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When Only a Crisis Brings Reforms

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By Fareed Zakaria
Monday, August 17, 2009

We've seen in recent weeks the twin personalities of the U.S. government. One is impressive, the other deeply worrying. First, the good news: We have increasing evidence that Washington's response to the global financial collapse was effective. Last fall, the financial markets seized up, credit froze and the economy went into a nosedive. Almost every metric by which we judge the economy moved into its darkest territory since the 1930s. And this happened at the worst possible time. A lame-duck U.S. president faced an opposition party in charge of both houses of Congress. It was a recipe for paralysis, bickering and inaction.

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In fact, the administration and Congress collaborated fast and well, and within two weeks Congress appropriated a staggering $700 billion to rescue the financial system. As the Bush administration left office, it worked closely with the incoming Obama team, which continued the basic framework of the rescue, modifying some aspects of the Bush programs and adding others. Both groups worked carefully with the Federal Reserve, the lead player in this drama, which acted aggressively and creatively. Democrats such as Barney Frank supported the Bush administration. George W. Bush put aside his ideological blinders and massively intervened in the economy.

As with any successful policy, it is now easy to say that action was unnecessary or overdone. At the time, of course, the dominant criticism was that the rescue effort was too weak -- the banks needed to be nationalized! -- and the fiscal stimulus too small. As with all emergencies, one can always suggest, in retrospect, that more sophisticated strategies could have been taken. The measures that were adopted may lead to other problems over time, such as inflation. But faced with the distinct possibility of an economic depression, Congress, the administration and the Fed worked together and brought stability to the system. In a crisis, they responded. Why? Precisely because it was a crisis.

There is something about America -- the system, the government, the people -- that allows us to react to a crisis with astonishing speed. Think of Pearl Harbor, or even Sept. 11. Whatever one may think of the Bush administration's later strategy, in the weeks after 9/11 both parties came together and crafted important policies -- getting international cooperation in making counterterrorism a top priority, improving safety on airplanes and in airports, tracking terrorists and their money, chasing al-Qaeda. These actions have helped to keep terrorists on the run and continue to make it difficult to plan and execute spectacular attacks.

Now, to see the weakness of the American system, consider the past two weeks and the debacle of the health-care debate. Clearly the U.S. health-care system is on an unsustainable path. If current trends continue -- and there is no indication that they won't -- health care will consume 40 percent of the national economy by 2050. The problem is that this is a slow and steady decline, producing no crisis. As a result, we seem incapable of grappling with it seriously.

It's not as if the problems aren't apparent to everyone, whatever your political persuasion. Costs are rising so fast that every day more than 10,000 Americans lose their insurance coverage. In 1993, 61 percent of small businesses provided health insurance for their employees. Now only 38 percent do. Larger firms face greater health-care costs. Yet, Americans do worse on almost every health measure than most advanced industrial countries, which spend about half as much on health care per person and have proportionately more elderly people.

Meanwhile, the political debate is unreal, with conservatives suggesting that President Obama is endorsing euthanasia and murder boards, and turning America into Russia. (I guess they haven't noticed that Russia isn't communist anymore.) The lack of serious discussion is tragic, because the Democrats' proposals leave much to be desired. They include only a few, vague measures to rein in costs, and the chief one -- a medical board -- assumes (improbably) that Congress will cede massive powers to five unelected people who would have the power to deny people treatments and drugs. The likely scenario is that expanded coverage and new benefits will be enacted, while the cuts and curbs will be pushed off to be tackled another day.

Health care is the nation's most serious long-term problem. Social Security, government pension liabilities, state-government deficits and energy dependence all pose the same issue. Each of these problems is getting worse by the day, yet the political system seems unable to take them on and make major reforms. On these critical issues, America is caught in a downward spiral. It makes you wish for a crisis.

Fareed Zakaria is editor of Newsweek International and the author of "The Post-American World." His e-mail address is comments@fareedzakaria.com.


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