Tuesday, June 28, 2011

Negotiating with terrorists

"Terrorists" is probably too strong a word for the subject of this post, but what else do you call people who threaten to do something incredibly destructive if they do not get their way? I'm talking about the Republican leaders like Senator Mitch McConnell who are taking advantage of the fact that the government is at the limit of its borrowing capacity as a lever to try to get their way in ongoing budget negotiations. These leaders know that allowing the United States to default on its obligations would not only raise interest rates, which would cost all of us many billions of dollars, but would send such shock waves around the world that we would potentially cause another credit crisis and a severe global economic downturn. They know that this is a trigger they must never pull, yet they continue to link their agreement to extend the government's borrowing authority to concessions they are demanding in budget talks--in particular Republicans are trying to link Democrats to their plans to take Medicare apart, and are refusing to consider revenue increases as part of any deal.

How do you bargain with people who appear ready to engage in mutual assured destruction? This is an issue negotiators confront frequently, whenever one side seems eager to allow a strike or a war or a lawsuit to go forward when a more rational calculation of both parties' self-interest would counsel in favor of making a deal. Democrats will need to use all available techniques to avert default and make the best deal possible.

First, Democrats need to re-frame the debate. Democrats do not want to be perceived as advocates for borrowing more money, at a time when people are concerned about budget deficits, while Republicans are trying to rein in excessive government spending. Guess who wins that debate? Instead, Democrats need to talk even more about the importance of honoring the government's financial obligations. Today Senate Majority Leader Harry Reid put out a helpful statement that goes a long way toward re-framing the debate. In it, Reid talks about the "catastrophic" consequences of defaulting the nation's debts, and chastises the Republicans for being willing to risk default so as to preserve tax breaks and give-aways for the most privileged individuals and businesses. He also tries to make clear that the Republican plans call for borrowing as much as the Democrats. The only difference is that Republicans want to borrow to preserve tax breaks for the rich, while Democrats are willing to borrow to preserve Medicare and make investments in our future. Those Republicans who act unconcerned about the consequences of default need to be called out for that; the public also needs to be educated about the prospect of allowing a default.

Second, Democrats need to make the Republicans understand that they will suffer just as much from the failure to make a deal as Democrats would. Natural Republican constituencies such as business owners do not want to see their costs of borrowing increased. They do not want to see the economy tanked for Republican political gain. Refusing to raise the debt ceiling is not just a gun being held to the Democrats' heads. It is a gun Republicans are holding to their own heads as well.

Third, Democrats need to have a Plan B. In budget negotiations, as we've seen time after time in California, Republicans have more leverage because they are more willing to risk the consequences of a failure to make a  deal than the Democrats. They even perceive some political gain from holding the line. Not only do Republicans need to understand that there is some political risk to them from taking too hard a line on spending cuts (as they are finding out by seeing the harsh public reaction to their plans to re-structure Medicare), they also need to see that the Democrats might be able to withstand the risk of not making a deal. In the 1990's budget negotiations between Bill Clinton and Newt Gingrich, Republicans made the mistake of forcing a government shut-down when President Clinton would not agree to their budget demands. They found that Democrats not only withstood the consequences of a shut-down, but that the public for the most part blamed Republicans. In this year's budget negotiations, Republicans need to have some fear that the Treasury and Congressional Democrats have a plan for dealing with a failure to raise the debt limit, a plan that would not cause an immediate default, but might cause such delays in government payments to contractors, soldiers, federal employees, and senior citizens that it would cost the Republican side politically if it were allowed to happen. Nobody should want to put Plan B into effect, but anyone who has ever been in any kind of business negotiation knows that you can't get your best deal unless you show that at some point you are not afraid to walk away from the table.

(Cleavon Little in Blazing Saddles)

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