Almost exactly one year ago, the New York Times ran a story on China's growth into a world power, about which I blogged here -- I thought it made some stupid historical analogies.

Today Jane Perlez -- one of the Times' best foreign correspondents, in my book -- has a similar story. This one has no dumb analogies and a lot more meat on it:

These days, Australian engineers - like executives, merchants and manufacturers elsewhere in the region - cannot seem to work fast enough to satisfy the hunger of their biggest new customer: China.

Not long ago Australia and China regarded each other with suspicion. But through newfound diplomatic finesse and the seemingly irresistible lure of its long economic expansion, Beijing has skillfully turned around relations with Australia, America's staunchest ally in the region.

The turnabout is just one sign of the broad new influence Beijing has accumulated across the Asian Pacific with American friends and foes alike. From the mines of Newman - an outpost of 3,000 in a corner of the outback - to theforests of Myanmar, the former Burma, China's rapid growth is sucking up resources and pulling the region's varied economies in its wake. The effect is unlike anything since the rise of Japanese economic power after World War II.

For now, China's presence mostly translates into money, and the doors it opens. But more and more, China is leveraging its economic clout to support its political preferences.

Beijing is pushing for regional political and economic groupings it can dominate, like a proposed East Asia Community that would cut out the United States and create a global bloc to rival the European Union. It is dispersing aid and, in ways not seen before, pressing countries to fall in line on its top foreign policy priority: its claim over Taiwan.

China's higher profile is all the more striking, analysts, executives and diplomats say, as Washington's preoccupation with Iraq and terrorism has left it seemingly disengaged from the region, which in turn has found the United States more off-putting and harder to penetrate after Sept. 11.

American military supremacy remains unquestioned, regional officials say. But the United States appears to be on the losing side of trade patterns. China is now South Korea's biggest trade partner, and two years ago Japan's imports from China surpassed those from the United States. Current trends show China is likely to top American trade with Southeast Asia in just a few years.

China's prime minister, Wen Jiabao, as much as threw down the gauntlet last year, saying he believed that China's trade with Southeast Asia would reach $100 billion by 2005, just shy of the $120 billion in trade the United States does with the region.

Mr. Wen's claim was no idle boast. Almost no country has escaped the pull of China's enormous craving for trade and, above all, energy and other natural resources to fuel its still galloping expansion and growing consumer demand. Though the Chinese government's growth target for 2004 is 7 percent, compared with 9.1 percent for 2003, few are worried about a slowdown soon.

Read the whole thing. It remains the case that China's power is only felt at the regional level -- and Perlex asserts rather than proves her argument about America disengaging because of the war on terrorism.

Still, it's worth chewing on.

Via Chris Betram, I took Chris Lightfoot's estimation quiz. He got a 39; I got a 40.

I'm guessing we're equally chagrined at our performance, however (I can't believe I was that far off on the GDP of Great Britain-- wait, yes I can: in my head I used the inverted exchange rate between the two currencies to get from dollars to pounds).

Go take it for yourself and report back.

Last month the Phillipine government's decision to evacuate all nationals out of Iraq after a truck driver was taken hostage. At the time, Arroyo said she was proud of her decision: "she was unrepentant Tuesday, saying the hostage, Angelo de la Cruz, had became a symbol of the 8 million Filipinos who have left their poor country to send home money from hard and sometimes dangerous work abroad." Arroyo subsequently banned Filipinos from working in Iraq.

According to the AP, it looks like some other Filipino symbols are somewhat upset with the Arroyo government:

Riot police used water cannons Friday to disperse protesters demanding that the Philippines lift its ban on allowing its citizens to go to war-ravaged Iraq for jobs.

The protesters marched to the presidential palace to urge President Gloria Macapagal Arroy to let them leave for Iraq, where they said U.S. military contracts await them.

"Your concern for us is highly appreciated but we need cash," one placard read. "Please allow us to work in Iraq," said another.

Riot police and rolls of barbed wire blocked more than 200 protesters at the foot of a bridge leading to the palace, where they sat down, linked arms, and sang religious songs, vowing to stay there until the ban is lifted....

"Most of us are going hungry here. If they can give us jobs here, then its OK, but they can't," said Danny Baloloy, a plumber who said a job that pays $650 a month awaits him at a U.S. base in Iraq.

The ban was imposed last month after a Filipino truck driver, Angelo dela Cruz, was abducted by Iraqi insurgents. He was freed after Manila pulled out its troops ahead of schedule, as demanded by the kidnappers.

About 3,000 Filipinos seeking jobs in Iraq last week also protested against the ban, saying they would rather risk their lives than face joblessness and hunger at home.

Via Glenn Reynolds, I see that James Lileks has a Jewish World Reviiew essay on John Kerry's ambition. Here's the key part of Lileks' thesis:

So why does Kerry want to be president?

The reason is almost tautological: John Kerry wants to be president because he is John Kerry, and John Kerry is supposed to be president. Hence his campaign's flummoxed and tone-deaf response to the swift boat vets. Ban the books, sue the stations, retreat, attack. Underneath it all you can sense the confusion. How dare they attack Kerry? He's supposed to be president. It's almost treason in advance.

There's something bothering me about this line of argument -- namely, that it applies with equal force to George H.W. Bush. Before he got elected in 1988, Bush Sr. was widely viewed as a resume looking for a position to fill. And he was a mighty fine president in my book.

I'm not saying that John Kerry is George H.W. Bush. I'm just saying that Lileks ain't persuading me.

UPDATE: Before adding a comment to this post, re-read it very carefully -- yes, that's right, I'm comparing Kerry to Bush 41, not to Bush 43.

Sarah Ellison has a must-read front-pager in today's Wall Street Journal. Well, actually it's only a must-read if you have small children -- if you don't, just skip to the next post.

OK, now that the appropriate demographic has been selected, here's Ellison's account of the most daunting challenge parents of two-year olds face -- toilet-training them before they start pre-school. The good parts:

For millions of toddlers, August is crunch time.

Preschool starts in September, and because of strict no-diaper rules at many schools, toilet training must end.

In Overland Park, Kan., Kerri Heller has until Sept. 2 to toilet-train her 3-year-old son, Jack. Ms. Heller started training in earnest earlier this month, and says she has barely left the house since.

On a Monday, she bought an egg timer and set it to ring every 30 minutes to remind Jack to use the toilet....

The no-diaper deadline for preschools is a big business issue for the $6.5 billion U.S. diaper industry, driving away good customers every year. It's "the biggest force at work in toilet training," says Thomas J. Falk, chief executive of Kimberly-Clark Corp. It makes Huggies, the No. 1 brand in the U.S.

Preschools often discourage diapers because of burdensome health regulations and legal concerns. Those schools that do change diapers often require two adults to be present during diaper changing, to prevent child abuse and forestall lawsuits.

The Weekday Nursery School in New Rochelle, N.Y., strongly encourages all 3-year-olds to be trained. It takes about 12 minutes for a teacher to change a child's diaper, says director Sara Arnon. That's if the teacher complies with state health regulations such as placing fresh disposable paper on the changing table (like at a doctor's office), using latex gloves and double-bagging dirty diapers. For a 2½-hour morning preschool, that means a lot of teachers' time would be spent changing diapers, she says.

Besides, the school found out years ago that changing older children when some of their classmates are already toilet-trained doesn't work. "It didn't last two months," says Ms. Arnon. "The other children called the untrained children 'babies.' "

Preschool enrollment is rising as more mothers head to work, and finding the right school is an ever more competitive enterprise. Ms. Heller lined up a year-and-a-half ago at 6 a.m. to get Jack into a "pre-preschool" program to help him get into the preschool he's about to attend.

The preschool deadline is one reason that Procter & Gamble Co., the No. 2 U.S. diaper maker, has developed a new product. It aims to smooth the way for potty training by essentially reversing years of diaper engineering. Instead of instantly absorbing liquid, the diaper holds a small amount of liquid next to a toddler's skin for two minutes or so before drying out.

The P&G product, called Pampers Feel 'n Learn Advanced Trainers, started arriving in U.S. stores in June. The goal is to establish enough discomfort that a toddler notices when he or she has an accident. P&G says feeling the wetness will help toddlers recognize that they should have gone to the bathroom. Of course, the same result could be achieved using regular underwear, but with the Feel 'n Learn diaper there's no mess for parents to clean up....

Babies used to graduate from diapers at a younger age in the U.S., and still do in some parts of Europe and Asia. People there tend not to make such a big deal of the process, says Kimberly-Clark's Mr. Falk. "Some European cultures don't have a word for toilet training," he says. In rural China, most babies wear underpants with a split in them and quickly learn how to use the toilet.

But American parents have grown more tolerant since the parenting philosophy of Boston pediatrician T. Berry Brazelton swept the country in the 1960s. Dr. Brazelton urged parents to adopt a "child-centered" approach to toilet training rather than imposing a schedule.

Since then, the age for completing toilet training has edged ever higher. Many parents and child-care workers say disposable diapers are so super-absorbent today that when a child has an accident, he or she barely notices. In the last few years, diaper makers have added larger sizes and created a new growth area with so-called training pants, which are pull-on diapers for older toddlers. Diaper companies say training pants help make the transition from diapers to regular underwear less stressful, but some parents worry they further delay the end of toilet training....

Catherine Haskins understands motivation. Ms. Haskins, who works for a marketing and public-relations firm in Kansas City, Kan., has pompoms in her bathroom to cheer on her daughter, Emma, who will be 3 in December. The tot, who is preparing for preschool that month, has also received stickers and Spiderman paraphernalia for good performance. Emma's training is almost complete, says Ms. Haskins, but it hasn't been easy. "I have had a step stool in front of my toilet for a year," she says.

Morgan Lilly Rodriguez, 3, of New York City, is signed up to go to preschool full-time in September. But she still has several accidents a week and doesn't like to flush the toilet. "She's afraid she's going to flush herself down," says her mother, Annette.

The rush to get children ready troubles Dr. Brazelton, now 86 years old. Preschool is an "artificial deadline," he says. "It isn't respectful of the time some children need."

As much as I occasionally rag on journalists, Ellison deserves dome props for this piece. It manages to offer slice-of-life vignettes while simultaneuously addressing larger issues -- day-care regulations, child-rearing philosophies, and product innovations.

UPDATE: Over at Galley Slaves, Victorino Matus has more information about the role that toilets can play in larger questions of public policy.

David Wighton and James Harding report in the Financial Times that George W. Bush has alienated former supporters among the financial folks:

Wall Street's enthusiasm for US President George W. Bush appears to have cooled as the presidential race tightens and concerns grow about foreign policy and fiscal deficits.

Some leading fundraisers of Mr Bush's re-election bid have stopped active campaigning and others privately voice reservations.

The New York financial community is expected to give the Republicans a lavish welcome when the president's party arrives for its national convention next week. Wall Street has been a big contributor to Mr Bush's record-breaking re-election fund. But one senior Wall Street figure, once talked of as a possible Bush cabinet member, said that he and other prominent Republicans had been raising money with increasing reluctance. “Many are doing so with a heavy heart and some not at all.” He cited foreign policy and the ballooning federal deficit as Wall Street Republicans' main concerns.

A Republican in the financial services industry concurs. “Many of them may be maxed out,” he said, referring to campaign contributions that have hit the legal ceiling, “but they are backing away from Bush.”

The deficit has been criticised by Peter Peterson, chairman and co-founder of Blackstone Group, the New York investment firm, and former commerce secretary under President Richard Nixon. In his new book, Running on Empty, he accuses both parties of recklessness but attacks the Republican leadership for a “new level of fiscal irresponsibility”.

One New York dinner in June 2003 raised more than $4m, partly thanks to the efforts of Stan O'Neal, chief executive of Merrill Lynch. Yet Mr O'Neal has done no fundraising for the campaign at all since then and friends say he is not supporting Mr Bush. “He is best described as independent,” said one. Another senior Wall Street figure, who has given money to the campaign, said he was among many Wall Street bosses who were impressed with Mr Bush's handling of the September 11 attacks. “But since then, I have lost faith over foreign policy and tax,” he said.

Even those who are campaigning for Mr Bush sound increasingly defensive. “Whether or not you like him, you can't change leaders during a war,” said the head of one Wall Street firm.

This jibes with the disaffection felt with the Bush economic team by Republican-leaning policy wonks. And from the other side of the Republican spectrum, David Kirkpatrick reports in the New York Times that traditional conservatives aren't pleased with the Republican party platform (link via Noam Scheiber).

The interesting question will be whether any of this will affect the election. In another post, Scheiber asks the key question:

I don't know many Democrats who think right-wingers are going to end up defecting to Kerry. (Except for maybe a handful of libertarians living in Dupont Circle--but I don't think they're going to swing the election.) So the fact that 90 percent or more of GOP voters support Bush over Kerry is neither here nor there. The key question for the Bush campaign is what percentage of conservatives will end up staying home on election day. And I think its entirely plausible that a smaller fraction of self-described conservatives would vote for Bush if the election were held today than did in 2000--partly because Iraq isn't especially popular among Sunbelt isolationist types, and partly because of a handful of smaller greivances, like the budget deficit and the Medicare bill, and the brief flirtation with immigration reform and a mission to Mars.

Of course, it's important not to confuse D.C.-based conservatives with the much more electorally significant group of self-described conservative voters. (The D.C. breed is probably far more upset about the budget deficit and the Medicare bill, maybe Bush's too-grudging support for an anti-gay marriage amendment, too.) Still, I think there's a large enough group of conservatives out there who think Bush hasn't quite panned out for the Bush campaign to be concerned.

Kevin Canfield of the Newark Journal News thinks that op-ed columnists are overrated blowhards (link via NRO's The Corner):

Op-ed columnists are the self-assured know-it-alls of the political media. Shrugging off impartiality and other journalistic creeds in favor of partisan swagger, D.C.-centric op-ed columnists wield their various points of view with a degree of confidence known only to true believers.

Oh, wait, I got that wrong -- replace "op-ed columnist" with "blogger" and then you get Canfield's lead paragraph.

My point here is not (only) to pick on Canfield -- the substance of his story is to discuss the limits of the blogosphere's influence -- but rather to re-emphasize a point I made when George Packer's blog essay came out: "conduct a mental experiment -- replace the word 'blogosphere' with 'New York Times op-ed columnists' or 'David Broder. See if the criticism[s]... still hold up."

Also, it's not like there aren't theories out there explaining how blogs influence politics.

As I said in my previous post on the topic, Fred Kaplan really disliked Senator Roberts' intelligence proposal. Some highlights from his Slate piece:

Sen. Pat Roberts' plan to overhaul the U.S. intelligence bureaucracy is a true stinker, every bit as bad as his establishment critics contend....

Anyone who studies the "intelligence community" as much as Roberts does would also know—or should—that the proposal, if it were put into effect, would do more harm than good. So again, what's going on here?

....The first is that he's advancing a deliberately extreme proposal in order to prod the stuffy, stodgy bureaucracy into moving. He's telling the White House that if Bush doesn't start making serious reforms, Congress will—possibly in ways that the executive branch won't like. And he's shifting the definition of "acceptable" reform: By proposing a plan that goes well beyond the 9/11 commission's proposals, he is making those commission proposals seem more moderate by comparison....

However, there is a second, more cynical, and, alas, more plausible theory: He's putting out a proposal that's deliberately out-to-lunch, in order to distract the debate from more reasonable resolutions, to deflect attacks on Bush, and to discourage the whole idea of organizational reform.

I think it's safe to say that intelligence reform expert Amy Zegart really dislikes Fred Kaplan's take. She e-mailed me the following reaction:

I am, as my four-year old would put it, "steaming mad." Where to begin? First, anyone who has spent 5 seconds with Pat Roberts (and I spent 3 hours in front of him last week) knows he's deadly serious about reform. Where has Fred Kaplan been? Has he read the 500+ page Senate Intelligence Committee report Roberts' committee wrote in July about WMD in Iraq and the pathological deficiencies in the IC that led to it? Does he think this report descended like manna from heaven or does he realize the Committee's expert staff spent, oh I don't know, a year on it? I have anextra copy; perhaps I should send it to him.

Second, Kaplan forgets conveniently the fact that 2 of the key ideas in this proposal --splitting the CIA's clandestine side from its analytical side and creating a new national intelligence director -- were EXACTLY the same as a proposal made 12 years ago by David Boren and David McCurdy, the Democratic chairmen of the Senate and House intelligence committees. Then there is the substance of his claims. There are many valid concerns about this proposal, but Kaplan does not raise them.

Post your own thoughts below.

UPDATE: Esther Pan has compiled an excellent backgrounder on the different reform proposals at the Council on Foreign Relations web site.

Yesterday, Virginia Postrel posted and linked to several stories about a Public Policy Institute of California study on the effect of offshore outsourcing on the Californian economy. Postrel wrote, "The study found that outsourcing actually increases employment in California. Now the Assembly is sitting on the study."

The Assembly may have sat on the study, but it now appears to be available to the public. I clicked over to the PPIC web site and found the report by Jon Haveman and Howard Shatz, which is dated today. Some of their analysis sounds awfully familiar. The good parts (from p. 22-24):

[T]here is evidence that some California jobs eliminated by offshoring are similar to those likely to be created in the state by offshoring. Offshoring can allow the economy to reallocate labor and capital from one set of tasks to another set of higher-level tasks, and California has a strong supply of highly skilled workers who can take on these higher-level tasks. A second mitigating factor for the U.S. economy, and especially for California, is that there is growing world demand for the U.S. provision of services that are similar to those being sent offshore. This is a source of job creation for workers dislocated because of offshoring. California is a significant producer and exporter of these services, and this fact should ease the transition for affected workers in the state.

These two points suggest that jobs are being created in industries and occupations that are relatively similar to those being eliminated. For example, computer programming is one occupation that is projected to be negatively affected by offshoring, and evidence suggests that this is in fact the case. Between 1999 and 2002, 71,000 computer programmer jobs were eliminated, 23,000 of which were in California. Note, however, that offshoring is only responsible for a small fraction of these lost jobs; the technology bust explains most of them.

At the same time that opportunities for computer programmers were declining, more than 115,000 software engineering jobs were created, a disproportionately large share of which – 24,000 – were in California. The transition between these occupation categories – programmers and software engineers – may be unsettling but also may be easier than the transition between many other jobs, and the software engineering jobs pay over $10,000 more per year on average. It is certainly true that not all the workers who held computer programmer jobs became software engineers, and tracing how any such transition might have taken place is difficult. However, the decline of programmers and the rise of software engineers illustrates the fact that as old opportunities disappear – through economic cycles, technological change, and offshoring – the U.S. economy has the capacity to create better opportunities, and in this case, the skill sets required are similar.

As a result, the economy’s adjustment to this new phenomenon need not be as difficult as it was to the shift from manufacturing to service sectors in the 1980s and 1990s. Many of the workers displaced by offshoring have significant skills, and this bodes well for their future employment prospects. This observation is consistent with the evidence suggesting that workers with more skills have less difficult transitions to new jobs; the transitions are faster and involve less wage erosion. This is not to minimize the effect on workers who lose their jobs, especially less-skilled workers, but merely to put it in perspective....

An additional item is worthy of note. It is likely that “outstating” – outsourcing to another state – is a much more important phenomenon than is offshoring for California. The recent mass layoffs report of the Bureau of Labor Statistics noted that of the job relocations where the destination was known, more than 68 percent took place within the United States, rather than overseas. California companies have actively engaged in outstating back-office processes for years. These are the very same processes that are the most vulnerable to offshoring. It is possible that many jobs being moved offshore by California companies would have left the state anyway. Newspaper accounts in places such as Phoenix express the fear that back-office jobs that have only recently arrived from California are headed abroad.

I look forward to the California state legislature's efforts to impose a tariff on services from Arizona.

Here's the report's conclusion regarding the bills designed to block the offshore outsourcing of government contracts (from p. 31):

In the end, the policy of restricting government contractors to vendors employing only domestic labor falls short of the optimal choice in several respects. First, on a per worker basis, it is likely to be more expensive than other options. Second, it is likely to assist a very small subset of workers displaced by offshoring. Third, policies banning offshoring are most likely to assist relatively skilled workers with high earnings capacity. In this time of tight budgets, more cost-effective means of assistance are available and should be investigated.

Red Herring has more on the California situation. Daniel Weintraub concludes in the Sacramento Bee:

The bottom line, though the researchers don't put it this bluntly, is that politicians, either from ignorance or malevolence, are trying to scare Californians into believing that offshoring is bad for the economy, and bad for them. The reality is that the opposite is true, and that the proposals seeking to freeze the economy in place will do far more harm than good.

Indeed.

[Sure, that's California. The rest of the country is losing jobs, right?--ed. Not according to this Business Week story from earlier this month]:

Foreign investment for setting up U.S. subsidiaries and plants doubled, to $82 billion, between 2002 and 2003, according to the Commerce Dept. That means 400,000 new jobs, most of them tech-related, figures the Organization for International Investment, a trade association based in Washington, D.C. Over the same period, outsourcing has taken away about 300,000 U.S. jobs, according to tech consultancy Forrester Research. So, on a net basis, foreign outfits have actually added some 100,000 U.S. jobs.

There's plenty of incentive to keep the trend going. For starters, foreign companies often find that having a U.S. base can be a big help when selling to the lucrative U.S. market. That's one reason Fremont (Calif.)-based Infosys Consulting, a subsidiary of Indian outsourcer Infosys, plans to hire about 500 consultants -- most of them Americans -- over the next two years, says Basab Pradham, senior vice-president and head of worldwide sales....

As U.S. companies begin to outsource such mission-critical functions as human resources and finance, they still want to be able to coordinate and oversee such work more closely. "What we're beginning to witness is a change in the [offshoring] business model," says Wipro's [corporate vice-president of human resources Pratik] Kumar. "A lot of outsourcing companies used to be completely offshore. But as they've begun to handle more complex work, they find that they need to have more local expertise deployed."

UPDATE: Ashish Hanwadikar has more links on this.

Josh Elliott posts a fine rant in Sports Illustrated's blog about the Olympics that echoes my own thoughts on the matter:

No athletic event that is judged belongs in the Olympics.

And no exceptions: No gymnastics. No ice skating or boxing. No synchronized swimming or diving. If it can't be won on the track, in the lane lines or with one more goal than the other folks, it has no place in the world's premier festival of sport, one that purports to give us the world's greatest champions. For if a win can't be unquestionably achieved, what's it worth, really? Without an objective, inarguable method for determining victory and defeat, the very meaning of the competition is lost. (After all, this isn't my niece's toddler soccer league, where one team scores 49 goals and the other scores two, then the exhausted competitors are told, Saturday after disillusioning Saturday, that it was a tie.) Without an absolutely certain outcome, an event such as, say, the men's gymnastics all-around, isn't a sport at all. It's a talent show.

(Disclaimer for the knee-jerk brigade: The Blog is not impugning the wondrous athleticism of world-class gymnasts, platform divers and bantamweights. At the Olympic level, they are physical marvels, able to do things that most of us would find more torturous than exhilarating. Problem is, there's one thing none of them will ever do: definitively win their competitions.)

One could argue that there is some degree of subjective judgment in any sport -- umpires calling balls and strikes, officials determining if a runner jumped the gun, etc. However, it is exceedingly rare for the subjective elements in these sports to overwhelm the objective components. In gymnastics or ice skating, the entire competition is based on subjective judgments.

This doesn't mean that judged competitions aren't exciting. Gymnastics, diving, ice skating can be entertaining, and they demand physical excellence -- but they're not sports.

I fully recognize that this will never happen, but that doesn't change the fact that Elliott is right.

UPDATE: Hmmm.... I'm not sure Laura McKenna would approve.

ANOTHER UPDATE: Matthew Yglesias and Belle Waring weigh in with some counterarguments. Belle is misinterpreting my post in think that I was laying out a necessary and suifficient condition for an activity to be labeled a sport -- I was just articulating a necessary condition.

Matt raises an interesting point:

The trouble with the Olympic sports Dan objects to is that the quality of the athleticism on display is so uniformly high that human error is frequently the decisive factor. When you think about it, though, any basketball game that was seemingly decided by a last-second shot was always, in fact, decisively impacted by the inevitable human error in the officiating. The thing about the Olympics is that every gymnastics competition is like an extremely close game, because it involves several participants capable of near-perfection. If the competitors exhibited a very wide range of ability, small imperfections in the judging wouldn't matter, just as they don't matter in a blowout basketball game.

I'll confess one source of bias that went unmentioned in my original post: it could also be that the Olympic sports I consider to be dubious require musical accompaniment.

Bloomberg runs a story on an arcane policy entity called the Pension Benefit Guaranty Corporation that I fear will be making news in, oh, about five years:

The pension shortfall among U.S. companies may force the federal agency that insures retirement plans to seek a taxpayer bailout similar to the one during the savings and loan crisis, according to the Cato Institute, a policy research group.

The Pension Benefit Guaranty Corp. had a record deficit of $11.2 billion last year after taking over plans for 152 companies, including Bethlehem Steel Corp. and US Airways Group Inc.

Without changes to funding and premium rules, that deficit is likely to swell to $18 billion in the next 10 years and may reach more than $50 billion, said Richard A. Ippolito, who wrote the study for Cato, a policy research group, and is a former chief economist for the pension agency.

"If exposures create claims that reach catastrophic levels, taxpayers will be called upon to provide a bailout," Ippolito said.

Here's the link to Ippolito's study. From the abstract, this sounds like a classic moral hazard problem:

The Pension Benefit Guaranty Corporation, the federal agency that insures private-sector defined-benefit pension plans, had a surplus of $9.7 billion at the end of 2000 but a deficit of $11.2 billion at the end of 2003. Pension plan underfunding stands at more than $350 billion, which increases the likelihood that more pension plans will go under and taxpayers will eventually be called upon to provide a bailout.

The reasons for the PBGC's financial difficulties can be found in the structure of defined-benefit pension plans and in the way Congress set up the premium rules when it created the program in 1974. First, because the PBGC stands as the ultimate guarantor of companies' pension liabilities, plan sponsors have an incentive to invest their assets in equities rather than fixed-income securities of the same duration as the liabilities. Second, funding rules allow companies to make gradual contributions to their pension plans in the event of underfunding, which guarantees long-term exposure for the PBGC. Furthermore, when faced with higher contributions, companies have usually appealed to Congress to reduce the underfunding that they need to report, which reduces contribution requirements.

Unfortunately, Congress has failed to adequately address the problems of the PBGC. In temporary legislation passed in April 2004, Congress reduced the required contributions companies must make to their defined-benefit pension plans by an estimated $80 billion over two years by changing the formula used to calculate pension liabilities. Congress also provided additional relief of approximately $1.6 billion to steel and airline companies with heavily underfunded pension plans.

Rather than place the PBGC on sounder financial footing, those measures will likely worsen the agency's financial condition.

Read the whole thing.

William Sjostrom has taken a look at the American Political Science Association's (APSA) press release announcing the highlights for its annual conference next week. Sjostrom thinks the deck of high-profile speakers is stacked:

Their featured speakers from outside the profession are George Soros, Mary Robinson, Paul Heinbecker, Lani Guinier, and Joseph Stiglitz....

Guinier and Robinson are experienced, articulate and smart lawyers. Whatever his failings as a policy maker, as an economic theorist Stiglitz is a genius. Granted, Soros is a few cards shy of a full deck, but he is a billionaire, so maybe he will pick up the lunch tab. What is depressing is remarkably narrow range of ideas present. If this were the annual banquet for The Nation, it would be hardly out of place. But for the APSA featured speaker line-up, it is seems as if the organizers are indulging in aggressive ideological narrowness.

Sjostrom has half a point. I flipped through some of the previous APSA programs, and though there are some exceptions -- William Kristol is an APSA regular -- most of the guest speakers range from mainstream Democrat (Rep. John Lewis, Amitai Etzioni) to radical leftist (Noam Chomsky). And I'll certainly acknowledge that the APSA membership and structure is probably skewed slightly to the left.

Over time, this is undoubtedly a self-reinforcing equilibrium, as conservative-minded political scientists abandon conferences like APSA for the think tank world or for parallel organizations like the Eric Voegelin Society. The assumption that all academics are leftists probably makes it difficult for APSA to obtain top-flight speakers that are right of center.

However, before anyone gets too excited, a brutal, unvarnished truth must be acknowledged -- at most, 5% of APSA participants attend these talks. APSA has about 6,000 attendees, and a crowd of 300 for these kind of talks would be impressive. These speakers influence no one, but are rather preaching to a small and committed choir.

The reasons for the poor attendance are several. First, these kind of talks are usually held during the vital hours of eating and drinking, where the real business of APSA is conducted: power-schmoozing. Well, that and reconnecting with old grad school friends. Second, after a long day of presenting, discussing, and listening to political science, the last thing most people want to do is go to a lecture about politics.

Which is the other dirty secret about my profession -- there's a difference between political science and politics. Most of the presentations and papers given at APSA do not address normative debates about the way politics should be. Instead, they are more detached analyses of why things are the way they are. Sometimes the answers can be ideological, but most political scientists just care about whether their answer is correct -- or more precisely, whether someone else can demonstrate that their preferred answer is wrong.

Anyway, now is as good a time as any to link back to my tips for conference rookies attending APSA for the first time this year.

Feel free to comment here on Senator Pat Roberts' proposed plan for intelligence reform. As I've said before, I'm leery of the pushes towards centralization made in the 9/11 Commission report, and Roberts' proposal goes further in some ways. On the other hand, I really do like the idea of splitting up the analytic and clandestine components of the CIA, an I really like the idea of rotating intelligence officers through different agencies.

My opinion don't count for much on this, however. On the other hand, Amy Zegart's opinion does count for a great deal -- intelligence reform is what she studies. So check out what Zegart said last night on Aaron Brown's NewsNight:

It's one of the boldest proposals for reform that we've seen in the 57 years of the intelligence community....

I think one of the critical differences between Senator Roberts' proposal and the 9/11 Commission is the 9/11 Commission essentially said, "Look at the pieces we have here. How can we make these work better?" Senator Roberts' proposal actually takes out that blank sheet of paper and says, "How could we actually redesign the entire intelligence system to work better?"

.... I think there are three major differences that make it better than, for example, the 9/11 Commission proposal. The first is that the national intelligence director has even more power in Senator Roberts' proposal than in the 9/11 Commission.

Now, bear in mind that the details of this proposal of Senator Roberts' proposal are not widely known but my understanding is the national intelligence director would have hiring and firing power that goes far deeper in agencies that now reside in the Pentagon, like the National Security Agency.

The second change is, as you mentioned, dismantling the CIA, separating in particular the clandestine side of the CIA from the analytic side of the CIA.

But there's a third change. And I think it is harder to see and equally important. And that's Senator Roberts' proposal tries to get at cultural changes inside the community. The 9/11 Commission identified critical cultural pathologies in our intelligence system, but really put off proposals for solving them and put them in the hands of the national intelligence director.

Senator Roberts' proposal actually goes much farther than that. For example, you'll notice the language refers to a national intelligence service. Dismantling the CIA is part of creating that one-team approach. And there are also requirements in this proposal to, for example, require the rotation of intelligence officials to different agencies outside their own, which is crucial for getting them to trust and understand each other and share information better.

UPDATE: I think it's safe to say that Fred Kaplan doesn't like the proposal.

Screw Bush or Kerry -- why can't someone like Mikheil Saakashvili run for president in the United States? As someone who witnessed first-hand the Soviet-style traffic police in action when living in Ukraine, I could only weep with joy after reading C.J. Chivers' account in the New York Times of Saakashvili's police reforms. The good parts:

Georgia has had what it calls its Rose Revolution, the bloodless nudge last year that pushed President Eduard A. Shevardnadze from power. Now it is having a road revolution, utterly changing what it is like to drive in one corner of the former Soviet Union.

This summer Mikhail Saakashvili, Mr. Shevardnadze's successor, dismissed his nation's traffic police officers, almost to a man, and a month later he replaced them with a force whose Western influences are unmistakable.

Two remarkable things followed.

First, for a month in Georgia there were almost no traffic police at all, a condition that led one Russian visitor to declare that in the summer of 2004 it was as if the White Guard had left the city, but the Red Guard had not arrived. According to Mr. Saakashvili, the accident rate held steady, which says more about the ineffectiveness of the former traffic cops than about the defensive driving habits of Georgian drivers, such as they are.

The second and more lasting change is that Mr. Saakashvili appears to have struck a decisive blow against one of the most loathed figures to emerge from the collapse of the Soviet Union....

Even in the pandemic of corruption that is the former Soviet Union, traffic police officers are nearly universally regarded as an especially low form of social parasite, an opinion that holds true from Moscow to Samarkand.

Georgia's problems were of a type. It had become impossible to drive any distance without being stopped. Mr. Saakashvili said that was so because every traffic cop was expected to pay his supervisor a regular cut, and every supervisor paid his senior officer, up the chain of command. "It was like a pyramid," he said in an interview in his office in Tbilisi, Georgia's capital. "The police were the biggest headache in this country."

For Mr. Saakashvili, who has taken to fighting corruption with vigor, the traffic police, known here as GAI (pronounced ga-EE), were the perfect opponent for his fight card - flabby, unpopular and crooked, ready-made for a quick knockdown.

He disbanded them in July. A new force was recruited, trained and dispatched by mid-August. Called the Patrol Police, it has a broader mission than traffic enforcement and is modeled after American state police.

It is also smaller than GAI, with 1,600 officers, and better paid than the old, to reduce the temptation to levy informal driving taxes.

Read the whole thing. And here's a backgrounder on Georgia's current situation.

Finally, a president who actually wants to shrink the state!

UPDATE: Thanks to Jonathan Kulick, who links to this Economist story from July about Georgia's new economy minister Kakha Bendukidze. The highlights:

If you want to buy a dysfunctional boiler house, an international airport, a tea plantation, an oil terminal, a proctology clinic, a vineyard, a telephone company, a film studio, a lost-property office or a beekeepers' regulatory board, then call Kakha Bendukidze, Georgia's new economy minister. His privatisation drive has made him a keen seller of all the above. And for the right price he will throw in the Tbilisi State Concert Hall and the Georgian National Mint as well.

Mr Bendukidze made his name and fortune as an industrialist in neighbouring Russia, putting together the country's biggest heavy-engineering group, OMZ, before returning to his native Georgia in June of this year with a mandate to reverse more than a decade of post-Soviet decay. He insists that he was taken by surprise when Georgia's president, Mikhail Saakashvili, and prime minister, Zurab Zhvania, nobbled him for a chat in the course of a private visit he made to Tbilisi in May, and then offered him a ministerial job the same evening. But having said yes, he is cracking ahead, doing everything that businessmen must dream of making governments do. He says that Georgia should be ready to sell “everything that can be sold, except its conscience”. And that is just the start.

Next year—if not sooner—he will cut the rate of income tax from 20% to 12%, payroll taxes from 33% to 20%, value-added tax from 20% to 18%, and abolish 12 kinds of tax altogether. He wants to let leading foreign banks and insurers open branches freely. He wants to abolish laws on legal tender, so that investors can use whatever currency they want. He hates foreign aid—it “destroys your ability to do things for yourself,” he says—though he concedes that political realities will oblige him to accept it for at least the next three years or so.

As to where investors should put their money, “I don't know and I don't care,” he says, and continues: “I have shut down the department of industrial policy. I am shutting down the national investment agency. I don't want the national innovation agency.” Oh yes, and he plans to shut down the country's anti-monopoly agency too. “If somebody thinks his rights are being infringed he can go to the courts, not to the ministry.” He plans, as his crowning achievement, to abolish his own ministry in 2007. “In a normal country, you don't need a ministry of the economy,” he says. “And in three years we can make the backbone of a normal country.”

The rest of the story explains why this schedule may be just a tad optimistic -- but damn, do I like this guy's instincts.

Finally, a leader for the lower-right quadrant!!

LAST UPDATE: Gavin Sheridan has lots of posts on Georgia.

Lou Dobbs has just published a book, Exporting America : Why Corporate Greed Is Shipping American Jobs Overseas. To promote it, Dobbs gave a long interview to Bill Moyers on the latter's PBS program.

The interview provides a field day of contradictions and economic illiteracy, but the one thing that came through loud and clear is that Lou Dobbs is not the best writer in the world. Moyers quotes the opening passage from Exporting America:

The power of big business over our national life has never been greater. Never have there been fewer business leaders willing to commit to the national interest over the selfish interest for the good of the company over that of the company's they head. (emphasis added)

I'm pretty sure I know what Dobbs meant by that second sentence -- but I can't swear complete certainty.

UPDATE: Thanks to alert reader gw, who actually went into the bookstore and discovered that the underlined sentence is written as: "Never have there been fewer business leaders willing to commit to the national interest over the selfish interest for the good of the country over that of the companies they head."

Slightly more intelligible, but I think the Pulitzer committee will be underwhelmed.

Over at Time's web site, Perry Bacon Jr. declares a pox on both Bush and Kerry when it comes to deficit reduction:

The problem, experts say, is that neither candidate truly has a plan to rein in America's burgeoning budget deficit which currently sits at more than $400 billion. Both campaigns offer budget plans that hide costs or assume savings that are unlikely to occur, while adding more than $1 trillion of new spending. And while each candidate promises to cut the deficit in half over the next four years, the issue ranks low on their priority list....

In his campaign, Bush rarely discusses deficit reduction as an issue, choosing to say that America has had more important priorities over the last four years: improving the economy through tax cuts and fighting the wars. He has pledged to cut the deficit by half over the next four years, mainly with increased economic growth bringing in more tax revenues and holding down spending, except for homeland security and defense. But Bush's chief campaign promise is to make permanent all the tax cuts he has signed as president, many of which are set to expire over the next decade. That won’t be cheap; it will cost an estimated $1.2 trillion, and budget experts say Bush’s projections don’t include many costs, such as continued spending on the wars and assume Congress will hold down costs on many other domestic programs like education....

Despite the right advisers and phrases, Kerry's budget doesn't show the discipline of his talk. Kerry advisers propose a health plan of more than $900 billion dollars, but say more than $300 in cost reductions will result in a slimmer $650 billion tab. Experts question whether the Kerry campaign can truly save $300 billion by changes such as improved medical technology. Other Kerry plans require cuts in "corporate welfare" that aren't spelled out specifically. Kerry proposes to roll back tax cuts for people who make over $200,000 each, which would raise an estimated $800 billion that Kerry could spend on education and health care. But Kerry also supports more than $400 billion in tax cuts, keeping Bush's tax reductions on middle class Americans, and throwing in new ones, such as a $4,000 tuition tax credit for families sending a child to college. And Kerry doesn’t apply his "pay-go" rule to his support of the Bush middle-class tax cuts.

Like Bush, Kerry spends about $1.2 trillion dollars and doesn’t include costs for the war and other likely expenses. “What he's saying is that even though I’m criticizing Bush, I've got the same goal he does," says Robert Bixby, executive director of the Concord Coalition, a non-partisan Washington group that focuses on deficit reduction. "Kerry does a good job explaining why deficits matter, but I think the actual numbers he's putting out don't necessarily match the rhetoric."

This mirrors a point Steve Chapman made last week in the Chicago Tribune:

The budget surplus is gone, federal spending is out of control and the government is swimming in debt. But, to coin a phrase, help is on the way. President Bush and Sen. John Kerry both promise that in the next four years, they will cut this year's $445 billion federal budget deficit in half.

To which serious students of the budget reply: Big, fat, hairy deal. The vow is only slightly more risky than promising that four years from now, everyone will be four years older. All the next president needs to do to cut the deficit in half, you see, is ... nothing. Leave existing laws and policies in place, without changing a thing, and the deficit would dwindle to a mere $228 billion. For that, we don't need a president.

Kerry and Bush, to be fair, do not propose to do nothing. They have all sorts of plans to shower citizens with new spending programs and tax cuts, even though we can't pay for the ones we've got. But they insist they can hand out these goodies while making big advances against the deficit--Bush by cracking down on new spending, Kerry by repealing tax cuts for the rich.

To assume they'll actually attack the deficit requires a suspension of disbelief. The Bush who says he'll hold down domestic outlays, after all, is the same Bush who has never vetoed a spending bill, or any other bill--the first president with that dubious distinction since James Garfield, who had the excuse of being mortally wounded by an assassin after only four months in office....

Kerry is more believable only because he doesn't even feign interest in spending discipline. The National Taxpayers Union Foundation estimates that all his promises would raise annual federal outlays by $226 billion a year.

Some of this would be paid for by repealing some of the Bush tax cuts, but much of it would come from piling up debt for our children and grandchildren. The anti-deficit Concord Coalition figures that based on their public commitments, either Bush or Kerry would enlarge the projected deficit over the next 10 years by about $1.3 trillion.

Even their meager promise to halve the deficit rests on the sort of accounting that got Enron in trouble. Bush's blueprint doesn't include the $50 billion he plans to request for the occupation of Iraq over the next year--and it assumes we won't spend anything in Iraq after that. Kerry, in a show of bipartisanship, makes the same convenient but ridiculous assumption.

I've said it before and I'll say it again -- I've never been more underwhelmed with my choice of major party candidates.

If I haven't depressed you already, go check out the Concord Coalition's latest report on fiscal responsibility. The quick summary:

The budget deficit continues to ratchet upward and there is no consensus on what, if anything, to do about it. At best, Washington policymakers seem content to tread water in the rising tide of red ink. At worst, they are cynically professing concern about the deficit while pursuing tax and spending policies they know will only dig the fiscal hole deeper. One thing is clear: specific plans to actually reduce the deficit are not on the agenda. Such complacency is not warranted....

Earlier this year, the Congressional Budget Office (CBO) projected a fiscal year 2004 deficit of $477 billion. Since then, however, revenue growth has been stronger than expected and the actual deficit for 2004 will likely be closer to the $445 billion deficit that the Bush administration (OMB) now projects. Does that mean that current policies are bringing the deficit down? No. For one thing, the deficit is going up, not down. It is true that when CBO issues its next forecast, the projected deficit will be lower than it was–just as the OMB's projected deficit has declined since February. What matters, however, is the bottom line and there can be no denying that a deficit of $445 billion, or close to it, is considerably larger than last year’s deficit of $375 billion....

Fiscal policy this year has featured wishful thinking and creative accounting rather than actions to control the deficit.