Obamacare, Kludgeocracy and New Federalism


In the midst of all the liberal panic about the failure of the Healthcare.gov website, the California version of Obamacare has been functioning efficiently.

In its first month of business, California’s insurance exchange enrolled more people than any other state-run exchange and more than the federal exchange serving 36 states, which has been paralyzed by technological failures.

The problems of the Affordable Care system point to the basic dichotomy inherent in a Federal system of governance. The more centralized control, the more complexity of systems needed to serve all of the states. An extraordinarily important essay from Professor Steven Teles of Johns Hopkins University entitled Kludgeocracy: The American Way of Policy, highlights the dilemma.

For any particular problem we have arrived at the most gerry-rigged, opaque and complicated response. From the mind-numbing complexity of the health care system (which has only gotten more complicated, if also more just, after the passage of Obamacare), our Byzantine system of funding higher education, and our bewildering federal-state system of governing everything from the welfare state to environmental regulation, America has chosen more indirect and incoherent policy mechanisms than any comparable country.

And while a system of pure federalism might lead to less complexity as the states were left to devise their own solutions to education or healthcare, that is not the system we currently have, as Teles points out.

While states and localities actually administer all of these programs, the federal government is deeply involved as a funder, regulator, standard-setter and evaluator. The consequence is the complicated “marble-cake federalism” structure that characterizes almost all domestic policy in the United States, and which makes clear lines of responsibility (as we have learned in the Katrina disaster and the BP oil spill) hard to establish.

The main point of Teles’ Kludgeocracy argument is that, as we have seen in both Obamacare and the NSA scandal, the private contractors and consultants who actually run things are a self perpetuating nightmare.

This army of consultants and contractors then became a lobby for even greater transfer of governmental functions — including, as Janine Weidel shows in Shadow Elite, such core roles as formulating policy knowledge needed for government out of the state and into the private sector, thus becomes nearly indispensable. And with their large, generally non-competitive profits, the kludge industry has significant resources to invest to ensure that government programs maintain their complexity, and hence the need to purchase their services.

Whereas the Healthcare.gov website was built by an army of competing vendors with no one in charge, the Covered California site was built by a single contractor, Accenture, with a reputation for complex IT execution. As Teles has suggested, this system that only makes lip service to federalism needs to be sacked, “In other words, whether it is education or health care, either give the problem to the federal government or give it to the states, but don’t give it to both.”

If indeed complexity is the single most important issue of our time, then progressives must reconsider their aversion to localism, born during the civil rights era. In the corporations we partner with at the USC Annenberg Innovation Lab, the notion of pushing power to the edges of the organization is seen as the secret to nimble, innovative firms. As Sam Palmisano said when he was CEO of IBM, “we must lower the center of gravity in the company.”

I have been writing about a new progressive federalism since 1997, observing how California created it’s own clean car laws that were far superior to the Federal regulations. In the areas of LGBT rights and gun control, it has been the progressive states that have led. In a world of kludgeocracy, and a gerrymandered House of Representatives, progressives should reconsider embracing a new federalism if they want to get anything done in the next decade.

Jonathan Taplin is a professor at the Annenberg School for Communication at the University of Southern California and the Director of the USC Annenberg Innovation Lab.

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