Not exactly a recess, or even a “district work period— — more like a district angst period — this August was far more tumultuous and action-packed than most any I can remember. A core part, of course, was the intensity in districts and states all across the country over health care reform. But August also included the death of Sen. Edward Kennedy (D-Mass.), leaving a huge void in the policy sphere and in the life of Washington, D.C.

[IMGCAP(1)]Kennedy was truly larger than life in his personal magnetism and ebullience as well as his command of the legislative process and of his colleagues’ affection and admiration. His death has huge ripples in September, with Congress returning to an agenda that is daunting and wide-ranging enough for two years, much less the three months or so remaining in the session.

Of course, a major part of the impact of his absence is the vacuum Kennedy leaves as health care reform moves to its critical stages. Other Senators have power and expertise in health policy, but there is no other Kennedy. Imagine where we would be on the issue if Kennedy had been his usual presence over the past year — or even if he were back at half speed for the fall. But Kennedy’s demise also has potentially huge significance for financial regulatory reform.

It is highly likely that Sen. Chris Dodd (D-Conn.) will move to take the reins at the Health, Education, Labor and Pensions Committee — in part to continue the legacy of his dear friend Ted, but also because of Dodd’s own long-standing passion over the policy areas in the committee.

That would mean Sen. Tim Johnson (D-S.D.) chairing the Banking, Housing and Urban Affairs Committee — and that in turn means a different agenda and perspective from the top of the key panel, given South Dakota’s role as a banking center. The chairman is not all-powerful in these cases, but wielding the gavel does make a difference in timing, staffing and details. A chairman from South Dakota will simply have a different outlook and different priorities and bottom lines than a chairman from Connecticut.

The financial regulatory reform is an important priority for Congress, but it is still small potatoes politically and substantively compared to health care reform. This week is the beginning of a whole new stage, one where President Barack Obama moves his involvement to a different level, stepping in much more aggressively but still trying to strike a delicate balance to meet the very different needs of two very different legislative bodies.

It has always been true on this issue that the House and Senate, with different memberships and different rules, will have different centers of gravity. A public insurance option is not going to get enough support from Democrats in the Senate to make it viable; a reform plan without a public option is not going to get enough support from Democrats in the House to make it viable.

The president’s speech tonight will have to thread a needle, keeping his progressive forces just happy enough, while still leaving running room to get enough support in the Senate to get a bill through. The Senate bill is very likely to be structured by the White House negotiations with Sen. Olympia Snowe (R-Maine). It has already been affected by the White House move to accelerate the pace and have the president do a speech in front of a joint session — that move undoubtedly prodded Senate Finance Chairman Max Baucus (D-Mont.) to move to a different gear to get his own plan out before the speech. Elements of the Baucus plan might prove attractive enough to garner some additional Republican support and change the whole Senate dynamic.

Reform’s details, though, might be shaped by the political dynamics in Massachusetts to fill the Kennedy seat. Will a bill to change state law to allow an interim appointment pass both chambers and be signed by the governor expeditiously? Having the 100th Senator (and 60th Democrat) can make a huge difference even before the floor votes on the critical procedural and substantive motions and amendments. When every vote is precious, that extra one means more leverage at the margins in negotiations for Senate Democratic leaders — and it is at the margins where the real decisions are made.

Even with 60 Democrats, Snowe remains a key figure. Many Democrats (including some, like Arkansas Sen. Blanche Lincoln, facing potentially tough re-election bids) do not want to vote for a bill that is purely partisan. Even one Republican signing on makes the bill bipartisan. If the negotiations don’t work, a number of moderate and more conservative Senate Democrats will not vote for a reconciliation bill or even vote for cloture unless they believe that every effort was made to compromise with the other side.

Contrary to the overheated rhetoric of some Republican Senators and their allies, reconciliation is not the new nuclear option. It has been used frequently by both parties to further substantive goals, including health insurance portability, nursing home standards, expanded Medicaid eligibility, increases in the earned income tax credit, welfare reform, the State Children’s Health Insurance Program, major tax cuts and student aid reform.

But reconciliation is, or should be, the last resort. It is a clumsy way to legislate, with plenty of drawbacks. And at the same time, Moynihan’s Law remains resonant: Enacting major social change is best done with broad bipartisan leadership support. So a bill that can capture 65 or 70 votes in the Senate is better than one that can capture only 60; a bill that can get to 60 with at least one Republican is better than one enacted with 51 votes. This is true even if getting to 70 or getting to 60 means some dilution in the bill’s breadth and impact.

In the end, getting some kind of health care reform enacted into law will inevitably require serious compromise, leaving some major battles for another day. Health care reform will be a big test for liberal Democrats and their ability to govern. Will they be able to swallow hard and accept those compromises? If not — if reform fails because it is not pure enough or tough enough — they will face a bitter lesson next November.

The stakes could not be higher, substantively and politically, as we enter the fall stretch. And that makes the months ahead some of the most exciting ever for Congress watchers.

Norman Ornstein is a resident scholar at the American Enterprise Institute.