This week, economists warn about the fallout of defaulting on US debts, the Biden Administration reframes US-China economic rhetoric, M1A1 Abrams tanks arrive in Germany to train Ukrainian forces, and General Paul Nakasone may soon step down from his role leading the NSA and USCYBERCOM.

Industrial Policy & International Security

US debt ceiling debacle adds to economists’ fears of turmoil | Financial Times

The United States is nearing its debt ceiling, but Democrats and Republicans have not been able to agree on raising the $31.4 trillion limit. Interim measures to bypass the restriction will expire on June 1st. Whether the US government decides to default on payments or spend in defiance of the ceiling, it faces political, financial, and economic turmoil. The US faced a similar challenge in 2011 and though a resolution was ultimately reached, government debt was downgraded from a AAA rating, which caused stock prices to plummet by more than 5 percent in one day. Experts caution that a US default, even if it is corrected quickly, may result in up to two million jobs lost and a sharp recession comparable to the global financial crisis over a decade ago. Although the consequences of failing to raise the debt limit are hard to accurately predict, Fed chair Jay Powell noted during a press conference that they “could be quite high.”

Biden administration tamps down talk of US-China decoupling | Bloomberg

Biden administration officials are reassuring US allies and businesses that the government is not pursuing a long-term decoupling of the US and Chinese economies. Speeches by national security advisor Jake Sullivan and Treasury Secretary Janet Yellen adopted new language to  dispel misconceptions of US policy. In a recent speech at the Brookings Institution, Sullivan clarified that “we are for de-risking and diversifying, not decoupling.” Former National Security Council official Jennifer Harris commented that the Biden administration is defining a more sustainable status quo that more effectively manages the costs of globalization. Technology restrictions like the recent limits on China’s access to semiconductors are expected to continue but not bleed outside the bounds of national security. However, it will take more than a change of tone to convince allies and businesses that the US is not pursuing economic nationalism. Regardless, Beijing perceives that the US is leading a “comprehensive containment” strategy against China. US allies prefer a pragmatic approach to China but, going into the 2024 US presidential election, Republicans may paint any engagement as Biden being soft on China. 

US Abrams tanks for training Ukrainian forces arrive in Germany ahead of schedule | AP

Thirty-one M1A1 Abrams tanks designated to train Ukrainian forces arrived at the Grafenwoehr Army base in Germany ahead of schedule. Training will begin in a few weeks. Defense Secretary Lloyd Austin told the US Senate Appropriations defense subcommittee that it will last approximately ten weeks, at which time the Abrams tanks designated for Ukraine will be built to their military’s specifications and ready to deploy in theater. This training period follows months of combat instruction including how to use Stryker and Bradley fighting vehicles and the M109 Paladin, a self-propelled howitzer gun. Senator Susan Collins emphasized to Secretary Austin and General Mark Milley, chairman of the Joint Chiefs of Staff, that concerns about the budget should not hold them back from sending more weapons to Ukraine. And Senator Lindsay Graham warned that Beijing is closely observing the war in Ukraine and a Russian victory may impact the country’s decision-making about a move to take Taiwan.  

US Regulation

AI needs superintelligent regulation | Financial Times

Financial Times authors argue that timely government regulation of AI is crucial to manage the growing misuse of AI technology in areas like discrimination, disinformation, and fraud. As a stop-gap, they argue that regulators adjust existing rules to address AI-specific risks; tech companies implement shared principles on transparency, accountability, and fairness; and government organizations and universities improve their technological acumen to reduce the risk of tech transfer. The authors also propose that governments adopt one of two possible regulatory regimes to manage long-term risks: 1) a precautionary model that requires pre approval of algorithms in critical fields such as healthcare, the judicial system, and the military, similar in operation to the US Food and Drug Administration; or 2) a “governance by accident” model that grants authority to the government to mandate changes in response to a fault, similar to the operation of international aviation authorities. While some leading technologists have argued to pause AI development, the forfeited advancements are not worth the risk when ethical and safety gains are better guaranteed by government-led regulation.


A satellite-cellular merger could be the next revolutionary tech innovation | The Hill

New partnerships between satellite operators, smartphone manufacturers, cellcom carriers, and entrepreneurs will allow smartphones to communicate through a satellite. This development has contributed to the Federal Communications Commission’s (FCC) decision to launch an initiative to merge satellite and cellular communications, which is significant because the two technologies have been subject to completely separate regulatory environments for decades. Advances in microchip technologies have dramatically changed the technology and economics of cellular and satellite communications—the latter also becoming more affordable due to innovations in rocketry and satellite design. However, integration of the two technologies will be difficult because satellite communications have international and national security implications. Initial partnerships aim to provide smartphone uses with access to emergency services via satellite but, over time, integration could redefine how consumers engage in any online activity.


NSA Chief Paul Nakasone has said he expects to step down in coming months | The Wall Street Journal

Government officials expect General Paul Nakasone, director of the National Security Agency (NSA), to step down from his position leading the spy agency and US Cyber Command in the coming months. After five years of service in this role, it is unclear whether he will rotate to another position or retire; a spokesman for the NSA declined to comment on personnel matters. The timeline of this expected change in leadership is unclear and could be affected by the departure of NSA Deputy George Barnes, who is also expected to retire soon. The short list of candidates for the dual-hatted leadership position include Air Force Lieutenant General Tim Haugh, deputy chief of Cyber Command, Rob Joyce, director of cybersecurity at NSA, and Anne Neuberger, deputy national security advisor for cybersecurity and emerging technology. Secretary of Defense Lloyd Austin listed the role as “due to rotate within the next 120 days.” However, Senator Tommy Tuberville’s blockade of senior military promotions that require Senate approval could delay the appointment of a new chief of NSA and Cyber Command. 

State & Local Tech Ecosystems

Regional innovation hubs: engines of economic dynamism or wolves in sheep’s clothing? | Forbes

James Broughel, an economist and Senior Fellow at the Competitive Enterprise Institute, argues that government-led development of regional innovation hubs may pose more harm than good. The history of similar efforts to foster economic growth includes few successes. Broughel believes this is because bureaucrats do not have the incentives or the tools to pick winners and can be swayed by special interest groups. As a result, taxpayer dollars are wasted for little return. While the losses are socialized, the near-term benefits of these efforts to spark innovation are privatized, further skewing incentives. The CHIPS Act has appropriated $500 million to ignite regional tech hubs and is currently accepting proposals for how to distribute funds. Broughel advises that the best chance for viable innovation hubs depends on keeping political issues separate from funding decisions and giving taxpayers a greater stake in the potential rewards. He points out that the risk and reward of past government success stories, like DARPA and Operation Warp Speed, were shared by the same people. 

Democracy Online

Disinformation Is Not the Real Problem With Democracy | The New York Times

Opinion columnist Jamelle Bouie shares his thoughts on journalism and democracy ahead of an upcoming talk he is giving on the same subject. He argues that the current issues of misinformation, disinformation, and partisan news are not a new phenomenon but a return to an often unreliable information environment common until World War II. Bouie references the observations of Alexis de Tocqueville that the free press conceptualizes a community back to itself; without the press, common action would be much rarer. The decline of local and regional news outlets today may therefore be a stronger contributor than false information to the weakening of democratic institutions and the public's trust in democracy. As a result of this decline, he says Americans lack the necessary information to participate in the political process in their communities. Wider trends reflect lower voter turnout in state and local elections and political disengagement. Bouie suggests that the lack of institutions linking political awareness to something more local may be driving the total devolution of politics into entertainment. 

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