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The Health Bill Should Terrify Wall Street

Not because of what the bill says, but because of how Republicans are going about passing it.

By Jonathan Bernstein (Bloomberg View)

No matter which way the Republican health care bill goes, there's one group that should be seriously freaking out right now: Wall Street. Not because of what the bill says, but because of how Republicans are going about passing it.

For organized interest groups, even those usually happy with Republicans -- whether it's banking or small business or manufacturing -- Republicans have raised red flag after red flag during the health care push. They wrote both the House and Senate versions of the bill in their leadership offices. In the House, the bill received only very brief pro forma committee votes; in the Senate, it didn't even get that. And they didn't hold a series of hearings leading up to the bill, either in this Congress or by Republican-majority chambers in previous Congresses. 

Now, it's not unusual for leaders to extensively rewrite a final version of a bill and it's not unprecedented for a bill to go straight from passing one house of Congress to the floor of the other (Obamacare, for example, was rewritten in then-Majority Leader Harry Reid's office). But a major bill has never completely skipped over serious consideration by the committees.

That matters because the committee process is how organized groups with a recognized stake in the outcome in some policy area -- what scholars sometimes call "issue networks" -- get a chance to make a case for what they care about. So for example the House Financial Services Committee held a hearing on the Volcker Rule this spring prior to concluding work on a reform bill, and invited both opponents and defenders of that measure. That hardly guarantees wins for all groups, nor does it guarantee that every possible group gets included in the process. But for those groups that are included, the process is a solid safeguard against their interests being totally steamrolled in the offices of the House speaker or Senate majority leader.  

Of course, even if drafting the bill is a closed process, party leaders can still listen to whatever groups they want. On financial regulation, Republicans right now would likely listen to the concerns of Wall Street whether or not the committee process was used. But the precedent being set on health care could prove devastating in the future. If outside groups can be shut out here, they can be shut out anywhere, and that will tend to happen more often if it succeeds as a political strategy.

There's also very little evidence that the Republican health care plan will work in the real world as described, and in fact not very much evidence that Republicans care. Their overwhelming goal, as far as anyone can tell, is to pass something that they can call "repealing and replacing" Obamacare; the goal of a smoothly-functioning health care system just doesn't seem to matter very much to them.

That's not snark. The formulation of public policy in Congress depends on the expertise found in the committees, not in leadership offices. Chairs spend years developing deep familiarity with policy areas, and hire staff with detailed knowledge. Leadership involvement has almost always been about rounding up the votes to get something over the finish line -- in which the finish line is defined as a White House signing ceremony, not successful implementation of the new law.

The U.S. policy-making process is always going to be unusually susceptible to what the political scientist Steven Teles calls "klugeocracy," in which policy tends to be the product of a series of compromises and improvisations, rather than a coherent, well-thought-out whole. The U.S. has always been far less reliant on bureaucracy and the neutral expertise it rewards, and more reliant on constantly renegotiated compromises by politicians. But at least in the 1970s and 1980s politicians in Congress tried to build up their resources add expertise to the system; the House in particular has sought to eliminate it since Newt Gingrich's speakership began in 1995. 

And there's another reason the health-care bill should frighten organized groups in general, and Wall Street in particular. Republicans have refused to drop their bill despite how poorly it polls; they've even refused to modify it in order to make it more popular. That might at first seem like good news for financial interests, since it suggests that the party might stand up to populist, anti-bank impulses. But what it really suggests is that parties -- at least the Republican Party now, and perhaps Democrats in the future -- may have either chosen to ignore the normal warning signs that would convince lawmakers to hit the brakes, or are so trapped within partisan information flows that they've become incapable of seeing those warning signs. 

If groups normally able to produce alerts for Congress are no longer being heard, that's another problem for Wall Street. It has always been able to say that a proposal wouldn't just punish its targets, but would also harm the economy, and get taken seriously by both parties. Not necessarily believed, of course, but listened to. They may not be able to count on that in the future. 

So far, health care is an outlier. The Republican financial regulation bill has had more of a regular committee process, although still far less so than would have been the case 30 or 40 years ago. But if the health care bill passes (and especially if it becomes law and isn't thought to be a disaster), both parties may learn from the experience that shortcuts, end runs, and secrecy are the best path to legislative success. And no industry, no matter how well connected it has been in the regular political system up to this point, would be safe. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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