Wonkbook: Ben Bernanke’s surprisingly excellent, radical speech

June 3, 2013

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Here's some real talk for the graduating class at Princeton University:

"The concept of success leads me to consider so-called meritocracies and their implications. We have been taught that meritocratic institutions and societies are fair. Putting aside the reality that no system, including our own, is really entirely meritocratic, meritocracies may be fairer and more efficient than some alternatives. But fair in an absolute sense? Think about it. A meritocracy is a system in which the people who are the luckiest in their health and genetic endowment; luckiest in terms of family support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate–these are the folks who reap the largest rewards."

As the kids say, BOOM. But who said it? Who went to Princeton and told the assembled victors of the meritocracy that, in effect, they didn't build that?

Why, Federal Reserve Chairman Ben Bernanke of course.

Bernanke didn't stop with questioning the underpinnings of the meritocracy. He went after sexual attraction, too: "Remember that physical beauty is evolution’s way of assuring us that the other person doesn’t have too many intestinal parasites."

And economics: "Economics is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much."

And the rich: "I think most of us would agree that people who have, say, little formal schooling but labor honestly and diligently to help feed, clothe, and educate their families are deserving of greater respect–and help, if necessary–than many people who are superficially more successful. They’re more fun to have a beer with, too."

And the rich again: "A career decision based only on money and not on love of the work or a desire to make a difference is a recipe for unhappiness."

And the costs of sending a kid to Princeton: "My colleague also used to say that, from a financial perspective, the experience was like buying a new Cadillac every year and then driving it off a cliff."

Bernanke's full address is here. And note that this comes on the heels of his commencement speech at Bard's College, where he talked about robots and lasers.

Of course, if Bernanke is skeptical of the meritocracy and even more skeptical that the rich deserve their wealth, that might be because he's watched his policies make the rich richer, despite all they did to cause the crisis, even as the folks with "little formal schooling but [who] labor honestly and diligently to help feed, clothe, and educate their families" have fallen further behind. It's enough to make anyone a radical.


Federal Reserve Chairman Ben S. Bernanke at Princeton. Rich Schultz/AP

Wonkbook's Number of the Day: $50 million. That's how much the IRS spent on more than 200 employee conferences between 2010 and 2012.  

Wonkbook's Quotation of the Day: "Remember that physical beauty is nature’s way of assuring us that the other person doesn’t have too many intestinal parasites," said Fed chairman Ben S. Bernanke to Princeton University in his baccalaureate address.

Wonkblog's Graphs of the Day: Patrolling the U.S.-Mexico border, an interactive.

Wonkbook's Top 5 Stories: 1) Obamacare is launching; 2) scandalwatch continues; 3) economics does well when the economy doesn't; 4) the pace of immigration reform; and 5) this is how gun control will happen.

1) Top story: Checking in with Obamacare

The shocking truth about Obamacare's 'rate shock.' "Last week, California released early information on the rates insurers intend to charge on the new insurance marketplaces — known as “exchanges” — that the state is setting up under Obamacare. They were far lower than anyone expected. Where analysts had anticipated average premiums of $400 to $500, insurers were actually charging $200 to $300. “This is a home run for consumers in every region of California,” crowed Peter Lee, director of the state’s exchanges." Ezra Klein in The Washington Post.

Health care's problem with prices. "In many other developed countries, a basic colonoscopy costs just a few hundred dollars and certainly well under $1,000. That chasm in price helps explain why the United States is far and away the world leader in medical spending, even though numerous studies have concluded that Americans do not get better care. Whether directly from their wallets or through insurance policies, Americans pay more for almost every interaction with the medical system." Elisabeth Rosenthal in The New York Times.

It's official: Obamacare's small-business exchange is partially delayed. "The idea, floated in regulations last month, wouldn’t put off the Small Business Health Options Program, or SHOP, altogether. Small businesses could still buy coverage for their employees on the new exchanges. What would be put off a year was an employee choice component: Rather than have each worker pick a plan, the employer would pick one insurance provider for everyone...On Friday, Health and Human Services issued its final regulation, and the delay still stands, with federal officials noting worries about getting the choice function ready to launch in less than six months." Sarah Kliff in The Washington Post.

Will the Supreme Court strike at Obamacare yet? "President Obama’s healthcare law is under attack in the courts even as the administration sprints toward full implementation. Despite surviving a stiff challenge at the Supreme Court last year, some of the law’s biggest provisions remain at risk from legal challenges...The challenge to the law’s insurance subsidies, while more obscure, poses a far bigger and more dangerous threat to the Affordable Care Act. Simon Lazarus, senior counsel at the Constitutional Accountability Center, has argued that there’s a very real chance the Supreme Court’s conservative majority would strike down the IRS’s approach to insurance subsidies if it gets the chance." Sam Baker in The Hill.

@CitizenCohn: Funny thing: If conservatives weren't predicting Obamacare doom, modestly good news wouldn't be a big deal (funny strange, not funny ha ha)

Co-ops gear up for competition with major insurers under health law. "People in the market for health insurance in Oregon want to know what their out-of-pocket expenses will be — down to the dollar. They want doctors who reply to e-mail. They want the option to see alternative practitioners. And of course, they want premiums that don’t burn holes through their pockets...That’s what focus groups have told Oregon’s first consumer-owned and -operated health plan. And that’s what the fledgling co-op is promising to deliver later this year when it begins enrolling members." Roni Caryn Rabin in The Washington Post.

GOP rift widens over Medicaid expansion. "Republican fissures over the expansion of Medicaid, a critical piece of the 2010 health-care law designed to provide coverage to millions of uninsured Americans, continue to deepen, with battles in Arizona and elsewhere showing just how bitter the divisions have become. Despite expressing distaste for the new law, some GOP governors have endorsed an expansion of Medicaid, and three — Jan Brewer of Arizona, John Kasich of Ohio and Rick Snyder of Michigan — are trying to persuade their Republican-controlled legislatures to go along. The governors are unwilling to turn down Washington’s offer to spend millions, if not billions, in their states to add people to the state-federal program for the poor" Sandhya Somashekhar in The Washington Post.

@jonathanweisman: House Rs redraft failed pre-x health bill. Instead of ObamaCare hi-risk pool, it would fund state-based risk pools. Viva la difference

...And the Michigan gov. wants to talk about Medicaid. "Michigan Gov. Rick Snyder (R) said Friday that he asked Health Secretary Kathleen Sebelius to meet with state officials on a proposal to cap Medicaid benefits for able-bodied adults...One GOP proposal would place a four-year lifetime cap on Medicaid coverage for non-disabled adults. Snyder has questioned whether the plan is legal, and federal officials have said they would not approve it." Elise Viebeck in The Hill.

Music recommendations interlude: The Jayhawks, "Save It for a Rainy Day."

Top op-eds

SUMMERS: This is no time for austerity. "[R]esponsible governing also requires recognising that when economies are weak and monetary policy is constrained, fiscal policy can have a large impact on economic activity. This can, in turn, improve revenue collections and reduce expenditure on social welfare. In such circumstances, attempts at rapid reductions in the budget deficit may backfire. That is where we have been in recent years. Circumstances have been anything but normal." Lawrence Summers in The Financial Times.

SHILLER: Unemployment's costs. "Some kinds of austerity programs may indeed boost morale. Monks find their life’s meaning in a most austere environment, and military boot camps are thought to build character. But the kind of fiscal austerity that is being practiced now has the immediate effect of rendering people jobless and filling their lives with nothing but a sense of rejection and exclusion." Robert Shiller in Slate.

THALER: Breadwinning wife, nervous husband. "[A] new study reveals that women’s gains on the economic front may be contributing to a decline in the formation and stability of marriages. One reason for this decline may be that women with greater earning power have greater economic security that allows them to leave bad marriages. Yet another possibility is that many men seem to be clinging to a social norm from the “Mad Men” days: that the husband should be the primary earner in a family." Richard W. Thaler in The New York Times.

LUCE: Obama and the 'geek elite.' " Mr Obama is no traitor to geek culture. His administration shares many of the faults and virtues of the Silicon Valley leaders to whom it is so closely allied...It is hard to avoid the suspicion that Mr Obama’s reputation for being a nerd shields him from tougher criticism. Call it geek exceptionalism." Edward Luce in The Financial Times.

EMANUEL: How to reduce the suicide rate. "There is a simple way to make medication less accessible for those who would deliberately or accidentally overdose — and that is packaging. We need to make it harder to buy pills in bottles of 50 or 100 that can be easily dumped out and swallowed. We should not be selling big bottles of Tylenol and other drugs that are typically implicated in overdoses, like prescription painkillers and Valium-type drugs, called benzodiazepines. Pills should be packaged in blister packs of 16 or 25. Anyone who wanted 50 would have to buy numerous blister packages and sit down and push out the pills one by one. Turns out you really, really have to want to commit suicide to push out 50 pills. And most people are not that committed." Ezekiel J. Emanuel in The New York Times.

KRUGMAN: The geezers are alright. "[H]aven’t all the great and the good been telling us that Social Security and Medicare as we know them are unsustainable, that they must be totally revamped — and made much less generous? Why yes, they have; they’ve also been telling us that we must slash spending right away or we’ll face a Greek-style fiscal crisis. They were wrong about that, and they’re wrong about the longer run, too." Paul Krugman in The New York Times.

Fifties interlude: An old video about the rise of the "middle-income consumer."

2) Scandalwatch continues

IRS faulted for conference spending. "An internal watchdog at the Treasury Department is set to report Tuesday that the IRS spent almost $50 million on more than 200 employee conferences from 2010 through 2012, spending the tax-collecting agency's new acting commissioner called "inappropriate."...Republican lawmakers briefed on the report on conference spending released details from select portions, highlighting a $4 million gathering for 2,600 managers at three hotels in Anaheim, Calif., in August 2010. Several IRS employees stayed in presidential suites, the House Oversight and Government Reform Committee said. About 15 outside speakers were paid $135,000." Andrew Ackerman and Michael M. Phillips in The Wall Street Journal.

Holder still under pressure over leak probes. "Republicans on Sunday kept up a drumbeat of criticism directed at Attorney General Eric H. Holder Jr., who has come under fresh scrutiny following the Justice Department’s handling of leak investigations. “The attorney general has to ask himself the question, ‘Is he really able to effectively serve the president of the United States and the American people under the present circumstances?’ That’s a decision he’d have to make,” Sen. John McCain (R-Ariz.) said on CBS’s “Face The Nation.”" Sean Sullivan in The Washington Post.

IG report finds budget mismanagement in Job Corps program. "Poor budgeting caused the Job Corps cost overruns that led to an enrollment suspension for the federal job-training program earlier this year, according to a report from the Labor Department’s inspector general. Job Corps froze new enrollments in January after running a deficit of $60 million. The program lifted the hold in April but still plans to reduce enrollment by 20 percent." Josh Hicks in The Washington Post.

Research you can use interlude: "Swearing increased pain tolerance, increased heart rate and decreased perceived pain compared with not swearing."

3) Economics does well when the economy doesn't

Interest in macroeconomics is countercyclical. "On Tuesday mornings, graduate students and professors fill a classroom here to watch doctoral candidates run the economic gantlet. For an hour and a half, the presenters explain their works in progress to the crowd, who pepper them with questions, critiques and suggestions. The sessions weren't always so lively, said Harvard professor Benjamin Friedman, who has been participating in the university's Research in Macroeconomics seminars for years. The packed classrooms these days—a contrast with the thinly attended presentations a decade ago—illustrate how the 2008 financial crisis and the accompanying recession have revived scholarship in macroeconomics." Brenda Cronin in The Wall Street Journal.

Explainer: Key economic data coming your way this weekAmrita Jayakumar in The Washington Post.

Bank for International Settlements worries about effects of cheap money. "Markets are “under the spell” of the world’s central bankers, with cheap money driving stock prices to record highs despite a lack of good economic news, the Bank for International Settlements has said. The BIS, the so-called central bankers’ bank, on Sunday became the latest high-profile financial institution to warn that low rates and a plentiful supply of cash from quantitative easing had prompted investors to drive asset prices to record highs in spite of signs that a meaningful recovery continues to elude the global economy" Claire Jones in The Financial Times.

The likelihood of a deficit deal is declining. "Shrinking near-term federal deficits, slowing health-care cost increases and partisan gridlock have all but wiped out the likelihood for a deal this year to reduce long-term U.S. deficits, perhaps delaying a compromise until after the 2014 midterm elections, White House officials and congressional lawmakers said. The prospects for such a "grand bargain" this year have been unclear for some time, but parties to the discussions said in recent days the chances appear to have further diminished due to signs the government's fiscal health is improving. That has removed the pressure needed to force compromises." Peter Nicholas, Janet Hook, and Damian Paletta in The Wall Street Journal.

Read: Ben Bernanke's baccalaureate speech to Princeton University. Neil Irwin in The Washington Post.

'Temporary' farm subsidy program may finally die. "The building is one of the finest on Central Park West. Celebrity residents. Park views. Units priced up to $24 million. It is most definitely not a farm. But last year, the U.S. government sent $9,070 in farm subsidies to an apartment here.  Even the women who got that money isn’t exactly sure why. “I really don’t know,” Lisa Sippel said. Sippel does own farmland, but it’s in Missouri. Somebody there does the work...The program is one of Washington’s walking dead — “temporary” giveaway programs that have staggered on years beyond their intended expiration dates." David A. Fahrenthold in The Washington Post.

What sequester? Washington is booming, and a new gilded age takes hold. "Some demographers predicted the boom here would ebb as federal spending shrank amid troop withdrawals from the Middle East and efforts to trim the deficit. Instead, the region has shown surprising resilience, thanks to an economy that has steadily broadened beyond the government. More than a generation of heavy federal spending, it turns out, has provided the seed money for a Washington economy that now operates globally—less tied to the vicissitudes of the capital's political rhythms. The new moneyed brain trust is being led by professionals in defense, intelligence and data—many of whom excelled initially due to government ties. They've propelled the D.C. region as a leader in the cybersecurity and data sectors, as well as in more-specialized arenas including educational products and health-care data management." Elizabeth Williamson in The Wall Street Journal.

NOAA scraps furloughs. "The agency in charge of the National Weather Service will no longer furlough employees under sequestration. The announcement from National Oceanic and Atmospheric Administration (NOAA) came late Friday as severe tornadoes struck the Oklahoma City area, taking nine lives..."That is precisely why I'm pleased to report that this evening the Department of Commerce transmitted to Congress a new sequestration plan," Sullivan wrote. "Because of this new development we are canceling our intent to furlough all 12,000 of our employees."" Elise Viebeck in The Hill.

Play: The only game you need to understand Social SecurityDylan Matthews in The Washington Post.

Surpluses help, but states still see landscape of fiscal woe. "While the fiscal picture is brightening around the country, with many states expecting surpluses this year after years of deficits and wrenching budget crises, mounting Medicaid costs and underfunded retirement promises are continuing to cloud their long-term outlook. And some of the surpluses that are materializing, as welcome as they are, are not as robust as they appear at first glance — especially as bills come due for some of the costs that states put off during the long economic downturn." Michael Cooper and Mary Williams Walsh in The New York Times.

Mathematical interlude: Why the history of the continuum hypothesis is awesome

4) Immigration reform -- how quickly?

Will immigration reform really pass by July 4? "The Senate’s third-ranking Democrat predicted Sunday that a bipartisan immigration reform package will pass the full Senate with broad support by the Independence Day holiday." Sean Sullivan in The Washington Post.

Who's crossing the southern border? "About 43 percent of those detained say they’ll try to cross again in the near future — often because they’re trying to get back to a job or family members waiting for them in the United States. That’s one upshot of a big new survey (pdf) from the National Center for Border Security and Immigration at the University of Arizona. The researchers interviewed more than 1,000 detainees at the Border Patrol’s Tucson Sector in 2012." Brad Plumer in The Washington Post.

Conservatives say immigration backlash is coming. "Opponents of the Senate immigration reform bill say a strong public backlash is coming and think they have a good chance of stopping it on the Senate floor. Advocates on both sides of the debate agree the response to the bill, especially from conservatives, has been muted so far. They attribute the relative tranquility with which the legislation moved through the Judiciary Committee to several factors." Alexander Bolton in The Hill.

Last week in review interlude: Wonkblog's highlights.

5) This is how gun control will happen

Gun control battle shifts to the state capitals. "Michael R. Bloomberg, the mayor of New York, undaunted by defeat in Congress, is taking his campaign for stricter gun laws to the nation’s state capitals, including here, where a bill to expand the use of criminal background checks is before the State Legislature." Javier C. Hernandez in The New York Times.

...As does the push for new mental-health programs. "Karmen Hanson, program manager at the National Conference of State Legislatures, said just about every state is looking at some aspect of mental health care, and about two dozen have introduced targeted legislation this year. … The state bills mostly fall into three broad categories: boosting funding, broadening the rules for court-ordered treatment or commitment, and putting in place duty-to-warn standards for mental health professionals to report patients that could be a threat to themselves or others." Rachael Bade in Politico.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Ben Bernanke on life, love, and intestinal parasitesNeil Irwin.

The only game you need to understand Social SecurityDylan Matthews.

Who’s crossing the Mexico border? A new survey tries to find outBrad Plumer.

It’s official: Obamacare’s small-business exchange is partially delayedSarah Kliff.

The tax break stateMike Konczal.

The shocking truth about Obamacare’s rate shockEzra Klein.

Et Cetera

In the final week of June, we'll get a number of major Supreme Court decisionsPeter Landers in The Wall Street Journal.

RNC chair says party is 'open for repairs.' Russell Berman in The Hill.

Got tips, additions, or comments? E-mail me.

Wonkbook is produced with help from Michelle Williams.

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