Negotiation in the News: The U.S. Debt Crisis

In the 1990's, the national debt of the United States was rapidly shrinking. However, the following two decades brought two wars, tax cuts, a meltdown in the housing industry, and a financial crisis. It became apparent that the national debt would surpass the debt ceiling of $14.3 trillion and the U.S. would begin defaulting on its obligations around August 2nd if the debt ceiling was not raised. (Coy; Balboni) The negotiations sought a balance between increasing the debt ceiling, increasing taxes, and decreasing government spending. Contentions existed based on who should bear the tax increases, where the spending cuts should come from, and by how much the debt ceiling should be raised. Various proposals were advocated by President Obama and House Speaker Boehner together, Joe Biden, House Majority Leader Cantor, and the Gang of Six, a group of 3 Republican and 3 Democratic senators (Shear). In the end, President Obama and the leaders of the House and Senate reached a deal that raised the debt ceiling and made upfront spending cuts of $1 trillion. (Riley) Despite an eventual resolution, the long and difficult negotiation process presents an interesting case study of the best and worst negotiation practices.

The debt ceiling dispute addressed the interests and needs of each of the following parties: each political party, with Democrats, Republicans, and the Tea Party receiving the most attention; individual representatives and senators from each party; President Obama; the federal government; and the American public. The parties that were actually involved in negotiating a resolution were President Obama, members of the House, and members of the Senate. The basic issue that the dispute was addressing was the creation of a long-term management plan to control the national debt, while meeting government obligations and ensuring the continuation of public programs. While this need was shared by all parties, the interests were a source of a conflict. Each politician has an interest in maintaining an approval rating in order to be reelected. Similarly, each political party wants to maintain approval in order to be the stronger party. The federal government's interest is in continuing efficient operations and the American public's interest is in maintaining a lower tax rate and continuing public programs.

Strategies utilized in the negotiation focused on each party's interest. For example, the Republicans banded together to refuse to vote on an increase of the debt ceiling without first establishing spending cuts. Some individuals employed tactics to criticize the others that were involved in the negotiation, including Senator Schumer from New York implying that House Speaker Boehner needed to grow up and Boehner saying the same of Obama. (Fahrenthold) Parties to the negotiation have walked out of talks, creating further delays. The August 2nd deadline was used as a source of pressure to force some sort of deal. Added pressure came with the reduction of the United States' credit rating and the stock market plunge, demonstrating clear evidence of what would ensue if actions were not quickly taken. In the end, Obama's strategy involved reaching out to both parties, not just his own. Speaking to the moderates of each party against the backdrop of the economic decline, a deal was forged without the approval of the more conservative and more liberal members of the House and Senate. (Riley)

These debt ceiling talks ignored many proven negotiation strategies by not using principled negotiation (Fisher and Ury xvii-xix). At the root of the problem was that they were bargaining based on their political positions, rather than the common interest that was at stake if a solution could not be reached. For example, a deal spearheaded by Vice President Biden had $2 trillion in cuts and several hundred billion in new revenues, but House Majority Leader Cantor walked away citing that his chamber's Republicans would not support it (Shear) This demonstrates how the political party's support was a factor in evaluating a plan, rather than the merits of the plan for solving the problem at hand. In the end, members from both parties had to come together for a resolution, but the delays in doing so were costly to the American economy and, ironically, the politicians' approval ratings.

This negotiation did not separate the problem from personal feelings and opinions about people involved in the talks, which is essential to a principled negotiation (Fisher and Ury 17-19). Personal attacks on individuals, such as those by and against House Speaker Boehner, are evidence of the commingling of opinions with the issue the negotiation addressed. Once again, in the end, there was a resolution that utilized strategies advocated by people from different political parties. However, this resolution was postponed and may have alienated some supporters because of the personal criticisms and insults that were employed as tactics during the talks. Despite one's feelings about another party to the negotiation, expressing an opinion about his or her maturity will only hinder the continuation and productivity of talks.

The negotiations also failed to come up with options for mutual gain (Fisher and Ury 56-80). This issue was a result of focusing on positions. The individuals involved in the negotiation seemed to be seeking a winner and a loser, rather than just finding a smart, feasible solution to the national debt problem. For example, Democrats were hung up on the issue of increasing taxes for hedge fund managers, oil companies, and wealthy jet owners, (Shear) even though there may have been other ways of reaching the solution needed. By thinking in terms of win and lose, the parties in a negotiation may overlook weaknesses in their own suggestions and how utilizing the ideas of others may strengthen the implementation of their strategies and complement their weaknesses. This type of perspective on the negotiation also considers subjective criteria, rather than objective criteria in conducting the negotiation (Fisher and Ury 81-84). Without objective criteria, it is harder to keep parties to the negotiation on the same page about what the best options are and how successful the negotiation has been.

If the debt ceiling talks could be done over, there are a number of actions that could have yielded better results. First, the negotiations should have been framed from the beginning in terms of the problem, with objective criteria to evaluate the solution. For example, the present value of each proposed spending cut or tax hike. These could be based on economic research and evidence to demonstrate their validity. Neutral or bipartisan researchers should be used in evaluating the relevant criteria. Second, moderators during the negotiation should have been used to ensure "fair play." These talks did not separate the issue from the people involved. The personal attacks only hindered progress and a moderator could have curbed some of the insults and facilitated the negotiations moving forward. Finally, all suggestions should be considered individually and together. The parties should have considered ways to hybridize suggestions, inventing new ways of addressing the problem.

In the future, this could be better handled by implementing the following proposals:

(1) Employ a professional negotiator with experience working in highly divided groups with a large number of individuals;

(2) Use a neutral committee to evaluate each suggestion on the basis of objective, economic criteria;

(3) Use a neutral committee to consider ways in which the existing suggestions may work together in a combined plan;

(4) Use a neutral committee to research solutions that have not yet been considered. The current national debt crisis appears to have a resolution. The long-term success of that resolution has yet to be determined. However, it is evident that difficult negotiations in Congress are far from ideal. Future problems may be solved more efficiently and effectively by implementing a principled negotiation.

References

Balboni, Philip S. "US Debt Crisis: What's Wrong with America?" Global Post.

Coy, Peter. "Why the Debt Crisis is Even Worse Than You Think." Bloomberg Businessweek.

Fahrenthold, David. A. "Battle over National Debt Ceiling has Negotiation Experts Shaking their Heads." Washington Post.

Fisher, Roger & Ury, James. Getting to Yes: Negotiation Agreement Without Giving In. New York: Penguin. Print.

Riley, Charles. "Obama: We have a Deal." CNN Money Web. Shear, Michael D. "A Debt Ceiling Cheat Sheet: 8 Possible Plans." The New York Times.