The Debt Ceiling Debate: Lessons in How Not to Negotiate

Setting ideologies aside (if you are able), each side in Washington has made some serious tactical blunders in the debt ceiling debate. If we can divorce our passions and anxieties from this situation, we all may be able to learn a thing or two on how to, or how not to, go about engaging and interacting with the person or team on the other side of the table.

Obama, on his part, has been intent on maintaining his professorial "Most Reasonable Man in the Room" appearance. While that may play well for the history books someday, it does not win this battle, nor does it necessarily give him an edge in the upcoming elections. Remember Michael Dukakis? Of course you don't remember George Bush Sr.'s rival in the 1988 presidential elections, because he ran on a theme of "competence" (in contrast to Reagan's apparent bluster), which promptly and swiftly lost him the election.

The Republicans, however, may have overplayed their hand in the current debate. The Tea Party caucus, in wanting everything they're demanding, and in large part driven by the pledges they signed for Grover Norquist's organization Americans for Tax Reform, promising not to raise taxes under any circumstances, have taken an absolutist ideological gamble that risking a debt ceiling default is not going to be perceived by their electorate as more damaging than going back on their no-taxes pledge. They well remember how Bush the First, after beating Dukakis, was hammered by Clinton the next time around, by going back on his famous "Read my lips: No new taxes" pledge.

But the problem is, the debate has raged so long that the credit markets may very well reduce the U.S.'s sterling credit rating anyway, especially if any deal that comes out of this is a temporary six-month fix.

This whole scenario reminds me of a scene in the movie "Mulholland Falls" (I love it, but it got a rather poor rating on IMDB). In the film, Nick Nolte is a cop on "The Hat Squad" in 1940s Los Angeles. He uncovers a conspiracy surrounding atomic bomb testing. A girl who was dating the chief scientist of the conspiracy is killed because she knew too much. It just so happens that Nolte, who was married, had had an affair with her too, and the bad guys got a film of it. Before she died, she passed a film with incriminating evidence to Nolte. Treat Williams plays an Oliver North-type military character who will do anything to bury the conspiracy. Williams wants to swap the affair film with Nolte for the conspiracy proof film. To induce Nolte to be willing to bargain, he sent a copy of the affair film to Nolte's house, where his wife (Melanie Griffith) watched it, freaked out, and left Nolte.

Through a series of intrigues, Williams gets Nolte on a cargo plane over the Nevada desert where the testing took place. This conversation then takes place:

Williams: "You gave us the wrong film, Lieutenant.... Everything you have for everything we have; that was the understanding."

Nolte: "Well you see there's a problem. You sent the film to my house."

Williams: "That was to get your attention. No copies were sent to the press or the Los Angeles Police Department."

Nolte: "You see, the problem is, you sent the film to my house, addressed to my wife. She watched it. I don't care who sees it now. You see what I mean? I don't have anything to lose."

A fight ensues, and Nolte gets the better of Williams. Nolte gets Williams by the open door of the plane, and just before he throws him out, there is a last interchange:

Williams: "You're pathetic, Hoover! I did my job! She died because she was in the way!"

Nolte (screaming): "She died for nothing, you son of a b***h!" Nolte then tosses Williams out of the plane.

By way of analogy, we can imagine that Obama is Nolte, the Tea Party Caucus is Williams, the wife who left Nolte is the U.S.'s credit rating, and the dead girl is the dead trust and respect of the American people for their elected representatives.

If the U.S.'s credit rating gets downgraded anyway, Obama has nothing left to lose. He has already declared that "This may bring my presidency down, but I will not yield on this," meaning approving a short-term debt ceiling lift. None of the proposed plans can pass both houses, and definitely not the President's desk. More than likely, Monday will see a "clean bill" authorizing the debt ceiling increase, and the Tea Party will ultimately have acheived nothing.

The Tea Party is going to its (metaphorical) death believing it has done the right thing; I strongly believe all incumbents will be punished for this in 2012, which does not bode well for the Republicans in the House.

But Obama is severely damaged as well (Nolte lost his wife, his job, the girl he loved, and all his partners in the battle with Williams). It remains to be seen if he can rescue his presidency from this debacle. My guess is no, unless the Tea Party, not realizing the irreparable damage it has already caused itself, continues in its intransigency for the rest of this congressional term and practically begs the American voters to "kill" it.

So, what is the negotiating lesson to be learned here? Primarily, that playing a zero-sum, winner-take-all game can often inflict damage on both parties to such an extreme that both lose, as well as those for whom they were negotiating. The end result is a cheaper, meaner situation that nobody is happy with. Building trust, respect, and a multiple-win scenario is always preferable, especially if you have to deal with those parties again in the future. Remember what Grandma always told you: "You can catch more flies with honey than with vinegar." Think about this next time you find yourself across the table from suppliers, or anybody from whom you want something.

There are many more lessons to be learned here, but I leave them as exercises for the class to work out on its own.