Politics and the Workplace

Several people wondered why I chose a political example for my post about negotiating with madmen. After all, conventional wisdom is that politics shouldn't be mixed with work, right?

And I think that point is correct - if your version of politics is the kind of single-issue advocacy, "principle-and-the-rest-be-damned" or magical thinking that seems to characterize so much of our political discourse. Best to keep it to yourself to avoid coming off as a crank, or someone with some gaping holes in their ability to reason.

But if you are someone who thinks about politics and policy, there's nothing like hashing those ideas out with others at work. Some of the most enjoyable and challenging political discussions I've had have come up this way. Why? Because in the workplace, you're more likely to run across smart people who are approaching these problems from a different perspective (as opposed to solving the world's problems for the umpteenth time with your like-minded college friends).

What's more, as our public political discourse has become more polarized, it's important that people call out the insanity. So to be clear: I don't consider the question of whether the Treasury needs to raise more revenue to be a political one. Rather, it's a self-evident proposition. Revenues are running at a level of GDP (15%) we haven't seen in 60 years. This low level of revenue is supporting a much greater swath of services than existed in the 1950's. While it is an equally self-evident proposition that entitlement spending needs to be cut, there's simply no way our modern industrial democracy can function the way Americans expect it to on a budget of 15% GDP. The political questions include how much revenue needs to be raised (and in what ratio to cuts in spending), in what form (higher taxes for the wealthy, comprehensive tax reform, etc.), and what the ultimate GDP target should look like (history and economics suggest 18-21%).

The grown-ups in the room know this and are asking these questions. There's a lot of work to be done to figure out what the ratio of revenue to cuts should be. My view is that it should be about a 1-2 or 1-3 ratio, but others I respect have suggested we could go as high as a 1-6 ratio.

So it was disappointing to see that every GOP candidate, when asked at last week's debate if they would support raising revenues at a 1-10 ratio of cuts, said they would not. That's not reality. It's not governing like an adult. We need to have a real discussion about how to change our tax code, raise more revenue, and make some fundamental changes (and cuts) to entitlement programs.

And there's no reason to rule out the workplace in having that discussion.

Negotiating with Madmen

Very few deals are truly "take it or leave it." And those that are require order-takers, not deal negotiators.

But every now and then, your counterparty to a negotiation will take this nutty "my way or the highway" position. Either because they misperceive their leverage, figure there's no cost in asking for the moon, or are just plain bonkers, they'll refuse to engage in the process of compromise that lies at the heart of every successful deal.

This isn't usually a very effective negotiating tactic. Experienced people will simply take the "highway" option, pack up and walk from the negotiation. And if you didn't really mean to give the ultimatum, and have to go crawling back to get talks going again, well . . . it's pretty obvious what that does to your negotiating leverage.

In order to do so, you've got to have an alternative - another competing deal, or a willingness to simply let a bad deal go by.

And this is what bothered me so much about the "debt limit deal" worked out between the White House and Congress. Obama assumed he was dealing with responsible counterparties, when he reality he had loonies on the other side of the table. Now, maybe the GOP wasn't really ready to let the US slip into default, but they certainly gave the impression of that - and in economic matters, impressions of what a government is capable of doing matter, a lot.

The first "my way or the highway" ultimatum was the GOP insistence that no deal for deficit reduction would involve increasing revenues. This should have been met with a response along the lines of "look - if you guys aren't going to take the business of governing seriously, these negotiations are over. I'm just going to ignore the debt limit and get back to work."

Messaging like that would have sparked outrage on the right of course, but it's a valid position both from a policy perspective (the debt limit conflicts with laws authorizing expenditures) and a strategic one (forcing the Republicans to choose between negotiating in good faith and going to court to force the US into default). But most importantly, it would have clarified the issues and let us know whether a meaningful deal could really be had.

Obama may have calculated that the threat of default was enough to restrain the right, and he may been correct, to a point. The problem is, all he could wring out with that weak piece of leverage was a face-saving mess of a deal that does little to address what's wrong with our economy. And we got it for the cost of undermining confidence in the United States.

It's an object lesson in the merits of sharpening the edges of a deal early on. But to do so, you've got to be willing to walk when the other side starts talking crazy.