Monday, July 04, 2011

U.S. Home Prices Are Poised to Climb

Bloomberg -- "Prices for U.S. homes may climb as soon as the third quarter, ending price declines as a drop in foreclosures makes more home available for sale, said Housing and Urban Development Secretary Shaun Donovan. “It’s very unlikely that we will see a significant further decline,” Donovan said on CNN. “The real question is when will we start to see sustainable increases. Some think it will be as early as the end of this summer or this fall.”

Home sales have increased in six out of the past nine months and the number of property owners in default is declining, Donovan said on CNN’s “State of the Union” program. Housing prices will begin rising as the number of foreclosures declines, he said. “In the long run, it’s a good time to buy,” Donovan said. “It’s so affordable today compared to where it’s been for generations.” 

Related: Real estate bidding wars are back in some D.C. areas.

HT: Gary Lyle

Markets in Everything: $49 Strip Mall Lab Tests; A Convenient, Affordable Antidote to Obamacare

Click arrow to watch video.

KSTP -- "Next time you want a blood test, you could get it at a strip mall. A store-front lab firm is now open in Plymouth. It is the first business of its kind in Minnesota, but it will not be the last.

53-year-old Elaine Warren came to Any Lab Test Now to get her cholesterol checked. "I had an annual exam. It was up just a little bit so I thought I'm going get ahead of the game," says Warren. Her insurance covered her annual exam back in January, but to have her cholesterol checked now at her regular clinic would cost her $57 for the test, and a $45 co-pay for a total of $102. Her visit to Any Lab Test Now cost her $49. She was told she would get her results in about two days.

Any Lab Test Now has what it calls a 'Take Out Menu' of lab tests it performs. Lab officials say they've seen DNA tests for both paternity and immigration related issues, STD testing for informational purposes, thyroid panels and diabetes panels.

University of Minnesota Business Professor Steve Parente says with high deductible insurance becoming more popular this store-front lab test firm is an increasingly popular business model. Any Lab Test Now opened its first Minnesota branch in Plymouth in June and plans to have three more in the next year."

MP: This is one more example of affordable, convenient, market-based medicine with transparent pricing at labs that are open six days per week, and with evening hours at many locations.  Any Lab Test Now now operates in 31 states, and you don't need an appointment, insurance or a physician's referral.  At the same time that Obamacare is planning a complete government takeover of health care and medicine in America that will stifle competition and raise prices, the market continues to offer many new, innovative, alternative solutions to health care that are competitive, affordable and convenient.  

HT: Mike Carlson

Las Vegas, Phoenix Home Sales at 5/6 Year Highs

1. "Las Vegas region home sales were at a five-year high in May, rising modestly from both April and a year earlier as sales of distressed properties continued to account for nearly 70% of the resale market. Price measures moved little month-to-month but the declines from a year earlier steepened amid higher levels this year of foreclosure resales and sub-$100,000 transactions.  In May, 4,570 new and resale houses and condos closed escrow in the Las Vegas metro area – the highest sales tally for a May since 2006. May sales rose 1.8% from April and 1.7% from May 2010." 

2. "Phoenix-area home were at a six-year high in May, amid near-record levels of investor purchases. The region’s median price remained at essentially the same level – $120,000 – it’s been at the past six months as distressed property sales continued to account for around 2/3 of the resale market. The median price dropped sharply from a year earlier, however, as the number of homes selling below $100,000 shot up nearly 41% year-to-year. 

A total of 9,837 new and resale houses and condos closed escrow during May in the Phoenix metro area. That was up 0.8% from the month before and up 4.9% from a year earlier.  May’s total sales were the highest since 2007, when 10,112 homes sold, and were 8.6% short of the average number of May sales since 1994. However, the number of existing single-family detached houses that sold in May was the highest for that month since 2005, while resales of condos were the highest for a May since 2006."

Update: Real estate bidding wars are back in parts of DC area.  

Are Race-Based Preferences in Mich. Coming Back?

RaceChance of UM Admit w/3.2 GPA, 1240 SATGPA @ UM, 2003-2004Academic Probation at UM 2003-2004 (%)Honors Program at UM, 2003-2005 (%)

With a 58% to 42% overall margin, Michigan voters in 2006 overwhelmingly approved a ballot initiative called "Proposal 2" that ended the traditional practice of racial double standards in college admissions at selective public universities, and required that all state-funded universities start practicing race-neutral admissions (and race-neutral hiring and contracting).  By county, 80 out of 83 Michigan counties voted in favor of Proposal 2, which amended the state constitution with the following section:

"The University of Michigan, Michigan State University, Wayne State University, and any other public college or university, community college, or school district shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting."

One of the main motivations for Michigan's Proposal 2 was the ongoing, blatant racial double-standards in undergraduate admissions at the University of Michigan main campus, illustrated in the table above using data from the Center for Equal Opportunity.  With a high school GPA of 3.20 and an SAT score of 1240, blacks (92%) and Hispanics (88%) had roughly a 90% chance of being admitted in 2005, while Asians and whites with the same academic credentials had only about a one in ten chance (10 and 14 percent, respectively).

In addition to the obvious issue of racial favoritism for admission to Michigan, the other data in the table provide evidence of another issue: the possibility that racial favoritism results in an "academic mismatch" for minority students at highly selective universities like Michigan.  Black and Hispanic students at Michigan earn lower GPAs than whites or Asians, and are much more likely to be on academic probation, and much less likely to qualify for the Honors Program.  Without racial double-standards in admissions, black and Hispanic students might have studied at a less-selective school like Michigan State, Wayne State, Central Michigan, Eastern Michigan or Western Michigan, all very highly regarded public universities in Michigan.  But without racial preferences for admission at those less selective schools, it's very likely that minority students would have higher GPAs, be less likely to be on academic probation and more likely to qualify  for an Honors Program compared to Michigan.

Although not shown in the chart, the huge differences in graduation rates by race also provide strong evidence of academic mismatch at Michigan.  In 2006, 89% of white students at Michigan graduated within 6 years, compared to only 68% of black students, a huge 21% graduation rate race gap (source). 

But there's been a new development in the fight for racial equality and equal opportunity  under the law.  According to the Detroit Free Press, "Affirmative action is back on the menu in Michigan, but for how long is anyone's guess.  On Friday, a federal appeals court struck down Proposal 2, the 2006 Michigan constitutional amendment that banned affirmative action in college admissions, employment and contracting."  Michigan's attorney general will be appealing the ruling, and the ban on race-based preferences will stand for now.  It's possible this will end up being considered again by the Supreme Court, which previously ruled against the University of Michigan's undergraduate racial quota and point system that produced the outcomes in the table above.  

Hopefully, the vision of racial equality and equal opportunity expressed by President John F. Kennedy will prevail in the courts: "Simple justice requires that public funds, to which all taxpayers of all races and national origins contribute, not be spent in any fashion which encourages, entrenches, subsidizes or results in racial discrimination."

Sunday, July 03, 2011

The Great Gov't.-Induced Homeownership Bubble

In his latest column, George Will reviews the scalding new book “Reckless Endangerment" by New York Times columnist Gretchen Morgenson and housing finance expert Joshua Rosner.  Here's an excerpt from George Will:

"The book is another cautionary tale about government’s terrifying self-confidence. It is, the authors say, “a story of what happens when Washington decides, in its infinite wisdom, that every living, breathing citizen should own a home.”

The 1977 Community Reinvestment Act pressured banks to relax lending standards to dispense mortgages more broadly across communities. In 1992, the Federal Reserve Bank of Boston purported to identify racial discrimination in the application of traditional lending standards to those, Morgenson and Rosner write, “whose incomes, assets, or abilities to pay fell far below the traditional homeowner spectrum.”

In 1994, Bill Clinton proposed increasing homeownership through a “partnership” between government and the private sector, principally orchestrated by Fannie Mae, a “government-sponsored enterprise” (GSE). It became a perfect specimen of what such “partnerships” (e.g., General Motors) usually involve: Profits are private, losses are socialized.

There was a torrent of compassion-speak: “Special care should be taken to ensure that standards are appropriate to the economic culture of urban, lower-income, and nontraditional consumers.” “Lack of credit history should not be seen as a negative factor.” Government having decided to dictate behavior that markets discouraged, the traditional relationship between borrowers and lenders was revised. Lenders promoted reckless borrowing, knowing they could off­load risk to purchasers of bundled loans, and especially to Fannie Mae. In 1994, subprime lending was $40 billion. In 1995, almost one in five mortgages was subprime. Four years later such lending totaled $160 billion.

By 2003, the government was involved in financing almost half — $3.4 trillion — of the home-loan market. Not coincidentally, by the summer of 2005, almost 40 percent of new subprime loans were for amounts larger than the value of the properties."

MP:  The chart above helps tell the story, by showing graphically the unprecedented, government-induced rise in homeownership, from less than 64% in 1994 to more than 69% in 2004, a 5.4 percentage point increase in only one decade.  In many ways, what has been called the "housing bubble" was at the same time an unsustainable "homeownership bubble" (fueled by the political obsession with homeownership) and the bursting of the home price bubble was at the same time a bursting of the "homeownership bubble" as the graph clearly demonstrates.   

Sunday Rant on Flip-Flops and Baby Strollers

Here's my Sunday rant on two "extreme living" trends:

1. Extreme Flimsy Footwear: Once upon a time, flip-flops were cheap, rubber thongs that you bought at the drug store and only wore in the summer when you went to the beach or washed your car, or maybe wore in the locker room.  Now flip-flops have become almost year-round, everyday footwear that I see everywhere: in airports, shopping malls, downtown DC, on the DC Metro, in restaurants, at ball games, etc.  You'll even see them at the White House on an official visit with the President of the United States (see picture above, and news report here on the "flip-flop scandal" at the White House in 2005; so I guess I'm a little "late to the party" on this foot fashion controversy).

Update: "Hot weather is finally here, but with it, painful foot conditions. A common culprit? Those bbiquitous, thin flip-flops.  They're colorful, cheap, convenient and trendy. But those who specialize in treating foot problems say they're terrible for feet because they offer neither support nor protection against trauma.  They're also dangerous to wear while driving because they can get stuck under the gas pedal or the brake.

Dr. Joseph Stern, a Lower Mainland podiatrist who is president of the Canadian Podiatric Medical Association, said flip-flops should only be worn for short periods, "like from the house to the pool." (Vancouver Sun).

2. Extreme Over-sized Monster Strollers. Once upon a time, baby strollers were flimsy and lightweight with small wheels.   Today, baby strollers have "gone Hummer" with huge wheels, heavy-duty construction, multiple storage compartments, with options like sidecars, sound systems, navigation, air conditioning, and outhouses.  OK, I made up the part about the options, but the stroller pictured above illustrates the typical over-sized Monster Hummer stroller that has invaded Washington, D.C. in large numbers, especially in my neighborhood near the National Zoo - and they create havoc on crowded Metro trains, elevators and the escalators.  Total "excess" in my opinion.

Suggestion: Could we maybe go a little less flimsy on our footwear, and a little more flimsy on our baby strollers?

Saturday, July 02, 2011

Amazing Discovery by the Government in American Samoa: Demand Curves Really Do Slope Downward

From the Government Accountability Office's (GAO) June 2011 report on the devastating effects of Congressionally-mandated increases in the minimum wage in American Samoa by 56% and in the Northern Marian Islands by 66% since 2007 (see chart above):

"In 2007, the United States Congress enacted a law incrementally raising the minimum wages in American Samoa and the Commonwealth of the Northern Mariana Islands (CNMI) until they equal the U.S. minimum wage.  American Samoa’s minimum wage increased by $.50 three times, and the CNMI’s four times before legislation delayed the increases, providing for no increase in American Samoa in 2010 or 2011 and none in the CNMI in 2011 (see chart). As scheduled, American Samoa’s minimum wage will equal the current U.S. minimum wage of $7.25 in 2018, and the CNMI’s will reach it in 2016. 

Here are some of the key findings from the GAO report:

1. In American Samoa, employment fell 19 percent from 2008 to 2009 and 14 percent from 2006 to 2009.  Data for 2010 total employment are not available. 

2. GAO questionnaire responses show that tuna canning employment fell 55 percent from 2009 to 2010, reflecting the closure of one cannery and layoffs in the remaining cannery. Private sector officials said the minimum wage was one of a number of factors making business difficult. 

3. The employers reported taking cost-cutting actions from June 2009 to June 2010, including laying off workers, reducing overtime hours, decreasing benefits, temporarily closing and freezing hiring. The employers attributed most of these actions largely to the minimum wage increases. Cannery officials expressed concern in interviews about American Samoa’s dwindling global competitive advantage.

4. In the CNMI, employment fell 13 percent from 2008 to 2009 and 35 percent from 2006 to 2009.  In discussion groups, private sector employers said minimum wage increases imposed additional costs during a time in which multiple factors made it difficult to operate.

And here are some of the blunt comments about the report from the Governor of Samoa (Appendix VII) and the devastating effects of the mandated wage increases on the Samoan economy:

1. The draft report itself does not capture or convey the magnitude of the economic disaster that has befallen American Samoa.  

2. It is absolutely clear that American Samoa's cannery employment losses, plant closures and and other adverse actions were attributed significantly and most often to the minimum wage increases.

3. There is more than enough evidence in the report to support our recommendation to terminate the increases in the minimum wage immediately in American Samoa. 

4. Application of the U.S. minimum wage to American Samoa, pursuant to the scheduled increases mandated by Congress, continues to have devastating effects on American Samoa's economy.  It is causing severe distortions in American Samoa's labor market. It has driven up labor costs such that businesses are being forced to cut employment, close or relocate.

MP: What's amazing is that it apparently takes 142 pages of government-based analysis in this GAO report to come to the following conclusion: "Demand curves slope downward."

In an amazing flash of economic lucidity back in 1987 during its pre-Krugman era, the New York Times actually got it exactly correct in an editorial titled "The Right Minimum Wage: $0.00":

"The idea of using a minimum wage to overcome poverty is old, honorable - and fundamentally flawed. It's time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little."

Given the economic devastation the minimum wage has caused for American Samoa, I'm pretty sure its Governor, employers and most employees would agree that the right minimum wage for American Samoa is $0.00 per hour, just like it's the right minimum wage for the entire planet.  

HT: jlkinsella

U.S. is Well-Positioned to Navigate the Exhilarating Changes Coming Because Change is Our Home Field

Walter Russell Mead writing in today's WSJ, "The Future Still Belongs to America":
"It is, the pundits keep telling us, a time of American decline, of a post-American world. The 21st century will belong to someone else. This fashionable chatter could not be more wrong. Sure, America has big problems. But what is unique about the United States is not our problems. Every major country in the world today faces extraordinary challenges—and the 21st century will throw more at us. Yet looking toward the tumultuous century ahead, no country is better positioned to take advantage of the opportunities or manage the dangers than the United States.

The great trend of this century is the accelerating and deepening wave of change sweeping through every element of human life. Each year sees more scientists with better funding, better instruments and faster, smarter computers probing deeper and seeing further into the mysteries of the physical world. Each year more entrepreneurs are seeking to convert those discoveries and insights into ways to produce new things, or to make old things better and more cheaply. Each year the world's financial markets are more eager and better prepared to fund new startups, underwrite new investments, and otherwise help entrepreneurs and firms deploy new knowledge and insight more rapidly.

Scientific and technological revolutions trigger economic, social and political upheavals. Industry migrates around the world at a breathtaking—and accelerating—rate.  Each year the price of communication goes down and the means of communication increase.

New ideas disturb the peace of once-stable cultures. Young people grasp the possibilities of change and revolt at the conservatism of their elders. Sacred taboos and ancient hierarchies totter; women demand equality; citizens rise against monarchs. All over the world more tea is thrown into more harbors as more and more people decide that the times demand change.

This tsunami of change affects every society—and turbulent politics in so many countries make for a turbulent international environment. Managing, mastering and surviving change: These are the primary tasks of every ruler and polity. Increasingly these are also the primary tasks of every firm and household. 

This challenge will not go away. On the contrary: It has increased, and it will go on increasing through the rest of our time. The 19th century was more tumultuous than its predecessor; the 20th was more tumultuous still, and the 21st will be the fastest, most exhilarating and most dangerous ride the world has ever seen.

Everybody is going to feel the stress, but the United States of America is better placed to surf this transformation than any other country. Change is our home field. It is who we are and what we do. Brazil may be the country of the future, but America is its hometown.

Happy Fourth of July."

Friday, July 01, 2011

How State Income Tax Rates Affect NBA Outcomes

Drew Johnson of the Taxpayers Protection Alliance has a great post about how state and local income tax rates determine winners and losers in the NBA.  Here are some key excerpts:

"The NBA operates under a salary cap that not only limits the total amount a team can spend on the combined salaries of all players, but also places a ceiling on the amount that individual players can earn.  As a result, top players with similar years of service in the league make roughly the same salary regardless where they play. Since the maximum salary available to an elite level player varies little from one team to the next, state and local income tax rates play the greatest role in determining the difference in how much money star players ultimately pocket from team to team.

Exhibit A: When LeBron James famously ditched the Cleveland Cavaliers for the Miami Heat last summer, it was estimated that he would save $25 million in state taxes over the next five years by playing in income tax free Florida rather than Cleveland, where combined city and state income taxes approach 8%.

There is a clear pattern of talented players migrating to, or staying with, teams in states with little or no personal income tax. Since they can more easily attract and keep better players, teams in states with lower taxes have consistently performed better on the court than teams in highly taxed states in recent seasons.

Over the past seven years, teams based in the 10 lowest taxed cities in the NBA reached the NBA Finals seven times, winning four championships (Dallas, Miami and San Antonio, twice). In contrast, only three times did one of the 10 teams that play in the NBA markets with the highest income tax burdens reach the Finals.

The trend continued this season when seven of the teams located in the NBA’s 10 lowest taxed cities made the playoffs. This year’s playoffs featured only three teams in the 10 highest taxed NBA cities. During the 2010-11 NBA season, the 10 teams playing in the cities with the lowest income tax burden averaged a stout 57.8% winning percentage. The 10 teams playing in the cities with the highest income tax burden combined for a paltry 39.3% winning percentage."

MP: The chart above (click to enlarge) displays a regression analysis that supports Drew's findings (each blue dot represents an NBA team).  For the 2010-2011 season there was a statistically significant negative relationship (at the 1% level) between: a) the winning percentage for NBA teams, and b) the combined state and local income tax rates for an NBA team's home state.   That is, the higher (lower) the income tax burden of an NBA team's home state the lower (higher) the winning percentage for that team.

From the regression equation, we can quantify the relationship as follows: For every one percentage point increase (decrease) in the combined state and local income tax rate in the state of an NBA team, the winning percentage of that team decreases (increases) by 2.33 percentage points (and that relationship is statistically significant at the 1% level, with a t-statistic of 3.36).  

DSK Guilty: Intrade Odds Fall From 73% to 20%


Thursday, June 30, 2011

Quote of the Day: Unbelievably Loopy Economics; CAP Finds That Demand Curves Slope Upward

"The Center for American Progress, often called the think tank for the Obama White House, recently recommended another increase in the minimum wage to $8.25 an hour. Though the U.S. unemployment rate is 9.1%, the thinkers assert that a rising wage would "stimulate economic growth to the tune of 50,000 new jobs." So if the government orders employers to pay more to hire workers when they're already not hiring, they'll somehow hire more workers. By this logic, if we raised the minimum wage to $25 an hour we'd have full employment."

~WSJ editorial

How The Economic Miracle of Chile Increased Life Expectancy by Almost 22 Yrs. in Just Half a Century

The top chart above helps to document graphically what has accurately been described as the “the economic miracle of Chile.” Up until the early 1980s, when the first round of economic reforms (1974–1983) were starting to have a positive effect, Chile’s economic performance was among the weakest of the Latin American countries, with annual increases of real GDP per capita averaging only 0.70% from 1913 to 1983. Additional economic reforms in 1985 and 1990 that included trade liberalization supercharged Chile’s economy, and annual growth in per capita output since 1983 has averaged an impressive 4.0% per year. Before the economic reforms, with only 0.70% annual growth, it took almost an entire century for living standards to double in Chile; living standards now double every 19 years with 4.0% real growth, and that’s a real economic miracle!

A major factor in Chile’s amazing economic success has been its active pursuit since the 1990s of becoming one of the world’s most open and free markets. To help overcome its natural handicap of being a small and remote country, Chile has become a world leader in free trade, demonstrated by its free trade agreements with more than 50 countries around the world, giving its consumers and companies access to more than half of the world’s markets.

The bottom chart above illustrates a major benefit of Chile's miraculous economic turnaround: a significant increase in life expectancy relative to its South American neighbors.  In 1960, life expectancy in Chile was only 57 years, much lower than Venezuela (59.5 years), Paraguay (63.8 years) and more than five years below Argentina (65.2 years).  By 2009, life expectancy in Chile increased to 78.7 years, the highest in all of the Americas except for Canada (80.89 years) and the United States (79.43 years).  That's an amazing increase of almost 22 years in life expectancy for Chileans, from 57 to 78.7 years, in just half a century. 

Bottom Line: The "Chilean economic miracle" demonstrates that free market capitalism and free trade are the best paths to prosperity and a long life. 

Thanks to Charles Musick for providing the life expectancy data. 

New Milestone for "New Age of Energy Abundance"

Natural gas production in the U.S. set another new monthly record in April according to data released yesterday by the Energy Information Administration.  Gross withdrawals of natural gas increased to an all-time high of 78.58 billion cubic feet (Bcf) per day in April, up by 0.54% from the 78.16 Bcf a day in March, and up by almost 7% from production in April last year (see chart above).  

This new natural gas production record is another new milestone for the ongoing success of the hydraulic fracturing method of extracting natural gas from deep shale rock that is bringing about a new age of energy abundance in the United States.  

North Dakota's Booming Oil Economy

If there's any doubt that domestic drilling of oil and gas generate huge and significant positive economic benefits (more jobs, income, output, tax revenues, etc.), the booming economy in North Dakota provides a convincing case study.  The Peace Garden State's economy is doing so well on so many different measures, here are some highlights of its ongoing economic success:  

1. Monthly oil production dipped slightly in April, but is above its year-ago level by 23% and above the April level two years ago  by 78.5% (see chart above).  Oil production this year has averaged more than 10.5 million barrels per month, which is double the monthly production levels in 2008, and triple the levels from five years ago. 

2. Oil-related employment in North Dakota has more than doubled in just two years, from 6,800 jobs in May 2009 to 15,200 jobs in May of 2011.  While the national economy struggles with another "jobless recovery," North Dakota has continued to add jobs, and not just oil-related jobs.  The overall state employment level reached an all-time high in May and is 2.5% above the June 2009 level when the recession ended.     

3. In the first quarter of 2011, North Dakota led the country with a 6.9% increase in personal income.  Second place Wyoming at 2.6% wasn't even close, and North Dakota's increase was almost four times the national average of 1.8%. 

4. In 2010, North Dakota led the country with a 7.1% increase in real state GDP, almost three times the national average of 2.6%, and two full percentage points above the 5.1% growth for second-place New York.

5. North Dakota continues to lead the country with the nation's lowest jobless rate.  In May, North Dakota's unemployment rate of 3.2% was lower than second-place Nebraska's rate of 4.1% by almost a full percentage point, and was almost six percentage points below the national rate of 9.1%.   

6. As a result of North Dakota's booming oil-based economy, tax collections from 2009-2011 have exceeded projections by $237.5 million.  Through May, sales tax collections exceeded projections by 13% and income tax revenues by 10.6%. 

Bottom Line: North Dakota's impressive economic success clearly illustrates some of the benefits of domestic energy production: more jobs, record economic growth, huge gains in personal income, and even more tax revenues.  There's no reason that the economic success of North Dakota can't be duplicated elsewhere, if we would only open up more U.S. land and off-shore areas to domestic energy exploration and drilling.   

Wednesday, June 29, 2011

But At Least the Politicians Care... In Theory.

Current teenage unemployment rates for May 2011:

All teenagers: 24.2% 

Black teenagers: 40.7%

Male black teenagers: 45.1%

Female black teenagers: 35.9%

To paraphrase Larry Elder, let's sum up. Politicians and the mainscream media ignore market forces, don't care about the reality that demand curves slope downward, and overlook the significant adverse impacts of raising the minimum wage on teenage unemployment.  But hey, at least they care. In theory. Especially for minorities.

Wal-Mart Gets the Gold Medal For Employee Safety

OSHA Enforcement Inspections, 2006-2011
Inspections per 100,000 Employees
Home Depot
Whole Foods
2,100,000 (1,400,000 U.S. only)
10.2 (or 15.4 U.S. only)

The table above shows: a) the number of OSHA enforcement inspections over the last five years for a sample of large U.S. companies, along with b) the number of employees at those companies (from Yahoo! Finance), and finally c) the number of OSHA inspections per 100,000 employees at those companies.  

Note that when adjusted for the number of employees, Walmart has the best safety record by far among the group of retailers and manufacturers (Ford). Walmart's main competitor Target has almost six times more OSHA enforcement inspections, and Costco has twelve times as many.     

Conclusion: Wal-Mart has a much better safety record than Target, Home Depot, Lowes, McDonald's, Whole Foods, Costco and Ford, when measured by inspections per employee, and therefore gets the Gold Medal for employee safety.

Update: Even after adjusting for Walmart's U.S. employees only (1.4 million), and not adjusting any of the other companies for U.S. employees only, Walmart still comes out ahead with the best safety record per 100,000 employees.

On Behalf of Eyebrow Threaders, The Institute for Justice Goes Up Against The AZ Cosmetology Cartel

The video above is about the Institute for Justice's latest heroic effort to defend small businesses and entrepreneurs against economic protectionism, empower individuals to earn an honest living, and promote economic liberty.  Here's a summary:
"Eyebrow threading is a natural and safe method of hair removal that uses a single strand of cotton thread to remove unwanted hair, most commonly from the eyebrows, with no chemicals, dyes, hot wax or sharp objects. But state bureaucrats have decided that threaders cannot practice their trade without first obtaining an unnecessary and expensive government license. The Arizona Board of Cosmetology is now requiring skilled threaders to obtain an aesthetician license, which requires at least 600 hours of classroom instruction—not one hour of which teaches or tests threading—and that can cost over $10,000. But threaders do not need full-blown cosmetology training.

That is why a group of five threaders have filed Gutierrez v. Aune, a lawsuit to vindicate their economic liberty, which is the right to earn an honest living free from unreasonable government regulation. This lawsuit continues the Institute for Justice Arizona Chapter’s ten-year fight to vindicate economic liberty as a fundamental and constitutionally protected right under the Arizona Constitution."

Related: The Arizona Republic newspaper defends the eyebrow threaders' right to earn an honest living in an editorial today titled "Leave Eyebrow-threaders Alone."

Tuesday, June 28, 2011

2,000 Yrs. in One Chart: 23% of all Goods, Services Made Since 1 A.D. Were Produced This Decade!

The chart above is from The Economist and shows a "population-weighted history of the past two millennia" based on "economic output" and "years lived."  According to The Economist:

"By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already "longer" than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010." 

MP: It also looks like more economic output was produced in the 20th century than in the previous 19 centuries combined.

HTs: Robert Kuehl and Steve Bartin

Inconsistencies in Reporting U.S. Trade Data? Is the BEA Following the Cash, or the Goods and Assets?

The BEA released data today on the "U.S. Net International Investment Position at Yearend 2010" with these highlights:
  • The U.S. net international investment position at yearend 2010 was -$2,471.0 billion, as the value of foreign investments in the United States ($22,786 billion) continued to exceed the value of U.S. investments abroad ($20,315 billion).   
  • There was a -$74.6 billion change in the U.S. net investment position from yearend 2009 to yearend 2010 that primarily reflected net foreign acquisitions of financial assets in the United States that exceeded net U.S. acquisitions of financial assets abroad.
  • Foreign acquisitions of financial assets in the United States were $1,245.7 billion in 2010, up substantially from $335.8 billion in 2009.
  • U.S. acquisitions of financial assets abroad were $1,005.2 billion in 2010, up substantially from $139.3 billion in 2009. 
MP: This analysis seems to depart from the way the BEA calculates trade data in the following way:

1. When U.S. imports (cash out) exceed exports (cash in), it gets reported by the BEA as a "trade deficit" because the accounting logic is based on following the cash, and not the goods.  Because the "cash out" for imports is greater than the "cash in" for exports, there is a "net cash outflow" from the U.S. to our trading partners, and we call this a "trade deficit."  

2. When the BEA calculates the international investment position, it seems to depart from following the cash, and switches to following the assets.  The fact that the value of foreign investments in the United States ($22,786 billion) exceeds the value of U.S. investments abroad ($20,315 billion) means that there has been a net inflow, or capital surplus, into the  U.S. of $2,471 billion.   And yet the BEA reports this as a negative -$2,471 billion because of the switch from following the cash (+$2,471 billion inflow) to following who ends up with the assets. 

Likewise, the BEA reports a -$74.6 billion annual change in the U.S. net investment position for 2010 because of a $74.6 billion capital inflow, or as the BEA stated because "net foreign acquisitions of financial assets in the United States exceeded net U.S. acquisitions of financial assets abroad" last year. 

Why the switch from following where the cash ends up (and not goods) when reporting trade data for the U.S., to following where the asset ownership ends up (and not the cash) when reporting the net international investment position for the U.S.?

If the government reported trade statistics the way it reports our net investment position, the BEA would follow where the goods end up and not where the cash ends up. In that case, it seems like the BEA would report our "trade deficit" instead as a "trade surplus."  Reason? We acquire more output produced in foreign countries in a given quarter or year than the output our trading partners acquire that was produced in the U.S. during that time period.  In terms of which country ends up with the most "stuff" on net, the U.S. would be running a "trade/stuff/output surplus," and not a deficit.  It's only because the BEA tracks which country ends up with the most "money" on net, and not the most "goods" on net, that the BEA reports a "trade deficit" for the U.S.

Alternatively, if the BEA reported the U.S. net international investment position the way it reports trade data, shouldn't it be reporting a positive $2,471 billion net investment position overall and a positive $74.6 surplus for 2010?  

The BEA is apparently reporting the the U.S. currently has both a "trade deficit" and an "international investment" deficit?  How can that be?

Chart of the Day: Motorcycle Deaths by Age

The chart above shows the percentage of annual motorcycle deaths represented by the youngest age group (< 29 years) and the oldest group (> 50 years), according to annual data from the National Highway Traffic Safety Administration for the years 1975 to 2009.  In 1975, 80% of motorcycle fatalities were in the youngest age group and that percentage fell over time; only 3% of the deaths were in the older age group in 1975 and that share increased over time (see chart).  It's interesting to note that by 2009, the share of motorcycle deaths for the older group (31%) exceeded the share of deaths for the younger group (26%) for the first time ever.   

I assume these trends in motorcycle deaths reflect the popularity of motorcycles among the baby boom generation, who started driving motorcycles when they were younger and have continued to drive bikes as they age.  Meanwhile, if motorcycles have become less popular among young people in their 20s, the two demographic trends would explain why the share of motorcycle deaths represented by the 50+ age group is increasing, and was greater in 2009 than the younger age group's share of deaths.   

The Iron Law of Intervention

Economist Art Carden identifies what he calls an Iron Law of Intervention in his recent Forbes column: "If you want to make a problem worse, pass a law to fix it."

Art illustrates the law by explaining how price gouging laws actually make conditions much worse, not better, for the victims of natural disasters like the recent tornadoes in Alabama and Missouri.

Other examples of the Iron Law would be: a) rent control laws, which worsen shortages of affordable housing, and b) minimum wage laws that make unskilled workers worse off, not better off. 

Semi-Annual Grammar/Punctuation/Spelling Rant: Why Is This Simple Grammar Rule SO Difficult?

Please indulge me in my semi-annual supercilious grammar - punctuation - spelling rant. Here's some background, here's the rule, and here are some recent examples below from CD comments of the misuse of "it's" for "its."  Excuse my snobbish confusion, but I still can't figure how or why such a simple rule (from about the third grade maybe?) gives so many intelligent people so much trouble?  "It's" is a contraction for "it is" and if you can't substitute "it is" for "it's" you should be using "its" (possessive) and not "it's."

1. You simply list every evil regime you can think of and then credit it's existence and it's crimes to the U.S.

2. The fact that the US imports most of it's oil from Canada and not the Saudis is irrelevant.

3. The age of the US truck fleet is at it's highest level since the interstate highway system.

4. That was were I was headed with my question about government and it's role.

5. That is natural law in it's pure form.

6. If you took the whole earth and broke it up into piles of it's constituent components....

7. Any state that wants to operate it's own system with it's own rules can do so including their own version of block grants.

Suggestion: Spend just five minutes thinking about this rule, and you'll know it and "own it" for life, and the misuse of it's will "stand out like a sore thumb" when you see it in print.

Comments welcome.

Monday, June 27, 2011

Food Deserts in DC? No Problem, Let Walmart Handle It. Bonus: Thousands of New Jobs As Well

The United States Department of Agriculture has recently released a "Food Desert Locator," which is an interactive Internet mapping tool that pinpoints low-income neighborhoods across the United States with high concentrations of residents who have limited access to a local supermarket or large grocery store.  From the USDA's May 2, 2011 press release:

"About 10 percent of the 65,000 census tracts in the United States meet the definition of a food desert. These food desert tracts contain 13.5 million people with low access to sources of healthful food. The majority of this population—82 percent—live in urban areas. 

This new Food Desert Locator will help policy makers, community planners, researchers, and other professionals identify communities where public-private intervention can help make fresh, healthy, and affordable food more readily available to residents."   

MP: Who needs "public-private intervention" to make "fresh, healthy and affordable food more readily available" in poor neighborhoods when you have Walmart willing to do a "private intervention" by opening stores in food deserts and solving the problem?  

A case in point: The pink shaded areas on the map above show the food deserts in the Washington, D.C. metro area.  Walmart is planning to open four new stores next year in the Washington area, and two of them are in the city's food deserts (see map above).  And Walmart will not only solve the poor neighborhood's food desert problem, it will also address some other problems like bringing 1,200 new permanent jobs to the District with benefits available to full and part-time associates,  400 constructions jobs to build the  stores, and affordable $4 prescription drugs.  

Bottom Line: If you care about poor people, are concerned about food deserts, and want more Americans to have jobs, you just gotta love Walmart. For all of its ongoing efforts to eliminate food deserts and bring affordable, fresh and healthy food to poor neighborhoods across the country in cities like Chicago and Washington, D.C., I hereby nominate Walmart for the 2011 Nobel Peace Prize. 

How Big U.S. Companies Would Rank as Countries

Based on 2010 sales revenue, Business Insider has a list of how 25 of America's largest companies compare to the GDP of entire countries in 2010, here are the top three:

1. With 2010 revenues of $414 billion, Walmart would rank as the world's 26th largest economy, right behind #25 Norway, which produced $422 billion of GDP last year.

2. Exxon would rank as the world's 30th largest economy with $355 billion of revenue, ahead of Thailand's $319 billion of GDP. 

3. Chevron would rank #46 in the world with $196 billion in sales last year, ahead of the Czech Republic's GDP of $192 billion.  

HT: Robert Kuehl

Update: Please note that sales revenue and GDP are measures of different types of economic activity and are not directly comparable in a pure economic or scientific sense.  Consider this to be more of an amusing comparison that allows us to put the billions of dollars of revenue that Walmart or ExxonMobil generate every year into some context by comparing those dollar amounts to the annual output of entire country, giving us an appreciation of the size of America's largest companies.    

#1, #2 American-Made Cars: Toyota and Honda

Rank 2011Make/ModelU.S. Assembly LocationRank 2010
1Toyota Camry Georgetown, Ky.;1
Lafayette, Ind.
2Honda Accord Marysville, Ohio;2
Lincoln, Ala.
3Chevrolet Malibu Kansas City, Kan. 5
4Ford Explorer Chicago, Illinois 
Honda Odyssey
Lincoln, Ala. 6
6Toyota Sienna Princeton, Ind. 10
Jeep Wrangler
Toledo, Ohio 9
Chevrolet Traverse
Lansing, Mich.
9Toyota Tundra San Antonio, Texas 8
10GMC Acadia Lansing, Mich.
Sources: Automaker data, Automotive News, dealership data, and National Highway Traffic Safety Administration

"'s American-Made Index (AMI) recognizes cars and trucks that are built here, have a high amount of domestic parts and are bought in large numbers by American consumers (see top ten above). Despite stagnant sales, the Toyota Camry and Honda Accord remain atop this year's American-Made Index. Falling domestic parts content axed Ford's popular Escape and Focus, but the Dearborn MI automaker's redesigned, Chicago-built Explorer hit the ground running and entered the list at fourth place.

Detroit's full-size pickups, once a dominant force on the AMI, remain off the chart. The F-150 held a commanding No. 1 spot in the first three years that compiled the index, with domestic parts content as high as 90 percent. Alas, today's Michigan- and Missouri-built F-150 bears only 60 percent domestic content rating. Similarly, the Chevrolet Silverado, which held second place for much of the F-150's reign, has just 61 percent domestic content. Chrysler's Ram 1500 pickup's 70 percent domestic content fares better, but it still falls short of the AMI's 75-percent cutoff."

MP: Three out of the top five, and four out of the top six American-made cars are built by the Japanese automakers Toyota and Honda.  Out of the top ten American-made cars, half are built in the U.S. by Toyota and Honda, three by Toyota and two by Honda. 

Update: Isn't it a bit ironic that many of the "most American made" cars would get towed from the two UAW parking lots in Flint, MI pictured below? And what about the 17 vehicles on the UAW’s 2011 Vehicles Guide built in Canada by unionized members of the "Canadian Auto Workers" - including the Chevy Camaro, Chrysler Town and Country, Dodge Challenger, Lincoln Town Car - wouldn't they be considered "foreign cars" subject to getting towed by UAW Local 659? And the following vehicles on the list that are built by UAW workers in the U.S. for Japanese automakers Mazda and Mitsubishi would apparently be approved at either lot: Mazda6, Mitsubishi Eclipse, Mitsubishi Eclipse Spyder, Mitsubishi Galant, Mazda B-series, and the Mitsubishi Endeavor?

Update: See Don Boudreaux's Open Letter to the President of UAW Local 599.  

Sunday, June 26, 2011

Sunday Links

1. Intrade contracts for Obama to be re-elected next year are now trading at 56%, the lowest re-election odds since early January 2011 (see chart above).   (HT: Steve Bartin)

2. Made in China: The new San Francisco-Oakland Bay bridge.

3. Children with Medicaid are far more likely than those with private insurance to be turned away by medical specialists or be made to wait more than a month for an appointment, even for serious medical problems. Reason? Lower payments by Medicaid, delays in paying, and red tape. 

4. Increased worldwide demand is fueling a Kentucky bourbon boom, thanks in part to a growing middle class in emerging markets.  (What would Ian Fletcher, author of "Free Trade Doesn't Work" say?)

5. The U.S. military spends $20 billion annually on air conditioning in Iraq and Afghanistan. 

6. The Great Corn Con: "In its myriad corn-related interventions, Washington has managed simultaneously to help drive up food prices and add tens of billions of dollars to the deficit, while arguably increasing energy use and harming the environment." I think author Steven Rattner is agreeing with RollingStone Magazine that "Ethanol is not just hype -- it's dangerous, delusional bullshit."

Quote of the Day: Thomas Sowell on the Cavemen

At Cafe Hayek, Don Boudreaux quotes economist Julian Simon:

“Natural resources are not finite in any meaningful economic sense, mind-boggling though this assertion may be.  The stocks of them are not fixed but rather are expanding through human ingenuity.”

Here's a related quote about natural resources from economist Thomas Sowell in his book "Knowledge and Decisions":

"The cavemen had the same natural resources at their disposal as we have today, and the difference between their standard of living and ours is a difference between the knowledge they could bring to bear on those resources and the knowledge used today." 

Thursday, June 23, 2011

Some Non-Strategic Thinking About a Non-Problem

Gasoline prices have been dropping steadily for the last six weeks, and the current price of $3.62 per gallon (national average) is the lowest in three months and almost 8% below the recent peak of close to $4 per gallon in early May (see chart above).  America's  stock of crude oil for the week ending June 17 was at the highest level (1.065 billion barrels) in more than four month since early February.  So what's the administration's "solution" to the "non-problems" of rising oil supplies and falling oil and gas prices?

Tap into America's "Strategic Petroleum Reserve" for 30 million barrels of oil, enough for about 36 hours of domestic consumption, while at the same time opposing any legislation that would allow greater access to domestic oil supplies, see Mark Green's post at the Energy Tomorrow blog titled "Non-Strategic Thinking."  Mark quotes American Petroleum Institute president Jack Gerard on CNBC:

"It's confusing as to why we would wait to this point to release part of the (SPR), but we've still failed to step forward and say let's bring long-term supply to the marketplace, create American jobs at a time when we have 9.1 percent unemployment and produce millions of dollars of federal revenue at time when we're struggling with a debt and deficit crisis. ... Just yesterday the administration sent a letter to Capitol Hill opposing a permitting bill that was designed to expedite permits in Alaska to produce oil and natural gas. We are getting a confused message."

Larry Kudlow is rightly skeptical and suspicious of the "government solution" to the "non-problem" and wonders if the IEA delivered a "QE3 quick fix to save Obama’s skin?" and concludes "Lord save us from short-run government fixes. Haven’t we had enough of them?"

Wednesday, June 22, 2011

"In Loco Parentis": Mandatory Flotation Devices

"People who hope to beat the summer heat by swimming, floating or boating on rivers in King County (Washington state) must wear a life vest or face an $86  fine. A divided County Council on Monday passed a personal flotation device ordinance by a five to four vote. Opponents said it was an intrusive move by "big government."

"This council sometimes thinks it's everybody's mom," said Councilwoman Kathy Lambert, who voted "no."  Supporters said the new rule will save lives."

May Real Estate Sales Were Booming in Florida, Especially in Miami, Where "Home Sales Go Nuts"

Nationally, home sales fell in May by 3.8% from April and by 15.3% from May last year, but the real estate market in Florida was booming in May, with strong gains statewide in condo sales, but especially in the Miami metro area.  

Statewide, Florida Realtors just reported that existing home sales increased by 3% in May and sales of existing condos rose 17%, both compared to a year ago. The median sales price for existing homes in Florida decreased by 5% in May to $135,500 from $142,900 a year ago, but the median price fro homes sold in May increased by almost 3% from April.

In the Miami metro area, the May increases in home and condo sales were even stronger.  The Miami Herald is reporting that there were "875 sales of existing single-family homes, and 1,420 condo sales in May, increases of 20 percent and 46 percent from last May, respectively. Compared to April, home sales were up 5.4 percent in Miami-Dade and up 1.1 percent in the condo market." Here's another news story with the title "Miami Home Sales Go Nuts."

Foreign buyers are helping to fuel the increase in Miami real estate sales, here's a Bloomberg story about strong demand for Miami homes and condos from Brazilian investors, who are taking advantage of the 45% appreciation of Brazil's currency since 2008. 

Tuesday, June 21, 2011

Texas Turns Off Lights on Federal Lightbulb Ban

"State lawmakers have passed a bill that would allow Texans to skirt federal efforts to promote more efficient light bulbs, which ultimately pushes the swirled, compact fluorescent bulbs over the 100-watt incandescent bulbs many grew up with. The measure, sent to Gov. Rick Perry for consideration, lets any incandescent light bulb manufactured in Texas - and sold in that state - avoid the authority of the federal government or the repeal of the 2007 energy independence act that starts phasing out some incandescent light bulbs next year."

"Let there be light," state Rep. George Lavender, R-Texarkana, wrote on Facebook after the bill passed. "It will allow the continued manufacture and sale of incandescent light bulbs in Texas, even after the federal ban goes into effect. ... It's a good day for Texas."

Markets in Everything: Cash-Only Doctor

Renegade Minnesota doctor -- makes same-day house calls, spends 30 minutes with each patient, and accepts payment in cash, checks, eggs, wine, pork sausage, pickles, homegrown tomatoes, or homemade pies, but not insurance, Medicare or Medicare. 

Monday, June 20, 2011

MIT's BPP Monthly Inflation Rate Falls to 5-Mo. Low and TIPS Breakeven Spread Falls to A 6-Month Low

The Billion Prices Project @ MIT has just been updated with daily price data through June 1, and is reflecting moderating inflationary pressures that have fallen to a new 5-month low (see chart above of monthly inflation rates since 12/25/2010).  From a high of about 0.85% for the monthly inflation rate through late February, inflation has fallen to about 0.32% for the month ending June 1, and has been trending steadily downward for the last three months to the lowest level since late January.  

From a statement issued by the BPP @ MIT group: "We had been anticipating a slowdown in the all-items CPI, which was reflected in the BLS announcement a few days ago. The annual inflation rate appears to be stabilizing around 3.5%."

Another market indicator showing moderating inflationary pressures is the 10-year Treasury breakeven spread between yields on nominal and indexed Treasuries, which fell today to 2.17%, the lowest level since December 10, 2010 more than six months ago.  

Bottom Line: Inflationary pressures are falling. 

Another Reason For Companies to Leave California

Last week I posted about the record number of companies leaving California (5.4 per week this year), and here's an AP news story "Wave of Lawsuits Over Seats Hit Retail Stores," about a recent development that might give companies in the Golden State even more incentive to leave (or not move there in the first place, or not expand operations there):

"Enterprising trial attorneys by the dozen are using an obscure California labor law requiring retailers such as Wal-Mart, Home Depot and Target to have enough seats on hand for their workers. Superficially, the allegations appear to be little more than a nuisance.

But armed with two recent appellate decisions that allow workers and their lawyers to use California's novel "private attorney general" provision, the retailers are facing millions of dollars in damages. A first violation calls for as much as $100 per employee per pay period and double that for subsequent violations."

Markets in Everything: Fishing Pole with Video

The makers of FishEyes have created a rod and reel that features an integrated wide-angle video camera at the end of the line, sitting just above your bait.

What Happens on the Internet Every Minute

"Let's say that it takes you exactly one minute to read this post. In that time, over 6,600 photos will be uploaded to Flickr, about 70 new domains will be registered, over 1,200 new ads will be created on Craigslist, and more. Find out here what happens on the Internet every 60 seconds (see graphic above, click to enlarge)."

Sunday, June 19, 2011

Tiger Economics

From an interview with Michael ‘t Sas-Rolfes at the Percolator Blog:

"Conservation NGOs benefit from the tiger’s charismatic high profile as a means to raise funds, and conservation scientists like to study tigers, so one could argue that they have an incentive to prevent them from becoming extinct. By contrast, rural people living near tigers have to deal with threats to their livestock and children, and human-tiger conflict is a serious problem over most of the wild tiger’s range. Rural people have less of an incentive to conserve tigers, especially when offered large sums of money for tiger carcasses.

I believe that the main challenge for tiger conservation is that people living next to wild tigers are the ones who actually control their destiny, and right now those people typically don’t benefit much from the presence of wild tigers. The people who do benefit are mostly far away and don’t have much real control over what happens to tigers. There is a mismatch between who pays the costs and who gets to benefit from tiger conservation.

For something to be an asset, it has to be owned by someone. Right now most wild tigers are typically ‘owned’ by governments, but that is a weak and dispersed form of ownership, which does not benefit or incentivize specific people who control the wild tiger’s destiny. Those people are typically rural subsistence farmers and poorly paid government employees.

By creating stronger property rights – i.e. more direct ownership of tigers – one could create ways for more specific groups, communities or agencies to control and benefit directly from tigers. Ways to benefit could include genuine “adopt-a-tiger” schemes, contractual agreements with local people, tourist viewing, and possibly trophy hunting (although this is currently banned). This would give tigers much greater asset value."