Monday, December 3, 2012

Understanding leverage

The meme-of-the-day on the left seems to be that President Obama has finally learned how to negotiate with Republicans. Here is Steve Benen on that one.
The New York Times reports today that the president is "scarred by failed negotiations in his first term and emboldened by a clear if close election to a second, has emerged as a different kind of negotiator." Throughout his first term, Obama "repeatedly offered what he considered compromises on stimulus spending, health care and deficit reduction to Republicans, who either rejected them as inadequate or pocketed them and insisted on more."

So, this time, the president presented a plan that met his own standards, and challenged GOP leaders to do the same. 
Most readers here know that I find Benen to be one of the best writers on the internet. But on this one, I have to disagree.

To understand President Obama's positioning on these negotiations, you have to understand the concept of leverage. Here's Joe Markowitz - a professional negotiator - explaining it.
This is basic Negotiation 101. If you MUST make a deal, you are going to have to compromise, because the other side knows you must make a deal. And therefore you probably won't get your best deal, but you will get something accomplished. On the other hand, if you can afford to walk away from a deal, you can also afford to be uncompromising, because you win either way. Either you make the deal you want, or you blame the other side for the failure to conclude the negotiation.
In other words, the most powerful leverage in negotiations is the ability to WALK AWAY from a deal.

Most of President Obama's accomplishments during his first term were deals the Republicans decided they could walk away from (more than that, their goal was to obstruct any/everything he tried) but he couldn't if he wanted to actually get something done...stimulus, health care reform, Wall Street reform, etc. And so the President needed to compromise (most often with Democrats) to get enough votes to pass those things.

The beauty of the debt ceiling deal is that it led to these negotiations that the President is willing to walk away from but the Republicans cannot - and that gives him the leverage. Here's Jonathan Chait  explaining what walking away would look like.
On the morning of November 7, a reelected President Obama will do … nothing. For the next 53 days, nothing. And then, on January 1, 2013, we will all awake to a different, substantially more liberal country. The Bush tax cuts will have disappeared, restoring Clinton-era tax rates and flooding government coffers with revenue to fund its current operations for years to come. The military will be facing dire budget cuts that shake the military-industrial complex to its core. It will be a real-world approximation of the old liberal bumper-sticker fantasy in which schools have all the money they require and the Pentagon needs to hold a bake sale.

All this can come to pass because, while Obama has spent the last two years surrendering short-term policy concessions, he has been quietly hoarding a fortune in the equivalent of a political trust fund that comes due on the first of the year. At that point, he will reside in a political world he finds at most mildly uncomfortable and the Republicans consider a hellish dystopia.
Many are suggesting that it was Obama's re-election that gave him the leverage. But I'd call that momentum rather than leverage. The Republicans have shown over and over again that they are willing to take legislative positions that go against what the majority of people support. Republicans in the House who are elected from solid red districts really don't have to worry about that. They're much more concerned about the leverage of a tea party primary.

And so what I would argue is that the change we see in the President's negotiating style is a reflection his awareness that on this one - he has the leverage. He and the Democrats created that via their superior negotiating on the debt ceiling deal.

To miss that as the important difference here is to not only miss the long game, it also misses that there are likely to be times in the future when the President reverts to his previous style because he lacks the leverage. For example, right now Speaker Boehner is promising to use the debt ceiling as a hostage in perpetuity.
Congress is never going to give up this power. I've made it clear to the president that every time we get to the debt limit, we need cuts and reforms that are greater than the increase in the debt limit. It's the only way to leverage the political process to produce more change than what it would if left alone.
If Boehner actually continues to play that hand, President Obama will be forced to compromise unless and until we give him a majority in the House. He cannot walk away from negotiations that would send the world economy into collapse. Like it or not - that's Boehner's leverage.


  1. Thanks for the mention, Smartypants! My guess is that the House Republicans will be reluctant to push the debt ceiling card too much, remembering what a disaster it was when they held up on raising the debt ceiling the last time. Nobody wants the US credit rating downgraded again, or the stock market crashing. More likely they will just send us over the fiscal cliff and try to blame the Democrats for raising everybody's taxes and cutting defense spending, and then we will get some kind of deal next year. But that is risky for the Republicans also, because they really don't want those defense cuts and tax increases to kick in. Which means they might actually let Nancy Pelosi bring the Senate bill extending the Bush tax cuts for the 98% to the floor, and find enough Republicans to vote for it, in exchange for stopping the defense cuts. That's what the Republicans would do if they were smart. They would take the deal. In the meantime they will whine and squawk a lot.

    1. Joe,

      Its my pleasure to link to such great analysis.

      I'm much better at understanding what's going on than I am in predicting the end result - especially where Republicans are concerned ;-)

  2. Except that Wall Street wants the President to win this one because they want the debt ceiling taken out of the hands of Congress. If they have any leverage at all with the GOP, they might just spend it on this one to force them to give up the debt ceiling power.


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