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  • Watchdog agency increases its pandemic unemployment benefits fraud estimate to as much as $135 billion | CNN Politics

    Watchdog agency increases its pandemic unemployment benefits fraud estimate to as much as $135 billion | CNN Politics

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    Washington
    CNN
     — 

    As much as $135 billion in fraudulent Covid-19 pandemic unemployment insurance claims were likely paid out, according to a report released Tuesday by the US Government Accountability Office.

    The whopping figure, which equates to as much as 15% of total unemployment benefits distributed during the pandemic, is a notable bump up from the $60 billion the watchdog agency had previously estimated in January.

    In comments on a draft of the GAO report, the Department of Labor said the office is likely overestimating the actual amount of fraud. However, the department’s Office of Inspector General in February said in testimony before a House committee that at least $191 billion in pandemic unemployment benefits payments could have been improper, with “a significant portion attributable to fraud.”

    The GAO pushed back on the department’s assertions in its report and stood by the methodology used.

    “Given that not all potential fraud will be investigated and adjudicated through judicial or other systems, the full extent of UI fraud during the pandemic will likely never be known with certainty,” the GAO report said. “Therefore, it is appropriate to rely on estimates, such as ours, to make more comprehensive conclusions about the extent of fraud in the UI programs during the pandemic.”

    The findings released on Tuesday shed light on the numerous schemes to steal money from a range of hastily implemented pandemic relief programs, which have drawn the attention of congressional lawmakers and prompted legislative action. Last year, President Joe Biden signed two bipartisan bills into law aimed at holding individuals who commit fraud under pandemic relief programs accountable.

    “My message to those cheats out there is this: You can’t hide. We’re going to find you. We’re going to make you pay back what you stole and hold you accountable under the law,” the president said at the time.

    The House of Representatives also passed a bill in May that would help recover fraudulent unemployment insurance benefits paid out during the pandemic. The bill, however, has not been brought to a vote in the Senate.

    Fraud within the nation’s unemployment system skyrocketed after Congress enacted a historic expansion of the program in March 2020. State unemployment agencies were overwhelmed with record numbers of claims and relaxed some requirements in an effort to get the money out the door quickly to those who had lost their jobs.

    But the enhanced payments and lax controls quickly attracted criminals from around the world. States and Congress subsequently tightened their verification requirements in an attempt to combat the fraud, particularly in the Pandemic Unemployment Assistance program, which allowed freelancers, gig workers and others to collect benefits for the first time.

    More than $888 billion in federal and state unemployment benefits were paid from the end of March 2020 through early September 2021, when all the pandemic enhancements ended nationwide, according to the Labor Department Office of Inspector General.

    The GAO report said the “unprecedented demand for benefits and need to quickly implement the new programs increased the risk of fraud.”

    Other pandemic relief programs were also the target of criminals. The GAO in May flagged 3.7 million recipients of Small Business Administration funds as having “warning signs consistent with potential fraud.” The SBA doled out $1 trillion to help small businesses during the pandemic through measures including the Paycheck Protection Program and Covid-19 Economic Injury Disaster Loan program. More than 10 million small businesses were assisted.

    Some of the fraudulent claims have been recouped. States identified $5.3 billion in fraudulent unemployment benefits overpayments and has recovered $1.2 billion, according to the GAO.

    A Justice Department spokesperson told CNN on Tuesday that as of August 30, the department has charged more than 3,000 people for pandemic related fraud.

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  • Elon Musk should be forced to testify on X’s ‘chaotic environment,’ US regulator tells court | CNN Business

    Elon Musk should be forced to testify on X’s ‘chaotic environment,’ US regulator tells court | CNN Business

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    Washington
    CNN
     — 

    Elon Musk should be forced to testify in an expansive US government probe of X, the company formerly known as Twitter, the US government said.

    The government said mass layoffs and other decisions Musk made raised questions about X’s ability to comply with the law and to protect users’ privacy.

    The US government’s attempt to compel Musk’s testimony is the latest turn in an investigation that predates Musk’s acquisition of X that has intensified due to Musk’s own actions, according to a court filing by the Justice Department on behalf of the Federal Trade Commission.

    The court filing dated Monday cites depositions with multiple former X executives, including its former chief information security officer and former chief privacy officer, who testified that a barrage of layoffs and resignations following Musk’s $44 billion takeover may have hindered X from meeting its security obligations under a 2011 FTC consent agreement.

    Twitter and its outside attorney didn’t immediately respond to a request for comment.

    According to testimony cited in the filing, there were so few employees left after the departures that anywhere from 37% to 50% of the company’s security program lacked effective management and oversight, with no one available to take responsibility for those controls. Other planned upgrades to the company’s security program were “impaired,” the filing said, citing a deposition by the former chief information security officer, Lea Kissner.

    In another example, Musk personally tried to rush the rollout of Twitter Blue, the company’s paid subscription service, the filing said. That forced the company’s security team to bypass the required security and privacy checks that were a part of Twitter’s own policies and that had been mandated in the FTC order, according to the testimony of Damien Kieran, the former chief privacy officer.

    The filing also alleges that Musk’s move to grant several journalists access to internal company records — access that would culminate in the so-called Twitter Files claiming to show evidence of politically motivated censorship — initially involved a plan that could potentially have led to the exposure of private user data in violation of the FTC order.

    According to the filing, Musk’s plan originally called for providing access through a dedicated company laptop with “elevated privileges beyond just what a[n] average employee might have.”

    “Longtime information security employees intervened and implemented safeguards to mitigate the risks,” the filing said, but even then, the former employees testified, the process raised doubts about Musk’s commitment to privacy and security.

    X has moved to block Musk from being forced to testify and has asked a federal court to invalidate the entire FTC order requiring it to safeguard user privacy, accusing the FTC of asking too many questions in its probe.

    But in its filing, the US government said its interest in Musk’s testimony is well-justified based on the appearance of a “chaotic environment” at X driven by “sudden, radical changes at the company” following Musk’s acquisition.

    “The FTC had every reason to seek information about whether these developments signaled a lapse in X Corp.’s compliance” with the 2011 order, the filing said. Confirmed violations of the FTC order could lead to billions of dollars in fines for X, as well as potential legal ramifications for individual executives such as Musk if they are deemed personally responsible for them.

    The FTC investigation traces back to bombshell allegations — raised by Twitter’s former security chief Peiter “Mudge” Zatko and predating Musk’s acquisition — that for years Twitter has failed to live up to its legally binding commitments to the FTC to protect user privacy and security. Those allegations were first reported last year by CNN and The Washington Post.

    The investigation has proven politically charged as Musk — and his allies including Republicans on the House Judiciary Committee — have responded to the probe by publicly accusing the FTC of harassment and overreach.

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  • Fortnite players can now apply for a portion of its $245 million FTC settlement | CNN Business

    Fortnite players can now apply for a portion of its $245 million FTC settlement | CNN Business

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    New York
    CNN
     — 

    Millions of Fortnite users can now claim their small part of the $245 million that the game’s parent company agreed to pay as part of a settlement with the US Federal Trade Commission.

    Epic Games in December settled allegations with the FTC that it used deceptive tactics that drove users to make unwanted purchases in the multiplayer shooter game that became wildly popular with younger generations a few years ago. The FTC said Tuesday it has now opened the claims process for the more than 37 million potentially affected users who could qualify for compensation.

    Epic Games agreed in December to pay a total of $520 million to settle US government allegations that it misled millions of players, including children and teens, into making unintended purchases and that it violated a landmark federal children’s privacy law.

    In one settlement, Epic agreed to pay $275 million to the US government to resolve claims that it violated the Children’s Online Privacy Protection Act by gathering the personal information of kids under the age of 13 without first receiving their parents’ consent. In a second and separate settlement, Epic also agreed to pay $245 million as refunds to consumers who were allegedly harmed by user-interface design choices that the FTC claimed were deceptive.

    The FTC said in a statement Tuesday that the Fortnite maker “used dark patterns and other deceptive practices to trick players into making unwanted purchases” and also “made it easy for children to rack up charges without parental consent.”

    (“Dark patterns” refer to the gently coercive design tactics used by countless websites and apps that critics say are used to manipulate peoples’ digital behaviors.)

    The FTC is now notifying users who may be eligible to receive part of that $245 million settlement fund. Affected users may receive an email from the FTC over the next month with a claim number, or they can go directly to the settlement site and file a claim using their Epic account ID.

    Here’s who can apply: Users who were charged in-game currency for items they didn’t want between January 2017 and September 2022, parents whose children made charges to their credit cards on Fortnite between January 2017 and November 2018 or users whose accounts were locked sometime between January 2017 and September 2022 after they complained to their credit card company about wrongful charges. Claimants must be 18 years old; for younger users, their parents can submit a claim on their behalf.

    Users have until January 17, 2024, to submit a claim to be included in the settlement class. It is not yet clear how much the individual settlement payments will be.

    Epic’s agreement with the FTC also prohibits the company from using dark patterns or charging consumers without their consent, and forbids Epic from locking players out of their accounts in response to users’ chargeback requests with credit card companies disputing unwanted charges.

    Epic said in a blog post in December when it reached the agreement that, “no developer creates a game with the intention of ending up here.” It added, “We accepted this agreement because we want Epic to be at the forefront of consumer protection and provide the best experience for our players.”

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  • Huawei wants to go all in on AI for the next decade | CNN Business

    Huawei wants to go all in on AI for the next decade | CNN Business

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    Editor’s Note: Sign up for CNN’s Meanwhile in China newsletter which explores what you need to know about the country’s rise and how it impacts the world.


    Hong Kong
    CNN
     — 

    Huawei has joined the list of companies that want to be all about artificial intelligence.

    For the first time in about 10 years, the Chinese tech and telecoms giant announced its new strategic direction on Wednesday, saying it would shift its focus to AI. Previously, the company had prioritized cloud computing and intellectual property, respectively, over two decade-long periods.

    Meng Wanzhou, Huawei’s rotating chairwoman and chief financial officer, made the announcement in Shanghai during a company event.

    “As artificial intelligence gains steam, and its impact on industry continues to grow, Huawei’s All Intelligence strategy is designed to help all industries make the most of new strategic opportunities,” the company said in a statement.

    Meng said in a speech that Huawei was “committed to building a solid computing backbone for China — and another option for the world.”

    “Our end goal is to help meet the diverse AI computing needs of different industries,” she added, without providing details.

    Huawei’s decision follows a similar move by fellow Chinese tech giant Alibaba (BABA), announced earlier this month, to prioritize AI.

    Other companies, such as Japan’s SoftBank, have also long declared an intent to focus more on the fast-moving technology, and more businesses have jumped on the bandwagon this year due to excitement about platforms such as GPT-4.

    Meng returned to China in September 2021 after spending nearly three years under house arrest in Canada as part of an extradition battle with the United States. She and Huawei had been charged for alleged bank fraud and evasion of economic sanctions against Iran.

    The executive, who is also the daughter of Huawei founder Ren Zhengfei, was able to leave after reaching an agreement with the US Department of Justice and ultimately having her charges dismissed.

    Meng began her role as the rotating chairperson of the company in April and is expected to stay in the position for six months.

    News of Huawei’s strategic update came the same day the company was mentioned in allegations lodged by China against the United States.

    In a statement posted Wednesday on Chinese social network WeChat, China’s Ministry of State Security accused Washington of infiltrating Huawei servers nearly 15 years ago.

    “With its powerful arsenal of cyberattacks, the United States intelligence services have carried out surveillance, theft of secrets and cyberattacks against many countries around the world, including China, in a variety of ways,” the ministry said.

    It alleged that the US National Security Agency (NSA), in particular, had “repeatedly conducted systematic and platform-based attacks on China in an attempt to steal China’s important data resources.”

    Huawei declined to comment on the allegations, while the NSA did not immediately respond to a request for comment outside regular US business hours.

    The claims are especially notable because US officials have long suspected the company of spying on the networks that its technology operates, using it as grounds to restrict trade with the company. Huawei has vehemently denied the claims, saying it operates independently of the Chinese government.

    In 2019, Huawei was added to the US “entity list,” which restricts exports to select organizations without a US government license. The following year, the US government expanded on those curbs by seeking to cut Huawei off from chip suppliers that use US technology.

    In recent weeks, Huawei has added to US-China tensions again after launching a new smartphone that represents an apparent technological breakthrough.

    Huawei launched the Mate 60 Pro, its latest flagship device, last month, prompting a US investigation. Analysts who have examined the phone have said it includes a 5G chip, suggesting Huawei may have found a way to overcome American export controls.

    — Mengchen Zhang contributed to this report.

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  • US government and 17 states sue Amazon in landmark monopoly case | CNN Business

    US government and 17 states sue Amazon in landmark monopoly case | CNN Business

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    CNN
     — 

    The US government and 17 states are suing Amazon in a landmark monopoly case reflecting years of allegations that the e-commerce giant abused its economic dominance and harmed fair competition.

    The groundbreaking lawsuit by the Federal Trade Commission and 17 attorneys general marks the US government’s sharpest attack yet against Amazon, a company that started off selling books on the internet but has since become known as “the everything store,” expanding into selling a vast range of consumer products, creating a globe-spanning logistics network and becoming a powerhouse in other technologies such as cloud computing.

    The complaint alleges Amazon unfairly promotes its own platform and services at the expense of third-party sellers who rely on the company’s e-commerce marketplace for distribution.

    For example, according to the FTC, Amazon has harmed competition by requiring sellers on its platform to purchase Amazon’s in-house logistics services in order to secure the best seller benefits, referred to as “Prime” eligibility. It also claims the company anticompetitively forces sellers to list their products on Amazon at the lowest prices anywhere on the web, instead of allowing sellers to offer their products at competing marketplaces for a lower price.

    That practice is already the subject of a separate lawsuit targeting Amazon filed by California’s attorney general last year.

    Because of Amazon’s dominance in e-commerce, sellers have little option but to accept Amazon’s terms, the FTC alleges, resulting in higher prices for consumers and a worse consumer experience. Amazon also ranks its own products in marketplace search results higher than those sold by third parties, the FTC said.

    Amazon is “squarely focused on preventing anyone else from gaining that same critical mass of customers,” FTC Chair Lina Khan told reporters Tuesday. “This complaint reflects the cutting edge and best thinking on how competition occurs in digital markets and, similarly, the tactics that Amazon has used to suffocate rivals, deprive them of oxygen, and really leave a stunted landscape in its wake.”

    The states involved in the case are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.

    The complaint was filed in the US District Court for the Western District of Washington, and seeks a court order blocking Amazon from engaging in the allegedly anticompetitive behavior. Khan declined to say Tuesday whether the agency will be seeking a breakup of the company, saying the case is currently focused on proving Amazon’s liability under federal antitrust law.

    The suit makes Amazon the third tech giant after Google and Meta to be hit with sweeping US government allegations that the company spent years violating federal antitrust laws, reflecting policymakers’ growing worldwide hostility toward Big Tech that intensified after 2016. The litigation could take years to play out. But just as Amazon founder Jeff Bezos and his spectacular wealth have inspired critics to draw comparisons to America’s Gilded Age, so may the FTC lawsuit come to symbolize a modern repeat of the antitrust crackdown of the early 20th century.

    In a release, Khan accused Amazon of using “punitive and coercive tactics” to preserve an illegal monopoly.

    “Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them,” Khan said. “Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”

    “Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition. The practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon’s store,”said David Zapolsky, Amazon’s Senior Vice President of Global Public policy and General Counsel. “If the FTC gets its way, the result would be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small businesses—the opposite of what antitrust law is designed to do. The lawsuit filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court.”

    For years, Amazon’s critics including US lawmakers, European regulators, third-party sellers, consumer advocacy groups and more have accused the company of everything from mistreating its workers to forcing its third-party sellers to accept anticompetitive terms. Amazon has unfairly used sellers’ own commercial data against them, opponents have said, so it can figure out what products Amazon should sell itself. And the fact that Amazon competes with sellers on the very same marketplace it controls represents a conflict of interest that should be considered illegal, many of Amazon’s critics have said.

    The lawsuit represents a watershed moment in Khan’s career. She is widely credited with kickstarting antitrust scrutiny of Amazon in the United States with a seminal law paper in 2017. She later helped lead a congressional investigation into the tech industry’s alleged competition abuses, detailing in a 450-page report how Amazon — as well as Apple, Google and Meta — enjoy “monopoly power” and that there is “significant evidence” to show that the companies’ anticompetitive conduct has hindered innovation, reduced consumer choice and weakened democracy.

    The investigation led to a raft of legislative proposals aimed at reining in the companies, but the most significant ones have stalled under a barrage of industry lobbying and decisions by congressional leaders not to bring the bills up for a final vote.

    Lawmakers’ inaction has left it to antitrust enforcers to police the tech industry’s alleged harms to competition. In 2021, President Joe Biden stunned many in Washington when he tapped Khan not only to serve on the FTC but to lead the agency, sending a signal that he supported tough antitrust oversight.

    Since then Khan has taken an aggressive enforcement posture, particularly toward the tech industry. Under her watch, the FTC has sued to block numerous tech acquisitions, most notably Microsoft’s $69 billion deal to acquire video game publisher Activision Blizzard. It has moved to restrict how companies may collect and use consumers’ personal information, and warned them of the risks of generative artificial intelligence.

    Throughout, the FTC has scrutinized Amazon — suing the company in June for allegedly tricking millions of consumers into signing up for Amazon Prime and reaching multimillion-dollar settlements in May with the company over alleged privacy violations linked to Amazon’s smart home devices.

    But the latest suit against Amazon may rank as the most significant of all, because it drives at the heart of Amazon’s e-commerce business and focuses on some of the most persistent criticisms of the company. In a sign of how threatening Amazon perceived Khan’s ascent to be, the company in 2021 called for her recusal from all cases involving the tech giant.

    Khan has resisted those calls. On Tuesday, the FTC said it held a unanimous 3-0 vote authorizing the lawsuit; Khan was among those voting to proceed.

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  • FCC to reintroduce rules protecting net neutrality | CNN Business

    FCC to reintroduce rules protecting net neutrality | CNN Business

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    CNN
     — 

    The US government aims to restore sweeping regulations for high-speed internet providers such as AT&T, Comcast and Verizon, reviving “net neutrality” rules for the broadband industry — and an ongoing debate about the internet’s future.

    The proposed rules from the Federal Communications Commission will designate internet service — both the wired kind found in homes and businesses as well as mobile data on cellphones — as “essential telecommunications” akin to traditional telephone services, said FCC Chairwoman Jessica Rosenworcel. The rules would ban internet service providers (ISPs) from blocking or slowing down access to websites and online content.

    In addition to the prohibitions on blocking and throttling internet traffic, the draft rules also seek to prevent ISPs from selectively speeding up service to favored websites or to those that agree to pay extra fees, Rosenworcel said, a move designed to prevent the emergence of “fast lanes” on the web that could give some websites a paid advantage over others.

    With Tuesday’s proposal, the FCC aims to restore Obama-era regulations that the FCC under Republican leadership rolled back during the Trump administration.

    But the proposal is likely to trigger strong pushback from internet providers who have spent years fighting earlier versions of the rules in court.

    Beyond their immediate impact to internet providers, the draft rules directly help US telecom regulators address a range of consumer issues in the longer run by allowing the FCC to bring its most powerful legal tools to bear, Rosenworcel said. Some of the priorities the FCC could address after the implementation of net neutrality rules include spam robotexts, internet outages, digital privacy and high-speed internet access, said Rosenworcel in a speech at the National Press Club Tuesday to announce the proposal.

    Rosenworcel said reclassifying internet service providers as essential telecommunications entities — by regulating them under Title II of the FCC’s congressional charter — would provide the FCC with clearer authority to adopt future rules governing everything from public safety to national security.

    Rosenworcel argued, “without reclassification, the FCC has limited authority to incorporate updated cybersecurity standards into our network policies.”

    She added that traditional telephone companies currently cannot sell customer data, but those restrictions do not apply to ISPs, which are regulated differently. “Does that really make sense? Do we want our broadband providers selling off where we go and what we do online?”

    Regulating internet providers using the most powerful tools at the FCC’s disposal would let the agency crack down harder on spam robotexts, Rosenworcel said, as spammers are “constantly evolving their techniques.”

    And the proposed rules could promote the Biden administration’s agenda to blanket the country in fast, affordable broadband, she argued, by granting internet providers the rights to put their equipment on telephone poles.

    “As a nation we are committed, post-pandemic, to building broadband for all,” she said. “So keep in mind that when you construct these facilities, utility poles are really important.”

    The FCC plans to vote Oct. 19 on whether to advance the draft rules by soliciting public feedback on them — a step that would precede the creation of any final rules.

    Net neutrality rules are more necessary than ever, Rosenworcel said in her speech, after millions of Americans discovered the vital importance of reliable internet access during the Covid-19 pandemic. Rosenworcel also made the case that a single, national standard on net neutrality could give businesses the certainty they need to speed up efforts to blanket the nation in fast, affordable broadband.

    But Rosenworcel’s push is already inviting a widespread revolt from internet providers that make up some of the most powerful and well-resourced groups in Washington.

    The proposal could also lead to more of what has helped make net neutrality a household term over the past decade: Late-night segments by comedians including John Oliver and Stephen Colbert; in-person demonstrations, including at the FCC’s headquarters and at the home of its chair; allegations of fake, AstroTurfed public comments and claims of cyberattacks; and even threats of violence.

    The latest net neutrality rulemaking reflects one of the most visible efforts of Rosenworcel’s chairwomanship — and one of her first undertakings since the US Senate this month confirmed Anna Gomez as the agency’s fifth commissioner, breaking a years-long 2-2 partisan deadlock at the FCC that had prevented hot-button initiatives from moving forward.

    The draft rules also show how a continued lack of federal legislation to establish a nationwide net neutrality standard has led to continued flip-flopping rules for ISPs with every change of political administration, along with a patchwork of state laws seeking to fill the gap.

    If approved next month, the FCC draft would be opened for public comment until approximately mid-December, followed by an opportunity for public replies lasting into January. A final set of rules could be voted on in the months following.

    For years, consumer advocacy groups have called for strong rules that could prevent ISPs from distorting the free flow of information on the internet using arbitrary or commercially motivated traffic rules.

    In contrast, ISPs have long argued that websites using up big portions of a network’s capacity, such as search engines or video streaming sites, should pay for the network demand their users generate. European Union officials are said to be considering just such a proposal.

    A third rail of broadband policy

    In attempting to revive the agency rules, the FCC is once again touching what has become the third rail of US broadband policy: Title II of the Communications Act of 1934, the law that gave the FCC its congressional mandate to regulate legacy telephone services.

    Tuesday’s proposal moves to regulate ISPs under Title II, which would give the FCC clearer authority to impose rules against blocking, throttling and paid prioritization of websites. The draft rules are substantially similar to the rules the FCC passed in 2015, the people said. The rules were upheld in 2016 by a federal appeals court in Washington in the face of an industry lawsuit.

    Soon after that ruling, however, Donald Trump won the White House, leading him to name Ajit Pai, then one of the FCC’s Republican commissioners, as its chair. Among Pai’s first acts as agency chief was to propose a rollback of the earlier net neutrality rules. The FCC voted in 2017 to reverse the rules, with Pai arguing that the repeal would accelerate private investment in broadband networks and free the industry from heavy-handed regulation. The repeal took effect in 2018.

    In the time since, ISPs have refrained from doing the kind of blocking and preferential treatment that net neutrality advocates have warned could occur, but Rosenworcel’s proposal highlights how concerns about that possibility have persisted.

    The Biden administration on Tuesday praised the FCC’s plan to reintroduce net neutrality rules for broadband providers.

    “President Biden supports net neutrality so that large corporations can’t pick and choose what content you can access online or charge you more for certain content,” said Hannah Garden-Monheit, special assistant to the president for economic policy. “Today’s announcement is a major step forward for American consumers and small businesses and demonstrates the importance of the president’s push to restore competition in our economy.”

    Net neutrality began as a bipartisan issue, with the George W. Bush administration issuing some of the earliest principles for an open internet that led to FCC attempts at concrete regulation in 2010 and again in 2015.

    The telecom and cable industries have long opposed the use of Title II to regulate broadband, arguing that it would be a form of government overreach, that telephone-style regulations are not suited for digital technologies, and that it would discourage private investment in broadband networks, hindering Americans’ ability to get online.

    “Treating broadband as a Title II utility is a dangerous and costly solution in search of a problem,” said USTelecom, a prominent industry trade group, in a statement Tuesday. “Congress must step in on this major question and end this game of regulatory ping-pong. The future of the open, vibrant internet we now enjoy hangs in the balance.”

    The reference to net neutrality as a “major question” offers clues about possible future litigation involving the proposal, as the Supreme Court has increasingly invoked the “major questions” doctrine to scrutinize federal agency initiatives.

    In her speech Tuesday, Rosenworcel acknowledged the coming pushback — as well as past incidents involving supporters of strong net neutrality rules.

    “I have every expectation that this process will get messy at times,” Rosenworcel said. “In the past, when this subject came up, we saw death threats against [former Republican FCC Chairman Ajit Pai] and his family. That is completely unacceptable, and I am grateful to law enforcement for bringing the individual behind these threats to justice. We had a fake bomb threat called in to disrupt a vote at the agency. We had protesters blocking [former Democratic FCC Chairman Tom Wheeler] in his driveway and keeping him from his car. We saw a dark effort to tear down a pro-net neutrality nominee for the agency.”

    Part of what made the FCC’s 2015 rules particularly controversial, however, was that classifying ISPs as Title II providers meant the agency could theoretically attempt to set prices for internet service directly, a prospect that ISPs widely feared but that the FCC in 2015 promised not to do.

    Tuesday’s proposal makes the same commitment, the people said, forbearing from 26 provisions of Title II and more than 700 other agency rules that could be seen as intrusive. The draft rules also prohibit the FCC from forcing ISPs to share their network infrastructure with other, competing internet providers, the people said, a concept known as network unbundling.

    On top of fierce industry pushback in the FCC’s comments process, the proposal could also lead to legal challenges against the FCC. While the 2015 net neutrality rules survived on appeal, suggesting the current FCC may be on firm ground to issue the current proposed rules, the draft comes as the Supreme Court has moved to reconsider the power of federal agencies by scrutinizing courts’ decades-long deference to their expert authority.

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  • FCC issues historic $300 million fine against the largest robocall scam it has ever investigated | CNN Business

    FCC issues historic $300 million fine against the largest robocall scam it has ever investigated | CNN Business

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    CNN
     — 

    The Federal Communications Commission on Thursday cracked down on a massive illegal robocall operation responsible for billions of auto-warranty scam calls in recent years, with regulators imposing a record $300 million fine on what authorities said is the largest such network it has ever investigated.

    The globe-spanning illegal operation violated US telecom laws by making more than five billion robocalls to more than half a billion phone numbers over the course of just three months in 2021, the FCC said in a release Wednesday.

    But the campaign had been in existence for even longer, the FCC added. Using a multitude of shell companies, aliases and fly-by-night phone providers allegedly under their control, the people behind the network — which CNN has previously reported on — had sought to dupe unwitting consumers into buying shoddy service contracts for their vehicles since 2018.

    The ringleaders of the operation, Roy Melvin Cox Jr. and Aaron Michael Jones, were repeat offenders who had already been under judicial orders not to engage in telemarketing.

    A breakthrough in enforcement came last July, when Ohio Attorney General Dave Yost filed a lawsuit against the network that outlined many of the operation’s details, including its organizational structure. At the same time, the FCC directed US voice providers to stop carrying calls originating from providers used by the network.

    Within weeks, third-party industry estimates showed an 80% reduction in the volume of auto-warranty spam calls in the United States, and on Thursday, the FCC said the move ultimately led to a 99% reduction in such calls.

    The Ohio AG’s lawsuit had been the culmination of a joint state and federal investigation that also highlighted the growing effectiveness of technology and policies aimed at beating back the tide of illegal robocalls.

    For example, improvements in call-tracing have allowed investigators to quickly identify the source of unwanted, automated calls, while additional FCC policies have enabled regulators to block entire voice providers from the US telephone network for robocall violations.

    The partnership between the FCC and Ohio officials has also been replicated with 46 other states, the District of Columbia and Guam, with Hawaii and New Mexico joining the list on Thursday, the FCC said.

    It is now up to the Justice Department to collect on the federal fine, FCC Chairwoman Jessica Rosenworcel said in a statement, adding that in the future, Congress should authorize the FCC to seek payment through the courts directly on its own.

    “We know the scam artists behind these calls are relentless — but we are coming for them and won’t stop until we get this junk off the line,” Rosenworcel said.

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  • Major Supreme Court cases to watch in the new term | CNN Politics

    Major Supreme Court cases to watch in the new term | CNN Politics

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    CNN
     — 

    Looking at an upcoming Supreme Court term from the vantage point of the first Monday in October rarely tells the full story of what lies ahead, but the docket already includes major cases concerning the intersection between the First Amendment and social media, gun rights, racial gerrymandering and the power of the executive branch when it comes to regulation.

    The court will still determine if it will hear oral arguments on issues such as medication abortion and transgender rights, not to mention the possibility of a flurry of emergency requests related to the 2024 election.

    Here are some of the key cases on which the court will hear oral arguments this term:

    After the Supreme Court issued a major decision last year expanding gun rights nationwide, lower courts began reconsidering hundreds of firearms regulations across the country under the new standard crafted by Justice Clarence Thomas that a gun law passes legal muster only if it is rooted in history and tradition.

    On the heels of that decision, a federal appeals court invalidated a federal law that bars an individual who is subject to a domestic violence restraining order from possessing a firearm. That law, the 5th US Circuit Court of Appeals ruled, “is an outlier that our ancestors would never have accepted.”

    The Biden administration has appealed, saying the ruling “threatens grave harms for victims of domestic violence.”

    In 2019, nearly two-thirds of domestic homicides in the United States were committed with a gun, according to Everytown for Gun Safety.

    Lawyers for Zackey Rahimi, a man who was prosecuted under the law in 2020 after a violent altercation with his girlfriend, have urged the justices to let the lower court opinion stand, arguing in part that there is no law from the founding era comparable to the statute at hand.

    Racial gerrymandering: South Carolina congressional maps

    Justices will consider a congressional redistricting plan drawn by South Carolina’s Republican-controlled legislature in the wake of the 2020 census. Critics say it was designed with discriminatory purpose and amounts to an illegal racial gerrymander.

    The case focuses the court’s attention once again on the issue of race and map drawing and comes after the court ordered Alabama to redraw the state’s congressional map last term to account for the fact that the state is 27% black. The decision, penned by Chief Justice John Roberts, surprised liberals who feared the court was going to make it harder for minorities to challenge maps under Section 2 of the historic Voting Rights Act.

    In the latest case, the South Carolina State Conference of the NAACP and a Black voter named Taiwan Scott, are challenging the state’s congressional District 1 that is located along the southeastern coast and is anchored in Charleston County. Although the district consistently elected Republicans from 1980 to 2016, in 2018 a Democrat was elected in a political upset, though a Republican recaptured the seat in 2020.

    The person who devised the map has testified that he was instructed to make the district “more Republican leaning,” but that he did not consider race. He did, however, acknowledge that he examined racial data after drafting each version and that the Black voting age population of the district was likely viewed during the drafting process.

    A three-judge district court panel struck down the plan in January, saying that race had been the predominant motivating factor. “To achieve a target of 17% African American population,” the court said, “Charleston County was racially gerrymandered and over 30,000 African Americans were removed from their home district.”

    Expert explains why Justice Thomas’ gifts from wealthy friends are problematic

    In the latest attack against the so-called administrative state, the justices are considering whether to overturn decades old precedent to scale back the power of federal agencies, impacting how the government tackles issues such as climate change, immigration, labor conditions and public health.

    At issue is an appeal from herring fishermen in the Atlantic who say the National Marine Fisheries Service does not have the authority to require them to pay the salaries of government monitors who ride aboard the fishing vessels.

    In agreeing to hear the case, the justices signaled they will reconsider a 1984 decision – Chevron v. Natural Resources Defense Council – that sets forward factors to determine when courts should defer to a government agency’s interpretation of the law. First, they examine a statute to see if Congress’ intent is clear. It if is – then the matter is settled. But if there is ambiguity – the court defers to the agency’s expertise.

    Solicitor General Elizabeth Prelogar told the justices that the agency was acting within the scope of its authority under the Magnuson-Stevens Fishery Conservation and Management Act and said the fishermen are not responsible for all the costs. The regulation was put in place to combat overfishing of the fisheries off the coasts of the US.

    Representing the fishermen, former Solicitor General Paul Clement argues that the government exceeded its authority and needs direct and clear congressional authorization to make such a demand. “The ‘net effect’ of Chevron,” Clement said, is that it “incentives a dynamic where Congress does far less than the Framers anticipated, and the executive branch is left to do far more by deciding controversial issues via regulatory fiat”

    For the second time in recent years, the court is taking aim at a watchdog agency created to combat unfair and deceptive practices against consumers, in a case that could deal a fatal blow to the future of the agency and send reverberations throughout the financial services industry.

    At the center of the case at hand is the Consumer Financial Protection Bureau – an independent agency set up in the wake of the 2008 financial meltdown that works to monitor the practices of lenders, debt collectors and credit rating agencies.

    Congress chose to fund the CFPB from outside the annual appropriations process to ensure its independence. As such, the agency receives its funding each year from the earnings of the Federal Reserve System. But the conservative 5th US Circuit Court of Appeals held last year that the funding scheme violates the Appropriations Clause of the Constitution, that, the court said “ensures Congress’ “exclusive power over the federal purse.”

    According to the CFPB, the agency has obtained more than $18.9 billion in ordered relief, including restitution and canceled debts, for more than 195 million consumers, and more than $4.1 billion in penalties, in actions brought by the agency against financial institutions and individuals that have broken federal consumer financial protection laws.

    A handful of other agencies have similar funding schemes including the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

    Three years ago, the Supreme Court limited the independence of the CFPB by invalidating its leadership structure. A 5-4 court held that the structure violated the separation of powers because the president was restricted from removing the director, even if they had policy disagreements.

    Agency regulatory authority: Securities and Exchange Commission

    The justices are looking at the in-house enforcement proceedings of the US Securities and Exchange Commission in another case that invites the conservative majority to pare back the regulatory authority of federal agencies.

    The court’s decision could impact whether the SEC and other agencies can conduct enforcement proceedings in-house, using administrative courts staffed with agency employees, or whether such actions must be brought in federal court.

    On one side are critics of such agency courts who argue that they allow federal employees to serve as prosecutors, judges and jury, issuing rulings that could particularly hurt small businesses. On the other side are those who point out that several agencies, including the Social Security Administration, have such internal proceedings because the topics are often complex and the agency has more expertise than a federal judge.

    The case arose in 2013 after the SEC brought an enforcement action against George Jarkesy, who had established two hedge funds with his advisory firm, Patriot28, for securities fraud.

    The 5th Circuit ruled that the SEC’s proceedings deprive individuals of their Seventh Amendment right to a civil jury. In addition, the court said that Congress had improperly delegated legislative power to the SEC, which gave the agency unconstrained authority at times to choose the in-house administrative proceeding rather than filing suit in district court.

    In December, the court will examine the historic multibillion-dollar Purdue Pharma bankruptcy settlement with several states that would ultimately offer the Sackler family broad protection from OxyContin-related civil claims.

    Until recently, Purdue was controlled by the Sackler family, who withdrew billions of dollars from the company before it filed for bankruptcy. The family has now agreed to contribute up to $6 billion to Purdue’s reorganization fund on the condition that the Sacklers receive a release from civil liability.

    The Biden administration, representing the US Trustee, the executive branch agency that monitors the administration of bankruptcy cases, has called the plan “exceptional and unprecedented” in court papers, noting that lower courts have divided on when parties can be released from liability for actions that caused societal harm.

    “The plan’s release ‘absolutely, unconditionally, irrevocably, fully, finally, forever and permanently releases’ the Sacklers from every conceivable type of opioid-related civil claim – even claims based on fraud and other forms of willful misconduct that could not be discharged if the Sacklers filed for bankruptcy in their individual capacities,” Prelogar argued in court papers.

    For the second year running, the justices will leap into the online moderation debate and decide whether states can essentially control how social media companies operate.

    If upheld, laws from Florida and Texas could open the door to more state legislation requiring platforms such as Facebook, YouTube and TikTok to treat content in specific ways within certain jurisdictions – and potentially expose the companies to more content moderation lawsuits.

    It could also make it harder for platforms to remove what they determine is misinformation, hate speech or other offensive material.

    “These cases could completely reshape the digital public sphere. The question of what limits the First Amendment imposes on legislatures’ ability to regulate social media is immensely important – for speech, and for democracy as well,” said Jameel Jaffer, the executive director of Columbia University’s Knight First Amendment Institute, in a statement.

    “It’s difficult to think of any other recent First Amendment cases in which the stakes were so high,” Jaffer added.

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  • Nevada GOP Senate candidate raised money to help other candidates — the funds mostly paid down his old campaign’s debt instead | CNN Politics

    Nevada GOP Senate candidate raised money to help other candidates — the funds mostly paid down his old campaign’s debt instead | CNN Politics

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    CNN
     — 

    Nevada Republican Senate candidate Sam Brown created a political action committee to “help elect Republicans” but most of its funds were spent paying down debt from his failed previous campaign. The group donated less than 7% of its funds to the candidates it was set up to support, according to campaign finance records – a move one campaign finance expert likened to using the PAC as a “slush fund.”

    Brown formed the Duty First PAC in July 2022, saying the organization would help Republicans take back Congress. A month earlier, Brown lost the Republican Senate primary to Adam Laxalt after raising an impressive $4.4 million for his upstart campaign, but his campaign was left with more than $300,000 in debt.

    Now Brown is running again in Nevada as a top recruit of Senate Republicans.

    A former Army captain, Brown made lofty promises when launching his PAC, Duty First.

    “With your support, we will: Defeat the socialist Democrats. Help elect Republicans who believe in accountability to the Constitution and service to the people. Stand with the #DutyFirst movement, chip in with a grassroots contribution today,” he said in a tweet announcing the PAC.

    “We’ll ensure that the socialist agenda of the Democrats does not win in November, and the Republicans continue to be held accountable to defending our Constitution and defending our conservative principles. The country’s counting on us,” Brown said in an accompanying video for the PAC’s launch in July 2022.

    Since then, the PAC raised a small amount – just $91,500 – and used the majority of their money – $55,000 – to repay debt from Brown’s failed campaign for Senate, which Brown had transferred over. Campaign finance experts told CNN this falls into a legal gray area.

    Of the $90,000 spent so far, just $6,000 made its way to five Nevadan Republican candidates’ committees. An additional payment for $1,000 was listed as going directly to congressional candidate Mark Robertson as a contribution but lists the amount as being directly paid to the candidate at his home – not to his committee.

    Instead, the Duty First PAC made over a dozen debt payments. A combined $23,000 was spent on website and software services used by Brown’s Senate campaign. Another $11,275 went towards paying down the failed campaign’s credit card, with an additional $3,000 spent on credit card interest fees.

    Duty First paid off over $1,200 in credit card debt accrued at a country club near where Brown previously lived in Dallas, Texas, and ran for the state house in 2014. A spokesman for the Brown campaign said in an email to CNN the “facility fee” charges were for a fundraiser “hosted by supporters of Sam’s campaign.”

    The most recent FEC filing shows Brown is now trying to dispute over $80,000 in remaining debt from the previous campaign, which the spokesman said “will be resolved in due course.” A majority of the disputed debt owed is for direct mail services used by Brown’s previous campaign.

    Duty First PAC is also responsible for eventually repaying Brown $70,000 that he personally loaned his committees.

    The spokesperson for Brown’s campaign defended the PAC’s spending.

    “The PAC promised to support conservative candidates in Nevada, and it did exactly that by donating to every Republican candidate in Nevada’s federal races during the 2022 general election,” they said.

    According to a CNN analysis of Duty First PAC’s FEC filings, of all the money raised, less than 7% went to candidates. When considering Brown’s personal loans, debt the PAC took on from Brown’s campaign, and expenditures, fewer than 2% of the PAC’s funds went towards candidates in 2022

    The money not spent on debt went to a variety of consulting and digital marketing expenses. The PAC spent $1,090 on a storage unit, more than it donated to the winning campaign of Republican Rep. Mark Amodei.

    Despite this, Brown played up his PAC’s donations to candidates in interviews and in posts on social media.

    “I have pledged to help defeat the Democrats in Nevada,” he added in an email, announcing the launch of the PAC.

    The PAC’s donations were from grassroots donors, who typically donated $50 or less.

    Just a day before the 2022 midterm election, Brown announced donations to several candidates running for office in Nevada.

    Records with the FEC show the 2022 donations to House candidates were made on October 31, while the donation to Laxalt’s Senate campaign was made in early September.

    “The Duty First PAC proudly supports conservatives fighting for Nevada,” he said in a tweet after making the donations on November 7, 2022. “This past week, we donated funds to the four Republicans working to take back the House. Join us in supporting them right now!”

    Later, following the 2022 midterms in a late November interview on a local Nevada radio station, Brown played up the PAC’s work and said it would continue to work between election cycles.

    “Duty First is here to kind of work between the cycles, so to speak and help candidates who are running,” Brown said. “In fact this cycle, you know, we had raised money and supported all of our Republican federal candidates, Adam Laxalt, as well as the four Congressionals.”

    “And so, it’s our way of pushing back against the Democrat agenda and their representation,” Brown said. “But, also, it gives Duty First supporters and people that believe in our mission, a sort of platform to remind Republicans what we’re about.”

    Campaign finance experts CNN spoke to said Brown marketing the Duty First PAC as a way for people to financially support conservative candidates was a “creative way” for Brown to pay off old campaign debts behind the scenes.

    “It creates a situation where contributors to a PAC may think that PAC is doing one thing, which is supporting political candidates, when in fact what it’s doing is being used to pay off long standing debts from a previous campaign,” said Stephen Spaulding, vice president of policy at Common Cause and former advisor to an FEC commissioner.

    Since the FEC has not issued an advisory opinion that would “apply to that candidate and any other candidate that has a very similar situation,” Spaulding said transferring debts between campaign committees and PACs is a gray area in campaign finance law. In Brown’s case, his candidate committee was rolled into a PAC, Sam Brown PAC, that was associated with his candidacy, which the campaign finance experts agree is a common maneuver for candidates. But what struck the experts as odd was that Brown terminated the Sam Brown PAC, and transferred his outstanding loans and debts to the Duty First PAC.

    Brown’s 2024 candidate committee, Sam Brown for Nevada, is an entirely new committee with its own FEC filings, despite having the same name as his previous committee. This committee, formed in July 2023, is not affiliated with the Duty First PAC, nor is it obligated to pay off the remaining $271,000 in previous campaign debt and loans.

    “Unfortunately, Sam Brown, like too many other politicians, has given almost no money to other candidates and, instead, has used his PAC as a slush fund,” said Paul S. Ryan, executive director at Funders’ Committee for Civic Participation. “Many donors would understandably be upset if they learned their money wasn’t used to help elect other candidates like Brown – the reason they made their contributions,” he added.

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  • US regulator seeks court order to compel Elon Musk to testify about his Twitter acquisition | CNN Business

    US regulator seeks court order to compel Elon Musk to testify about his Twitter acquisition | CNN Business

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    New York
    CNN
     — 

    The US Securities and Exchange Commission on Thursday applied for a court order to force Elon Musk to testify in an ongoing probe related to his acquisition of Twitter and public disclosures he made in connection with the deal, according to court filings.

    The filing Thursday in San Francisco federal court seeks a judge’s order requiring Musk to testify, alleging “blatant refusal to comply” with an earlier SEC subpoena.

    X, the company formerly known as Twitter, did not immediately respond to a request for comment.

    The SEC action is the latest turn in a long-running inquiry into whether Musk fully complied with his disclosure obligations when he began acquiring large amounts of Twitter stock, prior to his deal to buy the company. And it underscores years of friction between Musk and the agency over his public comments on numerous matters involving his companies.

    Musk began buying up large amounts of Twitter stock in early 2022, and he revealed on April 4 of that year that he had become the company’s largest shareholder. Later that month, Musk inked a deal to buy the platform for $44 billion and — after a monthslong legal battle attempting to exit the deal — officially closed the acquisition in October of last year. Musk has faced a number of legal challenges related to his Twitter acquisition in the months since his takeover.

    Musk testified twice as part of the SEC’s investigation in July 2022, according to the agency.

    Starting that same month, Musk produced “hundreds of documents” to federal investigators working on the probe, “including documents Musk authored,” according to a declaration by an SEC attorney filed alongside the agency’s court request.

    The SEC served Musk with a subpoena to testify again in the matter in May 2023, according to the court filing. The current subpoena at issue seeks evidence and testimony from Musk that the SEC does not yet possess, the agency said.

    Despite previously agreeing to testify on September 15 and rescheduling the testimony once, Musk “abruptly notified the SEC” two days before his scheduled appearance to say he would not be showing up, the filing states.

    The SEC attempted to negotiate with Musk to find alternative dates later this fall, according to court documents.

    “These good faith efforts were met with Musk’s blanket refusal to appear for testimony,” it adds.

    “The subpoena with which Musk failed to comply relates to an ongoing nonpublic investigation by the SEC,” the filing continued, “regarding whether, among other things, Musk violated various provisions of the federal securities laws in connection with (1) his 2022 purchases of Twitter, Inc (“Twitter”) stock, and (2) his 2022 statements and SEC filings relating to Twitter.”

    When Musk informed the SEC he would not be appearing to testify, his lawyer, Alex Spiro, wrote to the agency on September 13, saying Musk had “already sat for testimony twice in this matter” and that “enough is enough.”

    Spiro’s letter, which was included as an exhibit in the SEC’s court filings, accused regulators of seeking Musk’s testimony in bad faith and attempting to waste Musk’s time.

    In addition, Spiro claimed that the recent release of Walter Isaacson’s biography of Musk would interfere because it contained “new information potentially relevant to this matter” that would take time for both sides to digest.

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  • Americans’ wages are finally outpacing inflation. But could it last? | CNN Business

    Americans’ wages are finally outpacing inflation. But could it last? | CNN Business

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    Minneapolis
    CNN
     — 

    US wages have been on the rise, but it sure hasn’t felt like it. For more than two years, persistent and pervasive inflation has taken big bites out of Americans’ paychecks.

    That’s finally starting to change now that inflation is waning.

    In June, for the first time in 26 months, US workers’ real weekly earnings (a week’s worth of wages adjusted for inflation) grew on an annual basis, according to data released this week from the Bureau of Labor Statistics. Annual real weekly wages were up 0.6% last month, a rate that’s a tick below the 0.7% gain seen in February 2020.

    June also marked the second consecutive month of year-over-year real hourly wage growth — the first back-to-back months of gains since early 2021.

    “The big problem for most consumers is when wage increases do not keep pace with inflation, then we lose real purchasing power,” said William Ferguson, the Gertrude B. Austin professor of economics at Grinnell College in Iowa. “And that’s actually what hurts people.”

    Although long overdue, this development is landing at a sticky time in the economy and the Federal Reserve’s knock-down-drag-out fight to tame inflation. The Fed has been laser-focused on dampening demand, and central bankers have frequently noted they’re keeping close watch on how much wage growth could stoke that demand and, in turn, inflation.

    Alternatively, if a cooling labor market turns frigid, that could also make this recent growth short-lived.

    “If inflation is moderate and the labor market is very strong, it’s a reason for vigilance, but it’s not a reason on its own to continue hiking,” said Alex Pelle, Mizuho Securities US economist. “It’s one of those things that you need to watch, because there’s the argument that will add to inflationary pressures.”

    The Fed is in the midst of a wait-and-see period. After 10 consecutive rate hikes in 15 months, the Fed’s policymakers in June voted to hold the benchmark rate steady so they could evaluate the effects of the tightening to date, as well as the activity within the banking sector and broader economy.

    Although the major economic reports of the past two weeks did show key data was moving in the preferred direction — slowing job growth, a slight slackening within the labor market, cooling consumer price inflation and practically flat producer prices — markets largely expect the Fed to continue with a well-telegraphed quarter-point increase when it meets later this month.

    “The Fed does not want to repeat the mistake of the 1970s, when they stopped the tightening and inflation bounced back up,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics.

    Fears of a dreaded “wage-price spiral” — when rising wages and prices feed into each other — have made a bogeyman out of wage growth. However, recent economic research from the likes of the San Francisco Fed and former Fed chair Ben Bernanke noted that wages gains have had little, and certainly not overwhelming, effects on this inflationary cycle.

    Wage gains “will fuel spending, and I do think it will be something that keeps a floor on inflation that’s above [the Fed’s target of] 2%, but let’s see how it evolves over time,” Pelle said. “I don’t want to jump the gun and say absolutely that this is something that the Fed needs crushed.”

    If a data point from the June jobs report proves to be a trend and not a one-month blip, the wage gains seen now could be short-lived.

    In June, the number of people employed part-time for economic reasons grew by 452,000 to 4.2 million, an increase that was partially reflective of people “whose hours were cut due to slack work for business conditions,” the BLS noted.

    Still, the broader labor market trends, including hiring activity, labor movements and businesses’ budgets are favorable to workers maintaining these real wage gains, said Julia Pollak, chief economist with ZipRecruiter.

    Job growth is slowing somewhat, but the gains are still above pre-pandemic averages as companies continue to backfill shortfalls left by the pandemic and respond to continued demand. Also, some workers who have felt they’ve been given short shrift or are discouraged about two years of negative real wages are responding with labor strikes, she noted.

    And finally, supply-side inflation has drastically cooled to the point where annual inflation is practically flat — which, ideally, gives firms more wiggle room to pay workers, she said.

    “For the most part, this is still a tight labor market, still very low unemployment, still healthy business activity in lots and lots of industries where businesses have little choice but to staff up or at least maintain the staff they have,” she said.

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  • DeSantis fundraising slowed after initial campaign launch, filing shows | CNN Politics

    DeSantis fundraising slowed after initial campaign launch, filing shows | CNN Politics

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    CNN
     — 

    Republican presidential candidate Ron DeSantis is relying on larger donors to fuel his campaign and saw the pace of contributions slow after his initial announcement, a new report detailing his fundraising for the quarter ended June 30 shows.

    His campaign also confirmed to CNN on Saturday that it had recently let some staffers go.

    “Defeating Joe Biden and the $72 million behind him will require a nimble and candidate driven campaign, and we are building a movement to go the distance,” DeSantis’ campaign spokesperson Andrew Romeo said in a statement.

    Politico reported Saturday that “fewer than 10 staffers” in event planning were cut on Thursday. DeSantis’ latest FEC fiiling shows that about 90 people were on his campaign payroll during the second quarter. Two veterans of his political operation are also departing the campaign to work with an outside group that will focus on boosting his presidential bid.

    DeSantis’s camp has been working to reassure his benefactors that he has a path to the GOP nomination, even as he continues to trail former President Donald Trump in the polls.

    DeSantis, whose campaign posted a strong second-quarter haul of $20 million, saw his fundraising surge after launching his White House bid on May 24, but it quickly fell off in the weeks that followed, a CNN review shows. Among individuals giving more than $200, DeSantis raised more than $5 million in the opening days of his campaign – roughly 30% of the total he raised from those donors in the quarter.

    Candidates are only required to disclose details on contributions that exceed $200, including the date they were received.

    And DeSantis’ filing with federal regulators shows that a relatively small share – roughly 15% – of his individual contributions came in amounts of $200 or less. Donors who contribute in small amounts are valuable to campaigns because they can be tapped repeatedly for contributions before they hit donation limits. Robust small-dollar donations can also be a sign of grassroots momentum behind a campaign.

    About $3 million of the $20 million DeSantis reported raising in the second quarter cannot be touched in the battle for the 2024 GOP nomination because it is designated for the general election and cannot be used unless he becomes his party’s standard-bearer.

    Trump has traditionally relied on legions of grassroots donors to sustain his campaigns. Candidates still were filing their reports with the FEC on Saturday night as the midnight deadline to disclose their fundraising and spending details for the April to June period approached.

    The filings offer a snapshot of which Republican candidates are struggling to gain early traction with donors and those who have jumped to early leads.

    DeSantis has significant resources behind his campaign. A super PAC supporting his candidacy, Never Back Down, has previously announced taking in $130 million since it launched in March. But nearly two-thirds of that sum came from a state political committee tied to DeSantis’ 2022 reelection campaign in Florida, as CNN has previously reported.

    This story has been updated with additional information.

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  • Key US inflation gauge cooled last month to the lowest level in nearly three years | CNN Business

    Key US inflation gauge cooled last month to the lowest level in nearly three years | CNN Business

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    Minneapolis
    CNN
     — 

    Wholesale inflation continued its yearlong slowdown last month, rising by just 0.1% for the 12 months ended in June, according to the Bureau of Labor Statistics’ Producer Price Index released Thursday.

    The PPI index, a key inflation gauge that tracks the average change in prices that businesses pay to suppliers, has cooled significantly since peaking at 11.2% in June 2022 and has now declined for 12 consecutive months. Annual producer price inflation is at its lowest level since August 2020, BLS data shows.

    Economists were expecting an annual increase of 0.4%, according to Refinitiv.

    On a monthly basis, prices increased by 0.1%.

    Goods prices held steady for the month, after tumbling 1.6% in May, according to the BLS report. As such, prices for services — which increased 0.2% from May — were the primary driver behind June’s slight increase.

    PPI is a closely watched inflation gauge since it captures average price shifts before they reach consumers and is a proxy for potential price changes in stores.

    While the PPI doesn’t directly correlate into exactly what will come from the following month’s Consumer Price Index — a major inflation gauge that tracks price shifts for a basket of goods and services — it provides a look at whole economy inflation, minus rents, said Alex Pelle, Mizuho Securities US economist.

    And that picture right now is looking pretty sharp.

    “It’s definitely a good month for inflation,” Pelle told CNN. “You saw that in CPI, and now you’re seeing it in PPI.”

    In June, inflation as measured by the CPI cooled to 3% annually, its lowest rate since March 2021, the BLS reported Wednesday.

    Both the CPI and PPI have declined monthly since their peaks in June 2022, when record-high energy and gas prices fueled the spikes to 9.1% and 11.2%, respectively.

    As such, the base effects of year-over-year comparisons are playing a part in the indexes’ sharp retreats.

    Still, underlying inflation is showing a cooling trend as well — albeit more muted.

    In the case of PPI, when stripping out the more volatile categories of food and energy, this “core” index rose 2.4% for the 12 months ended in June. That’s a step back from the 2.6% increase seen in May and economists’ expectations of 2.6%.

    Core PPI, which ticked up 0.1% on a monthly basis, is at its lowest annual level since February 2021.

    Inflation is looking a heck of a lot better than last year, when the Federal Reserve embarked on a campaign to combat price hikes with rate hikes, but economists don’t expect the latest CPI and PPI prints will dissuade central bankers from giving another crank to tighten monetary policy.

    Starting in March 2022, the central bank rolled out 10 consecutive interest rate hikes to tame inflation, finally hitting pause last month. The Fed is widely expected to raise rates by another quarter point when it meets later this month.

    “[The June data] means that the doves are going to have a little bit better of an argument to hold sooner rather than later, so that does reduce the probability of a second hike this year,” Pelle said, noting the commonly used terms to describe Fed members’ differing monetary policy approaches.

    Doves tend to favor looser monetary policy and issues like low unemployment over low inflation, while hawks favor robust rate hikes and keeping inflation low above all else.

    But just how long a hold could last is another matter, said Pelle.

    The job market is cooling from a scorching state, but it remains historically hot and tight. Considering ongoing demographic shifts (including the massive Baby Boomer generation aging out of the workforce), that tightness could continue, Pelle said.

    “Do we really need to be cutting rates if you have GDP running around trend and the labor market still very tight,” he said. “Inflation is coming down, but the economy is maybe growing a little bit into these higher rate levels. So the hold could be longer than people expect. But we might have some of the sting out on getting even higher.”

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  • Could the June CPI report change the Fed’s rate trajectory? | CNN Business

    Could the June CPI report change the Fed’s rate trajectory? | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.



    CNN
     — 

    After the June jobs report showed a cooling but still-hot picture of the labor market, investors are looking to a key inflation report due Wednesday for more clues on the economy’s health. But some investors say the results will likely do little to sway the Federal Reserve’s interest rate trajectory.

    What happened: The labor market added just 209,000 jobs in June, below economists’ expectations for a net gain of 225,000 jobs. That’s the smallest monthly gain since a decline in December 2020.

    But beneath the surface, the jobs market remains hot. Average hourly earnings growth remained steady at 0.4% from May and also unchanged at 4.4% year-over-year, suggesting that wage inflation remains sticky. The unemployment rate also fell to 3.6% from 3.7%, though jobless rates for Black and Hispanic workers rose sharply.

    There is “nothing in the release that would change our expectation that the Fed has more work to do,” said Joseph Davis, global chief economist at Vanguard.

    Accordingly, traders continued to overwhelmingly expect a quarter-point rate hike at the Fed’s July meeting. Traders saw a roughly 92% chance of such a decision as of the market close on Friday, according to the CME FedWatch Tool.

    What’s next: The June Consumer Price Index report, a key inflation reading, is due on Wednesday.

    Economists expect a 3.1% increase in consumer prices for the year ended in June, which would be a cooldown from a 4% annual increase in May, according to Refinitiv.

    Recent data has suggested that inflation is coming down, though it remains above the Fed’s 2% target. The Personal Consumption Expenditures price index, the Fed’s favorite inflation gauge, rose 3.8% for the 12 months ended in May. That’s down from the revised 4.3% annual rise seen in April.

    But it’s unlikely that the June CPI report will change the Fed’s interest rate trajectory, barring a huge upside or downside surprise, especially considering that Fed officials in recent weeks have been vocal that more rate hikes are likely coming, said James Ragan, director of wealth management research at DA Davidson.

    Still, that doesn’t mean investors should expect infinite rate hikes from the Fed.

    “We continue to expect that [the] Fed will soon reach its terminal rate, bringing it closer toward the end of its most aggressive tightening campaign in generations,” said Candice Tse, global head of strategic advisory solutions at Goldman Sachs Asset Management.

    The Producer Price Index report for June is due on Thursday.

    UPS and the Teamsters union are in contract negotiations. Without a deal, 340,000 Teamsters could go on strike on August 1.

    Such an event could be damaging to the US economy, reports my colleague Chris Isidore.

    UPS carries 6% of the country’s gross domestic product in its trucks. The company carried an average of 20.8 million US packages a day through last year, and that number is down only slightly this year.

    In other words, the company’s services are critical to keeping the gears moving seamlessly in supply chains that saw massive snarls during the height of the Covid pandemic. A strike could potentially bring back the problems that were so prominent just a couple years ago, including shipping delays and higher prices.

    The Biden administration is keeping an eye on negotiations between both parties in “recognition of the role UPS plays in our economy and of the important work that UPS workers did through the pandemic and continue to do today,” acting labor secretary Julie Su told CNN on Friday.

    But the company and union broke off last week, with both sides claiming the other walked away from the bargaining table.

    Read more here.

    Monday: Consumer credit for May and NY Federal Reserve’s Survey of Consumer Expectations for June.

    Tuesday: NFIB small business optimism survey for June.

    Wednesday: Consumer Price Index report and housing starts for June.

    Thursday: Producer Price Index report for June.

    Friday: University of Michigan consumer sentiment and inflation expectations for July.

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  • Expect more rate hikes from the Fed after the latest jobs report | CNN Business

    Expect more rate hikes from the Fed after the latest jobs report | CNN Business

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    Washington, DC
    CNN
     — 

    An interest rate hike later this month was already in the cards for the Federal Reserve. But after the June jobs report, the timing of a second hike remains unclear.

    Job gains remain robust, wage growth is still going strong, and unemployment continues to hover near historic lows. That means the job market is still fueling demand in the economy, which the Fed has been trying to slow through rate hikes. And Fed officials have made it clear they think the central bank still has more work to do to bring down inflation, which is still running well above the 2% goal.

    Federal Reserve Bank of Chicago President Austan Goolsbee, a voting member of the Fed committee that decides interest rates, said in an interview Friday that he sees “a decent chance of further tightening down the pipeline” and that inflation “needs to come down more.”

    Other Fed officials have struck a similarly hawkish tone on inflation, hinting strongly at a hike in July.

    “I remain very concerned about whether inflation will return to target in a sustainable and timely way,” said Federal Reserve Bank of Dallas President Lorie Logan on Thursday during a meeting hosted by the Central Bank Research Association. “I think more restrictive monetary policy will be needed to achieve the Federal Open Market Committee’s goals of stable prices and maximum employment.”

    Fed officials voted last month to hold the key federal funds rate steady at a range of 5-5.25% to reassess the economy after a string of 10 consecutive rate hikes and to monitor the effects of bank stresses in the spring, according to minutes from that meeting released Wednesday.

    “We can take some time and assess and collect more information and then be able to act, knowing that we also communicated through our projections that we don’t think we’re done, based on what we know,” said New York Fed President John Williams Wednesday during a moderated discussion in New York. “And obviously we’re absolutely committed to achieving our 2% inflation goal.”

    And Fed Chair Jerome Powell himself has doubled down on the need for more rate increases in recent speeches, not ruling out back-to-back hikes, despite economic indicators showing slight progress on inflation.

    Financial markets are pricing in a more than a 90% chance of a rate hike later this month, according to the CME FedWatch Tool.

    The Fed wants to see the labor market slow down broadly, bringing it into “better balance,” as Powell has frequently described it. That means wage growth would need to cool consistently, monthly payroll growth would need to be close to a range of 70,000 and 100,000 — the smallest job gain needed to keep up with population growth — and unemployment would need to rise, according to economists. Job market conditions don’t resemble that just yet.

    “This is clearly a very tight labor market, so I expect the Fed to look at this data and say there is justification here for continued small rate increases because the labor market is not cooling enough,” Dave Gilbertson, labor economist at payroll software company UKG, told CNN.

    Labor costs are higher because of a persistent difficulty in hiring, weighing on labor-intensive service providers such as hospitals and restaurants, which has put upward pressure on consumer prices since businesses typically raise wages to address hiring challenges.

    Powell homed in on that dynamic in recent remarks, and research from top economists argues the Fed will have to slow the economy further to fully address the labor market’s stubborn impact on inflation. Whether that means a full-blown recession or a so-called soft landing remains to be seen, but some Fed officials are optimistic.

    “I feel like we are on a golden path of avoiding recession,” Goolsbee told CNBC Friday.

    And there has been some progress on bringing the job market back into better balance while inflation has come down. Job openings fell to 9.82 million in May, down from a peak of 12 million in March 2022, though they still greatly exceed the number of unemployed people seeking work. And June’s jobs total of 209,000 is still robust by historical standards.

    But Gilbertson said labor shortages have been largely driven by demographic shifts, which might keep the job market tight for the foreseeable future.

    Beyond the expected hike in July, the Fed is going to remain laser-focused on wage growth to inform its decision-making later in the year. Central bank officials will pay particular attention to the Employment Cost Index, which recently showed that pay gains picked up in the first three months of the year. The index for the second quarter will be released in late July — after the Fed meets.

    “The focus is on the path of wage inflation because of its pass-through to services inflation,” said Sonia Meskin, head of US Macro at BNY Mellon IM.

    The June jobs report showed that average hourly earnings growth was unchanged at 0.4% from the month before and also unchanged at 4.4% year-over-year — not a welcome development.

    Core inflation hasn’t decelerated as fast as the headline measure because of the tightness in the labor market. The Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, rose 3.8% in May from a year earlier, down from April’s 4.3% rise; while the core measure edged lower to 4.6% from 4.7% during the same period.

    Within the core measure, services inflation also remains sticky and Powell said in last month’s post-meeting news conference that “we see only the earliest signs of disinflation there” and that the services sector’s “largest cost would be wage cost.”

    The Fed’s strategy to address services inflation is simply by curbing demand through more rate hikes. So, in addition to the labor market, the Fed is highly attentive to consumer spending, which has cooled in the past several months, according to figures from the Commerce Department.

    Other headwinds are expected to weigh on consumers in the months ahead, such as the resumption of student loan payments and the Supreme Court blocking President Joe Biden’s student loan forgiveness program. Americans are also running down their savings accounts while racking up debt, so US consumers may need to start cutting back soon.

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  • As Beijing’s intelligence capabilities grow, spying becomes an increasing flashpoint in US-China ties | CNN

    As Beijing’s intelligence capabilities grow, spying becomes an increasing flashpoint in US-China ties | CNN

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    Hong Kong
    CNN
     — 

    For the second time this year, concerns of Chinese spying on the United States have cast a shadow over a planned visit to China by the US’ top diplomat as the two superpowers try to improve fractured ties while keeping a watchful eye on each other.

    US Secretary of State Antony Blinken is expected to land in Beijing over the weekend following the postponement of his earlier trip planned for February after a Chinese surveillance balloon meandered across the continental US, hovering over sensitive military sites before being shot down by an American fighter plane.

    But with Blinken poised to make a trip seen as a key step to mend fractured US-China communications, another espionage controversy has flared in recent days following media reports that China had reached a deal to build a spy perch on the island of Cuba.

    Beijing has said it wasn’t “aware” of the situation, while the White House said the reports were not accurate – with Blinken earlier this week saying China upgraded its spying facilities there in 2019.

    The situation is just the latest in a string of allegations of spying between the two in recent months. They underscore how intelligence gathering – an activity meant to go on without detection, out of the public eye – is becoming an increasingly prominent flashpoint in the US-China relationship.

    CIA Director Bill Burns secretly traveled to China in May to meet counterparts and emphasize the importance of maintaining open lines of communication in intelligence channels, CNN reported earlier this month.

    “Crisis communications are arguably in their worst state since 1979. This puts a premium on both countries’ ability to gather intelligence to understand each other’s capabilities, actions, and strategic intent around the globe,” said Lyle Morris, a senior fellow at the Asia Society Policy Institute’s Center for China Analysis.

    That pushes intelligence gathering itself to become “another factor that is complicating US-China relations,” he said.

    That’s especially the case, experts say, as China continues to expand its own intelligence gathering capabilities – catching up in an area where the US has traditionally had an edge.

    “It’s fair to say that we’ve been spying on each other at various scales for a long time,” said former Central Intelligence Agency (CIA) China analyst Christopher Johnson.

    “No doubt there’s been an uptick from both sides, but probably more so on the Chinese side, simply because they’ve gotten larger, more influential, richer, and therefore have more resources to devote than they did in the past,” said Johnson, who is now president of the China Strategies Group consultancy.

    Chinese leader Xi Jinping has also pursued a far more assertive foreign policy than his predecessors during his past decade in power.

    That’s been accompanied by “a consistent emphasis on enhancing intelligence capabilities, modernizing technology, and improving coordination among different security agencies,” according to Xuezhi Guo, a professor of political science at Guilford College in the US.

    China’s main intelligence activities fall under departments within the People’s Liberation Army and its vast civilian agency known as the Ministry of State Security (MSS). Other arms of the Communist Party apparatus also play a role in activities beyond conventional intelligence gathering, experts say.

    The MSS, established in 1983, oversees intelligence and counterintelligence both within China and overseas. Its remit has encouraged analogies to a combined CIA and Federal Bureau of Intelligence. But the sprawling Beijing-headquartered MSS is even more secretive – without even a public website describing its activities.

    The agency is “expected to play an even more significant role in China’s domestic and international security and stability” in the coming years, amid mounting challenges at home and abroad, Guo said.

    In the context of both China’s growing clout and geopolitical frictions, experts say it’s no surprise Beijing is allegedly seeking to establish or expand surveillance facilities in Cuba – or other places around the world – with the US as a key target, but not the only one.

    Meanwhile, intelligence gathering in China has become harder.

    Xi has consolidated his power and become increasingly focused on security – including building out the state’s ability to monitor its citizens, both online and through China’s extensive surveillance infrastructure.

    “The task of collecting intelligence in China is arguably harder than ever and yet more necessary than ever,” said Johnson, the former analyst, pointing to challenges of gaining insight into the government under the centralized leadership of Xi, who maintains a “very small circle of knowledge or trust.”

    China’s building of a domestic “surveillance panopticon” has also enabled its counter-intelligence, according to Johnson.

    US intelligence has difficulties having operational meetings or “going black” (dodging surveillance) within China, he said, especially during the Covid-19 pandemic when movement was tightly controlled and even more digitally monitored than usual.

    CIA operations also suffered a staggering setback starting in 2010, according to The New York Times, when the Chinese government killed or imprisoned more than a dozen sources over two years.

    In 2021, CNN reported that the agency was overhauling how it trains and manages its network of spies as part of a broad transition to focus more closely on adversaries like China and Russia.

    A tower of security cameras near Shanghai's Lujiazui financial district in May.

    This contrasts with what some US lawmakers and commentators believe has been a too relaxed approach to national security with regards to China, where even private businesses are beholden to the ruling Communist Party, which also seeks to keep tabs on its citizens overseas.

    Experts have also warned about the overlap between espionage efforts and operations like those of China’s United Front – a sprawling network of groups that manage the party’s relationship with non-party industries, organizations and individuals around the world.

    Heightened concern and awareness about Chinese intelligence gathering – or the potential for it – has exploded in the US in recent years.

    That’s played out in debates about the use of Chinese telecoms equipment and social media platforms – think Huawei and TikTok – as well as in government efforts to prosecute economic espionage cases and prevent any influence campaigns from impacting American democracy.

    Beijing has said repeatedly that it does not interfere in the “internal affairs” of other countries. Both Huawei and Tiktok have repeatedly denied that their products present a national security risk or would be accessed by the Chinese government.

    In the US, there’s also been concern about over-hyping the threat and sparking anti-Chinese sentiment.

    The US Justice Department last year ended its 3-year-old China Initiative, a national security program largely focused on thwarting technology theft, including in academia, after a string of cases were dismissed amid concerns of fueling suspicion and bias against Chinese Americans.

    US intellectual property had long been a traditional target of Chinese espionage.

    A survey of 224 reported instances of Chinese espionage directed at the United States since 2000, conducted using open source data by the Center for Strategic and International Studies (CSIS) think tank in Washington, found nearly half involved cyber-espionage, while over half were seeking to acquire commercial technologies.

    Beijing appears to be increasingly pushing back on what it sees as a double standard – as the US’ international surveillance efforts have also been well-documented.

    The 2013 leak produced by former National Security Agency contractor Edward Snowden, for example, revealed Washington’s vast global digital surveillance capabilities, against both rivals and allies alike. Meanwhile, the US intelligence community is widely understood to have its own overseas facilities for collecting signals intelligence.

    Last month, Beijing released a report from a national cybersecurity agency titled “‘Empire of Hacking’: The US Central Intelligence Agency.” It accused the US of promoting the internet in the 1980s in order to further its intelligence agencies’ efforts to launch “Color Revolutions” and overthrow governments abroad.

    “The organizations, enterprises and individuals that use the Internet equipment and software products of the USA have been used as the puppet ‘agents’ by CIA, helping it to be a ‘shining star’ in global cyber espionage wars,” the report also claimed.

    China’s own internet is heavily censored with access limited by a “Great Firewall” – part of its extensive efforts to control the flow of information alongside its extensive digital surveillance of its own population.

    China’s Foreign Ministry last month again pointed its finger at the US after Washington released a warning alleging that a Chinese state-sponsored hacker had infiltrated networks across US critical infrastructure sectors.

    Earlier this month, the ministry also slammed the US for sending what it said were more than 800 flights of large reconnaissance aircraft “to spy on China” last year – though no assertion was made of crossing into Chinese airspace.

    The comment came after each country’s military accused the other of misbehavior after a Chinese fighter jet intercepted a US spy plane in international airspace over the South China Sea.

    TikTok CEO Shou Zi Chew testifies at a House Energy and Commerce Committee hearing on Capitol Hill in Washington, DC on Thursday, March 23, 2023.

    Experts say this rhetorical back-and-forth over each other’s clandestine activities is likely only to continue as US-China competition drives both to ramp up their intelligence gathering – and China continues to expand its own prowess, including through technological advancements such as satellite networks, surveillance balloons and data processing.

    “China increasingly has capabilities (that the US has been known for) … this is moving from a one way street historically to a two-way street,” said John Delury, author of “Agents of Subversion: The Fate of John T. Downey and the CIA’s Covert War in China.”

    He pointed to how China had long been subject to US offshore surveillance and – prior to the restoration of diplomatic relations in the 1970s – direct aerial surveillance.

    “There’s a psychological dimension to this as well,” Delury added, noting that the spy balloon incident earlier this year brought this to the fore – giving Americans the unnerving sense that China “can do this to us now, they have technical capabilities and can look at us.”

    Meanwhile, there’s much at stake in how well the two governments can repair official communication – seen as a key element of Blinken’s expected visit on Sunday and Monday.

    “When there’s less communication, the two intelligence communities inside the two governments have to do more and more guesswork,” said Delury. “Then there’s a lot more room for faulty assumptions.”

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  • Why do businesses keep raising their prices? | CNN Business

    Why do businesses keep raising their prices? | CNN Business

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    Los Angeles
    CNN
     — 

    After two years of surging prices, economists still can’t agree on what has caused the world’s worst inflation crisis in decades.

    While the usual culprits cited by economists include pandemic-era supply chain bottlenecks, the war in Ukraine and various US economic policies, others say it’s due to “greedflation,” the idea that companies use higher inflation rates as an excuse to jack up prices and grow their margins.

    However, according to preliminary findings in a New York Federal Reserve survey, there might be something else at play.

    The survey of 700 businesses across New York, Atlanta and Cleveland found that strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation.

    That means a business can essentially set prices as high as it wants, as long as they aren’t so high that they drive away the customer base. In other words, it’s Econ 101: Good, old-fashioned supply and demand.

    More than 82% of businesses surveyed said demand factored into their pricing decisions, while only 52% of businesses said they take the overall rate of inflation into account when setting prices.

    Customers have become trained to tolerate price hikes, said John Zheng, a professor of marketing at the Wharton School at the University of Pennsylvania.

    “As a consumer during inflation, you know the costs for companies are increasing, so, therefore, you become more receptive to a higher price,” he said.

    Approval of price increases could fuel even higher pricing in the future — a cycle that can be hard to break, said Zheng.

    Mr. Mac’s mac and cheese restaurant in Manchester, New Hampshire tried boosting prices a little at a time to keep up with inflation in 2021, but it wasn’t enough to cover the cost increases to the business, vice president of operations Mark Murphy told CNN. Fearing customer backlash, the restaurant accepted smaller margins instead of pricing out their diners.

    When the business finally hiked prices, Murphy said the decision was “painful.”

    “We were looking at our sales and our orders daily, and we were checking every review to see what people were saying,” Murphy said. “It was very scary.”

    Despite those fears, Mr. Mac’s elevated prices did not cut into business.

    “What we ended up finding was customers may not have been happy about it, but they were not surprised. I think they kind of understood that prices are increasing. They see it everywhere they go,” he said.

    Murphy said the restaurant has since raised prices more than once to keep up with inflation.

    Multinational companies Colgate, Procter & Gamble and PepsiCo have raised prices by double-digit percentages over the past year, according to their first-quarter earnings reports, outpacing the US inflation rate.

    However, as the Federal Reserve hikes interest rates and the economy slows down, customers may soon be less keen to pay through the nose for goods and services, Zheng said.

    Businesses may already be in tune with the change: Those surveyed by the New York Fed said they expect lower cost and price pressures in the coming year.

    Emily Netti, a wedding photographer in Syracuse, New York, said she has raised prices by a few hundred dollars multiple times over the past two years to pay competitive rates to the additional photographers and editors she hires. However, she said she is mindful that her local customer base may soon want to cut back on expenses.

    “I’ve started to slow down in my own market within Syracuse,” she said.

    “I do see myself raising by $100 rather than $300 for now, so I can match the market.”

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  • US fighter jets responded to an aircraft with an unresponsive pilot near DC. The aircraft ultimately crashed in Virginia | CNN

    US fighter jets responded to an aircraft with an unresponsive pilot near DC. The aircraft ultimately crashed in Virginia | CNN

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    CNN
     — 

    US F-16 fighter jets caused a sonic boom across the Washington, DC, region Sunday as they scrambled to reach an unresponsive aircraft that ultimately crashed in Virginia, officials said.

    A US official said the F-16s did not shoot down the aircraft and that it is typical for the Federal Aviation Administration to call in jets if someone is flying unsafely.

    The pilot of the civilian aircraft was unresponsive as the F-16 fighter jets attempted to make contact, according to a news release from the Continental US North American Aerospace Defense Command Region.

    The F-16 jets were “authorized to travel at supersonic speeds,” which resulted in the sonic boom heard in the Washington, DC, area.

    The F-16s used flares “in an attempt to draw attention from the pilot,” the release added.

    The civilian aircraft, a Cessna 560 Citation V, was intercepted by the NORAD jets around 3:20 p.m. and ultimately crashed near the George Washington National Forest in Virginia.

    “The pilot was unresponsive and the Cessna subsequently crashed near the George Washington National Forest, Virginia,” the release said. “NORAD attempted to establish contact with the pilot until the aircraft crashed.”

    Four people were on board the aircraft, which overshot its planned destination by 315 miles before crashing, sources familiar with the investigation said.

    Search efforts were still underway by state and local authorities Sunday evening, Virginia State Police told CNN.

    State police were notified around 3:50 p.m. of a possible aircraft crash in the Staunton/Blue Ridge Parkway region, the agency said.

    Nothing has been located at this time, it added.

    The National Transportation Safety Board said on Twitter it was investigating the crash.

    The military aircraft caused a sonic boom heard across the Washington, DC, metropolitan region.

    “We are aware of reports from communities throughout the National Capital Region of a loud ‘boom’ this afternoon,” DC Homeland Security & Emergency Management said on Twitter.

    There is no threat at this time, the agency added.

    Earlier, the FAA said in a statement that a Cessna Citation crashed in southwest Virginia Sunday.

    The aircraft took off from Elizabethton Municipal Airport in Elizabethton, Tennessee, and was bound for Long Island MacArthur Airport in New York.

    The aircraft crashed into a mountainous terrain in a “sparsely populated area”, according to FAA.

    The US Capitol Complex was placed on “an elevated alert” when the small aircraft flew near the area on Sunday afternoon, according to a statement from US Capitol Police.

    “This afternoon, our officials were working closely with our federal partners to monitor an unresponsive pilot who was flying an airplane near the National Capital Region. The U.S. Capitol Complex was briefly placed on an elevated alert until the airplane left the area,” the statement said.

    The US Secret Service said they did not alter their posture for keeping President Joe Biden secure after the incident. Biden was golfing at the Andrews Air Force Base golf course near Joint Base Andrews in Maryland.

    The incident “had no impact on Secret Service,” spokesperson Anthony Guglielmi said in a Sunday statement.

    The President has been briefed on the incident, according to a White House official.

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  • US Postal Service releases national dog bite rankings | CNN

    US Postal Service releases national dog bite rankings | CNN

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    CNN
     — 

    California and Texas ranked highest on the United States Postal Service’s annual list of states with the most dog bites against its employees, the USPS announced.

    The report calls attention to the aggressive dog behavior mail carriers often face as the USPS kicks off National Dog Bite Awareness Week.

    In 2022, California had the highest number of dog bites with 675. Texas and New York were not far behind with 404 and 321 bites, respectively, the Postal Service reported.

    “When our mail carriers are bitten, it is usually a ‘good dog’ that had not previously behaved in a menacing way,” USPS Occupational Safety and Health Senior Director Linda DeCarlo said in a news release.

    Houston, Los Angeles and Dallas ranked highest among US cities with the most dog attacks against USPS workers last year, according to the USPS.

    More than 5,300 USPS employees were attacked by dogs during mail deliveries last year, according to the Postal Service.

    The annual public service awareness campaign, accompanied by the hashtag #dogbiteawareness, runs through next week.

    “When letter carriers deliver mail in our communities, dogs that are not secured or leashed can become a nemesis and unpredictable and attack,” Leeann Theriault, USPS employee safety and health awareness manager, said in the release.

    The USPS trains its mail carriers not to startle dogs, to avoid petting or feeding them and to place something between themselves and the animal – like their mail satchel – if a dog does attack, the postal said in a news release.

    Since most people know the general time their mail arrives each day, the USPS advised keeping dogs secure before Postal Service employees stop by.

    Other advice for dog owners, according to the USPS: Place pets on a leash, keep them in the house or behind a fence and make sure they’re away from the door.

    The Postal Service also advises parents to not allow children to take mail directly from mail carriers, as the dog may view it as a threat to the child’s safety.

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  • Employers are preparing for a recession, but that doesn’t always mean layoffs | CNN Business

    Employers are preparing for a recession, but that doesn’t always mean layoffs | CNN Business

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    Minneapolis
    CNN
     — 

    Areas of the US economy have started to crack under the weight of persistently high inflation and a string of 10 consecutive rate hikes from the Federal Reserve.

    But despite all that, the labor market has kept humming right along. And that’s largely expected to be the case, again, in Friday’s monthly jobs report from the Bureau of Labor Statistics.

    Economists are forecasting a net gain of 190,000 jobs for May, according to Refinitiv. While that would mark a significant retreat from April’s surprisingly strong 253,000 jobs added, it would land slightly above the average monthly gains seen during the strong labor market in the years leading up to the pandemic.

    Economists are also expecting the unemployment rate to tick back up to 3.5%. The US jobless rate has hovered at decade-lows for more than a year, with the current 3.4% rate matching a 53-year low hit in January.

    Private sector employment increased by 278,000 jobs in May, according to ADP’s monthly National Employment Report, frequently seen as a proxy for the government’s official number. That’s significantly higher than estimates of 170,000 jobs added but slightly below the previous month’s revised total of 291,000.

    Additional labor market data released Thursday showed that initial weekly jobless claims for the week ended May 27 totaled 232,000, almost no change from the previous week’s revised total of 230,000 applications.

    “In the last few months, the job market has continued to defy gravity, adding a steady clip of jobs and holding unemployment at historically low levels despite a backdrop of rising interest rates, banking turmoil, tech layoffs and debt ceiling negotiations,” Daniel Zhao, lead economist at employment review and search site Glassdoor, wrote in a note this week. “After a healthy April jobs report, May is likely to repeat with an equally strong performance.”

    Consumer spending and the labor market — two ares of strength in the economy — have, in a way, continued to feed on themselves.

    Last week, a Commerce Department report showed that not only did the Fed’s preferred inflation gauge heat up in April but so did consumer spending. Economists largely attributed consumers’ resilience to the healthy labor market as well as ample dry powder stockpiled from home refinances and from the temporary pause in student loan payments.

    In turn, that’s kept businesses busy.

    “With demand for goods and services holding up, employers who have been cautious and have been very nervous about over-hiring are — when push comes to shove — having to keep hiring just to keep pace with business activity,” Julia Pollak, chief economist for online employment marketplace ZipRecruiter, told CNN. “They’re very worried about a recession later this year, but they need to keep hiring today to provide the pizzas that people are demanding and to prevent flights being canceled.”

    She added: “Companies have also learned the hard way how costly staffing shortages can be.”

    But labor shortages are becoming far less acute: This past Memorial Day weekend, 1% of flights were canceled, Pollak said, noting that cancellations were fivefold higher a year before.

    “And while that’s a good news story — the end of shortages and disruptions during the pandemic is good for most consumers and good for businesses — it does come at some cost, which is a measurable decline in worker and job seeker leverage,” she said.

    Labor turnover data released Wednesday showed that the US employment market remained tight in April.

    Job openings bounced up to 10.1 million positions, bucking economists’ predictions for a fourth-consecutive monthly decline, according to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey report. The jump brought the ratio of vacancies to unemployed to almost 1.8, which is well above a range of 1.0 to 1.2 that is considered consistent with a balanced labor market, according to Michael Feroli, JPMorgan chief US economist.

    Although the April JOLTS data showed that fewer people were voluntarily quitting their jobs, the amount of layoffs and discharges dropped during the month, suggesting that employers are continuing to hoard workers, noted economist Matthew Martin of Oxford Economics.

    While monthly job gains haven’t tailed off as much as anticipated to this point, there is a notable slowdown that’s occurred from the blockbuster job gains of the past three years.

    But whether the softening is a sign of a return to pre-pandemic form or perhaps of a downswing into a downturn, remains to be seen.

    Some of the traditional recession indicators have been flashing red. Layoff announcements have quadrupled so far this year to 417,500, which — excluding 2020 — is the highest January to May total since 2009, according to a report from Challenger, Gray & Christmas released Thursday. Falling consumer confidence, monthly declines in the Conference Board’s Leading Economic Index, and drops in temporary help employment are also signaling that a downturn is just ahead. However, that long-predicted recession isn’t here just yet.

    “We were in such an unusual place during the pandemic with some of those indicators at completely extraordinary heights that they have experienced extraordinary declines,” Pollak said. “But those declines were just a return to normal, not a contraction, and it’s not a recession.”

    The government’s May jobs report is scheduled for Friday at 8:30 a.m. ET.

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