-munity, main-
tains relationships
with existing clients,
architects and engi-
neers, and develops
new client relation-
ships and new busi-
ness opportunities.
He’s been with Alexander Building Con-
struction for over 24 years. Seitz served as
company president for 12 years before tran-
sitioning to his current role as senior direc-
tor of business development two years ago.
As president of the company from 2008
through 2019, he’s proud that Alexander
developed long-term relationships with
many clients and community leaders in
Central Pennsylvania. At the same time, the
company developed internal personnel for
project-level and corporate-level leader-
ship roles that will ensure the company’s
future success.
Seitz shared two important life lessons.
He said good things will result when you
make a commitment, work hard and see it
through. And treating people with respect
and sincerity leaves a positive lasting im-
pression on them.
For fun, Seitz spends time with his chil-
dren and grandchildren. He said his chil-
dren and their spouses fi ll him with tremen-
dous pride and his grandchildren make him
laugh and keep him young. He and his wife
also enjoy spending time at the Jersey shore
with family and friends.
TODD SHAMASH
President & CEO
Capital BlueCross
He oversees all major facets of Capi-tal BlueCross’
business operations,
including overall
performance, diver-
sification strategy,
subsidiary gover-
nance, fi nance, risk
exposure, strategic
partnerships , and growth. Shamash’s over-
arching responsibility is to ensure Capital
BlueCross’ place as a leading health plan
in one of the country’s most competitive
healthcare environments.
Shamash has been with Capital BlueCross
since April 2020.
In his current role, he’s proud of helping
Capital BlueCross make a positive, tangible
impact in its communities. “In prior public
service, I’m proud of my work supporting
eff orts like the Children’s Health Insur-
ance Program (CHIP) and developing other
mechanisms to help people access health-
care, like the Healthy Pennsylvania initiative
and Medicaid expansion,” Shamash said.
Important life lessons: You can have
knowledge, expertise and be educated, but
it’s how you constructively work with people
– communicate clearly, listen intently and
earnestly and, yes, how you treat people
– that really makes the diff erence, not just
day to day, but over time. People remember
if you are approachable and willing to help.
Shamash said his favorite fun moments
involve family activities. “Watching my kids
experience things, playing sports, with me
or having me as a spectator. Taking a hike
together, and the moments when we turn
off the devices and play a board game. Th at’s
when the laughter occurs and where I fi nd
happiness,” he said.
MIKE SHIRK
CEO
High Companies
As CEO, Shirk says his duties are strength-ening the family
of 11 diverse compa-
nies, serving a great
team of coworkers,
and making a posi-
tive impact in the
community.
He has been in the
position for six years.
“I am extremely proud of the agility and
grit shown by the High team in tackling the
2020 COVID challenges. Every day our team
demonstrated unwavering commitment to
keeping each other healthy, executing very
well for our customers and delivering on crit-
ical investments for our future,” Shirk said.
Th e most important life lesson he’s learned
is that life is a team sport, and success comes
from having a lot of great coaches and team-
mates along the way. “I am particularly for-
tunate to have a wife and kids that make me
better. Th ey’re my MVPs,” he said.
For fun, Shirk enjoys “pretty much any ac-
tivity on the water … fi shing, boating, crabbing,
or just jumping in the waves with the kids.”
JAY SIDHU
Chairman and CEO
Customers Bancorp, Inc.
Sidhu’s duties include overall executive lead-ership of the bank
holding company and
its subsidiaries.
He has been in
his position with
Customers Bancorp
since the formation
of the bank in 2009.
Sidhu is proud of building fi nancial insti-
tutions that serve hard-working Americans
and the small businesses they own, oper-
ate, and grow. He’s also proud of enabling
the American dream: business ownership,
home ownership, a great family-sustaining
job, and fi nancial security are the greatest
awards one can achieve, he believes.
Most important life lessons he’s learned:
Never stop trying. Never give up your goals.
Never quit.
What he does for fun is banking. “If you
don’t have fun at your occupation, fi nd an-
other occupation. You only have a passion
for leadership and excellence if you feel pas-
sion for what you do and have fun doing it. I
love what I do and the people with whom I
am so fortunate to work,” Sidhu said.
ROBERT SIMPSON
CEO
Crispus Attucks Association of York
In addition to providing vision and guid-ance for staff and
ensuring positive
relationships and
collaborations with-
in the community,
Simpson is respon-
sible for overseeing
the day-to-day oper-
ations and developing programs to address
the root issues in York City.
He has been in his position with Crispus
Attucks for 41 years.
“Over the past 41 years, I’ve had the honor
of working as a team with our staff and part-
ners to grow Crispus Attucks York from one
small building to a four-block campus. Th e
campus provides critical services, includ-
ing childcare, a charter school, workforce
development, housing and more for our
community,” Simpson said.
Th e most important life lesson he’s
learned: it’s important to listen to others
for advice and learn from diff erent per-
spectives, which can only happen if we are
humble. “No one person has all the answers,
so we need to work together to successfully
serve our community,” he said.
Eight years ago, he found a young, aban-
doned dog; she was very underweight. “My
wife and I didn’t want her to be put down, so
we decided to keep her. She has become the
love of our life. I enjoy walking and playing
with her every single day,” Simpson said.
JEFFREY SMITH
General Manager
Alexander Building Construction Co.
As general manager of the company’s Harrisburg of-
fi ce, Smith has over-
sight of the offi ce’s
daily functions and
financial respon-
sibilities. He also
provides executive
management over-
sight and leadership through all phases of
work and is responsible for ensuring overall
project and corporate success and customer
satisfaction.
He was named to the position in No-
vember 2018 and has worked for Alexander
for 15 of his 22-year career. He was named
Project Manager of the Year by Ameri-
can Subcontractors Association of Central
Pennsylvania in 2012.
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27POWER
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CONGRATULATIONS JIM KOURY ON
YOUR WELL DESERVED SUCCESS
From the entire team at
TOP 25
KYLE C. SNYDER
Senior Vice President and COO
Penn State Health
Holy Spirit Medical Center
As senior vice president and chief oper-ating offi cer of
Holy Spirit Medical
Center, he is respon-
sible for its daily
operations, manag-
ing and developing
staff , and ensuring
high-quality care
and strong fi scal operations.
Snyder joined Penn State Health system
with the Nov. 1, 2020 transfer of owner-
ship of Holy Spirit Health System, where
he served as chief administrative offi cer
for Holy Spirit Hospital since 2015. In this
role, he was responsible for the operations
of Holy Spirit Hospital, Holy Spirit Medi-
cal Group and Holy Spirit EMS. He helped
develop a comprehensive clinical program
plan, which established the direction for
clinical program growth at Geisinger Holy
Spirit and served as the resource that guided
the investment of capital, the recruitment of
physicians and staff and the transition from
a community hospital to a regional referral
center for south central Pennsylvania.
DANENE SORACE
Mayor
City of Lancaster
As mayor, her duty is to serve the City of Lancaster.
Sorace has been
mayor for three
years. She is Lan-
caster’s 43rd may-
or, and the second
woman to serve in
the position. Before
her election as mayor, she served for three
years on Lancaster City Council.
She is proud of many things, and a
lot of them can be found at www.lan-
casterblockbyblock.com. “I am proud to
work alongside so many people who are
invested in the success of the city, inside
and out of city government,” Sorace said.
“There is a Talmud quote that summa-
rizes a life lesson I have gleaned from this
job: ‘Do not be daunted by the enormity
of the world’s grief. Do justly now, love
mercy now, walk humbly now. You are
not obligated to complete the work, but
neither are you free to abandon it.’ I am
never going to complete the work, but I
work to make things a little better every
day,” she said.
Sorace enjoys time with friends and
family because they laugh together.
“Laughter is the best medicine,!” she said.
VINCE SORGI
President & CEO
PPL
Sorgi leads a team of more than 12,000 employees in the
U.S. and U.K. aligned
around a singular
mission: to provide
electricity and natu-
ral gas safely, reli-
ably and aff ordably
to more than 10 mil-
lion customers every day. Along with PPL’s
leadership team, he is focused on setting the
strategy and direction for the company so it
can continue delivering long-term value for
customers and shareowners. Priorities for
2021 and beyond include advancing PPL’s
clean-energy strategy, enhancing diversity,
equity and inclusion at PPL and building
strong communities through philanthropy,
volunteerism and customer assistance.
Sorgi became president and CEO in June
2020. Before that he had served as presi-
dent and COO since July 2019 and as CFO
from 2014 to 2019.
“I’m incredibly proud of the work we do at
PPL to make life better for those we serve. We
deliver a service that is essential to our way
of life, and that reality brings with it an awe-
some responsibility, but it also off ers a sense
of purpose that is just incredibly rewarding,”
Sorgi said. “I feel the most joy and pride in
seeing others develop into great leaders. In my
opinion, the greatest compliment to a leader
is when they move on and no one notices.”
Most important life lesson: “My parents in-
stilled in me the value of an honest day’s work
and a job well done at a very young age. But it’s
important to not get lost in your goals and to
always remember the Golden Rule: treat others
the way you want to be treated. To be fair and
compassionate, I try to view and appreciate a
situation from other people’s points of view.”
For Sorgi, family is a huge part of who
“I am today and what drives me. We enjoy
spending time together whether we are on a
mountain skiing, a lake boating or just hang-
ing out at home. I also love to relax by playing
guitar or going for long walks,” he said.
JEFFREY STAUFFER
President & CEO, Chairman
Ephrata National Bank
Stauff er manages and directs the bank to-ward its primary
objectives, based on
profi ts and return on
capital. He’s also re-
sponsible for overall
implementation and
management of the
bank’s objectives,
policies and strategic plans. He provides
overall leadership for all departments and
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28 POWER
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100
is actively involved in community relations.
He has held various positions during his
39-year ENB career. Stauff er moved into his
current role Jan. 1, 2020.
He is proud of the role the team and
he have played in extending the legacy of
Ephrata National Bank. “Our predecessors
laid the groundwork for a stable, successful,
community minded institution. We con-
tinue that tradition while working hard to
help our clients achieve fi nancial success
as defi ned by them,” he said.
His major life lesson: it’s all about people. “We
are all in this together. All of us need guidance,
help and support from others. Every person,
every job and every viewpoint is necessary for
the collective success of the bank, of our com-
munities, and our lives in general,” Stauff er said.
For fun he spends time with his family and
fl y fi shing. “Sharing life with my family is my
most treasured activity. My wife and children
are my best friends. Fishing provides me with
alone time, relaxation, and allows me to qui-
etly refl ect on life,” Stauff er said.
CHAD STINE
President & CEO
Bennett Williams Realty Inc. dba Bennett
Williams Commercial
Stine joined Bennett Williams Commer-cial in 1999 af-
ter graduating from
Penn State Univer-
sity. He started as a
retail leasing agent
at Bennett Williams
and was made a part-
ner and promoted to
vice president in 2008. He was promoted to
president and CEO of the company in 2012.
His primary focus is new construction
development and leasing, as well as site
selection for national tenants such as Aldi,
Five Guys Burgers & Fries, Advance Auto,
Dunkin Donuts, Th e Greene Turtle, AT&T
and Little Caesars.
Outside of life at Bennett Williams, Stine
spends most of his time juggling various
activities and sporting events with his wife
and three children.
RICHARD L. STOUDT JR.
President
High Construction Co.
Stoudt is responsible for the overall direc-tion and manage-
ment for High Con-
struction throughout
eastern Pennsylva-
nia, Delaware, New
Jersey, Maryland and
upstate New York.
He has been in
the position since August 2014. High Con-
struction provides commercial construction,
design-build, and general contracting services
in Pennsylvania, New York, New Jersey, Dela-
ware, Maryland and Virginia.
Key insights: Collaboration begins with
a clear and deep understanding of client vi-
sion, what’s driving the vision and the objec-
tives and expectations. How well someone
listens and feeds back requirements is a good
fi rst indicator of how future conversations
will go. Project execution should be planned
in advance, during the pre-construction
phase, to make sure there’s a clear path
forward having the client, the contractor,
subcontractors and all stakeholders aligned.
JOHN J. “SKI” SYGIELSKI
President & CEO
Harrisburg Area Community College (HACC)
The primary re-s p o n s i b i l i t i e s
of his job focus on
leadership: forward-
ing the college’s goals,
planning all aspects
of the college’s pro-
grams and services
and procuring resources through government
entities or philanthropy. “Today, the role of a
president is much more of a town minister
than an academic philosopher,” Sygielski said.
He became the seventh president of HACC,
Central Pennsylvania’s Community College, in
July 2011 and is known as either “Dr. Ski” or “Ski”.
He said his greatest accomplishment is
expanding the image and reputation of HACC
beyond central Pennsylvania. Other accom-
plishments: Conferring more than 40,000 cer-
tifi cates, diplomas and degrees. Raising more
than $20.2 million for students and employ-
ees. Hiring diverse senior leadership. Being
elected chairman of the board of the Ameri-
can Association of Community Colleges.
Life lessons he’s learned: Courageously be-
lieve in yourself. “If you want others to believe
in you, you have to believe in yourself and that
you are capable, worthy and deserving,” he
said. “People will treat you based on what you
think of yourself, how you treat yourself and
how you act and behave in the world.”
Sygielski enjoys biking in central Pennsyl-
vania and around the world. “Bicycling aff ords
me an incredible sense of freedom to explore
and be adventurous. It connects me to my inner
self, providing opportunities to think and cen-
ter myself. It also aff ords me an opportunity to
raise money for the HACC community,” he said.
PATRICK J. TOOMEY
United States Senator
Toomey’s duty is representing the interests of Pennsylvania’s nearly 13 million resi-
dents in the Senate.
A Republican, he
has served in the
position for 10 years
He previously served
in the U.S. House of
Representatives for
six years. Honoring
his pledge to limit himself to three terms, he
did not seek re-election to the House in 2004.
He is proud of playing a central role in craft-
ing the Tax Cuts and Jobs Act of 2017. He de-
scribed the act as “the most sweeping reform
to the U.S. tax code in a generation; leading
to historic economic growth and prosperity.”
“I believe in the importance of integrity,
persistence and preparation. With those
three traits, a person can accomplish almost
anything,” Toomey said.
He is an amateur beekeeper. “I raise and
maintain bee colonies in my backyard. In
the Senate I’m often dealing with abstrac-
tions. With beekeeping, it’s fun to have tan-
gible, and delicious, results,” Toomey said.
KURT TRIMARCHI
Partner
McKonly & Asbury LLP
Trimarchi leads the fi rm’s largest family-owned business relationships, provid-
ing strategic advice
to meet their needs.
He has had the op-
portunity to serve
clients in a variety
of industries such
as family business,
manufacturing, dis-
tribution, retail and fi nancial services and
to bring tax value ideas and strategies to
help maximize tax savings for these clients.
He has been with McKonly & Asbury since
2003 and has more than 20 years of broad
domestic and international tax experience.
Trimarchi said his position has allowed
him to help clients and families grow their
businesses and then to assist them when
they are ready to transfer the business to
the next generation. “It is a privilege to be a
partner to these businesses,” Trimarchi said.
A motto he tries to live by is to treat people
with respect, regardless of the situation. “It
is important to keep in mind, no matter the
short-term outcome of those interactions,
you will always win the long game by treat-
ing people the right way,” he said.
Coaching youth football is one of his fa-
vorite things. “I love the game of football and
the strategy behind it. I also enjoy develop-
ing young men to be better players, team-
mates and hopefully individuals. It’s always
great to run into a former player and have
them still call you coach,” Trimarchi said.
JONATHAN H. WEIS
Weis Markets Inc.
Chairman, CEO and President
Jonathan Weis is the grandson of co-found-er Harry Weiss. He was elected company
chair in April 2015.
Weis has extensive
experience in the su-
permarket business
and during his ca-
reer he has worked
in store operations,
produce merchan-
dising and grocery procurement.
Founded in 1912, Weis Markets Inc. is
a mid-Atlantic food retailer operating 197
stores in Pennsylvania, Maryland, Delaware,
New Jersey, New York, West Virginia and
Virginia. Overall, Weis employs more than
23,000 associates in its stores, distribution
center, corporate offi ce and manufacturing
facilities. Built on self-reliance, the company
processes its own milk and uses the excess
butterfat to make Weis Quality Ice Cream.
B.J. WERZYN
CEO
West Shore Home
Werzyn founded the Cumberland Coun-ty-based window, door and garage-
door retailer and in-
staller in 2006. He has
focused on building
repeatable and scal-
able systems that al-
lows West Shore to
maintain a high stan-
dard of customer ser-
vice across the board at all its locations.
West Shore is committed to providing cus-
tomers with a home improvement experience
that accommodates their needs and keeps
in step with their fast-paced lives. Home
improvement is about more than making up-
grades and installing new products; it’s about
helping customers live better lives.
BOB WHALEN
President & CEO
H.B. McClure Company
He views his primary responsibility as establishing and communicating the
company’s organi-
zational vision and
constructing the
cultural conditions
for employee-owner
success. Another
part of his job is to
create an environ-
ment where it is possible for H.B. McClure’s
employee owners to make it a great place
to work, have a rewarding career and build
long-term wealth for their families.
H.B. McClure was established in 2014
when Herbert Bassett McClure bought into
Fisher Brothers and formed Fisher McClure.
Whalen purchased H.B. McClure in 2008
and became CEO. H.B. Global was born out
of H.B. McClure in 2017, and Whalen transi-
tioned to CEO of the new parent company.
He is proud of having convinced the com-
pany’s board of directors to sell the company
to its employees and become an ESOP – the
acronym for employee stock ownership plan
– in 2010. Whalen said this move set the stage
for organizational success over the past de-
cade. H.B. McClure’s employee owners are
the direct recipients of that increased value in
their ESOP retirement accounts.
Whalen said the most important life
lesson he’s learned involves the evolution
from being focused on his personal achieve-
ments to being focused on the prosperity of
others. “Th e irony in this is when you help
others reach a higher level of success, you
accomplish more personally – and there is
tremendous fulfi llment in helping others
realize their dreams,” he said.
POWER 100
Continued from page 27
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29POWER
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POWER
100
Congratulations to James Saxton
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attorneys, and strategic partners
who offer an innovative level of
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Whalen enjoys golfi ng, fi shing, and hunting.
“Golfi ng helps to fulfi ll my competitive outlet.
Fishing and hunting allow me to forget about
work and recharge. My favorite time of the year
is fall in central Pennsylvania; it’s incredibly
beautiful and refreshing to be outdoors,” he said.
TOM WOLF
Governor
Commonwealth of Pennsylvania
Wolf oversees the executive branch of Pennsylva-
nia’s government,
including many
state agencies. His
goal is to help state
workers do their
jobs well and pro-
vide the best pos-
sible service to Pennsylvanians. He is also
responsible for setting policy, responding
to emergencies and signing legislation.
Wolf, a Democrat, has been governor
since Jan. 20, 2015.
As governor, Wolf has invested $1.4 bil-
lion in education and oversaw the imple-
mentation of the fair funding formula to
help students get the high-quality educa-
tion they deserve. “Good public education
will put our students, and our common-
wealth, on the path to success,” he said.
His most important life lesson is one he’s
learned throughout his life from his fam-
ily, and from his experiences in the Peace
Corps, business and public service. “Any
challenge can be tackled if you do it with
confi dence and in partnership with good
and competent people,” he said.
He is an inveterate reader. “Reading chal-
lenges us to broaden our horizons, explore new
ideas, and reconsider our own preconceived
notions – but also, it’s just fun,” Wolf said.
KEN WOLFE, CPA
President and Managing Principal
Brown Shultz Sheridan & Fritz
As managing principal and president at BSSF, Wolfe
oversees the manage-
ment of the fi rm, serv-
ing its people, clients
and community. In
addition to fi rm man-
agement, he works
with clients in the
construction, manufacturing, and real estate
industries as well as other for-profi t entities.
Wolfe has been with BSSF since Septem-
ber 1991 and has served as president and
managing principal since July of 2005.
He is proud of BSSF’s continued growth
and how the fi rm has helped its clients and
team members achieve extraordinary out-
comes. “We expanded our team, our partner-
ships and our services to support our clients
during one of the most diffi cult years in mod-
ern history, and we were named one of the #1
Best Places to Work in PA in 2020,” Wolfe said.
Something he learned early in his career
is: “I am never the smartest person in the
room, nor do I need to be. Being a leader
is more about recognizing and using the
talents of the people around me to lift up
the team as a whole,” he said.
Wolfe loves to spend as much time as he can
outside. “I really enjoy playing sports and hik-
ing with my family. My wife and I also share the
travel bug; we’re fond of just picking up for the
weekend and exploring little towns and desti-
nations we’ve never seen before,” Wolfe said.
DANIEL A. WUBAH
President
Millersville University
As president, Wubah supports the uni-versity’s mission
of providing diverse,
dynamic, meaningful
experiences to inspire
learners to grow both
intellectually and
personally to enable
them to contribute
positively to local and global communities.
He became the 15th president of Millers-
ville on July 1, 2018. Before that, he served
as provost and later the senior advisor to the
president at Washington and Lee University.
His previous positions include deputy pro-
vost and vice president for undergraduate
education at Virginia Tech; associate provost
and professor of zoology at the University of
Florida; associate dean, professor of biology
and special assistant to the president at James
Madison University, and associate professor
and department chair at Towson University.
A microbiologist, Wubah is an elected Fel-
low of the American Association for the Ad-
vancement of Science and testifi ed before the
U.S. Congress on how to prepare the science
workforce for the 21st century. In July 2020, he
was among the speakers at a United Nations
panel about the COVID-19 pandemic.
In private life, Wubah is a tribal king
(safohene) at Breman Asikuma in the Cen-
tral Region of Ghana. His royal name is Nana
Ofosu Peko III. He and his wife, Judith, have
two daughters and two grandchildren.
ROBIN ZELLERS
President and Broker
NAI CIR
Zellers is responsible for overseeing transactional activity, investment, ad-
visory and consult-
ing and corporate
services. He is also
responsible for as-
signing and manag-
ing all of the fi rm’s
national and inter-
national business
through the NAI Global network.
He joined NAI CIR in 2003. He has more than
25 years of experience, primarily in commercial-
industrial development, leasing, sales, receiver-
ship, consulting and asset management. <
POWER 100
Continued from page 28
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However, users may print, download, or email articles for individual use.
© 2018IHS Markit.
No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client
and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness
are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss,damage or expense incurred by reliance on information or
any statement contained herein.
page of 1 61
Country Reports – United States
27 Apr 2018 Country Risk | Profile
Overview
President Donald Trump’s administration has had a major effect on the domestic political and violent risk operating environment. Trump has reversed many of former
president Barack Obama’s executive orders on immigration, business regulation and foreign policy. He has also taken steps in pursuing an “America First” foreign policy that
features elements of trade protectionism as set out in his National Security Strategy. Although organised attack risks remain, radicalised Islamist and domestic (right and left
wing) groups and individuals pose a more imminent threat, with prevention efforts less effective. Protests, particularly around police-related violence and right-wing extremism,
are increasing. National security drives foreign policy, with Iran, North Korea, and Russia featuring prominently. The economy remains on a path of steady growth consistent
with a moderate recovery.
Overall
1.2
MODERATE
Political
1.7 Elevated
Economic
0.2 Low
Legal
0.9 Moderate
Tax
1.5 Moderate
Operational
1.2 Moderate
Security
1.7 Elevated
Note: 0.1 = minimum risk, 10.0 = maximum risk.
Medium Term Overall Rating / 100
0
AAA 0 HIGHEST QUALITY
Note: 0 = minimum risk, 100 = maximum risk. Ratings form part of enhanced
Economic and Sovereign Risk services.
Political
The policies advanced by President Donald Trump have undone a number of Obama legacies, such as executive actions (including on immigration, gun control, the
environment and Cuba) as well as his flagship health care policy, the Affordable Care Act. Although Republicans control a majority in both congressional houses, splits within
the party have largely prevented the passage of any major legislation aside from a major tax regime overhaul. Major items for 2018 include an infrastructure package,
immigration, and trade policy.
Economic
Forecast summary
Solid growth with higher inflation out of the gate
Fourth-quarter GDP growth was reported at 2.9% in Bureau of Economic Analysis’ third estimate, revised up 0.4 percentage point from the second estimate, with notable
upward revisions to personal consumption expenditures (PCE) and inventory investment. Over the final three quarters of last year, GDP rose at a robust 3.0% annual rate.
While the economy surely had solid momentum heading into 2018, the incoming data point to a temporary slowdown in the first quarter. The main source of first-quarter
weakness is PCE, which has slowed sharply early this year.
Following only 1.7% growth in the first quarter, we forecast GDP growth to pick up to 3.0% or better over the balance of 2018, followed by 2.9% next year and 2.1% over 2020
, lowering the unemployment rate to 3.6%. This growth is aided by recently legislated tax cuts and new federal spending, and not at all derailed by new tariffs on imports of
steel and aluminum, since the growing list of exemptions from these tariffs has mitigated their effect.
Country Risk Ratings (Strategic Risk) – United States
Sovereign Risk Ratings – United States
© 2018IHS Markit. page of 2 61
© 2018 IHS Markit
Core PCE inflation is picking up. Over the six months ended in February, the core PCE price index rose at a 2.3% annual rate. By this measure, we have already surpassed
the Federal Reserve’s 2.0% objective. We forecast core PCE inflation of 2.0% for this year, 2.2% over 2019, and 2.3% inflation over 2020. This prompts four Fed interest-rate
hikes this year, followed by several more over 2019 and 2020.
Changes since last forecast
Changes since last forecast (April forecast, third estimate of fourth-quarter 2017 GDP)
Gross domestic product Lower
Consumer spending Lower
Business investment Higher Incoming data indicating a stronger start to 2018 than previously forecast
Residential investment Lower Marked decrease in population projections from the Census
Government spending Unchanged
Exports Unchanged
Imports Lower
Short-term interest rates Unchanged
Long-term interest rates Unchanged
Consumer Price Index (core) Higher Further tightening of labor markets
Unemployment rate Higher
United States:
Key indicators and forecasts
Historical
data edge 2014 2015 2016 2017 2018 2019 2020 2021
Real GDP (percent change) 2017 2.6 2.9 1.5 2.3 2.7 2.9 2.1 1.7
Nominal GDP (billion USD) 2017 17,428 18,121 18,624 19,391 20,324 21,436 22,479 23,451
Nominal per-capita GDP (USD) 2017 54,601 56,372 57,542 59,496 61,897 64,819 67,494 69,923
Consumer price index (percent change) 2017 1.6 0.1 1.3 2.1 2.3 1.7 2.9 2.5
Exchange rate (year end, USD/EMU) 2017 1.21 1.09 1.05 1.20 1.21 1.23 1.25 1.27
Exchange rate (year end, JPN/USD) 2017 120.64 120.50 116.80 112.90 108.75 113.07 112.29 110.78
Source: IHS Markit
Business environment
Strengths and weaknesses
Strengths Weaknesses
The legal system is clear, pro-business and generally transparent. Despite recent reductions, many businesses find taxes overly complicated.
The labour market is flexible and dynamic and the government bureaucracy is
relatively efficient.
A recent wave of trade protectionism raises the possibility of policy uncertainty around
existing trade agreements.
The United States has a well-developed, albeit ageing, infrastructure and can
cope with disasters better than most countries.
The country is extremely litigious, particularly over the issues of equal opportunities
and unfair dismissal.
Higher education produces a large number of skilled graduates. Violent crime, albeit decreasing, remains higher than in most wealthy countries and
there exists a risk of cyber attacks on business.
Legal
The legal system is independent, clear, and pro-business, reducing contract alteration and contract enforcement risks. However, a recent wave of trade protectionism raises
policy uncertainty around existing trade agreements. For example, in early 2018, President Donald Trump raised global tariffs on steel and aluminium by 25% and 15%
respectively. Trump replaced deceased Supreme Court Justice Antonin Scalia with Neil Gorsuch, a conservative that maintains the court’s right-leaning bent.
Tax
© 2018IHS Markit. page of 3 61
In December 2017, President Donald Trump signed what is viewed as the most significant tax overhaul in three decades. The Tax Cuts and Jobs Act reduced corporate taxes
from 35% to 21%. The bill also moved away from a worldwide taxation system on earned income for domestic corporations, shifting to a territorial system. In addition,
individual taxes will continue to be divided into seven income brackets, with some individuals across all brackets seeing their taxes reduced on a temporary basis.
Operational
Foreign investment is welcomed, although a recent trend towards trade protectionism increases uncertainty around existing trade agreements. President Donald Trump’s
immigration policy raises the likelihood of firms facing difficulties in securing visas for foreign employees. Corruption levels remain modest.
Environmental
ist movements have
become more active recently, particularly around pipelines in western states. There have been limited labour strikes around minimum wage levels. Trump has indicated that
he would look to make a significant investment in infrastructure and has lifted some barriers to certain energy projects on federal land and offshore.
Security
War risks
The risk of war on US soil remains low. Yet, aside from the recently announced possible US-North Korea summit in late Spring 2018, the odds of a nuclear confrontation with
North Korea has risen since 2015. Additionally, a number of ongoing military engagements abroad – in
Afghanistan
, Iraq, Somalia, Syria, and Yemen – have escalated under
President Donald Trump’s administration. Trump’s continued animosity towards the Iranian nuclear agreement also raises the prospect of military, if only in association with
escalating hostilities with Iran and US allies like Israel and/or Saudi Arabia.
Terrorism risks
Terrorist attacks inspired or directed by the Islamic State or al Qaeda pose a risk. Attacks would likely involve firearms or improvised explosive devices as seen in the 2016
mass shooting in Orlando and in the September 2016 bombings in New York. Attacks could also involve the use of vehicles, as seen in the 2016 and 2017 attacks in
Columbus and New York City. Right-wing terrorists pose a threat to Jewish, Muslim, African American, and LGBT assets and individuals, in addition to government buildings
and abortion clinics. Attacks carried out by environmental and animal rights activists exist, but remain relatively infrequent.
Social stability and unrest risks
The period immediately following the presidential election experienced a number of protests against the policies of President Donald Trump. Other demonstrations have
involved individuals associated with white supremacist or other right-wing extremist organisations, which are frequently met with opposition anti-fascist (Antifa) protests,
leading to violence and arrests. Although race relations and incidents of police brutality remain important issues, the number and intensity of Black Lives Matter protests have
decreased since Trump’s election. However, protesters will continue to organise when instances of police brutality occur and when police officers receive perceived light
punishments in courts.
Political: Overview
The policies advanced by President Donald Trump have undone a number of Obama legacies, such as executive actions (including on immigration, gun control, the
environment and Cuba) as well as his flagship health care policy, the Affordable Care Act. Although Republicans control a majority in both congressional houses, splits within
the party have largely prevented the passage of any major legislation aside from a major tax regime overhaul. Major items for 2018 include an infrastructure package,
immigration, and trade policy.
Government stability
With Republicans retaining control over both Congressional houses in the 2016 election and Donald Trump’s presidential victory, the odds of co-operation between the
legislative and executive branches appeared high. However, splits between the Republican Party’s conservative and moderate wings have delayed major legislation from
being passed, such as healthcare. For example, moderates in the Senate rejected proposals from conservative House Republicans that would have dismantled Obamacare.
Nonetheless, a Republican-controlled Congress has worked with Trump to lower corporate income taxes and decreased federal regulations on environmental and labour
standards. There are also plans in 2018 to increase investment in the infrastructure, commodities, financial, and energy sectors. Trump has already begun the process of
opening of large tracts of federally owned areas for extractive industries.
Although high deficits following the 2008 financial crisis have decreased, they are set to expand following the passage of tax reform in December 2017. Financial problems
continue to surface with state and municipal governments. In July 2013, Detroit filed for the largest municipal bankruptcy in US history. Then, in 2015 and 2016, Puerto Rico
defaulted on a portion of its debt obligations, setting up the need to create congressional committee to restructure its obligations.
Political summary
© 2018IHS Markit. page of 4 61
© 2018 IHS Markit
Presidential
elections
Next contest: 2020 November; Last contest: 8 November 2016 (election of the electoral college, whose formal vote to select the president took
place on 19 December).
Legislative
elections
Next contest: 2018 November; Last contest: 8 November 2016 (House of Representatives and one-third of the seats in the Senate). Mid-term
elections are scheduled for 6 November 2018.
Head of State Donald J. Trump (since 20 January 2017)
Vice President Mike Pence (since 20 January 2017)
Finance Steven T. Mnuchin (since 13 February 2017)
Defence/Security Kirstjen Nielsen (since 6 December 2017)
Defence/Security Gen. (Retd) James Mattis (since 20 January 2017)
Justice/Attorney
General
Jeff Sessions (since 9 February 2017)
Labour Alexander Acosta (since 27 April 2017)
Interior/Home
Affairs
Ryan Zinke (since 1 March 2017)
Policy direction and predictability
With Republicans retaining a majority in both the House of Representatives and the Senate following the November 2016 presidential election, President Donald Trump has
had a stronger hand to craft a pro-business agenda that has reduced federal government regulations and lowered corporate taxes.
The tax reform legislation passed by Congress in December 2017 represented the largest shift in tax policy since the 1980s.
Trump has also enacted new policies via executive orders without congressional authorisation, such as cancelling previous Obama executive actions on immigration, gun
control and Cuban-American relations. He has also attempted to drive growth in the energy and mining sectors by removing restrictions put in place during the Obama
administration including on the production of American energy reserves including shale, oil, natural gas and clean coal, and to certain energy infrastructure projects including
the Keystone pipeline. However, other legislative and executive efforts have stalled, whether in health care, where moderate Senate Republicans balked at passing
healthcare reform, or in immigration, where some federal courts have temporarily halted the administration’s attempts to curtail immigration.
Trump filled the vacancy on the US Supreme Court caused by the death of former Justice Antonin Scalia by nominating Neil Gorsuch, a fellow judicial conservative, ensuring
that the court remain socially conservative and in favour of efforts to reduce regulatory restrictions on business.
Opposition prospects and programme
In the 2016 elections, Republicans maintained narrow majorities in Congress. Although the dominance of Republicans following the 2016 election left most Democratic policy
objectives sidelined at least until 2019 (after the November 2018 midterm elections), they should enjoy slightly more power to craft policy in 2018 in areas like immigration,
healthcare, and infrastructure negotiations, where their votes will be needed to pass critical bills in the Senate (where 60 votes are needed to break a filibuster) or where the
House Republicans are split.
Parliament Summary
Party abbr. Party name Seats
House of Representatives (Lower chamber)
Rep Republican Party 241
Dem Democratic Party 194
Senate (Upper chamber)
Rep Republican Party 52
Dem Democratic Party 48
Data reflects seat distribution following last election Source: IHS and CIRCA People in Power
Economic
Overview
Country risk ratings for the United States remain exceptionally low.
In fiscal 2015, the federal budget deficit was the smallest share of GDP since 2007. The deficit is projected to average approximately 2.9% of GDP in fiscal 2016, compared
with 1.1% in 2007 and a high of nearly 10% in 2009.
© 2018IHS Markit. page of 5 61
The political process of appropriations produced several successive years of threatened government shutdowns and debt-ceiling crises, but as a result of the Bipartisan
Budget Act of 2015, the debt ceiling was suspended until March 2017 and the spending caps triggered by sequestration were lifted for fiscal 2016 and 2017. In addition,
several more pieces of budgetary legislation, including a five-year highway spending bill, were successfully passed at the beginning of fiscal 2016. As a result of these laws,
economic risk from fiscal policy is minimal.
The economy continues to grow at a measured pace consistent with a moderate recovery. The unemployment rate is easing into the level associated with full employment.
The economy continues to grapple with several points; an inventories correction is ongoing and energy-sector capital spending is in a slump, while net exports weigh down
growth, due to both a strong dollar and weak growth in the rest of the world. Nevertheless, the solid performance of domestic demand means that underlying growth remains
sturdy.
Short-term outlook
First-quarter GDP growth came in strong at 2.3%.
The unexpected strength in first-quarter GDP growth was accounted for by larger-than-expected contributions from net exports, fixed investment, and government
consumption and gross investment.
Net exports rose $8 billion on the quarter, in contrast to our expectation of a decline, as exports were above expectations and imports were below.
GDP growth slowed relative to the fourth quarter, accounted for by a slowdown in final sales to domestic purchasers, which was partially offset by increases in net
exports and inventory investment. These two latter components jointly contributed 0.6 percentage point to first-quarter GDP growth, compared with a subtraction of 1.7
percentage points in the fourth quarter.
Movements in inflation as measured in the National Income and Product Accounts were mixed in the first quarter. The GDP price index rose at a 2.0% rate in the first
quarter, down from 2.3% in the fourth quarter. The core PCE index rose at a 2.5% rate in the first quarter, matching our estimate, and up from 1.9% in the fourth quarter
.
Solid growth with higher inflation out of the gate
Fourth-quarter GDP growth was reported at 2.9% in Bureau of Economic Analysis’ third estimate, revised up 0.4 percentage point from the second estimate, with notable
upward revisions to personal consumption expenditures (PCE) and inventory investment. Over the final three quarters of last year, GDP rose at a robust 3.0% annual rate.
While the economy surely had solid momentum heading into 2018, the incoming data point to a temporary slowdown in the first quarter. The main source of first-quarter
weakness is PCE, which has slowed sharply early this year.
Following only 1.7% growth in the first quarter, we forecast GDP growth to pick up to 3.0% or better over the balance of 2018, followed by 2.9% next year and 2.1% over 2020
, lowering the unemployment rate to 3.6%. This growth is aided by recently legislated tax cuts and new federal spending, and not at all derailed by new tariffs on imports of
steel and aluminum, since the growing list of exemptions from these tariffs has mitigated their effect.
Core PCE inflation is picking up. Over the six months ended in February, the core PCE price index rose at a 2.3% annual rate. By this measure, we have already surpassed
the Federal Reserve’s 2.0% objective. We forecast core PCE inflation of 2.0% for this year, 2.2% over 2019, and 2.3% inflation over 2020. This prompts four Fed interest-rate
hikes this year, followed by several more over 2019 and 2020.
Assumptions
Fiscal policy: We have dampened the impact of fiscal stimulus in 2018 in this forecast, based on higher-than-expected levels of incoming personal tax data, as indicated by
the monthly personal income and consumption reports.
Federal Reserve: The Fed raised the federal funds target range 25 basis points in March, and we expect three additional rate hikes in 2018, followed by three more in 2019.
Non-US GDP growth: Real GDP growth for the nation’s major-currency trading partners is assumed to average 1.8% annually from 2018 through 2028. For “other important”
trading partners, growth averages 3.5% over the next 10 years, including a peak of 3.7% in 2021.
Energy: The Brent oil price is projected to dip from $62/barrel in the fourth quarter of 2017 to $60/barrel by the last quarter of 2018. Brent is expected to press down to $55/
barrel by the third quarter of 2019, before resuming a constant climb through the rest of the forecast interval.
Exchange rates: We assume the dollar will partially reverse its recent decline and nudge up slightly to a high in the third quarter of 2019, yet remain 3.4% below the 2017
average. This will be followed by a steady decline through the end of the forecast period, resulting in a 6.4% drop by the end of 2028.
Other key assumptions: We have incorporated new population projections from the Census Bureau. The total population, including armed forces overseas, is now expected
to grow at an average rate of 2.3 million persons per year over the next 10 years, versus 2.5 million per year in the previous forecast.
Changes since last forecast
Changes since last forecast (April forecast, third estimate of fourth-quarter 2017 GDP)
Gross domestic product Lower
Consumer spending Lower
© 2018IHS Markit. page of 6 61
Business investment Higher Incoming data indicating a stronger start to 2018 than previously forecast
Residential investment Lower Marked decrease in population projections from the Census
Government spending Unchanged
Exports Unchanged
Imports Lower
Short-term interest rates Unchanged
Long-term interest rates Unchanged
Consumer Price Index (core) Higher Further tightening of labor markets
Unemployment rate Higher
Medium- and Long-term analysis
Real GDP growth will average 2.2% per year during 2016–46.
The outlook for inflation remains moderate. Consumer Price Index (CPI) inflation will average 2.4% per year over the forecast period. Core inflation will average 2.0%.
Nonfarm business productivity growth averages 1.7% over the forecast period.
The current-account deficit remains negative over the forecast period, averaging 3.3% of GDP.
Real oil prices eventually stabilize at about $80–85 per barrel (2009 dollars).
The labor market improves over the forecast period, with the unemployment rate eventually settling around 4.7%.
The federal budget deficit remains in deficit through 2046.
Real GDP growth will average 2.2% per year in 2016–46. This is 0.4 percentage point slower than during the past 30 years. The economy’s underlying growth will slow as
baby boomers begin to retire, slowing labor-force growth. Potential output growth should hold up fairly well in the future, with greater business fixed investment and R&D
spending offsetting the slowdown in labor force growth. Eventually, though, the effects of weaker labor-force growth become dominant and, in a sense, self-perpetuating. As
output growth drops off, business fixed investment rises more slowly, limiting capital stock growth and thus future output gains.
The outlook for inflation remains moderate. Over the long run, inflation is a monetary phenomenon. Its future course will be determined by policies implemented by Janet
Yellen, and her successors. Since we do not know who these successors will be, we assume the Federal Reserve will try to contain inflation over the forecast period. The
Consumer Price Index (CPI) is expected to average 2.4% annual increases in 2016–46, somewhat less than the 2.7% average in 1985–2015. The broader-based GDP
deflator will rise 2.1% per year.
Nonfarm business productivity growth averages 1.7% over the projection period. It has slowed sharply since the Great Recession, and its average growth rate for the
past four years is 0.6%. In our latest forecast, productivity growth averages 1.7% over the next 30 years, just below its current 50-year average of 1.9%. A caveat: the recent
historical productivity estimates are revised several times over several years before they solidify. The effective capital stock (in 2009 dollar terms) is projected to increase
3.4% annually, 0.` percentage point higher than recorded for 1985–2015.
The current-account deficit remains negative over the forecast period, averaging 3.3% of GDP. A decline in the dollar relative to industrialized-country-currencies,
combined with modest unit labor cost growth, will stimulate US exports abroad and result in a steady improvement in the merchandise trade balance (as a share of GDP). IHS
Economics projects that real exports will expand at a 4.2% average annual rate over the projection period. Real imports, meanwhile, will grow at a 3.9% average annual rate.
Real oil prices eventually stabilize at about $80–85 per barrel (2009 dollars). IHS expects the average acquisition price of foreign oil to remain high in the long run. In the
end, scarcity tends to bid energy prices up, while new technologies tend to hold them down. The long-term trend was revised downward compared with the previous forecast
based on a reassessment of the long-term outlook by IHS CERA.
The labor market improves over the forecast period, with the unemployment rate eventually settling at about 4.7%. Slower long-run increases in the labor force
indicate more moderate long-run employment growth in the future. Total civilian employment will rise at an average annual rate of 0.7% from 2016 to 2046. Total
establishment employment will rise from 142 million in 2016 to 179 million in 2046. Manufacturing’s share of total employment will continue to decline over the forecast period,
falling to 6.7% in 2046, from 8.6% in 2016. The broad service sector will generate an increasing share of employment growth in the forecast period, although the federal
government’s share of employment will decline during the forecast period.
The federal budget deficit remains in deficit through 2046. The federal deficit, which peaked at $1.4 trillion in fiscal year 2009 and dropped below $1.0 trillion after fiscal
year 2012, gets smaller through 2016, but then starts to increase again. With the economy growing faster than the pace of government spending, the government sector’s
share of GDP will decline over the forecast period. The state and local government sector maintains the dominant share of total government purchases, growing from 62% in
2015 to 69% in 2046. At the federal level, the military accounted for 60% of federal purchases in 2015, and accounts for 61% in 2046.
Growth
GDP
Fourth-quarter GDP growth was reported at 2.9% in Bureau of Economic Analysis’ third estimate, revised up 0.4 percentage point from the second estimate. Over the
final three quarters of last year, GDP rose at a robust 3.0% annual rate.
© 2018IHS Markit. page of 7 61
Following only 1.7% growth in the first quarter, we forecast GDP growth to pick up to 3.0% or better over the balance of 2018, followed by 2.9% next year and 2.1%
over 2020, lowering the unemployment rate to 3.6%.
Consumer spending growth will continue to support the economic expansion, underpinned by lower personal tax rates and gains in employment, real disposable
incomes, and home values. We forecast real consumer spending growth of 1.2% in the first quarter of 2018, 0.7 percentage point slower than in the previous forecast,
but expect 2.5%-or-better growth rates for the rest of the year. Real personal disposable income growth is estimated at 4.3% in the first quarter and remains robust.
We estimate that the new tariffs on steel and aluminum will raise less than $10 billion annually—a “rounding error” in our $20-trillion economy. Hence, by themselves,
the tariffs have little impact on the federal budget or the macroeconomic outlook.
Over the next two years, we forecast business fixed investment to grow 5.8% and 6.3%, respectively, and then slow to a still respectable 4.5% pace in 2020. Supportive
provisions from the Tax Cuts and Jobs Act, an expected downward drift in in risk spreads, the newly enacted Bipartisan Act of 2018, and a broadly firming economy will
raise demand enough to give businesses the confidence they need to expand capacity.
Net exports are expected to cut 0.88 percentage point off first-quarter GDP growth, after slicing off 1.16 percentage points the previous quarter. The drag to growth is
mostly coming from imports, particularly imports of consumer and capital goods.
The Census Bureau released new population projections in March. We lowered the housing forecast as a result.
Job growth is expected to build to a rough average of 250,000 per month over the second half of 2018, before gradually subsiding to around 90,000 per month in 2020.
The Federal Open Market Committee (FOMC) raised the target for the federal funds rate by 0.25 percentage point to a range of 1.501.75% at its policy meeting that
concluded on 21 March. We expect additional rate hikes this year in June, September, and December. Beyond 2018, more rate hikes should raise the upper end of the
funds rate target range to 3.50% in 2020.
The number of housing starts in 2018–28 is 2.3% lower than previously projected, 15.87 million versus 16.22 million; and the composition is more tilted toward the
single-family category, 76% versus 73% previously, over the next 10 years.
Employment gains are expected to be relatively solid through 2019, averaging roughly 215,000 per month, or about 2% per year.
We have made no change to our forecast that the Federal Reserve will raise interest rates four times in 2018, with the first quarter-point rate hike occurring at the
upcoming policy meeting on 21 March. Beyond 2018, we expect additional increases that raise the upper end of the target range for the federal funds rate to 3.5% in
2020.
Consumer demand
Consumer spending growth will continue to support the economic expansion, underpinned by lower personal tax rates and gains in employment, real disposable
incomes, and home values.
We forecast real consumer spending growth of 1.2% in the first quarter of 2018, 0.7 percentage point slower than in the previous forecast; real personal disposable
income growth is forecast at 4.3% in the first quarter.
Our real consumer spending growth outlook has been revised down by 0.2 percentage point to 2.5% for 2018, and remains at 2.7% for 2019.
We expect growth of real disposable personal income to accelerate from 1.2% in 2017 to 2.6% in 2018 (0.4 percentage point less than the previous forecast) and then
to ramp up to 3.6% in 2019.
Issue to watch: Total individual tax refunds in 2018 are on track to surpass their previous high point. Based on incoming data, we expect a total of $301 billion to be
disbursed to taxpayers through the end of June—nearly 1% more than last year.
Consumer spending growth will continue to support the economic expansion, underpinned by lower personal tax rates and gains in employment, real disposable incomes, and
home values. We forecast real consumer spending growth of 1.2% in the first quarter of 2018, 0.7 percentage point slower than in the previous forecast. Real personal
disposable income growth is forecast at a much faster 4.3% in the first quarter, which pushes the saving rate up 0.7 point to 3.3%.
Consumers took a breather in the first quarter after a raucous end to 2017, but will pick up the pace in the rest of the year. Our forecast for real consumer spending growth
has been revised down by 0.2 percentage point to 2.5% in 2018, and remains at 2.7% in 2019 and 2.4% in 2020. We expect growth of real disposable personal income to
accelerate from 1.2% in 2017 to 2.6% in 2018 and to 3.6% in 2019, before easing to 2.4% in 2020. In the pessimistic scenario (probability = 20%), the US economy suffers a
crisis of confidence and enters a two-quarter recession; real consumer spending grows 2.6% in 2018, 1.5% in 2019, and 1.7% in 2020. In the optimistic scenario (probability =
15%), the improving economy causes renewed household formation and the housing market bounces back; real consumer spending grows 2.8% in 2018, 3.8% in 2019, and
3.9% in 2020.
Consumer markets outlook
(Percent change, annual rate)
Quarterly Years
2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020
Real consumer spending 2.2 4.0 1.2 2.8 2.6 2.5 2.8 2.5 2.7 2.4
Durable goods 8.6 13.7 -1.1 6.2 4.3 3.9 6.7 5.6 4.4 3.5
Nondurable goods 2.3 4.8 -0.8 2.6 2.1 2.4 2.4 2.1 2.1 1.5
Services 1.1 2.3 2.2 2.4 2.6 2.4 2.2 2.2 2.6 2.5
Unit sales of new light vehicles (millions) 17.1 17.7 17.1 16.8 16.9 16.8 17.2 16.9 16.8 16.7
Real disposable income 0.7 1.1 4.3 2.5 3.1 3.7 1.2 2.6 3.6 2.4
Real household net worth 5.5 6.0 6.9 -3.6 2.2 2.2 6.0 1.9 1.3 1.8
Personal consumption deflator 1.5 2.7 2.8 1.4 1.9 1.6 1.7 2.0 1.8 2.4
Personal saving rate (% of disposable income) 3.4 2.6 3.3 3.3 3.4 3.6 3.4 3.4 4.2 4.1
Consumer Sentiment Index (Michigan, level) 95.1 98.4 98.9 99.3 99.6 99.8 96.8 99.4 98.9 97.3
Household obligations ratio (% of disposable income) 15.9 15.9 15.9 16.0 16.0 16.0 15.8 16.0 16.3 16.6
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Source: IHS Markit
Capital investment
Real nonresidential fixed investment is starting out this year stronger than we estimated last month. Over the first half of 2018, we look for average annualized growth of
5.4%, up 2.0 percentage points from last month’s forecast.
Following 4.7% growth last year, nonresidential fixed investment firms to growth of 5.8% this year and 6.3% next year. This firming trend mirrors accelerating nonfarm
business sector output, from 2.9% last year to 3.3% this year and 3.5% next year.
Solid investment spending is supported by more sanguine perceptions of risk, declining risk spreads, and easing lending conditions.
Key provisions from the Tax Cuts and Jobs Act, as well as new fiscal stimulus from the Bipartisan Budget Act, also support business fixed investment in the forecast.
Real fixed investment in structures grows at a healthy average rate of 5% per year through 2020, while real spending on intellectual property products grows at roughly
a 4% rate.
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Inventory investment was soft last year, even as final sales were strong. This lowered the inventory-to-sales ratio enough to set up inventory investment as a solid
contributor to GDP growth in 2018.
The solid start to 2018, combined with favorable conditions for investment spending, will contribute to solid growth of nonresidential fixed investment over the next few years.
A key factor supporting stronger investment spending is the Tax Cuts and Jobs Act (TCJA), which includes two key provisions that are expected to boost nonresidential fixed
investment: a lower marginal tax rate on corporate income and expanded expensing of newly placed capital equipment. Rising borrowing costs in our forecast are partially
mitigated by these provisions. Another key factor supporting investment spending is the Bipartisan Budget Act, the stimulus from which will give businesses confidence that
demand will be sufficient to warrant expanded capacity. Moreover, continued broad economic improvement will lead to more favorable perceptions of risk. This, in turn, puts
downward pressure on borrowing costs (as risk spreads narrow) and will lead to further easing of bank lending standards. Together, these conditions will help boost
nonresidential fixed investment to growth of 5.8% this year and 6.3% next year.
Inventory investment is expected to firm this year. Strong growth of final sales last year—an average of 2.9% per quarter—and weak inventory investment led to declines in
the aggregate inventory-to-sales ratio to a level that we think is suboptimal. To prevent further declines in the aggregate inventory-to-sales ratio, inventory investment is
expected to jump from $15 billion last year to $65 billion this year and $80 billion in 2019. That is, inventory investment is expected to switch from a source of drag last year to
a source of growth.
Business investment outlook
(Percent change, annual rate)
Quarterly Years
2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020
Real gross private nonres. investment 4.7 6.8 5.4 5.4 6.4 6.6 4.7 5.8 6.3 4.5
Equipment 10.8 11.5 4.8 5.3 8.6 9.1 4.8 7.9 8.1 5.7
Information processing equipment 10.9 8.5 6.1 7.7 9.5 8.7 7.6 8.3 6.9 4.2
Industrial equipment 7.6 4.6 11.3 18.8 12.3 13.1 7.1 11.2 10.7 6.3
Transportation equipment 14.9 15.7 -1.3 -8.4 1.8 8.5 -0.3 3.3 3.8 1.0
Other equipment 9.2 18.3 4.1 6.5 11.7 6.4 5.3 9.4 12.0 11.9
Intellectual property products 5.2 0.8 5.1 4.1 3.9 4.1 3.9 3.8 3.9 2.9
Research & development 3.2 3.5 5.7 4.0 3.7 3.6 3.0 4.0 3.9 2.1
Software 8.2 -2.2 5.0 4.7 4.3 4.6 5.1 3.9 4.1 3.8
Entertainment, artistic, and literary originals 0.5 3.8 3.1 2.1 3.4 3.8 2.5 2.6 3.7 2.9
Nonresidential structures -7.0 6.3 7.0 7.3 5.5 5.2 5.6 4.8 5.9 4.3
Buildings & other -14.2 4.9 8.4 3.1 7.6 8.2 0.1 2.7 8.3 5.9
Power & communications -9.0 -2.2 -6.7 9.4 0.4 0.1 -5.9 -2.5 3.0 -4.1
Mining & petroleum 22.6 18.4 16.9 19.0 1.7 0.4 58.2 19.0 1.3 8.2
Source: IHS Markit
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Labor markets
February was a great month for job growth, but March was anemic. The average of the two was a solid gain.
The unemployment rate held steady again, at 4.1%, with declines in both payrolls and the labor force after large February jumps.
The outlook for 2018 job gains has been boosted by tax cuts and the budget deal, with solid growth expected in 2019 as well. However, demographics take over
thereafter and job gains cool.
Issue to watch: What slack there is in the labor markets will fade fast as the expected robust job gains of 2018 and 2019 materialize. The labor market must transition
to boosting output with much slower payroll gains. So far, progress on boosting output per hour has been slow, although productivity remains in the black; it needs to
improve soon unless labor-force growth improves.
With the weak March payroll growth and a 50,000-net downward revision to the January and February gains, the first-quarter monthly average fell short of the April forecast,
but exceeded the March forecast. The first-quarter tally was 616,000—the best quarterly increase since the summer of 2016. With real GDP set to rise 2.8% this year (fourth
quarter-to-fourth quarter basis), up from 2.6% last year, annual job growth should pick up from 2.2 million last year to 2.8 million this year, before the deceleration begins.
The labor market is telling the same story that we have been anticipating. With a 4.1% jobless rate, the United States is close to its full employment. There is still room for the
labor-force participation rate to climb from the 62.9% recorded in March back toward 63.3%, but future labor-force growth depends on demographics, as well as a battle
between falling participation rates by the young and rising rates by those over 65 years old.
The unemployment rate falls to 3.6% next year, but what the US economy really needs is for productivity gains to firm up. We expect that this improvement will materialize in
the next three years; without this, something will have to give, like longer workweeks, higher participation rates, or reduced GDP growth. A portion of this improvement is from
an “up-skilling” of workers, or better matches in people’s job skills with available jobs in a full-employment job market, rather than one with legacy under-skilling (i.e., people
overqualified for their jobs) left over from the recession. In short, the labor market is moving after nearly a decade from a buyers’ market for to a sellers’ market, and
businesses will need to adapt. Nevertheless, payroll gains will need to cool.
Employment outlook
(Percent change, annual rate)
Quarterly Years
2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020
Employment – total nonfarm payrolls 1.5 1.5 1.9 1.7 1.9 2.0 1.6 1.7 1.7 1.0
Average monthly change (thousands) 184 185 230 211 235 250 190 210 214 131
Employment – construction 1.7 4.3 7.6 3.6 2.3 3.5 3.4 4.2 4.2 4.4
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Employment – manufacturing 1.1 2.3 2.8 2.0 2.7 1.7 0.7 2.1 1.4 0.8
Employment – private service providing 1.8 1.6 1.7 1.8 2.0 2.2 1.8 1.8 1.8 0.7
Unemployment rate (level) 4.3 4.1 4.1 4.0 3.9 3.8 4.4 3.9 3.6 3.6
Employment – household survey 1.8 0.4 2.4 1.2 1.9 2.1 1.3 1.6 1.6 1.0
Civilian labor force 1.7 -0.5 2.5 0.6 1.6 1.6 0.7 1.2 1.3 1.1
Manhours in private nonfarm establishments 1.5 2.1 2.1 2.1 2.6 2.7 1.8 2.2 2.2 1.0
Nonfarm productivity 2.6 -0.0 -0.4 1.4 1.2 1.0 1.2 0.8 1.2 1.3
Source: IHS Markit
Inflation
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Inflation
The consumer price index (CPI) fell 0.1 point in March, driven by a plunge in gasoline, while the core CPI rose 0.2%; 12-month growth of the core CPI jumped 0.2 point
to 2.1% year on year (y/y).
The producer price index (PPI) for final demand climbed 0.3% in March, and the core measure also increased 0.2 point, to 2.7% y/y; goods and services prices both
advanced.
The growth rate of the personal consumption expenditure (PCE) deflator increased by 0.1 point to 1.7% y/y in February, and growth of the core PCE inflation rate added
0.1 point to reach 1.6% y/y.
Our forecast is for core PCE prices to rise at a 2.5% annual rate in the first quarter and 2.1% for each of the following four. Our forecast now calls for core PCE inflation
to breach the Federal Reserve’s 2% target on a sustained basis this year.
Issue to watch: Although the March employment report was generally disappointing, the 12-month increase of average hourly earnings rose 0.1 percentage point to
2.7%. Combining this with private hours and factoring in our estimate of government wages and salaries, the report points to growth of wage-and-salary income in the
first quarter of 6% or better.
Core personal consumption expenditure (PCE) inflation is picking up. We view consumer price inflation as largely determined by well-anchored inflation expectations, recent
past inflation, relative changes in energy and nonenergy import prices, and economic slack. Further tightening in labor and product markets will contribute to additional firming
in both wage and price inflation, including a modest overshoot of the Federal Reserve’s explicit 2% inflation target. Our forecast is for core PCE prices to rise at a 2.5% annual
rate in the first quarter—faster than the 2.0% objective due to residual seasonality and a one-off increase in healthcare costs—and to mark up a 2.1% gain for each of the
following four quarters. In year-on-year terms, core PCE inflation breaches the 2% target in late second quarter and onward. Although it increased a tame 1.5% in 2017, we
expect it to rise 2.0% in 2018, 2.2% in 2019, and 2.3% in 2020. The headline index, which includes food and energy, will rise 2.4% in 2020, boosted by projected double-digit
gains in energy prices. The rise in the employment cost index is expected to pick up from 2.5% in 2017 to 3.3% in 2019 and then 3.7% by 2021.
Inflation outlook
(Percent change, annual rate)
Quarterly Years
2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020
CPI 2.1 3.3 3.6 1.2 1.9 1.1 2.1 2.3 1.7 2.9
Core CPI 1.8 2.2 3.0 2.3 2.4 2.3 1.8 2.3 2.4 2.5
Core PCE deflator 1.3 1.9 2.5 2.1 2.1 2.1 1.5 2.0 2.2 2.3
PPI – finished goods 1.6 5.9 3.5 0.7 1.2 0.2 3.2 2.5 1.0 2.9
Brent crude (spot price, $/bbl) 52 62 67 64 64 60 55 64 57 66
ECI – compensation 3.1 1.9 3.3 2.6 3.1 3.3 2.5 2.8 3.3 3.5
Nonfarm compensation per hour 3.6 2.4 3.7 2.5 2.7 3.0 1.6 2.8 3.2 4.1
Nonfarm productivity 2.6 -0.0 -0.4 1.4 1.2 1.0 1.2 0.8 1.2 1.3
Unit labor costs 1.0 2.5 4.1 1.1 1.4 1.9 0.4 2.0 2.0 2.8
Source: IHS Markit
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Exchange Rates
In inflation-adjusted terms, the dollar nudges back up to a high in the third quarter of 2019, followed by a steady decline through the end of the forecast period.
We assume the dollar will partially reverse its recent decline and nudge up slightly to a high in the third quarter of 2019, yet remain 3.4% below the 2017 average. This will be
followed by a steady decline through the end of the forecast period, resulting in a 6.4% drop by the end of 2028.
Selected average exchange rates
2017 2018 2019 2020
Brazilian reais per dollar 3.19 3.33 3.53 3.71
Canadian dollars per US dollar 1.30 1.25 1.25 1.23
Chinese yuan per dollar 6.76 6.37 6.49 6.70
Euros per dollar 0.89 0.82 0.83 0.81
UK pounds per dollar 0.78 0.71 0.71 0.69
Japanese yen per dollar 112.18 106.71 111.64 112.78
Mexican pesos per dollar 18.92 19.15 18.91 19.20
Exchange Rate and CPI Tables
Policy
Monetary policy
We expect a total of four interest rate hikes by the Federal Reserve over 2018, with additional hikes in following years that bring the upper end of the funds rate target
range to 3.5% by 2020.
Federal Open Market Committee (FOMC) members recently revised up their forecasts, the median of which now shows the target funds rate rising to 3.5% in 2020, as
in our forecast.
Strong economic growth, tight labor markets, fiscal stimulus (from the recently enacted tax cut and Bipartisan Budget Act), and a soft dollar (that could result in upward
pressure on prices) are consistent with our forecast for multiple Fed rate hikes over the next few years.
Futures have priced in a lower path for the funds rate, suggesting more upward pressure on bond yields as the Fed continues to raise the funds rate gradually.
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Our forecast for several rate hikes over the next few years is wholly consistent with our expectation for solid, above-trend GDP growth that pushes the unemployment rate
down close to the mid-3% range in 2019, more than a percentage point below the Congressional Budget Office’s estimate of the long-term unemployment rate consistent with
full employment (the nonaccelerating inflation rate of unemployment) of 4.7%. Tight labor markets will generate gradually rising inflationary pressures, aided by stable long-run
inflation expectations. Furthermore, recent increases in energy prices and a softer dollar that put upward pressure on nonenergy import prices also contribute to inflationary
pressures in the forecast. As a result, we expect core personal consumption expenditure (PCE) inflation, which excludes the direct effects of movements in food and energy
prices, to reach 2.0% this year and remain above 2.0% through 2020. This is above the Federal Open Market Committee’s (FOMC) 2.0% inflation target. Tight labor markets
and 2%-plus inflation are consistent with our expectation that the federal funds rate target will be pushed above its longer-run anchor within the next two years.
Trading in fixed-income markets suggest that investors have not fully priced in the tightening in short-term interest rates that we and the FOMC expect is likely to occur over
the next few years. As markets respond to actual rate hikes and expectations of more to come, this will reinforce upward pressure on bond yields. Term premia will also be
pushed up in response to higher inflation premia and balance-sheet shrinkage by the Federal Reserve. We expect the 10-year Treasury note yield, which was trading near
2.80% as this forecast was being prepared, will rise to about 3.70% in 2020.
There are risks to both sides of our forecast for interest rates. Equities suffered a bout of indigestion in early February. Although some of those declines have been reversed,
volatility remains elevated, and the risk of another round of softening in equities lingers as bond yields continue to trend higher. However, major new fiscal stimulus (including
from the Bipartisan Budget Act of 2018 and the Tax Cuts and Jobs Act) will boost demand and reinforce increases in inflation and interest rates. The effects from these fiscal
initiatives is estimated with significant uncertainty, so there is risk that they could be larger than currently anticipated.
Monetary policy outlook
(Percent)
Quarterly Years
2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020
Federal funds rate 1.15 1.20 1.45 1.72 1.93 2.20 1.00 1.82 2.77 3.33
2-year Treasury note yield 1.36 1.70 2.16 2.40 2.67 2.94 1.40 2.54 3.37 3.69
10-year Treasury note yield 2.24 2.37 2.76 2.92 3.09 3.24 2.33 3.00 3.49 3.68
30-year fixed mortgage rate 3.89 3.92 4.27 4.50 4.64 4.77 3.99 4.54 5.04 5.
30
Core PCE deflator (year-on-year percent change) 1.4 1.5 1.7 2.0 2.2 2.2 1.5 2.0 2.2 2.3
Core CPI (year-on-year percent change) 1.7 1.7 1.9 2.3 2.5 2.5 1.8 2.3 2.4 2.5
Real GDP (percent change, annual rate) 3.2 2.9 1.7 3.0 3.2 3.2 2.3 2.7 2.9 2.1
Unemployment rate (level) 4.3 4.1 4.1 4.0 3.9 3.8 4.4 3.9 3.6 3.6
Source: IHS Markit
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Fiscal policy
On 23 March, the president enacted the Consolidated Appropriations Act of 2018 (CAA18). This was anticipated under the previously enacted Balanced Budget Act of
2018 (BBA18), and so had no impact on either our fiscal assumptions or the forecast.
On 9 March the president announced tariffs on imports (25%) of steel and aluminum (10%), effective 23 March. These tariffs, which are included in the forecast, will
raise only small amounts of revenue and have little impact on the macroeconomic outlook. The president is also threatening to impose tariffs on $150 billion of imports
from China. These tariffs are not included in the forecast but would be a larger, more disruptive fiscal event.
We assume the personal provisions of the Tax Cuts and Jobs Act (TCJA) and the fiscal year (FY) 2019 level of budget authority enacted under the BBA18 are extended
.
Under our assumptions, the taxing and spending policies of federal and state and local government add about 0.75 percentage point to real GDP growth averaged over
2018–19.
Since last fall, two major fiscal legislations have been enacted. First was the TCJA, costing $1.5 trillion over 10 years before economic effects. Second was the BBA18,
costing nearly $400 billion over 10 years. Consequently, since the fall we have downgraded our projections for federal deficits and debt. We now see federal net saving, as
measured in the National Income and Product Accounts, falling from -$0.7 trillion in FY 2017 (3.4% of GDP) to -$1 trillion by 2020 (4.5% of GDP). The next Budget and
Economic Outlook from the Congressional Budget Office (CBO), due out 9 April, will be the first to reflect the TCJA and the BBA18. Although the CBO is required by law to
assume provisions of the TCJA sunset as scheduled, and that a sequestration of budget authority occurs in 2020, we do expect the report to show fiscal projections
qualitatively similar to ours, significantly worse than in CBO’s last report published in June 2017, and a powerful indication that current policies on taxes and spending are not
indefinitely sustainable.
Government outlook
(Billions of dollars)
Quarterly Years
2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020
Federal, fiscal year
Total receipts 807 770 740 1,008 848 820 3,315 3,365 3,498 3,706
Year-on-year percent change 1.1 3.9 1.0 -2.5 5.0 6.5 1.5 1.5 4.0 5.9
Budget outlays 950 994 1,033 1,004 1,069 1,077 3,981 4,101 4,386 4,610
Year-on-year percent change -3.5 4.6 -1.5 -2.6 12.5 8.3 3.3 3.0 7.0 5.1
Unified deficit -143 -225 -294 4 -221 -258 -666 -736 -888 -904
Percent of GDP -2.9 -4.6 -5.9 0.1 -4.3 -5.0 -3.5 -3.7 -4.2 -4.1
State and local, calendar year
Current receipts (annual rate) 2,503 2,548 2,561 2,586 2,616 2,645 2,490 2,602 2,714 2,842
Year-on-year percent change 2.6 3.6 3.9 5.7 4.5 3.8 3.1 4.5 4.3 4.7
Current expenditures (annual rate) 2,677 2,703 2,727 2,746 2,769 2,796 2,669 2,760 2,862 2,983
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Year-on-year percent change 2.9 3.2 3.1 3.6 3.4 3.4 3.3 3.4 3.7 4.2
Net saving (annual rate) -174.8 -155.6 -166.6 -159.1 -153.3 -151.6 -178.8 -157.7 -147.7 -140.5
Percent of GDP -0.9 -0.8 -0.8 -0.8 -0.7 -0.7 -0.9 -0.8 -0.7 -0.6
Source: IHS Markit
External sector
Net exports are expected to cut 0.88 percentage point off first-quarter GDP growth, after trimming 1.16 percentage points in the previous quarter.
Tariff announcements by the United States and China increase the risk of escalating trade protectionism. That is not currently our forecast, given the mutual and
entangled interests of the two countries.
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After 3.2% growth in 2017, world real GDP growth is projected to increase 3.4% in both 2018 and 2019 before decelerating. This forecast is unchanged.
Financing the projected deficits associated with the two recently passed bills will drive the exchange rate up this year, widening the current-account deficit through 2020.
Issue to watch: A trade war remains a concern.
Net exports are expected to cut 0.88 percentage point off first-quarter GDP growth, after trimming 1.16 percentage points in the previous quarter. The real trade-weighted
exchange rate has dropped 1.5% this year, after falling 6.5% in 2017. Financing the projected deficits associated with the two recently passed bills will drive it up this year,
widening the current-account deficit through 2020. After 3.2% growth in 2017, world real GDP growth is projected to increase 3.4% in both 2018 and 2019 before decelerating.
This forecast is unchanged. The Import price index increased at 5.9% annual rate in the first quarter, following a 6.6% fourth-quarter rise. The index that excludes fuel rose at
a 3.2% annual rate (strongest gain since the second quarter of 2011), while the index for consumer imports edged up 1.1% (the strongest gain since the first quarter of 2014).
In recent years, Fed policymakers have assumed that import prices, which declined from mid-2014 to early 2016 because of the strong dollar, would eventually play a role in
bringing PCE inflation above 2.0%. These assumptions may prove to be true.
International trade outlook
(Percent change, annual rate)
Quarterly Years
2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020
Real exports 2.1 7.0 1.7 4.7 6.7 6.8 3.4 4.3 6.3 6.1
Goods 1.8 11.6 2.9 5.8 6.1 5.6 4.5 5.4 5.2 5.3
Services 2.5 -1.4 -0.7 2.4 8.0 9.2 1.3 2.2 8.7 7.5
Real imports -0.7 14.1 6.8 5.1 6.6 6.3 4.0 6.5 6.8 6.7
Goods -0.2 17.3 7.1 6.4 7.0 6.7 4.3 7.4 7.4 7.5
Services -2.6 1.1 5.5 -0.8 4.5 4.7 2.5 2.1 3.9 3.0
Exchange rate – broad index of trading partners -12.8 3.3 -7.8 2.1 1.4 1.2 -0.3 -3.0 1.1 -0.1
Exchange rate – major currency trading partners -18.7 2.8 -11.9 1.2 0.0 1.8 -0.6 -5.2 0.9 -2.5
Exchange rate – other important trading partners -8.1 3.7 -4.8 2.8 2.3 0.8 -0.1 -1.4 1.3 1.6
Trade balance (billion dollars, annual rate) -541 -616 -693 -709 -697 -664 -568 -691 -618 -634
Current-account balance (billion dollars, annual rate) -406 -513 -591 -618 -619 -609 -466 -609 -6
10 –
667
Percent of GDP -2.1 -2.6 -3.0 -3.1 -3.0 -2.9 -2.4 -3.0 -2.8 -3.0
Source: IHS Markit
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Monthly Forecast Update Tables
Detailed Quarterly Forecast Tables
Monthly Economic Outlook PDF
Quarterly Economic Outlook PDF
Near-term outlook
© 2018IHS Markit. page of 19 61
Key indicators and forecasts
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© 2018 IHS Markit
United States: Key indicators and forecasts
Historical
data edge 2014 2015 2016 2017 2018 2019 2020 2021
Real GDP and its components (percent change)
Gross domestic product 2017 2.6 2.9 1.5 2.3 2.7 2.9 2.1 1.7
Domestic demand 2017 2.7 3.5 1.7 2.4 3.1 3.1 2.3 1.8
Exports of goods & nonfactor services 2017 4.3 0.4 -0.3 3.4 4.3 6.3 6.1 4.9
Imports of goods & nonfactor services 2017 4.5 5.0 1.3 4.0 6.5 6.8 6.7 5.0
Real per-capita GDP 2017 1.8 2.1 0.8 1.5 1.9 1.9 1.3 1.1
Nominal GDP (billions of current US dollars)
Gross domestic product 2017 17,428 18,121 18,624 19,391 20,324 21,436 22,479 23,451
Domestic demand 2017 17,937 18,645 19,146 19,962 21,000 22,038 23,095 24,066
Exports of goods & nonfactor services 2017 2,374 2,265 2,215 2,344 2,517 2,710 2,927 3,134
Imports of goods & nonfactor services 2017 2,883 2,789 2,736 2,916 3,193 3,312 3,543 3,748
Nominal per-capita GDP 2017 54,601 56,372 57,542 59,496 61,897 64,819 67,494 69,923
Prices (percent change)
GDP deflator 2017 1.8 1.1 1.3 1.8 2.0 2.5 2.7 2.6
Consumer price index 2017 1.6 0.1 1.3 2.1 2.3 1.7 2.9 2.5
Wholesale price index 2017 0.9 -7.2 -2.6 4.4 3.7 0.7 2.6 1.7
Terms of trade 2016 0.3 3.1 1.3 -0.1 3.0 3.7 2.1 1.7
Other indicators
Industrial production (percent change) 2017 3.1 -1.0 -1.9 1.6 3.9 3.3 2.1 1.5
Retail sales (percent change) 2017 2.5 2.5 1.7 2.4 1.5 2.1 1.8 1.4
Unemployment rate (percent) 2017 6.2 5.3 4.9 4.4 3.9 3.6 3.6 3.7
Population (millions) 2017 319.2 321.5 323.7 325.9 328.3 330.7 333.1 335.4
Percent change 2017 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7
Exchange rate (year end, per USD) 2017 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Percent change 2017 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Broad money supply (percent change) 2017 5.8 5.7 7.3 4.8 2.7 2.7 2.5 3.0
Fiscal balance (percent of GDP) 2016 -3.8 -3.4 -4.0 -4.5 -4.9 -5.3 -5.2 -5.2
Policy interest rate (percent per annum) 2017 0.12 0.24 0.54 1.30 2.29 3.01 3.44 3.45
Short-term interest rate (percent per annum) 2016 0.03 0.05 0.32 0.93 1.83 2.58 3.07 3.17
Long-term interest rate (percent per annum) 2017 2.54 2.14 1.84 2.33 3.01 3.49 3.68 3.71
Source: IHS Markit
Forecast assumptions
Global
Our US forecast incorporates the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018. We assume the level of appropriations is extended to prevent a sharp
fiscal contraction in fiscal year 2020 and that personal tax cuts are made permanent rather than expiring in 2026.
Our forecasts incorporate US import tariffs of 25% on steel and 10% on aluminum, but after allowing for exemptions their macroeconomic impacts are small. Announced
tariffs between the United States and China that have not yet been implemented are not in the forecast.
As the US unemployment rate falls below 4.0% and inflation picks up, interest rates will rise. The upper bound of the US federal funds rate target is expected to
increase from 1.50% currently to a high of 3.50% in mid-2020. It subsequently retreats to its long-run equilibrium rate of 2.75% in the mid-2020s.
IHS Markit expects the European Central Bank (ECB) to leave its policy rate at zero until December 2019 and then gradually raise it to a long-term equilibrium of 3.00%
by the end of 2022. The Bank of England is expected to increase its policy rate to 0.75% in May and 1.00% in August; it reaches a long-run level of 3.50% in 2022.
We expect a modest appreciation of the US dollar through mid-2019 as US bond yields rise and the tax changes attract capital inflows. Then, as other central banks
withdraw monetary accommodation, the dollar will depreciate moderately in the medium term. The euro is expected to edge down to USD1.20 in spring 2019 before
rising to USD1.30 by the end of 2024.
Rapidly rising US shale oil production will lower the price of Dated Brent from USD64/barrel in 2018 to USD57 in 2019. The real price of Brent in 2017 US dollars is
expected to stabilize at USD70/barrel in 2030.
In the near term, slower industrial growth in China, adequate global supplies, and tightening financial markets should restrain prices of industrial materials. In the long
run, we expect mild inflation in materials prices.
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Brexit negotiations between the United Kingdom and European Union are expected to result in a free-trade agreement, alongside some industry-specific agreements on
access to the single market. Since a comprehensive agreement is unlikely to be finalized by March 2019, there will be a multiyear transition period.
With President Xi Jinping’s tenure potentially prolonged, China’s economic development strategy will remain a top-down, state-led one. The central government is
expected to take a gradual approach to structural reforms.
Japan will raise its consumption tax from 8% to 10% in October 2019. Buy-in-advance purchases give way to a pullback in spending in late 2019.
Global forecast assumptions
2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2
Brent crude-oil price (USD/barrel) 50.94 52.17 61.57 66.91 63.67 64.33 60.33 57.00 56.00
US federal funds rate (percent) 111.06 111.01 112.95 108.20 105.13 105.88 107.68 109.59 111.26
ECB refinancing rate (percent) 0.25 0.25 0.50 0.50 0.75 1.00 1.00 1.00 1.25
US dollar per euro (quarter average) 1.10 1.17 1.18 1.23 1.23 1.22 1.21 1.21 1.20
Yen per US dollar (quarter average) 1.04 1.15 1.30 1.51 1.80 2.01 2.29 2.54 2.81
Source: IHS Markit
Medium- and long-term outlook
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© 2018 IHS Markit
United States: National income accounts
Average level or
Historical compound growth
data edge 2014 2015 2016 2017 2018 2019 2020 2021-26 2021-47
Billions of current local currency units
Gross domestic product 2017 17,428 18,121 18,624 19,391 20,324 21,436 22,479 25,984 41,374
Domestic demand 2017 17,937 18,645 19,146 19,962 21,000 22,038 23,095 26,571 42,270
Private consumption 2017 11,864 12,332 12,821 13,396 14,014 14,655 15,379 17,846 28,971
Government consumption 2017 2,563 2,611 2,658 2,732 2,846 2,964 3,076 3,455 5,025
Fixed capital formation 2017 3,433 3,590 3,632 3,819 4,068 4,329 4,567 5,217 8,183
Change in inventories 2017 -0.1 0.2 -0.4 -0.1 0.3 0.1 -0.1 0.0 0.0
Net exports 2017 -509.5 -524.0 -521.2 -571.6 -676.1 -602.1 -615.6 -587.7 -913.4
Exports of goods & nonfactor services 2017 2,374 2,265 2,215 2,344 2,517 2,710 2,927 3,637 6,218
Imports of goods & nonfactor services 2017 2,883 2,789 2,736 2,916 3,193 3,312 3,543 4,225 7,131
Percent change at constant prices
Gross domestic product 2017 2.6 2.9 1.5 2.3 2.7 2.9 2.1 1.7 1.9
Domestic demand 2017 2.7 3.5 1.7 2.4 3.1 3.1 2.3 1.6 1.9
Private consumption 2017 2.9 3.6 2.7 2.8 2.5 2.7 2.4 2.0 2.1
Government consumption 2017 -0.5 1.3 1.0 0.1 1.4 1.6 0.5 0.2 0.5
Fixed capital formation 2017 4.8 3.5 0.6 3.4 4.6 5.2 3.6 1.4 2.0
Change in inventories (contrib. to growth) 2017 -0.1 0.2 -0.4 -0.1 0.3 0.1 -0.1 0.0 0.0
Net exports 2017 -5.6 -27.5 -7.5 -6.1 -13.9 -8.2 -8.7 -0.3 -2.3
Exports of goods & nonfactor services 2017 4.3 0.4 -0.3 3.4 4.3 6.3 6.1 3.9 3.5
Imports of goods & nonfactor services 2017 4.5 5.0 1.3 4.0 6.5 6.8 6.7 3.1 3.2
Billions of current US dollars
Gross domestic product 2017 17,428 18,121 18,624 19,391 20,324 21,436 22,479 25,984 41,374
Domestic demand 2017 17,937 18,645 19,146 19,962 21,000 22,038 23,095 26,571 42,270
Private consumption 2017 11,864 12,332 12,821 13,396 14,014 14,655 15,379 17,846 28,971
Government consumption 2017 2,563 2,611 2,658 2,732 2,846 2,964 3,076 3,455 5,025
Fixed capital formation 2017 3,433 3,590 3,632 3,819 4,068 4,329 4,567 5,217 8,183
Change in inventories 2017 78.0 111.9 35.1 15.7 72.5 89.1 73.2 53.5 90.4
Net exports 2017 -509.5 -524.0 -521.2 -571.6 -676.1 -602.1 -615.6 -587.7 -913.4
Exports of goods & nonfactor services 2017 2,374 2,265 2,215 2,344 2,517 2,710 2,927 3,637 6,218
Imports of goods & nonfactor services 2017 2,883 2,789 2,736 2,916 3,193 3,312 3,543 4,225 7,131
Source: IHS Markit
United States: Inflation and financial indicators
Average level or
Historical compound growth
data edge 2014 2015 2016 2017 2018 2019 2020 2021-26 2021-47
Government finances (billions of LCU)
Revenues 2016 5,233 5,455 5,512 5,582 5,717 5,871 6,188 7,414 8,289
Percent change 2016 4.8 4.2 1.0 1.3 2.4 2.7 5.4 5.0 82.4
Expenditures 2016 5,890 6,079 6,261 6,446 6,706 7,015 7,349 8,694 13,879
Percent change 2016 2.5 3.2 3.0 2.9 4.0 4.6 4.8 4.8 4.1
Balance 2016 -656.6 -624.3 -749.1 -863.6 -989.4 -1,143.6 -1,161.2 -1,280.6 -1,391.5
Percent of GDP 2016 -3.8 -3.4 -4.0 -4.5 -4.9 -5.3 -5.2 -4.9 -3.8
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© 2018 IHS Markit
© 2018 IHS Markit
Inflation indicators (percent change)
GDP deflator 2017 1.8 1.1 1.3 1.8 2.0 2.5 2.7 2.4 2.2
Consumer price index 2017 1.6 0.1 1.3 2.1 2.3 1.7 2.9 2.3 2.2
Wholesale price index 2017 0.9 -7.2 -2.6 4.4 3.7 0.7 2.6 1.9 1.6
Export prices 2017 0.0 -5.0 -1.9 2.4 2.9 1.3 1.8 1.9 1.3
Import prices 2017 -0.3 -7.8 -3.1 2.5 2.9 -2.8 0.2 1.6 1.4
Monetary indicators
M1 (billions of LCU) 2017 2,898 3,064 3,343 3,597 3,743 3,847 3,924 4,234 5,570
Percent change 2017 9.9 5.7 9.1 7.6 4.1 2.8 2.0 2.2 2.5
Broad money (billions of LCU) 2017 11,605 12,267 13,163 13,790 14,159 14,541 14,906 16,920 27,147
Percent change 2017 5.8 5.7 7.3 4.8 2.7 2.7 2.5 3.8 4.0
Policy interest rate (percent) 2017 0.12 0.24 0.54 1.30 2.29 3.01 3.44 3.12 2.79
Short-term interest rate (percent) 2016 0.03 0.05 0.32 0.93 1.83 2.58 3.07 2.91 2.57
Long-term interest rate (percent) 2017 2.54 2.14 1.84 2.33 3.01 3.49 3.68 3.66 3.65
Source: IHS Markit
United States: Balance of payments
Average level or
Historical compound growth
data edge 2014 2015 2016 2017 2018 2019 2020 2021-26 2021-47
Current account (billions of current US dollars)
Current-account balance 2016 -373.8 -434.6 -451.7 -459.4 -505.7 -495.8 -539.5 -490.7 -757.8
Balance on goods 2016 -751.5 -761.9 -752.5 -806.9 -848.4 -833.1 -889.5 -996.2 -1,649.4
Goods, credit (exports) 2016 1,634 1,511 1,456 1,561 1,725 1,821 1,941 2,315 3,933
Goods, debit (imports) 2016 2,385 2,273 2,208 2,368 2,574 2,654 2,830 3,312 5,634
Balance on services 2016 261.2 261.4 247.7 243.7 273.4 346.6 416.4 599.1 1,119.6
Services, credit (exports) 2016 741.9 753.2 752.4 777.6 831.0 926.7 1,021.0 1,298.7 2,441.1
Services, debit (imports) 2016 480.8 491.7 504.7 533.9 557.6 580.0 604.7 699.6 1,247.7
Balance on primary income 2016 210.8 181.0 173.2 217.1 196.7 123.3 72.1 62.7 -10.5
Primary income, credit 2016 817.3 783.0 814.0 918.5 972.8 988.4 1,014.3 1,208.2 1,928.8
Primary income, debit 2016 606.6 602.0 640.8 701.3 776.1 865.1 942.1 1,145.5 1,862.5
Current-account balance (% of GDP) 2016 -2.1 -2.4 -2.4 -2.4 -2.5 -2.3 -2.4 -1.9 -1.8
Capital account (billions of current US dollars)
Balance on capital account excl. reserves 376.5 449.8 491.0 444.1 453.5 548.8 646.0 866.0 1,607.8
Net direct investment 2016 -136.1 30.8 41.7 -33.2 -34.0 -1.6 39.6 108.0 305.0
Net incurrence of liabilities (inflow) 2016 207.4 379.4 333.8 251.4 280.9 321.3 359.3 414.3 575.7
Net acquisition of financial assets (outflow) 2016 343.4 348.6 292.1 284.6 314.9 322.9 319.7 306.3 270.7
Net portfolio investment 2016 119.2 97.0 339.4 596.3 557.8 546.0 525.1 558.2 786.1
Net incurrence of liabilities (inflow) 2016 701.9 250.9 402.3 648.7 684.0 730.0 750.9 776.2 918.5
Net acquisition of financial assets (outflow) 2016 582.7 154.0 62.9 52.5 126.2 184.0 225.8 218.0 132.4
Net other investment 2016 246.3 35.8 108.3 -118.9 -70.3 4.4 81.3 199.8 516.7
Net incurrence of liabilities (inflow) 2016 147.1 -235.1 381.6 193.3 221.9 261.2 301.4 373.1 621.0
Net acquisition of financial assets (outflow) 2016 -99.2 -270.9 273.4 312.2 292.1 256.8 220.1 173.3 104.3
Reserves, related items (change in reserves) -15.3 -13.1 5.2 1.3 1.1 1.2 1.2 1.2 0.5
Source: IHS Markit
Business environment: Legal: Overview
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The legal system is independent, clear, and pro-business, reducing contract alteration and contract enforcement risks. However, a recent wave of trade protectionism raises
policy uncertainty around existing trade agreements. For example, in early 2018, President Donald Trump raised global tariffs on steel and aluminium by 25% and 15%
respectively. Trump replaced deceased Supreme Court Justice Antonin Scalia with Neil Gorsuch, a conservative that maintains the court’s right-leaning bent.
Contract enforcement
The United States is a common-law jurisdiction based on precedent with contractual, tort, trust and land laws adapted from early English law, with the US Supreme Court as
the ultimate arbiter. The court system also has a well-developed arbitration process, the cornerstone of which is the Federal Arbitration Act (FAA). The FAA ensures that
agreements to arbitrate are enforced by requiring courts to compel arbitration if a party to an arbitration agreement refuses to arbitrate and to stay proceedings where a valid
arbitration agreement exists. Confiscation and enforcement risks are not an issue, as the judiciary is independent and tends to be fair in settling contract disputes and
enforcing its rulings. Statutory federal law will normally prevail over state and local rules, but often regulates the same subjects without conflict and therefore both sets of law
apply. Crucially, state law may still have a significant effect on land, contractual, tax, and environmental issues and is therefore a major consideration when choosing a
location for investment. Rarely, contracts will be altered or cancelled for reasons of national security or in response to anti-trust considerations.
Expropriation risks
During former president Barack Obama’s administration, some financial-service providers and auto manufacturers were essentially nationalised following the 2008 financial
crisis, but this was to rescue them rather than to bring their assets under state control, and the government has since sold its shares. As in most developed countries, the
federal government is empowered to acquire property for public use on a mandatory basis under the concept of eminent domain, but appropriate compensation must be
furnished. President Donald Trump has not advocated for any major policy changes here.
Key indicators – regulation and contracts
Doing business indicators 2014 OECD avg.
Average time to clear customs* (days) NA NA
Trade facilitation, lead time (days)
Import 5.4 9.6
Export 6.0 10.5
Enforce a contract
Time required (days) 420.0 539.5
Number of procedures 33.6 31.5
Start a business
Time required (days) 5.6 9.2
Number of procedures 6.0 4.8
Registration of property
Time required (days) 15.2 9.6
Number of procedures 4.4 4.7
Time to resolve insolvency (years) 1.5 1.7
Taxation indicators
Highest marginal tax rate** (percent)
Corporate 40.0 NA
Individual 35.0 NA
Time to prepare and pay taxes (hours) 175.0 175.4
Tax payments, number 10.6 11.8
* Latest available: NA
** Latest available: 2009
Source: World Bank
Tax: Overview
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In December 2017, President Donald Trump signed what is viewed as the most significant tax overhaul in three decades. The Tax Cuts and Jobs Act reduced corporate taxes
from 35% to 21%. The bill also moved away from a worldwide taxation system on earned income for domestic corporations, shifting to a territorial system. In addition,
individual taxes will continue to be divided into seven income brackets, with some individuals across all brackets seeing their taxes reduced on a temporary basis.
Taxation risks
Delivering on a major item on his policy agenda, in December 2017, President Donald Trump signed what is viewed as the most significant tax overhaul in three decades. The
Tax Cuts and Jobs Act reduced corporate taxes from 35% to 21%. The bill moved away from a worldwide taxation system on earned income for domestic corporations,
shifting to a territorial system. The bill encouraged repatriation of overseas capital by domestic firms, providing for a one-time tax of 15.5% on cash and liquid assets and 8%
on illiquid assets. Republicans are hoping that cutting corporate taxes will drive job creation and boost economic growth ahead of the 2018 mid-term elections. After a slew of
mergers between US and foreign companies to reduce their taxes, the Obama administration launched an effort to crack down on tax inversions via federal regulations from
the Treasury Department. Individual tax rates continue to be divided into seven income brackets, with some individuals across all brackets seeing their taxes reduced on a
temporary basis. The bill also raised the standard deduction for both individuals and couples.
Rates snap-shot
Tax s nap- s hot
Corporate
% Notes
Corporate income
tax rate
21 Flat rate. In addition, many states levy income
or capital-based taxes. An alternative minimum
tax (AMT) is imposed.
Capital gains tax
rate
35 –
Branch rate tax 35 –
Withholding tax
– –
dividends 30 Applicable to payments to non-residents.
Interest
30 –
Royalties from
patents,
know-how etc.
30 –
Branch remittance
tax
30 This is the branch profits tax.
Net operating
losses (years)
– –
Carry-back 2 Special rules apply to certain types of losses
and entities.
Carry-forward 20 –
Personal income
tax (2012bands)
% Notes
Top rate: earnings
above
USD388,350
35 Rates for single individuals
Earnings between
USD178,650
andUSD388,350
33 –
Earnings between
USD85,650
andUSD178,650
28 –
Earnings between
USD35,350
andUSD85,650
25 –
Earnings between
USD8,700
andUSD35,350
15 –
10 –
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Earnings below
USD8,700
Source: Ernst & Young, US Internal Revenue Service (IRS)
Operational: Overview
Foreign investment is welcomed, although a recent trend towards trade protectionism increases uncertainty around existing trade agreements. President Donald Trump’s
immigration policy raises the likelihood of firms facing difficulties in securing visas for foreign employees. Corruption levels remain modest. Environmentalist movements have
become more active recently, particularly around pipelines in western states. There have been limited labour strikes around minimum wage levels. Trump has indicated that
he would look to make a significant investment in infrastructure and has lifted some barriers to certain energy projects on federal land and offshore.
Labour relations risks
Unions and labour unrest are focused on a few industries such as the aviation, marine, and automotive industries. Union membership remains much higher among
public-sector workers (34.4% in 2016) than in the private sector (6.4%). However, a Supreme Court case will be decided by June 2018 that will make it easier for public
employees to refrain from paying union dues, which could diminish the existing gap. Strikes are relatively rare, and the president reserves special authority to delay the action
if he believes it would be disruptive or against the public interest, most often when dealing with strikes involving logistics and transportation, such as ports or airlines. However
, the fact that companies will usually provide alternative services in the event of an action, ensures that disruptions are normally not extensive for most industries. Employers
can either voluntarily recognise unions, or be forced to do so by a majority of workers in a “bargaining unit”. Employees can only be union members under one of these two
scenarios. The government must also certify organisations as legitimate unions. Once a union has won the right to represent employees in a particular workplace it generally
has sole authority to negotiate conditions of employment. In the public sector, regulation of unions varies by state. Most model their approaches on the National Labor
Relations Act (NLRA), which guarantees the right to unionise, to collective bargaining, and to strike. Traditionally, the dominant union federation in the US has been the
American Federation of Labor-Congress of Industrial Organizations (AFL-CIO). This umbrella organisation wields considerable political influence and campaigns for
worker-favourable policies.
Corruption risks
Allegations of political corruption abound in the United States, but primarily due to the dynamism of US investigative journalism, so such threats should be kept in perspective.
The prevalence of interest groups, which lobby politicians and support political campaigns to gain the measures they desire, is an explicit feature of US political life and
undoubtedly contributes to these accusations. However, in light of an easing of campaign finance regulation by the Supreme Court in its 2008 decision, Citizens United v FEC
risks of high-level campaign corruption continue to rise. Corruption scandals highlighted in the press often concern high-level political politicians accepting gifts in exchange
for minute changes in legislation that favour individual companies. The penalties for those caught can be severe. President Donald Trump originally proposed stricter lobbying
rules, but many of these have been loosened since their initial creation.
Security: War risks: Overview
The risk of war on US soil remains low. Yet, aside from the recently announced possible US-North Korea summit in late Spring 2018, the odds of a nuclear confrontation with
North Korea has risen since 2015. Additionally, a number of ongoing military engagements abroad – in Afghanistan, Iraq, Somalia, Syria, and Yemen – have escalated under
President Donald Trump’s administration. Trump’s continued animosity towards the Iranian nuclear agreement also raises the prospect of military, if only in association with
escalating hostilities with Iran and US allies like Israel and/or Saudi Arabia.
Interstate war
The risk of the US engaging in a war on its soil is highly unlikely, as is the risk of the US engaging in a conventional war with Russia or China. However, the US continues to
be engaged abroad in multiple military deployments, which face potential escalation.
President Donald Trump has announced several plans that signal a likely escalation in foreign US military engagements, such as his decision to grant senior military officials
greater freedom to plan and conduct military operations in active war zones. This has already affected ongoing military operations in Somalia and Yemen, as Trump has
reportedly approved requests to designate parts of these countries as an ‘area of active hostilities’, thus granting local commanders increased authority and freedom to
conduct raids and drone strikes. The Pentagon has authorised hundreds of additional soldiers to be sent to Iraq, Somalia, and Syria, and thousands more to Afghanistan.
Sizeable strikes have been carried out by the US military in Syria, most notably in April 2017 by attacking the Syrian government’s Shayrat air base with 59 Tomahawk
missiles.
Meanwhile, the US is facing an increased risk of military engagement in Asia. Until recently, when President Donald Trump announced he would be willing to meeting North
Korean leader Kim Jong-un, the US had been taking a strident rhetorical line in response to North Korea’s continued ballistic missile and nuclear tests. Trump had previously
claimed that the US would prevent North Korea from acquiring long-range intercontinental ballistic missiles. China’s increased territorial assertiveness, particularly in the
dispute over islands in the South China Sea, has also increased the risk of US involvement in armed conflict there. Trump’s interest in maintaining access to the South China
Sea for US military forces also contributes to the rising risk of conflict. Although the exact mechanism that the US would use to ensure US access remains unclear, it is
important to note that the US Navy has continued to carry out its first freedom of navigations patrol under the Trump administration. Finally, Trump’s continued animosity
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towards the Iranian nuclear agreement also raises the prospect of military strikes against Iran, if only in association with escalating hostilities with that country and US allies
like Israel and/or Saudi Arabia.
Terrorism risks: Overview
Terrorist attacks inspired or directed by the Islamic State or al Qaeda pose a risk. Attacks would likely involve firearms or improvised explosive devices as seen in the 2016
mass shooting in Orlando and in the September 2016 bombings in New York. Attacks could also involve the use of vehicles, as seen in the 2016 and 2017 attacks in
Columbus and New York City. Right-wing terrorists pose a threat to Jewish, Muslim, African American, and LGBT assets and individuals, in addition to government buildings
and abortion clinics. Attacks carried out by environmental and animal rights activists exist, but remain relatively infrequent.
Hotspots and targets
The most frequent terrorist plots over the past few years have involved low-capability self-radicalised actors inspired by the Islamic State or al Qaeda. The majority of attacks
carried out involved firearms – such as the June 2016 mass shooting in Orlando, Florida – or improvised explosive devices, as seen in the September 2016 attacks near New
York. Islamist attacks will increasingly involve the use of vehicles as weapons, as seen in the 2016 attack in Columbus, Ohio and 2017 attacks in Charlottesville, Virginia, and
New York City. As Islamic State militants have lost control of territory in Syria, the organisation has urged supporters to carry out attacks at home rather than traveling to its
territory. Although the nature of recent attacks and plots do not represent increased capabilities, the wide availability of high-caliber firearms in the US significantly increases
the odds of success. Social media technologies have also expanded the domestic threat by connecting home-grown jihadist sympathisers with militants abroad, and by
making it difficult for local authorities to distinguish between viable and incredible threats. Finally, terrorist threats emanating from individuals returning from Syria/Iraq or
Somalia in support of al-Shabaab will almost certainly increase.
The threat posed by right-wing terrorism has increased, with the Anti-Defamation League reporting an 86% increase in the number of anti-Semitic attacks in the first quarter of
2017 and an increase in the number of anti-Islamic hate groups. Reports indicate that white supremacist organisations have become more emboldened since the election of
President Donald Trump, targeting members of and venues associated with the African American, Jewish, Muslim, and LGBT communities, as witnessed by the holding of
their largest rally in many years in August 2017 in Charlottesville, Virginia. Law enforcement officers and government assets face a risk of attack from right-wing extremists,
particularly from members of the patriot, anti-government, and sovereign citizen movements, as seen in the 41-day 2016 occupation of the Oregon Malheur National Wildlife
Refuge.
The number of vandalism and arson attacks carried out by environmental and animal rights activists has decreased over the past decade, but these are likely to recur
sporadically, particularly in West Coast areas. Following the election of Trump, there also is an increased risk of arson or vandalism against local Republican political sites like
county headquarters.
Social stability and unrest risks: Overview
The period immediately following the presidential election experienced a number of protests against the policies of President Donald Trump. Other demonstrations have
involved individuals associated with white supremacist or other right-wing extremist organisations, which are frequently met with opposition anti-fascist (Antifa) protests,
leading to violence and arrests. Although race relations and incidents of police brutality remain important issues, the number and intensity of Black Lives Matter protests have
decreased since Trump’s election. However, protesters will continue to organise when instances of police brutality occur and when police officers receive perceived light
punishments in courts.
Protests and riots
Demonstrations by individuals associated with white supremacist or other right-wing extremist organisations have become increasingly common, as have counter protests
organised by members of the anti-fascist movement. Since 2016, such opposing protests have been seen in Charlottesville (Virginia), Asheboro (North Carolina), Berkeley,
Boston, Pikeville (Kentucky), and Sacramento. Participants in these opposing protests have engaged in violence on multiple occasions, including fist fights and stabbings.
Police have also faced a risk of being injured during these rallies as they try to separate protesters. Anti-fascists (Antifa) have often been associated with anarchist
movements and have developed a reputation for engaging in “direct action” protest tactics. These tactics often involve provoking physical confrontations and damaging
property.
The period following the election and inauguration of President Donald Trump has continued to witness demonstrations by those protesting Trump’s actions and policies. For
instance, there have been protests throughout the US calling for Trump to release his tax returns and for his administration to address climate change. Protests surrounding
major policy decisions are likely to continue throughout 2018 and, when held in urban centres, could cause limited property damage to retail outlets, government, and office
buildings.
Race relations and police brutality have frequently sparked protests, civil unrest, and violence throughout the US. The Black Lives Matter (BLM) movement formed in 2012
and, over the following years, played a significant role in organising demonstrations protesting police brutality and advocating for improved race relations. However, the
number and intensity of BLM movement protests have decreased since the election of Trump, with reports indicating the movement may be focusing instead on engaging in
policy efforts and working with other minority groups. However, protests are likely to still form around instances of police brutality and the sentencing of any police officers
involved. These protests have the potential to spark riots and to cause road blockages.
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Environmental protests are likely at mountaintop coal-mining sites and facilities of mining companies operating in the mid-Atlantic/Appalachian region. Environmental protests
against fracking, shale gas development, and major pipeline construction projects have also been on the rise. Protests also may be held in reaction to the Trump
administration’s environmental policies.
Anti-drone activists continue to hold protests on a regular basis at US Air Force bases across the country to protest the use of drones in military operations. Such protests
have been held at Creech Air Force Base in Nevada, Beale Air Force Base in California, and Hancock Air Force Base in New York. Arrests are common during these protests
as activists have been known to trespass onto the bases, block the base gates, or block traffic.
Key facts and demographics
Area: Total 9,826,675 km ; land 9,161,966 km ; water: 664,709 km2 2 2
Language: English 82.1%, Spanish 10.7%, other Indo-European 3.8%, Asian and Pacific island 2.7%, other 0.7% (2000 census)
Religion: The state is constitutionally barred from favouring a particular religion. Protestant 51.3%, Roman Catholic 23.9%, Mormon 1.7%, other Christian 1.6%, Jewish 1.7%,
Buddhist 0.7%, Muslim 0.6%, other or unspecified 2.5%, unaffiliated 12.1%, none 4% (2007 est.)
Time Zone: GMT -5 to GMT -10
Population: 311,591,917 (US Census Bureau, 2011)
Neighbours
:
Canada,
Mexico
Capital City
:
Washington, DC
Primary
Ports:
Houston (Texas), Long Beach (California), New York, South Louisiana, Valdez (Alaska)
Primary
Airports:
Dallas/Fort Worth International, Hartsfield Atlanta International (Georgia), JFK International (New York), Miami International, Newark Liberty International (New Jersey),
O’Hare International (Chicago), San Francisco International
Currency: US dollar (USD)
Political system and players
Parties and key figures
Major parties
The United States essentially has a two-party system. Both parties share a commitment to capitalism and constitutional democracy, and have always done so – a genuinely
socialist or authoritarian political party has never won power in the US. A large section of the electorate has no degree of identification with either party, and members of
Congress act with far greater independence from party control than they do in many other developed countries, especially those with parliamentary systems.
The Democratic Party
Political stance: The Democratic Party is a centre-left party that tends to be supportive of welfare expenditure and believes that the government has an obligation to
provide social and economic programmes.
Support base: Democrats tend to be supported by a cross-section of the population with liberal views, and includes significant support from minorities.
Recent history: Democrat Barack Obama secured the presidency in 2008 and 2012.
Potential future leaders: Corey Booker, Joe Biden, Elizabeth Warren
The Republican Party
Political stance: The Grand Old Party (GOP) is considered to be the more conservative of the two leading parties, with recent incarnations of the party have claimed to
oppose big government and have emphasised individualism and private enterprise.
Support base: Republican support cuts across the population with significant regional support in the South across the West of the country.
Recent history: Donald Trump won the presidency in 2016 and the Republican Party regained control of the House of Representatives in the 2010 mid-term elections
and the Senate in 2014.
Potential future leaders: Mike Pence, Paul Ryan
Leadership
Title Name Appointed
President Donald J. TRUMP 20 Jan 2017
Vice President Mike PENCE 20 Jan 2017
Secretary of the Treasury Steven T. MNUCHIN 13 Feb 2017
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Secretary of Defense Gen. (retd) James MATTIS 20 Jan 2017
Secretary of Homeland Security Kirstjen NIELSEN 6 Dec 2017
Attorney General Jeff SESSIONS 9 Feb 2017
Secretary of Labor Alexander ACOSTA 27 Apr 2017
Secretary of the Interior Ryan ZINKE 1 Mar 2017
Secretary of Transportation Elaine L. CHAO 31 Jan 2017
Secretary of Energy James Richard PERRY 2 Mar 2017
Secretary of Health and Human Services Alex AZAR 29 Jan 2018
Secretary of Education Elisabeth (Betsy) Prince DeVOS 7 Feb 2017
Secretary of Commerce Wilbur L. ROSS Jr 28 Feb 2017
Secretary of Agriculture George Ervin ‘Sonny’ PERDUE III 25 Apr 2017
Secretary of Housing and Urban Development Benjamin S. CARSON Sr 2 Mar 2017
Secretary of Veterans’ Affairs (nominated) Adm. Ronny L. Jackson 28 Mar 2018
Secretary of Veterans’ Affairs (acting) Robert WILKIE 28 Mar 2018
Director of the Office of Management and Budget (OMB) Mick MULVANEY 16 Feb 2017
Ambassador to the United Nations Nikki R. HALEY 24 Jan 2017
Representative for Trade Negotiations Robert LIGHTHIZER 15 May 2017
Key figures
President Donald Trump
Donald Trump is the 45th president of the United States. The president is the nation’s chief executive, responsible for carrying out congressional and federal law. Trump won
election to the presidency on 8 November 2016, defeating Democratic challenger Hillary Clinton with 304 electoral-college votes to 227, despite losing the popular vote by two
percentage points. He assumed the office on 20 January 2017. Trump is the first businessman elected to the White House without any previous government or military
experience.
Trump was born and raised in New York City, the son of a wealthy real estate developer. Trump then pursued business of his own after university, constructing several
buildings of his own, including Trump Tower in Manhattan and three casinos in Atlantic City. After a downturn in the 1980s that resulted in Trump losing many of his properties
, he revitalised his company in the 1990s by marketing various brands using his name, with notable examples including steaks, water, a university, and various resorts. He
also appeared on the popular television reality series The Apprentice.
In 2011, Trump gained attention by questioning whether former president Obama was born in the United States and therefore eligible to be president. In mid-2016, after toying
with the idea for several elections, he announced his presidential candidacy. After a contentious primary, Trump emerged the victor from the Republican party, beating 16
opponents.
Vice-President Mike Pence
Mike Pence was sworn in as the 48th vice-president on 20 January 2017. The vice-president’s specific constitutional role is to succeed the president in the event of the latter’s
death, resignation or incapacity, and to serve as president of the Senate. In the latter capacity the vice-president acts only to break tied votes in the chamber.
Pence was born in Columbus, Indiana, on 7 June 1959. He graduated from Hanover College in 1981 and gained a law degree from Indiana University in 1986.
Pence was an attorney for several years and lost two races for Congress in 1988 and 1990. Later, from 1993 to 1999, he gained notoriety by hosting The Mike Pence Show, a
local Indiana radio programme. Pence won his first political race in 2000, winning the 2nd district congressional seat for Indiana. He served as a member of Congress until
2013. In 2012, Pence won the Indiana governor’s race and served in that capacity until being selected by Trump to become his running mate in 2016.
Senate Majority Leader Mitch McConnell
The Senate majority leader is the chief strategist and spokesman for the party with the most seats in the Senate and is in charge of scheduling the chamber’s business. Mitch
McConnell was born on 20 February 1942 in Sheffield, Alabama, but was raised in Louisville, Kentucky. He gained his undergraduate degree from the College of Arts and
Sciences at the University of Louisville, Kentucky, in 1964 and went on to complete a Juris Doctor degree at the University of Kentucky, Lexington, in 1967. He served on the
staffs of Republican Senators John Sherman Cooper and Marlon Cook, as an intern and an assistant respectively before becoming a deputy assistant attorney general in the
administration of Gerald Ford. Before running for elective office he served two terms as the chief executive, or Judge-Executive, of Jefferson County, Louisville from 1978.
In 1984, he defeated the incumbent Democratic Senator Walter Huddlestone by less than half a percentage point. His 1990 re-election, against former Louisville mayor
Harvey Sloane, was a little more comfortable because McConnell was returned by 4%. In subsequent elections, McConnell has become embedded, winning 55% in 1996 and
nearly 65% in 2002. He chaired the Senate Republican campaign committee in 1998 and 2000 before becoming chief whip, unopposed, after the 2004 elections. When
Senate majority leader Bill Frist announced that he would not run for re-election in 2006, McConnell was the favourite to succeed him after the elections. He was duly elevated
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to the post without challenge in November 2006 and won re-election in Kentucky for a further six-year term in 2008, and again in 2014. After a period of Democratic leadership
in the Senate, he again became the majority leader following the 2014 Senate elections.
Senate Minority Leader Charles (Chuck) Schumer
The task of the minority leader is to develop strategies by which the minority (currently Democrat) caucus in the Senate can act in concert to work with or oppose the majority (
currently Republican) caucus. Schumer (born 23 November 1950) hails, like President Trump, from New York City, where he was born and raised. He graduated from
Harvard University, first with his bachelors degree and then his law degree in 1974. After graduating, Schumer immediately began a career in politics, running first for the New
York State Assembly, where he served until 1980, and then in the US Congress from 1980 to 1999. In 1998, Schumer ran for the Senate, beating Republican Al D’Amato.
Since winning his first Senate race, he was re-elected in 2004, 2010, and 2016, each time rising in the Democratic Senate hierarchy. When former Senate Minority leader
Harry Reid announced his retirement in 2016, it was announced that Schumer would serve as leader of the Democrats following the presidential election.
Speaker of the House of Representatives Paul Ryan
The speaker is the most powerful figure in the House of Representatives and is second in line to the presidency after the vice-president in the event of presidential death,
resignation, or incapacity. Elected by a majority of the House membership, the speaker presides over House debate, appoints committee chairmen and the membership of
select committees, and determines rulings affecting House business.
Paul Ryan took over from John Boehner as speaker in October 2015 after Boehner announced his mid-term resignation. Ryan has represented the 1st congressional district
of Wisconsin since 1999. Before taking over as speaker, Ryan served as chairman of the House Ways and Means Committee and prior to that the House Budget Committee.
Minority Leader of the House of Representatives Nancy Pelosi
Nancy Pelosi lost the speakership and became the minority leader of the House in January 2011, following the severe defeat inflicted upon the Democrats in the mid-term
elections of November 2010.
Pelosi was born in Baltimore, Maryland, on 26 March 1940. Her father, Thomas D’Alesandro Jr, served four terms in the House of Representatives from Baltimore (1939–47).
He went on to become mayor of Baltimore. Pelosi was educated at Trinity College, Washington, DC, graduating in 1962. She settled in California, married and had five
children. She worked as a Democratic Party activist, chairing the California Democratic Party and was a member of the Democratic National Committee from 1976 to 1996.
She first ran for elected office in a special election to succeed Democratic Representative Sala Burton who died in early 1987. Pelosi’s district encompasses most of San
Francisco, which is one of the most socially liberal cities in the US. It was the first city in California to elect, in 1978, an openly gay mayor. Since retaining the seat in 1988,
Pelosi has rarely failed to gain 80% of the votes of the district. The nature of her district has led the Republicans to deride Pelosi as being out of touch with the mainstream
American voter, who, they claim, has little in common with a ‘San Francisco liberal’. However, this charge has, so far, failed to gain national traction. Pelosi was re-elected in
2008 with 72% of the vote, falling below 80% for the first time since 1990 due to the independent candidacy of anti-war activist Cindy Sheehan.
Pelosi was again re-elected in 2010 but lost the speakership as the Democrats suffered a major defeat in the House elections and the Republicans became the majority party.
She is continues as the minority leader in Congress.
Civil society
Major pressure groups
Interest groups engage in issue and agenda advocacy, citizen participation, formation of coalitions with other groups, and monitoring of government departments and policy.
In order to influence legislation, interest groups are heavily involved in electioneering and raise money on behalf of candidates and parties who are sympathetic to their
causes or who can be influenced by lobbying into supporting their agendas. Broadly, interest groups can be classified into the seven categories listed below with examples.
Agricultural: American Farm Bureau, National Farmers Union, and Association of Wheat Growers.
Business and commercial: National Association of Manufacturers, Chamber of Commerce, American Business Conference.
Collective: American Association of Retired Persons, National Association for the Advancement of Coloured People, National Organisation of Women.
Ideological: Americans for Democratic Action, Americans Conservative Union, and American Civil Liberties Union.
Professional: American Medical Association, American Bar Association, National Education Association.
Specific issue: National Rifle Association, Greenpeace USA, National Right to Life Committee, Media Matters.
Trade unions: American Federation of Labour-Congress of Industrial Organisations, United Auto Workers, United Mine Workers.
State institutions
Constitution
The United States of America is a federal republic with a strong democratic tradition. The form of government is based on the constitution of 17 September 1787, and
comprises three separate but equal branches: the executive, the legislature, and the judiciary. Congress, supported by a two-thirds majority of both houses, has the power to
propose amendments to the constitution or to call a convention for proposing amendments if required to do so by the legislatures of two-thirds of all states. Any such
amendment must then be ratified by three-quarters of the states. The Bill of Rights, consisting of the first 10 amendments, including the right to bear arms, was added on 15
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December 1791. Other amendments include: the abolition of slavery in 1865; the ‘due process’ clause in 1868; equal voting rights regardless of race or colour in 1870; the
election of senators in 1913; the prohibition of intoxicating liquors in 1919 and its later repeal in 1933; female suffrage in 1920; limiting the presidential tenure of office to two
terms in 1951; and the right to vote for citizens aged 18 and over in 1970.
Executive
The executive branch of government is responsible for enforcing the laws of the land. Executive power is vested in the president, who appoints the cabinet and oversees the
various federal government agencies and departments, and also serves as commander in chief of the armed forces. The president and vice-president stand for election
together and are elected by voters from each state for a four-year term, which may be renewed only once.
The vice-president is president of the Senate and becomes president for the remainder of the term if the president is unable to serve. Cabinet ministers or department heads,
who are chosen by the president and approved by the Senate, advise the president on policy issues and help execute those policies, while heads of independent agencies
help execute policy and provide special services.
The president has extensive, but not unlimited, powers. He proposes legislation to Congress in the process of formulating national policy and may veto any bill passed by
Congress. However, Congress can override a veto by a two-thirds majority in both houses. Much of the president’s ability to succeed legislatively is dependent on whether his
party controls Congress.
Legislature
The constitution established the legislative branch of government with the formation of a bicameral Congress comprising the House of Representatives and the Senate. As
well as its primary duty of writing, debating, and passing bills subject to the president’s approval, Congress also investigates pressing national issues and supervises the
executive and judicial branches. Congress is also responsible for appropriating funds for all government activities, and can, therefore, promote or impinge on the executive’s
ability to follow through on its policy objectives. Congress also has the capacity to cease all non-essential government operations if it fails to pass budgetary legislation.
The House of Representatives comprises 435 members elected every two years. While each state is guaranteed one seat, members represent an area of a state, known as a
congressional district, with the number of representatives based on the number of districts in a state. Specific actions that may only be performed by the House include
instigating laws that make people pay taxes and impeachment, i.e. deciding if a government official, including the president, should be put on trial before the Senate for crimes
against the United States.
The Senate has 100 members, with two senators elected for six-year terms from each of the 50 states, one-third of whom are elected every two years. Powers peculiar to the
Senate include confirming or disapproving presidential executive appointments; recommending treaty ratification; and holding a trial and convicting any government official
who commits a crime against the country.
Judiciary
The judicial branch of government was established under the 1787 constitution, with the creation of the Supreme Court comprising a number of justices determined by
Congress. One of the Supreme Court’s most important responsibilities is to decide cases that raise questions of constitutional interpretation. Known as judicial review, this
enables the judiciary to provide checks and balances on the executive and legislative branches. Decisions of the Supreme Court in these matters can only be changed by
another Supreme Court decision or by a constitutional amendment.
The Supreme Court also reviews cases from the lower federal courts, which were established by Congress using powers granted in the constitution. Appointees to the federal
bench serve for life or until they voluntarily resign or retire. The Supreme Court exercises complete authority over the federal courts.
While also bound by the interpretation of federal laws and the constitution, the operations of state courts are not subject to the same supervision from the Supreme Court,
which cannot interpret state law or issues arising under state constitutions.
The US accepts compulsory jurisdiction of the International Court of Justice, with reservations, but has not ratified the statute of the International Criminal Court.
Regional and local
The United States has a number of dependent areas: American Samoa, Baker Island, Guam, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Midway Islands,
Navassa Island, Northern Mariana Islands, Palmyra Atoll, Puerto Rico, US Virgin Islands, Wake Island. Palau, the Federated States of Micronesia and the Republic of the
Marshall Islands have Compacts of Free Association with the US.
External relations
Overview
Following the end of the Cold War, the terrorist attacks on 11 September 2001 on the United States provided a new rallying point for US foreign policy. During the
administration of George W Bush (2001–09), US policy concentrated on a war on terrorism. Bush declared that American foreign policy was now universal in scope, with the
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government seeking to hunt down those responsible for the attacks and, furthermore, to defeat any terrorist networks with a global reach. Deep international mistrust of US
foreign policy accompanied much of the rest of Bush’s term, with this new enemy – terrorism inspired by Islamist extremism – frequently interpreted by Bush’s critics as a
wholesale onslaught on Islam itself.
A significant difference between the administration of former president Barack Obama and that of his predecessor was to be found in image and presentation. Obama’s
election was heralded positively worldwide, predicated on the belief that he would change the international posture of the United States substantially, away from the perceived
unilateralism and aggression of the Bush years towards multilateralism and a newly pacific outlook.
President Donald Trump’s external priorities represent a shift from Obama’s. In particular, he has indicated a turn away from free trade by withdrawing from the Trans-Pacific
Partnership (TPP), renegotiating the North American Free Trade Agreement (NAFTA), and threatening to raise tariffs on Chinese imports. Other areas where the
administration adopted new policies included withdrawing from the Paris Accord on Climate Change and relocating the US embassy in Israel from Tel Aviv to Jerusalem.
However, in other areas, Trump has taken on a far more traditional foreign policy, one where the US continues to be engaged abroad in a number of military deployments with
the potential for escalation. In 2017, Trump increased the number of troops deployed to both Afghanistan and Syria, much like the Obama administration before him. Although
Trump’s efforts have been largely successful in eradicating the Islamic State, any conflict between Syria, the Kurds (in Syria’s north), and Turkey would obviously increase the
potential of heavier US involvement. Similarly, in Afghanistan, the current administration has raised US involvement by placing additional troops on the group to counter
territorial gains by the Taliban. Such deployments would likely only increase if it appeared that the Afghan government looked set to face severe setbacks and possibility of
losing control of the capital. During Obama’s term, relations between the US and former adversaries have improved, with a negotiated settlement on Iran’s nuclear programme
implemented in January 2016 and the normalisation of relations with Cuba. Trump has re-evaluted both relationships, placing new sanctions on both countries, and has
threatened to upend the current nuclear deal via declining to renew sanctions waivers.
The US remains dominant in multilateral organisations. The US’s membership is critical to the operation of key international organisations; if they have pretensions of
reflecting a global consensus, it means little if the US is not on board. US financial and logistical contributions are required to sustain many of the organisations, including the
UN, NATO, the International Monetary Fund, and the World Bank. Nonetheless, the US has had an awkward relationship with many of the bodies and has historically been
very reluctant to accept others’ jurisdiction. For example, the Trump administration has cut USD285 million to the UN’s management and support budget and announced other
proposed cuts to various humanitarian and peacekeeping operations. In addition to global organisations, the US is a key member of a number of regional groupings. Most
significant among these are NAFTA and the Asia-Pacific Economic Co-operation (APEC).
Bilateral
China
Current status
and significance
China’s relationship with the United States can most accurately be characterised as one of strategic distrust coupled with co-operation. Chinese assertiveness over claims in
the East and South China seas is a significant point of tension, with Washington expressing concern over Beijing’s aggressive land-reclamation projects at various
Chinese-occupied islets in the South China Sea. Concerns over China’s perceived indifference towards rigorous labour and environmental standards have been a major factor
in US objections to China’s efforts to expand its global influence, although such issues will likely receive reduced emphasis under the Trump administration. The trade
imbalance between the two countries and frequent accusations of intellectual-property theft, currency manipulation, and protectionism are significant causes for concern in the
US, and will likely remain major source of friction.
In June 2017, the US enacted unilateral sanctions on firms and individuals with ties to North Korean nuclear and missile weapons programmes. Despite US pressure, China is
highly unlikely to change its strategy toward North Korea as indicated by Chinese regulatory actions against South Korean firms over their country’s deployment of the
Terminal High Altitude Area Defense (THAAD) missile defence system. China has also exerted pressure on the US in tying bilateral trade to North Korea. US sanctions
against Chinese firms would likely result in less progress in cutting the USD347-billion trade deficit the US ran with China in 2016. Both sides remain highly likely to seek
avoiding the risk of a trade war, but an increase of protectionist measures, in areas such as World Trade Organization (WTO) complaints, are likely. Indeed, on 21 June, the
US decided to proceed with a previous WTO complaint against Chinese rice, wheat, and corn, which the previous Barack Obama administration had initiated.
Major issues in Sino-American economic and trade relations – 2000s to mid-2010s
Alleged Chinese manipulation of the renminbi was among the greatest irritants in US-China trade relations during this period. Between 2010 and 2015, the US Congress
introduced at least four bills that proposed to impose punitive tariffs on any country that deliberately misaligned its currency, although none of these bills was made into law.
Lobbies, such as the National Association of Manufacturers, have also pointed to China’s “unfair” capacity to flood the US market. China’s full entry to the WTO in 2006 led to
strong anti-China rhetoric over the outsourcing of “American” jobs.
Major issues in Sino-American security relations – 2000s to mid-2010s
The US remained a major provider of Taiwan’s defence needs. According to the 1979 Taiwan Relations Act, any threat to the security of Taiwan would be treated as a threat
to US interests. Successive US administrations explicitly pledged US support in the event of Chinese military action against Taiwan, and every US president since Jimmy
Carter had authorised major arms sales to the island. Cyber security was, and remains, a major issue. US cyber security experts traced various systematic attacks on US
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government, corporate, and infrastructure computer systems to computers in China. In 2012, US lawmakers called for Chinese telecoms companies Huawei and ZTE to be
banned from the US, citing cyber security concerns. In May 2014, a federal grand jury indicted five officers from the People’s Liberation Army’s Unit 61398 on charges of theft
of confidential business information from US companies through cyber espionage.
Relations under former president Barack Obama
The issue of perceived unfair trade practices was contentious under the Obama administration. Within two days of Obama taking office, Timothy Geithner,
then-secretary-designate of the Treasury, accused China in a written note to the Senate Finance Committee of “manipulating” its currency, a term the Bush administration
avoided. China’s disputes in the South and East China seas – in particular the dispute with Japan over the Senkaku/Diaoyu Islands and with the Philippines over the
Scarborough Shoal – forced the US to reaffirm its traditional security alliances. China’s establishment of an Air Defence Identification Zone in November 2013 elicited concern
not only from Japan and South Korea, but also from the US. Shortly after the announcement, the US dispatched B-52 bombers through the zone to assert its freedom of
navigation, which China did not interfere with. Since then, tension over the declaration of the zone largely receded. One of the most serious incidents in bilateral security
relations under Obama’s watch occurred on 8 March 2009, when five Chinese ships (two paramilitary and three civilian) jostled a US surveillance ship (the US NS Impeccable
) operating in international waters in the South China Sea. The incident clearly demonstrated the possibility for relatively minor incidents to escalate into more serious crises.
Relations under former president George W. Bush
Bush replaced his predecessor Bill Clinton’s approach to China as a strategic partner with one that viewed China as a strategic competitor. The view was reinforced by the
first major complication in bilateral relations under Bush’s watch, when a US EP-3 surveillance aircraft on a routine reconnaissance mission collided with a Chinese J-8 fighter
jet on 1 April 2001, resulting in the loss of the Chinese pilot. The 24-member US crew was detained after being forced to land on the Chinese island of Hainan. The two sides
found a diplomatic solution, reflecting the importance both countries placed avoiding conflict escalation. Bilateral relations underwent something of a transformation following
the 11 September 2001 attacks on the US. In October 2001, China and the US agreed to set up an anti-terrorism co-operative mechanism following high-level negotiations.
However, despite offering its diplomatic support for a crackdown against all forms of international terrorism, China could not convince the US to recognise its claimed “terrorist
” (or separatist) problem in Xinjiang beyond the US classification of the East Turkistan Islamic Movement as a terrorist organisation in August 2002. Nevertheless, events in
the early years of the Bush administration did not derail ever-growing trade links between the two countries.
Americas
Canada
Canada’s most important political, economic and security partner is the United States. The two countries enjoy a close relationship symbolised by the world’s longest (8,892
km) undefended border, and their citizens share many political and social values and cultural traits. However, Canadians have long been ambivalent about their geographic
proximity to the US, which brings not only economic opportunity, but also concerns over sovereignty and national identity, defined by a pride in Canadian cultural
distinctiveness.
The election of Donald Trump strained relations between the countries, which under US President Barack Obama and Canadian Prime Minister Justin Trudeau had
experienced a warm friendship driven by strong political and policy alignment. Although the center-left Liberal government has been careful to maintain cordial and respectful
relations with the US administration, the countries have significant policy differences. On foreign affairs, Canada is a strong voice for multilateralism and trade liberalisation,
while the US has taken a unilateralist and protectionist turn; on economic policy, Canada has made shifted the tax burden from middle income earners to the top 1% of
incomes in the country, while Trump has attempted to sharply proposed to reduce estate tax and lower the corporate income tax rate, measures which would largely benefit
the well-off; on social policy, Canada’s focus on social inclusion for historically marginalised communities and open approach to refugees stands in sharp contrast to the
Trump administration’s strict approach to illegal migrants, as seen in the recent decision to appeal the Deferred Action for Childhood Arrivals Act. Their proximity also causes
acute political difficulties, including on sensitive subjects such as immigration: changes to US migration policy have driven increasing flows of refugees from the US across the
border into Canada, straining the resources of border communities and causing political friction within affected communities and between some local administrations and the
federal government. More significantly, the Trump administration has initiated a renegotiation and modernisation of the North American Free Trade Agreement (NAFTA)
between Canada, Mexico, and the US. NAFTA has tripled trade between the partners to USD1 trillion per year, and the countries’ supply chains have become deeply
integrated: 80% of all Canadian exports are bound for the US. This has strongly benefitted Canada, which is estimated to have received a boost to GDP growth of 2.5% per
annum from trade liberalisation. Canada would experience significant economic shock at the termination or severe renegotiation of NAFTA, and the negotiations are
top-of-mind for policymakers at all levels of government.
The Canadian government has made maintaining good relations with the US a top priority. Trudeau shuffled his cabinet in the wake of Trump’s election, and established a
dedicated unit within the prime minister’s office, led by a senior government staff member, to co-ordinate a whole-of-government direction for these relations. The Trudeau and
his staff have attempted to forge personal relationships with the Trump and his staff, and have adopted a deeply calm, measured approach to carefully nurturing and
developing the relationship between the two countries. This defensive approach belies the administration’s drive to defend Canadian interests, particularly in trade
negotiations, and willingness to firmly, if politely, argue Canada’s case on foreign and social policy issues when necessary, such as on the need to advance trade liberalisation
and protect refugees.
Cuba
The normalisation of diplomatic relations between the United States and Cuba and the easing of previously existent restrictions, a process begun in 2014, moderately
improved the business environment for tourism, travel, and food links with the US. Without providing specific details, President Donald Trump confirmed on 16 June that he
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would reverse the restrictions lifted by the Obama administration, and new OFAC and Depart of Commerce regulations are expected to be issued and become effective from
September onwards. Specifically, trade with Cuba’s military and armed forces commercial wings is to be restricted. Ongoing business operations, particularly in the tourist
sector, are unlikely to be affected significantly. However, new operations and travel from September onwards are likely to be constrained. The uncertainty regarding Trump’s
policies for Cuba will likely slow down investment over the next year, particularly because the Republican control of both houses in the US will diminish the probability of the
US trade embargo being lifted. The bilateral relationship could potentially turn sour as the Castro administration has not committed to fully transitioning the country towards
democracy, a vital demand of members of the US Republican Party. In December 2014, US president Barack Obama announced a move towards the normalisation of
relations with Cuba. The announcement followed 18 months of secret talks in which the release of the US contractor Alan Gross, who had been held on espionage charges in
Cuba, was negotiated in exchange for the release from US custody of the remaining members of the group known as the Cuban Five, Cuban agents who had been
imprisoned in the US in 1998 for conspiracy offences.
A steady stream changes to policies which disadvantaged Cuba followed, culminating in Obama’s historic visit to Cuba in March 2016. In the financial arena, US companies
with commercial links to Cuba can now open a bank account in a financial institution on the island, and Cubans may open bank accounts in the US. Washington has also
announced the suspension of one aspect of the Torricelli Act of 1992, which prohibits any foreign ship docking in Cuban ports to travel to the US within the following six
months. The measure has permitted US cruise lines to begin operating in Cuba.
Cuba obligingly altered its travel restrictions to permit three rounds of formal negotiations, two in Havana and one in Washington, which took place between January and
March 2015, aimed at restoring embassies in the respective capitals. In addition, a round of discussions on the topic of human rights took place and the two presidents had a
face-to-face talk on the fringes of the seventh OAS Summit of the Americas in Panama in April 2015. Shortly afterwards, Obama announced that he would be removing Cuba
from the US list of state sponsors of terrorism. This was a widely anticipated move which lifted a barrier to agreeing the exchange of embassies and significantly eased the
restraints on Cuba’s international banking arrangements. This made foreign direct investment in Cuba less risky and resulted in a surge in investment in the island, mainly in
the tourist sector, between 2015 and 2016.
Major trade sanctions against Cuba and the US embargo on Cuba are likely to be maintained in the three-year outlook and thereafter, until Cuba sends firm indications of
democratisation or respect for the human rights of dissents. This is still unlikely, as Cuban authorities have made explicit their stated purpose of perpetuating their political
system – the only single-party system in the Western Hemisphere. A change in US policy towards Cuba, now likely to reversed, had given more room for the US Department
of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce to grant more licences to conduct aid, educational, or humanitarian activities in
Cuba; such as the sale, export, or re-export of medicines and medical supplies, food, and agricultural commodities to the island, financial services, transport – including aerial
and marine – and other economic activities favouring, among other sectors, the tourist, food, and financial services industries.
Mexico
The bilateral relationship between the United States and Mexico is based on trade, mutual concerns on drug trafficking, border security, and immigration. Trade between the
US and Mexico is governed by the North American Free Trade Agreement (NAFTA) which also includes Canada. NAFTA entered into force in 1994 and allowed Mexico to
become in 2014 the US’s third-largest trading partner after China and Canada. However, the treaty is due to be renegotiated in 2017–18, following the election of US
president Donald Trump. Major components of the deal including the numerous agriculture, textile, and automobile tariffs phased out between 1994 and 2007 may be
removed or reversed during the renegotiation process.
The US president favours the protection of US manufacturing jobs and the reduction of the US trade deficit with Mexico (USD63.2 billion in 2016), which was about to reach a
10-year high in March 2017. He issued diverse threats aimed at preparing the grounds for renegotiating better trade terms. These have included the imposition of a 35% tariff
on firms that relocate to, or import goods from, Mexico; the levying of remittances to Mexico to partly finance a border wall; repeated calls aimed at pressuring private
companies into reconsidering relocation plans to Mexico; considering the implementation of a US border adjustment provision that would increase taxes on US imports and
exempt them from exports.
The economic uncertainty generated by Trump’s protectionist stance and the desire to renegotiate or quit NAFTA, which Trump has denounced as the “worst trade deal in the
history of the world”, has already started to negatively affect Mexico. Companies such as Carrier Corporation, GM, and Ford have decided to cancel investment plans in
Mexico. The hypothetical imposition of unilateral trade tariffs from the US would likely pave the way for a surge in investment-related disputes through NAFTA’s dispute
settlement provisions.
The proliferation of Mexican drug-cartels shipping narcotics to the US has also shaped bilateral relations. Co-operation is currently based on the sharing of US intelligence on
the whereabouts and activities of Mexico’s main criminal organisations, and on the provision of financial aid and military equipment through a programme known as the Mérida
Initiative. Since its implementation in 2008 the Mérida Initiative has disbursed about USD1.6 billion out of the USD-2.6 billion approved by the US Congress to Mexico,
including training programmes, police capacity building, a judicial, and other institutional reforms in Mexico, and the delivery of military helicopters.
Under former president Barack Obama, the US expelled 3.12-million deportees between 2008 and 2016 (a record of 409,849 in 2012). This number could eventually rise
under President Trump, given that he promised mass deportations during his electoral campaign. Former president Obama issued an executive order in November 2014 to
deal with the immigration system. This order expanded the population of unauthorised immigrants eligible to apply for citizenship, affecting 5-million undocumented migrants.
On 23 June 2016, the US Supreme Court blocked Obama’s Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA) immigration programme, a
decision that maintained the possibility of undocumented migrant deportations.
Trade
US-Mexican relations had been on an improving trajectory since the mid-1980s, principally as a result of increasing commercial ties as Mexico liberalised its economy and the
two parties implemented the North American Free Trade Agreement (NAFTA); this agreement came into force in 1994 and contains chapters on several trade-related issues
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such as rules of origin, customs procedures, phytosanitary measures, government procurement, and intellectual property. NAFTA allowed Mexico to become the US’s
third-largest trading partner after China and Canada. In 2016, bilateral trade reached USD482.23 billion. The US trade deficit with Mexico reached USD62 billion in 2016.
Additionally, the US is Mexico’s main trade partner, accounting for more than 80% of its total trade, and in some cases 40% of the components of products made in Mexico
come from the US. Mexico’s main exports to the US are vehicles, electrical machinery, machinery, mineral fuel and oil, and optic and medical instruments. Meanwhile,
Mexico’s main imports from the US are machinery, electrical machinery, mineral fuel and oil, vehicles, and plastic. NAFTA’s Chapter 11 is vital for Mexican and US investors
as it provides an impartial dispute settlement mechanism, including for instances of contract alteration and expropriation. Since 1994, there have been 58 bilateral commercial
disputes in the NAFTA framework involving Mexico.
Trade is still mostly carried out by land, with 42 border crossing points that are consistently busy and are vital to the bilateral relation (San Ysidro, in Tijuana, has for example
11 lanes open 24 hours). “Maquiladoras” abound in Mexico’s US border as several US firms have benefited from Mexico’s lower wages and skilled labour force.
Trade under former president Obama and Peña Nieto
The Peña Nieto administration has focused on promoting US investment in Mexico’s energy sector. Mexico is already the third-largest supplier of US crude oil imports (after
Canada and Saudi Arabia) and its government expects US companies to invest in Mexico following the 2013–15 opening of its country’s hydrocarbons sector to private
participation. Furthermore, Mexico’s Federal Commission of Electricity (Comisión Federal de Electricidad: CFE) announced in June 2015 its intention to build an 800-km
underwater gas pipeline from Tuxpan, in the Mexican state of Veracruz, to Texas, in the US. The project is being carried out by Infraestructura Marina del Golfo (IMG), a joint
venture between IEnova (40%) and TransCanada (60%), with IMG gaining a 25-year concession for the completed pipeline. Another infrastructure project is the 860-km-long
Los Ramones natural gas pipeline, which would let Mexican companies import up to 2.1-billion cubic feet of natural gas per day from shale gas locations in the US. The
construction of this facility began in 2014 and is expected to meet 20% of Mexico’s natural gas requirements when completed. These two initiatives would allow Mexico to
import cheap natural gas from the US, with several positive economic implications for both consumers and producers.
Both countries also continue to work on improving the efficiency of their 48 shared border crossings. In October 2015, Mexico, and the US signed a customs agreement that
aimed to reduce cargo waiting times by 80%, with the establishment of several common joint inspections points (one in Laredo, Texas, another in Otay, Tijuana, and a third in
San Jerónimo, Chihuahua). Further efforts to improve cross-border infrastructure included in 2015 a rail link that connects Matamoros, Tamaulipas, to Brownsville, Texas and
the San Diego-Tijuana Passenger Bridge, linking both international airports. After a three-year pilot programme, the US Department of Transportation also announced in
January 2015 that it would finally allow Mexican cargo companies to apply for permits to provide transportation services in the US; this terminated what had been one of the
longest-standing bilateral disputes since NAFTA’s creation in 1994, and allows the US to avoid more than USD2 billion in retaliatory tariffs on US goods.
Trade between Mexico and the Trump administration
Mexican president Peña Nieto and members of the Mexican ministerial cabinet such as Foreign Affairs Minister Luis Videgaray and Economy Minister Ildefonso Guajardo
have repeatedly emphasised that they favour a relationship based on co-operation and the promotion of trade between the US and Mexico. Following the November election
of Donald Trump, Mexican authorities have emphasised that they are willing to revise the bilateral relationship with the aim of modernising NAFTA; a sentiment echoed by
Canadian prime minister Justin Trudeau.
Throughout his campaign, Trump threatened to impose a 35% tariff on US-based companies with operations in Mexico that imports goods into the US. NAFTA’s Article 2202
allows amendments for the trade treaty in accordance with legal procedures of each party while article 2205 allows for the unilateral withdrawal of a party six months after the
submission of a written notice to the other parties. Thanks to its economic size, the US holds the greatest bargaining power on the negotiating table. Failure to do so would
jeopardise access to its main export market. A potential renegotiation is likely to take years and could potentially redefine the trade relationship. Such a scenario will create a
period of uncertainty similar to Brexit in Europe, potentially slowing down private investment in major export sectors in Mexico such as the automotive, electrical machinery,
mineral fuels, and agricultural sectors.
Drugs
The “war on drugs” of presidents Ronald Reagan and George W. Bush in the 1980s greatly expanded the scope of US operations on Mexican territory, mostly carried out by
the Drug Enforcement Agency (DEA). The DEA trained hundreds of Mexican police and implied in many occasions a circumvention of Mexican jurisdiction. This issue was a
significant source of bilateral impasses during the 1980s and 1990s. Mexico nevertheless continued to co-operate from political pressure in the form of “drug certification”,
which the US used to rate a country’s anti-narcotic efforts. Despite multiple attempts, Mexico failed to establish a fully functional agency to combat drug traffickers during this
period.
It was during President Vicente Fox’s (2000–06) term that both countries sought to strengthen counter-narcotic efforts significantly. Fox increased the number of extraditions
from six prior to his administration to 133 during his six-year term. Yet the most significant change came during the Felipe Calderón (2006–12) presidential term, after he
declared Mexico’s own “war on drugs” through the deployment of the army to battle armed drug-cartel cells. This generated the conditions for the US and Mexico to enhance
their bilateral relationship. In 2007, the Mexican and the US governments agreed on a new package of counter-narcotics aid and assistance under the original title “Joint
Strategy to Fight Organised Crime”, subsequently referred to as the “Mérida Initiative”, and was approved by the US Congress in 2008. Since its creation it has disbursed
about USD1.6 billion in assistance programmes including training, police capacity building, institutional reforms in Mexico (anti-corruption programmes included), and the
delivery of US equipment, including military helicopters.
Practical security and political co-ordination continues to date. The extent of cross-border smuggling – drugs northwards and arms southwards – has made border security a
heated focus of domestic political debate in the US. An incident in early 2011 undermined bilateral trust. In March 2011, the press on both sides of the border revealed the
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existence of an operation conducted by the US Bureau of Alcohol, Tobacco and Firearms (ATF), named “Fast and Furious”, which had lost track of the weapons it had
allowed to be smuggled across the border to gain intelligence on Mexico’s drug-trafficking organisations. This generated discontent in the political class and Mexican media,
particularly when it was revealed that weapons supposedly tracked under the operation had been connected to the murder of a US border agent.
Co-operation under former president Obama and Peña Nieto
Co-operation between both countries continued under the administration of former US president Barack Obama (2012–16) and Mexico’s Enrique Peña Nieto (2012–18). The
US no longer certifies Mexico’s counter-narcotics efforts and it continues to support Mexico’s efforts in fighting criminal organisations through the provision of intelligence and
equipment. However, the July 2015 escape of Sinaloa cartel leader Joaquin “El Chapo” Guzmán from a Mexican maximum-security prison slightly damaged bilateral relations,
as Mexico did not wish to extradite him to the US. Relations turned again sour in October 2015 when the US Department of State deputy spokesperson Mark Toner confirmed
that his government had partially withheld funding for combating organised crime in Mexico based on the country’s human rights track record. The total withheld amounted to
about USD5 million that had been earmarked under the Mérida Initiative. The withholding of the funds was small and temporary (Mexico’s defence budget is estimated by IHS
Markit at about USD7.5 billion) and did not significantly affect the Mexican government’s war against organised crime. The decision followed allegations of the Mexican
military’s involvement in the killing of 22 individuals in Tlatlaya, Estado de Mexico in 2014 (a judge release four of seven imprisoned military officers in 2015 after it could not
find evidence) and the 2014 murder of 43 students in the state of Guerrero by gunmen and local police. Despite the disagreements and tensions between both governments,
co-operation between both has continued. “El Chapo” Guzmán was recaptured in January 2016 and was extradited to the US in January 2017, days before Trump became
president.
Trump administration and Mexico
Counter-narcotics co-operation is likely to be revised under Trump. Given Trump’s protectionist stance, it is highly likely that the US will threaten the provision of military aid to
Mexico under the Mérida Initiative in exchange for trade concessions, or as a way of re-allocating resources to build a wall between the US and Mexico. Such a scenario
would decrease the Mexican authorities’ capability to track criminals, which has previously assisted in the capture and/or killing of top drug cartel bosses in Mexico. This would
be particularly problematic given that violent deaths in Mexico during early 2017 were at their highest level since 1997.
Immigration
NAFTA’s implementation in 1994 boosted cross-border trade between Mexico and the US but alongside legal trade, the opening of the border allowed illegal trade to flourish,
facilitating drug trafficking and people smuggling that continues to date. Under former National Action Party (Partido Acción Nacional: PAN) presidents Vicente Fox (2000–06)
and Felipe Calderón (2006–12) Mexico’s relations with Washington were dominated by immigration-related issues. Mexico pursued efforts to grant legal recognition to the
millions of undocumented Mexican immigrants working in the US. The then Bush administration tried to hold its promise to draft an immigration bill, but the US Congress
repeatedly opposed it. In response to the growing cross-border illegal trade, then-president Bush began to increase border measures, including boosted border surveillance,
increased number of border patrol agents and the construction of a 1,200 kilometres fence in 2006. The US continued its approach, inspiring rallies across the country against
the criminalisation of migrants.
Bilateral relations were negatively affected in 2010 by the passage of an immigration control law, known as SB 1070, in the state of Arizona, which critics claimed leads to
instances of racial profiling. The Mexican government complained that the law discriminated against Mexicans and Latinos, and violated the rights of many US citizens of Latin
America origin legally living and working in the US. In June 2012, the US Supreme Court upheld one of the most controversial provisions of Arizona’s anti-immigration law,
allowing authorities to check a person’s immigration status while enforcing other laws. This law also inspired similar laws in other states’ legislations further increasing bilateral
tensions.
Immigration under former president Obama and Peña Nieto
Under former president Obama, the US deported hundreds of thousands of Mexican immigrants, reaching an all-time high number in 2012 with over 400,000 deportees.
Given the fact that the US Congress has been unable to achieve progress on an immigration reform, Obama issued an executive order in November 2014 to deal with the US
immigration system. This order expanded the population of unauthorised immigrants eligible to apply for citizenship, affecting 5 million undocumented migrants. The US
Supreme Court ruled against Obama’s executive order in June 2016, leaving millions of undocumented migrants subject to deportation.
Immigration under President Donald Trump and the Peña Nieto administration
US president Donald Trump took an anti-illegal immigration stance throughout his campaign, focusing on illegal Mexican immigration to rally supporters. Trump promised to
deport at least 3 million individuals with criminal records, many of them likely to be Mexicans, and to build a new border wall throughout his campaign. Early in his
administration, Trump issued two executive orders related to migration and security. The first ordered the building of a border wall and an escalation of deportations and
immigration enforcement, while the second suspended incoming travel to the US for citizens of six predominantly Muslim countries (Iran, Libya, Somalia, Sudan, Syria, and
Yemen). Although Trump has insisted that Mexico pay for the eventual building of the border wall, any such suggestion has been dismissed outright by Mexico. The US
president has threatened to block Mexican remittances through the imposition of tougher requirements such as the need to demonstrate legal US residency when attempting
to transfer funds towards Mexico. Mexican remittances totaled USD26.97 billion in 2016, a record high.
Asia-Pacific
Afghanistan
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Following the Soviet Union’s 1989 withdrawal from Afghanistan, the United States’s interest in the country diminished almost entirely, until the 11 September 2001 attacks
placed Afghanistan back on the US foreign policy agenda.
With the accession of President Barack Obama in 2009, the definition of success in Afghanistan moved from nation-building towards a narrower counter-terrorism objective –
eradicating Al-Qaeda and its havens in Afghanistan and Pakistan. Obama ordered a surge in US troop numbers, authorising the deployment of 47,000 additional troops to
Afghanistan to join the existing 30,000-strong US force, although he warned that the US would begin to withdraw its military forces by 2011. The Kabul conference in July
2010 endorsed former president Hamid Karzai’s timetable for the overall control of security to be transferred from foreign to Afghan forces by 2014.
In addition to the deployment of extra troops, the US rapidly increased the size of the Afghan National Defensce and Security Forces (ANDSF). The US accelerated the
timeframe for Afghan National Army (ANA) training, seeking to double the size of the ANA to 134,000 by 2011. In 2015, the ANA grew to about 176,000 personnel, including
the Afghan Air Force (AAF), and total ANDSF-force strength sits above 320,000.
The US-Afghan relationship has been tumultuous, especially during Karzai’s second term from 2009 to 2014. Ahead of the 2009 Afghan presidential election, relations
reached an all-time low. Karzai became increasingly critical of civilian casualties committed by international troops, while Washington repeatedly criticised what it deemed as
the Afghan government’s insufficient progress in tackling corruption. Karzai repeatedly emphasised that ending civilian casualties and protecting Afghan lives were important
preconditions for efficient counter-terrorism efforts. The accidental killing of civilians by NATO air strikes continued to increase tensions between the Afghan government and
the US.
US-Afghan relations have markedly improved since Ashraf Ghani’s election in 2014. Ghani has sought to demonstrate that he is a valuable and effective partner to maximise
US assistance and support for his government. Ghani was warmly received on his visit to the US in March 2015, in which he personally thanked wounded US soldiers for their
service in Afghanistan.
In mid-2017, President Donald Trump delegated the authority to deploy additional troops to the Pentagon. It is unlikely that this will turn into a large surge of troops; instead,
the Pentagon is likely to approve a small US troop increase of approximately 3000–5000. This creates space for further debate within the administration on the future direction
of its policy on Afghanistan.
India
The collapse of the Soviet Union, followed by the liberalisation of the Indian economy in 1991, led the Indian government towards a re-evaluation of its foreign policy and a
closer relationship with the United States and other Western countries. The desire of India and the US to balance China’s growing power has also been a major factor.
Significant improvements in the relationship reached a peak in 2005, when India and the US announced a strategic partnership and 10-year defence accord during a visit by
then-president George W Bush to New Delhi. This also involved a landmark civil nuclear deal in which the US agreed to supply nuclear technology, despite India refusing to
sign the Non-Proliferation Treaty. In 2016, the US designated India a major defence partner.
The US continues to view India as a market with tremendous growth potential, and hopes to increase bilateral trade from its current level of around USD100 billion to USD500
billion per year. The growth in this trade is mostly in India’s favour. In 2000, 21% of India’s exports went to the US. By 2015, this had fallen to 15% – although the US remained
the largest export destination for India. Meanwhile, the proportion of India’s imports that came from the US fell from 6% – the largest import source – to just over 5%, now
behind China (15%), the United Arab Emirates (6%), Saudi Arabia (5%), and Switzerland (5%). However, Indian exports to the US are mostly low value-added products.
Exports of precious metals, gems, crude petroleum, steel, and organic chemicals far outweigh those of capital machinery, vehicles, or even textiles. India’s Bharatiya Janata
Party (BJP) government remains keen to increase the value-added component of India’s exports as its balance of payments grow but this is unlikely to a point of contention
with the US. India’s exports have increasingly been to the Asia-Pacific and Middle East regions and strong growth there detracts attention from the low-value trade with India’s
largest export destination. Instead, diplomacy has focused on high-skilled (‘H-1B’) visas for technical Indian workers that have increasingly come to rely on the US for
employment. The transfer of skills from returning expats exposed to US corporate culture is also prized for the same reason of indigenising innovation and increasing the
value-added to Indian GDP.
However, the focus of India-US diplomacy remains strategic. The growth of a strong and cohesive Indian-American lobby within the US government has fostered an
increasing belief that India is not only a trading partner, but increasingly a natural ally as a robust democracy and counterbalance to China. Public polling of Americans
consistently returns India as one of their most favourably viewed countries. As both cause and consequence of this, India has also been de-coupled from Pakistan in US
strategic discourse, with recent rhetoric emphasising common resolutions to disrupt and dismantle terrorist groups and eschewing any mention of the disputed Kashmir region
, most recently during Prime Minister Narendra Modi’s state visit to the US in June 2017. This has coincided with increasing Chinese financial and political support for
Pakistan
– most notably in the China-Pakistan Economic Corridor). In the past, the US has played an important mediation role between India and Pakistan, often intervening to
de-escalate confrontations between the two nuclear-armed states. It has decisively intervened on three occasions – forcing a ceasefire in the Kargil War in 1999; persuading
both countries to de-mobilise forces from their borders in 2002, following a militant attack on the Indian parliament; and ensuring that there was no military escalation between
the two countries after the Mumbai attacks in 2008. Today, however, the US and India engage in regular military exercises, including, trilaterally with Japan, the annual
Malabar naval exercises in the Bay of Bengal. Intelligence-sharing and co-operation to combat terrorism is becoming regularised. Also, Israel is emerging as a mutual military
partner after Modi made the first state visit to Israel by an Indian prime minister, and an agreement was reached for India to buy INR32 trillion (over USD500 million) in
missiles, launchers, and military-grade surveillance equipment from Israel.
Japan
Current status
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Japan and the US are laying the foundation for a new diplomatic partnership. Since resuming the Liberal Democratic Party (LDP) leadership in 2012, Prime Minister Shinzo
Abe has called for stronger ties with the US and a revival of the traditional US-Japan alliance. He has accused the former ruling Democratic Party of Japan (DPJ) of allowing
relations with the US to deteriorate during its time in office. Abe’s foreign-policy focus is driven by wider regional security worries, as well as domestic imperatives, namely his
goal of shoring up the flagging economy. With the US also seeking to spur its domestic economic growth, the two countries agreed in February 2013 that trade co-operation
should be the linchpin of their new diplomatic partnership. In October 2015 the regional trade pact, the Trans-Pacific Partnership (TPP), which will abolish all tariffs among
member countries over the next decade, was finally agreed after years of dispute over mainly the agriculture and automotive sectors in Japan and the US. Once it passes
through national legislatures in 2016 it will substantially increase trade between the two largest economies of the TPP, namely Japan and the US. In April 2015 the US and
Japan updated the guidelines of their security alliance for the first time since 1997 to enhance operational co-ordination and trilateral or multilateral security co-operation. The
passage through the Japanese Diet of two bills in September 2015 formalised Japan’s commitment to collective self-defence, or defending its allies when Japan itself is not
under attack, marking a substantial strengthening of Japan’s contribution to the US-Japan security arrangement.
Japan-US relations until 2013
Relations between Japan and the US are underpinned by the bilateral Treaty of Mutual Co-operation and Security signed in 1951 and amended in 1960. US-Japanese
relations have been marred by sporadic tensions over trade, which peaked during the mid-1980s. However, these have eased significantly since the 1990s and July 2013
when Japan joined the TPP trade negotiations. The US-Japan security alliance and preferential trade agreements supported Japan’s post-war development as a free market
and counterbalance to Communist Asia. However the necessity and practicality of the alliance has been weakened by the dissolution of Cold War structures – with the
exception of the Korean Peninsula – and the weakening fiscal position of the US. Nonetheless, China’s increasing military spending provides a new rationale for continued
co-operation in the region, including a potentially increasing role for Japan’s Self-Defence Forces (SDF). Japan is making incremental moves to become a “normal ally” of the
US. Japan supported the US-led war in Iraq from 2003 through SDF reconstruction and humanitarian missions. Japan has also provided financial and legislative support to
relocate thousands of marines from Okinawa to Guam, although implementation remains improbable in the medium term. Underlying concerns include the possible
ramifications for Japan of any US-led military action against China in defence of Taiwan. However, this scenario remains highly unlikely in the near term.
North Korea (DPRK)
North Korea’s key priority in its foreign policy has long been its relations with the US and, in particular, the establishment of a peace treaty between Washington and
Pyongyang. This has been for three reasons: first, to safeguard and guarantee North Korea’s own security from the country it sees as its greatest external threat; second, to
restore diplomatic parity relative to South Korea, which maintains good relations with both its traditional allies of the US and Japan, and also North Korea’s historic allies,
China and the Russian Federation; and, third, to achieve access to international financial institutions such as the International Monetary Fund (IMF) and World Bank, from
which North Korea’s leadership hopes to obtain the funds required to revitalise the economy.
President Barack Obama’s administration has maintained an unofficial policy of “strategic patience”, which in effect means waiting for North Korea to change its behaviour and
return to negotiations, while applying pressure through diplomatic and economic sanctions. North Korea’s dislike for any conditions attached to negotiations means the
probability of a normalisation of relations is low. Moreover, heightened public outrage over the cyber-hacking of Sony Pictures in November 2014 attributed to North Korea
resulted in several new financial sanctions placed on companies and individuals, and increases the probability that sanctions will be tightened further.
Meanwhile, Obama’s administration has expressed strong unity with regional allies and traditional North Korean foes Japan and South Korea. The US’s co-ordination with
South Korea in particular increased in intensity after the sinking of the South Korean corvette Cheonan in March and shelling of Yeonpyeong Island in November 2010, a rise
in belligerent rhetoric following missile tests in 2013 and 2014, and an underground nuclear detonation in February 2013.
Pakistan
Historically, the US–Pakistan relationship has been fraught with mutual animosity but has also featured close co-operation. In 2004, Pakistan was named a major non-NATO
ally by the former George W Bush administration as part of US efforts against Al Qaeda. The US has also provided USD33 billion in economic assistance to Pakistan since
2002, of which USD14 billion has been part of the Coalition Support Fund (CSF), which compensates the Pakistani military’s expenditures in fighting militancy. Due to internal
political dynamics, the Pakistani military establishment exerts greater influence over the bilateral relationship than the country’s civilian government.
The bilateral relationship is primarily driven by US security interests in South Asia, but these are often at odds with what the Pakistani military establishment’s policy agenda.
Most significantly, the US has increased pressure on Pakistan to target elements of the Afghan Taliban within its territory as part of efforts to stabilise Afghanistan. However,
the Pakistani military establishment perceives the Afghan Taliban to be an asset in its efforts to maintain influence in Afghanistan. The military also remains wary of extended
co-operation with the US, with the latter perceived as a short-term ally. It has therefore been reluctant to act meaningfully against the Afghan Taliban.
Long-term strategic trends suggest that US-Pakistan bilateral relations will wane. In particular, Pakistan’s suspicion of US interests has entrenched following the expansion of
US–India ties, which Pakistan considers inimical to its interests. In contrast, Pakistan has deepened its relationship with China, primarily through the China-Pakistan Economic
Corridor (CPEC), which involved in excess of USD60 billion of Chinese investment in Pakistan’s energy and infrastructure sectors.
Growing US frustrations over Pakistan’s perceived inaction led to disbursement of the CSF being suspended in 2016. More recently, in July 2017, Congress passed legislation
with stricter requirements for US economic assistance to Pakistan. Nonetheless, complete disengagement is unlikely. US defence officials acknowledge that effective
counter-terrorism measures against regional militant groups cannot be undertaken without the active support of Pakistan’s military. There is also an acceptance by the US that
Pakistan must be involved in any discussions over the safety and stability of Afghanistan.
Trump’s administration has no stated policy on Pakistan. However, media reports suggest that it is considering a more robust approach to force Pakistan to co-operate in
targeting the Afghan Taliban. Potential policy options include removing Pakistan’s major non-NATO ally status, further reducing aid and increasing Unmanned Aerial Vehicle
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attacks in Pakistani territory. If implemented, these policy options would probably be perceived as confrontational by the Pakistani military establishment, and would therefore
actually decrease the likelihood of Pakistani co-operation.
Europe and CIS
Germany
The United States has traditionally been Germany’s closest ally and partner outside the European Union. German-US relations have been firmly embedded in NATO’s
defence structure for the past few decades and are supported by strong economic and political links. However, these bilateral links are currently being tested by an array of
policy changes by the administration of US president Donald Trump, especially regarding NATO and trade agreements. Prior to their close relationship during the presidency
of Barack Obama (2009–17), diplomatic relations between Germany and the US had deteriorated in the early 2000s during the administration of former US president George
W. Bush as the German government at the time was strongly opposed to US intervention in Iraq. Despite close relations between Obama and German chancellor Angela
Merkel, some political differences remained and revelations that the US Secret Service had been spying on German companies while tapping Merkel’s phone strained
diplomatic relations slightly in 2015. Germany supports the US-led international alliance against the Islamic State and endorses the implementation of the Transatlantic Trade
and Investment Partnership (TTIP), which Trump has withdrawn the US from, in a sharp U-turn from his predecessor’s policy. Nevertheless, it is likely that Germany will
maintain friendly relations with the US despite increasing differences.
Russian Federation
Russia’s relationship with the US is a complex one, based not just on practical issues of competition and co-operation, but also Moscow’s desire to maintain its status as an ”
equal partner” to the US in the global sphere. This has led to a foreign policy platform aimed at three main priorities:
Asserting Moscow’s hegemonic authority over the “near abroad” of the former Soviet states.
Working with China and other allies to undermine US “unipolarity” – or dominance of the international order.
Developing advantageous bilateral links with other states, from Germany to Venezuela, that can have a practical impact in helping secure Russian interests and aid
development.
For much of the 1990s, relations between Moscow and Washington were built on good personal relations between presidents Boris Yeltsin and Bill Clinton, as demonstrated
by a number of summit agreements. However, there was a fundamental difference in assumptions about the nature of the relationship. Although the US has provided Russia
with support and assistance, there was a considerable legacy of mutual suspicion, but no serious resolution of fundamental areas of disagreement between Russian and US
interests. Disagreements over issues such as NATO enlargement, Kosovan independence, sanctions against Iran, the US-led invasion of Iraq and the proposed deployment
of US-led NATO missile defence shield in Europe all served to undermine otherwise cordial relations, while Washington’s criticism of Russia’s military response to Georgia’s
August 2008 operation against separatist forces in South Ossetia provoked a more significant and sustained downturn in relations.
Putin was one of the first foreign leaders to express his support following the 11 September 2001 terrorist attacks on the US. Soon after that Russia agreed to US military
deployments in certain former Soviet republics of Central Asia, abandoned its military installations in Cuba and Vietnam and increased its support of the Northern Alliance in
Afghanistan. More importantly, it eased its opposition to such issues as NATO enlargement and the US missile defence system, albeit temporarily. Many observers were
surprised by Putin’s show of support, but his decisions were influenced by a recognition that involvement in the emerging war on terrorism would allow him a freer hand in
dealing with his own insurgent problems, particularly in Chechnya, where Russia had previously faced criticism from the West for its alleged human rights abuses.
In return, Washington backed a breakthrough Russia-NATO agreement establishing a joint council which for the first time had given Moscow an opportunity to influence
NATO’s agenda. The US also recognised Russia as a market economy, and pledged its support for Moscow’s bid to join the World Trade Organisation (WTO). However,
while international security and the war on terrorism continue to top the bilateral agenda, the pressure on the US administration to adopt a tougher line on Russia mounted.
Concern at human rights abuses in Chechnya, an anti-democratic turn in Russia and nuclear co-operation with Iran all led to criticism, which Moscow regarded as both
hypocritical and a breach of its post-11 September 2001 deal.
On the other hand, Russia and the US have good reason to co-operate on a wide range of issues, from trade to non-proliferation. As a result, the administration of US
president Barack Obama has sought to improve relations in what US vice-president Joseph Biden called in early 2009 the need to “reset relations”. There have been some
positive developments in bilateral relations since then, such as finalising of a successor agreement to the Strategic Arms Reduction Treaty (START), completed in March
2010 and signed into being by Obama and then-Russian president Dmitry Medvedev the following month. The new accord will limit both sides to 1,550 warheads, 700
deployed intercontinental and submarine-launched missiles and 800 delivery vehicles. It also stipulates that strategic offensive weapons are to be based only within US and
Russian territory. The signing of the new START agreement illustrates the ability of the US and Russia to co-operate on areas of mutual interest and presaged greater
collaboration on other similar issues in the future, such as Afghanistan and efforts to limit nuclear proliferation.
Despite these relative successes, on a broader scale, relations between Washington and Moscow remain poor. Moscow is unprepared to accept Washington’s role as the
sole global superpower, as evidenced by the open disagreement between the two countries over the best approach to the civil conflict in Syria; it also resents what it sees as
efforts to resist its dominance in Eurasia by encouraging democratisation in other post-Soviet states. Indeed, the ongoing process of developing a US-led NATO missile
defence shield in Europe, which Russia considers to be a threat to its strategic deterrent, remains the biggest cause of tensions in the relationship. Attempts at co-operating
over the missile defence system have been made, but the clear divergence in positions between Moscow and Washington over what form the system should take, as well as
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refusals from the US to provide legal guarantees that the system will not be aimed at Russia, have meant that an agreement has remained elusive. In response to the
impasse and continuing development of the system Moscow has outlined plans to deploy Iskander short-range ballistic missiles to its European exclave of Kaliningrad, which
it says could be used to target the planned NATO ballistic missile interceptor site to be placed in Poland.
At the same time, Washington is increasingly aware of Russia’s anti-democratic tendencies and feels that Moscow’s policies towards many global trouble spots – including
arms sales to states such as Venezuela – continue to be unhelpful. The passage of the Magnitsky Act in 2012, which denied entry and froze the assets of individuals
associated with a particularly flagrant human rights abuse, has also complicated the relationship, given that Moscow regards it as a biased move that ignores other countries’
abuses.
The latest episode in US-Russian relations, sparked by Russian intervention in Ukraine, represents a new low in the post-Soviet era, one from which the relationship is
unlikely to recover in the near term. The US has enacted two rounds of sanctions against Russia and has threatened more, resulting in criticism and threats of return
sanctions from Russia. Meanwhile, the US and NATO will seek to bolster defences in Europe to address the perceived risk of further Russian interventionism, which Russia
will view as a hostile stance.
United Kingdom
The US has traditionally been the UK’s closest ally and partner outside the EU. However, the dynamics of the collaboration between the two countries is currently changing
slightly following the election of the Republican Donald Trump to the US presidency in late 2016. Historically, UK-US relations have been firmly embedded in NATO’s defence
structure and are supported by strong economic and political links. It is a long-standing concept in UK foreign policy that there is a “special relationship” between the UK and
the US. With its roots supposedly found in a shared Anglo-Saxon heritage and a common language, the relationship was largely formed as a result of the alliances between
the countries in the First and Second World Wars and has endured through extremely close co-operation in the defence, security, and intelligence fields. Both countries have
promoted trade liberalisation and have broadly similar conceptions of external threats. The warmth of the relationship has often been determined by the personal relationship
or political affinity shared by the leaders of both countries; however, even when personal relations between the two leaders have not been so close, official ties have generally
remained very friendly. The UK supports the US-led international alliance against the Islamic State.
Middle East and North Africa
Egypt
Egypt’s size, large population, strategic location on the Suez Canal, and proximity to Israel mean that the United States has a keen interest in supporting Egyptian government
stability and national security. As a result, Egypt has profited greatly from US interest in Egypt’s adherence to a peace treaty with regional ally Israel, receiving around USD1.3
billion each year in aid from the US since 1979 – the bulk of which has been military aid. This situation, the strategic importance of Egypt to US foreign policy, and the
long-standing relationship between the US and former Egyptian president Hosni Mubarak accounts for President Barack Obama’s hesitancy in supporting popular protests at
the start of the January−February 2011 uprising, although he did eventually call on Mubarak to resign.
The US has delivered F-16 fighter jets and Apache Helicopters to Egypt. Ultimately, aware that the US cannot afford to lose its strategic relationship with Egypt, President
Abdel Fattah el-Sisi is unlikely to question the strategic partnership with the US, while continuing to expand economic and military co-operation with other actors, including
Gulf states and Russia.
Historical context
Following Mubarak’s toppling, the US government sent several diplomatic delegations to the Muslim Brotherhood headquarters even before Mohamed Morsi was declared
president of Egypt, in order to seek good relations with the Islamist government. However, relations were strained over the Cairo protests against a September 2012 film
made by a US Copt that ridiculed the Muslim prophet Mohammed. Protests, which broke out on the anniversary of the 11 September 2001 attacks on the US, targeted the US
embassy and little attempt was made at first to prevent damage to American property in Cairo. Morsi’s slow response and failure to condemn the attack on the US embassy
outright caused Obama to state that Egypt “is not our ally”.
The US was also dismayed by the reduction of Egyptian-Israeli military and intelligence co-operation following Morsi’s election. It did not officially oppose Morsi’s removal on 3
July 2013 by the army, but expressed concern over what looked like a military coup (without officially labelling it as such).
After hundreds of people were killed during forcible dispersion of pro-Muslim Brotherhood sit-ins in Cairo on 14 August 2013, the US suspended military aid to pressure Egypt
to end violence against opponents and hold elections. Yet, shared US-Egyptian interests in containing the insurgency in the Sinai on Israel’s borders led the US to partly
resume military aid to Egypt in April 2014, with the justification that these were needed to support operations targeting terrorist groups active in the Sinai Peninsula, and that
Egypt was upholding the Camp David Treaty with Israel and giving ongoing support to US strategic priorities in the region. In March 2015, the US fully resumed its military aid
to Egypt and, by summer 2015, the Egyptian-American relationship had been almost restored to its previous level of engagement under Mubarak. US president Donald Trump
has sought to build a personal relationship with Sisi and has singled him out as a key ally in confronting political Islam regionally.
Iran
The Trump administration has adopted a markedly more hostile stance towards Iran than that held by the previous Obama administration. The Iran nuclear agreement (Joint
Comprehensive Plan of Action – JCPOA), negotiated, finalised, and implemented under the Obama administration, has intensified Iran’s commitment to its expansionist
regional objectives. The Trump administration seeks to contain, if not actively confront, Iran’s regional expansion, not least Iran’s gains in Syria, Iraq, and to a lesser extent in
Yemen. Iran is unlikely to abandon its regional objectives, particularly establishing a land-bridge between Iran and the Mediterranean through Iraq, Syria, and Lebanon.
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Although the US would see this outcome as unacceptable, given that this would establish Iran as the ascendant regional power and threaten the US’s regional allies, the US
has limited options. There is very little appetite in the US for military action against Iran with the objective of regime change. Meanwhile, although the US preserves the
authority to impose economic sanctions on Iran for its non-nuclear provocative actions, any sanctions legislations that would otherwise impede Iran’s ability to benefit from its
nuclear-related sanctions relief risk JCPOA’s collapse. Barring any significant Iranian nuclear violations, a perceived US-instigated collapse of the JCPOA would likely
challenge the US’ ability to re-gain Russian, Chinese, and perhaps even European acquiescence to enforcing the multilateral sanctions regime on Iran. This means that
additional US sanctions are likely to remain limited to designations of entities and individuals connected to Iran’s support for terrorism, ballistic missile programme, and
humanitarian violations, rather than much more aggressive blanket sanctions on Iran’s strategic energy, automotive, and financial sectors. Although Iran and the US do not
have formal diplomatic relations, the JCPOA has institutionalised bilateral relations. Nevertheless, the US’s more hostile stance vis-à-vis Iran is weakening centrist president
Hassan Rouhani’s diplomatic outreach and reduces room for flexibility in bilateral relations.
Historical context
The US cut off formal diplomatic relations with Iran after the 1979 hostage crisis, following the Islamic Revolution that overthrew the US-backed Shah’s regime. A telephone
call between Rouhani and Obama in September 2013 was the first direct contact between the presidents of the two countries since 1979. A bilateral meeting between Iran’s
foreign minister, Mohammad Javad Zarif, and US secretary of state John Kerry in November 2014 was also the first bilateral talks at ministerial level since 1979. Relations
progressively deteriorated following a series of bombings targeting Americans attributed to Iran’s proxy, Hizbullah, in particular the 1983 bombing of the US Embassy in Beirut,
which killed 17 Americans; the 1983 bombing of a US Marine barracks in Beirut, which killed 241 Americans, and the 1996 Khobar Towers bombing in Saudi Arabia, which
killed 19 Americans. In the following years, US concerns over possible military dimensions to Iran’s nuclear programme resulted in efforts to isolate and pressure Iran both
unilaterally and through the UN. The policy resulted in a series of UN Security Council resolutions since December 2006 which imposed trade and financial sanctions on Iran.
Iraq
Iraq remains dependent on support from the US, both financially and militarily. Despite US forces completing their withdrawal from Iraq in December 2011, US involvement in
Iraq was renewed following the launch, on 15 June 2014, of Operation Inherent Resolve (OIR) against the Islamic State. 3,000 US troops were deployed in the initial phase,
mostly in a training and advisory capacity. As of early 2017, this number had risen to more than 5,000. In the same time frame, the US launched a combined 17,000 airstrikes
against Islamic State targets in Iraq and Syria. On 11 July 2017, in the wake of the liberation of Mosul from the Islamic State, the commander of the OIR Combined Joint Task
Force, Lt. Gen. Stephen J. Townsend, announced that the “fight was far from over” and that no change was likely in US troop levels in the “immediate future”.
The US remains Iraq’s main arms supplier. The most high-profile recent deal was Iraq’s USD3-billion acquisition of 18 F-16 aircraft in 2011, with a subsequent order of a
further 18 being placed in 2012. This deal was controversial and received much condemnation from the Kurdistan Regional Parliament due to fears that it would be used to
attack Kurdish-dominated areas. The shipment was slow to materialise, but the first deliveries arrived at Balad Air Base in July of 2015. In January 2014, the Pentagon
informed the US Congress that it intended to sell 24 Apache attack helicopters to Iraq in a deal worth USD4.8 billion. Despite Iraq seeking to diversify its suppliers – it entered
into a USD4.2-billion arms deal with Russia in 2012 – Baghdad’s remains overwhelmingly dependent on Washington for arms. Iraqi army’s capability deficiencies include
insufficient artillery (a large number of US-supplied howitzers were taken by the Islamic State two years ago). Therefore the US is deploying its own artillery in support of Iraqi
advances in Nineveh province.
Israel
US-Israeli ties have historically been strong, with the US providing some USD3 billion a year in mostly military aid to Israel. The new Trump administration has signalled a
supportive stance vis-à-vis Israel, with Israel standing as the second leg of Trump’s first foreign trip after Saudi Arabia. Bilateral relations deteriorated under Obama, not least
over disagreements over the Iran nuclear agreement and US attempts to pressure Israel into freezing its settlement programme in the occupied Palestinian territories.
Although the US vetoes virtually all UN Security Council resolutions that criticise Israel, the Obama administration refused to a veto UNSC 2334 in December 2016, which
condemned Israel’s settlement activities as threatening the viability of a two-state solution based on the 1967 lines. Despite this primarily political censure, the US signed a
USD38-billion package in military aid in September 2016 for the next decade, reaffirming its role as Israel’s primary security guarantor. Although there are concerns that a
closer US partnership with Arab Gulf countries, primarily to contain Iran, would be at the expense of US relations with Israel, the US is unlikely to withdraw its support for
Israel, a reliable ally in the Middle East.
Historical context
The strategic alliance between the two countries began in earnest when then-president John Kennedy sold HAWK anti-aircraft missiles to Israel in 1962 after Egypt obtained
long-range bombers from the Soviet Union. Dismissing its previous policy of ensuring that no one state should gain a military advantage in the region, US military and
economic aid to Israel began to grow. Since then, the US has been Israel’s primary arms supplier. In 1987, Israel was designated as a major non-NATO ally, and allowed to
compete equally with NATO countries and other US allies for defence contracts. The two countries also hold joint military exercises, and have a joint anti-terrorism working
group and a hotline between the Pentagon and Israel’s Ministry of Defence. The relationship is underpinned by a powerful pro-Israel lobby in the US.
The US has also acted as a peace broker between Israel and its Arab adversaries. Former president Jimmy Carter brokered the 1979 treaty between Israel and Egypt, while
Bill Clinton oversaw the 1994 peace deal with Jordan. Clinton also came close to getting then-premier Ehud Barak and his Palestinian counterpart, Yasser Arafat, to come to
a final settlement at Camp David in July 2000. Since then, as Israeli-Palestinian relations deteriorated, no other initiative has had much chance of success, although President
George W Bush convened the Annapolis conference in 2007 and Obama appointed peace envoys and had John Kerry conduct intensive diplomacy in 2014.
Sub-Saharan Africa
Nigeria
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Nigeria
Current status
The US has stepped up assistance to Nigeria in the wake of the kidnapping of over 200 girls from their school in Chibok, Borno state, in April 2014; President Barack Obama
dispatched a team of advisers and technical experts to assist the Nigerian military, and sanctioned reconnaissance flights and the use of unmanned drones. The biggest
contingent is a group of 80 military personnel sent to Chad to run and protect intelligence, surveillance, and reconnaissance missions over northeast Nigeria. Assistance is
likely to continue over the long term, now that the scale of the Boko Haram insurgency is clear, but US law limiting the levels of co-operation and information-sharing with
foreign militaries considered to have poor human rights records will curtail the practical usefulness of this relationship. This was emphasised in November 2014 when the
Nigerian ambassador to the US complained that its refusal to sell hi-tech weaponry including attack helicopters was preventing Nigeria dealing a “knockout blow” to Boko
Haram. US secretary of state John Kerry visited President Muhammadu Buhari in late August 2016 and is believed to have discussed the sale of up to 12 A-29 Super Tucano
light aircraft in recognition of warmer US-Nigeria relations. President Donald Trump reportedly called Buhari in February 2017 to assure him that he wanted to expedite the
sale in order to serve the twin aims of combating Islamist terrorism and boosting the US defence industry, although it remains unclear how Nigeria can afford to meet the
estimated USD600-million cost.
Closer co-operation has followed the victory of Buhari in the March 2015 presidential election, as he had enjoyed significant implicit support from the US which had shown
signs of frustration with levels of rampant corruption in the Goodluck Jonathan administration and his failure to tackle Boko Haram. Kerry played a particularly prominent role
in co-ordinating international opinion before the election, and warning Jonathan to ensure a free and fair poll was permitted.
The signs of a new rapprochement with the US were immediate, as Buhari was invited for a four-day state visit in July 2015, including personal meetings with Obama. Buhari
secured commitments for closer co-operation and technical assistance in the fight against Boko Haram, as well as help in recovering an estimated USD150-billion worth of
assets stolen under previous administrations. Security concerns are now the overriding priority of the US-Nigeria relationship, particularly with the US having ended its imports
of Nigerian oil in 2014.
1990s to 2010s
Although relations between the US and Nigeria have markedly improved since Nigeria’s return to democracy, concern about corruption in Nigeria has remained high on the
US priority list. Then Nigeria president Olusegun Obasanjo’s official visit to the US at the end of October 1999 led to more US aid to Nigeria and an end to a US ban on flights
to the country due to poor airport security and drug smuggling. In 2000–01 the US provided some USD29 million per year to Nigeria in development aid, making it the
country’s largest bilateral donor, just ahead of the United Kingdom. The consolidation of civilian control over the military and the full restoration of democratic institutions in
Nigeria have also been high on the US agenda.
During then president Bill Clinton’s official visit to Nigeria in September 2000, a number of bilateral agreements were concluded, among others relating to increased military
co-operation and countering drug trafficking. Military assistance was resumed in May 1999, following six years of suspension under the Sani Abacha military government. In
2000, Operation Focus Relief saw US Army trainers undertake a 10-week peacekeeping training and equipment programme for five battalions of Nigerian troops to be
deployed as part of the United Nations Mission in Sierra Leone (UNAMSIL) force in Sierra Leone. The US has also assisted in the professionalisation of Nigerian military
forces by refurbishing aircraft and supplying coast guard patrol craft. It met half the USD7 million cost for a private security assistance firm, MPRI, to train senior Nigerian
military and defence officials on up-to-date techniques in defence budgeting, resource management, and force development. However, some military assistance from the US
was suspended in March 2003, with the US citing human rights concerns over the Nigerian army’s alleged killing of about 200 Tiv civilians in Benue and Taraba states during
inter-communal violence in October 2001. Some Nigerian officials protested that this action was taken to punish Nigeria for its failure to back in public the US position on Iraq.
US officials denied this. Assistance for military training was resumed in September 2003.
Then US president George W Bush visited Nigeria in July 2003 as part of his five-state tour of Africa. Bush and Obasanjo agreed to work together to find a solution to the
crisis in Liberia. At the end of July, shortly after criticising US government inactivity, Obasanjo revealed that the US had promised to provide USD10 million to finance the first
phase of deployment of Nigerian troops in Liberia, via private-sector security contractors. Obasanjo also worked closely with US officials to bring to an end the military coup in
São Tomé and Príncipe in July 2003. In mid-September 2003, Nigeria suffered a setback when it was returned to the US list of major drug-transiting nations. However, the US
provided USD1.1 million in assistance in early October for Nigerian law enforcement programmes, including the combating of drug trafficking.
US Secretary of State Hillary Clinton visited seven African nations in August 2009, including Nigeria, underlining Washington’s commitment to the continent. In June 2011,
Jonathan went on a state visit to the US, to meet with his US counterpart, Obama. The talks were also set to strengthen bilateral relations and provided an opportunity to
consult on regional and global developments. Hillary Clinton returned to Nigeria in August 2012 as part of another Africa tour, meeting with Nigerian officials and speaking on
various issues, including the challenges Nigeria faces in the security arena in terms of the Islamist militant group Boko Haram. In July 2013, Obama announced the ‘Power
Africa’ initiative, pledging USD7 billion to enhance power infrastructure in six African countries, including Nigeria.
Multilateral
Global organisations
NATO
In the early 2000s, Robert Gates, then Secretary of Defence, expressed fears that NATO was in danger of becoming a “two-tiered alliance” during testimony to the Senate
Armed Services Committee in February 2008. Gates’ comments were made against the background of an increasingly acrimonious diplomatic standoff within the alliance
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regarding force levels, strategy, and tactics in Afghanistan, where NATO commands the International Security Assistance Force (ISAF). However, in recent decades NATO
and the United States have further strengthened their alliance and cooperation in response to Russia’s involvement in Ukraine and Syria, one of the most pressing issues
facing the member states. Former secretary of defense Ash Carter under former president Barack Obama has said the alliance is “stronger than ever before”, demonstrating
greater support by the US to work alongside NATO countries in joint military exercises and strategic collaboration.
Following lukewarm support for NATO during his election campaign, President Donald Trump restated his concerns ahead of his inauguration, labelling the alliance “obsolete”
. Despite this, new secretary of defense, James Mattis (a former army general), emphasised NATO’s effectiveness during his Senate confirmation hearings.
At the NATO Wales Summit in 2014, NATO members discussed challenges posed by Russia’s strategic actions and implications, calling to further improve the Alliance’s
military and strategic position in Europe and the rest of the world. Member states reached an agreement on the Readiness Action Plan (RAP), a comprehensive package of
measures aiming to fully prepare NATO members to act swiftly and firmly to new security challenges, strengthening collective defence through continuous air, land and
maritime presence, particularly in Eastern Europe. Former president Barack Obama, during remarks at the summit not only commended the actions decided upon by the
NATO member states but also openly encouraged non-NATO member states to consider applying for membership. Although the US would ideally like to see NATO
expansion continue by taking in the former Soviet republics of Georgia and Ukraine, Washington recognises that Russia holds sway in its “near abroad” and that it lacks the
clout to effect expansion in the face of Russian opposition. Furthermore, European allies also have exhibited wariness towards expanding NATO membership. Opposition
from Germany and other European states anxious not to antagonise Russia is sufficient to prevent expansion as enlargement is dependent on unanimity among existing
NATO members. The president’s statement in welcoming potential new member states will likely set a precedent for his successor in 2017, involving the US in a greater role
in European security, given Russia’s recent actions in Ukraine and Crimea.
In response to the rising Russian presence in Eastern Europe and the Middle East, as well as Islamic State in Iraq and the Levant (ISIL) in Iraq and Syria, joint NATO and US
military exercises have robustly increased since 2014 to ensure greater preparation in the event of an attack. In 2015 alone, NATO has held multiple military exercises,
including its largest exercise in over a decade known as Trident Juncture, an amphibious training drill in Spain, Portugal, and Italy. Another significant exercise, Swift
Response, was the largest airborne drill in Europe since the end of the Cold War. Held in Germany, Italy, Bulgaria, and Romania, 5,000 soldiers from 11 NATO member
states participated in “simultaneous multinational airborne operations” which spanned for four weeks. In light of criticism from Russia, NATO defends these military exercises
by reiterating that these drills are necessary in order to address concerns of Russia’s growing aggression in Europe and the Middle East. NATO spokesperson Oana
Lungescu, in a press briefing in July 2015, affirmed NATO’s stance on the series of military exercises, stating they “ensure that NATO Allies are ready to deal with any
emerging crisis, from any direction, and that they are able to work effectively with partners in tackling any crisis”.
Ash Carter announced in June 2015 that the US will station heavy equipment, including artillery, tanks, and infantry-fighting vehicles on a rotating basis in Eastern European
NATO member states. This marks a new level of US participation in the region, especially given Obama’s previous decision in September 2009 not to proceed with the Bush
plan to establish a missile defence system in Eastern Europe, which was met with relief by most governments in Western Europe but was a severe disappointment to Poland
and the Czech Republic. Eastern European countries such as Poland have exceptionally increased investment in military defence mechanisms alongside with the US greater
defence measures in the region. In early 2015, the Polish government decided to invest in US company Raytheon’s Patriot anti-missile system to bolster its defence, in light of
Russia’s looming influence near in Ukraine.
Ash Carter also announced in a press release that the US will meet the pledge all NATO allies made at the Wales Summit in 2014 to invest no less than 2% of the country’s
GDP to defence within the decade, indicating greater financial and military partnership with NATO. Understandably, the US already meets this pledge as one of the largest
defence spending partners in NATO, which is currently set at 3.5% of the GDP. Although NATO Secretary General Jens Stoltenberg has expressed support for higher
expenditure on defence to prepare for future defence challenges, the organisation will likely increase its spending budget only moderately as a collective whole. Most NATO
member states spend small amounts on boosting military spending, remaining wary of economic conditions in Europe. In 2015, only four out of 28 countries met the
organisation’s spending target, which included Britain, Estonia, Greece and the US. Western European states in particular have generally not changed military spending, and
will maintain this position unless prompted by NATO member states in favour of a larger expenditure on defence spending. NATO’s non-binding agreement of increasing
defence spending to 2% by 2024 demonstrates a greater strategic need for member states to assume more responsibility in defining and protecting European security in the
midst of Russia’s growing influence in the region.
Elsewhere, NATO continues to serve as an important resource in Afghanistan. After the Taliban briefly occupied the provincial city Kunduz in 2015, the US decided to retain
9,800 US troops in the region until the end of 2016, and then gradually will reduce the number of troops to about 5,500, until it decides to fully withdraw. To further support
efforts to train Afghan soldiers and maintain peace in the region, NATO member states such as Germany, Turkey, and Italy will continue to keep their current level of
deployment in Afghanistan.
External trade
Data
United States: Major trading partners, 2015
EXPORTS IMPORTS
Country Billions of USD Percent share Country Billions of USD Percent share
Canada 280.0 18.6 China 481.9 21.5
Mexico 236.4 15.7 Canada 295.2 13.2
China 116.2 7.7 Mexico 294.7 13.1
Japan 62.5 4.2 Japan 131.1 5.8
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© 2017 IHS
United Kingdom 56.4 3.7 Germany 124.1 5.5
Germany 49.9 3.3 South Korea 71.8 3.2
South Korea 43.5 2.9 United Kingdom 57.8 2.6
Netherlands 40.7 2.7 France 47.8 2.1
Hong Kong 37.2 2.5 India 44.7 2.0
Belgium 34.1 2.3 Italy 44.0 2.0
Source: IMF, Direction of Trade
United States: Major trading partners, 2000
EXPORTS IMPORTS
Country Billions of USD Percent share Country Billions of USD Percent share
Canada 174.6 22.6 Canada 229.2 18.5
Mexico 108.8 14.1 Japan 149.5 12.1
Japan 64.5 8.4 Mexico 135.1 10.9
United Kingdom 41.4 5.4 China 106.2 8.6
Germany 29.2 3.8 Germany 59.5 4.8
South Korea 27.3 3.5 United Kingdom 43.7 3.5
Taiwan 23.8 3.1 Taiwan 41.9 3.4
Netherlands 21.7 2.8 South Korea 40.9 3.3
France 20.4 2.6 France 30.1 2.4
Singapore 17.5 2.3 Italy 26.0 2.1
Source: IMF, Direction of Trade
Economic development
Overview
Producing around a fifth of total global output, the United States is the largest and most diverse economy on the planet. Average real income levels are high, even if distribution is
less even than in other industrialized economies. GDP per head on a purchasing power parity basis was estimated at USD35,000 in 2002. The US economy is more market oriented than just
about any other developed economy. This has created an economic dynamism, together with income disparities, more marked than in other developed economies. Impressive productivity
growth in recent years has elevated growth rates and driven down the unemployment rate. Growth in the past 15 years has been solid, except for in 2001, when the economy slipped into
recession. Growth in 2004 was the strongest since 1999. Growth has been accompanied by notable imbalances within the economy. The twin deficits—fiscal and current account—have grown
in recent years. Although the more likely scenario is that these balances will be sorted out over time through tax increases and a weakening in the US dollar, these deficits, particularly the
current-account deficit, pose risks. One risk is that the US dollar may abruptly fall, raising interest rates and throwing the economy into recession.
Policymakers generally follow market-oriented policies. Government activity as a percentage of overall economic activity is one of the lowest within an industrialized economy.
Government accounted for around 14% of GDP in 2003. Despite promises, successive administrations have found it difficult to reduce the size of the public sector. In recent years, growth has
been increasingly driven by expansionary fiscal policies (i.e., tax cuts) and monetary policies (low interest rates). These policies have fueled consumer spending and a housing-sector boom.
The challenging factor to the authorities as growth strengthens and the potential for inflation begins to threaten again, particularly with high global oil prices, is how to bring monetary and fiscal
policy toward a stance more closely associated with strong growth. The Bush administration has endeavored to make its huge program of tax cuts permanent, but some cuts may be rolled
back if the deficit continues to soar. The war in Iraq and the wider costs of the war on terror have only added to the fiscal pressures.
Labor markets
Historically, the economy is a job-creating machine. More than 20 million new jobs were created in the 1980s and 1990s. Nevertheless, job growth slowed after 2000, and following the
onset of the 2008 recession, the economy lost more than 8 million jobs. IHS Global Insight expects more than 19 million jobs will be created this decade. The unemployment rate, which
averaged 5.1% between 1994 and 2007, is usually low compared with other industrialized economies. The unemployment rate shot up when the economy went into recession in 2008,
however, and it is likely to remain above 7% during the first half of this decade.
The population projections are built on the Census Bureau’s latest projections, which were released in August 2008. These projections have the US population expanding at an annual
rate of 0.9% in 2009–40, when the population reaches 404 million. Growth in the older-age cohorts will be stronger as the baby boomers age. The 65-years-and-over population share rises
from 12.9% in 2009 to 20.1% in 2040.
Slower long-run increases in the labor force indicate more moderate long-run employment growth in the future. Total civilian employment will rise at an average annual rate of 1.0% in
2009–40. Total establishment employment will rise from 140 million in 2009 to 182 million in 2040, an increase of 30%. Manufacturing’s share of total employment will continue to decline over
the forecast period, falling to under 6% in 2040 from about 10% in 2009. The broad service sector will generate an increasing share of employment growth in the forecast period, although the
federal government’s share of employment will decline during the forecast period.
Monetary system
The US dollar dominates international transactions, and US monetary policy therefore has worldwide economic consequences. Several currencies are pegged to the US dollar, and many
countries use US dollars as their currency. Monetary policy is conducted by the Federal Reserve (Fed). The Fed implements monetary policy by managing the federal funds rate, while the rate
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banks charge other banks for overnight loans. The target federal funds rate is set by the Federal Open Market Committee (FOMC). The FOMC seeks to promote effectively the goals of
maximum employment, stable prices, and moderate long-term interest rates, as required by the Federal Reserve Act. Other monetary policy tools used by the Fed include changing the
required reserve ratio, and changing the discount rate, the rate the fed charges banks for loans.
Financial system
The banking sector has been consolidating in recent years. Recent mergers include Bank of America with Fleet Boston (2003) and JP Morgan Chase with Bank One (2004). The big three of
United States banking are Citigroup, JP Morgan Chase, and Bank of America. These banks are giants not only domestically, but also internationally. The asset base of the three largest banks
at the end of 2003 stood at USD3.2 trillion. The major banks are driven both by the retail and investment banking businesses.
Below the major giants of the industry, however, the sector is surprisingly fragmented. There were around 8,000 banks at the end of 2003, and another 1,500 other savings institutions. The
fragmentation of the banking sector is the product of a system still regionally orientated. The 10 largest banks in the country hold around 62% of capital. No single bank is permitted to acquire
more than 10% of nationwide deposits.
The capitalized value of companies listed on the New York Stock Exchange is about USD15 trillion. The market picked up in 2003 after three consecutive years of decline. Equity indexes
peaked in the first quarter of 2000, following a 20-year bull run. Market capitalization at the end of 2000 stood at more than USD11 trillion. The collapse in equity indexes in 2000 was most
poignantly felt in the NASDAQ high-tech exchange, which plummeted in the wake of the dot-com bubble.
Within the bond market, the retreat of interest rates into 2000, particularly following the September 11, 2001, attacks in the US, saw yields on bonds plummet. There were accusations the Fed
was feeding a bond bubble that burst around the time of the 2003 Iraq war. Subsequently, as economic activity picked up, the yield curve within the bond markets steepened noticeably.
Notable within bond markets has been the degree to which foreign players, particularly foreign central banks, have been entering the US treasury market, helping to fund the US
current-account deficit.
Natural resources
Agricultural potential within the country is considerable. The grain baskets of the Midwest help make the economy the most important cereal producer in the world. Agricultural production
amounts to 2% of GDP. The fishing sector is of some importance on the coasts, despite the decline in East Coast cod stocks.
There are substantial mineral deposits of almost all key minerals within the country, but not enough to ensure self-sufficiency. Aluminum is the most important mined product, accounting for
about 17% of the global total. Iron, copper, lead, silver, and gold deposits are other major mining products.
At the beginning of 2003, the country had around 22 billion barrels of oil in proven reserves, concentrated in California, Texas, Alaska, and Louisiana. Exploration in Alaska and Louisiana is
expected to increase oil reserves. United States oil production meets around 40% of total domestic oil demand. The US is still the world’s third-largest oil producer. It is also the world’s largest
single energy market. It represents more than 25% of global consumption of oil, natural gas, coal, and nuclear energy, and ranks first in the global production of coal and nuclear energy. The
country has the world’s largest reserves of coal, which provide more than 50% of its electricity generation needs. Almost 1 billion tonnes of coal were produced in 2003, almost entirely for
domestic electricity production. Coal production is concentrated in Wyoming, West Virginia, and Kentucky.
Proven gas reserves at the beginning of 2003 accounted for a little more than 5 trillion cubic meters. Gas reserves are not sufficient to meet domestic demand; most of the balance is imported
from Canada.
Tourist attractions within the country include major urban centers (such as New York City, New Orleans, San Francisco, and Washington, D.C.), major beach centers (Florida, California, and
Hawaii), and numerous spectacular natural attractions (Niagara Falls, the Grand Canyon, and Yellowstone National Park).
Energy
2008 2009 2010 2011 20
12
Oil (Thousand b/d)
Production 6,492 6,941 7,212 7,431 7,633
Consumption 17,859 17,290 17,614 17,505 17,147
Natural gas (Billion cubic feet)
Production 19,375 19,741 20,452 20,947 20,947
Consumption 22,306 21,976 22,922 23,495 24,433
Coal (Thousand short tonnes)
Production 965,498 883,555 897,313 893,899 790,463
Consumption 909,607 808,296 854,994 808,459 694,974
Electricity (Thousand megawatt hours)
Production 4,343,761 4,166,144 4,346,882 4,328,650 4,348,378
Consumption 3,861,938 3,685,155 3,844,343 3,814,983 3,892,345
Source: IHS
Key sectors: Key sectors analysis
Agriculture: Although only a small component of overall GDP, the United States is one of the most important agricultural producers in the world, particularly of grain. The agricultural
sector is among the most capital intensive in the world. In recent years, agriculture has been consolidating. In 1940, there were 6 million farms averaging 67 hectares each. By the late
1990s, there were only about 2.2 million farms averaging 190 hectares in size. The agricultural sector, however, remains heavily dependent on a subsidy system developed as part of
the New Deal. Attempts to reduce subsidies have faltered.
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© 2018 IHS Markit
Automotive: The US automotive industry is the largest in the world. The country has a bigger vehicle production industry and a larger vehicle market than any other country, with only
Japan able to lay claim to being in a similar league. The country boasts the world’s two largest vehicle manufacturers in General Motors (GM) and Ford; a third major manufacturer,
DaimlerChrysler; and the majority of the world’s largest component suppliers. Competition from new manufacturers is intense, and the former Big Three are fighting hard to avoid losing
market share.
Energy: Today, the US is the world’s largest single energy market. It represents more than 25% of global consumption of oil, natural gas, coal, and nuclear energy, and ranks first in the
global production of coal and nuclear energy. It has the world’s largest reserves of coal, which provide over 50% of its electricity generation needs. The US is a major oil-producing
country. Most of its existing oil-producing fields, however, are maturing or in decline.
Telecoms: The US generated USD302 billion in telecoms revenues in 2001. Key growth drivers for the sector include a mobile workforce and high levels of foreign direct investment.
Inhibitors include overcapacity, particularly in the long-haul market.
United States: Top-10 Sectors Ranked by Value Added
2017 Level 2018 Percent Change Percent Share of GDP
(Bil. US$) (Real terms) (Nominal terms)
1. Real estate activities(L) 2,359.1 2.4 12.2
2. Public admin & defense, other services (O,S,T,U) 1,862.2 1.6 9.6
3. Human health and social work activities(Q) 1,435.8 3.4 7.4
4. Wholesale trade, except of motor vehicles and motorcycles(G46) 1,176.0 2.3 6.1
5. Education(P) 1,056.6 3.0 5.4
6. Retail trade, except of motor vehicles and motorcycles(G47) 928.1 2.4 4.8
7. Security, buildings, employment (N78,N80,N81,N82) 888.0 4.1 4.6
8. Construction(F) 823.3 1.2 4.2
9. Financial service activities, except insurance and pension funding(K64) 615.1 2.8 3.2
10. Accommodation and food service activities(I) 578.8 2.3 3.0
Top-10 Total 11,723.0 60.4
Updated: 19 April 2018
Source: World Industry Service, IHS Markit
Business environment: Legal system
There are federal courts and state courts, both of which are subdivided into trial courts and appellate courts. Cases begin in trial courts, with appellate courts available
to hear appeals. Federal cases begin in the United States district courts, with appeals to one of 13 appellate courts.
There are 12 geographically divided federal court jurisdictions, plus the Federal Circuit, which handles patent law and Claims Court appeals. Appellate court decisions
are binding on lower courts in that area, but not on other appellate jurisdictions.
The Supreme Court may only review cases with a constitutional element, but will also consider cases of national interest or issues on which the appellate courts have
ruled differently.
Business regulation
Dispute resolution
In addition to the court system there is also a well-developed arbitration process, the cornerstone of which is the Federal Arbitration Act (FAA). The act ensures that
agreements to arbitrate are enforced by requiring courts to compel arbitration if a party to an arbitration agreement refuses to arbitrate, and to stay court proceedings where a
valid arbitration agreement exists.
Company law and corporate governance
Any foreign person wishing to do business in the United States must select the form of business entity in which to conduct US operations. The creation, management and
powers of the different forms of business entities are governed by state, rather than federal law. The choice of entity must be considered in light of the specific considerations
of a particular business venture or transaction. The results, in terms of tax treatment, exposure to contract and tort liability, and efficiency and methods of governance, may
vary significantly, depending on the form of entity chosen. There is no optimal entity for all situations. Each has its own advantages and disadvantages. The types of entity
available throughout the US include corporations, general partnerships, limited partnerships, business trusts, joint ventures, limited liability companies (LLC), branch offices of
foreign entities, and sole proprietorships. A branch of a foreign corporation is considered a mere extension of the corporation rather than a separate legal entity. In most cases
, a business entity formed under the laws of one state will be recognised by all other states.
Branch offices: A US branch is a US business conducted by a foreign individual or corporation organised under the laws of another country that is not separately
incorporated.
Foreign corporation: A foreign enterprise can form a US company to conduct its US business. A corporation is organised under the laws of a specific state rather than
under federal law.
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Partnership: A foreign investor can conduct a US business through a partnership. There are three types of partnerships under US law: general; limited; and limited
liability. Generally, partnerships, like corporations, are formed under state laws. Partnerships are frequently used for joint ventures or for real estate investments that
involve other investors. Often, a domestic corporation is used for an investment, but that corporation becomes a partner in a US partnership with a co-venturer or
co-investor.
Bankruptcy
The US Bankruptcy Code was enacted in 1978 and governs both corporate and individual bankruptcies. Each judicial district (90 in total) has a bankruptcy court. Federal
bankruptcy cases are decided by the United States bankruptcy judge, a judicial officer of the US district court. In practice, however, most of the process is handled outside of
the courts by trustees appointed to oversee cases. There are several types of bankruptcy: Chapters 7; 11; 12; and 13. Chapters 7 (“liquidation”) and 11 (“reorganisation”) are
generally used for businesses and corporations. Under Chapter 7, non-exempt assets must be sold off, while under Chapter 11, the debtor will restructure but continue to
operate and pay off the debts to the creditor. Chapter 11 is particularly popular and is more favourable than bankruptcy regulations in many other countries. Chapters 7 and
13 (“adjustment of debts of an individual with regular income”) are used for individual debtors. Chapter 7 allows individuals’ debts to be written off entirely, while Chapter 13
involves a similar repayment plan to that under Chapter 11 for companies. The 2005 Bankruptcy Reform Act reduced judges’ discretion over which to apply. Chapter 12 (”
adjustment of debts of a family farmer with regular annual income”) is used for family farms only. There is also Chapter 9 (“adjustment of debts of a municipality”), again
similar to Chapter 11. A more detailed description of all the forms of bankruptcy can be found .here
Competition
The basic antitrust statutes in the United States are:
1890 Sherman Act: Prohibits contracts, combinations, and conspiracies that restrain trade as well as monopolisation.
1914 Clayton Act: Applies to exclusive dealing arrangements, tie-in sales, price discrimination, mergers and acquisitions, and interlocking directorates. The Clayton Act
was amended by the and the . Private lawsuits can be brought by those wronged and significant 1936 Robinson-Patman Act 1950 Celler-Kefauver Anti-merger Act
claims made.
1914 Federal Trade Commission Act: A catch-all measure that can be used to fill apparent loopholes in the other legislation.
Competition law, particularly in the area of antitrust, has traditionally been tightly enforced in the United States and is in the remit of the Federal Trade Commission (FTC).
Former president George W. Bush’s administration let it been known that it would concentrate more on cartel-like behaviour than on the abuse of dominant position type
action typified by the Microsoft prosecutions during the Clinton era. During the Bush era, the Department of Justice did not file a single case against a dominant firm for
monopolistic behaviour. The administration of former president Barack Obama altered this policy in May 2009, with then assistant attorney general Christine Varney reversing
amendments to Section 2 of the Sherman Act, which loosened the rules against forming a monopoly.
Employment
Employment and labour laws have traditionally been problematic areas for business, particularly in the area of discrimination, and this is unlikely to change. The George W.
Bush administration signalled its pro-business intentions from the start when it refused to implement former president Clinton’s ergonomics regulations on safety at work, but
the Obama administration was tougher on labour issues. President Donald Trump, meanwhile, has taken a more business friendly approach, especially in regards to overtime
and safety rules. The Supreme Court has gradually been tightening disability laws and narrowing the definitions upon which compensation can be requested. Federal
employment laws – of which there are more than 180 – are administered and enforced principally by the Department of Labor. Key laws and regulations that cover multiple
sectors include:
Wages and hours: The Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay. It also sets minimum wages for people working in different
types of job. Many states have meanwhile introduced their own, higher minimum wages.
Workplace safety and health: This is handled under the terms of the Occupational Safety and Health Act (OSH), by the Occupational Safety and Health Administration
.
Workers’ compensation, gender discrimination: There are a range of sector-specific acts that regulate compensation and medical care. Under the Civil Rights Act of
1964 provisions were brought in to counter gender pay inequality, but the practice has persisted. In 2009 the Lilly Ledbetter Fair Pay Act was signed which amended the
Civil Rights Act to restart the 180-day statute of limitations for filing a lawsuit with each discriminatory pay cheque. Previously, pay inequality was often only discovered
or challenged when it was already too late.
Pensions and welfare benefits: The Employee Retirement Income Security Act (ERISA) applies to those employers who offer pension or welfare benefits to
employees. A wide range of fiduciary, disclosure and reporting requirements are imposed.
Labour representation: The Labor-Management Reporting and Disclosure Act, 1959, sets out the relationship between unions and their members. Labour
organisations are bound by a range of rules on their finances and management. For employees there is a range of whistleblower protection.
Family rights: The Family and Medical Leave Act requires employers with over 50 staff to offer 12 weeks of unpaid, job-protected leave following childbirth or during
major illness of a family member.
Migrant and seasonal workers: The Migrant and Seasonal Agricultural Worker Protection Act regulates the hiring and employment activities in this sector. Such
workers are also regulated under the terms of the Fair Labor Standards Act and the Immigration and Nationality Act.
Redundancies: Plant closures and layoffs are regulated by the Worker Adjustment and Retraining Notification Act (WARN). This means employees must be warned in
advance.
Environmental
http://www.uscourts.gov/library/bankbasic
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Major environmental laws in the United States include:
National Environmental Policy Act, 1970: This is the basic national charter for environmental protection.
Clean Air Act, 1955
Clean Water Act, 1948
Comprehensive Environmental Response, Compensation, and Liability Act, 1980
Emergency Planning & Community Right-To-Know Act, 1986
Endangered Species Act, 1973
Federal Food, Drug and Cosmetic Act, 1938
Oil Pollution Act, 1990
Pollution Prevention Act, 1990
Resource Conservation and Recovery Act, 1976
Safe Drinking Water Act, 1974
Solid Waste Disposal Act, 1965
Toxic Substances Control Act, 1976
For full listings, please follow this .link
These are all administered by the Environmental Protection Agency (EPA), but enforcement varies at the state level. There are also further state and local regulations. Under
George W. Bush’s presidency, some environmental restrictions were rolled back, but former president Barack Obama moved to reverse this, including by announcing the
Clean Power Plan, which sought, in part, to establish national standards to limit carbon pollution by power plants. In October 2017, President Donald Trump’s EPA
Administrator Scott Pruitt began repealing the plan. This has been contested by several states and environmental groups. Meanwhile, the Trump administration has taken
other measures in reducing other Obama environmental regulations on both the energy and mining sectors.
Intellectual property
Intellectual property rights (IPR) protection is TRIPS-compliant and enforcement is generally good. The four key laws in this area are the Digital Millennium Copyright Act, the
Lanham Act on trademarks, the Patent Act and the Uniform Trade Secrets Act. Successive administrations have struggled to persuade other countries to respect the
intellectual property of its artists and businesses. China has come under particular pressure on this front and the Trump administration has threatened the country with
sanctions if it does not improve its own IP protections.
Land
Private property rights are one of the fundamental components of the US Constitution, and are consequently well protected. There are nonetheless some restrictions imposed
by government upon property owners, usually in the interests of environmental and resource protection. Such restrictions can be imposed by either federal or state
legislatures. The Endangered Species Act is one of the most commonly used tools at regulators’ disposal. The concept of “eminent domain”, or compulsory purchase of
private property, also exists in US law, provided the state pays fair market value.
Foreign exchange and profit repatriation
There are no restrictions or requirements with respect to the use of currency accounts by domestic or foreign investors. Consequently, foreign investors are not subject to any
limitations on the repatriation of share capital, loans, income, or dividends to their home country.
Investment protection
The United States welcomes foreign direct investors and provides fair, equitable, and non-discriminatory treatment. The only limited exceptions are designed to protect
national security, covered by the so-called Exon-Florio provision. In 2007, Congress enacted the Foreign Investment and National Security Act, which established the
framework to be used by the Committee on Foreign Investment in the United States (CFIUS) when it conducts reviews on an inter-agency basis. Exon-Florio refers to Section
721 of the 1950 Defense Production Act (amended by Section 5021 of the 1988 Omnibus Trade and Competitiveness Act). The president can block an investment if:
There is credible evidence that the foreign entity exercising control might take action that threatens national security, and
The provisions of law, other than the International Emergency Economic Powers Act do not provide adequate and appropriate authority to protect the national security.
See this for more detail.link
In 2005, the George W. Bush administration came under strong pressure to resist an attempt by Chinese state-controlled energy firm, China National Offshore Oil Corp’s (
CNOOC) efforts to acquire Unocal. The Obama administration did not aggressively pursue anti-investment, protectionist policies. However, recently members of Congress
have begun debating new legislation that would enhance the powers of CIFUS to explicitly take a tougher line against both Chinese and Russian foreign investment.
Privatisation
http://www.epa.gov/
http://www.treasury.gov/about/organizational-structure/offices/International-Affairs/Pages/cfius-index.aspx
© 2018IHS Markit. page of 49 61
The United States makes widespread use of private provision of public services, with state involvement in the economy relatively low by international standards. However,
there have been few conventional “privatisations” in recent years, and there are often restrictions on investments by foreign firms. Former president Ronald Reagan was a
vigorous proponent of privatisation – one of the landmarks was the sale of Conrail in 1987 – but his successors have been less active in terms of outright sales of public
assets or bodies. At the state and city level there is also a high level of contracting out. The unions have tended to resist privatisation as they regard it as a back-door means
for the government to reduce their influence. Given the many types of “privatisation” of services, the regulations that apply are many and diverse. See also the Procurement
section below.
Procurement
Given the large size of the United States’ annual federal budget, with spending of USD4.147 trillion budgeted for fiscal year 2017, firms around the world are keen to gain
access to contracts. The US operates a complex system of agencies and rules governing procurement, some of which are more open and transparent than others. There has
long been a “revolving door” for jobs between government agencies and their major suppliers, although former president Barack Obama and current president Donald Trump
have announced reforms to limit this practice. The best starting point for finding out about public procurement procedures is the General Services Administration ( ). This GSA
has links to legislation and a variety of websites listing available tenders and contracts. For state-level procurement, vendors should approach the administrations directly.
Major international agreements
North American Free Trade Agreement (NAFTA)
World Trade Organization (WTO) Treaties
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)
World Intellectual Property Organization (WIPO) Copyright Treaty
The US also has a series of bilateral free-trade agreements (FTAs). Beneficiaries of existing bilateral agreements include Australia, Bahrain, Chile, Israel, Jordan, Malaysia,
Morocco, and Singapore, with FTAs for Colombia, Panama, and South Korea approved by the US Congress in 2011. There are a number of multi-country deals in addition,
such as the United States-Southern Africa Customs Union FTA. Free-trade agreements have ignited considerable political controversy over recent years, which has led
current President Donald Trump to announce that he will withdrawal from the Trans-Pacific Partnership and revise NAFTA. In 2017, President Trump announced that the US
will withdrawal from the 2015 Paris Agreement on Climate Change, stating that enactment of the agreement would undermine the US economy.
Taxes: Corporate
Tax snap-shot
Corporate % Notes
Corporate
income tax rate
21 Top rate. In addition, many states levy income
or capital-based taxes. An alternative minimum
tax is imposed.
Capital gains
tax rate
15–
20%
Branch rate tax
35
Withholding
tax
Dividends 30 Applicable to payments to non-residents.
Interest 30
Royalties from
patents,
know-how etc.
30
Branch
remittance tax
30 This is the branch profits tax.
Net operating
losses (years)
Carry-back 2 Special rules apply to certain types of losses
and entities.
Carry-forward 20
Individual
Personal Income Tax (2016
projected bands)
% Notes
http://www.gsa.gov/portal/category/100000
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Top rate: Earnings above
USD500,000
37 Rates (in each instance) for
single individuals
Earnings between USD200,000
and USD500,000
35
Earnings between USD157,501
and USD200,000
32
Earnings between USD82,501
and USD157,500
24
Earnings between USD38,701
and USD82,500
22
Earnings between USD9,526 and
USD38,700
12
Earnings up to USD9,525 10
Source: US Internal Revenue Service (IRS)
Infrastructure
Overview
In general, the operating infrastructural environment in the United States is good. Infrastructure is highly developed by global standards, although many bridges, tunnels, and
roads have begun to age and are in need of repair. The labour market is flexible and dynamic, and the government bureaucracy is generally efficient. Foreign investment is
welcomed in most sectors, although employing foreign staff in the US can prove very difficult. Anti-globalisation and environmentalist movements mirror those in most
Western democracies, but are unlikely to cause problems for foreign investors. In the wake of terrorist attacks there have been additional security precautions at airports and
other public transport hubs, which can produce lengthy delays. The current administration has pledged large-scale investment in road networks and airports. In recent years
the US has been struck by a series of exceptional natural disasters. These have included Hurricane Katrina’s devastation of New Orleans and surrounding areas, widespread
forest fires, a record number of tornadoes in the South and Midwest in spring 2011 and an extensive drought in Summer 2012. Climate change has been blamed by
environmentalists for intensified weather conditions, although it does not necessarily explain these instances. Parts of the country are prone to earthquakes, although the
infrastructure is generally well prepared.
Roads
The US has an extensive network of public roads. The massive “interstate” highway network was largely developed in the 1950s under the Eisenhower administration as the
federal government sought to expand its competency (through promoting and regulating interstate trade) in an area previously under the remit of state governments.
The continental US is connected to Alaska via the Trans-Alaskan Highway, which passes through the Canadian hinterland and was constructed as a strategic link during the
Second World War. The West Coast route between Vancouver and Anchorage is impassable to road traffic. There are few other permanent highways in Alaska.
Railways
The domestic emphasis on road transport has meant that the rail network is comparatively underused and mainly handles bulk freight, such as grain and coal, rather than
passengers. There are 195,000 km of Class 1 freight railroads, 34,191 km of regional freight railroads and 45,731 km of light freight railroads while Amtrak, the principle
passenger company, accounts for 36,590 km of the network. The introduction of high-speed rail links has attracted more passengers to the railroads, especially on the East
and West Coasts. The rail industry is divided into dozens of different companies. The rail network also has international links with both Canada and Mexico.
Waterways
The US has a total of 42,000 km (26,000 miles) of navigable waterways, including rivers, canals, and lakes. The largest of the inland waterways are the Great Lakes system (
including 619 deep water ports and 144 shallow water ports) and the Mississippi-Missouri-Ohio river complex, which link up most of the major cities between the Appalachians
and the Great Plains. These two natural water systems are inter-connected through canals in Illinois. The Great Lakes system connects to the Atlantic Ocean via the Welland
(Niagara) shipping canal and Canada’s St Lawrence Seaway, and via canals from Lake Ontario to New York’s Hudson River. Another important canal is the Chesapeake and
Delaware Canal, which bypasses the Chesapeake peninsula. There are around 2,400 inland river and canal ports with commercial facilities in the US.
Airports
The US has around 19,000 airports, including civil, military and joint airports, heliports, STOLports (short take-off and landing), and seaplane bases in the US and its territories
. Of those, about 5,400 are open to public use and about 660 are certificated airports serving air-carrier operations with aircraft seating more than 30 passengers.
The William B. Hartsfield Atlanta International Airport
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Reference point 33° 38.3’N, 84° 25.7’W
Maximum runway length 11,900 ft (3,600 m)
Runway surface Concrete
Elevation 1,000 ft (320 m)
Nearest town/city Atlanta 8 miles
Boston Logan International Airport
Reference point 42° 21.9’N, 71° 00.4’W
Maximum runway length 10,000 ft (3,000 m)
Runway surface Bituminous concrete
Elevation 20 ft (6 m)
Nearest town/city Boston 1 mile
Chicago O’Hare International Airport
Reference point 41° 58.8’N, 87° 54.3’W
Maximum runway length 13,000 ft (4,000 m)
Runway surface Bituminous, grooved
Elevation 670 ft (200 m)
Nearest town/city Chicago 16 miles
Dallas Ft. Worth International Airport
Reference point 32° 53.8’N, 97° 02.2’W
Maximum runway length 13,000 ft (4,100 m)
Runway surface Concrete, grooved
Elevation 600 ft (180 m)
Nearest town/city Dallas 15 miles, Fort Worth 18 miles
Denver International Airport
Reference point 39° 51.5’N, 104° 40.1’W
Maximum runway length 12,000 ft (3,600 m)
Runway surface Concrete
Elevation 5,400 ft (1,700 m)
Nearest town/city Denver 23 miles
Detroit Metropolitan Wayne County Airport
Reference point 42° 12.9’N, 83° 20.9’W
Maximum runway length 12,000 ft (3,600 m)
Runway surface Concrete
Elevation 640 ft (190 m)
Nearest town/city Detroit 15 miles
Bush Intercontinental Airport,
Houston
Reference point 29° 58.9’N, 95° 20.8’W
Maximum runway length 12,000 ft (3,600 m)
Runway surface Concrete, grooved
Elevation 98 ft (29.9 m)
Nearest town/city Humble 4 miles, Houston 15 miles
Las Vegas McCarran International Airport
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Reference point 36° 04.8’N, 115° 09.0’W
Maximum runway length 15,000 ft (4,000 m)
Runway surface Asphalt PFC
Elevation 22,000 ft (4,400 m)
Nearest town/city Las Vegas 6 miles
Los Angeles International Airport
Reference point 33° 56.6’N, 118° 24.4’W
Maximum runway length 12,000 ft (3,700 m)
Runway surface Concrete
Elevation 130 ft (38 m)
Nearest town/city Los Angeles 12 miles
Memphis International Airport
Reference point 35° 02.6’N, 89° 58.4’W
Maximum runway length 9,300 ft (2,800 m)
Runway surface Concrete, grooved
Elevation 330 ft (100 m)
Nearest town/city Memphis 4 miles
Miami International Airport
Reference point 25° 47.6’N, 80° 17.4’W
Maximum runway length 13,000 ft (4,000 m)
Runway surface Asphalt, grooved
Elevation 11 ft (3.3 m)
Nearest town/city Miami 10 miles
Minneapolis St. Paul International Airport
Reference point 44° 53.1’N, 93° 12.9’W
Maximum runway length 10,000 ft (3,000 m)
Runway surface Asphalt, concrete
Elevation 840 ft (260 m)
Nearest town/city Minneapolis 12 miles
Newark International Airport
Reference point 40° 41.6’N, 74° 10.1’W
Maximum runway length 11,000 ft (3,300 m)
Runway surface Asphalt, grooved
Elevation 18 ft (5 m)
Nearest town/city Newark, city limits
New Orleans
International Airport
Reference point 29° 59.6’N, 90° 15.4’W
Maximum runway length 10,000 ft (3,000 m)
Runway surface Asphalt, concrete grooved
Elevation 6 ft (2 m)
Nearest town/city New Orleans 10 miles
New York John F. Kennedy International Airport
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Reference point 40° 38.4’N, 73° 46.7’W
Maximum runway length 15,000 ft (4,400 m)
Runway surface Asphalt, concrete grooved
Elevation 13 ft (4 m)
Nearest town/city New York 13 miles
New York La Guardia Airport
Reference point 40° 46.6’N, 73° 52.4’W
Maximum runway length 7,000 ft (2,000 m)
Runway surface Asphalt, concrete grooved
Elevation 22 ft (6.7 m)
Nearest town/city New York City 8 miles
Oakland International Airport
Reference point 37° 43.3’N, 122° 13.2’W
Maximum runway length 10,000 ft (3,000 m)
Runway surface Asphalt
Elevation 6 ft (1.8 m)
Nearest town/city Oakland 4 miles
Orlando International Airport
Reference point 28° 25.9’N, 81° 19.5’W
Maximum runway length 12,000 ft (3,700 m)
Runway surface Concrete
Elevation 96 ft (30 m)
Nearest town/city Orlando 6 miles
Phoenix Sky Harbor International Airport
Reference point 33° 26.2’N, 112° 00.5’W
Maximum runway length 11,000 ft (3,500 m)
Runway surface Concrete
Elevation 1,100 ft (340 m)
Nearest town/city Phoenix 2 miles
Pittsburgh International Airport
Reference point 40° 29.29’N, 80° 13.58’W
Maximum runway length 12,000 ft (3,500 m)
Runway surface Concrete, asphalt
Elevation 1,200 ft (370 m)
Nearest town/city Pittsburgh 18 miles
San Francisco International Airport
Reference point 37° 37.1’N, 122° 22.4’W
Maximum runway length 12,000 ft (3,600 m)
Runway surface Asphalt
Elevation 11 ft (3.3 m)
Nearest town/city San Francisco 8 miles
Lambert St. Louis International Airport
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Reference point 38° 44.9’N, 90° 21.6’W
Maximum runway length 11,000 ft (3,400 m)
Runway surface Concrete, grooved
Elevation 900 ft (180 m)
Nearest town/city St. Louis 10 miles
Salt Lake City International Airport
Reference point 40° 47.2’N, 111° 58.1’W
Maximum runway length 12,000 ft (3,700 m)
Runway surface Asphalt
Elevation 4,000 ft (1,300 m)
Nearest town/city Salt Lake City 3 miles
Seattle-Tacoma International Airport
Reference point 47° 26.00’N, 122° 18.5’W
Maximum runway length 12,000 ft (3,600 m)
Runway surface Concrete
Elevation 430 ft (130 m)
Nearest town/city Seattle, city limits
Ronald Reagan Washington National Airport
Reference point 38° 51.1’N, 77° 02.3’W
Maximum runway length 6,900 ft (2,000 m)
Runway surface Asphalt, grooved
Elevation 16 ft (5 m)
Nearest town/city Washington, DC 2 miles
Washington Dulles International Airport
Reference point 38° 56.7’N, 77° 27.4’W
Maximum runway length 12,000 ft (3,500 m)
Runway surface Concrete
Elevation 300 ft (95 m)
Nearest town/city Herndon 4 miles, Washington, DC 26 miles
Civil airlines
Alaska Airlines
Alaska Airlines, founded in 1932, covers an area in the Pacific coast that spans from the northern coastline of Alaska to Mexico. The Alaska Air Group consists of two airlines;
Alaska and Horizon. Alaska undertakes long haul routes as far as California, Mexico and Hawaii.
American Airlines
American Airlines had its beginnings in 1920, from which time it has expanded to become one of the largest carriers in the world. It is owned in full by AMR, which acquired
American Airlines in 1982. A major source of the airline’s growth has been acquisitions. AMR took over Reno Air in 1999, its subsidiary American Eagle obtained Business
Express that same year, American acquired the majority of Trans World Airlines assets which has since been fully integrated into the main airline. In April 2003, AMR
concluded agreements to allow financial restructuring, covering levels of staff and associated costs, and a reduction in route structure and fleet, including a down-sizing of the
St. Louis hub.
In 2015, American Airlines merged with US Airways, creating the world’s largest airline. It has a fleet of over 950, serving over 350 destinations.
Delta Airlines
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In September 2005, Delta filed for Chapter 11 bankruptcy protection for the first time in its 76-year history, citing unsustainable labour costs and record prices for aviation fuel.
At the time of the filing, Delta had USD20.5 billion in debt, USD10 billion of which it had accumulated since January 2001. By the time it emerged from bankruptcy in April
2007 Delta had undertaken a massive overhaul of its personnel and operations. It had also resisted takeover bids from a number of suitors, including US Airways.
Delta serves more destinations than any other US airline, despite having suspended numerous routes, including Los Angeles to Hong Kong, Seoul and Bangkok; and Atlanta
to Tokyo.
In October 2008, Delta completed a merger with Northwest Airlines thus becoming the world’s largest commercial carrier. It has a fleet of over 400 serving over 370
destinations.
Frontier Airlines, Inc
Frontier Airlines was acquired by People Express in 1986. Under this new management, it recommenced operations in July of 1994. Frontier is a low fare airline with service
to selected major US cities. Frontier experienced sustained growth until the traffic downturn of 2001, but recovered strongly and continued with a four-year transition to an
all-Airbus fleet, completed in 2005. It has a fleet of 50, serving nearly 60 destinations. In April 2008, Frontier announced that it filed for Chapter 11 bankruptcy.
JetBlue Airways
JetBlue Airways is a low-cost airline with its headquarters in Forest Hills, New York. Its main base is John F Kennedy International Airport. It was incorporated in 1998 and
started operations out of JFK in February 2000. Several of its executives worked for Southwest Airlines, and JetBlue at first adopted a similar low-cost approach, but it has
since placed more emphasis on passenger comfort. It now has a fleet of over 150 aircraft and serves 60 destinations in 20 states plus Puerto Rico, and also flies to 11
countries in Latin America and the Caribbean, including Mexico, Bermuda and the Bahamas.
Southwest Airlines
Southwest Airlines, founded as Air Southwest in 1967, began operations in 1971. Southwest primarily runs short haul routes (about 1.5 hour flights) with low fares as an
alternative to ground transportation. Morris Air, acquired in 1993, was integrated into Southwest in 1994. Due to its low-cost structure, the airline was able to survive the 11
September 2001 downturn with relatively little financial disruption. Today it is the largest airline in the United States by number of passengers carried domestically per year
and the second largest airline in the world by number of passengers carried.
United Airlines
In 1926, United Airlines emerged from the merger of Boeing Air Transport, National Air Transport, Pacific Air Transport and Varney Airlines. By 1991, United had purchased
the Pacific, European and Latin American facilities of Pan American. In 1993, United underwent capital restructuring as a result of which a merger between Covia Partnership
and Galileo Company Limited ensued through a subsidiary of United. In 1994, an ESOP agreement resulted in 55% employee ownership and voting rights until 2000 definitely
, and until employee ownership falls under 20% after that, making UAL Corporation the largest majority employee-owned company in the world. UAL is quoted on various
stock exchange markets.
United was a founding member of the Star Alliance airline network – of which Air Canada, Lufthansa, SAS, Thai International and Varig are also a part – in 1997.
After the 11 September 2001 attacks, the acute traffic downturn – along with the cancellation of the merger with US Airways – prompted United to suspend its common stock
dividend, lay off 20,000 employees and reduce its scheduled services by 20%. In December 2002, the parent company, and certain US subsidiaries filed for protection under
Chapter 11 of the US Bankruptcy code. It emerged from bankruptcy protection in February 2006.
In May 2010, United Airlines agreed a merger with Continental Airlines that was approved in October 2010. The merger has created the world’s largest airline – to be called
United Airlines. The deal is said to be worth over USD3 billion and is intended to produce savings of USD1 billion.
Prior to the merger United Airlines had a fleet of over 400 aircraft and served over 200 destinations. This capacity will now be greatly increased, even taking into account
efficiency savings made in areas of overlap with Continental.
Ports
The US has 4,050 deep-water and 2,118 shallow-water commercial ports along its coasts.
Baltimore
Baltimore is found at 39° 17’N, 76° 35’W with an arrival outer limit at North Point. There are two different entrances and exits to the sea lanes; the primary being a 150 nautical
mile stretch through Chesapeake Bay and Cape Henry in the South and the second being the Chesapeake and Delaware ship canal and is shorter by about 125 miles sailing
distance. The first entrance is 700 ft wide and 50 ft deep; the second is 450 ft wide and 35 ft deep. The maximum length allowed is 1,250 ft, draft is 50 ft and there are no
beam restrictions. The port has 37 major terminals, one with tanker capacity with a maximum LOA 800 ft and 97,000 dwt. There are terminals with facilities for general cargo,
dry bulk and liquid bulk. The nearest airport to Baltimore port is BWI Airport, 10 miles away.
Baton Rouge
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Baton Rouge port is located at 30° 28’N, 91° 12’W. It holds no restrictions for entry, clearance, docking or undocking. The port maintains a projected depth of 45 ft through
constant dredging. The Exxon Terminal has a LOA 810 ft maximum with no beam restrictions. The port has grain, dry bulk and molasses handling facilities and offers a
midstream anchorage buoy service in the Mississippi River opposite its docks for the transfer of cargo between barges and ships. There are three bridges that cross at New
Orleans — one at Baton Rouge, one at Gramercy and one at Luling-Destrehan – all maintain sufficient clearance. There are tanker capabilities in the port, and it is six miles
from Ryan Airport.
Beaumont
The port of Beaumont is at 30° 05’N, 94° 05’W and is situated on Neches River, above Sabine Lake. It mainly handles cargo such as forest products, grains, project cargo,
military matériel, bagged goods, metals and wood chips. The port is accessible through either the Gulf of Mexico or the federally maintained Neches Channel, the latter
maintains a minimum width of 400 ft and depth of 40 ft, and has an air draft of 136 ft. There are 6,800 linear feet of harbour front. Wharves 2 and 3 and Harbour Island provide
open berths for cargo that does not require covered storage at shipside. Wharves 2 and 3 have a Ro-Ro platform and measure 758 ft in length. The port offers a floating dry
dock and is serviced by four major rail carriers, five major roadways and by steamship lines.
Boston
The Boston port is located at 42° 21’N, 71° 05’W. The principal rivers to which the port facilitates access are the Charles, Mystic and Weymouth Fore River. The main
entrance to Boston Harbour is through the North Channel and President Roads, with a controlling depth of 35 ft; the average rise of the tide is 9.5 ft in Boston. There are three
main entrance channels from sea to President Roads – Broad South North Channel, South South Channel and The Narrows. The Main Ship Channel connects President
Roads to the Chelsea and Mystic Rivers and Charlestown Bridge on the Charles River. The port consists of 114 piers or wharves, some with railroad connections and a
maximum of 40 ft depth alongside at mean low water. There are dry docks, facilities for bulk cement and 12 berths with tanker capacity with depths ranging from 32 ft to 40 ft.
The closest airport is Logan International Airport in East Boston.
Chicago
The port of Chicago is located at 41° 50’N, 87° 45’W. During the St. Lawrence Seaway navigation season from 1 April to 15 December, the controlling depth is 27 ft. At
Seaway Locks there is a maximum of 740 ft length, 26 ft draft and 78 ft beam. The Calumet River Terminals handle general cargoes, steel products, containers, raw materials
and dry bulk commodities. They have over 5,000 ft of berthing space available. The Lake Calumet Terminals transport liquid bulk cargoes, steel, ores, pig iron, scrap,
containers, non-ferrous metals, lumber, pulp and general cargoes. They have over 3,000 ft of berthing available and a dockside terminal that handles steel, machinery,
containers, scrap, pig iron, ferro-alloys and other metallic bulk commodities with over 1,000,000 sq ft of open storage under cranes.
Corpus Christi
Corpus Christi is found at 27° 48’N, 97° 23’W. It contains all of Nueces County. The Corpus Christi Inner Harbour is composed of the Tule Lake Channel and the Viola
Channel; the Industrial Canal links the Corpus Christi Turning Basin, Avery Point Turning Basin, Chemical Turning Basin, Tule Lake Turning Basin and Viola Turning Basin.
There is 24-hour service and no restrictions. The maximum size for cargo vessels is 45 ft draft and is the same for tankers. There is a main turning basin, which is over a mile
long and 800 ft wide; all basins, channels and canals have a water depth of 45 ft. The dock has container, bulk cargo and tanker facilities. The nearest airport is Port,
approximately eight miles away and servicing three regular airlines.
Houston
Houston is found at 29° 45’N, 95° 20’W. Maximum vessel size and LOA with beam figures are as follows: Bolivar Roads to Barbours Cut has a maximum vessel size of 950 ft
and LOA with beam 135 ft; Barbours Cut to Baytown has a maximum vessel size of 900 ft and LOA with beam 135 ft; Baytown to Boggy Bayou (Shell) has a maximum vessel
size of 860 ft and LOA with beam of 120 ft; Boggy Bayou to Sims Bayou (Arco) has a maximum vessel size of 750 ft and LOA with beam of 116 ft and Sims Bayou to Houston
Turning Basin has a maximum vessel size of 750 ft and LOA with beam of 106 ft. There are over 60 wharves and piers in the port, some with bulk handling facilities and
tanker capacity – of all the paths, the Bolivar Roads to Baytown channel has the greatest weight tolerance at 95,000. The port maintains a 12,000 ton dry dock at Greens
Bayou and a 14,000 ton capacity dry dock in the Houston Ship Canal. Houston Airport is in one half hour away.
Los Angeles
The Los Angeles port is found at 33° 43’N, 118° 16’W. Its boundary is located at the breakwater at Angels Gate Light – all arriving vessels must pass through here. Vessels
entering the port pass eastward of the respective sea buoy and vessels outbound pass westward of the sea buoy. There are restrictions only on draft. The supertanker
terminal in the outer harbour has fairway of 51 ft. The port has container handling, tanker and specialised cargo handling facilities; berthing is arranged through Agent. There
are five bridges and five drawbridges in the port.
Mobile
Mobile is located at 30° 40’N, 88° 02’W. Restrictions include a controlling depth of 40 ft for entrance, channel and anchorage and a mean tidal range of 1.5 ft. Vessels can
dock and sail at any time and during any tidal stage. The port consists of 34 berths. There is a public grain elevator with a 40 ft depth alongside and a loading rate of 115,000
bushels/hour for grain. The McDuffie Terminals contain two berths, No. 1 has a length of 170 m and both together are 320 m in length, and has a bulk coal handling plant. The
Bulk Handling Plant contains two berths with a 40 ft depth alongside and a quay length of 1,500 ft. The port has a container berth with 894 ft length and a 1 x 45 ton lift
capacity crane. Tankers can be a maximum length of 950 ft.
New Orleans
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New Orleans
New Orleans port is located at 29° 56’N, 90° 04’W. A projected depth of 45 ft is maintained at the entrance of the Mississippi River and along its navigable channel, although
situation from decreased river current velocity make this difficult. The Southwest Pass dictates draft and there is entrance day and night. The port has container handling and
tanker facilities available. There are six bridges in the port, three are located at new Orleans, one at Baton rouge, one at Destrehan and one at Donaldsonville. All provide
sufficient clearance. New Orleans International Airport is located in the vicinity of the port.
New York and New Jersey
The New York and New Jersey port is found at 40° 43’N, 74° 00’W. Its main entrance is the Ambrose Channel with a projected depth of 45 ft and a width of 2,000 ft. The
harbour’s northern approach is through Long Island Sound to the East River and is also maintained at a 45 ft depth. The port provides container and tanker facilities as well as
mobile floating cranes with a capacity of up to 500 tonnes. It has four dry docks with a lifting capacity of 25,000 tonnes and one that can handle vessels of up to 1,100 ft LOA,
140 ft beam and 120,000 dwt. Kennedy International, Newark International and La Guardia Airports are all in close proximity.
Philadelphia
Philadelphia port is located at 39° 57’N, 75° 10’W. There are no restrictions on entry except by vessel draft. Delaware River is dredged at 40 ft and there is a mean tidal range
of approximately 5.7 ft. The port has 15 terminals, some with container and bulk handling facilities. There are terminals with tanker capacity and all terminals are equipped
with reducers. It also offers a floating dry dock with a capacity of 70,000 tonnes. The Philadelphia International Airport is six miles from the centre of the harbour.
Portland (Maine)
Portland port is found at 43° 39’N, 70° 14’W. There are no entry restrictions at night, although deep draft vessels are only brought in on high water. The maximum beam and
draft allowed through the bridge is 93 ft and 35 ft, respectively. In the harbour area, draft size is restricted to 45 ft. Arrivals and departures are controlled by tidal conditions.
The port contains only one general cargo and several dry dock facilities. There are terminals with Ro-Ro, container, liquid and covered storage capability. Tankers arrive at
Portland Pipe-line to one of ten terminals designed to receive them. The Portland Municipal Airport is four miles away from the port.
Portland (Oregon)
The port of Portland is situated at 43° 30’N, 122° 40’W. There are no restrictions on vessels that have a draft of under 36 ft. Larger drafts can be accommodated depending on
circumstances. There are no size restrictions on length and breadth. There are four public ocean cargo terminals in the port with 19 berths with a depth alongside of 40 ft
minimum. There are facilities for the special handling of commodities and general cargo handling. Tankers are able to use eight berths with drafts varying from 30 ft to 38 ft.
Portland Airport is 10 miles away from port.
Savannah
The port of Savannah is located at 32° 02’N, 81° 07’W. There is a 31 ft depth restriction at any time, although depths of over that occur on incoming tide. The port operates 12
general cargo berths, two tanker berths, five container berths, one dry bulk cargo berth and a Ro-Ro ramp. The port’s Eugene Talmadge Memorial Bridge has a vertical
clearance of 135 ft. The port offers the Sayler Marine Dry Dock. Savannah International Airport is in close proximity.
Seattle
The port of Seattle is situated at 47° 36’N, 122° 20’W along the limits of King County. There is a passing restriction owing to overhead power cables with a vertical clearance
of 155 ft at Burlington Northern Railroads Bridge. The port contains 15 terminals with over 46 berths designed for ocean-going vessels with depths alongside ranging from 11
m to 21 m. Seattle maintains 10 dry docks and is in close proximity to Seattle-Tacoma International Airport.
South Louisiana
South Louisiana port is found at 30° 06’N, 90° 29’W and is located on the Lower Mississippi River. It encompasses the parishes of St. Charles, St. John the Baptist and St.
James. The minimum water depth in its main channel is 45 ft. The port contains general cargo, dry bulk and liquid bulk terminals. The port offers tanker facilities and is
serviced by Illinois Central and Kansas City Southern Railroads.
Tacoma
Tacoma is positioned at reference point 47° 14’N, 122° 28’W. It allows for a maximum length of over 305 m and draft is subject to berth depth. The port consists of 32
deep-water berths with depths ranging from 9.15 m to 21.34 m. It offers bulk, container and tanker handling facilities. There are three operational bridges in the port, and
Seattle-Tacoma International Airport is 16 miles north from the port.
Tampa
The port of Tampa is located at 27° 57’N, 82° 28’W. Recommended draft is 33.5 ft. There exist no tidal restrictions besides loaded vessels into Port Tampa. Maximum draft
capacity is 38.5 ft MLW, there is no limit on length or breadth. Containers can be handled at various general cargo terminals although no specialised container facilities exist;
general cargo, specialised general cargo and dry bulk and tanker facilities are also available. The port also offers dry docks. Tampa International Airport is about 15 minutes
from the main port area.
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Security: Crime
Overview
Violent crime against individuals is higher than other OECD countries. According to data from the FBI, the number of violent crimes increased by 5.3% in the first six months
of 2016 compared to 2015, with the number of aggravated assaults experiencing the largest percentage increase. The pervasiveness of firearms continues to be a major
component of criminal activity across the range of crimes. Despite the recent increase, violent crime rates have declined over both the five- and 10-year trend. Property crimes
have also declined over the same periods. Hate crimes involving acts motivated by racial, gender, gender identity, religious, and other group-based biases continue to remain
significant.
Trafficking
Drugs
Illegal narcotics trafficking is regularly cited by officials as a major threat to US national security, and efforts to combat it dominate policy towards Latin America in particular.
The Department of State has a special bureau for International Narcotics and Law Enforcement Affairs (INL) which runs a large foreign assistance programme, aimed at
helping foreign governments prevent the production and trafficking of illicit drugs to the United States. There is also an Office of National Drug Control Policy (ONDCP).
Each year, in a memorandum to the secretary of state, the US president publishes a list of major illicit drug producing and transit countries. For the fiscal year 2017, this ”
determination” listed Afghanistan, the Bahamas, Belize, Bolivia, Burma, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, India,
Jamaica, Laos, Mexico, Nicaragua, Pakistan, Panama, Peru, and Venezuela. The determination, issued in September 2016, also designated Bolivia, Burma, and Venezuela
as countries that had “failed demonstrably” over the previous year to adhere to their obligations under international counter-narcotics agreements. The revised list reflected
increasing concerns over drug production and transit in Central American countries previously unlisted, such as Belize, Costa Rica, El Salvador, Honduras, and Nicaragua. By
way of comparison, the countries included in the list for 2008 were Afghanistan, the Bahamas, Bolivia, Brazil, Colombia, the Dominican Republic, Ecuador, Guatemala, Haiti,
India, Jamaica, Laos, Mexico, Myanmar, Nigeria, Pakistan, Panama, Paraguay, Peru, and Venezuela.
Cocaine: According to the 2017 International Narcotics Control Strategy Report (INCSR), Columbia continues to be the major provider of cocaine in the US. In order to
smuggle cocaine into the US, traffickers primarily rely on using land, air, and sea routes through Central America, Mexico, and the Caribbean. Over the past decade,
traffickers have smuggled approximately 97% of the cocaine bound for the US out of South America using non-commercial maritime transportation. However, smaller
amounts of cocaine have also been smuggled to the US using commercial maritime vessels and non-commercial aircraft.
Heroin: According to a 2015 report from the UN’s International Narcotics Control Board (INCB), Heroin in the US primarily comes from Afghanistan and Mexico. The US Drug
Enforcement Administration (DEA) noted in its 2015 National Drug Threat Assessment that Colombia was also a primary source of the heroin smuggled into the US. Mexican
cartels have been expanding aggressively into the heroin market, increasing their influence into the eastern and Midwest US.
Fentanyl: Illicit fentanyl, an extremely potent synthetic opioid (up to 50 times more potent than heroin), has become a growing problem throughout the US. The drug
increasingly has been mixed in with heroin and other drugs. Mexican drug cartels often obtain fentanyl from China and then lace the fentanyl in with heroin, before distributing
it in the US. Fentanyl is also manufactured in China. The mixing of Fentanyl in with heroin, along with it being pressed into counterfeit prescription pills, is believed to be a
contributing factor to rising overdose deaths associated with synthetic opioids throughout the US. According to the Centers for Disease Control and Prevention, the nationwide
death rate from overdoses caused by synthetic opioids, including illicit fentanyl, has increased 72% from 2014 to 2015.
Marijuana: Marijuana is the most readily available and widely used illicit drug in the US. A Gallup survey published in 2016, estimated that 43% of Americans had taken
marijuana at some point. While marijuana continues to be smuggled into the US from Mexico, the amounts seized at the border have been steadily decreasing in recent years
. The US Border Patrol reportedly seized 1.9 million pounds of marijuana in 2014, down from 2.5 million pounds in 2011. This reduction has largely been attributed to the
growing number of US states legalising marijuana. As of January 2017, nine states had legalised non-medical marijuana. Domestic production of marijuana also continues to
increase in states such as California, Colorado, and Washington. This trend has also been driven by the legalisation of both medical and non-medical marijuana in a number
of states. In recent years, Canada has also become more of a significant source of marijuana in the US.
MDMA and LSD: Methylenedioxymethamphetamine (MDMA) is a stimulant and hallucinogenic that is attractive to a younger, middle-class demographic, along with lysergic
acid diethylamide (LSD). More commonly known as ecstasy or molly, MDMA has appeared in the US via Europe, principally from the Netherlands and Belgium where it is
made in tablet form in illegal laboratories. It frequently arrives in the US via Canadian and Mexican transit points. MDMA is also produced inside the US, but domestic versions
of the drug are often less pure than the MDMA coming from Europe. Most of the key ingredients required to make MDMA are produced in China and Southeast Asia. LSD has
been produced on the west coast of the US in, for example, San Francisco and, further north into Oregon and Washington. Often sold by mail order, the anonymity of the
transactions has hindered the task of prosecuting authorities and has given the drug a cachet to users that more “street” drugs, such as crack cocaine, lack.
Methamphetamines: According to the US Drug Enforcement Agency (DEA), Mexican drug traffickers produce approximately 90% of the methamphetamines found in the US
while China has become the primary source for the majority of the ingredients required to make the drug. Although methamphetamines continue to be produced in the US,
such as in the mid-west, it has become more difficult to do so due to laws restricting access to cold medicines that contain pseudoephedrine, a precursor ingredient for
methamphetamines. Methamphetamine laboratories are subject to frequent raids and closures, but are comparatively easy to reassemble. Methamphetamines made under
such conditions are hard to keep track of, since they can be manufactured in powder and crystal form.
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Phencyclidine: Phencyclidine (PCP), a hallucinogenic that can provoke violent and paranoid behaviour in the user, has principally been produced in the Los Angeles area.
Other drugs, depressants, such as Flunitrazepam, better known as the “date rape” drug Rohypnol, and gamma-hydroxybutyrate (GHB), are banned in the US, as are a wide
variety of anabolic steroids.
Weapons proliferation and procurement
State
Former president George W Bush used the threat purportedly posed by Saddam Hussein’s attempts and previously documented ability to develop non-conventional weapons
as the main justification for the invasion of Iraq in March 2003. Saddam had previously used chemical weapons against the Kurds of Halabja in 1988 and during the Iran-Iraq
war. Eliminating the threat posed by CBRN (chemical, biological, radiological, and nuclear) weapons in the hands of regimes opposed to the United States was a clear priority
for the Bush administration since the president’s January 2002 State of the Union speech, in which he labelled Iran, Iraq, and North Korea an “axis of evil”, claiming that
weapons programmes in these countries constituted the biggest threat to US national security.
Missile technology in Iran and North Korea is still largely at a developmental stage and involves fewer missiles with lower accuracy, yield, longevity, and reliability than those
of the erstwhile Cold War enemies of the US. Nonetheless, North Korea has tested nuclear weapons and they are thought by the current Trump administration to pose a
potential threat to the US as they continue to flout UN Security Council restrictions on their nuclear programmes.
Iran
Although a decade of worsening relations between the US and Iran has finally shown some rapprochement with the implementation of the Iran-P5+1 nuclear agreement in
January 2016, concerns will remain regarding Iranian enrichment of uranium, ostensibly for non-military purposes. Without permanent safeguards, there is a clear risk that
civilian nuclear enrichment capability could be developed into military applications at a later stage. Indeed, the Trump administration has increased sanctions on Iran for its
ballistic missiles programme, as it could provide a means for regional nuclear weapons delivery if warheads are developed in the future. Iran stated that its right to enrich
uranium for commercial purposes is non-negotiable during the November 2013 Geneva negotiations and the development of a nuclear power capacity appears key to its
position. Although President Donald Trump advocated for withdrawing from the nuclear deal as a candidate, he has kept the deal in place while raising sanctions on the
Iranian government. Accordingly, maintaining a level of trust for both sides will be a difficult exercise, making this deal fragile in the medium term.
North Korea
North Korea is possibly more concerning than Iran, as its nuclear programme appears even more central to the legitimacy and strategy of the regime and its direct actions are
more aggressive. North Korea’s nuclear programme is also more advanced; it holds stocks of weapons-grade plutonium and has conducted three successful nuclear tests
thus far. North Korea has openly tested space launch vehicles, the Taepodong-1 and the Taepodong-2, which theoretically could be used as ballistic missiles capable of
delivering a small biological or chemical weapon to parts of the US. It conducted its first nuclear detonation in October 2006. A sudden acceleration of nuclear and ballistic
missile programmes in early 2013 was particularly concerning and caused a spike in tensions on the Korean peninsula akin to incidents of direct North Korean aggression. A
nuclear test in February 2012 was followed by a successful launch of the Unha-3 rocket into orbit, which was a development of the Taepodong-2. Both of these were in direct
violation of UN Security Council Resolutions and dramatically raised tensions. Although the likelihood of successful delivery is judged to be low, given the difficulties remaining
in miniaturising a nuclear warhead and creating an accurate, reliable ballistic missile, the country has demonstrated an active nuclear capability and has sped up both ballistic
missile and nuclear programmes since 2009. This means the threat has to be taken seriously, if not for the US directly, then for its key regional allies in Japan and South
Korea.
In early April 2009, North Korea launched a long-range rocket with a payload, it claimed, of an experimental communications satellite. Although the launch was judged
successful by the North Koreans, it was later confirmed that the rocket did not reach orbit. The UN Security Council subsequently condemned the test as a cover for an
offensive weapons capability test, and said it would tighten sanctions against Pyongyang unless it complied with its 2006 UN resolution banning missile tests. North Korea is
known to have sold ballistic missile technology to several Middle Eastern countries and to Iran in the past. Therefore, there is a high level of concern regarding the potential
proliferation of nuclear weapons by North Korea.
Kim Jong-il’s death in December 2011 further muddied the waters. Kim’s successor was immediately named as his youngest son Kim Jong-un, yet the new leader remains an
enigma with a lack of public exposure, and his probable policy intentions even more so. It is clear that Pyongyang has been keen to play up its nuclear capability since the
accession of Kim Jong-un. The successful missile launch in December 2012 and the nuclear test in February 2013 caused tensions to rapidly escalate. Although these have
subsided, North Korea has not toned down its nuclear programme, nor has it made signs that it is willing to make concessions regarding its nuclear ambitions. In turn, this has
led Washington to strengthen its missile shield along the west coast of the US and to warn North Korea about its future conduct. The latter half of 2013 has seen North Korea
beginning to restart the reactor at Yongbyon, and make infrastructure upgrades to missile launch facilities at Tonghae and Sohae and the nuclear testing range at Punggye-ri.
South Korean military and government officials have voiced concerns that a fourth test is inevitable and some have gone as far as to say that it may only be a matter of three
years before North Korea can mount a warhead on a ballistic missile.
In June 2013, Pyongyang said it was prepared to open talks with the US and in the same month a summit meeting in Beijing between President Xi Jinping of China and
President Park Geun-hye of South Korea underlined the two governments’ commitment to revive the six-nation talks on North Korea’s nuclear programme. Despite all sides
agreeing that a resumption of talks is desirable (particularly China), putting this into practice is proving more difficult. The US refuses to engage in high-level negotiations until
North Korea agrees to renounce all of its nuclear capability, but Pyongyang has said that its position as a nuclear power must be recognised. Statements made by Glyn
Davies, the US Special Representative for North Korea, said that “we’re [the US] looking for strong indications that North Korea is ready to move forward and take steps and
so far they are absent, so we call on North Korea to move meaningfully in the direction of the demands that have been made by the international community to give up its
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nuclear weapons.” The US State Department has said that “the ball is in North Korea’s court”, which leaves probability of meaningful dialogue at a relatively low point as North
Korea’s nuclear programme is central to its strategic objectives and position.
Aside from North Korea’s nuclear programme, attempts at reconciliation and dialogue are also undermined by conventional North Korean attacks and constant verbal attacks
from Pyongyang. The apparent sinking of a South Korean warship by a North Korean torpedo in March 2010 raised tensions on the peninsula and was followed by a North
Korean artillery attack on the South Korean island of Yeonpyeong in November 2010. These underlined the unpredictability of the regime. The sudden spike in tensions in
2013, which was largely relating to Pyongyang’s nuclear programme were accompanied by aggressive rhetoric, the closing of the Kaesong industrial park, cyber attacks, the
severing of communication lines, and short-range missile launches. In November 2013, North Korea detained US citizen and Korean War veteran Merrill Newman for ‘crimes
against the state’. This will further damage relations and appears to be a propaganda effort by Pyongyang.
Non-state
US intelligence agencies remain particularly concerned about the potential for terrorists to acquire or gain access to CBRN weapons and delivery systems. Conventional
explosive devices continue to be the most probable tools for attacking US targets, because they are more easily available and can be adapted to overcome security obstacles
with no trouble. However, there is persistent evidence of Al-Qaeda and other terrorist groups seeking to acquire CBRN materials and weapons, which in crude form are
relatively easily available. Active state sponsorship and assistance of non-state groups in the procurement and development of CBRN capabilities also remains an issue for
the US intelligence agencies.
Debt indicators
2013 2014 2015 2016 2017 2018 2019 2020 2021
Foreign exchange earnings (USD, bil.) 2,376 2,476 2,363 2,325 2,466 2,679 2,875 3,092 3,291
Portfolio investment, net (USD, bil.) 30.7 120.8 53.6 196.7 131.7 37.0 28.6 20.2 10.2
Portfolio investment, net (% of GDP) 0.2 0.7 0.3 1.1 0.7 0.2 0.1 0.1 0.0
Foreign direct investment, net (USD, bil.) -104.7 -101.2 195.0 167.8 166.9 171.8 178.3 183.9 188.6
Foreign direct investment, net (% of GDP) -0.6 -0.6 1.1 0.9 0.9 0.8 0.8 0.8 0.8
Foreign exchange reserves, excl. gold (USD, bil.) 135.0 128.1 108.3 108.9 111.0 115.9 122.0 127.8 133.5
Import cover (months) 0.6 0.5 0.5 0.5 0.5 0.4 0.5 0.4 0.4
Total external debt (USD, bil.) 16,488 17,258 17,710 18,025 18,941 19,487 20,129 20,870 21,689
Total external debt (% of GDP) 98.8 99.0 97.7 96.8 97.7 95.6 93.8 92.9 92.4
Total external debt (% of forex earnings) 693.9 697.0 749.5 775.4 768.1 727.3 700.2 675.0 659.1
Short-term external debt (USD, bil.) 5,454 5,456 5,212 5,196 5,409 5,594 5,809 6,055 6,326
Short-term external debt (% of total external debt) 33.1 31.6 29.4 28.8 28.6 28.7 28.9 29.0 29.2
Short-term external debt (% of international reserves) 4,038 4,259 4,812 4,772 4,875 4,826 4,762 4,739 4,738
Total external debt service (USD, bil.) 1,399 1,406 1,388 1,409 1,432 1,456 1,484 1,513 1,543
Interest payment arrears (USD, bil.) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
External liquidity gap (% of forex earnings) 216.4 225.1 235.7 239.1 230.9 224.9 221.1 213.3 205.4
Source: Historical data from selected national and international data sources. All forecasts provided by IHS Markit.
Highlights
Since Donald Trump assumed the presidency and Republicans held their majorities in both the House of Representatives and Senate in the 2016 elections, the party has
been grappling with advancing their pro-business agenda. Trump campaigned on a domestic platform highlighting economic disaffection and immigration restrictions, and an ”
America First” foreign policy featuring trade protectionism. However, legislative progress on these issues has been complicated by divisions within his party and unified
opposition by Democrats. Generally, the legal system is independent, clear, and pro-business, reducing contract alteration and contract enforcement risks. However,
corporate scandals and the 2008 financial crisis exposed regulatory shortcomings. Businesses have complained that the toughened regulation in the wake of the scandals
imposes an unnecessarily heavy burden, particularly in the financial sector, which Trump has sought to rollback. Tax and regulatory regimes and incentives differ extensively
from state to state. In a legislative victory, Trump successfully lowered corporate tax rates from 35% to roughly 21%. The operational environment is comparatively strong,
with an efficient bureaucracy, world-leading universities, and a flexible, capable labour force. The terrorist attacks of 11 September 2001 drew attention to security and
operational threats. Growing cyber risk following recent cyber attacks targeting the government and US-based firms have produced calls for enhanced information sharing
legislation. In the run-up to the 2016 election and since Trump’s inauguration the country has experienced a number of incidents of civil unrest. Although an organised
widespread anti-Trump movement has not materialised, isolated anti-Trump protests of particular issues (environment, immigration, abortion) in urban centres are likely. Race
relations and police brutality as seen recently in Chicago, Cleveland, and Charlotte are likely to continue to spark violence by the Black Lives Matter movement, such as
occurred in September 2017 in St. Louis, raising the risk of widespread protests and riots in urban centres.
US Consumer Markets: Monthly Forecast Analysis: Consumer Markets: Summary
© 2018IHS Markit. page of 61 61
Analyst Contact Details: Chris Christopher, Michael Montgomery, David Deull, Patrick Newport, James Bohnaker
Consumer spending growth will continue to support the economic expansion, underpinned by lower personal tax rates and gains in employment, real disposable
incomes, and home values.
We forecast real consumer spending growth of 1.2% in the first quarter of 2018, 0.7 percentage point slower than in the previous forecast; real personal disposable
income growth is forecast at 4.3% in the first quarter.
Our real consumer spending growth outlook has been revised down by 0.2 percentage point to 2.5% for 2018, and remains at 2.7% for 2019.
We expect growth of real disposable personal income to accelerate from 1.2% in 2017 to 2.6% in 2018 (0.4 percentage point less than the previous forecast) and then
to ramp up to 3.6% in 2019.
Issue to watch: Total individual tax refunds in 2018 are on track to surpass their previous high point. Based on incoming data, we expect a total of $301 billion to be
disbursed to taxpayers through the end of June—nearly 1% more than last year.
Economic outlook
Solid growth with higher inflation out of the gate
Fourth-quarter GDP growth was reported at 2.9% in Bureau of Economic Analysis’ third estimate, revised up 0.4 percentage point from the second estimate, with notable
upward revisions to personal consumption expenditures (PCE) and inventory investment. Over the final three quarters of last year, GDP rose at a robust 3.0% annual rate.
While the economy surely had solid momentum heading into 2018, the incoming data point to a temporary slowdown in the first quarter. The main source of first-quarter
weakness is PCE, which has slowed sharply early this year.
Following only 1.7% growth in the first quarter, we forecast GDP growth to pick up to 3.0% or better over the balance of 2018, followed by 2.9% next year and 2.1% over 2020
, lowering the unemployment rate to 3.6%. This growth is aided by recently legislated tax cuts and new federal spending, and not at all derailed by new tariffs on imports of
steel and aluminum, since the growing list of exemptions from these tariffs has mitigated their effect.
Core PCE inflation is picking up. Over the six months ended in February, the core PCE price index rose at a 2.3% annual rate. By this measure, we have already surpassed
the Federal Reserve’s 2.0% objective. We forecast core PCE inflation of 2.0% for this year, 2.2% over 2019, and 2.3% inflation over 2020. This prompts four Fed interest-rate
hikes this year, followed by several more over 2019 and 2020.
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