Time for a Four Star Cyber General

Cyber is everywhere in our lives today and it is our greatest strategic weakness.

In 2015, the FBI and Department of Homeland Security determined Chinese sources, likely the Chinese Army, hacked the federal government’s Office of Personnel Management stealing 21.5 million applications for security clearances. Not only were vital statistics like social security number and credit history vacuumed up but, also, family relationships and social networks. Not even such a blatant and dangerous data security breach spurred the government beyond holding a couple of face saving Congressional hearings. —

Wikileaks disclosed information hacked from the CIA that exposed our ability to track terrorists through their cell phones. The result tipped off the terrorists who’ve returned to more primitive but harder to track methods of communication.

Global “ransom ware” attacks on hospitals have done little to prompt even a single Congressional hearing.

Equifax Credit Bureau was so careless with data they collect from all Americans involuntarily that hackers roamed undetected through their huge credit databases for nearly four months stealing the information of nearly half of the American people – using — what appears to be — a specific set of selection criteria. The government’s response: Consumers can sue Equifax.

The Security and Exchange Commission’s EDGAR System was hacked a year ago (August, 2016). It is likely that some person or persons or country unknown had access to the financial reporting data of every publically traded American or multi-national corporation before that information was made public, as required by law. Congress and the American people were not told until the appointment of a new SEC Chairman in September, 2017.

For almost a year, hackers were able to use (or sell)”insider trader information” to trade on specific stocks before the company’s public announcement of earnings. Such trading is a federal crime.

Just last week, the Department of Homeland Security released a list of 21 states where Russians successfully or semi-successfully hacked into state election systems prior to the 2016 Presidential election.

Taken together these are hostile acts against the nation and the people of the United States – as surely as if those bits and bytes were bullets.

In this war of bits, bytes, and the dark web, there is no “frontline” and Congress is not doing its job: Building an army to protect you and I – the American people – from a nefarious global network of economic terrorists.

No American is Safe:

Almost every aspect of daily American life is connected to the World Wide Web.

When you:

  • Apply for a job
  • Apply for a mortgage or rental approval
  • Watch television
  • Shop – online and off
  • Buy groceries at the local grocery store
  • Dial 911 an emergency
  • Catch up with friends
  • Make a medical appointment
  • Pay the basic monthly bills
  • Save for retirement etc.

The details of every transaction are collected by numerous public and private interests – irrespective of your Constitutional right to privacy. Under the best of circumstances, this data is summarized and sold to better “target” you as a customer.

In the hands of a criminal this data can be used to steal your identity. It can be used to blackmail you into – for example — spying against your employer, your neighbors or friends. It might allow a health insurance company illegal access to your genetic profile.

Protect Our National Infrastructure

There is no part of the infrastructure that we all depend on that does not, also, depend on technology:

  • Weather forecasting
  • Water storage and transport
  • Power generation and transport
  • Farming
  • Air travel
  • Rail travel
  • Ocean and river craft
  • Your family car
  • Corner gas station
  • Hospitals
  • Police Stations
  • Jails
  • Military Installations and Military Hardware etc.

It is not classified information that our government, private and public utilities and other quasi-government agencies have acknowledged their vulnerability to cyber attack.

Stop for a moment and think what the consequences would be if, for example, your electric utility provider were held for ransom by a hostile government or non-state-actor. Denied electric power, many activities we take for granted would quickly stop. What would the social consequences be if gasoline pumps stopped pumping, grocery stores couldn’t refrigerate or even checkout your groceries, ATMs could not dispense cash, and credit card transactions could not be verified across a wide section of America.

Every automaker and others including Apple and Google are working on the “inevitable” driverless car — navigation via the Internet. WHAT IF a terrorist or state actor hacked into the driverless car fleet and turned our interstate highways into real-time bumper cars?

CYBER WARFARE IS NOT STAR WARS

Several states have started to regulate autonomous vehicles, remote home security and other technologies that could put Americans at risk. Not so Congress.

Congress is worried about other things: for example, to build or not to build a wall on our southern border.

Daily reports of massive data breaches, repeated theft of Americans personal data by criminals and hostile state actors, over several years, haven’t prompted Congress or the President – past or present – to take the necessary steps to protect every day Americans from this new and potent threat.

Congress and state governments have been repeatedly briefed on the vulnerabilities of our power grid and communication systems to cyber attack. But none of those briefings have moved Congress to debate or legislate additional cyber security measures outside the reactive Homeland Security Department’s Computer Emergency Reaction Term.

It is well past time that Congress acts pro-actively to establish a cabinet level CYBER SECURITY Department to coordinate all military, intelligence, law enforcement and private sector cyber security initiatives.

Every American has a right to expect Congress to take all steps necessary to protect the life, liberty, privacy and security of every citizen.

As much as we expect our military to be one step ahead of our potential enemies – so must our cyber sleuths.

Graphic courtesy of us.123rf.com

A Crucial Balancing Act: DACA and Enhanced Border Security

President Trump has invited an explosion in Congress with his recession of the 2012 Obama Executive Order that protected undocumented aliens who were brought to the United States by their parents when they were still children and before 2007.

There is majority public support for legislation to protect the “DACAs” (Deferred Action [for] Childhood Arrivals).

Three bills have been entered into Congressional hopper – the bi-partisan Senate Dream Act 2017, the House Recognizing America’s Children Act and the House Dream Act.

Nancy Pelosi, embolden by her meeting with President Trump, insists House Democrats will settle for nothing less than their Dream Act – which broadens the categories of eligibility beyond President Obama’s Executive Order and offers Dreamers a direct path to American citizenship.

The two other bills take a more measured approach — offering at first provisional legal status to work, travel, go to school, etc. Only after serving several years of provisional status would “Dreamers” earn a right to apply for permanent residency and eventually citizenship — hardly a “get out of jail free” card.

Initial reaction on Capitol Hill suggests that there is broad support, in Congress, for DACA-fix legislation – limited in scope and purpose.

After sixteen years of bi-partisan failure to pass such a bill what is different this time?

Passing a small, targeted immigration bill will benefit both political parties going into the 2018 mid-term elections.

Politics Makes Strange Bedfellows

Does President Trump think he can trade a DACA law for his often promised southern “border wall”? It’s possible but not realistic.

More realistically — the Republican majority in Congress knows it cannot afford to lose this opportunity to partially rebuild its relationship with Hispanic voters. But the GOP must also be responsive to its own base – which has used its votes repeatedly to demand enhanced border security first and granting legal status second.

Democrats will seek political advantage in the mid-term elections by supporting a “clean DACA law” (effectively an amnesty) that would attract more Hispanic support from the US citizen brothers and sisters of the Dreamers — even at the expense of further erosion of their traditional organized union, blue collar base in the mid-west.

Representatives and senators in the center of both parties have a clear common interest. The majority want a bill they can pass, the President will sign, and that they can defend to their constituents during the 2018 primary and general elections.

Senators as philosophically opposed as Lindsey Graham (R-South Carolina) and Diane Feinstein (D-California) have both acknowledged that only a DACA Fix that includes steps to strengthen our border security meets all three conditions.

Effective Border Security Doesn’t Mean Walls

A wall on our southern border — even if Mexico or Congress was willing to pay for it – will not secure our borders.

Fact is every year since 2007 more than half of the illegal immigrants to the USA have been airport arrival “visa overstays”.

Technology, not concrete, is the solution to our 360 degree land, air, and sea border security problem.

  1. Strengthen E-Verify

The 1986 Immigration Reform Act (aka Simpson Mazzoli) attempted to balance compassion for some two million illegal aliens who had been in the country for many years with stronger border security and enforcement measures.

The 1986 legislation defined as a crime any USA employer hiring/employing a person who could not prove they had the legal right to work (and live) in the United States.

To help employers stay “on the right side of the law”, Congress mandated the development of an electronic verification system – E Verify — every employer would need to use to verify every new employee’s “work authorization status”.

The bureaucracy took a different approach than the law required while subsequent Congresses just looked the other way.

Participation in the E-Verify System is voluntary unless the employer is a federal contractor – or in some states a state contractor. There is only limited enforcement even for federal contractors.

Any other employer can enroll to use the system on a voluntary basis with little risk of being subjected to enforcement action by Homeland Security.

Under current Homeland Security policy, even if a new hire is “non-compliant” – determined not to have work authorization – termination is not required only strongly suggested.

Congress should give Homeland Security twelve months from date of passage of new Border Security legislation to deliver an E-Verify System that is tested, proven and works.

Once tested and proven, the system must be made mandatory for all newly hired workers – every employer, everywhere – with significant civil and criminal penalties for employers that violate it.

Restricting the E-Verify mandate to new hires will protect those working without papers in the USA today – i.e. DACA’s parents – from termination because of status.

No DACAs could move from provisional status to permanent resident status until E-Verify is successively implemented, rolled out nationally and demonstrated to work – including employer enforcement.

  1. Discourage Illegal Entry with Improved Tracking Technology at Every Border

Simultaneously, Customs and Border Security must
improve its ability to electronically track arrivals and departures of tourists and other foreign nationals with temporary (time fenced) visas.

Currently, a photo is taken of every airport arrival and stored with passport information collected prior to and upon arrival.

Today, Homeland Security has no way to track where a “visitor” goes once they cross the border or walk out of the airport. It’s just too easy to blend in and stay – get a job, rent an apartment, or buy a car.

  • Congress should authorize the Attorney General to determine the Constitutionality of attaching a GPS tracking device to all foreign passports in the United States to ensure timely departures.
  1. Eyes in Sky

High tech surveillance is part of 21st century life – at the mall, the airport, the stop light, on the freeway – rendering walls historic artifacts.

Congress needs to increase funding for technology already used by Border Patrol including satellites, in the ground sensors, and drones to patrol remote stretches of both the southern and northern borders.

  • More drone operators, for example, to spot irregular arrivals faster and guide border patrol agents to apprehend them.
  • Ground level sensor technology can be more effective than walls.
  1. A Tamper-proof Internal Identification System

Homeland Security must be given a deadline to negotiate a plan with the states to issue technically sophisticated drivers’ licenses and other internal identification documents.

  • Congress first mandated a tamper-proof “National ID” following 9/11 but it has never been implemented.
  • Adding technical sophistication to our (state issued) internal identity documents will prevent the possibility of unauthorized immigrants using our air travel system – reducing the terrorist threat as well.
    • Some states currently issue Driver’s Licenses to undocumented aliens but those licenses must meet federal guidelines that insure TSA can quickly identify them as not authorized for air travel.

Tamper-proof national identification documents are, also, a defense against the growing national threat from counterfeiting and identity theft.

None of these four steps would deny sanctuary to anyone currently in the United States.

Build Public Confidence for Immigration Reform

If the public saw each step implemented, tracked and succeeding — public confidence in the government’s ability to secure our borders would grow.

Simultaneously, Congress could use the two or three years required to implement and assess the effectiveness of these first border security steps to develop a thoughtful set of next steps to fairly resolve the status of DACA’s parents and other undocumented immigrants.

Securing the border along with resolving the legal status of those who have been living in the shadows of America for many years would
build public confidence in the government’s ability to manage our immigration system.

Public confidence is the necessary pre-requisite to a comprehensive 21st century immigration reform plan.

Graphic courtesy of iconfinder.com

 

Compassion Combined with Enforcement Can End DACA Crisis

The decision of the Trump Administration to rescind the Obama era executive order on DACA without a Congressional agreement to fix the problem is baffling.

The President and the Attorney General have created yet another legislative crisis for a Congress already overwhelmed by seemingly irreconcilable differences ranging from how to increase and manage the national debt ceiling to passing a 2018 federal budget (for the first time in 8 years) as a pre-requisite for any meaningful discussion of tax reform.

After years of promises, Congress does not yet have any reasonable plan to repeal, replace or repair the Affordable Care Act.

They’ve not passed a Defense Authorization Appropriation in the face of worrisome aggressive actions and threats against the United States by nuclear capable North Korea. Not to mention the ongoing military operations in Afghanistan, Iraq, Syria and so forth.

In the face of the well documented philosophic splits inside and between both political parties represented in the 115th Congress – it is unlikely that meaningful tax reform can muster any combination of the required 60 votes in the Senate.

Adding a legislative “DACA-fix” to Congress’ already impossible 2017 to-do-list is akin to throwing a match into a house with a gas-leak so you can enjoy the fiery explosion.

DACA is a Result of 2012 Presidential Politics

President Obama insisted for four years that he “lacked the Constitutional authority” to intervene on behalf of undocumented aliens living in the United States – arguing only Congress could change the law.

But in the run up to the 2012 Presidential Election, President Obama changed his mind about the extent of his executive power to protect undocumented (“illegal”) aliens living in the United States.

Facing a tougher than expected 2012 re-election challenge from Mitt Romney, he used Executive Orders to protect two classes of illegal immigrants from deportation proceedings and grant them temporary work permits – a total of more than three point six (3.6) million people.

  • Deferred Action (for) Childhood Arrivals (DACA)
  • Deferred Action (for) Parents (of) Americans (DAPA)

The Supreme Court agreed with President Obama’s first position — ruling DAPA and some parts of DACA to be unconstitutional in 2015 but left limited DACA protections in place.

While some might ascribe cynical political motives to President Obama we can all agree that, as a parent himself, he believed it is unfair to punish children for the sins of their parents.

The 600,000 to 800,000 young people who remained eligible for deferred action are between 18 and 30 years of age, originally brought to the United States illegally by their parents when they were children. They’ve grown up in the United States. Many have siblings born in the United States who are citizens.

These young people know no other country than the United States. There are, except for their immigration status, indistinguishable from their classmates, neighbors, work place colleagues or citizen spouses.

Some don’t even speak the language of the country of their birth.

The young people who have “come out of the shadows” by applying for a two year renewal work permit under DACA are contributing members of society.

They are caught in the limbo of Congress’ bi-partisan failure to frontally address a United States Immigration System that is completely broken and politicized – an impasse that has existed continuously since 2004 through majority Republican and majority Democratic congresses.

Immigration Reform Begins One Small Step (Bill) at a Time

As soon as Attorney General Session announced a planned end to the deferral program, members of both parties in Congress rushed to find a camera to promise a quick bi-partisan legislative solution to the DACA problem.

The White House press secretary even urged Congress to immediately pass comprehensive immigration reform.

But, if it were so easy – wouldn’t Congress have done it in 2004 or 2007 or 2010, 2012? The devil is in the details.

The history of comprehensive immigration reform – last enacted in 1986 – does not inspire confidence in the American people.

The 1986 “carrot” — amnesty to some two million undocumented aliens — was implemented right away but the “sticks” of stronger border control and stepped-up interior enforcement – E Verify (Employment Eligibility Verification) – have never been fully implemented.

The result is an estimated 11 million more undocumented immigrants today who point to 1986 Simpson-Mazzoli as evidence they have a “right” to legal status.

As a nation we just don’t do comprehensive well. Instead of one big omnibus bill that will never be fully understood or implemented, Congress should start with several, more modest, single purpose bills that can be fitted together in an interlocking immigration reform package — implemented, measured, tracked and enforced one step at a time over several years – starting with DACA.

Bi-Partisan Incremental Deal

The American people have shown in recent Politico polling support for – and our economy needs — more skilled and younger immigrants who can assimilate into American culture – the definition of a Dreamer (DACA).

A bi-partisan poll of the American political center taken by NBC News and Esquire Magazine in 2013 demonstrated a willingness to grant legal status (even eventual citizenship) to undocumented immigrants living in the United States for many years if the government can demonstrate the border is secured against further unauthorized immigration.

The Trump Administration created a “Dreamer crisis” and then gave Congress six months to “fix” the problem. That’s not constructive.

The Trump Administration must work with Congress to fashion a legislative process which builds the trust of the American people and sets the stage for future legislation to modernize our antiquated immigration system.

A reform bill that conveys legal status to qualifying Dreamers who arrived in the USA before 2007 linked to a companion bill focused on improved northern, southern; land, sea and air border security seems a good place to start.

 

Graphic is courtesy of the Delgado Law Group — with thanks

Importing Cheap Labor Eliminates American IT Jobs

Immigration policy played an important part in the debate before and after the 2016 election.

The debate was focused on whether or not to protect undocumented aliens in the United States because they do “jobs Americans won’t do” – for example agriculture, food processing, and unskilled construction.

But no attention has been paid to protecting jobs Americans are doing from documented alien labor.

Despite the loss of +/- 200,000 US technology jobs, the United States Citizenship and Immigration Services (USCIS) proceeded to awarded 85,000 “temporary high skilled knowledge worker” non-immigrant visas (H1-B) to foreign contract worker firms and American technology firms — 85,000 direct competitors for the limited number of IT jobs available in 2016 and 2017.

Why are we not Employing American Workers?

The phenomenon is not new. Computer World estimates that at least 776,000 tech workers have entered the United States to directly compete with American workers between 2007 and 2017.

For the last few years, the majority of these visas (65,000 annually) went to India-based contract labor (outsourcing) firms. The firms, in turn, hire BA graduates from Indian colleges and universities to fill the visas.

The advanced degree quota for H1-B visas (20,000 annually) go to high technology companies — Facebook, Apple, Google, Microsoft and Intel, to name just a few.

In addition, H1-B visas are issued to American college and universities above the annual quota stipulated by Congress.

While, at the same time, the National Institutes of Health spends $11 million a year to help US citizen Ph.D. graduates in STEM to find alternative careers. There are not enough jobs for all the Ph.D. graduates USA universities produce.

Solution: Hire a Made-in-America Worker

The H1-B visa program poses a direct threat to US technology workers – both present and future – as the numbers of these workers have continued to grow despite a general weakening of demand for IT workers in the United States.

In recent years more and more high profile American companies have fired entire departments of American workers and hired H1-B replacements.

  • Southern California Edison
  • Northeast Utilities
  • Toys R Us
  • Disney Company http://www.mercurynews.com/2016/09/06/emmons-when-walt-disney-co-replaces-americans-with-h1b-workers-its-a-small-world-for-sure/
  • University of California San Francisco Medical Center
  • Too many more to name

In all of these situations, the American workers were required to train their replacements as a condition of receiving their severance pay!

Many of the displaced workers had 10, 15 or 20 years of service to the firms that dismissed them in the name of profits. http://fortune.com/2015/12/24/disney-bob-iger-compensation/

Turn-off the Spigot

Despite extensive investigation and numerous hearings before Congressional Committees no action has been taken to correct the abuses of the H1-B program.

Currently there are three bills pending. One in the Senate and two in the House, including one authored by Silicon Valley representative Zoe Lofgren which would require H1-B employers to pay 150 to 200 percent of the current prevailing wage for that job classification – a move that would bring the program back to its original intent. Once, again, the H1-B visa would be reserved for the rare, unusual and uniquely skilled job creator.

In addition, the Trump Administration has issued an Executive Order to “study” the problem but did so without turning off the spigot.

Exactly the opposite should be done.

There is a practice from an earlier time in information technology that applies to the current H1-B situation.

Before every executive had a laptop with a company performance dashboard in the middle of his/her desk, IT departments used to produce volumes of paper reports. Periodically, the queue of reports had to be “cleared” to reduce wasted paper and reduce labor costs.

The IT Department would simply stop printing all the reports one Friday evening and wait to hear on Monday who called and asked for their report. If no one asked for a specific report by the following Friday, it was discontinued.

Instead of waiting for Congress – which has shown no appetite to touch anything related to immigration this year – let’s just turn-off the spigot by Executive Order.

Don’t hold a lottery to award the 85,000 2017 H1-B visas and see if any labor shortage occurs – if any company mounts a court challenge in the name of shareholder profits.

It is more likely that the result would more be more jobs and better wages for American technology workers.

Banking for 21st Century American Infrastructure

Banking for 21st Century American Infrastructure

I do Pilates every day and go to a Pilate’s class 3 times a week not because I like it – but because I know it’s essential to maintaining strong bones and muscles (the human infrastructure) over a life time.

I choke down two HUGE calcium pills each morning for the same reason.

Not bragging – but comparatively – my infrastructure’s in a lot better shape than America’s.

Just as the human body hangs on a strong skeletal muscular core – the USA’s economy hangs on a strong infrastructure.

That’s a problem.

Infrastructure Drives Productivity

Every hour each individual worker wastes commuting on overcrowded highways reduce our economic productivity decreases and pollution increases in our atmosphere.

An antiquated passenger and freight railway system delivers products to market too slowly at too high a price and serves too few passengers in a small number of commuter corridors.

Our international airports are the first impression we make on foreign tourists and foreign business people – seeking to do business in the United States. Too often – even in Washington, New York and Los Angeles – our airports look less like the gateway to the world’s largest economy and more like the bus station in the 1969 movie Midnight Cowboy.

When portions of our electric grid fail, commerce stops. The national economy shrinks.

Drought and floods both result in costly economic dislocation.

Infrastructure is a Big Capital Expense

We know that our electrical grid, water storage and transport systems are at risk of attack from saboteurs and/or hackers.

There is no effective urban evacuation plan in earthquake prone California. Our road system is inadequate, at risk of failing in a major earthquake and not a reliable corridor of escape.

Baton Rouge flooded for lack of a by-pass canal.

But no one is doing anything to solve the problem

Why? It costs money.

America Needs an Infrastructure Bank

It is time to charter a USA Infrastructure Bank with sufficient capital to meet the estimated demand.

The bank would use its capital to make loans to Federal Highway System, states, localities, airports, Amtrak, and publicly owned utility providers to fund infrastructure refurbishment and upgrades.

The loans would be repaid from taxes, bonds issued by government entities and service fees paid by users.

Hillary Clinton has proposed such a bank as part of her Presidential campaign. Three bills were introduced in Congress in 2015 but never made it out of committee.

These proposals would charter the bank as a WHOLLY OWNED GOVERNMENT CORPORATION.

The problem is we already have one and know the consequences.

The US Post Office is a wholly owned government corporation!

An Economic Shot-in-the-Arm

Rebuilding, modernizing and securing our infrastructure would give the US economy a huge boost.

The American Association of Civil Engineers estimates that needed infrastructure upgrades could add up to $3 trillion by 2020:

  • Create millions of new “skilled jobs” with good wages.
  • Boost productivity by speeding people and goods to market at a lower costs
  • Encourage innovation, creativity and entrepreneurship – leading to new industries and new global opportunities
  • Increase our national security and protect the homeland.

Who is going to pay for it without adding to the National Debt?

Let’s Make a Deal with Big Business

The Treasury estimates that US multi-national corporations are holding approximately $2.3 trillion in profits off-shore to avoid the world’s highest business tax rate.

Repatriating these profits could generate as much as $8 trillion in U.S. domestic economic activity.

This economic elixir is going to remain off-shore as long as the US Treasury demands 35 percent tax-off-the-top.

Why not offer these tax payers a deal they can’t refuse — one-time tax of 15 percent on only half of their off-shore profits in return for lending the other half to the newly chartered USA Infrastructure Bank for a fixed period of time?

To protect their “investments” the corporations (for example Apple, Google, Facebook, Merck, etc.) would be granted the majority of seats on the new bank’s Board of Directors — in ratio to their contribution.

  • The corporations would receive interest on their “investment” in the bank.
  • The corporations could use the money exactly as they do today – collateral for bank borrowing to finance operations.
  • “Investment” would be returned to the corporations after a specified period of time.

Don’t Upgrade — Innovate

Instead of replacing 20th century structures and systems with more “modern” facilities, a Board dominated by the most innovative business leaders in the world would move to capitalize opportunities currently in the design and development stage: Innovative thinkers will anticipate the future — asking questions that lead to a merger of 21st and 22nd century infrastructure.

  • How will driverless cars change the way we drive and build roads?
  • Should we invest in building high speed railways or jump to Hyperloop connections between major cities?
  • Can we turn oceans into environmental friendly sources of water and electricity versus building more reservoirs?

This kind of thinking increases the chances of making major technological breakthroughs exponentially. Innovation can create new global commercial opportunities for American entrepreneurs!

A partnership between business and government can demonstrate to politicians and bureaucrats the value of thinking strategically rather than tactically — the first step toward the 21st century American citizens want and deserve.

What does the USA have to lose?

Mexico

We Can Fix the Mess NAFTA Created for US/Mexico Trade

The Canada and USA Bi-lateral Free Trade Agreement was implemented in 1990.

At that time I was the Program Manager for a global logistics re-engineering effort at Unisys. This was a first-of-its kind Logistics System (people, process and enabling technology) seamlessly integrating manufacturing plants and distribution centers located in five countries – including the United States and Canada – on three continents.

The system tied every component (by “country of origin”) plus all labor added at every level of the manufacturing process directly to the unique (serial numbered) computer peripheral finished product.

The granular ability to track parts and tie them, across the global supply chain, to the individual worker who had handled them led to an agreement with the US Customs Service to provide entry documents electronically to the US Customs Service for pre- approval.

The team quickly created electronic entry documents to satisfy the new Canadian customs requirements – making Unisys an early beneficiary of the agreement.

After some initial hesitance by the Canadian people – who feared becoming a defacto 51st state – free trade between the USA and Canada has worked very well — accelerating negotiations for a tri-lateral North American Free Trade Agreement (NAFTA) — signed into law by Bill Clinton in 1993.

Why the Assumptions of NAFTA Failed at our Southern Border

NAFTA has not worked as well with Mexico. During negotiations, many acknowledged the challenges of integrating two “developed” economies with a third that was still “developing”. But negotiators underestimated those challenges.

The US government expected that free trade would expand economic opportunity in Mexico. Expanded opportunity, they argued, would reduce the flow of illegal immigrants seeking employment in the United States.

The hopes for a broader improvement in the economic lives of “average” Mexicans have not been realized.

NAFTA and US Jobs

Trade between the United States and Mexico grew exponentially under NAFTA. But as more raw materials moved south to be returned as manufactured goods — the historic USA trade surplus became a persistent 25% trade deficit. https://www.census.gov/foreign-trade/statistics/highlights/topcurmon.html

The deficit will continue to grow as Mexico aggressively imports American manufacturing jobs. http://www.reimagineamerica.org/saving-us-economy-starts-now-keep-oreo-cookies-in-chicago/

But not all job-shifting by US manufacturers to Mexico is negative for American workers.

The “cross border supply chain” has the potential to strengthen employment across North America.

The Ford Solution

Made-in-America is central to Ford Motor’s brand strategy.

When they announced the development of a 2018 manufacturing line in Mexico to build low margin Ford Focus hybrids – they simultaneously announced the existing Michigan plant will be upgraded to produce high priced SUVs and trucks.

The $8/hr jobs go to Mexico to preserve and increase $60/hr jobs in Michigan.

Bombardier – the Canadian airplane manufacturer makes a similar argument — its Mexican fuselage plant results in increased employment in the United States and Canada. http://www.economist.com/news/briefing/21592631-two-decades-ago-north-american-free-trade-agreement-got-flying-start-then-it

US/Canadian Free Trade Suggests a Template

Auto manufacturing on both sides of our northern border increased as a result of liberalized Direct Foreign Investment (FDI) regulations in Canada.

It created a flourishing cross border consumer economy with Canadian “day trippers” flocking to US shopping centers to buy attractively priced merchandise.

The US market for Canadian energy products and precious metals increased as a result of lower costs and ease of transport.

Hollywood studios have taken advantage of the lower production costs in Canada to develop significant satellite operations without fear of intellectual piracy.

USA/Canadian imports and exports tend to balance each other out – resulting in real GDP growth in both countries.

Canada is, also, our most reliable ally. https://www.washingtonpost.com/news/checkpoint/wp/2015/03/11/canadas-highway-of-heroes-the-patriotic-tradition-lives-on-after-afghanistan/

Building a Beneficial US/Mexico Relationship

A mutually beneficial trade relationship with Mexico is entirely possible – a relationship that looks more like our Canadian trading relationship.

More manufacturing jobs are an opportunity to expand the Mexican middle class but not all of those jobs have to come at the expense of American workers.

Rising factory wages in China create an opportunity for Mexico to compete globally to manufacture products destined for North American consumers.

To capitalize on this opportunity, Mexico must rapidly improve public education. The US can help through the Peace Corps, Teach America and other non-governmental organizations.

Build a more Efficient Cross Border Supply Chain

Further, strengthening the North American supply chain so that raw materials, sub-assemblies, and finished goods can move smoothly, safely, rapidly and legally across our southern border will require better highway and rail transport from the Mexican interior.

Joint investment in developing infrastructure – through the Inter-American Development Bank and cross border investment (http://www.marketwatch.com/story/warren-buffett-and-bill-gates-like-railroads-and-you-should-too-2015-09-17) — will create skilled and unskilled labor jobs in Mexico – drawing more economic migrants back to Mexico from the US while growing GDP on both sides of the border.

Renegotiate NAFTA

Growing trilateral GDP was the impetus behind NAFTA. It remains the objective, but the agreement has to be renegotiated with assumptions based on reality.

What is important is to grow the middle class throughout North America. This is not a zero sum game!

The United States and Canada can help accelerate Mexico’s economic development but Mexico must take the first step by cleansing itself of rampant internal corruption.

In addition to demands for better schools, the emerging middle Mexican middle class will demand effective public safety and better social services. NAFTA negotiators must support these demands.

Further, they must link renegotiation to forceful actions by the Mexican government to deal with international drug smuggling and human trafficking.

Nothing undermines NAFTA more than the volatile southern border that has existed since General Pershing chased Poncho Villa back across Rio Grande in 1916!

Made In China

China versus USA: Piracy on the High Seas of International Trade

While Thomas Jefferson was negotiating with France over the Louisiana Purchase, pirates operating out of Tripoli (now Libya) were menacing American mercantile ships in the Mediterranean – imprisoning and ransoming crews — and impeding the expansion of American trading relationships with Southern Europe.

Expanding global trade was imperative to the survival of the Republic.

In their book Thomas Jefferson and The Tripoli Pirates, authors Brian Kilmeade and Don Yaeger offer an engaging account of America’s first response to piracy on the high seas.

President Jefferson sent the US Navy and Marines.

Supported by Congress, Jefferson took major risks — ranging from the bombardment of Tripoli to the Trade Embargo of 1807 — to establish the RIGHT of American merchants to trade anywhere at any time without fear of assault by pirates or the British Navy. https://www.monticello.org/site/research-and-collections/embargo-1807

USA Founded on Principle of Trading Freely

Profitable trade has driven American economic development since the first European settlements.

For the next +/- 150 years, the colonies traded abundant natural resources (animal furs, lumber and fish) and commercial agricultural products (cotton, tobacco, molasses, sugar) for manufactured products and luxury goods (silk, tea).

More than 20 percent of North American trade was carried by ships built and owned by colonial merchants by 1773 — when the Boston Tea Party previewed the coming rebellion.

The British government should have taken note.

The seeds of the American Revolution were spread in reaction to British trading policies these merchants considered oppressive and confiscatory.

The British East India Company imported tea from China and sold it in the colonies — forbidding colonial merchants to engage in direct trade with China.

Not long after the Revolution the Stars and Stripes flew over the Canton, China harbor.

Our early trade with China was lopsided, corrupt, and tightly constrained by the Chinese Emperor — not very different from our trade with China today.

How China Plays by Different Rules

Since World War II, American trade policy’s been built on the assumption that strong trading relationships lead to strong friendships, a “level playing field” for expanding trade, and a strengthening global middle class.

A middle class opposed to war and eager to buy American manufactured and agricultural products.

China and the United States resumed trading after a thawing of relations during the 1970s.

Rather than level the playing field – American concessions as acts of “friendship” — tariff reductions — cost jobs.

But there’s no reciprocity from China. America imports 91 percent more from China than it exports to China.

China’s emerging middle class has shown a willingness to pay for quality American made goods but their government continues to protect Chinese businesses from foreign competition.

China’s global power house factory system was built on what the World Trade Organization often finds to be unfair trading practices: erecting barriers to some products  and “dumping” others.

Apple Inc. Suffers Chinese Trade Piracy

For example, CEO Tim Cook argues Apple cannot manufacture iPhones in the United States because wages for Tool and Die Makers would add 40% to the cost of iPhone.

The facts are different. The manufacturing cost difference would be about $2.50 for every $700 retail phone

The real reason – China requires products sold in China to be made in China.

China is Apple’s largest iPhone market.

But acquiescence has not protected Apple from Chinese trade piracy.

Just last week, Chinese Courts ruled that a Chinese (defendant) firm can manufacture and sell worldwide goods stamped with the iPHONE logo and the internationally recognized registered trademark symbol (“R”) without a license from (compensating) Apple. http://www.bbc.com/news/business-36200481

Counterfeiting goods is big business in China.

It is government sanctioned 21st century piracy!!

The Real Reason Behind our Murky Relations

With such an abysmal record on trade, why is China is still a “most favored nation”?

Why are China’s military provocations in South China Sea, cyber assaults on our government agencies and overt military spying met with pronouncements of concern rather than actions of real consequence?

Easy: China holds nearly $2 Trillion – 1/3 of the total US Debt in foreign hands.

We Must Retool Our Assumptions about China

President Obama and his successor – whoever she or he may be – must make clear to China bilateral trading relationships and genuine friendships are not necessarily the same thing.

We trade with nations we do not consider friends – for example Vietnam or Russia.

BUT – we do favors – eliminate tariff barriers – only for our friends.

The United States economy – troubled as it is – is still the largest economy in the world. (http://www.investopedia.com/articles/investing/022415/worlds-top-10-economies.asp)

If China doesn’t sell their goods to the United States who will buy them?

If China does not buy US Treasuries where will they safely invest their dollars?

We have economic leverage. Chinese outrages have stirred the administration but quick, bold trade renegotiation is required.

China should have no doubt we remain committed to eliminating any and all piracy.

Tulips

Saving US Economy Starts Now: Keep Oreo Cookies in Chicago

The first item I selected at the grocery store last night was a bunch of fresh tulips with a banner “Grown in California”.

As I was preparing dinner, I turned on the ABC Nightly News. David Muir reported from the newly renovated Renaissance Hotel at Times Square that Marriott Hotel brands were all switching their guest room towels from imports to “MADE IN AMERICA” – without adding a penny of cost to Marriott hotel operations.

Consumers Drive Job Creation

My tulip purchase helped to make and maintain a job for a Californian.

Marriott Hotels’ towel decision has created 150 manufacturing jobs in Georgia.

Those manufacturing jobs will create additional opportunities from cotton farmers to the local diner.

Marriott Hotels’ action is not just good for American workers – it’s classic American marketing. They’ve created a differentiator.

A differentiator is anything that will separate Marriott from the competition– i.e. will cause the consumer to pause — give their offering a second look.

Guests will tell their friends how good they felt wrapping themselves in Made-in-America towels at a Marriott property.

That good feeling — backed up with an effective advertising and free media campaign will garner Marriott brands additional customers this vacation season. http://www.themadeinamericamovement.com/manufacturing/towels-us-marriott-hotels-made-in-usa/

The more effective the strategy is for Marriott, the more quickly their competitors will “catch the wave” of Made in America towels.

Every Presidential Candidate Promises Jobs

According to recent polls, the number one issue in the 2016 Presidential Election is THE ECONOMY.

Every candidate is promising to produce jobs – lots of jobs.

But none of them have explained how they are going to do it.

Maybe we should elect David Muir? Unlike all the leading Presidential candidates, he understands that a dynamic economy is a balance of consumption and production!

The American economy grows, generates real new Gross Domestic Product (GDP) when it creates a demand for American made goods instead of imports. pace at which the economy grows is determined by how fast those dollar bills change hands between producers and consumers within the circle of the US economy.

When consumer goods are imported into the United States rather than manufactured in America, the American economy shrinks because dollars exchange hands between consumers in the United States and producers in other countries.

In Short: Importing consumer goods exports American jobs, wages and consumer dollars.

The Result is a Slowing US Economy

Demand makes economies grow.

In the years after the Second World War Mississippi enjoyed a flourishing textile industry. They grew cotton and turned it into textiles and clothing that we all bought.

In the 1980s and 1990s textile manufacturing jobs in Mississippi began a steady migration to China and other “developing” countries – where wages were lower.

The Congressional Research Service estimates that by 2005 three quarters of the nation’s textile and clothing jobs had been off-shored.

In Mississippi, riverboat gambling became the replacement industry. “Service sector” jobs – waiters, maids, and croupiers – command much lower wages than more highly skilled manufacturing jobs.

Less clothing manufacturing meant less demand for Mississippi cotton. Cotton farmers earn less and employ fewer workers to grow, harvest and gin the cotton.

The result: Fewer jobs, lower paying jobs and reduced profits — a reduction in national consumer demand for “Made-in- Mississippi” — weakened the Mississippi economy.

Mississippi has the highest poverty rate in the United States – with more than 20 percent of their population living below the poverty line.

In 2016 – Plug the Job Leak

Stop the bleeding!

Between 1998 and 2013 fully one third of the manufacturing jobs in the United States disappeared. This extraordinary job loss is magnified by the fact that the US population grew by twelve percent in the same period – widening the gap between good paying jobs and available workers.

Some of the job losses are due to innovation and obsolesce but most can be traced directly to the export of American jobs.

The pattern is continuing in 2015.

Nabisco announced that it is sending 600 unionized jobs from Chicago to Mexico to save $46 million dollars in “costs”.

Bring Oreo Cookies Back to Chicago

The sisterhood of American moms and grandmothers can stop this outrage by refusing to buy the product.

The most powerful weapon Americans possess against job loss is purchasing power.

Just like the union workers who are being shelved by Nabisco – all of us can “go on strike” – boycott Oreos made in Mexico!

I want my grandkid’s Oreos baked by a profit-sharing baker in Chicago.

I’ll pay a little more for bedding manufactured by a profit-sharing seamstress in Vicksburg, Mississippi.

It is a mystery to me that Presidential candidates don’t point to the relationship between “buy American” and “growing” American jobs?

Someone get Hillary and Donald a plate of Chicago baked Oreos!

education

Every American Worker Needs a Better 4th Grade Education

It’s hard to impress my 12 year old granddaughter, Alyssa.

We were Easter basket shopping and while we were standing in the checkout line, I was pulling out the cash to pay for our purchase – down to penny.

“Wow, how did you do that?” Alyssa asked, surprised that I could do the math in my head.

I explained I had added the price of the two items she and her sister had picked out and then multiplied the total by 9.25 percent (our sales tax rate) and rounded to the next highest penny.

“In your head?”

“There were no hand held calculators when I went to school.” I replied. “You couldn’t pass 4th grade if you didn’t know your times tables – backwards and forwards”.

It’s Not 1970!

In 1970 a high school diploma implied that the graduate had mastered basic arithmetic, could read and write a coherent paragraph demonstrating comprehension of what they’d read and possessed some knowledge of basic science.

Maybe not enough to be admitted to Harvard or UC Berkeley but certainly enough to begin to build a middle class life – an auto mechanic, building trades apprentice, chef, miner, farmer, police officer, fireman, US military member or factory worker.

Fast forward to 2016 and you’ll find fewer manufacturing jobs available to new high school graduates, but there are still hundreds of careers that can be built on a 1970s high school education including new careers like network administrator or computer programmer — jobs that pay +/- $70K or more a year – after only about a year of technical training.

The problem is that a high school diploma in 2016 does not require the same mastery of basic math, English, science and civics as it did in 1970.

Over the past half century a high school diploma has morphed from a measure of accomplishment to an entitlement earned by not disrupting the classroom.

The ACT College Testing Service statistics on college readiness are staggering. Just 25% of entering freshmen are ready to do college level mathematics and 50 percent are ready to do college level English.

When I was a freshman at UC Berkeley, the very few freshmen who failed their English, math or foreign language placement exams snuck out of the dorms at 7:30 AM to take their “walk of shame” to 8 AM remedial classes! Today there’s no sneaking around – it’s half the entering class!

Internationally American 15 year olds ranked 27th in math and 20th in science in 2012 — 50 points less than their peers in Hong Kong in both these vital areas.

The Best Education is Cumulative

A child who enters kindergarten not speaking English is immediately at risk of not succeeding in school, not graduating from high school and never achieving a middle class standard of living.

In California, for example, 42 percent kindergartners come from homes were no English is spoken.  Governor Brown estimates 38 percent of Californians work at low or minimum wage jobs. There’s a relationship!

Raising the minimum wage is not the solution.

We’ve got to fix our K to 12 education system.

True the percentage of high school graduates going directly to college has increased from 50 percent in 1970 to 69 percent in 2014.

But that statistical improvement results from a growing number of students – more boys than girls — dropping out of high school before graduation. Their teachers have taught since kindergarten that high school graduation is nothing more than a ticket to college. Once a student concludes college is out of reach – it is easy to decide to drop out and get a (minimum wage) job now.

A College Degree Isn’t Everything

The education establishment — and the politicians they support with their union dues — must abandon the subtle bigotry that assumes people who don’t have a college degree are “uneducated”.

If these people are “uneducated” – the education establishment should ask themselves — whose fault is it?

In the 21st century, technology will shrink the number of lawyers, for example, the economy needs far more drastically than it will shrink the demand for plumbers and mechanics.

A plumber still needs a good apprenticeship not a college degree.

During the next half century, technology will create tens of thousands of jobs we haven’t thought of yet.

The challenge for educators from the kindergarten classroom to Washington is to graduate every single high school student with a “1970s high school diploma”.

Basic math, English, science and civics skills are analogous to the foundation of a house. Just as different house styles can be built (and later remodeled) on a strong foundation the 21st century worker can train and retrain for several careers over their work life based on a solid high school academic foundation.

Technology can enhance these basic skills but can’t replace learning how to “do the work” to get the answer.

Teachers, themselves, need to embrace the 21st century reality – learning and adapting are the life blood of an economy of opportunity.

Learning needs to last a lifetime but K to 12 is still the indispensible foundation.

Photo Credit: Shutterstock

Cat

There’s No Such Thing as a Free College Education

While I was serving as the Strategic Staffing Manager at Intel Corporation, I had a mentor who was the Human Resource Manager for another large company.

Every time I stepped into his office I was confronted by a cardboard cutout of a kitten.

The kitten was crouched over a bowl of milk. The caption read “there is no such thing as a free lunch”.

When any Presidential candidate promises you something “free” in exchange for your vote, you need to ask yourself: “how much am I willing to pay for it in perpetuity – both in taxes and in diminished opportunity?”

Free Tuition Just Shifts the Burden

“A free college education for every student at every public college or university in America” is as likely as being swept up in a tornado, landing on your head still holding your dog, and living to tell about it – i.e. assuming the Wizard of OZ is a true story!

It is campaign fairy dust. Even Hillary Clinton agreed during the Wisconsin Democratic Debate Hillary Clinton.

The National Center for Public Policy and Higher Education recently published an e-book, American Higher Education: Journalistic and Policy, that documents how our states are already struggling to maintain their quality higher education programs.

Our top ranked universities are already under continuing stress: Universities of California, Oregon, Washington, Pennsylvania, and New York train a significant number of our doctors, lawyers, scientists and entrepreneurs.

What happens to these economically essential programs when funds are diverted to an open-ended commitment to undergraduate tuition?

State budgets are funded by taxes – principally income taxes, small business taxes, and real estate taxes.

As state tax revenues tumbled following the 2008 recession and states scrambled to balance their budgets, their public college budgets contracted proportionately.

The recovery, beginning in 2010, has not produced enough revenue to restore most of the drastic cuts.

The University of California, as an example, gets about 40% of its funding from state general tax revenues – the rest from federal government and private research grants, endowments, and student tuition and fees.

Undergraduate, in-state tuition has risen from around $7500 in 2005 to more than $12,000 for the current academic year.

Increased tuition has resulted in an explosion of student loan debt – easy to incur and very hard to repay.

The promise of “free tuition” has obvious appeal for both students and their parents, but is it sound policy?

“Free Tuition” Puts the Tax Burden on College Graduates

Bernie Sander’s free tuition plan is estimated to Sanders Plan cost $100 Billion in the first year of full implementation.

The plan would be funded by a $75 Billion a year tax on Wall Street. To pay the tax, Wall Street would increase fees on the investment tools used by large and small investors alike.

Taxing investment instruments reduces the amount of investment capital available for business formation and expansion around the country. The result would be a contraction of the economy and the creation of fewer new jobs.

Most small investors are parents or grandparents of college kids – or someday will be. The new fees will be added to the income and capital gains taxes these investors already pay. That will reduce the after tax income of retirees, for example.

Mr. Sanders would fund the balance of his plan through increased state taxes – raising taxes on small investors still further.

Students will begin to “pay forward” their “free tuition” in the form of higher taxes from their very first pay check until they die.

Public Colleges Need Incentives to Modernize

The objective of “free tuition” is laudable. A more realistic approach is to make college more affordable by driving down costs and embracing innovation.

Colleges and universities need to join the new America. They’ve got to learn to do more with less!

What if public colleges switched from negotiating reductions in faculty compensation and retirement benefits, and put more emphasis on faculty teaching hours.

If each professor taught 10 hours a week rather than 6 – a third more students could be accommodated at nearly the same cost.

Some studies estimate that as many as 70 percent of entering freshmen are not “college ready”.

What if colleges required freshmen to take and pass remedial courses over the Internet before arriving on campus?

Students – on average – would save a year of tuition and campus living expenses. Colleges would save staff and classroom space.

Millions upon millions of dollars are spent on college athletics.

What if the professional sports leagues that depend on college athletic departments as their “farm team” – paid for the management and maintenance of these athletic programs?

Student athletes would still get funding they need to underwrite their education.

Students and alumni would still participate in the rituals of college athletics.

They’d cheer proceeds from ticket sales, gear, and television rights going to reduce the cost of every student’s education.

And isn’t that the objective after all?

The tuition burden on students will start to decrease as soon as colleges and universities step up to the plate and focus on reducing their internal operating costs.

PHOTO CREDIT: Berkeley Lab