Editor's Note

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Will reading the Milken Institute Review make me rich, asks longtime reader JG of Passadumkeag, Maine?

You've inspired us, JG! We'll be awarding $10,000,000.00 to the first subscriber who decodes the secret message buried in the Review's masthead. Check out the clues on page 97, but don't forget to peruse the virtual gold in the issue.

len burman, director of the Urban-Brookings Tax Policy Center, thinks big with a proposal to reform the income tax, stabilize entitlement spending and tame budget deficits in one fell swoop. The lynchpin (or perhaps the Achilles heel): a value-added tax tied to the growth of health care costs. With both political parties opposed, "a VAT seems a non-starter," he writes. But stranger things have happened: "the Senate voted 98-0 against taxing Social Security benefits in July 1981. Just two years later, though, Congress passed the Greenspan Commission's reform package, which included a tax on Social Security benefits."

david e. bloom, elizabeth cafiero-fonseca, mark e. mcgovern and klaus prettner of Harvard and the University of Göttingen measure the dimensions of the health crisis sneaking up on China and India. "The cost of non-communicable diseases (in particular, cardiovascular diseases, cancer, chronic respiratory diseases and diabetes) will be high no matter what," they conclude. But "Unless the issue is given top priority, it will be utterly staggering. Effective action would, of course, be costly, but far less costly than the alternative."

severin borenstein, an economist at UC-Berkeley, responds to jeremiads mourning the consolidation of the airline industry. "That sounds like bad news for consumers, but there is some good news here as well," he writes. "Studies report a substantial decline in prices when Southwest, Jet Blue and Virgin America are present. And with low-cost carriers now vying for nearly two-thirds of all domestic traffic, the competition is very real."

joel mokyr, an economist at Northwestern, assays the implications of our dependence on technology for continuing prosperity and growth. "The human species has been on a wild techno-ride for millennia," he writes, "as innovation after innovation disrupted business as usual. Bite-back is common, and in some cases disastrous. Yet, while technological progress is never riskless, the risks of stasis are far more troubling. Getting off the roller coaster midride is not an option."

ted gayer and Emily Parker of the Brookings Institution revisit the Cash for Clunkers stimulus program of 2009 and find that its impact was less than met the eye. "Judging by the numbers," they conclude, "the program can hardly be rated a success. The cost per job saved was ferociously high, requiring six times the government outlay of alternative stimulus measures. And it apparently had a negligible effect on GDP. Much the same, moreover, can be said for the impact on fuel efficiency and auto emissions."

bob looney, a development economist at the Naval Postgraduate School in California, argues that the kingdoms of Oman, Jordan and Morocco survived the Arab Spring because they deliver more of what their citizens crave. "These three monarchies have a real shot at pulling away from their neighbors in terms of both economic development and evolution toward true democracy," he writes. "One could even go further and speculate that all three may be on the verge of a virtuous circle in which a young and increasingly influential entrepreneurial class helps reform-willing governments to sustain the push for growth, social mobility and job creation in a part of the world not known for moderation."

penny prabha, keith savard and heather wickramarachi of the Milken Institute defend the role of financial derivatives in managing business risk and expanding access to capital. And they offer some hard estimates to back up their argument. All told, "derivatives expanded U.S. GDP by about $3.7 billion a quarter between 2003 and 2012," they conclude, as well as "boosted employment by about 530,000."

Ready for more? Take a gander at glenn yago's prescription for capital market reform in Israel, sample an excerpt from The Dollar Trap, the new book from former IMF economist Eswar Prasad, scan the latest charticle by Brookings demographer Bill Frey and scrutinize a list of countries eager to have you as a resident (for a hefty price).
Happy reading.

— Peter Passell

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