Out of Control Policy Blog

How Obamacare Undermines Federalism: Part 2

Amity Shlaes has an excellent article in Businessweek dissecting the various ways Obamacare will undermine state experiments with health care reform. This is the classic example of the competitive benefits of "fiscal federalism": the idea that the states (and local governments) have incentives in a federalist system to compete and experiment with different policy approaches. At the end of the day, different solutions will work in different places because the context, needs, and political preferences are different. It's the opposite of the one-size fits all approach implicit in a unified, national system of health advocated by Obama and progressives.

As Shlaes notes:

It is that states can be laboratories where the country experiments to ascertain which mix of taxes, incentives and public administration works best when it comes to health care.

Obamacare threatens such experiments by superseding them. In doing so, the new federal program deprives the country not only of the experiments themselves but also of evidence that might cast doubt on the promises of the new legislation.

Mercatus Center economist and Reason magazine contributing editor Vernoique de Rugy has interesting insight and perspective on fiscal federalism and the consequences of its demise in a recent article for Reason magazine.

Samuel Staley is Research Fellow


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