Monday, May 28, 2012

A Tutorial for the President on Profit Maximization

Writing in the WSJ last week, economics professor Paul Rubin "takes the community organizer-in-chief to task for his dismissive comments about profit maximization" (ht/E. Frank Stephenson):

"In justifying his attacks on Bain Capital, President Obama argues that "profit maximization" might be an appropriate goal for a private-equity firm, but not for more general public policy. This argument ignores one of the most basic premises of economics.

We economists assume that firms always maximize profits, and that profit maximization by firms (all firms, not just private-equity ones) is a very good thing. But this is not because profits are in themselves good. Rather, profit maximization is good because it leads directly to maximum benefits for consumers. Profits provide the incentive for firms to do what consumers want. 

Consider the converse: What if a business does not maximize profits? Then it is either not making the products that consumers want the most, or it is not producing its products at the lowest cost. In either case, consumers are harmed. Any argument against "profit maximization" is an argument against consumer welfare.

Maximizing consumer welfare is the ultimate justification for an economy. Consumers are of course also workers and voters. Contrary to President Obama's claim, skill at profit maximization does translate directly into skill at governing the economy. Failure to understand this simplest and most basic point is probably itself enough to disqualify someone from the presidency when economic issues are paramount."

MP: Another good time to invoke the sagacious words of Frederic Bastiat below:

"Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race."

HT: Warren Smith

It's Time to Ditch the College-for-All Crusade

Excerpts from Robert Samuelson's editorial in today's Washington Post (emphasis mine):

"The college-for-all crusade has outlived its usefulness. Time to ditch it. Like the crusade to make all Americans homeowners, it’s now doing more harm than good. It looms as the largest mistake in educational policy since World War II, even though higher education’s expansion also ranks as one of America’s great postwar triumphs.

 Consider. In 1940, fewer than 5 percent of Americans had a college degree. Going to college was “a privilege reserved for the brightest or the most affluent” high-school graduates, wrote Diane Ravitch in her history of U.S. education, “The Troubled Crusade.” No more. At last count, roughly 40 percent of Americans had some sort of college degree: about 30 percent a bachelor’s degree from a four-year institution; the rest associate degrees from community colleges.

 Starting with the GI Bill in 1944, governments at all levels promoted college. From 1947 to 1980, enrollments jumped from 2.3 million to 12.1 million.  College became the ticket to the middle class, the be-all-and-end-all of K-12 education.  If you didn’t go to college, you’d failed. Improving “access” — having more students go to college — drove public policy.
We overdid it. The obsessive faith in college has backfired.

For starters, we’ve dumbed down college. The easiest way to enroll and retain more students is to lower requirements. Even so, dropout rates are high; at four-year schools, fewer than 60 percent of freshmen graduate within six years. Many others aren’t learning much.

The real concern is the quality of graduates at all levels. The fixation on college-going, justified in the early postwar decades, stigmatizes those who don’t go to college and minimizes their needs for more vocational skills. It cheapens the value of a college degree and spawns the delusion that only the degree — not the skills and knowledge behind it — matters. We need to rethink."

MP: The chart above shows graphically the results of the "college-for-all crusade."  In the 1970s and 1980s only about one out of three high school graduates went on to college.  Now about half of all high school graduates attend college.  And most of them now graduate with student loan debt of $25,000 and many are having a hard time finding a job.    

Markets in Everything: Medical Cash Discounts

At the Los Alamitos Medical Center, you get a 90% discount for paying cash for a CT scan of the abdomen, $250 cash vs. $2,400 average insurance price, read more here in the LA Times

Fuel Sources for U.S. Energy Demand to 2035

According to the latest forecasts from the Department of Energy in its latest Annual Energy Outlook, the fossil fuel (coal, natural gas and oil) share of energy consumption will fall only slightly in the future, from 83 percent of total U.S. energy demand in 2010 to 77 percent in 2035 (see chart).  On the other hand, the future of renewables is not looking so bright, in terms of its future contribution to America's energy demand.  In 2010, renewables (wood, municipal waste, biomass, and hydroelectricity in the end-use sectors; hydroelectricity, geothermal, municipal solid waste, biomass, solar, and wind for generation in the electric power sector; and ethanol for gasoline blending and biomass-based diesel in the transportation sector), contributed only about 7% of U.S. energy consumption, and that was less than the 8.9% share back in 1983.  Even by 2035, more than twenty years from now, renewables as a fuel source are expected to provide less than 11% of total energy demand.

Bottom Line: The scientific and economic reality (and even the government's own forecasts support this) is that affordable and reliable hydrocarbons will continue to be the major source of energy that will fuel America's economy well into the future, despite Obama's embrace of alternative energies as the “energies of the future,” and his dismissal of oil as a "fuel of the past." Hydrocarbon energy is America’s future, and it’s the energy treasures beneath our feet that will continue to power the U.S. economy for many generations to come.

Oil Prosperity Comes to Karnes City, TX

KARNES CITY, TEXAS - "Sitting in the bank manager's office, the man turned to his wife. "Show it to him, Mama," he said as they settled into wooden chairs across from Paul Brysch in the Karnes County National Bank. She nodded, slid an envelope from her purse and handed it to Brysch. A check for more than $300,000 was inside, the first royalty check from an Eagle Ford Shale well drilled on their property on the edge of Karnes County.

"Congratulations! Y'all must be thrilled!" Brysch said. "No, no, you don't understand," the man said, furrowing his brow. "We've never had money like this before. What do we do with it?"

The question has been repeated across the Crossroads since the Eagle Ford Shale play began booming, but nowhere is it more poignant than in Karnes County. These days, the county is a lively place, the epicenter of an oil boom changing the face of South Texas and bringing wealth to people who have struggled and scraped for generations just to keep hold of their land."

Sunday, May 27, 2012

U.S. Declines to Stop China From Sending Foreign Aid to American Consumers through Low Prices

WASHINGTON -- "The Obama administration may be getting tougher with China on trade on behalf of U.S. producers seeking to reduce foreign competition, but its approach in dealing with Beijing on the thorny currency issue remains patient diplomacy, especially because China's currency policy does generate huge cost advantages for American consumers and businesses purchasing their products.

The Treasury Department, in its semiannual report Friday on exchange-rate policies, once again refrained from labeling China a currency manipulator -- an accusation that would embarrass Beijing and trigger negotiations and possibly even lead to U.S. sanctions that would raise prices for American consumers and businesses purchasing Chinese imports.

The Treasury report made plain that U.S. officials believe that China’s currency, the yuan, remains “significantly undervalued,” saving Americans billions of dollars annually.  An artificially cheaper yuan gives Chinese exporters American consumers an extra price advantage in selling purchasing their China's goods in the U.S.  But Treasury still declined to cite China on behalf of American producers competing against China's everyday low prices, saying that the Chinese have made progress in correcting currency and related imbalances and also have assured the U.S. that they would move more quickly to adopt a more flexible, market-based exchange-rate system, even though that could disadvantage American households by raising prices on China's exports to the U.S.

MP: This is a good time to invoke French economist Frederic Bastiat, and thank China for its currency policy that saves American consumers billions of dollars every year, and in the process raises our standard of living:

"Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race."

Thank you poor citizens of China, on behalf of rich American consumers, for the generosity of your government.  We appreciate the transfer of wealth that results from your currency policy, from a relatively poor country to the consumers of an advanced, rich country.  It's really not necessary, but cost-conscious American consumers will gladly accept the foreign aid you send us by keeping our currency overvalued, and in the process, your products undervalued.  Thank you for the "everyday low prices" for products "Made in China." 

After the Bust, The Boom Eventually Happens; Some New Homes in Vegas Are Getting 15 Offers

1.AEI fellow Alex Pollock in his book "Boom and Bust" (emphasis mine):

"It was thought that a serious fall in house prices would not, and probably could not, happen nationwide and drag down the entire national average.  Many professional observers - realtors, bankers, financial analysts, investors and credit raters - believed that the national home price average might stagnate for a year or more, but nearly everyone also thought that it could not actually go down. So even the mortgage finance professionals, by and large, thought that house prices would not fall on a national basis, let alone by 30 percent! But they did."

"We should know from experience that many things once considered impossible have nonetheless come to pass. Afterward, we wonder why they were considered impossible. In the midst of the crisis and the bust, the recovery of housing, mortgage and financial markets, the banking system, and the general economy feels impossible, but nonetheless eventually happens."

"Las Vegas homebuilders can’t build houses fast enough these days to keep up with buyers’ demand. Yes, you read that right. The valley’s new home market is booming. Developers say they haven’t built, or sold, so many houses in years.

“I’m as much as 80 to 90 percent higher in volume than last year,” said Robert Beville, president of Harmony Homes. “I’ll probably more than double my deliveries this year.”

Applications for new home permits in Henderson, North Las Vegas, Las Vegas and Clark County have increased 40 percent from last year. Prices have risen 6 percent to an average of $201,000, and sales have jumped 20 percent. By June, experts expect to see 500 new-home closings a month.

There are 20 percent fewer single-family homes available on the Multiple Listing Service today than last year. There are 30 percent fewer condos and townhouses. Properties that a year ago would have sat on the market for weeks or months are now getting as many as 15 offers. List prices have become minimums. Most existing homes are selling for thousands more.

That’s if buyers can get them. A little more than 5,000 units are available for sale right now, the fewest since 2006 and an almost 60 percent drop from last year. Market conditions have combined to make it difficult for most buyers to purchase older homes.

Perhaps the biggest winners in the revived housing market are construction workers, particularly specialists. Framers, for example, are in high demand. Many left the state when the housing market deflated, and the ones who stayed took jobs in other fields. Now, homebuilders are entering bidding wars to hire those who are left."

HT: Gary Lyle for the  Las Vegas report. 

Today's Grade-Inflated, Lake Wobegon World; Letter Grade of A Now Most Common College Grade

In 1960, the average undergraduate grade awarded in the College of Liberal Arts at the University of Minnesota was 2.27 on a four-point scale.  In other words, the average letter grade at the University of Minnesota in the early 1960s was about a C+, and that was consistent with average grades at other colleges and universities in that era.  In fact, that average grade of C+ (2.30-2.35 on a 4-point scale) had been pretty stable at America's colleges going all the way back to the 1920s (see chart above from GradeInflation.com, a website maintained by Stuart Rojstaczer, a retired Duke University professor who has tirelessly crusaded for several decades against "grade inflation" at U.S. universities).
By 2006, the average GPA at public universities in the U.S. had risen to 3.01 and at private universities to 3.30.  That means that the average GPA at public universities in 2006 was equivalent to a letter grade of B, and at private universities a B+, and it's likely that grades and GPAs have continued to inflate over the last six years. 

Grade inflation is back in the news, with a Twin Cities Star Tribune article today "At U, concern grows that 'A' stands for average."

"A University of Minnesota chemistry professor has thrust the U into a national debate about grade inflation and the rigor of college, pushing his colleagues to stop pretending that average students are excellent and start making clear to employers which students are earning their A's.

"I would like to state my own alarm and dismay at the degree to which grade compression ... has infected some of our colleges," said Christopher Cramer, chairman of the Faculty Consultative Committee. "I think we are at serious risk, through the abandonment of our own commitment of rigorous academic standards, of having outside standards imposed upon us."

National studies and surveys suggest that college students now get more A's than any other grade even though they spend less time studying. Cramer's solution -- to tack onto every transcript the percentage of students that also got that grade -- has split the faculty and highlighted how tricky it can be to define, much less combat, grade inflation."

MP: As one University of Minnesota undergraduate student explained the rising GPA trend when evaluating a professor known as a rigorous grader, "We live in a grade-inflated world."  That University of Minnesota anthropology professor Karen-Sue Taussig suspects that today's "grade-inflated world" can be traced to the growing cost of a college degree, i.e. today's "tuition-inflated world." As Taussig told the Star Tribune, "They're paying for it, and they worked really hard, and they put in time, and therefore they think they should get a good grade."

Last year, Professor Rojstaczer and co-author Christopher Healy published a research article in the Teachers College Record titled "Where A Is Ordinary: The Evolution of American College and University Grading, 1940–2009." The main conclusion of the paper appears below (emphasis added), and is illustrated by the chart below showing the rising share of A letter grades over time at American colleges, from 15% in 1940 to 43% by 2008. Starting in about 1998, the letter grade A became the most common college grade. 

"Conclusion: Across a wide range of schools, As represent 43% of all letter grades, an increase of 28 percentage points since 1960 and 12 percentage points since 1988. Ds and Fs total typically less than 10% of all letter grades. Private colleges and universities give, on average, significantly more As and Bs combined than public institutions with equal student selectivity. Southern schools grade more harshly than those in other regions, and science and engineering-focused schools grade more stringently than those emphasizing the liberal arts. It is likely that at many selective and highly selective schools, undergraduate GPAs are now so saturated at the high end that they have little use as a motivator of students and as an evaluation tool for graduate and professional schools and employers."

MP: The connections among "grade inflation, "tuition inflation," "college textbook inflation," and exponentially rising student loan debt are important.  Perhaps students find it easier to accept rising tuition, higher textbook prices (many selling for $200-300 now), and $25,000 in average student loan debt if they at least graduate with mostly As and a GPA above 3.0?  Even if they can't find a job, they can take pride in having "earned" an inflated GPA?  

Saturday, May 26, 2012

Bank Earnings Reach 5-Year High in Q1 2012

The FDIC reported this week that bank profits in the first quarter of 2012 increased to $35.3 billion, the highest level in almost five years going back to the second quarter of 2007 (see chart above, data here).   That represents a 23% gain from the first quarter last year, and a 38% improvement from the previous quarter.  In other signs of improvements in the banking industry's financial condition, noncurrent loan rates and net chargeoff rates decreased in the first quarter this year compared to the same quarter last year, and in both cases there were decreases for all three loan categories: real estate, business and consumer.

Environmentalism as Religious Doctrine

In his book "The Armchair Economist," economist Steven Landsburg explains why he is not an environmentalist:

"The hallmark of science is a commitment to follow arguments to their logical conclusions; the hallmark of certain kinds of religion is a slick appeal to logic followed by a hasty retreat if it points in an unexpected direction. Environmentalists can quote reams of statistics on the importance of trees and then jump to the conclusion that recycling paper is a good idea. But the opposite conclusion makes equal sense.  I am sure that if we found a way to recycle beef, the population of cattle would go down, not up. If you want ranchers to keep a lot of cattle, you should eat a lot of beef.

Recycling paper eliminates the incentive for paper companies to plant more trees and can cause forests to shrink. If you want large forests, your best strategy might be to use paper as wastefully as possible — or lobby for subsidies to the logging industry. Mention this to an environmentalist. My own experience is that you will be met with some equivalent of the beatific smile of a door-to-door evangelist stumped by an unexpected challenge, but secure in his grasp of Divine Revelation.

This suggests that environmentalists — at least the ones I have met — have no real interest in maintaining the tree population. If they did, they would seriously inquire into the long-term effects of recycling. I suspect that they don't want to do that because their real concern is with the ritual of recycling itself, not with its consequences. The underlying need to sacrifice, and to compel others to sacrifice, is a fundamentally religious impulse."

Markets in Everything: Buy Your Wedding Toast

1. Buy a 3-5 minute customized wedding toast for $149, written for the best man, maid of honor, parents of the groom or bride, etc. from The Perfect Toast.

2. For a cheaper alternative ($18-20), you can buy fill-in-the-blank templates from Instant Wedding Toasts, along with an interactive workbook to help you write the perfect, personal speech as the best man, maid of honor, etc.    

Let's Repeal Deadly Prohibition On Kidney Sales


From Reason' Matt Welch in the Boston Review:

"Every day, eighteen people die in the United States while waiting in vain for a kidney transplant, according to the National Kidney Foundation. The Department of Health & Human Services reports that more than 92,000 patients were on the kidney waiting list [updated as of today] (see chart above), but that only 16,812 transplants were made in 2011. That deadly math is part of the reason that, according to the National Institutes of Health, more than 380,000 Americans are on dialysis, a punitively expensive and physically grueling death-postponement procedure. The imbalance cannot be meaningfully addressed via cadaver-harvesting alone.

So we know that maintaining prohibition—letting the law be guided by our moral revulsion toward placing price tags on human organs—will certainly increase the body count. We know that boosting the number of kidney donations from the living is the only real way to whittle the waiting list down. And we also know, from such procedures as egg donation, that legalizing monetary rewards is a guaranteed method for expanding the pool of living donors. Your morality may vary, but mine says that sentencing more than 6,000 people a year to an avoidable death falls well short of the Golden Rule. My inquest therefore concludes that the burden of argumentative proof on the legality of kidney sales should fall squarely on those who back the lethal status quo.

This is not some academic exercise. People are dying right now because we have let our revulsion at markets create serial prohibitions of consensual behavior, whether it’s buying and selling marijuana, sex, or kidneys. How many more people are we willing to let perish for this mistake?"

He was responding to the essay "How Markets Crowd Out Morals" by Michael J. Sandel in the same issue of Boston Review.

HT: Andrew Sullivan

Oil Prosperity Comes to Eagle Ford Texas

Rapid energy development has brought new jobs, rising income and growing wealth to this historically low-wage, low-income area of Texas.


From the Dallas Federal Reserve report "Oil Boom in Eagle Ford Shale Brings New Wealth to South Texas":

"Oil and natural gas activity is booming again in South Texas. The 2008 discovery of the Eagle Ford Shale play has breathed new life into industry in the region, where many mature and declining fields have operated for more than 40 years. Perhaps the largest discovery of new oil reserves in the United States since Prudhoe Bay, Alaska, in 1968, the Eagle Ford Shale extends over 23 South Texas counties (see map above).

Its southern edge begins near Laredo and trends northeast toward Austin, producing large quantities of natural gas. The northern edge—the formation is about 50 miles wide—follows a similar trend but produces oil. A central zone is rich in condensates, also called natural gas liquids, valuable to the refining and petrochemical industry on the Texas Gulf Coast.

The race to exploit these new South Texas reserves began in late 2008 and is primarily the result of recent advances that unlocked the secret of extracting natural gas and oil from shale. This new technology—along with favorable prices, existing infrastructure and ready access to the Gulf Coast refining and petrochemical complex—created the Eagle Ford Shale boom. Rapid oilfield development has brought new jobs, rising income and growing wealth to this historically low-wage, low-income area.

The Eagle Ford’s scale and speed of development proved so robust that they quickly overwhelmed previous efforts to comprehensively measure the economic impact. Recent data suggest that the oil boom’s impact on jobs, income and spending in the region has been profound.

Surging drilling activity has brought strong employment and wage growth to most of the counties in the Eagle Ford. Counties located above oil and condensate deposits, such as Dimmit, La Salle and McMullen, have experienced the greatest increase in employment and average weekly wages. Job growth was strong from 2005 to 2008, likely fueled by rising natural gas prices even before the Eagle Ford Shale play began (see bottom chart above).

Jobs in the region sank with the recession amid sharply dropping energy prices in 2009. From a low during first quarter 2010 to third quarter 2011, jobs grew at an annual rate of 5.9 percent, reaching 2.9 percent above the previous peak value. By comparison, during the same period, jobs statewide increased 2.4 percent and remained 0.01 percent below the previous high.

Generally, Eagle Ford counties represent about 2 percent of all Texas jobs. Since the beginning of 2010, the 15,773 net new jobs account for 6.9 percent of the state’s net gain during the period. While recent activity is impressive, more growth may lie ahead to meet demand. The scale of development has surpassed the capacity of local industry. Hotels, restaurants and gasoline stations are jammed with outside managers, crews and technicians. As the Eagle Ford matures and the local service industry expands, many outside workers may become local residents and employees.

Average weekly wages have grown markedly in most Eagle Ford counties.  For the 23 counties, the average annualized growth rate in the weekly wage during this period was 14.6%. By comparison, average weekly wages rose 6.8% in Texas, from $875 to $966, and 6.3% in the U.S., from $870 to $953. Given the strong growth in employment and average weekly wages in the Eagle Ford, seasonally adjusted total wages paid in its top five counties increased at an annual rate of 63.4% during this period, while the entire 23-county area saw a 25% increase."

Friday, May 25, 2012

Markets in Everything: Two, or Sometimes Even Four, Cell Phones per Person in Nigeria

BBC News -- "If you must make a call to anybody's mobile phone in Nigeria, you need to be understanding and patient - it can be a very frustrating and annoying experience. In the first place, it takes luck for the call to get through, and when both parties are connected, there is no guarantee that you will hear each other or that the line will not drop after a few seconds.

A conversation which normally should not last two minutes may after several calls take 10 minutes and, believe me, both of you will pay for every second. Being very practical people, Nigerians have devised a way, though expensive, to ease the problem.

Why wait for government regulators who are believed to be more interested in the huge after-profit taxes accruing from the networks than the satisfaction of subscribers? So everyone who can afford it has a minimum of two mobile phones from different operators. Some have as many as four. They use whichever is operational at any given time."

May Consumer Sentiment Highest in More Than 4 Years; New Record Set for Nine Straight Increases


In another important milestone for America's "Plow Horse Economy," the Thomson Reuters/University of Michigan consumer sentiment index increased in May for the ninth straight month.  That sets a new record for the most consecutive monthly increases in the history of the index going back to 1978.  It was also the most upbeat American consumers have been in more than fours years, since October 2007 before the recession started.  The May increase brings consumer confidence back above pre-recession levels for the first time since the recession started in December 2007. 

Here are links to news reports, one from the WSJ and one from Bloomberg, which says that "A record number of households said they'd heard better news on the jobs outlook, which combined with cheaper gasoline and an improving housing market may help sustain consumer spending and shield the economy from Europe's debt crisis."

Q: Don't the oil speculators get some of the credit for driving down gas prices at the pump over the last two months and helping to boost consumer confidence in May?

Markets in Everything: Consumer 3D Printer

A $1,299 replicator for the home.

Makeusof.com -- "Cubify understands the problem with geeky, DIY, hard to build and calibrate printers; and their Cube aims to solve this (pictured above). Currently on pre-order and due for release on May 25th, the device is about as consumer level as you can get.

At $1,299, it costs as much as a new desktop PC (and considerably less than the other leading consumer level 3D printer – the Makerbot Replicator) – but like all printers, they’ll get you on the cartridges! Yes, you heard me right – the Cube eschews traditional standardized filament rolls in favor of device-specific filament cartridges, with a variety of garish colors available for $50 each. The simplified loading process means switching out colors or loading a new cartridge is easy."

Obama's Public Equity Record is the Real Scandal

From Marc Thiessen writing in yesterday's Washington Post:

"Since taking office, Obama has invested billions of taxpayer dollars in private businesses, including as part of his stimulus spending bill. Many of those investments have turned out to be unmitigated disasters — leaving in their wake bankruptcies, layoffs, criminal investigations and taxpayers on the hook for billions. Consider just a few examples of Obama’s public equity failures:

Raser Technologies. In 2010, the Obama administration gave Raser a $33 million taxpayer-funded grant to build a power plant in Beaver Creek, Utah. After burning through our tax dollars, the company filed for bankruptcy protection in 2012. The plant now has fewer than 10 employees, and Raser owes $1.5 million in back taxes. 

ECOtality. The Obama administration gave ECOtality $126.2 million in taxpayer money in 2009 for, among other things, the installation of 14,000 electric car chargers in five states. Obama even hosted the company’s president, Don Karner, in the first lady’s box during the 2010 State of the Union address as an example of a stimulus success story. The company has since incurred more than $45 million in losses and has told the federal government, “We may not achieve or sustain profitability on a quarterly or annual basis in the future.” Worse, the company is now under investigation for insider trading.

Nevada Geothermal Power (NGP). The Obama administration gave NGP a $98.5 million taxpayer loan guarantee in 2010. The New York Times reported last October that the company is in “financial turmoil” and that “[a]fter a series of technical missteps that are draining Nevada Geothermal’s cash reserves, its own auditor concluded in a filing released last week that there was ‘significant doubt about the company’s ability to continue as a going concern.’ ” 

First Solar. The Obama administration provided First Solar with more than $3 billion in loan guarantees for power plants in Arizona and California. According to a Bloomberg Businessweek report last week, the company “fell to a record low in Nasdaq Stock Market trading May 4 after reporting $401 million in restructuring costs tied to firing 30 percent of its workforce.” 

Abound Solar, Inc. The Obama administration gave Abound Solar a $400 million loan guarantee to build photovoltaic panel factories. In February the company halted production and laid off 180 employees. 

Beacon Power. The Obama administration gave Beacon — a green-energy storage company — a $43 million loan guarantee. At the time of the loan, “Standard and Poor’s had confidentially given the project a dismal outlook of ‘CCC-plus.’ ” In the fall of 2011, Beacon received a delisting notice from Nasdaq and filed for bankruptcy.

●  This is just the tip of the iceberg. A company called SunPower got a $1.2 billion loan guarantee from the Obama administration, and as of January, the company owed more than it was worth. Brightsource got a $1.6 billion loan guarantee and posted a string of net losses totaling $177 million. 

● And, of course, let’s not forget Solyndra — the solar panel manufacturer that received $535 million in taxpayer-funded loan guarantees and went bankrupt, leaving taxpayers on the hook. 

If Obama wants to attack Romney’s alleged private equity failures as chief executive of Bain, he’d better be ready to defend his own massive public equity failures as chief executive of the United States."

Thursday, May 24, 2012

Penn Goes Off on Obama, Weed, War on Drugs



HT: Coyote Blog via Warren Smith

Lessons from The Laffer Curve in the 1920s

What happened to tax revenues collected in the 1920s following a "tax cut" in the top marginal income tax rate from 73% to 24%? They went up, not down.

Thomas Sowell discusses the relationship between tax rates and tax revenues in his latest column:

"Democrats have been having a field day with the cry of "tax cuts for the rich" — for which Republicans seem to have no reply. This is especially surprising, because Democrats made the same arguments back in the 1920s, and the Republicans then not only had a reply, but one that eventually carried the day, when the top tax rate was brought down from 73 percent to 24 percent (see chart above).

Those who argue that "the rich" should pay a higher tax rate, and that the revenue this would bring in could be used to reduce the deficit, assume that higher tax rates equal higher tax revenues. But they do not.

After Secretary of the Treasury Andrew Mellon finally succeeded in getting Congress to lower the top tax rate from 73 percent to 24 percent, the government actually received more tax revenues at the lower rate than it had at the higher rate. Moreover, it received a higher proportion of all income taxes from the top income earners than before.

Something similar happened in later years, after tax rates were cut under Presidents Kennedy, Reagan and G.W. Bush. The record is clear. Barack Obama admitted during the 2008 election campaign that he understood that raising tax rates does not necessarily mean raising tax revenues.

Why then is he pushing so hard for higher tax rates on "the rich" this election year? Because class warfare politics can increase votes for his reelection, even if it raises no more tax revenues for the government."

MP: Part of the confusion about the relationship between tax rates and tax revenues comes about because we use the terms "raise taxes" to mean both "raise tax rates" and "raise tax revenues" interchangeably (e.g. "raise taxes on the rich"). In reality, "raising tax rates" could result in either "raising tax revenues" or "lowering tax revenues." Most of the discussion about "raising (or lowering) taxes" leaves out the most critical factor: the "tax base, i.e. the activity subject to be taxed," and its changes in the tax base that ultimately determine the relationship between "tax rates" and "tax revenues."

In the case of lowering the top marginal income tax rate from 73% to 24% in the 1920s, the "tax base" expanded so much in response to the lower tax rate that tax revenues actually increased, not decreased. In other words, history tells us that the way to impose a "tax hike on the rich" is to lower, not raise, the tax rate. Lower tax rates increase the incentives to engage in productive, taxable activities and increase the incentives to report instead of hide or shift, taxable income, and therefore raise tax revenues.

With marginal tax rates scheduled to increase next year, the lessons of history also tell us that the tax revenues collected next year will go down, not up. Reason? The tax base of activity subject to the higher tax rates will contract so much that the tax revenue collected will shrink, not expand. Next year's "tax hikes on the rich" will likely end up being a "tax cut" in revenues, and will make the budget deficit worse. 

New and Frozen Frontier Awaits Offshore Oil Drilling in Alaska, Might Yield 1 Million Bbls/Day

From today's NY Times

"Barring a successful last-minute legal challenge by environmental groups, Shell will begin drilling test wells off the coast of northern Alaska in July, opening a new frontier in domestic oil exploration and accelerating a global rush to tap the untold resources beneath the frozen ocean.

Industry experts and national security officials view the Alaskan Arctic as the last great domestic oil prospect, one that over time could bring the country a giant step closer to cutting its dependence on foreign oil.

Other oil companies are already lining up to join Shell in the Arctic, which company executives say could eventually yield a million barrels a day of crude — or more than 10 percent of current domestic output."

MP: Peak what? 

Huge Subsidies ($6.5B) for Electric Vehicles Are Giving American Taxpayers High-Voltage Shocks

From my McClatchy editorial, out for national distribution this week, here is a link to the version in today's Sacramento Bee

"Since 2008, taxpayers have spent or provided loan guarantees of $6.5 billion for electric vehicles. That includes $2.4 billion for battery and electric drive component manufacturing, $3.1 billion in loan guarantees for electric vehicle projects, and $1 billion in tax credits for the vehicles. The price that American taxpayers pay for commercializing electric vehicles is painfully evident in the billions spent on green projects that are driven by politics rather than performance.

Using taxpayer dollars to favor one automotive technology over another is contrary to the free-market principles that undergird our economy. Simply put, subsidizing electric vehicles doesn't make economic sense.

The surest way to guarantee a product's failure is to subsidize it. Over time, cars that succeeded in the marketplace have been those that were developed and commercialized without government involvement. If a technology isn't capable of succeeding on its own economic merits, there's no amount of taxpayer support that will ever make it a commercial success."
Read more here: http://www.sacbee.com/2012/05/24/4513475/huge-subsidies-give-american-taxpayers.html#storylink=cpysdfasdfaf

Quote of the Day: Bastiat on Legal Plunder

"Legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole—with their common aim of legal plunder—constitute socialism.

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime."

~Frederic Bastiat

Credit Card Delinquency Rate Falls to Record Low; Household Fin. Obligation Ratio Lowest Since 1984

The Federal Reserve released new data today on delinquency and charge-off rates at U.S. commercial banks for the first quarter of 2012. For consumer credit cards, the delinquency rate fell for the 11th consecutive quarter to 3.07% during the January-March period, which is the lowest level ever recorded since the Federal Reserve started tracking these data back in 1991 (see blue line in chart).

For all consumer loans, the first quarter delinquency dropped to 2.89%, the lowest rate since the 2.8% reading in the first quarter of 2006, well before the recession started (see red line in chart).

Delinquency rates for all consumer loans and credit card debt are both back to pre-recession levels, and credit card delinquencies are at the lowest level ever recorded.  Likewise, the charge-off rates for all consumers loans and credit card loans are both back to pre-recession levels (data here).

The drops in delinquency and charge-off rates for consumer debt are consistent with the drops in the household debt service ratio (required payments on mortgage and consumer debt as a share of disposable personal income) in Q4 last year to 10.88% (red line in chart below), the lowest since 1993; and the drop in household financial obligations ratio (adds automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance, and property tax payments to the household debt service ratio) in Q4 to 15.93%, the lowest since 1984. 


MP: U.S. households appear to be managing debt better than at almost any time during  the last 20 years, in terms of a record-low delinquency rate on credit card debt, a return of the delinquency rate on all consumer debt to pre-recession levels, and the lowest share of monthly disposable income in almost 20 years going towards monthly car loans/lease payments, monthly mortgage/rent payments, and monthly credit card payments in almost 20 years. 

One Reason Why Oil Prices Will Remain Stable: U.S. Production Reached a 14-Year High in February

From today's WSJ editorial  "Why Oil Prices Will Keep Falling" by Nansen Saleri, CEO of Quantum Reservoir Impact in Houston:

"The invisible hand steadying global energy markets is the growing influence of modern technologies. So a case can be made for a relatively stable crude-price window—$80 to $120 a barrel for the next several years. 

The growing influence of modern technologies is evident everywhere. Net daily U.S. imports of petroleum have dropped by 50% to eight million barrels over the last five years. Imports are likely to shrink further in the coming decade due to an upsurge in domestic oil and gas supplies (see chart above).

Fracking and horizontal wells have given the U.S. an unmistakable geopolitical advantage while moderating the market swings. Both presidential candidates have a chance to accelerate U.S. energy independence. Ambiguity, policy vacillation and an overreach on uneconomical options (ethanol, wind) act as suppressants. But technology and market forces trump politics. The march is on."

MP: The chart above shows monthly U.S. oil production starting in January 1998, and going through February 2012, when production reached 6,144,000 barrels per day.  That was the highest monthly output of domestic crude oil in almost 14 years, going back to August 1998.  New energy and geophysical technologies like 3D-seismic imaging, fracking and horizontal drilling have opened up huge reserves of previously unrecoverable oil and gas in the United States, and that's the main reason that crude oil production is close to a 14-year high.  And it's one reason that "oil prices will keep falling," or will at least remain relatively stable.

Related from CBS News:  North Dakota could double its oil production by 2015 to more than 1 million barrels daily, putting it on par with Texas "if everything goes our way," according to the state's top oil regulator Lynn Helms. Billionaire Oklahoma oilman Harold Hamm said that Helms' prediction was probably accurate, if not a little low.

"We've been saying for two years that North Dakota could be at 1.2 million barrels a day by 2015," said Hamm, CEO of Continental Resources Inc.

3 Best Websites to Get A Free College Education

Education and learning should be a lifelong process and the Internet is your chance to get a university level education for free, regardless of where you are in life, according to this article, which recommends these three websites to get started:




Bakken 2? Oil Prosperity Comes to South Kansas; Could Be Largest Economic Impact in State History

Anthony, KAN. (CNNMoney) -- "It doesn't feel like we're in Kansas anymore. Oil rigs are springing up in farmers' fields. "No vacancy" signs hang in the windows of local motels, and a steady stream of trucks barrel through Main Streets. Along the state's southern border, the once-quiet farm towns are quickly transforming into oil boomtowns.

Hundreds of workers seeking high-paying jobs are flocking to places like Harper County, which had resorted to paying people to live there because of its declining population. Businesses are coming back from the dead and a housing shortage has caused rents to triple.

Oil companies began exploring Southern Kansas over a year ago, seeing enormous potential in the area now that new technologies like horizontal drilling and fracking have made it possible to tap into the oil-rich Mississippian Lime formation (see map above).

SandRidge Energy, which holds the most horizontal drilling permits in Kansas, estimates there are about 15 billion barrels of recoverable oil in this part of Kansas [MP: Estimates for recoverable Bakken oil range from 4 to 24 billion]. The company plans to drill 130 wells in the state by the end of the year -- up from 10 last year. And its wells are hitting oil 100% of the time.

"The oil companies aren't hitting any dry spots," said Mike Lanie, economic development director of Harper County. "This is looking like it could be the largest economic impact in the state's history, and for many people in these small towns, this will be a blessing," he added."

HT: Unknown

Wednesday, May 23, 2012

Shale Gas Boom Helps to Slash CO2 Emissions, As Well as Create Jobs and Save Consumers Billions

The chart above shows the significant reduction in coal's share of total U.S. energy generation, especially over the last four years, based on the most recent EIA data through February 2012.  For the first time in recent history, coal's share of electricity generation fell to below 40% in November and December of last year, and it's fallen even further to around 37% in the first two months of this year.  That's a very significant decline of almost 10% from coal's 48% share of electricity as recently as 2008, and that decline has happened for just one reason. No, it wasn't government regulation or energy policy.  It was because of the shale revolution that has produced an abundant supply of natural gas at historically-low prices, providing electric utilities with a cheaper and cleaner substitute for coal.   

From the Financial Times:

"The shale gas boom in the U.S. has led to a big drop in carbon emissions, as power generators switch from coal to cheap gas.  According to the International Energy Agency, U.S. energy-related emissions of carbon dioxide, the main greenhouse gas, fell by 450m tons over the past five years – the largest drop among all countries surveyed.

Fatih Birol, IEA chief economist, attributed the fall to improvements in fuel efficiency in the transport sector and a “major shift” from coal to gas in the power sector. “This is a success story based on a combination of policy and technology – policy driving greater efficiency and technology making shale gas production viable,” Mr Birol told the Financial Times.

Gas is fast becoming the new fuel of choice for the US power sector: in the past 12 months, coal generation has slumped by 19 per cent while gas generation has increased by 38 per cent, according to U.S. Department of Energy figures. A gas-fired plant produces half the CO2 emissions of a coal-fired one."

MP: So let's sum up some of the many economic and environmental benefits of the shale gas revolution:

1.  Residential, commercial, industrial and electricity-generating customers of natural gas have saved $250 billion over the last three years because of abundant, low-cost gas.

2. Hundreds of thousands of jobs have been created in natural-gas related industries, both directly in the gas drilling activities, and indirectly in the industries supporting natural gas drilling like companies producing steel piping, drilling equipment, fracking sand, etc.   

3. Cheap, abundant natural gas has sparked a manufacturing renaissance in energy-intensive industries like chemicals, fertilizers, and steel.

4. In the process of creating thousands of jobs and saving natural gas customers billions of dollars, the shale revolution has also significantly reduced carbon emissions as electricity producers have switched from dirty coal to clean, cheap natural gas.

Sure seems like a win, win, win situation  - an energy stimulus program that didn't require any taxpayer support and wasn't even part of any intentional energy policy from Washington. As Scott Grannis pointed out on his blog, "We have only just begun to see the impact of this incredible development on the U.S. economy's ability to grow."  And at his talk tonight at the Heritage Foundation for the Prosperity Caucus, Tyler Cowen suggested that we have probably under-estimated the positive effects of the energy revolution on the U.S. economy.  The changing energy landscape will definitely continue to provide significant benefits to the U.S. economy for decades to come. Welcome to the Shale Revolution.

HT: R.J. Kuehl

More Evidence We're Past the Housing Bottom


There are more signs that the real estate market is stabilizing from the FHFA monthly house price index (HPI), which is calculated based on home sales price information from conforming Fannie Mae and Freddie Mac mortgages.  As Brian Wesbury et al. point out today, the HPI increased by 2.9% in March compared to a year earlier, which was the largest annual increase since November 2006, and the second straight month showing an annual increase following 54 consecutive monthly decreases in year-over-year prices (see top chart above). The February-March monthly increase in the HPI of 1.9% was the largest monthly gain in the FHFA series going back to 1991.  

The bottom chart above displays the HAI back to 2000, and shows that the market reached a cyclical price bottom about a year ago, home prices may have found a support level over the last year, and we're now in a new period where we can expect small, but positive and consistent increases in home prices going forward.  

As Scott Grannis commented yesterday on his blog:

"In short, the housing bubble has burst and prices have finally returned to sensible levels. The repricing of the U.S. housing stock has allowed the market to clear; we've seen the worst, and now things are beginning to improve on the margin. The evidence is becoming very strong that at the very least we have seen a bottom in the residential housing market."

Amen.  And it's likely we're now moving past the bottom, which could very likely be established as March 2011.

Animation of Energy Prosperity Spreading Across Pennsylvania As Horizontal Drilling Takes Off

Black diamonds are conventional vertical wells and red diamonds are horizontal wells.

Just out this afternoon from the EIA:

"Between 2009 and 2011, Pennsylvania's natural gas production more than quadrupled due to expanded horizontal drilling combined with hydraulic fracturing (see chart below). This drilling activity, which is concentrated in shale formations that cover a broad swath of the state, mirrors trends seen in the Barnett shale formation in Texas.

The animation above illustrates Pennsylvania's relatively recent transition from conventional vertical wells (black diamonds) to horizontal wells (red diamonds), drilled mostly in sections of the Marcellus, Utica, and Geneseo/Burket shale formations located in the northeast and southwest portions of the state. The animation also shows that as horizontal drilling increased, the number of vertical wells—which are typically less productive—fell, resulting in an overall decline in the state's new well count.

Historically, natural gas exploration and development activity in Pennsylvania was relatively steady, with operators drilling a few thousand conventional (vertical) wells annually. Prior to 2009, these wells produced about 400 to 500 million cubic feet per day of natural gas. With the shift to and increase in horizontal wells, however, Pennsylvania's natural gas production more than quadrupled since 2009, averaging nearly 3.5 billion cubic feet per day in 2011 (see chart above)."

MP: The chart below shows the monthly number of "shovel-ready" energy-related jobs in Pennsylvania, which have almost doubled from 20,000 in early 2006 to almost 40,000 this year in April.  With each new shale gas well comes more than 100 new "shovel-ready" jobs as the graph clearly illustrates.  Drill, drill, drill = jobs, jobs, jobs.


BPP@MIT Annual Inflation Rate Falls Below 2%


The top chart above displays annual inflation rates based on daily online retail price data collected by the Billion Prices Project @ MIT, which just released data through April 30.  According to this real-time measure of major inflation trends in the U.S., inflationary pressures have been subsiding since last summer, and the annualized inflation rate fell below 2% at the end of April for the first time since early January 2010, more than two years ago.   

The bottom chart above shows that since January 2010, MIT's online price index has tracked the Consumer Price Index (NSA) pretty closely.  Despite the fact that the MIT online price index doesn't capture all of the items in the CPI, it's still a useful alternative measure of inflationary pressures in the U.S. economy, and gives us additional information about the trends in consumer prices and inflation based on real-time online retail prices.

Energy Stimulus: Shale Gas Saved Consumers $250 Billion and Created Thousands of Shovel-Ready Jobs

Click to enlarge.

The American Gas Association has just released a study titled "Identifying Key Economic Impacts of Recent Increases in U.S. Natural Gas Production." Parts of the Executive Summary and Conclusion appears below.   

Executive Summary: The recent success of shale gas and oil production in the United States coupled with only modest demand growth has resulted in measurable declines in domestic natural gas prices, which has benefited both gas customers as well as the overall economy. Lower natural gas commodity prices have in part:
  • Led to savings of almost $250 billion for end-use natural gas customers over the past three years (see chart above)

  • Provided a typical residential customer more than $175 in savings during 2010 alone

  • Helped the average commercial customer to save more than $1,100 in their 2010 annual bill

  • Contributed to the creation of 334,000 jobs in natural gas dependent industries during the past two years

  • Contributed to an analytical vision that the shale gas revolution may be responsible for bringing a million new manufacturing jobs to this country by 2025

  • Pointed to production activities of oil and gas in the United States that were responsible for nine percent of new U. S. jobs growth in 2011.
From the Conclusion:

Lower natural gas prices have also helped create jobs during one of the worst recessions on
record:
  • Job creation directly tied to energy extraction and delivery accounted for about 150,000 new jobs in 2011

  • Expansion of natural gas-dependent industries could lead to an additional one million manufacturing jobs by 2025

Leading Economic Indicators

The Conference Board reported this week that its Leading Economic Indexes increased in France by 0.40% in March, in China by 0.8% in April, in Australia by 0.2% in March, and in Germany by 0.3% in March. 

Ohio State Has 6.3 Full-Time Non-Teaching Employees for Every One Full-Time Professor

From the NY Times article "Slowly, as Student Debt Rises, Colleges Confront Costs": 

"At a time of diminished state funding for higher education and uncertain federal dollars, Ohio State University president Mr. E. Gordon Gee [MP: Highest paid public-university college president at almost $2 million per year] says that public colleges and universities need to devise a new business model to pay for the costs of education, beyond sticking students with higher tuition and greater debt. 

“The notion that universities can do business the very same way has to stop,” said Mr. Gee, who is also the chairman of a commission studying college attainment, including the impact of student debt.

College presidents across the country are confronting the same realization, trying to manage their institutions with fewer state dollars without sacrificing quality or all-important academic rankings. Tuition increases had been a relatively easy fix but now — with the balance of student debt topping $1 trillion and an increasing number of borrowers struggling to pay — some administrators acknowledge that they cannot keep putting the financial onus on students and their families.

Increasingly, they are looking for other ways to pay for education, stepping up private fund-raising, privatizing services, cutting staff, eliminating departments — even saving millions of dollars by standardizing things like expense forms. 

Colleges can be top-heavy with administrators and woefully inefficient, some critics say, and some have only recently taken a harder look at ways to streamline their operations."

MP: Ohio State University might provide a good example of an institution "top-heavy with administrators" and other full-time non-teaching personnel. 

The chart above displays the number of non-teaching full-time employees at Ohio State, which totaled 21,178 in 2010 including 1,634 Executive/Administrative/Managerial, 11,143 Other Professional (Support/Service), 3,502 Technical and Paraprofessionals, 2,794 Clerical and Secretarial, 602 Skill Crafts and 1,503 Service/Maintenance, according to U.S. Department of Education IPEDS data.  In contrast, Ohio State employed 3,359 full-time faculty in 2010, for a ratio of 6.3 non-instructional full-time employees per one full-time faculty.  

A comparison over time at OSU and a comparison to other institutions would be illustrative, but the 6.30-to-1 ratio documented above would seem prima facie to indicate a high degree of "administrative top-heaviness/bloat."  It's also consistent with documented growth over time in administrative ranks at most public universities, see this CD post and this Goldwater Institute study, "Administrative Bloat at American Universities: The Real Reason for High Costs in Higher Education."


Five Money-Saving Websites

Five new sites to help you save money, from US News and World Report.

1. Priceonomics - a price guide for everything (featured on CD).

2. Aisle50 - Like Groupon, but for groceries.

3. Dealupa - a single place to find the best daily deals, organized according to their quality and relevance to you.

4.  Carsabi - the ultimate online tool for used-car research.

5.  SpringCoin -- an automated, online debt-relief and debt- management website.

Tuesday, May 22, 2012

Dumbing it Down at the No. 1 (Now No. 2) Public High School in the Country: Thomas Jefferson

US News & World Report ranked Thomas Jefferson High School for Science and Technology in Arlington Alexandria as the second-best public school in the country this year, and the acclaimed, highly selective magnet school in Northern Virginia held the No. 1 rank in each of the five previous years.  But some serious academic concerns have been raised by the school's teachers about this year's freshman class.  An editorial in today's Washington Examiner highlights the situation (the editorial followed a previous Examiner story on Sunday):

"Teachers are complaining about the "profound lack of preparation and readiness" exhibited by current members of the freshmen class. In a letter to admissions director Tanisha Holland and the Fairfax County School Board, faculty members wrote: "Simply put, these students are not succeeding, and many are not succeeding in spite of the tremendous support and remediation being offered to them by their teachers." Holland responded that the school is "looking into the admissions process" to determine whether it could have done a better job of recruiting.

But Holland doesn't have to look beyond her own office to discover the cause of what the faculty describes as an "alarming trend" in admitting unprepared students. They determined that 50 questions on the math portion of the admissions exam reflected standards that should have been mastered in sixth grade. Instead of being at least two grade levels ahead of their peers, some students admitted to TJ were two grade levels behind.

Critics claim that TJ's dumbed-down admissions test was designed to increase enrollment of black and Hispanic students. If that's the case, it's been a failure even there. Only 13 Hispanics out of 222 applicants were admitted to the Class of 2015, and just six blacks out of 224 applicants. Since about 160 out of 480 freshmen need remediation, the vast majority must be white and Asian.

A more likely culprit is the changes made to TJ's admissions policies, starting in 2004, which eliminated raw test scores and GPAs as the main criteria for admission. By 2009, highly subjective "student information sheets," teacher recommendations and student essays made up 65 percent of the total score, whereas the weight given to the math portion of the admissions test and the applicant's seventh- and eighth-grade math and science grades declined to just 35 percent. Students whose lack of talent or motivation in math and science is reflected in their lower grades and test scores are currently being admitted to TJ over their more academically accomplished peers.

These misguided policies seriously undermine the fundamental mission of this governor's school, which was specifically designed to educate Virginia's future scientists and mathematicians. When academic merit is superseded by teachers' subjective judgments, a decline in standards is the all-too-predictable result."

On the Pending Transformation of Higher Education

From "College Crackup and the Online Future," by Mark C. Taylor, chairman of the department of religion at Columbia University, writing for Bloomberg:

"There is a widening gap between the rate at which knowledge is expanding and the rate at which colleges and universities change. In higher education, as in business, institutions must become more flexible and agile. Colleges and universities that can’t adapt will fail. Departments will either be eliminated or redesigned in ways that support more extensive collaboration among faculty members and students working in different areas. 

These changes will meet considerable resistance, but they are unavoidable and will have beneficial results. In all areas of endeavor, innovation comes about by bringing together what is usually held apart. Just as artistic creativity often occurs by mixing different genres, so intellectual innovation frequently results from crossing different disciplines.

With growing competition abroad and increasing financial problems at home, the worldwide pre-eminence of U.S. higher education isn’t assured in the 21st century. Even if it were possible to increase funding in this era of shortsighted austerity, it wouldn’t be enough. A fundamental transformation in higher education will require a thorough rethinking of both what and how we teach.

Colleges and universities will have to be reorganized and create new strategies for cooperation and collaboration that will enable them to provide the best education to the most students for the lowest price. If we have the imagination and determination to rise to this challenge, we will be able to provide the education our children and grandchildren deserve and the world needs."