National Intelligence Bulletin for 09 March 2018

The National Intelligence Bulletin is a weekly look at national security, domestic systems disruption, the risk of failing critical infrastructure, and threats to social, political, economic, and financial stability in the United States. This report is available each week for National Intelligence subscribers.


In this National Intelligence Bulletin… (3,338 words)

  • InFocus: Good times decrease social unrest; hard times increase it
  • Qualcomm, Broadcom, and 5G: Why this acquisition really matters
  • Former secretary criticizes lack of DHS focus
  • Trump administration mulls new rules for food stamp recipients
  • Political, social divide among generations leading U.S. to domestic conflict
  • DOJ files preemption lawsuit against California
  • Alabama man pleads guilty to attempting to support the Islamic State
  • 87 arrested in Capitol Hill DACA protest
  • USPS retirement plan deficit continues to grow
  • White House and FAA to tackle problem of rogue drones
  • Leading Index pointing to another decline/recession?
  • JPMorgan executives see potential for “deep correction”, recession
  • Gary Cohn’s departure signals shift towards protectionism
  • And more…

In Focus: Prior to the Trump administration, the greatest risk to systems disruption and domestic stability was cyber — the potential for a cyber attack or cyber exploitation. That was my greatest concern before the election, and while cyber still has the most significant and immediate potential to cause very large scale problems, civil unrest threatens domestic stability on a daily basis. If it weren’t for the flow of positive economic news and getting Americans back to work, the country’s social problems would be much worse. U.S. Border Patrol and Immigration and Customs Enforcement (ICE) deported millions of illegal aliens during the Obama administration. In fact, Obama set a record for deportations in his first year, with 1.5 million in 2009, but I don’t recall seeing the vitriol and propaganda surrounding those actions that we’re seeing now. Facebook live streams and YouTube videos routinely document ICE officers arresting illegal immigrants. As always, the real story appears in the comments section, where visibly angry Americans are honest with how they feel: many hate President Trump, U.S. Border Patrol, and ICE for enforcing federal law. The news media reports that President Trump is breaking up families and the social media accounts of these mainstream news outlets publish human interest pieces designed to evoke emotional responses to a rational actions. The level of hatred in the comments section that follows is palpable, and we have every reason to believe these people are sincerely posting their honest feelings. And we saw practically the exact same thing with last month’s CNN townhall on gun violence at schools, where an angry crowed yelled “Murderer!” to National Rifle Association spokeswoman Dana Loesch. Since then, Ms. Loesch and her children have received a multitude of death threats. Protests are a weekly occurrence across the nation, and sporadic political violence continues to be the norm.

This is when economic times are pretty good — the U.S. economy added 313,000 jobs last month — so my concern continues to be how the potential for a recession within the next two or three years will affect domestic stability. One thing we know from studying the Arab Spring and other popular revolts is that the risk of domestic upheaval increases greatly when youth unemployment is high. And considering that youth are often the least skilled and experienced of America’s workforce, we have every reason to be concerned about how artificial intelligence, automation, and robotics will affect the U.S. job market. That’s a longer term concern than the next recession, but it paints the picture that America has some real challenges ahead.

We at Forward Observer will continue to investigate what the specific challenges are, and when and how they’ll affect the country. But our jobs as preparedness-oriented Americans is to figure out what we can do at the local level to build resilient communities and increase access to local information. Putting aside the apocalypse fiction, I think a well-deserving thought exercise is to consider what our neighborhoods would look like with 20% unemployment. (For some context, the U.S. had 25% unemployment at the height of the Great Depression in 1933.) If you’re anything like us, then you at least believe there’s a significant potential of another really ugly period of American history, or something worse. Dedicate some time, if you’re not already, to developing some local solutions to this coming national problem.


Priority Intelligence Requirements

PIR1: What are new the indicators of systems disruption and threats to critical infrastructure?
PIR2: What are the new indicators of potentially disruptive social, cultural or political conditions or events?
PIR3: How are state and federal agencies preparing for domestic conflict, emergencies, or other instability?
PIR4: What are the new indicators of systems disruption and threats to the economic or financial industry?


PIR1: What are new the indicators of systems disruption and threats to critical infrastructure?

Qualcomm, Broadcom, and 5G: Why this acquisition really matters

The Committee on Foreign Investment in the United States (CFIUS), an organization within the Treasury Department, has been more active over the past several years while overseeing potential mergers and acquisitions involving Chinese companies. As we’ve previously reported, China is on a shopping spree, buying up farmland, energy facilities, mines, and other critical infrastructure around the world; so much so that Canada, the United Kingdom, and Australia have all recently vetoed potential Chinese acquisitions. Chinese ownership of critical infrastructure represents a clear and present danger to national security. And the United States is no different, with CFIUS — after blocking several Chinese bids on U.S. companies — this time looking at the potential hostile takeover of U.S. company Qualcomm by Singapore-based Broadcom.

This potential sale matters because Qualcomm is the world’s leader in 5G technology (after introducing the U.S. to 4G and 3G communications networks), and their purchase by Broadcom would give the company significant technological advantages over the United States. CFIUS probably fears that the sale could potentially allow China to manipulate 5G communications using Qualcomm’s network — clearly a threat to national security — if a Chinese company were to take over or later control Broadcom. Qualcomm also holds contracts with the Defense Department, underscoring just how significant this potential acquisition by a foreign company could be. [source]

Former secretary criticizes lack of DHS focus

Former Department of Homeland Security (DHS) secretary Tom Ridge criticized DHS, saying that they aren’t prepared to tackle today’s cybersecurity threats. “I don’t see a sense of urgency in the political world about how serious this challenge is. “We have been engaged in a fifth-dimension war, a cyberwar. No one has asked Congress to declare war, but every minute of every day and every week of every year, our adversaries are looking to disrupt, destroy and steal from us.” Ridge equated today’s cyber conflict as “a guerrilla war” and warned that DHS is not doing enough to stave off threats. [source] (Analyst Comment: We’ve previously reported that cyber experts are warning that a “cyber 9/11” is not a matter of ‘if,’ but of ‘when’. While such a black swan event could occur technically at any time, my focus is on the cyber exploitation that takes place before or during a conflict with Russia, China, North Korea, or Iran. Striking the homeland with cyber weapons is cost effective and especially viable for peer and near-peer competitors. For a country that lacks force projection, cyber attacks present a likely alternative to bombs and missiles, and U.S. critical infrastructure is deeply vulnerable to many forms of cyber attacks.)


PIR2: What are the new indicators of potentially disruptive social, cultural or political conditions or events?

Trump administration mulls new rules for food stamp recipients

While the Trump administration is focused on putting America back to work, it’s also mulling some new rules to who can receive food stamps and for how long. Current federal law prohibits individuals aged 18-49 from receiving Supplemental Nutrition Assistance Program (SNAP) benefits for more than a three months in a period of three years, unless those individuals are disabled or have children younger than 18. But according to the Department of Agriculture (USDA), there are nearly four million Americans capable of finding work, yet who continue to receive SNAP benefits and shouldn’t be. In a statement last month, Agriculture Secretary said that “USDA policies must change if they contribute to a long-term failure for many SNAP participants and their families.” States can currently seek exemptions for SNAP requirements for areas where jobs are hard to find, waiving the 20 hours-a-week work requirement. It’s unclear just how the USDA might start to remove four million recipients, but a USDA spokesman said that getting Americans back to work was a better long-term solution to poverty that SNAP benefits. [source]

Political, social divide among generations leading U.S. to domestic conflict

According to recently published data from Pew Research, a growing political and social divide exists between Millennials and other generations. For instance, Millennials are more likely to favor Democrats and also are more likely to believe that discrimination is the “main barrier” to the progress of Blacks in America.

“Millennials remain the most liberal and Democratic of the adult generations. They continue to be the most likely to identify with the Democratic Party or lean Democratic…

In fact, in an early test of midterm voting preferences (in January), 62% of Millennial registered voters said they preferred a Democratic candidate for Congress in their district this fall…

Among the public overall, 49% say that black people who can’t get ahead in this country are mostly responsible for their own condition; fewer (41%) say racial discrimination is the main reason why many black people can’t get ahead these days.”

While the 41 percent of the overall public blame racial discrimination the main barrier to the advancement of Blacks, that number is 52 percent among Millennials and increasing. Only 38 percent of Millennials believed that last year.

Concerning whether immigrants “strengthen the country,” 79 percent of Millennials agreed, which is much lower than the reset of the generations: 66 percent among Generation X (b. 1965-1980), 56 percent among the Baby Boomers (b. 1945-1964), and 47 percent among the Silent Generation (b. 1928-1945). [source]

(Analyst Comment: The latest research found that roughly 12 percent of Millennials were either consistently or most conservative, as compared to 57 percent who said they were mostly or consistently liberal. Some demographers point to differences in racial constructs among the generations as an explanation of why Millennials are so liberal. Millennials are least White generation (56 percent white), compared to Gen X (61 percent), Boomer (72 percent), and Silent (79 percent). Pew also points out that the next generation after the Millennials are going to be even more racially/ethnically diverse. Research out of the University of Maryland shows that immigration is a major reason for the political success of the Democrat Party. [source] According to older Pew data from 2012, some 75 percent of Hispanics prefer a bigger government to a smaller one. [source] Consider this: the South began to secede from the Union in 1861after Abraham Lincoln was elected president without support from any Southern state. If our first key assumption is that the death of the GOP as a national party — meaning that within 10 years, it’s virtually impossible for another Republican to be elected president — is a tipping point, and our second key assumption is that within 10 years, Democrats are able to pass a form of amnesty, then we will surely be at the most important and historic crossroads in this country within 10 years. The coming conflict is unlikely to resemble the Civil War, but we can certainly expect a major tidal shift in the political landscape that leads to politically-related violence. )

DOJ files preemption lawsuit against California

Attorney General Jeff Sessions announced on Thursday that he’s filing suit against the State of California, Governor Jerry Brown, and California AG Xavier Becerra to preempt passing legislation that will “intentionally obstruct and discriminate against the enforcement of federal immigration law”. One of the bills (Assembly Bill 450) would prevent employers in California from “voluntarily cooperating with federal immigration officials” and requires employers to notify employees about federal immigration inspection of their workplaces. Senate Bill 54 “restricts state and local law enforcement officials from providing information to federal immigration authorities”, and Assembly Bill 103 would allow the state of California to inspect and review federal detention of illegal aliens, which is a violation of the Constitution, according to the lawsuit. [source]

Alabama man pleads guilty to attempting to support the Islamic State

Aziz Ihab Sayyed, 32, of Huntsville, Alabama plead guilty to charges that attempted to provide “services and personnel” to the Islamic State of Iraq and al-Sham. Those “personnel” included himself. Sayyed admitted that he had purchased bomb-building materials and was going to attempt to carry out an attack against Redstone Arsenal, a U.S. Army installation. [source]

87 arrested in Capitol Hill DACA protest

Pro-DACA activists held a protest at the Capitol on Monday, which ended sometime after 87 of them were arrested. Of those arrested, 28 are being charged with resisting arrest. Another 19 were arrested after a demonstration in the Longworth House Office Building. [source]

USPS retirement plan deficit continues to grow

The United States Postal Service has been running about a $6 billion deficit for years, and now has a $73 billion deficit in its retirement plan, according to Federal News Radio. [source] (Analyst Comment: USPS can join the club with Illinois, California, and a number of other states will billion-plus dollar pension and retirement shortfalls. Unless significant changes are made — including later retirement, forced retirement, higher retirement savings inputs, and reduced benefits — the USPS and entire states are going to be asking for a federal bailout. As we’ve reported in previous weeks, President Trump wants to freeze federal pay, increase retirement savings requirements for new and current employees, and reduce retirement benefits to avoid similar problems in other government agencies. These kinds of shortfalls could be a major source of civil unrest, especially if pension and retirement benefits are cut and rising inflation decreases the purchasing power.)


PIR3: How are state and federal agencies preparing for domestic conflict, emergencies, or other instability?

White House and FAA to tackle problem of rogue drones

The Trump administration is preparing legislation that would give DHS and other law enforcement agencies the power to disrupt or destroy drones that pose a threat to national security or public safety. Measures are likely to allow law enforcement to jam, spoof, or otherwise attack a electronically attack a drone. Physical attacks aren’t yet being ruled out, either. [source] Meanwhile, the FAA is pushing for every drone in the U.S. to have the equivalent of a tail number, which identifies the owner and could provide additional information to law enforcement. An official for the White House Office of Science and Technology Policy recently said that the “administration is working on a legislative proposal to enable certain agencies to use technology capable of detecting, and if necessary, mitigating UAS-based threats to certain sensitive facilities and assets.” [source]


PIR4: What are the new indicators of systems disruption and threats to the economic or financial industry?

Leading Index pointing to another decline/recession?

The chart below is from the St. Louis Federal Reserve (Federal Reserve Economic Data; FRED) website, and it shows the predicted six-month growth rate for the United States by month going back to 1980. The red lines are mine, showing the highest predicted growth rate to the lowest predicted growth rate, which occurs at the depth of recession, indicated by gray. While a recession isn’t likely to be imminent (pending a black swan event), I think the chart is indicative that the Fed’s predicted growth rates are trending toward another recession, and I think we’re still on track for the 2020-2021 time frame. [source] (Analyst Comment: The Business Cycle Index is not indicating recession within 11 or 20 weeks.)

 

JPMorgan executives see potential for “deep correction”, recession

If you thought last month’s stock market plunge was bad, hang on to your shirts: JPMorgan Chase executive Daniel Pinto warned that the stock market could see as much as a 40 percent drop within two to three years. Speaking in a Bloomberg interview, Pinto said that the next correction could be “deep”, somewhere between “20 percent to 40 percent, depending on [that current] valuation.” Pinto also called the market “nervous” and said that if the president continues on his path to add tariffs, then it could negate the positive growth we’ve seen due to tax reform. On another topic, JPMorgan CEO added that a recession could be coming as soon as late 2019. [source]

 

Gary Cohn’s departure signals shift towards protectionism

Economic advisor Gary Cohn, sometimes referred to (with tongue-in-cheek) as “Globalist Gary”, recently departed the White House, signaling a shift towards economic protectionism and away from international “free” trade. Director of the Office of Management and Budget (OMB) Mick Mulvaney released a statement on Cohn’s departure, saying:

“I never expected that the coworker I would work closest, and best, with at the White House would be a ‘globalist.’ Gary Cohn is one of the smartest people I’ve ever worked with. Having the chance to collaborate with him will remain one of the highlights of my career in public service.” – OMB Director Mick Mulvaney

Losing Cohn was a blow to the establishment, as his economic advice was largely seen as grounding President Trump. But Cohn was already at odds with Commerce Secretary Wilbur Ross, trade advisor Peter Navarro, Stephen Miller, and others over economic policies, and the president’s decision to put tariffs on foreign steel and aluminum was Cohn’s line in the sand.

Where that leaves U.S. economic and trade policy in squarely in the hands of the protectionists. Economists are making a really big deal out of this, saying that it will lead to job losses and deteriorating relationships with U.S. allies. And China and Europe are leading the international charge, saying that tariffs violate the established order of free trade. The European Union has gone so far as to say that it’s going to impose tariffs on U.S. goods in retaliation. The economists are right: tariffs could lead to job loss. And China’s correct, too: the tariffs do violate the established order of free trade. But in response to the economists, the White House says that the decline of the U.S. steel industry is a national security concern. Right now, the U.S. imports nearly four times as much steel as it exports, and that steel goes into everything from office buildings and vehicles to aircraft carriers and submarines. [source] If the U.S. continues to import much of its steel from foreign sources, then those sources could be disrupted, doing significant harm to U.S. manufacturing. And in response to China, the White House says that the established order of free trade has been stacked against the U.S. for decades. China keeps U.S. companies out of Chinese markets and forces U.S. manufacturers operating in China to jump through special hoops to keep Chinese companies competitive. With these tariffs, President Trump is looking to make more than just a point about unfair trade practices; the president wants to achieve parity regarding U.S. trade practices. And if there are some short-term side effects, then they’ll likely be outweighed by solving the long-term systemic risks to national security and large trade deficits. The president is seeking “long-term viability” of the U.S. steel industry (and has already peeled back tariffs on Canada and Mexico).

But let’s take the worst case scenario that steel tariffs do cause some economic disruption to the U.S. A group named Trade Partnership, who bills themselves as non-partisan, says that the U.S. could lose as many as 146,000 jobs due to the tariffs. To put that into perspective, the U.S. added 313,000 new jobs last month alone, according to non-farm payroll numbers out today from the Bureau of Labor Statistics. [source] According to left-leaning Brookings Institute, several states could be negatively affected:

Texas, California, Illinois, Michigan, Louisiana, Pennsylvania, Ohio, and New York all import more than $2 billion annually in steel and aluminum products, together accounting for 60 percent of the nation’s total. Aside from Texas, California, and Louisiana, these states concentrate in the Northeast and Midwest’s Rust Belt. Given the large size of their economies, disruptions to trade in these states have significant potential to influence national economic growth and key industry sectors like automotive manufacturing, chemicals, and oil and gas production.

The states that rely most on steel and aluminum imports as a share of their total import base cut an interesting economic geography. In Missouri, Louisiana, Connecticut, and Maryland, aluminum and steel imports account for at least 5 percent of total state imports, double the share of the nation’s 2 percent total. [source]

For decades, the U.S. has racked up massive trade deficits. As long as the Trump administration frames this as an issue of national security, steel and aluminum might not be the only products to see tariffs.

 

Samuel Culper is a former military intelligence NCO and contract Intelligence analyst. He spent three years in Iraq and Afghanistan and is now the intelligence and warfare researcher at Forward Observer.

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