Nearly a decade ago, the United States began naming and shaming China for an onslaught of online espionage, the bulk of it conducted using low-level phishing emails against American companies for intellectual property theft.
On Monday, the United States again accused China of cyberattacks. But these attacks were highly aggressive, and they reveal that China has transformed into a far more sophisticated and mature digital adversary than the one that flummoxed U.S. officials a decade ago.
The Biden administration’s indictment for the cyberattacks, along with interviews with dozens of current and former American officials, shows that China has reorganized its hacking operations in the intervening years. While it once conducted relatively unsophisticated hacks of foreign companies, think tanks and government agencies, China is now perpetrating stealthy, decentralized digital assaults of American companies and interests around the world.
Hacks that were conducted via sloppily worded spearphishing emails by units of the People’s Liberation Army are now carried out by an elite satellite network of contractors at front companies and universities that work at the direction of China’s Ministry of State Security, according to U.S. officials and the indictment.
like Microsoft’s Exchange email service and Pulse VPN security devices, which are harder to defend against and allow China’s hackers to operate undetected for longer periods.
“What we’ve seen over the past two or three years is an upleveling” by China, said George Kurtz, the chief executive of the cybersecurity firm CrowdStrike. “They operate more like a professional intelligence service than the smash-and-grab operators we saw in the past.”
China has long been one of the biggest digital threats to the United States. In a 2009 classified National Intelligence Estimate, a document that represents the consensus of all 16 U.S. intelligence agencies, China and Russia topped the list of America’s online adversaries. But China was deemed the more immediate threat because of the volume of its industrial trade theft.
But that threat is even more troubling now because of China’s revamping of its hacking operations. Furthermore, the Biden administration has turned cyberattacks — including ransomware attacks — into a major diplomatic front with superpowers like Russia, and U.S. relations with China have steadily deteriorated over issues including trade and tech supremacy.
China’s prominence in hacking first came to the fore in 2010 with attacks on Google and RSA, the security company, and again in 2013 with a hack of The New York Times.
breach of the U.S. Office of Personnel Management. In that attack, Chinese hackers made off with sensitive personal information, including more than 20 million fingerprints, for Americans who had been granted a security clearance.
White House officials soon struck a deal that China would cease its hacking of American companies and interests for its industrial benefit. For 18 months during the Obama administration, security researchers and intelligence officials observed a notable drop in Chinese hacking.
After President Donald J. Trump took office and accelerated trade conflicts and other tensions with China, the hacking resumed. By 2018, U.S. intelligence officials had noted a shift: People’s Liberation Army hackers had stood down and been replaced by operatives working at the behest of the Ministry of State Security, which handles China’s intelligence, security and secret police.
Hacks of intellectual property, that benefited China’s economic plans, originated not from the P.L.A. but from a looser network of front companies and contractors, including engineers who worked for some of the country’s leading technology companies, according to intelligence officials and researchers.
It was unclear how exactly China worked with these loosely affiliated hackers. Some cybersecurity experts speculated that the engineers were paid cash to moonlight for the state, while others said those in the network had no choice but to do whatever the state asked. In 2013, a classified U.S. National Security Agency memo said, “The exact affiliation with Chinese government entities is not known, but their activities indicate a probable intelligence requirement feed from China’s Ministry of State Security.”
announced a new policy requiring Chinese security researchers to notify the state within two days when they found security holes, such as the “zero-days” that the country relied on in the breach of Microsoft Exchange systems.
arrested its founder. Two years later, Chinese police announced that they would start enforcing laws banning the “unauthorized disclosure” of vulnerabilities. That same year, Chinese hackers, who were a regular presence at big Western hacking conventions, stopped showing up, on state orders.
“If they continue to maintain this level of access, with the control that they have, their intelligence community is going to benefit,” Mr. Kurtz said of China. “It’s an arms race in cyber.”
The nation is facing once in a generation choices about how energy ought to be delivered to homes, businesses and electric cars — decisions that could shape the course of climate change and determine how the United States copes with wildfires, heat waves and other extreme weather linked to global warming.
On one side, large electric utilities and President Biden want to build thousands of miles of power lines to move electricity created by distant wind turbines and solar farms to cities and suburbs. On the other, some environmental organizations and community groups are pushing for greater investment in rooftop solar panels, batteries and local wind turbines.
There is an intense policy struggle taking place in Washington and state capitals about the choices that lawmakers, energy businesses and individuals make in the next few years, which could lock in an energy system that lasts for decades. The divide between those who want more power lines and those calling for a more decentralized energy system has split the renewable energy industry and the environmental movement. And it has created partnerships of convenience between fossil fuel companies and local groups fighting power lines.
At issue is how quickly the country can move to cleaner energy and how much electricity rates will increase.
senators from both parties agreed to in June. That deal includes the creation of a Grid Development Authority to speed up approvals for transmission lines.
Most energy experts agree that the United States must improve its aging electric grids, especially after millions of Texans spent days freezing this winter when the state’s electricity system faltered.
“The choices we make today will set us on a path that, if history is a barometer, could last for 50 to 100 years,” said Amy Myers Jaffe, managing director of the Climate Policy Lab at Tufts University. “At stake is literally the health and economic well-being of every American.”
The option supported by Mr. Biden and some large energy companies would replace coal and natural gas power plants with large wind and solar farms hundreds of miles from cities, requiring lots of new power lines. Such integration would strengthen the control that the utility industry and Wall Street have over the grid.
batteries installed at homes, businesses and municipal buildings.
Those batteries kicked in up to 6 percent of the state grid’s power supply during the crisis, helping to make up for idled natural gas and nuclear power plants. Rooftop solar panels generated an additional 4 percent of the state’s electricity.
become more common in recent years.
Some environmentalists argue that greater use of rooftop solar and batteries is becoming more essential because of climate change.
After its gear ignited several large wildfires, Pacific Gas & Electric began shutting off power on hot and windy days to prevent fires. The company emerged from bankruptcy last year after amassing $30 billion in liabilities for wildfires caused by its equipment, including transmission lines.
Elizabeth Ellenburg, an 87-year-old cancer survivor in Napa, Calif., bought solar panels and a battery from Sunrun in 2019 to keep her refrigerator, oxygen equipment and appliances running during PG&E’s power shut-offs, a plan that she said has worked well.
“Usually, when PG&E goes out it’s not 24 hours — it’s days,” said Ms. Ellenburg, a retired nurse. “I need to have the ability to use medical equipment. To live in my own home, I needed power other than the power company.”
working to improve its equipment. “Our focus is to make both our distribution and transmission system more resilient and fireproof,” said Sumeet Singh, PG&E’s chief risk officer.
But spending on fire prevention by California utilities has raised electricity rates, and consumer groups say building more power lines will drive them even higher.
Average residential electricity rates nationally have increased by about 14 percent over the last decade even though average household energy use rose just over 1 percent.
2019 report by the National Renewable Energy Laboratory, a research arm of the Energy Department, found that greater use of rooftop solar can reduce the need for new transmission lines, displace expensive power plants and save the energy that is lost when electricity is moved long distances. The study also found that rooftop systems can put pressure on utilities to improve or expand neighborhood wires and equipment.
Texas was paralyzed for more than four days by a deep freeze that shut down power plants and disabled natural gas pipelines. People used cars and grills and even burned furniture to keep warm; at least 150 died.
One reason for the failure was that the state has kept the grid managed by the Electric Reliability Council of Texas largely disconnected from the rest of the country to avoid federal oversight. That prevented the state from importing power and makes Texas a case for the interconnected power system that Mr. Biden wants.
Consider Marfa, an artsy town in the Chihuahuan Desert. Residents struggled to stay warm as the ground was blanketed with snow and freezing rain. Yet 75 miles to the west, the lights were on in Van Horn, Texas. That town is served by El Paso Electric, a utility attached to the Western Electricity Coordinating Council, a grid that ties together 14 states, two Canadian provinces and a Mexican state.
$1.4 million, compared with about $1 million to Donald J. Trump, according to the Center for Responsive Politics.
In Washington, developers of large solar and wind projects are pushing for a more connected grid while utilities want more federal funding for new transmission lines. Advocates for rooftop solar panels and batteries are lobbying Congress for more federal incentives.
Separately, there are pitched battles going on in state capitals over how much utilities must pay homeowners for the electricity generated by rooftop solar panels. Utilities in California, Florida and elsewhere want lawmakers to reduce those rates. Homeowners with solar panels and renewable energy groups are fighting those efforts.
Building power lines is hard.
Despite Mr. Biden’s support, the utility industry could struggle to add power lines.
Many Americans resist transmission lines for aesthetic and environmental reasons. Powerful economic interests are also at play. In Maine, for instance, a campaign is underway to stop a 145-mile line that will bring hydroelectric power from Quebec to Massachusetts.
New England has phased out coal but still uses natural gas. Lawmakers are hoping to change that with the help of the $1 billion line, called the New England Clean Energy Connect.
This spring, workmen cleared trees and installed steel poles in the forests of western Maine. First proposed a decade ago, the project was supposed to cut through New Hampshire until the state rejected it. Federal and state regulators have signed off on the Maine route, which is sponsored by Central Maine Power and HydroQuebec.
But the project is mired in lawsuits, and Maine residents could block it through a November ballot measure.
set a record in May, and some scientists believe recent heat waves were made worse by climate change.
“Transmission projects take upward of 10 years from conception to completion,” said Douglas D. Giuffre, a power expert at IHS Markit. “So if we’re looking at decarbonization of the power sector by 2035, then this all needs to happen very rapidly.”
“I think first, this is an economic surrender that other countries are glad to go along with, as long as America is making itself that uncompetitive,” Mr. Brady said. “And secondly, I think there are too many competing interests here for them to finalize a deal that would be agreeable to Congress.”
Other nations must also determine how to turn their commitments into domestic law.
The mechanics of changing how the largest and most profitable companies are taxed, and of making exceptions for financial services, oil and gas businesses, will be central to the discussions. There are already concerns that carve-outs could lead to new tax loopholes.
Ms. Yellen, who is making her second international trip as Treasury secretary, will be holding bilateral meetings with many of her counterparts, including officials from Saudi Arabia, Japan, Turkey and Argentina. China, which signed on to the global minimum tax framework, is not expected to send officials to the gathering of finance ministers and central bank governors, so there will be no discussions between the world’s two largest economic powers.
Mr. Saint-Amans expressed optimism about the trajectory of the tax negotiations, which were on life support during the final year of the Trump administration, and attributed that largely to the new diplomatic approach from the United States.
“It took a U.S. election, and some work at the O.E.C.D.,” he said.
During the panel discussion on tax and climate change, Ms. Yellen’s counterparts said they appreciated the spirit of cooperation from the United States.
Chrystia Freeland, Canada’s deputy prime minister and finance minister, said having the United States back at the table working to combat climate change was “welcome” and “transformative.” Mr. Le Maire thanked the Biden administration for rejoining the Paris Agreement.
“The U.S. is back,” he said.
Jim Tankersley contributed reporting from Washington, andLiz Alderman from Paris.
WASHINGTON — When the nation’s antitrust laws were created more than a century ago, they were aimed at taking on industries such as Big Oil.
But technology giants like Amazon, Facebook, Google and Apple, which dominate e-commerce, social networks, online advertising and search, have risen in ways unforeseen by the laws. In recent decades, the courts have also interpreted the rules more narrowly.
On Monday, a pair of rulings dismissing federal and state antitrust lawsuits against Facebook renewed questions about whether the laws were suited to taking on tech power. A federal judge threw out the federal suit because, he said, the Federal Trade Commission had not supported its claims that Facebook holds a dominant market share, and he said the states had waited too long to make their case.
The decisions underlined how cautious and conservative courts could slow an increasingly aggressive push by lawmakers, regulators and the White House to restrain the tech companies, fueling calls for Congress to revamp the rules and provide regulators with more legal tools to take on the tech firms.
David Cicilline, a Democrat of Rhode Island, said the country needed a “massive overhaul of our antitrust laws and significant updates to our competition system” to police the biggest technology companies.
Moments later, Representative Ken Buck, a Colorado Republican, agreed. He called for lawmakers to adapt antitrust laws to fit the business models of Silicon Valley companies.
This week’s rulings have now put the pressure on lawmakers to push through a recently proposed package of legislation that would rewrite key aspects of monopoly laws to make some of the tech giants’ business practices illegal.
“This is going to strengthen the case for legislation,” said Herbert Hovenkamp, an antitrust expert at the University of Pennsylvania Law School. “It seems to be proof that the antitrust laws are not up to the challenge.”
introduced this month and passed the House Judiciary Committee last week. The bills would make it harder for the major tech companies to buy nascent competitors and to give preference to their own services on their platforms, and ban them from using their dominance in one business to gain the upper hand in another.
including Lina Khan, a scholar whom President Biden named this month to run the F.T.C. — have argued that a broader definition of consumer welfare, beyond prices, should be applied. Consumer harm, they have said, can also be evident in reduced product quality, like Facebook users suffering a loss of privacy when their personal data is harvested and used for targeted ads.
In one of his rulings on Monday, Judge James E. Boasberg of U.S. District Court for the District of Columbia said Facebook’s business model had made it especially difficult for the government to meet the standard for going forward with the case.
The government, Judge Boasberg said, had not presented enough evidence that Facebook held monopoly power. Among the difficulties he highlighted was that Facebook did not charge its users for access to its site, meaning its market share could not be assessed through revenue. The government had not found a good alternative measure to make its case, he said.
He also ruled against another part of the F.T.C.’s lawsuit, concerning how Facebook polices the use of data generated by its product, while citing the kind of conservative antitrust doctrine that critics say is out of step with the technology industry’s business practices.
The F.T.C., which brought the federal antitrust suit against Facebook in December, can file a new complaint that addresses the judge’s concerns within 30 days. State attorneys general can appeal Judge Boasberg’s second ruling dismissing a similar case.
fined Facebook $5 billion in 2019 for privacy violations, there were few significant changes to how the company’s products operate. And Facebook continues to grow: More than 3.45 billion people use one or more of its apps — including WhatsApp, Instagram or Messenger — every month.
The decisions were particularly deflating after actions to rein in tech power in Washington had gathered steam. Ms. Khan’s appointment to the F.T.C. this month followed that of Tim Wu, another lawyer who has been critical of the industry, to the National Economic Council. Bruce Reed, the president’s deputy chief of staff, has called for new privacy regulation.
Mr. Biden has yet to name anyone to permanently lead the Justice Department’s antitrust division, which last year filed a lawsuit arguing Google had illegally protected its monopoly over online search.
The White House is also expected to issue an executive order this week targeting corporate consolidation in tech and other areas of the economy. A spokesman for the White House did not respond to requests for comment about the executive order or Judge Boasberg’s rulings.
Activists and lawmakers said this week that Congress should not wait to give regulators more tools, money and legal red lines to use against the tech giants. Mr. Cicilline, along with Representative Jerrold Nadler of New York, the chairman of the House Judiciary Committee, said in a statement that the judge’s decisions on Facebook show “the dire need to modernize our antitrust laws to address anticompetitive mergers and abusive conduct in the digital economy.”
Senator Amy Klobuchar, a Democrat of Minnesota who chairs the Senate Judiciary Committee’s subcommittee on antitrust, echoed their call.
“After decades of binding Supreme Court decisions that have weakened our antitrust policies, we cannot rely on our courts to keep our markets competitive, open and fair,” she said in a statement. “We urgently need to rejuvenate our antitrust laws to meet the challenges of the modern digital economy.”
But the six bills to update monopoly laws have a long way to go. They still need to pass the full House, where they will likely face criticism from moderate Democrats and libertarian Republicans. In the Senate, Republican support is necessary for them to overcome the legislative filibuster.
The bills may also not go as far in altering antitrust laws as some hope. The House Judiciary Committee amended one last week to reinforce the standard around consumer welfare.
Even so, Monday’s rulings have given the proposals a boost. Bill Baer, who led the Justice Department antitrust division during the Obama administration, said it “gives tremendous impetus to those in Congress who believe that the courts are too conservative in addressing monopoly power.”
Facebook and the tech platforms might like the judge’s decisions, he said, “but they might not like what happens in the Congress.”
GENEVA — President Biden had three big tasks to accomplish on his first foreign trip since taking office: Convince the allies that America was back, and for good; gather them in common cause against the rising threat of China; and establish some red lines for President Vladimir V. Putin of Russia, whom he called his “worthy adversary.”
He largely accomplished the first, though many European leaders still wonder whether his presidency may yet be just an intermezzo, sandwiched between the Trump era and the election of another America First leader uninterested in the 72-year-old Atlantic alliance.
He made inroads on the second, at least in parts of Europe, where there has been enormous reluctance to think first of China as a threat — economically, technologically and militarily — and second as an economic partner.
Mr. Biden expressed cautious optimism about finding ways to reach a polite accommodation with Mr. Putin. But it is far from clear that any of the modest initiatives the two men described on Wednesday, after a stiff, three-hour summit meeting on the edge of Lake Geneva, will fundamentally change a bad dynamic.
when he refers to Beijing’s actions against the Uyghur population and other predominantly Muslim ethnic minorities as genocide.
So Mr. Biden toned down his autocracy vs. democracy talk for this trip. And that worked.
Yet while “Biden has gotten words from the Europeans, he hasn’t gotten deeds,” said James M. Lindsay, director of studies at the Council on Foreign Relations. “Settling some trade issues is a very good start. But it’s not how you start, but how you finish, how you translate the sentiments in the communiqués into common policies, and that will be very difficult.’’
Mr. Biden carefully choreographed the trip so that he demonstrated the repairs being made to the alliance before going on to meet Mr. Putin. Mr. Biden made clear he wanted to present a unified front to the Russian leader, to demonstrate that in the post-Trump era, the United States and the NATO allies were one.
That allowed Mr. Biden to take a softer tone when he got to Geneva for the summit meeting, where he sought to portray Mr. Putin as an isolated leader who has to worry about his country’s future. When Mr. Biden said in response to a reporter’s question that “I don’t think he’s looking for a Cold War with the United States,’’ it was a signal that Mr. Biden believes he has leverage that the rest of the world has underappreciated.
Mr. Putin’s economy is “struggling,’’ he said, and he faces a long border with China at a moment when Beijing is “hellbent” on domination.
“He still, I believe, is concerned about being ‘encircled,’ ” Mr. Biden said. “He still is concerned that we, in fact, are looking to take him down.” But, he added, he didn’t think those security fears “are the driving force as to the kind of relationship he’s looking for with the United States.”
He set as the first test of Mr. Putin’s willingness to deal with him seriously a review of how to improve “strategic stability,’’ which he described as controlling the introduction of “new and dangerous and sophisticated weapons that are coming on the scene now that reduce the times of response, that raise the prospects of accidental war.”
It is territory that has been neglected, and if Mr. Biden is successful he may save hundreds of billions of dollars that would otherwise be spent on hypersonic and space weapons, as well as the development of new nuclear delivery systems.
But none of that is likely to deter Mr. Putin in the world of cyberweapons, which are dirt cheap and give him an instrument of power each and every day. Mr. Biden warned during his news conference that “we have significant cyber capability,” and said that while Mr. Putin “doesn’t know exactly what it is,” if the Russians “violate these basic norms, we will respond with cyber.”
The U.S. has had those capabilities for years but has hesitated to use them, for fear that a cyberconflict with Russia might escalate into something much bigger.
But Mr. Biden thinks Mr. Putin is too invested in self-preservation to let it come to that. In the end, he said, just before boarding Air Force One for the flight home, “You have to figure out what the other guy’s self-interest is. Their self-interest. I don’t trust anybody.”
David E. Sanger reported from Geneva and Steven Erlanger from Brussels.
There were two weeks left in the Trump administration when the Treasury Department handed down a set of rules governing an obscure corner of the tax code.
Overseen by a senior Treasury official whose previous job involved helping the wealthy avoid taxes, the new regulations represented a major victory for private equity firms. They ensured that executives in the $4.5 trillion industry, whose leaders often measure their yearly pay in eight or nine figures, could avoid paying hundreds of millions in taxes.
The rules were approved on Jan. 5, the day before the riot at the U.S. Capitol. Hardly anyone noticed.
The Trump administration’s farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses: Private equity has conquered the American tax system.
one recent estimate, the United States loses $75 billion a year from investors in partnerships failing to report their income accurately — at least some of which would probably be recovered if the I.R.S. conducted more audits. That’s enough to roughly double annual federal spending on education.
It is also a dramatic understatement of the true cost. It doesn’t include the ever-changing array of maneuvers — often skating the edge of the law — that private equity firms have devised to help their managers avoid income taxes on the roughly $120 billion the industry pays its executives each year.
Private equity’s ability to vanquish the I.R.S., Treasury and Congress goes a long way toward explaining the deep inequities in the U.S. tax system. When it comes to bankrolling the federal government, the richest of America’s rich — many of them hailing from the private equity industry — play by an entirely different set of rules than everyone else.
The result is that men like Blackstone Group’s chief executive, Stephen A. Schwarzman, who earned more than $610 million last year, can pay federal taxes at rates similar to the average American.
Lawmakers have periodically tried to force private equity to pay more, and the Biden administration has proposed a series of reforms, including enlarging the I.R.S.’s enforcement budget and closing loopholes. The push for reform gained new momentum after ProPublica’s recent revelation that some of America’s richest men paid little or no federal taxes.
nearly $600 million in campaign contributions over the last decade, has repeatedly derailed past efforts to increase its tax burden.
Taylor Swift’s back music catalog.
The industry makes money in two main ways. Firms typically charge their investors a management fee of 2 percent of their assets. And they keep 20 percent of future profits that their investments generate.
That slice of future profits is known as “carried interest.” The term dates at least to the Renaissance. Italian ship captains were compensated in part with an interest in whatever profits were realized on the cargo they carried.
The I.R.S. has long allowed the industry to treat the money it makes from carried interests as capital gains, rather than as ordinary income.
article highlighting the inequity of the tax treatment. It prompted lawmakers from both parties to try to close the so-called carried interest loophole. The on-again, off-again campaign has continued ever since.
Whenever legislation gathers momentum, the private equity industry — joined by real estate, venture capital and other sectors that rely on partnerships — has pumped up campaign contributions and dispatched top executives to Capitol Hill. One bill after another has died, generally without a vote.
An Unexpected Email
One day in 2011, Gregg Polsky, then a professor of tax law at the University of North Carolina, received an out-of-the-blue email. It was from a lawyer for a former private equity executive. The executive had filed a whistle-blower claim with the I.R.S. alleging that their old firm was using illegal tactics to avoid taxes.
The whistle-blower wanted Mr. Polsky’s advice.
Mr. Polsky had previously served as the I.R.S.’s “professor in residence,” and in that role he had developed an expertise in how private equity firms’ vast profits were taxed. Back in academia, he had published a research paper detailing a little-known but pervasive industry tax-dodging technique.
$89 billion in private equity assets — as being “abusive” and a “thinly disguised way of paying the management company its quarterly paycheck.”
Apollo said in a statement that the company stopped using fee waivers in 2012 and is “not aware of any I.R.S. inquiries involving the firm’s use of fee waivers.”
floated the idea of cracking down on carried interest.
Private equity firms mobilized. Blackstone’s lobbying spending increased by nearly a third that year, to $8.5 million. (Matt Anderson, a Blackstone spokesman, said the company’s senior executives “are among the largest individual taxpayers in the country.” He wouldn’t disclose Mr. Schwarzman’s tax rate but said the firm never used fee waivers.)
Lawmakers got cold feet. The initiative fizzled.
In 2015, the Obama administration took a more modest approach. The Treasury Department issued regulations that barred certain types of especially aggressive fee waivers.
But by spelling that out, the new rules codified the legitimacy of fee waivers in general, which until that point many experts had viewed as abusive on their face.
So did his predecessor in the Obama administration, Timothy F. Geithner.
Inside the I.R.S. — which lost about one-third of its agents and officers from 2008 to 2018 — many viewed private equity’s webs of interlocking partnerships as designed to befuddle auditors and dodge taxes.
One I.R.S. agent complained that “income is pushed down so many tiers, you are never able to find out where the real problems or duplication of deductions exist,” according to a U.S. Government Accountability Office investigation of partnerships in 2014. Another agent said the purpose of large partnerships seemed to be making “it difficult to identify income sources and tax shelters.”
The Times reviewed 10 years of annual reports filed by the five largest publicly traded private equity firms. They contained no trace of the firms ever having to pay the I.R.S. extra money, and they referred to only minor audits that they said were unlikely to affect their finances.
Current and former I.R.S. officials said in interviews that such audits generally involved issues like firms’ accounting for travel costs, rather than major reckonings over their taxable profits. The officials said they were unaware of any recent significant audits of private equity firms.
No Money Owed
For a while, it looked as if there would be an exception to this general rule: the I.R.S.’s reviews of the fee waivers spurred by the whistle-blower claims. But it soon became clear that the effort lacked teeth.
Kat Gregor, a tax lawyer at the law firm Ropes & Gray, said the I.R.S. had challenged fee waivers used by four of her clients, whom she wouldn’t identify. The auditors struck her as untrained in the thicket of tax laws governing partnerships.
“It’s the equivalent of picking someone who was used to conducting an interview in English and tell them to go do it in Spanish,” Ms. Gregor said.
The audits of her clients wrapped up in late 2019. None owed any money.
The Mnuchin Compromise
As a presidential candidate, Mr. Trump vowed to “eliminate the carried interest deduction, well-known deduction, and other special-interest loopholes that have been so good for Wall Street investors, and for people like me, but unfair to American workers.”
wanted to close the loophole, congressional Republicans resisted. Instead, they embraced a much milder measure: requiring private equity officials to hold their investments for at least three years before reaping preferential tax treatment on their carried interests. Steven Mnuchin, the Treasury secretary, who had previously run an investment partnership, signed off.
McKinsey, typically holds investments for more than five years. The measure, part of a $1.5 trillion package of tax cuts, was projected to generate $1 billion in revenue over a decade.
credited Mr. Mnuchin, hailing him as “an all-star.”
Mr. Fleischer, who a decade earlier had raised alarms about carried interest, said the measure “was structured by industry to appear to do something while affecting as few as possible.”
Months later, Mr. Callas joined the law and lobbying firm Steptoe & Johnson. The private equity giant Carlyle is one of his biggest clients.
‘The Government Caved’
It took the Treasury Department more than two years to propose rules spelling out the fine print of the 2017 law. The Treasury’s suggested language was strict. One proposal would have empowered I.R.S. auditors to more closely examine internal transactions that private equity firms might use to get around the law’s three-year holding period.
The industry, so happy with the tepid 2017 law, was up in arms over the tough rules the Treasury’s staff was now proposing. In a letter in October 2020, the American Investment Council, led by Drew Maloney, a former aide to Mr. Mnuchin, noted how private equity had invested in hundreds of companies during the coronavirus pandemic and said the Treasury’s overzealous approach would harm the industry.
The rules were the responsibility of Treasury’s top tax official, David Kautter. He previously was the national tax director at EY, formerly Ernst & Young, when the firm was marketing illegal tax shelters that led to a federal criminal investigation and a $123 million settlement. (Mr. Kautter has denied being involved with selling the shelters but has expressed regret about not speaking up about them.)
On his watch at Treasury, the rules under development began getting softer, including when it came to the three-year holding period.
Monte Jackel, a former I.R.S. attorney who worked on the original version of the proposed regulations.
Mr. Mnuchin, back in the private sector, is starting an investment fund that could benefit from his department’s weaker rules.
A Charmed March
Even during the pandemic, the charmed march of private equity continued.
The top five publicly traded firms reported net profits last year of $8.6 billion. They paid their executives $8.3 billion. In addition to Mr. Schwarzman’s $610 million, the co-founders of KKR each made about $90 million, and Apollo’s Leon Black received $211 million, according to Equilar, an executive compensation consulting firm.
now advising clients on techniques to circumvent the three-year holding period.
The most popular is known as a “carry waiver.” It enables private equity managers to hold their carried interests for less than three years without paying higher tax rates. The technique is complicated, but it involves temporarily moving money into other investment vehicles. That provides the industry with greater flexibility to buy and sell things whenever it wants, without triggering a higher tax rate.
Private equity firms don’t broadcast this. But there are clues. In a recent presentation to a Pennsylvania retirement system by Hellman & Friedman, the California private equity giant included a string of disclaimers in small font. The last one flagged the firm’s use of carry waivers.
The Biden administration is negotiating its tax overhaul agenda with Republicans, who have aired advertisements attacking the proposal to increase the I.R.S.’s budget. The White House is already backing down from some of its most ambitious proposals.
Even if the agency’s budget were significantly expanded, veterans of the I.R.S. doubt it would make much difference when it comes to scrutinizing complex partnerships.
“If the I.R.S. started staffing up now, it would take them at least a decade to catch up,” Mr. Jackel said. “They don’t have enough I.R.S. agents with enough knowledge to know what they are looking at. They areso grossly overmatched it’s not funny.”
BELFAST, Northern Ireland — The pandemic was hard on David Milliken, who sells drums, flags and pro-British banners from his brightly-colored shop in Sandy Row, a loyalist stronghold in Belfast. But now, he said, “things have started to open up again,” especially since “the unrest is back.”
Two months ago, Sandy Row exploded in flames as masked demonstrators hurled stones and gasoline bombs at the police to protest what they call the “Brexit betrayal.” With the loyalist marching season kicking off next month, there are fears that the eruption of violence was only a warm-up act.
Like others in Sandy Row, Mr. Milliken, 49, said he did not want a return to the Troubles, the bloody 30-year guerrilla war between Catholic nationalists, seeking unification with the Republic of Ireland, and predominantly Protestant loyalists and unionists, who want to stay in the United Kingdom.
iconic military victory over a Catholic king, James II, in 1690.
the 1998 Good Friday Agreement, which ended decades of sectarian strife, in part by tamping down Northern Ireland’s identity politics. Brexit has reawakened those passions, and they could flare further next year if, as polls currently suggest, the main Irish nationalist party, Sinn Fein, becomes the biggest party in a field of divided, demoralized unionists.
the Northern Ireland Protocol, a post-Brexit legal construct that has left the North awkwardly straddling the trading systems of Britain and the European Union. The protocol grew out of a deal between London and Brussels to avoid resurrecting a hard border between Northern Ireland and the Republic of Ireland. The catch is, it requires checks on goods flowing between the North and the rest of the United Kingdom, which carries both a commercial and psychological cost.
“It has hit the community here like a ton of bricks that this is a separation of Northern Ireland from the rest of the United Kingdom,” said David Campbell, chairman of the Loyalist Communities Council, which represents paramilitary groups that some say are stirring up unrest.
Mr. Campbell said that the paramilitaries actually tried to keep people off the streets. But he warned that unless the protocol was either scrapped or radically rewritten, violence would break out again during the marching season.
bitter divorce with the European Union.
Jonathan Powell, a former chief of staff to Tony Blair, the British prime minister at the time of the Good Friday Agreement, acknowledged that, “Biden could be important on the protocol.”
“Britain is rather friendless outside the E.U., so there is a limit to how far they can go against what the administration wants,” Mr. Powell added.
Until now, Mr. Johnson has taken a hard line in negotiations over the protocol. His senior aide, David Frost, says it is up to the European Union to propose remedies to the disruptions of the border checks. If it does not, Britain could abandon the protocol — a move the European Union says would breach the withdrawal agreement, though the bloc’s officials briefly threatened to scrap the protocol themselves in January.
the Democratic Unionists, a Northern Irish party that supported Brexit and has now fallen into disarray because of the fierce blowback from Mr. Johnson’s deal.
The party recently deposed its leader, Arlene Foster, and is squabbling over how to prepare for elections to the Northern Irish Assembly in May 2022. That has opened the door to something once thought inconceivable: that Sinn Fein could emerge as the largest party, with the right to appoint the first minister.
With Sinn Fein’s vestigial links to the paramilitary Irish Republican Army and bedrock commitment to Irish unification, an Assembly led by the party could prove far more destabilizing to Northern Ireland’s delicate power-sharing arrangements than the post-Brexit trading rules, which are difficult to explain, let alone use as a rallying cry.
But Sinn Fein’s leaders say that, with a growing Catholic population and the fallout from Brexit, momentum is on their side. The unionist parties supported Brexit, while they opposed it. They view the campaign against the protocol as a futile effort that only lays bare the costs of leaving the European Union.
“You have a very stark choice,” Michelle O’Neill, the party’s leader and the deputy first minister of Northern Ireland, said in an interview. “Do you want to be part of inward-looking Brexit Britain or outward-looking inclusive Ireland?”
Another question is how the authorities will deal with further unrest. In April, the police moved carefully against the rock-throwing crowds, treating them as a local disturbance rather than a national security threat. But if the violence escalates, that could change.
Monica McWilliams, an academic and former politician who was involved in the 1998 peace negotiations, said, “Loyalist threats, or violent actions, against a border down the Irish Sea may no longer be seen as a domestic problem.”
But the greater challenge, she said, is reassuring unionists and loyalists at a time when politics and demographics are moving so clearly against them. While there is little appetite in the Irish Republic for a near-term referendum on unification, Sinn Fein is within striking distance of being in power on both sides of the border — a development that would put unification squarely on the agenda.
In Sandy Row, the sense of a community in retreat was palpable.
Paul McCann, 46, a shopkeeper and lifelong resident, noted how real-estate developers were buying up blocks on the edge of the neighborhood to build hotels and upscale apartments. The city, he said, wants to demolish the Boyne Bridge — a predecessor of which William of Orange is said to have crossed on his way to that fateful battle with James II — to create a transportation hub.
“They’re trying to whitewash our history,” Mr. McCann said. “They’re making our loyalist communities smaller and smaller.”
For Gordon Johnston, a 28-year-old community organizer, it’s a matter of fairness: loyalists accepted the argument that reimposing a hard border between the north and south of Ireland could provoke violence. The same principle should apply to Northern Ireland and the rest of the United Kingdom.
“You can’t have it both ways,” he said. “You either have no borders or you have violence in the streets.”
A constellation of 5,400 offshore wind turbines meet a growing portion of Europe’s energy needs. The United States has exactly seven.
With more than 90,000 miles of coastline, the country has plenty of places to plunk down turbines. But legal, environmental and economic obstacles and even vanity have stood in the way.
President Biden wants to catch up fast — in fact, his targets for reducing greenhouse gas emissions depend on that happening. Yet problems abound, including a shortage of boats big enough to haul the huge equipment to sea, fishermen worried about their livelihoods and wealthy people who fear that the turbines will mar the pristine views from their waterfront mansions. There’s even a century-old, politically fraught federal law, known as the Jones Act, that blocks wind farm developers from using American ports to launch foreign construction vessels.
Offshore turbines are useful because the wind tends to blow stronger and more steadily at sea than onshore. The turbines can be placed far enough out that they aren’t visible from land but still close enough to cities and suburbs that they do not require hundreds of miles of expensive transmission lines.
approved a project near Martha’s Vineyard that languished during the Trump administration and in May announced support for large wind farms off California’s coast. The $2 trillion infrastructure plan that Mr. Biden proposed in March would also increase incentives for renewable energy.
The cost of offshore wind turbines has fallen about 80 percent over the last two decades, to as low as $50 a megawatt-hour. While more expensive per unit of energy than solar and wind farms on land, offshore turbines often make economic sense because of lower transmission costs.
“Solar in the East is a little bit more challenging than in the desert West,” said Robert M. Blue, the chairman and chief executive of Dominion Energy, a big utility company that is working on a wind farm with nearly 200 turbines off the coast of Virginia. “We’ve set a net-zero goal for our company by 2050. This project is essential to hitting those goals.”
rely on European components, suppliers and ships for years.
Installing giant offshore wind turbines — the largest one, made by General Electric, is 853 feet high — is difficult work. Ships with cranes that can lift more than a thousand tons haul large components out to sea. At their destinations, legs are lowered into the water to raise the ships and make them stationary while they work. Only a few ships can handle the biggest components, and that’s a big problem for the United States.
A 1,600-mile round trip to Canada.
Government Accountability Office report published in December. That is far too small for the giant components that Mr. Eley’s team was working with.
So Dominion hired three European ships and operated them out of the Port of Halifax in Nova Scotia. One of them, the Vole au Vent from Luxembourg, is 459 feet (140 meters) long and can lift 1,654 tons.
Mr. Eley’s crew waited weeks at a time for the European ships to travel more than 800 miles each way to port. The installations took a year. In Europe, it would have been completed in a few weeks. “It was definitely a challenge,” he said.
The U.S. shipping industry has not invested in the vessels needed to carry large wind equipment because there have been so few projects here. The first five offshore turbines were installed in 2016 near Block Island, R.I. Dominion’s two turbines were installed last year.
Had the Jones Act not existed — it was enacted after World War I to ensure that the country had ships and crews to mobilize during war and emergencies — Dominion could have run European vessels out of Virginia’s ports. The law is sacrosanct in Congress, and labor unions and other supporters argue that repealing it would eliminate thousands of jobs at shipyards and on boats, leaving the United States reliant on foreign companies.
Demand for large ships could grow significantly over the next decade because the United States, Europe and China have ambitious offshore wind goals. Just eight ships in the world can transport the largest turbine parts, according to Dominion.
200 more turbines by 2026. Dominion spent $300 million on its first two but hopes the others will cost $40 million each.
Fishermen fear for their livelihoods.
For the last 24 years, Tommy Eskridge, a resident of Tangier Island, has made a living catching conchs and crabs off the Virginia coast.
One area he works is where Dominion plans to place its turbines. Federal regulators have adjusted spacing between turbines to one nautical mile to create wider lanes for fishing and other boats, but Mr. Eskridge, 54, worries that the turbines could hurt his catch.
The area has yielded up to 7,000 pounds of conchs a day, though Mr. Eskridge said a typical day produced about half that amount. A pound can fetch $2 to $3, he said.
Mr. Eskridge said the company and regulators had not done enough to show that installing turbines would not hurt his catch. “We just don’t know what it’s going to do.”
who died in 2009, and William I. Koch, an industrialist.
Neither wanted the turbines marring the views of the coast from their vacation compounds. They also argued that the project would obstruct 16 historical sites, disrupt fishermen and clog up waterways used by humpback, pilot and other whales.
the developer of Cape Wind gave up in 2017. But well before that happened, Cape Wind’s troubles terrified energy executives who were considering offshore wind.
Projects up and down the East Coast are mired in similar fights. Residents of the Hamptons, the wealthy enclave, opposed two wind development areas, and the federal government shelved the project. On the New Jersey shore, some homeowners and businesses are opposing offshore wind because they fear it will raise their electricity rates, disrupt whales and hurt the area’s fluke fishery.
Energy executives want the Biden administration to mediate such conflicts and speed up permit approval.
“It’s been artificially, incrementally slow because of some inefficiencies on the federal permitting side,” said David Hardy, chief executive of Orsted North America.
Renewable-energy supporters said they were hopeful because the country had added lots of wind turbines on land — 66,000 in 41 states. They supplied more than 8 percent of the country’s electricity last year.
Ms. Lefton, the regulator who oversees leasing of federal waters, said future offshore projects would move more quickly because more people appreciated the dangers of climate change.
“We have a climate crisis in front of us,” she said. “We need to transition to clean energy. I think that will be a big motivator.”
SAN ANTONIO HUISTA, Guatemala — An American contractor went to a small town in the Guatemalan mountains with an ambitious goal: to ignite the local economy, and hopefully even persuade people not to migrate north to the United States.
Half an hour into his meeting with coffee growers, the contractor excitedly revealed the tool he had brought to change their lives: a pamphlet inviting the farmers to download an app to check coffee prices and “be a part of modern agriculture.”
Pedro Aguilar, a coffee farmer who hadn’t asked for the training and didn’t see how it would keep anyone from heading for the border, looked confused. Eyeing the U.S. government logo on the pamphlet, he began waving it around, asking if anyone had a phone number to call the Americans “and tell them what our needs really are.”
soared in 2019 and is on the upswing once more.
have risen, malnutrition has become a national crisis, corruption is unbridled and the country is sending more unaccompanied children to the United States than anywhere else in the world.
That is the stark reality facing Ms. Harris as she assumes responsibility for expanding the same kind of aid programs that have struggled to stem migration in the past. It is a challenge that initially frustrated her top political aides, some of whom viewed the assignment from Mr. Biden as one that would inevitably set her up for failure in the first months of her tenure.
Her allies worried that she would be expected to solve the entire immigration crisis, irked that the early reports of her new duties appeared to hold her responsible for juggling the recent surge of children crossing the border without adults.
linked to drug traffickers and accused of embezzling American aid money, the leader of El Salvador has been denounced for trampling democratic norms and the government of Guatemala has been criticized for persecuting officials fighting corruption.
Even so, Ms. Harris and her advisers have warmed to the task, according to several people familiar with her thinking in the White House. They say it will give her a chance to dive squarely into foreign policy and prove that she can pass the commander-in-chief test, negotiating with world leaders on a global stage to confront one of America’s most intractable issues.
critics denounced as unlawful and inhumane. Moreover, members of the current administration contend that Mr. Trump’s decision to freeze a portion of the aid to the region in 2019 ended up blunting the impact of the work being done to improve conditions there.
But experts say the reasons that years of aid have not curbed migration run far deeper than that. In particular, they note that much of the money is handed over to American companies, which swallow a lot of it for salaries, expenses and profits, often before any services are delivered.
Record numbers of Central American children and families were crossing, fleeing gang violence and widespread hunger.
independent studies have found.
“All activities funded with U.S.A.I.D.’s foreign assistance benefit countries and people overseas, even if managed through agreements with U.S.-based organizations,” said Mileydi Guilarte, a deputy assistant administrator at U.S.A.I.D. working on Latin America funding.
But the government’s own assessments don’t always agree. After evaluating five years of aid spending in Central America, the Government Accountability Office rendered a blunt assessment in 2019: “Limited information is available about how U.S. assistance improved prosperity, governance, and security.”
One U.S.A.I.D. evaluation of programs intended to help Guatemalan farmers found that from 2006 to 2011, incomes rose less in the places that benefited from U.S. aid than in similar areas where there was no intervention.
Mexico has pushed for a more radical approach, urging the United States to give cash directly to Central Americans affected by two brutal hurricanes last year. But there’s also a clear possibility — that some may simply use the money to pay a smuggler for the trip across the border.
The farmers of San Antonio Huista say they know quite well what will keep their children from migrating. Right now, the vast majority of people here make their money by selling green, unprocessed coffee beans to a few giant Guatemalan companies. This is a fine way to put food on the table — assuming the weather cooperates — but it doesn’t offer much more than subsistence living.
Farmers here have long dreamed of escaping that cycle by roasting their own coffee and selling brown beans in bags to American businesses and consumers, which brings in more money.
“Instead of sending my brother, my father, my son to the United States, why not send my coffee there, and get paid in dollars?” said Esteban Lara, the leader of a local coffee cooperative.
But when they begged a U.S. government program for funding to help develop such a business, Ms. Monzón said, they were told “the money is not designed to be invested in projects like that.”
These days, groups of her neighbors are leaving for the United States every month or two. So many workers have abandoned this town that farmers are scrambling to find laborers to harvest their coffee.
One of Ms. Monzón’s oldest employees, Javier López Pérez, left with his 14-year-old son in 2019, during the last big wave of Central American migration to the United States. Mr. López said he was scaling the border wall with his son when he fell and broke his ankle.
“My son screamed, ‘Papi, no!’ and I said to him, ‘Keep going, my son,’” Mr. López said. He said his son made it to the United States, while he returned to San Antonio Huista alone.
His family was then kicked out of their home, which Mr. López had given as collateral to the person who smuggled him to the border. The house they moved into was destroyed by the two hurricanes that hit Guatemala late last year.
Ms. Monzón put Mr. López in one of her relatives’ houses, then got the community to cobble together money to pay for enough cinder blocks to build the family a place to live.
While mixing cement to bind the blocks together, one of Mr. López’s sons, Vidal, 19, confessed that he had been talking to a smuggler about making the same journey that felled his father, who was realistic at the prospect.
“I told him, ‘Son, we suffered hunger and thirst along the way, and then look at what happened to me, look at what I lost,’” Mr. López said, touching his still-mangled ankle. “But I can’t tell him what to do with his life — he’s a man now.”
Ford Motor said on Wednesday that it would increase spending on electric vehicles by about a third from its previous plans and expects E.V.s to make up 40 percent of its production by 2030, a big increase in its commitment to the electrification of cars and trucks.
The company intends to spend $30 billion in the five years ending in 2025, up from the previous target of $22 billion. It also said it had accepted 70,000 reservations for the F-150 Lightning, the electric version of its top-selling pickup truck.
“This is our biggest opportunity for growth and value creation since Henry Ford started to scale the Model T,” Ford’s chief executive, Jim Farley, said in a statement.
Ford has gone from being a relative latecomer to battery-powered vehicles to making them a central focus. The company recently started delivering an electric sport utility vehicle, the Mustang Mach-E, that has sold well and been praised by car reviewers. The model also appears to have taken market share from Tesla, which until recently dominated the electric car market. Last week, Ford introduced the F-150 Lightning, and President Biden drove the truck at a company track in Michigan and praised its rapid acceleration.
The increase in spending reflects new investments in better technology and production. Last week, Ford said it would form a joint venture with a South Korean company, SK Innovation, to manufacture battery cells at two plants in the United States for future Ford and Lincoln vehicles.
Ford’s stock was up nearly 5 percent Wednesday morning after the company’s electric vehicle announcements.