The Tortured Saga of America’s Least-Loved Policy Idea

Friedman’s bottom lines were many, articulated in books, articles, Newsweek columns, a 1980 PBS series called Free to Choose and more. Freedom is society’s watchword, he maintains, and economic freedom is the gateway to political freedom and general prosperity. Competition between economic freedom and equality in outcomes is zero sum, and the former must win. Preceding Reagan’s inaugural address by nine years, Friedman wrote in Newsweek in 1972 that “government is the problem, not the solution.” Taxes are bad, ditto for regulations, and both should always be reduced. Budget deficits are never an excuse to raise taxes. Unions interfere with economic freedom. Global free trade, governed by clear rules, is the boss, even when partners manipulate their own markets. Though monopolies are bad, government intervention is a cure worse than the disease—so free markets should prevail. An influential proposition in his September 1970 op-ed in the New York Times Magazine asserted that the only legitimate purpose of for-profit corporations is return on equity to shareholders. Obligations to workers, customers, communities, the environment? Just say no. Just stay within the boundaries of law, he cautioned.

In 1979, Margaret Thatcher in Great Britain and Deng Xiaoping in China each assumed power with the Hayek-Friedman doctrine as a key influence. In 1981, Ronald Reagan joined them, declaring in his inaugural address that “in the current crisis, government is not the solution, government is the problem.” A new era—political, cultural and economic—had dawned in America and around the world and Stuart Butler had arrived just in time.

Camping with the Heritage Foundation

In 1973, a rising generation of conservative thinkers and activists formed the Heritage Foundation, intended as a “think and do” tank, a conservative force to counter the influence of the imposing Brookings Institution, the think tank of the liberal establishment. Unlike conservative fellow travelers at the American Enterprise Institute and the Hoover Institution, Heritage founders wanted their experts and writers of reports, books and white papers to get in the face of members of Congress, offering free and timely advice, anytime, anywhere. They rejected only talking with conservative media, preferring relationships with anyone and everyone.

“Heritage was a bridge between the academic and the policy-making communities,” Butler remembers. “It was set up to combine the research functions of a Brookings with the activist approach of a [Ralph] Nader-type group.”

As a young, politically-oriented PhD, Butler fit Heritage’s profile well. And Heritage fit his. As an IRS 501(c)(3) tax exempt organization, Heritage responded to requests for consultations without endorsing legislation or candidates. Their experts circulated accessible research on key issues rapidly to get analyses to mostly Republican members of Congress before votes, not after. In the 1970s, this was unprecedented help for congressional conservatives who noticed Heritage, as did the media and a significant part of the public. Though heavily funded in its early years by deep pockets such as Joseph Coors, Richard Scaife and other wealthy conservatives, Heritage rapidly developed a sizable paying membership base.

In 1980, shortly before Reagan’s inauguration, Heritage produced a 1,100 page “Mandate for Leadership” blueprint for the incoming administration, with 2,000 actionable recommendations to help them to hit the ground running in disassembling the New Deal state. Butler was a contributor, and when the project was repeated for the start of Reagan’s second term in 1985, he was lead author. He made a name fashioning and refashioning ideas for ambitious conservatives. In the early 1980s, he developed a U.S. version of the “urban enterprise zone” concept that offered tax advantages to corporations locating in distressed inner cities, an idea he borrowed from England and sold to policy entrepreneurs including Rep. Jack Kemp (R-NY).

Later in the decade Butler advanced “privatization” of government services including public housing, education and transportation. Many government services should be privatized, he argued, to save money and improve quality. In his 1985 book, Privatizing Federal Spending: A Strategy to Eliminate the Deficit, he wrote: “I see privatization as a very powerful device to change the rules of the game. It allows us to accept that society has an obligation to provide certain services, but gets you out of the trap of saying that they must be provided by government.” During the Reagan administration, Butler made the National Journal’s list of the 150 non-government officials with the greatest influence on decisions in Washington.

The health insurance conundrum

When Butler arrived in the U.S. in 1979 as a permanent resident, he remembers being shocked to learn that he had to sign up for health insurance. In England, access to health care had been a right since 1947 thanks to its National Health Service—no premiums, cost sharing, enrollment, narrow networks or the like that bedevil American consumers. This experience made an impression. “I went to the Blue Cross office in D.C. to sign up,” he remembers. “They asked, ‘who’s your employer?’ I said: ‘What’s that got to do with anything? This is odd.’”

Joe Antos of the American Enterprise Institute sees the U.K. connection as important to the evolution of Butler’s thinking: “Though he was no big fan of the NHS and had lived under it, he could ask questions that average smart Americans wouldn’t think of.”

In 1982, Butler became director of Heritage’s Domestic Policy Studies, a job spanning multiple policy domains. For the first time, health policy was his responsibility, and he managed a team that included health specialists such as Ed Haislmaier, who had strong analytical skills, and Bob Moffit with wide connections.

In the second half of the 1980s, U.S. health policy involving universal health insurance went from sleepy to hyperactive. In 1987, activists led by Boston physicians Steffie Woolhandler and David Himmelstein started Physicians for a National Health Program that reinvigorated activism for a Canadian-style “single payer” health system. In Congress, the Pepper Commission chaired by Sen. Jay Rockefeller (D-WV) proposed national reform built on a mandate for most employers to provide health insurance for their workers. This approach gained traction with passage in 1988 of a universal health care law in Massachusetts, signed by Democratic Governor (and presidential candidate) Michael Dukakis, that included an aggressive employer mandate, a law never implemented and repealed by 1996.