The Magazine

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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Second, even at the height of World War II, armaments, munitions, and military supplies still represented less than half of the goods and services the nation produced. Obamacare is more ambitious. It will eventually regulate the medical treatment of every man, woman, and child in the United States, not for a limited period of war, but forever. It goes beyond a wartime emphasis on the numbers of hard goods produced, such as munitions or airplanes, to permanently control services, where outcomes are more difficult to measure. It also seeks to replace the markets that aggregate the decisions of millions of people every day to allocate the economy’s resources. If the federal government couldn’t successfully micromanage the production of tanks and ammunition, it is hard to believe that bureaucrats can pull off the much more difficult job of producing the most effective outcomes for individual health.

Third, like the misbegotten initial stages of World War II mobilization, Obamacare is founded on an ideology that runs counter to the fundamental principles of American exceptionalism. The New Deal and the early World War II experience had their intellectual origins in the progressive movement. Championed by Woodrow Wilson, who as a political scientist studied German theories of the administrative state, progressivism sought to impose order on an unruly economy through central planning and expert management. When such controls were applied to the U.S. economy in the midst of the worst downturn in its history, the effects were lackluster at best. 

Obamacare resurrects these methods and this faith in central planning. As in the past, they are sparking irreconcilable conflict with individual choice, civil society, and private markets. Nobel Prize-winning economist F. A. Hayek demonstrated long ago that command-and-control bureaucracy cannot match the efficiency of decentralized markets because of the vast amount of information and processing power needed to allocate resources. In addition, private markets advance core American values. The resistance to Obamacare reflects not just differences between Republicans and Democrats, but a rejection by the American body politic of a foreign governing principle. As World War II showed, government achieves its purposes by harnessing, rather than fighting, American individualism and private initiative.

There is, of course, no direct analogy between producing ships and steel and gas masks for the Pentagon and producing more health insurance options and better health care for Americans. Nevertheless, critics of the Obama administration should take a page from FDR. If the congressional majorities don’t yet exist to repeal the ACA, critics should introduce targeted revisions that advance free-market principles. A supply-side solution for health care should increase the number of productive, innovative options. For the past two decades every major reform effort in health care has focused on managing the demand side of the equation. We’ve had HMOs and managed care, practice guidelines, “pay for performance,” and now Obamacare. As John C. Goodman of the National Center for Policy Analysis points out, each involves “buyers of care telling the providers how to practice medicine” and trying to lower costs by redistributing available care, or even rationing it. In Obamacare, those demands come via the insurers, with death panels—the ultimate rationing—just around the corner. 

It’s time to reverse the equation, as Bill Knudsen and his colleagues did in the 1940s. Just as the Army and Navy learned to leave contractors alone to figure out how to design a better plane, build it faster, and at a lower cost, and rewarded them with bigger contracts when they did, so government programs like Medicare and Medicaid should reward doctors and clinics that provide better coverage at lower cost. That would spur them to explore new technologies—say, online diagnosing as a substitute for some costly in-person visits. And it would incentivize private insurers to compete and innovate. Government could help by allowing insurance policies to be bought across state lines and instituting tax credits to encourage people to buy portable insurance on their own instead of through their employers. 

One more way the federal government could help would be to make the price of medical services and insurance transparent nationwide. A genuine Blue Book guide to the cost of services not only would allow customers to shop the actual marketplace—instead of the phony “market-place” of the Obama exchanges—but also would give health providers and insurers information about who’s providing services efficiently and who’s not. Every auto repair shop has a price list—and auto insurers love to advertise a lower cost for equal or better coverage in their cutthroat battle for customers. Why aren’t health insurance companies running TV ads with talking reptiles? Obamacare, and the perverse incentives of demand-side government management, guarantee they never will. 

Reforms like these would take advantage of the efficiency of decentralized markets, and they would align with American principles of individual freedom and limited government. And to the extent they were inspired by FDR’s war mobilization, we would reap the added satisfaction of finding the cure for one of Washington’s worst policy blunders ever in one more legacy from the Greatest Generation.

Arthur Herman is the author of Freedom’s Forge: How American Business Produced Victory in World War II and, most recently, The Cave and the Light: Plato Versus Aristotle, and the Struggle for the Soul of Western Civilization. John Yoo is Emanuel S. Heller professor of law at the School of Law, University of California at Berkeley, and a visiting scholar at the American Enterprise Institute.

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