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Morning Jay: Would Liberalism Be Better Off Without Obamacare?

6:00 AM, Oct 19, 2011 • By JAY COST
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The Obama administration’s abandonment of its efforts to implement the Community Living Assistance Services and Supports (CLASS) Act underscores something that conservatives have been arguing for two years: Regardless of what you think about more or less government regulation of health care, Obamacare is poorly designed and will prove calamitous if implemented, threatening the way that the middle class pays for and receives medical care.

Obama doctors

Put another way, liberalism could have done a lot better than this awful law, and conservatives who oppose more government intervention in health care on principle got lucky (in a sense) that the Democrats enacted a law with so many problems. Following this train of thought to its logical conclusion, we might therefore conclude that the left will be fortunate if the Supreme Court ultimately strikes down Obamacare, because the public will then never have to experience life under the new law, and thus liberals will not have to take the blame for it.

In this way, Obamacare resembles the National Industrial Recovery Act (NIRA) of 1933. The NIRA was the centerpiece of the so-called “First New Deal,” enacted during FDR’s initial 100 days in office. Reminiscent of the Bull Moose progressivism of FDR’s namesake and distant cousin Teddy, the NIRA aimed to implement a grand bargain between big business, big government, and labor. The feds would grant anti-trust exemptions to industries that implemented responsible production codes designed to benefit workers as well as consumers. The hope was that this would stabilize the economy in the face of the emergency gripping the nation.

It was a failure. First, it did little to nothing for unions, in large part because the labor provisions were ambiguously written, and businesses realized they could comply with the law by creating “company unions.” Beyond that, businesses also assessed that the National Recovery Agency (NRA), which was supposed to negotiate and enforce the codes, was a paper tiger. Unable or unwilling to use the regulatory muscle of the national government, the NRA would utilize only moral suasion to implement the agreements – and after the sense of emergency had passed by 1934, that just wasn’t enough to get businesses to follow the codes.

Liberals were hurt when the Supreme Court struck down the NIRA in Schechter Poultry v. United States, but the reality is that the left was better off in the long run without it. The NIRA simply wasn’t working, and with it swept aside, FDR began pushing with vigor for his "Second New Deal," including the revolutionary National Labor Relations Act (NLRA), which stands in stark contrast to the NIRA. This new law did not create an agency tasked with creating reams upon reams of industrial production codes like the NIRA did, but instead it gave workers the right to join unions, which would bargain for better wages and working conditions through private contract negotiations. It was a political boon to the party; after 1935, unionization rates took off, and millions of newly unionized workers became loyal Democrats for years to come. If the NIRA had been left in place, this might never have happened, and worse for American liberalism, it would have had to defend its failed industrial policy in election after election. Swapping the NIRA for the NLRA helped the Democrats hold on to the white working class for the next 30 years.

The CLASS Act is one small way in which Obamacare resembles the NIRA: Both were badly designed pieces of legislation, promising to regulate vast swaths of the American economy but doomed to fall far short of their proponents lofty claims. The problem with the CLASS Act is that it was bound to cost the government tens of billions of dollars because of adverse selection, and it’s a testament to the disingenuousness of congressional Democrats that they wrote the law in such a way that the Congressional Budget Office had to label it a deficit reducer. There are other massive problems lurking in the fine print of the new health care law beyond the CLASS Act, problems that similarly transcend the liberal-conservative divide and suggest that Obamacare will simply be unworkable in practice. Most notably, the bill cuts too deeply into Medicare without reforming the way the program operates. This is why Richard Foster, the chief actuary of Medicare and Medicaid Services, has warned:

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