IJ Helps Caveman Blogger Fight for Free Speech

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The Institute for Justice asks a very important question: "Can the government throw you in jail for offering advice on the Internet about what food people should buy at the grocery store?"
"That is exactly the claim made by the North Carolina Board of Dietetics/Nutrition. In December 2011, diabetic blogger Steve Cooksey started a Dear Abby-style advice column on his popular blog (www.diabetes-warrior.net) to answer reader questions. One month later, the State Board informed Steve that he could not give readers advice on diet, whether for free or for compensation, because doing so constituted the unlicensed, and thus criminal, practice of dietetics. The State Board also told Steve that his private emails and telephone calls with readers and friends were illegal, as was his paid life-coaching service. The State Board went through Steve's writings with a red pen, indicating what he may and may not say without a government-issued license."
"But the First Amendment does not allow the government to ban people from sharing ordinary advice about diet, or scrub the Internet—from blogs to Facebook to Twitter—of speech the government does not like. North Carolina can no more force Steve to become a licensed dietitian than it could require Dear Abby to become a licensed psychologist."
"That is why on May 30, 2012, Steve Cooksey joined the Institute for Justice in filing a major free speech lawsuit against the State Board in the U.S. District Court for the Western District of North Carolina, Charlotte Division. This lawsuit seeks to answer one of the most important unresolved questions in First Amendment law: When does the government's power to license occupations trump free speech?"
Watch video above for more information.  

Dueling Consumer Confidence Reports

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1. Last Friday, Thomson Reuters/University of Michigan reported that its consumer sentiment index increased in May for the ninth straight month.  That set 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.  Bloomberg reported 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."

2.  This morning, Gallup reported that its Economic Confidence Index held at -16 last week, the highest index level in the four-plus years of Gallup Daily tracking in the United States.

3. Also this morning, The Conference Board reported that its consumer confidence index fell to a five-month low in May, as Americans were less optimistic about current labor market and business conditions, as well as the short-term outlook.
What are we to make of these conflicting consumer confidence reports?  Perhaps it's a reflection of the weakness in survey-based measures of consumer confidence, or that surveys have large margins of error?  
In other news today, S&P reported that its Case-Shiller Home Price Index dropped in March by 2% to a post-crisis low.  Note that the Case-Shiller home price index is calculated based on a three-month moving average with a two month lag and is therefore based on home prices in January, February and March.  The sales and price gains I was reporting recently were for April, and those improvements won't be captured by the Case-Shiller index until next month's report. 

Center of Gravity in Oil World Shifts to Americas; It's the "Equivalent of a Category 5 Hurricane"

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As U.S. oil production ramps up, net oil imports have fallen to a 20-year low of 42.4% in 2012 through April.
The Washington Post reported recently on the new world energy map that is emerging, and it is no longer centered on the Middle East, but on the Americas:

"From Canada to Colombia to Brazil, oil and gas production in the Western Hemisphere is booming, with the United States emerging less dependent on supplies from an unstable Middle East. Central to the new energy equation is the United States itself, which has ramped up production and is now churning out 1.7 million more barrels of oil and liquid fuel per day than in 2005.

“There are new players and drivers in the world,” said Ruben Etcheverry, chief executive of Gas and Oil of Neuquen, a state-owned energy firm that is positioning itself to develop oil and gas fields here in Patagonia. “There is a new geopolitical shift, and those countries that never provided oil and gas can now do so. For the United States, there is a glimmer of the possibility of self-sufficiency.”

Oil produced in Persian Gulf countries — notably Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq — will remain vital to the world’s energy picture. But what was once a seemingly unalterable truth — that American oil production would steadily fall while the United States remained heavily reliant on Middle Eastern supplies — is being turned on its head.

Perhaps the biggest development in the worldwide realignment is how the United States went from importing 60 percent of its liquid fuels in 2005 to 45 percent last year (MP: Net oil imports have since fallen to a 20-year low of 42.4% this year through April, see chart above). The economic downturn in the United States, improvements in automobile efficiency and an increasing reliance on biofuels all played a role.

But a major driver has been the use of hydraulic fracturing. By blasting water, chemicals and tiny artificial beads at high pressure into tight rock formations to make them porous, workers have increased oil production in North Dakota from a few thousand barrels a day a decade ago to nearly half a million barrels today.

Conservative estimates are that oil and natural gas produced through “fracking,” as the process is better known, could amount to 3 million barrels a day by 2020. “We have a revolution here,” said Larry Goldstein, director of the Energy Policy Research Foundation in New York. 'In 47 years in this business, I’ve never seen anything like this. This is the equivalent of a Category 5 hurricane.'"

Start at the IRS to Find a Missing Child

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I've posted stories before about attempts to get the IRS to provide information about child abductors, but did you know there are parental abductors some who blatantly claim their kidnapped children on their federal returns? The hubris here is astonishing.

Washington Examiner reports:

Hardly a week passes without hearing something about missing children in this country. Some are believed stolen for sexual purposes, some are found murdered, and thousands of other children are kidnapped by one of their own parents.

Today, let's focus on parental abductors.

For the parent left behind after a former spouse has kidnapped their child, there is the agony of not knowing when -- or if -- they will ever see their baby again. Even the tiniest clue as to their son's or daughter's whereabouts is vitally important if there is ever to be a reunion.

To those heartsick parents, I say: The IRS may very well know where your missing child is, but the agency won't tell you.

Believe it or not, there are some parental abductors who file tax returns and blatantly claim their kidnapped child as a dependent!

Some of them apparently need the refund money, while others don't want to attract attention for failure to pay. When they file their return, they list their employer and their home address, along with the child's name and Social Security number.

All are major pieces of information the abandoned parent would love to know. But the IRS cloaks itself in Watergate-era privacy laws, shrugs its bureaucratic shoulders and says it just can't help the grieving parent locate the missing child.

Continued here...

Five Money-Saving Websites

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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.

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

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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."

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

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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

BPP@MIT Annual Inflation Rate Falls Below 2%

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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.

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

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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 hundreds of new "shovel-ready" jobs as the the graph clearly illustrates.   

In Praise of the Speculators, Who Smooth Out Production and Consumption, and Benefit Society

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From the article "Why Speculators?" by Percy L. Greaves, which originally appeared in the November 1964 issue of The Freeman:
"Frequently, the speculator is the first to foresee a future scarcity. When he does, he buys while prices are still low. His buying bids up prices, and consumption is thus more quickly adjusted to future conditions than if no one had foreseen the approaching scarcity. A larger quantity is then stored for future use and serves to reduce the hardships when the shortage becomes evident to all.
Since a price rise tends to encourage increased production, the sooner prices rise, the sooner new and additional production will be started and become available. So a successful speculator reduces both the time and the intensity of shortages as well as the hardships which always accompany shortages.
Likewise, speculators are often the first to foresee an increase in future supplies. When they do, they hasten to sell contracts for future delivery. This in turn drives down future prices earlier than would otherwise be the case. This tends to discourage new production that could only be sold at a loss. It also gives manufacturers a better idea of what future prices will actually be. So, here again the speculator tends to smooth out production and consumption to the benefit of all concerned.
A good example of how speculators serve society was provided in the coffee market a few years ago. A small newspaper item reported a sudden unexpected frost blight in Brazil. Speculators immediately realized that such a frost must have killed large numbers of coffee bushes. This meant much smaller future supplies for the United States. So the speculators promptly bought all the coffee they could below the price they thought would prevail when consumers became fully aware of the approaching shortage. This tended to raise coffee prices immediately.
The effect of this was to reduce consumption and stretch some of the existing supply into the shortage period. It likewise alerted coffee growers in other areas to be more careful in their picking and handling of coffee so that there was less waste. Higher prices encouraged them to get to market every last bean, which at lower prices would not have been worth the trouble. Higher prices also speeded up the planting of new bushes. Since it takes five years for a new coffee bush to bear berries, the sooner new planting was undertaken the shorter the period of shortage.
The speculators who first acted on this development served every coffee consumer. If these speculators had not driven up prices immediately, consumers would have continued drinking coffee at cheap prices for a time. Then, suddenly, they would have faced a still-greater shortage and still-higher prices than those that actually prevailed.
By buying when coffee supplies were still relatively plentiful and selling later when the shortage was known to all, speculators helped to level out the available supply and reduce the extreme height to which prices would otherwise have risen. Speculators make money only when they serve society by better distributing a limited supply over a period of time in such a manner that it gives greater satisfaction to consumers. They thus permit other businessmen and consumers to proceed with greater safety and less speculation in their own actions."  MP: In the example above, you could easily substitute "oil" for "coffee" and have a pretty good understanding of oil markets and oil prices over the last few months, and perhaps gain an appreciation of the role of oil speculators in helping to determine spot and futures prices for oil and gasoline, in response to changing market forces globally. And you could also understand how the media in the 1960s might have charged/blamed/accused coffee speculators for "high coffee prices," even though they were betting on market forces (falling future supply), not against market forces.  

Dropbox, Google Drive, and the CPI

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There's an ongoing debate (including in the CD comments section) about whether CPI inflation as measured by the BLS overstates or understates changes in consumer prices.  Mike Mandel makes the case here that the CPI may significantly overstate inflation because it doesn't capture many of the significant price decreases in online services, many of which are now free: Dropbox (which Mike Mandel uses 25-50 times per day) with 2.5 GB free storage, Google Drive ("Keep Everything, Share Anything, Access Everywhere") with 5 GB of free storage, and well, even free blogs like Mike's (Mandel on Innovation and Growth), and Marginal Revolution, Greg Mankiw's blog, Cafe Hayek, etc.

Consider that before the Internet, you'd have to buy books written by Tyler Cowen, Don Boudreaux or Greg Mankiw to access their expertise and knowledge, and you can now learn economics from them for free by reading their blogs.

Here's Mike:

"The omission of free online services from the CPI, once insignificant, has become increasingly important as we spend more and more of our time online. What has the bigger impact on Americans–an increase in the price of “lunchmeats” (2.3% over the past year) or a decline in the price of online storage (arguably down by as much as 50%, though it is probably less)?

That’s a real question, incidentally, not a rhetorical one. We may have reached the point where Internet companies are providing free services that have a higher value than some things we pay for. How do we change our economic statistics to reflect this new reality?"

MP: The reason this is an important economic issue is because if CPI inflation overstates true consumer price inflation due to mis-measurement of items like free online services, it would mean that the growth in real wages, real income, real output, etc. over time have been understated. 

HT: Mister Ed

Manufacturing: U.S. Will Own the Mid-21st Century and America Remains a Country Without Limits

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From today's WSJ article "The Future is More Than Facebook" by Forbes publisher Rich Karlgaard:
"Manufacturing? America will own the mid-21st century. Geopolitical instability and rising oil prices will wreck the late 20th-century rationale for outsourcing. Chinese labor costs are rising 20% a year while robotic costs are dropping by 30% a year. Do the math. 
"Made in the USA" is set to have a major comeback. The showstopper will be 3-D printing, which makes physical objects from a digital file. It will turn our artists into artisanal manufacturers and reward American-style creativity (see related CD post here
on 3-D printing, featuring a 2011 Forbes article by Mr. Karlgaard).
Energy? America's natural-gas and shale oil boom will bridge us to 2030 or so when solar energy and algae-based fuels will be closer to market parity and begin to make a real contribution. As long as I'm on the topic of the natural-gas boom, what key technology made this happy surprise possible? High-tech horizontal drilling. Who knew? We were all too busy fiddling with our iPhone apps to see it coming.
Question: If America could have only one of the following—Facebook, Twitter or horizontal drilling—which would be the smarter choice?
Happily, we don't have to make that choice. America remains the world's innovator, a country without limits."

Mortgage Denied: Sometimes, for No Good Reason

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Due to tighter standards from Frannie Mae and Freddie Mac, getting approved for a mortgage is getting more and more difficult for average Americans. People are getting denied left and right, sometimes for things beyond their control.

CNN reports:

Banks are reluctant to make loans without the Fannie and Freddie guarantee, and loans backed by them account for just about every mortgage written these days.

In 2009, the agencies lifted the minimum credit score that borrowers must have from 580 to 620. That's probably for the best.

But they've pushed through a host of other requirements as well, and that means real estate deals don't get done, even for some relatively low-risk borrowers.

"You can have one Fannie/Freddie guideline you violate and that gets you rejected," said Alan Rosenbaum of GuardHill Financial.

A quarter of all mortgage loan applicants get denied for loans, according to the Federal Reserve. Many other potential homebuyers never even try to get loans, said Jerry Howard, president of the National Association of Home Builders.

More here

Fraudulent Tax Returns Surge 181%

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According to reports, the number of taxpayers attempting to claim inflated refunds was on the rise. When the economy falters people start looking for more cash. And that means more people are willing to “push it” on their taxes. Good luck, when the audits start rolling in.

From Yahoo Finance:

The IRS identified 335,341 tax returns claiming $1.9 billion in fraudulent refunds as of March 4, 2011, according to the findings of an audit conducted by the Treasury Inspector General for Tax Administration. That's a whopping 181% increase from the same period last year.

While the IRS has become more effective in its screening process, a weak economy has also driven more people to cut corners, said Tim Gagnon, assistant academic specialist of Accounting at Northeastern University.

"When the economy gets really bad, people get more touchy about how much they're paying in taxes and look at where they think they can push the envelope a little more," said Gagnon. "100 extra dollars really makes a difference to people now."

Many taxpayers tried to boost their refunds or reduce their tax liability by claiming deductions and credits they didn't qualify for, TIGTA found.

For example, the Earned Income Tax Credit, aimed at helping lower-income taxpayers, has been a large source of fraud, with people falsely lowering their income to qualify or claiming children they don't have. The IRS estimates that 23% to 28% of EITC credits are wrongfully paid to Americans every year, totaling $11 to $13 billion.

More here