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The Genealogy of Obamacare

Harking back to the worst of the New Deal.

Jan 13, 2014, Vol. 19, No. 17 • By JAY COST
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Despite its clunky rollout, Obamacare continues to move forward. Many of the problems with the website have been fixed, at least on the “front end” that the consumer sees. The government, meanwhile, has reported nearly 2 million enrollments between the federal and state exchanges. This number is well below the 3.3 million expected—and it is almost surely an overestimation, considering the potentially high levels of nonpayment by enrollees and the remaining problems on the “back end,” where the insurance companies interact with the government. Still, it suggests that the program is here to stay for the time being.

Supporters of the law are breathing a huge sigh of relief, but their respite may be short-lived. Already there are hints of bigger problems with the law—bad ratios of healthy to sick enrollees, limited networks of doctors and hospitals, paltry drug formularies, and more. And there are more problems to come, symptoms of a deeper malady inherent in the law: It is ill-suited to our Madisonian system. Obamacare seeks to micromanage a vast sector of the American economy, when our government was designed purposely to prevent that sort of control. When central planners during the New Deal ignored the limitations placed on our pluralistic government, the results were disappointing and often perverse. The flaws already evident in the Obamacare system suggest that history may be repeating itself.

The progressives of the early 20th century were a diverse group of activists, but one thing they had in common was a taste for telling people what to do. Early progressive thinkers like Herbert Croly were enthusiastic about grand, government-directed endeavors to make America a better place. And that was the subtext of Theodore Roosevelt’s famed Osa-watomie speech: He wanted to co-opt Lincoln’s wartime coercion for peaceful social engineering.

The problem the progressives encountered is that our Madisonian system is incompatible with their grand ambitions. If the progressive left was bent on telling people what to do for their own good, just that sort of curb on individual freedom was one of the Framers’ biggest fears. For a decade, the Founding generation had been bossed around by a distant and unsympathetic British government, and then—after throwing off the shackles of colonialism—they found themselves, under the Articles of Confederation, at the mercy of ignorant, capricious, yet effectively omni-potent state legislatures. The subtext of Federalist 51 is a promise from Madison to the people: Nobody is going to tyrannize you under this new government. In Madison’s scheme, the government would empower a broad spectrum of interests to check one another, thus breaking and controlling what he called in Federalist 10 “the violence of faction.” 

Of course, this has not stopped the government from finding novel ways to boss people around. Even so, the Madisonian system has often thwarted central planners who think the world would be a better place if only the country would follow their dictates. 

This was a lesson the progressives had to learn the hard way during the New Deal. Today when people think of the New Deal, they are wont to recall Social Security or the minimum wage. But those were actually part of the second New Deal, which focused on granting new rights or powers to different groups. The first New Deal had more to do with controlling almost every aspect of American economic life, and it was an epic disaster that even the staunchest FDR cheerleaders are hard-pressed to defend. 

The Agricultural Adjustment Act (AAA) of 1933 was the first major program of the New Deal, and it was straightforward: The government would pay farmers not to farm in the hope that this would cut down the glut of agricultural products, raise farm prices and wages, and thus promote prosperity. Yet in practice it failed in surprising and far-reaching ways. It was in Dixie that the AAA wrought the most harm, decimating the economic standing of poor farmers, many of them black. Wealthy landowners manipulated the payment program so as to stiff tenants, purchase farm equipment, and send unskilled laborers crowding into the big cities looking for work. When reformers in the Agriculture Department tried to do something about this, they were unceremoniously sacked to keep congressional bigwigs like Senate majority leader Joseph Robinson of Arkansas happy. 

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