Subject: The Great Society (AEI Economics Ledger)

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Looking back, looking ahead
The Great Soci ety at 50. Nicholas Eberstadt: The Great Society pledge, and the fruit this would
ultimately bear, profoundly recast the common understanding of the ends of governance in our country.
The address heralded fundamental changes-some then already underway, others still only being
envisioned-that would decisively expand the scale and scope of government in American life and greatly
alter the relationship between that same government and the governed in our country today.
VIDEO The Great Society's triumph and tragedy
PODCAST Does economic freedom have a future in America? A Q&A with Arthur Brooks

Problems with Piketty

A question on Pi ketty. Andrew Biggs: Heres where the puzzlement comes in: pretty much every
economics textbook will tell you that r > g, but none of the textbook models take from this that the capital
stock will rise endlessly relative to the economy. Most of them hold that it stays pretty constant, and the
historical evidence supports that view.

Piketty s argument hits an iceberg. Stan Veuger: In 2014, the combined wealth of these people and
those who inherited their fortunes is about $212 billion, for a rate of return net of inflation of about 0.5
percent. That is a very low number, much lower than the 7 percent propagated by Piketty.

VIDEO Kevin Hassett discusses Thomas Pikettys new book on PBS NewsHour

Is the labor market broken?

The equal-pay debate. Andrew Biggs and Mark Perry: Some gender discrimination in the labor market
certainly does exist. But the best solution isnt more lawsuits. In fact, the Obama administrations proposal
to shift the burden of proof in gender discrimination cases against employers would make hiring a female
employee a potential legal liability for employers, and thus employers would hire fewer women.

Bad idea to destroy jobs. Ramesh Ponnuru: Its not just opponents of a higher minimum wage who
think it would destroy jobs while a lower one would create some. Almost everyone who has thought about
this question believes these claims are true. Most proponents of a higher minimum wage think the trade-
off is worth it because the job loss will be small and the benefits to people who will receive the higher
wage large.

Ameri cas increasingl y i rrelevant unemployment rate. Nicholas Eberstadt: If we want to understand
much less fix what ails our labor force today, we have to measure its problems first. Unfortunately,
our old-fashioned unemployment rate has become an increasingly inaccurate barometer for measuring
the health of the American labor market and the wellbeing of the American public. Other, better tools
exist. We must learn to use them.

Taxes

A tax on public health. Alan Viard and Alex Brill: Taxing e-cigarettes would threaten public health by
penalizing a product that holds the promise of luring people away from the traditional cigarettes that have
caused so much death and disease.

A clue about the prospects of tax reform. Alex Brill: If Congress continues to extend this laundry list of
narrow tax breaks and avoid the more difficult task of pursuing an overhaul of the tax code, the code will
remain in its current form: complex, distortionary, arbitrary, and unfair. How Congress deals with these
policies will serve as a clear signal of its willingness to tackle the broader task of tax reform.

Across the pond

Ratings agencies have learned little. Desmond Lachman: If the rating agencies are to play a useful
role in rating the sovereign debt of the European periphery, they must provide an objective assessment of
the probability that those countries might default on those debts. They should be providing such an
assessment rather than simply following the market as they have done in the past during the
downgrading cycle or as they now seem to be doing again in the upgrading cycle.

What Ukraine doesnt need. Desmond Lachman: The senators proposal that the U.S. Treasury should
work with the International Monetary Fund to help Ukraine set up a currency board to stabilize its
currency would seem to be wide of the mark. For not only would such a proposal require very large-scale
international financial support that would put the U.S. taxpayer at risk. It is also far from clear that in
Ukraines present circumstances the setting up of a currency board would be in the countrys best
interest.

In other news

Obamacare has fail ed to rein in health care costs. Stan Veuger: We now have the first quarter of
2014 to judge the spending effects of the law, albeit provisionally. According to the Bureau of Economic
Analysis, real health-care spending during the first three months of the year jumped by an annualized 9.9
percent. That is a staggering number.

Innovation put on the chopping block. J im Pethokoukis: America is plagued by mediocre primary
schools, subpar infrastructure, and dysfunctional government. But somehow, this country manages to get
at least one big, important thing right: innovation.

Mark your calendar

5.20 AEI event: The Great Society at 50: The triumph and the tragedy
5.20 AEI event: The fourth revolution: The global race to reinvent the state
5.21 FOMC announcement
5.22 J obless claims
5.27 AEI event: Economic liberty and human flourishing: Perspectives from political philosophy

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