The principal issue then was whether the federal government should
enter the public power business by investing taxpayers’ money to build
the Tennessee Valley Authority and to harness the Columbia and other
rivers for electrical energy, or whether the sites should be transferred to the
private sector. A second issue was who should build transmission lines
and set wholesale prices when the Federal government built dams.
The answer to the second question was first enunciated on the Senate
floor in the fight over the Wilson Dam in 1920 by Senator John Sharp
Williams of Tennessee. He said, “The government should have somewhere a
producer of these things that should furnish a productive element to
stop and check private profiteering.” Thus was born the yardstick
federal policy which later found its way into TVA legislation through
the efforts of Nebraska’s Senator George Norris. In a 1932 campaign
speech in Portland, Oregon, Franklin Roosevelt referred to his TVA and
other regional proposals as “yardsticks to prevent extortion against
Roosevelt’s statement enunciated America’s public power agenda, which
through the years has saved the federal government and electrical
consumers hundreds of billions of today’s dollars. This public
investment provided the electrical energy to build the bombers and the
atomic bomb and was a critical factor in winning World War II.
At the time of the Yardstick Public Power legislation of the 1930’s,
most of the farms and homes in rural America were without electrical
power. Only in the cities could private power companies make a profit
selling electrical energy. With the launching of the New Deal yardstick
pricing, together with publicly owned electrical cooperatives and
public utility districts, rural America was electrified and private
utilities ended up serving a large majority of rural consumers.
Because we adopted yardstick pricing back in the 30’s, today America
possesses a healthy and balanced mix of private, public, and
cooperative electrical systems.
The public power analogy might be a useful device in combating the
brutal campaign against a federal public health insurance option.
History is repeating itself. We see the same epithets of socialism,
unfair competition, and government interference with private enterprise.
Both America’s constitutional system of government and our free
enterprise economic system are built upon the fundamental notion of
balancing power between institutions. It is only when there is an
imbalance of power within one of the two systems or the share of power
between them that we fail . Recent disasters created by imbalance,
including Enron and California energy manipulation and the collapse of
the American banking system, wiping out our citizens’ retirement
accounts, are painful examples.
Most importantly and perhaps most painful for great numbers of our
citizens today, America trails all developed countries by many years in
fashioning an effective national health services delivery system .
There is no industry that has a more shared and complex mix of
nonprofit, government, and private for-profit delivery systems. Yet we
have a system that is neither cost-effective nor meets the needs of our
citizens, whether insured or not. It is a system that is out of balance.
It desperately needs an effective yardstick.
The imbalance in our system began in 1975 when the Supreme Court gave
the green light to commercialization of medicine by removing medicine
from protection of the antitrust laws. The imbalance was greatly
exacerbated in 1980, when the American Medical Association changed its
ethical guidelines to declare that medicine was no longer a
professional service but both a business and a profession. The other
factor of great influence that has led to imbalance is the dominance of
investor-owned private insurance companies born from the establishment
of employer-based health insurance systems.
Thus began the corporatizing and domination of Wall Street in
organizing and pricing for-profit medical services. Rather than a
system organized to deliver cost-effective medical services to
patients, today we have a system designed for profit .
Despite the roles of federal Medicare, state Medicaid, members of
Congress health care programs, federal delivery systems such as the
Veterans Administration, and nonprofit group health cooperative
associations, the balance of power in our national health care delivery
system is now largely in the hands of Wall Street-driven for-profit
enterprises. Every medical procedure from putting on surgical gloves to
sending bills to the insurance company has become a profit center. And
the pricing for all the services are set largely in an oligarchical
framework of administered pricing. There is absolutely no competitive
pricing. Have you or anyone you know ever negotiated the price of
So history repeats itself. The Democratic party is charged with
formulating another national yardstick policy that will have enormous
consequences for the health and welfare of our citizens in generations
to come. Like Franklin Roosevelt, President Obama is simply leading the
nation to create sufficient power in the public sector to balance
against the private sector and the Wall Street pricing effect. Or in
President Roosevelt’s words, “a yardstick to prevent extortion against
the public.” And, as President Obama stated, “to keep insurance
The failure of Congress to build in an effective market yardstick for
pricing medical services would cost future generations trillions and
fail to deliver cost-effective medical care to all our citizens. No
amount of regulation will suffice. Only the market mechanism will
provide effective cost reduction to pay for universal coverage.
Jack Churchill is a political economist living in Agness, Oregon.
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