Overheard at a Cato Institute talk I attended:

What have we gotten from Republicans controlling all the branches of government? A bloated entitlement state that eats its young, and a lot of buildings named after Ronald Reagan.

UPDATE: The author of the quote rightly claims credit for it.

ANOTHER UPDATE: Virginia Postrel echoes this theme:

By jetisoning any pretense to free-market principles, the GOP is defining itself entirely as the party of the religious right. The subsidies to friends are simply business as usual for whatever party is in power, a tool for fundraising but not for defining party identity.

Dear Karen,

I see you are slowly wending your way through the confirmation process for the post of Undersecretary of State for Public Diplomacy and Public Affairs. Congrats on that unanimous vote.

By the way, Robert Satloff has a must-read piece in TNR Online on the hurdles you will face at Foggy Bottom. Here are the opening and closing paragraphs:

In her Senate nominating testimony last week, Undersecretary of State-designate for public diplomacy Karen Hughes characterized America's challenge to win allies and understanding around the globe as a "struggle of ideas." Here's a story of what happened when one bright idea--ahem, my bright idea--offered as a modest proposal to help fight the post-9/11 hearts-and-minds battle in the Middle East ran up against a truly formidable adversary: the federal bureaucracy....

Both Hughes and [Dina] Powell have reputations for being smart, savvy professionals; but neither has ever worked in the State bureaucracy, where purse-strings are power and turf is holy ground. To be sure, officials in each one of State's alphabet soup of offices--ECA, OOS, MEPI--are caring, committed professionals, forced to make solomonic decisions about lots of worthy projects with limited funds. But Hughes and Powell have a special responsibility to see the big picture and to connect the many little dots that will make it come to life--in other words, to break through the bureaucratic brick-wall that is hampering our efforts to win hearts and minds in the Middle East. Hughes is right that the war on terrorism is a "struggle of ideas." It would be nice if implementing ideas to fight that battle weren't such a struggle.

Read the whole thing. And then roll up your sleeves.

And then -- only if you have the time, mind you -- go read Anne Applebaum too. .

The Bush administration is getting really, really good at using William Riker's "minimum winning coalition" theory of passing trade bills. Here's the Washington Post story by Paul Blustein and Mike Allen:

The House narrowly approved the Central American Free Trade Agreement this morning, delivering a hard-fought victory to President Bush while underscoring the nation's deep divisions over trade.

The 217 to 215 vote came just after midnight, in a dramatic finish that highlighted the intensity brought by both sides to the battle. When the usual 15-minute voting period expired at 11:17 p.m., the no votes outnumbered the yes votes by 180 to 175, with dozens of members undeclared. House Republican leaders kept the voting open for another 47 minutes, furiously rounding up holdouts in their own party until they had secured just enough to ensure approval.

The House vote was effectively the last hurdle -- and by far the steepest -- facing CAFTA, which will tear down barriers to trade and investment between the United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

"This win sends a powerful signal to the region and the world that the United States will continue to lead in opening markets and leveling the playing field," said Rob Portman, the U.S. trade representative, in a statement issued immediately after the vote.

Although the deal was approved by the Senate last month, it was overwhelmingly opposed by House Democrats who contend that it is wrong to strike a free-trade pact with poor countries lacking strong protection for worker rights. Only 15 of the 202 House Democrats backed the accord, while 27 out of 232 Republicans voted against....

Before the vote, GOP leaders, who had negotiated deals in recent days to sway Republicans, made it clear they were prepared to twist arms. "It will be a tough vote, but we will pass CAFTA tonight," House Majority Leader Tom DeLay (R-Tex.) told reporters yesterday morning. "And we will do it with very few Democrats on board."

Underscoring the importance that Bush attaches to the pact, he put his prestige on the line by making a rare appearance with Vice President Cheney at the weekly closed-door meeting of the House Republican Conference. Bush spoke for an hour, lawmakers said, stressing the national security implications of CAFTA, which are rooted in the concern that growing anti-American sentiment in Latin America would flourish if the United States refused to open its markets wider to the nations that negotiated the pact.

"Mothers and fathers in El Salvador love their children as much as we love our children here," Bush said, stressing the need to look out for the young democracies in "our neighborhood," according to lawmakers. He also noted that four of the six countries -- the Dominican Republic, El Salvador, Honduras and Nicaragua -- have assisted the U.S. military effort in Iraq.

The last-minute negotiations for Republican votes resembled the wheeling and dealing on a car lot. Republicans who were opposed or undecided were courted during hurried meetings in Capitol hallways, on the House floor and at the White House. GOP leaders told their rank and file that if they wanted anything, now was the time to ask, lawmakers said, and members took advantage of the opportunity by requesting such things as fundraising appearances by Cheney and the restoration of money the White House has tried to cut from agriculture programs. Lawmakers also said many of the favors bestowed in exchange for votes will be tucked into the huge energy and highway bills that Congress is scheduled to pass this week before leaving for the August recess. (emphasis added)

As that bolded portion suggests, whether using Riker's theory is good for public policy is another question entirely.

As I said before, I supprted CAFTA's passage, and I'm glad to see President Bush used some of those reasons to get it through. But I confess I can't muster a great deal of enthusiasm about this passage, except in so far as it preserves the possibility of achieving the Doha round.

Oh, and since the Bush administration won't do it, let me take the opportunity to thank the fifteen Democrats who voted for the bill -- without whom, I suspect, CAFTA would have gone down. You're a shrinking breed.

One interesting question for the future will be how the defections from the AFL-CIO will affect the lobbying power of unions on trade-related issues. I suspect that their trade policy shop is going to get seriously dented by this change. [But Nathan Newman says that competition among unions for organizing will be good for the labor movement!--ed. Check out Robert Fitch's take in Slate and see if Newman's optimism is still well-placed.]

UPDATE: Well, it looks like the Bushies aren't the only ones playing hardball:

From Roll Call: "House Minority Leader Nancy Pelosi (D-Calif.), angry that some of her own betrayed the party on a key trade vote, called a last-minute, Members-only meeting tonight to review the early-morning balloting and the reasoning behind defectors' votes.

"Pelosi called for the special session of the Democratic Steering and Policy Committee at a private whip meeting this morning, during which she said she 'had a sleepless night' over the Central American Free Trade Agreement vote that narrowly passed early in the morning. Sources in the room said Pelosi was furious at the outcome and the votes of some of the 15 Democrats - notably some in safe districts - who joined the Republicans to pass the bill.

Tim Harford is guest-blogging over at Marginal Revolution, and he links to a partially tongue-in-cheek Economist story (subscription required) that opens with the following:

In December, we warned that the dollar's role as the world's main currency was under threat if America continued in its profligate ways. Yet the dollar has been dethroned even sooner than we expected. It has been superseded not by the euro, nor by the yen or yuan, but by another increasingly popular global currency: frequent-flyer miles.

Harford goes on to observe, "frequent flyer miles are now the world's dominant currency, with outstanding balances at $700bn."

I'm embarrassed to say I haven't gotten around to having an online subscription, but I think the Economist's claim of frequent-flyer miles collectively functioning as a single currency is wrong. Why? Because collective frequent flyer miles are denominated with different units of account (some airlines use segments rather than miles). They also don't work terribly well as mediums of exchange -- e.g., exchanging United miles with American miles. UPDATE: Well, exchange is possible but incredibly costly, according to this MSN Money report:

Ten airlines, including American and Hawaiian, participate in the HHonors Rewards exchange, allowing the points-to-miles-to-points conversion among all 10. However, these exchanges come at a price. For the most part, 5,000 miles earn 10,000 HHonors points. (Kilometers from Lan Chile and miles from Virgin Atlantic are exchanged at a 1-to-1 ratio.) Converting the points back to miles erodes the value considerably. For all but Lan Chile, you get 1,500 miles for every 10,000 HHonors points. Essentially, you've traded 5,000 miles for 1,500 miles....

"Consumers can convert miles with United and American at a 1-to-1 ratio into Club Rewards points," says Ashley Miller, the program's North America director.

The points can be converted back into miles with the program's 24 other partner airlines, but at a 2-to-1 ratio so that 10,000 Club Reward points become 5,000 miles. There's also a handling fee for converting points to miles. Miles in those other 24 partner programs can't be converted to Club Rewards points.

The problem is that this makes the HHonors points the currency, not the frequent flyer miles themselves.

Individually, I can think of each frequent-flyer program as creating money, but together they don't form a single currency, but rather another six or seven.

It's been a while since I thought of how to define a currency, so I'd appreciate a correction if I'm wrong on this. I never feel completely comfortable contradicting the Economist.

UPDATE: Several commenters have suggested that I didn't detect the irony in the Economist piece -- au contraire, I was aware of the lighthearted one. If the logic underlying the humor doesn't hold up, however, then I'm not sure how funny it is.

Six months ago I posted on how the IT sector seemed to be thriving as of late despite the rise of offshore outsourcing.

Here's some more evidence from Thomas Hoffman at ComputerWorld:

A strengthening U.S. economy that's fueling increased IT spending and creating a tighter labor market has led to moderate pay gains for technical workers such as application developers and database administrators, according to new research and interviews with IT executives last week.

"There is a noticeable wage increase" for technical skills, said David Myers, director of project management at Solo Cup Co. in Highland Park, Ill.

Myers said he believes that the pay gains are the result of a general rise in IT capital spending, which has resulted in more projects being launched and a decreasing supply of available domestic IT labor....

A report released last week by Foote Partners LLC, a New Canaan, Conn.-based market research firm, found that pay for noncertified and certified technical skills has risen 3.8% and 1.3%, respectively, through the first six months of this year.

Pay raises this year have been particularly strong for people with skills in operating systems (up 8.2%), networking and internetworking (up 5.1%), and databases (up 4.3%), the report said.

The results, which are based on a survey of 1,800 North American and European organizations from April to July 1, suggest that the notion that lower-cost offshore outsourcing led to wage deflation for IT workers may have been overblown, said David Foote, president of Foote Partners.

Here's a link to the Foote Partners press release that's discussed above.

It's also worth noting that beyond offshore outsourcing, there was an excellent reason for the drop in wages that did take place among IT services between 2000-2003: reduced demand. According to the WTO's report on offshore outsourcing, the annual percentage change in the U.S. IT market in the early part of this decade was as follows:

2001: -4.5%
2002: -6.3%
2003: 0.4%

So it's a funny thing -- as demand has picked up in the US, the number of IT jobs and the level of IT wages has increased.

Oh, and for those IT readers of danieldrezner.com who complain about no jobs, I'll close with some anecdotal want-ads from the ComputerWorld story:

A tighter job market is making it particularly tough for Harrah's Entertainment Inc. to find experienced IT project managers, business systems analysts, data warehousing managers and other specialists, said Tim Stanley, senior vice president and CIO at the Las Vegas-based gaming and hospitality company. Harrah's is looking to fill 25 to 35 IT positions, he said.

Allan McLaughlin, senior vice president and chief technology officer at LexisNexis Group, a research provider in Dayton, Ohio, said hiring requests for IT workers are getting more specific -- another factor contributing to competition for technical skills.

LexisNexis has an increased need for networking specialists and plans to expand its five-person IT security team to nine or 10 people over the next six months, said McLaughlin.

Over at Crooked Timber, Harry Brighouse asks whether grades are improving because of inflation -- or because of other reasons:

The most frequently referred to site is Stuart Rojstaczer’s gradeinflation.com, which surveys a small number of institutions and finds increases in the mean grade in all of them over both a ten year and a 30 year period (much bigger in the private than in the public institutions). This is what people take to be firm evidence of grade inflation. But it isn’t, and I’m surprised that anyone thinks it is. Here’s why; within the institutions surveyed the students might have been gaining in achievement. Grade inflation consists in higher grades being given for similar quality work, not just higher grades being given. And no-one seems to have any data on the quality of the work being produced now or in the past.

Am I saying that students might have gotten smarter over the period? Well, they might, but that’s not what I’m saying. They might be better prepared for college than before, or, rather, enough of them might be better prepared to outweigh the fact that some of them are less well prepared.... Students might be working harder, or working smarter, because they care more about getting good grades believing (falsely, according to lots of commentators) that better grades yield higher incomes and better job prospects. Instructors might have improved: many of the institutions have seen a decline in the teaching load for instructors over that period, allowing instructors more time to devote to preparation etc. Instructors might be more talented: certainly, the early period of grade inflation coincides with increased use of competitive and open hiring practices, and with the increased admission of women into the faculty.

A lot of Harry's alternative explanatuons would suggest -- perish the thought -- there have been productivity gains in education.

Much as I'd like this to be true, I'm probably more skeptical than Brighouse of this possibility -- click here for one reason why the distribution of grades suggests other factors at work besides improving student and instructor quality.

A lot of Iraq critics have argued that the best thing to do in the country now is "declare victory and go home."

Pakistani President Pervez Musharraf seems to be pursuing a variant of this strategy with regard to his Northwest Frontier. This is according to the Financial Times' Farhan Bokhari et al:

General Pervez Musharraf, Pakistan's military ruler, claims that the command and control system of al-Qaeda in his country has been destroyed, excluding any possibility that the terrorist network could have carried out this month's bombings in London and Egypt.

In comments that British officials will view with scepticism, Gen Musharraf said al-Qaeda's sanctuaries in the northern tribal region bordering Afghanistan had been destroyed and 700 fighters captured. However, Egyptian authorities on Monday said they were investigating possible Pakistani militant suspects in connection with the bombing early on Saturday at Egypt's Sharm el Sheikh resort.

Meanwhile, in London British officials have expressed growing frustration with the Pakistani security service's inability to crack down on militants or keep a comprehensive register of madrassahs. Three of the four suicide bombers who killed 56 people in London on July 7 were Britons of Pakistani origin....

Pakistani officials said privately that they had asked Egypt to share any information on the identities of such suspects but the government publicly denied the connection. “What has appeared on these Arab TV channels is highly speculative,” Aftab Ahmed Khan Sherpao, the interior minister, said. “We have no knowledge of any such link and I don't think it is true.”

Gen Musharraf was adamant there was no connection. “Is it possible in this situation that an al-Qaeda man sitting here, no matter who he is, may control things in London, Sharm el Sheikh, Istanbul or Africa?” he said. “This is absolutely wrong.”

Now we know that the Chinese devalued the yuan -- and we know pretty much why. But what were nuts and bolts of the decision-making process? How did it hapen?

The staff at the Wall Street Journal has a great essay on the two-year process by which the Chinese decided to revalue their yuan. The opening is killer:

Last Thursday morning, several key foreign banks were asked to send a representative to the headquarters of the People's Bank of China, the central bank. The topic wasn't clear.

The meeting began around the time China's foreign-exchange market was closing for the day at 3:30 p.m. As a central-bank official began to talk, the doors were shut and locked.

"They started talking about something that wasn't very useful and then started to collect mobile phones and BlackBerrys," said a banker who was briefed later. The Chinese then distributed a four-point statement: Beijing was unlinking the yuan from the U.S. dollar effective immediately.

Then another surprise: The bankers were told they would have to cool their heels until an official statement was read nearly three hours later on China's government-controlled 7 p.m. news program.

That last-minute combination of surprise and secrecy was in keeping with the long-running drama over the yuan. (emphasis added)

UPDATE: Sorry, typo in the heading -- it should have been "revalue" and not "devalue" thanks to commenters for pointing out the error.

The Bush administration has insisted for years that the only way it will talk with the North Koreans is at multilateral talks involving Japan, South Korea, Russia, China, etc. The North Koreans, in contrast, always wanted bilateral talks with U.S. officials.

On the eve of the six-party talks starting again, it looks like the DPRK got its wish, according to the IHT'sChristopher Buckley:

The United States unexpectedly held talks with North Korea here today, on the eve of critical six-nation negotiations intended to defuse North Korea's nuclear program.

"Right now, this is the time to have these bilateral consultations," the top American envoy at the talks, Christopher Hill, told reporters here before meeting with the North Korean deputy foreign minister, Kim Kye Gwan. "We are just trying to get acquainted, to review how we see things coming up and compare notes."

Mr. Hill, the assistant secretary of state for East Asia-Pacific affairs, sought to downplay the status of today's talks, calling them "discussions" that were not part of the "negotiations."

Nonetheless, the rare bilateral encounter between the two countries is likely to fan hopes that this latest round of six-party talks, which start on Tuesday morning and include China, South Korea, Japan and Russia, will make progress toward scaling back North Korea's nuclear plans.

North Korea has long demanded more bilateral contact with the United States as part of any solution. And Mr. Hill's public acknowledgment of the bilateral meeting is itself a notable departure from Washington's past policy of acknowledging such contact only in off-the-record background briefings for journalists.

Read the whole thing -- there's some interesting material on how the Chinese view Sino-DPRK relations.