FDR understood the Power of the Public Option

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Roosevelt Understood the Power of a Public Option
December 1, 2009
NYT - EDITORIAL OBSERVER http://www.nytimes.com/2009/12/01/opinion/01Tue4.html
By ADAM COHEN
As governor of New York, Franklin D. Roosevelt crusaded for “public power,” government-owned electric plants. He was outraged by the high prices that monopolistic utility companies were charging and by their refusal to bring electricity to rural parts of the state, which, they said, could not be done economically. Public plants, Roosevelt said, could bring power to those who needed it and serve as a yardstick for measuring and keeping in check the prices charged by private power companies.
Many decades later, a major point of contention in the debate over health insurance reform is the so-called public option, a government-run program that would compete with private insurers. Critics have tried to paint it as a wild-eyed experiment, but it echoes F.D.R.’s battles for public power — in fact, the entire New Deal he later created. The argument Roosevelt made — that a government program could fix the flaws in a poorly functioning private market — applies with even more force in health care.
In the early 20th century, electricity was a hot political issue. It was expensive and did not reach many parts of the country. To Roosevelt, it was an important social justice issue. “When he talked about the benefits of cheap electricity he did not think in terms of kilowatts,” a top adviser said. “He thought in terms of the hired hand milking by electricity, the farm wife’s pump, stove, lights and sewing machine.”
When he ran for president in 1932, Roosevelt made public power a cornerstone of his campaign. In a speech in Portland, Ore., he explained that it could be a “birch rod in the cupboard,” which the citizenry could use to punish private power companies that were gouging the public or not providing good service. Critics accused Roosevelt of Bolshevism, but he was not deterred. Public power was no more radical, he said, than the public mail.
F.D.R. championed public power as president. During his first 100 days in office, he backed a bill to create the Tennessee Valley Authority, a federal authority that brought affordable electricity to an impoverished 40,000-square-mile stretch of the rural South.
Roosevelt had hoped to create other projects like the T.V.A., to establish yardstick pricing power on a national scale, but it proved to be a heavier logistical and political lift than he expected. In 1935, he brought government into the electricity business in another way. By executive order, he created the Rural Electrification Administration, which used federal money and local farm co-ops to lay electric lines in parts of the country that private companies had no interest in serving. The R.E.A. drove down electricity prices and helped bring lighting, sewing machines and radios to the 90 percent of rural Americans who were without them.
The whole New Deal was in a sense just a series of public options, some more optional than others, that offered government as an alternative to the often-flawed private market. The Farm Credit Administration and the Home Owners’ Loan Act used government funds to save farms and homes of Americans who would have been foreclosed on by private lenders. The Federal Deposit Insurance Corporation saved the private banking system by insuring savings accounts, which made the public willing to put money back in private banks. Social Security, all public and no option, rescued older Americans from living their final years in poverty.
A public option for health care could work much like the yardstick Roosevelt envisioned public power becoming. A publicly run health care program could compete with private insurance companies, which have a record of overcharging and underperforming.
Private health insurers and their allies in Congress argue that government is too inept to run a health insurance program and that it will be too costly. Actually, government already does that — for the military and in Medicare and Medicaid. As for cost, opponents of the public option may fear it would work too well — that to compete, private insurers would have to keep their prices down and the quality of their services up.
The private insurers and lawmakers who oppose the public option also claim it would be a radical break from how things have been done in this country. In reality, it follows directly from the New Deal tradition that created many of the mainstays of American society.