Why The Financial Reform Impasse Is Different From Health Care Gridlock

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At a superficial level, the impasse over financial reform looks an awful lot like the early days of the health care fight, with Republicans and Democrats meeting privately to reach an elusive, perhaps impossible compromise. And we all remember how that story ended. But peer closely and the two stories are different in so many ways, politically and philosophically, that it’s hard to imagine this turns into health care redux.

Perhaps the most important distinction is the politics. Republicans just don’t want to go down killing Wall Street reform legislation. That’s why they’ve softened their tone, and that’s why they say they’re confident they’ll ultimately be able to vote for a bill. No doubt they don’t mind a bit of delay–every day spent negotiating is another day the Senate doesn’t address climate change, immigration, the coming Supreme Court nomination and on and on. But they can’t keep up a weeks-long ruse that they’re negotiating in good faith, when in fact they aren’t, like they did on health care.“There’s a different political standing of this issue, probably, right?” Sen. Bob Corker (R-TN) told me last week. “By the time [health care] came to the floor, America had pretty well hardened itself in one direction or another.”

But almost as important is the policy. Broadly speaking, the Republicans say they’re with the Democrats in principle on the direction the regulatory reform bill is taking. They agree that large, failed financial firms should not be bailed out. They agree that derivatives should be regulated. They have accepted that reform will have to include some sort of new consumer protection agency, even if they don’t much care for federal bureaucracy, and many of them want to see the derivatives market face tighter regulation.

When you get down into the weeds, though, there are some real problems that cut to the heart of age-old differences between Republicans and Democrats. The leading negotiators on this legislation–Sens. Chris Dodd (D-CT) and Richard Shelby (R-AL)–have been notoriously tight-lipped about the substance of their talks. But we know a little bit about what’s causing them to drag on as long as they have. On consumer financial protection, Republicans want to make sure that any new agency isn’t too powerful–at least as they see it. They want to be sure that its rule-making authority can be checked by other regulators more easily than Democrats do. And at the same time, they want it to be able to pre-empt state regulations if and when states pass laws that exceed federal standards. Democrats disagree.

Compare that to health care, where the median Democrat and the median Republican were in different universes, ideologically, on the best way to address the country’s failing system. That made health care reform easier to demagogue and politicize, which is exactly what the GOP did.

That’s not to say the politics of financial reform couldn’t change, and ultimately overwhelm the policy. And it’s not to say that the differences are trivial–they are in many ways very fundamental. But health care 2.0? Not now, and probably not ever.