President Obama doesn't bluff (updated)

As I suggested the other day, in order to understand the state of negotiations over spending and taxes these days, you have to follow the leverage. These two paragraphs from a NYT article pretty well summarize the Republican positioning.

Given the difficulty of compromise, a fallback may emerge as a top option. Republican leaders could take up legislation already passed by the Senate to extend tax cuts on income under $250,000, attach a deferral or cancellation of the automatic spending cuts, and give Mr. Obama nothing else, denying requests for increased infrastructure spending, help for homeowners to refinance their mortgages, and extensions of the payroll tax cut and unemployment insurance.

Then Republicans would demand deep concessions on spending and changes to Medicare and Social Security as a price to raise the debt ceiling a few weeks later. 

In other words, when it comes to the Bush tax cuts, Republicans recognize that President Obama has the leverage (because he's willing to walk away and let them rise on everyone) and so they are ready to concede. But I doubt very much that Obama will be willing to include the elimination of the automatic spending cuts as part of that deal. Why should he? It simply strips him of future leverage. On that note, yesterday the White House told the Pentagon to start planning for those cuts. Yep, it was a little nudge to the other side, but its also good planning given the situation.

And so after conceding on the tax cuts, the Republicans want to shift all of these negotiations into an arena where they have all the leverage...another fight over the debt ceiling. They've calculated that President Obama won't be able to walk away from their threats to watch the U.S. default on its debt and so he'll be forced to compromise on cuts to Medicare and Social Security.

But yesterday the President had a message for them on that.

“The thinking is the Republicans will have more leverage because there will be another vote on the debt ceiling, and we will try to extract more concessions with a stronger hand on the debt ceiling,” Obama told members of the Business Roundtable. “That is a bad strategy for America, it’s a bad strategy for your businesses, and it is not a game that I will play.”

To be honest, I don't know what he has in mind about how to avoid that. Some people are suggesting that he's bluffing and is in the midst of a "stare-down" with Republicans about another attempt to hold the country hostage.

But what I know from watching this President for over 4 years is that he doesn't bluff and he doesn't tend to take on battles he can't win - not when it comes to foreign policy and certainly not when it comes to the state of the world economy. And so I'd suggest that he has a plan. And just as he set Romney up in that town hall debate, he's telling Boehner..."Please proceed, Speaker."

UPDATE: To read someone who has no idea about the concept of leverage in negotiations, take a look at this article by Noam Scheiber. Like many people he assumes that elections results are leverage. If you think that's the case, just imagine President Obama going to Speaker Boehner and saying, "I won the election, now give me what I want." If you think that would work, just imagine how you would have responded to that after Bush/Cheney won re-election. Yeah, not so much.

It's ironic that someone with so little insight into negotiations starts his column off with a patronizing nod to the President suggesting that he "is finally negotiating like someone who’s encountered a deck of cards once or twice in his life." That's highlighted by the fact that he goes on to say this:

There’s simply no way that, less than two years after Republicans very nearly forced the country to default, the House leadership is going to push things to the brink all over again.

It's always been interesting to me to watch these kinds of poutragers suggest that President Obama shouldn't be negotiating with the Republican hostage-takers because they are simply acting in bad faith and then turn around and assume some sort of good faith intention on their part.

Let's just say that I wouldn't be putting any money on Scheiber's odds in a card game.