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A Rendezvous with Disaster

Obamacare is a nightmare because today’s progressives have forgotten what FDR learned

Jan 27, 2014, Vol. 19, No. 19 • By ARTHUR HERMAN and JOHN YOO
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Obamacare has quickly become a train wreck. Its troubled website, higher premiums, and inevitable shortages and rationing, married to President Barack Obama’s political refusals to enforce parts of the law, guarantee that the program will go down as one of 


FDR on a wartime tour of a Boeing factory

the great public policy debacles in American history.

Unless the White House fixes the problems, the Obama legacy will be a government-controlled health care system that’s long on bureaucracy and short on doctors, with less treatment at higher cost. It is difficult to think of another domestic policy that failed so fast, for so many, at such expense. But one example from American history—Franklin Roosevelt’s rearmament program during World War II—provides both a warning and a guide. For while, as initially conceived, the national mobilization shared many of the fatal defects of Obamacare, changes were made in time to avert disaster, and the United States was transformed into the famous “arsenal of democracy.” Obamacare requires a similar course correction. Unlike the pragmatic FDR, however, today’s left so far refuses to reconsider and embrace market principles, preferring to sacrifice results on the altar of progressive ideology.

Committed to the belief that government is the solution to the nation’s most pressing problems, the Obama White House has not recognized that the real solution to the nation’s health care woes lies in less government, not more. The secret is to increase the supply side of the equation, instead of micromanaging the demand side, controlling what kind and how much coverage patients should receive, and eventually even how much treatment. 

It is that lesson that Americans learned the last time Washington tried to take over large sections of the economy for its own purposes. In trying to get the United States ready for modern war—the U.S. Army was slightly bigger than Holland’s—Roosevelt was under intense pressure to direct the entire effort from the White House, placing the crash program under the control of a single all-powerful figure whose word would have the force of law. Harry Hopkins wrote in a secret memo that America had to “exceed the Nazis” in commandeering the economy. And in some areas, such as rationing and wage and price controls, the New Dealers got their top-down way, plunging the country into the kind of bureaucratic nightmare we see unfolding with Obamacare.    

But in the all-important matter of converting a civilian economy to wartime production, Roosevelt had the sense to realize the job was too huge to be orchestrated by politicians and bureaucrats. Instead, he brought in top executives from industry to work out the timetable and means, using skills and experience developed in the marketplace. The result was the greatest industrial miracle of modern times.  

Even so, when Roosevelt recruited business leaders like General Motors president Bill Knudsen, AT&T’s Bill Harrison, and U.S. Steel chairman Edward Stettinius to help him arm the country in the summer of 1940, they soon learned that his New Deal beliefs made their assignment harder, not easier. One was a deep suspicion of the profit motive. Roosevelt and his advisers instinctively assumed that letting companies make good money producing the warplanes and tanks and landing craft the nation needed was war profiteering. Knudsen and his colleagues in the Office of Production Management had to explain that the profit motive would actually incentivize America’s best businesses to commit time and energy and creativity to their task. “The more people we get” volunteering to go into wartime production, Knudsen told the president, “the more brains we can get into it, [and] the better chance it will succeed.” Obamacare’s rules are designed to do the opposite: to limit the number of insurance providers and types of policies on the market, and to discourage newcomers from getting into the field. 

FDR’s second assumption was that certain strategic materials like rubber, steel, and aluminum were too vital to the war effort to be left to uncertain market forces and instead needed to be allocated by government in order to avoid shortages at critical points. But the opposite is true. Price controls and rationing plans, no matter how expertly designed, produce allocation distortions of their own—as the architects of Obamacare are about to find out. 

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