Rahm Emanuel's Crisis Breeds Health-Care Trouble

July 21 (Bloomberg) — Rash actions lead to reckless policies. That was a big takeaway of the economic crisis.

Even with Washington's enormous, temporary home-purchase tax credit dangling before their noses, and even with low prices, families are dawdling instead of snapping up homes.

The same cannot be said for Washington. On Capitol Hill and in the White House, action can't come fast enough. Lawmakers are pitching legislation with all the urgency of brokers hawking condos in West Palm Beach.

On health care, President Barack Obama made it clear he wants a deal in the next two weeks, before Congress's August recess.

Washington is so desperate to win over its clientele, it deploys conflicting arguments. Over the weekend, Health and Human Services Secretary Kathleen Sebelius stressed recession when she argued for health-care legislation. Health-care reform, she said, "may be the single most important issue to get our economy back on track." Presidential adviser Lawrence Summers, by contrast, is so bent on talking recovery that he cited a reduction in Google searches for "economic depression" as good news.

Why the difference in pace? The obvious reasons are political. Rahm Emanuel set the tone for the Obama era when, just after the election, he made his famous statement that a crisis should never go to waste. His underlying assumption might be called the Emanuel Postulate: It's easier to win electoral support for so-called progressive reforms in a crisis.

Advantage in Numbers

Democrats have achieved (at least on paper) filibuster-proof control of the nation's politics. Naturally enough they want to promulgate their boldest reform before that advantage erodes.

But the real reason why the rest of the country is slower than the politicians is substantive. The projects that lawmakers are proposing share disturbing attributes with the programs that generated our economic crisis in the first place, especially when it comes to timing. The bigger pieces of legislation are more likely to facilitate bankruptcy of the U.S. economy than prevent it.

Consider the housing trouble and the role that timing played in it.

For a long period, lawmakers and Wall Street argued that Fannie Mae and Freddie Mac widened access to homeownership, and at least for a while, they did. Yet as things are turning out, these government-sponsored enterprises are likely to curtail access over the long haul. That's because the financial crisis these institutions generated is killing the jobs that made families confident enough to buy.

Long-Term Health

The health-care legislation represents the same sort of timing trap.

The basic promise of the Democratic project is comprehensive access, meaning more Americans will get health care than before. This is likely to be true, at least for a while. The tens of millions who are uninsured may become insured. But over the longer run, the laws of supply and demand will do their work: true health care may not be available in many instances, even when nominal insurance is. Or the quality of the care will go down as doctors cram in patients.

Americans sense this. That is why, for example, they are twittering about the administration's creepy "Advance Care Planning Consultation" proposal, which would require that Social Security recipients sit down with a counselor to discuss ways to die more economically.

Tax Burden

The same treachery of timing is evident in proposed tax increases, especially the penalty tax on businesses that choose not to provide health care. Americans understand that those tax increases are likely, in the very short term, to generate some cash for Washington, and that some of that cash will widen government services for some, at least some of the time. But they also suspect that the increases will hurt growth, which is why a number of Democrats are opposing the idea of the health-insurance penalty on smaller business.

Voters are no longer at the beginning of their learning curve. They look at health care and they see a no-paper mortgage: something too good to be true. That's what their lawmakers will hear when they go back home for the August barbeques.

The Emanuel Postulate may have it precisely wrong. Instead of facilitating reform, the crisis can prevent it. Americans may be voting for Democrats, but they are thinking more like Republicans now.

Wrong Year

Though they won't say it, Democratic lawmakers may be wishing this was 2003, the year in which President George W. Bush bolstered his re-election chances by enacting a new prescription-drug program for seniors through Medicare.

Back then, enough lawmakers managed to convince themselves that an unaffordable measure was affordable. The self-deception rested on the general sense that more seemed possible. The jobless recovery was a recovery nonetheless, and heck, homeownership was creeping up toward a dizzying 70 percent.

We never got there. And the U.S. now is a different country, one that knows that not everything is possible, no matter how fast you move.

(Amity Shlaes, author of "The Forgotten Man: A New History of the Great Depression" is a Bloomberg News columnist. The opinions expressed are her own.)

© Copyright 2009 Bloomberg

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