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Hit the Gas?

November 30, 2012

Hot Air has been nicely tracking the latest regressions on the Fiscal Cliff negotiations.  I’m watching Fox Business this morning, where they’re worrying about what might happen even as they note that the market isn’t reacting at all.  The market is either convinced that there are a few weeks left or it’s just hoping that any good news will bring it up high enough that the inevitable downfall will not suck so bad.

Before the election, I noted the following:

Sequestration and many of the tax hits from the Fiscal Cliff will happen.  Honestly, if the current administration stays in power, it’ll be to a weakened position in congress.  This administration is not known for reaching out for compromise.  President Obama has no need to make a deal with congress when he can instead belittle them in the press, and blame them for failure.  If the Obama administration is bounced, then the president will have even less reason to deal with congress, and he’ll leave it to Mr. Romney to fix.  I do think one or two minor fixes to tax issues will happen, but random fixes will only serve to cause bigger problems.

I still hope I’m wrong, but it’s pretty clear that there’s no felt need to compromise with a weak Repbulican base, since they’ve proven in the past that they’ll do near-term tasks with a “deadline” that they have to meet later.

We’re starting to hear the right side of the aisle say that we’re better off just letting the country go off the cliff and that will force the left side back to the table.  Charles Krauthammer is an example:

Republicans must stop acting like supplicants. If Obama so loves those Clinton rates, Republicans should say: Then go over the cliff and have them all.

And add: But if you want a Grand Bargain, then deal. If we give way on taxes, we want, in return, serious discretionary cuts, clearly spelled-out entitlement cuts, and real tax reform.

Otherwise, strap on your parachute, Mr. President. We’ll ride down together.

(Go read that whole opinion piece.  It’s pretty good, obviously.)

I’ve been taught that strategic negotiation involves one of a couple concepts:

  • Win-win: which means that everyone gets something.  Settling for Win-Don’t Lose is not helpful, even if the “win” side believes that.
  • Disagree and Commit: Someone has to lose, and it’s usually the side with less power, so make the call that you’ll enthusiastically support what you don’t like and work to make it happen.
  • Agree to deal with the consequences: Know that what’s about to happen is not good, and plan for the inevitable.

It looks like the last option is now on the table (where the Dems though the middle one was the way to go, obviously).  Of course, since I thought it was going to happen, the “plan for the inevitable” part has been pretty forward on my head these days.  Can we survive a return to the cross-the-board Clinton-era tax rates and a hard cut in defense and a medium cut pretty much everywhere else?

The main problem with this is that we’re still not addressing entitlements.  Doing all the budget cuts to the existing budget won’t help when well over half of the real spending is aiming towards Social Security, Medicare, Healthcare, and the like.

We’ll see if Congress and the White House can pull this out.  You already know my prediction.

Updated 12/4: Via Hot Air, David Gergen is essentially saying the same thing… this is not a win-win scenario, it’s the D’s deciding that they can live with the consequences.  I had a boss that asked a customer that once… the customer was going to put a rival out of business and was going to do it by completely re-setting the market.  My boss wondered if the customer truly understood what they were doing, and they assured him they had it in had.  I’d note that the customer so horked the market that they eventually got bought out by a rival…

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10 Comments leave one →
  1. December 1, 2012 11:47 am

    What is interesting about this is the potential parallels to Rome. They could control people with the ancient version of materialism (threat to your life, threat to your property- or get with our program….just burn incense to our emperor once a year in addition to your gods, pay taxes and nothing bad will happen to you). Rome’s consternation at early Christians was the refusal to align to this while still obeying all the other laws and the fact that eternal life meant the threat to people’s lives didn’t work. What do you do with a people who welcome martyrdom & share within their community, caring for even the helpless outside their community? Julian the apostate was very frustrated that the mob style “nice school/church you have- it’d be a shame in something happened to it” didn’t stop their charity or cause them to renounce their beliefs: Julian
    “These impious Galileans not only feed their own poor, but ours also; welcoming them into their agapae, they attract them, as children are attracted, with cakes.[99]”

  2. November 30, 2012 11:59 am

    Obama should not negotiate until after January first, otherwise he’d be sacrificing leverage. And he’ll need all the leverage he can get, when dealing with a bunch who are willing to kill the hostages. i.e. put the debt ceiling on the line.

    • November 30, 2012 1:30 pm

      I don’t know why’d he’d need to negotiate after Jan 1st. By then, all the tax rates will be up, and he can push spending programs through one at a time. Sure, the debt ceiling has to be raised agaiin, but congress has not choice but to do that, since actual stoppage of spending would be a real disaster.

      • November 30, 2012 9:09 pm

        He doesn’t have to, but strictly looking at negotiating strategy, the point of optimum leverage is after Jan 1st. The post-cliff tax rates and spending cuts become Obama’s first “bid”, so to speak, from where the republicans would have to start negotiating.

        The fact that Obama got the house republicans to agree to this current cliff scenario is a testament to the lack of discipline and short-sightedness on the republican side. That’s not an ideological criticism; I hope they can start recruiting more rationalists and less zealots. A rational conservative would have balked at creating this fiscal cliff end game.

      • November 30, 2012 9:36 pm

        I think they viewed it through their own lens… “Wait, cutting defense that much and affecting other programs would be HORRIBLE.” In the end, small cuts to programs can be put back, but re-doing defense is nearly impossible.

        But yes, to my comment in the post, Win-Don’t Lose is a bad strategy.

  3. November 30, 2012 10:32 am

    One additional thought: If the country goes over the cliff and all the tax rates go up, it’s easy to blame on the Republicans. But it’s even easier to then say that all the rates have to stay up, because we’ll need that extra revenue to dig ourselves out of the economic hole that results. Dems don’t believe that lower taxes actually drive revenue, and they’ll just call for more government programs, and then push to raise taxes on the rich again. I wonder if 50% rates are too low?

    • November 30, 2012 12:08 pm

      I would think that by now that theory of lower taxes=higher revenues would be thoroughly debunked. In case there is any doubt, here is a recent non-partisan report: http://www.taxwarriors.com/Portals/127975/docs/r42729_0917.pdf

    • November 30, 2012 1:31 pm

      I don’t know that I’m arguing revenue. I just said that since they don’t believe it, they’ll push to raise taxes when they otherwise run out of revenue.

      For the record, I think tax revenues have more to do with business climate than tax rates. Business climate is going to stink next year, cliff or no cliff.

  4. JWoods permalink
    November 30, 2012 10:00 am

    This is not about negotiating, this is about I won and here is your punishment. Stupid, childish, but hey we get to experience the trapdoor opening below us. Feel like I am on the Haunted Hotel tower ride, waiting for the hook to disengage, except the landing may look like the Little Big Horn.

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