Seems like every day, I hear “Obama did this” or “Boehner said that” or “Polls show the other thing.” So nobody can seem to agree about the debt ceiling. Meh; I’m not worried. See, I’ve learned an important lesson in life: don’t worry about the things that are going to happen for sure, no matter how bad they are. And we’re going to default on our debt for sure, no matter how bad an idea that is.
Now, clearly Wall Street disagrees with this assessment; and, despite the clear evidence that markets are not always rational, I do tend to think that the stock market knows a few things. In this case, I think they know too much: they know how bad it will really be for the economy if we default on our debt. But our pending default has much more to do with the dynamics of negotiation than it does with the economy. Let’s break it down.
How Negotiation Works
Here’s how a simple two-party negotiation works. Both parties live in a world of facts:
Based upon those facts, the two parties have separate opinions and positions:
There’s an area of intersection of those opinions and positions:
And the resolution lies somewhere in that area. It may move back and forth; it may be on the edge of one party’s acceptable opinions and positions; but that’s where you’ll almost always find the resolution.
Of course, sometimes there’s no overlap in opinions and positions:
In these cases, there’s really no room for an agreement.
When parties fail to reach an agreement, both are stuck with what the pros call their BATNA — their Best Alternative to a Negotiated Agreement. In other words, they agree to disagree, and they both end up with whatever consequences they’ve prepared for themselves. Based on their failure to agree, the world of facts changes, and they live in a new environment:
Perhaps that environment leads to overlap in opinions and positions; perhaps not. Since these are imaginary people, we don’t care. Let’s move on to real people.
Where We Are
Now, right now, it appears to many that the problem that we have is that the GOP and the Democrats don’t have an overlap in opinions and positions:
However, the problem is actually much more serious than that: they don’t have an overlap in facts at all:
In this case, you can’t move the two circles of opinion to overlap, because you can’t move either out of its enclosing square of facts, and those don’t overlap at all. You’re stuck with a negotiation in which you’re horse-trading facts — “I’ll agree that the sky is green, if you’ll give me that grass is orange” — and that just leaves all the negotiators furious and their supporters feeling betrayed if an agreement is made.
Not only that, but the two sides BATNAs are also unrelated. If no agreement is reached, here’s what the two sides think will happen:
Not only not only that, but there’s a whole separate set of political facts perceived by each side, and those create substantial upsides in both parties’ BATNAs:
I’m sure you’ll be shocked, shocked to hear that I don’t see any overlap in each side’s perception of the political facts on the ground, any more than I see overlap in their perception of economic facts on the ground.
How to Solve Our Problem
Shoot the bastards. Ha! Just kidding. Well, sort of not. Shooting the bastards is how, historically, most of these disagreements about locus of power in Presidential systems actually have turned out. But I don’t mean that on the small scale; generally, these kinds of situations either resolve themselves by one party massively overplaying its hand and losing power, or by the two parties shooting it out at some length. The fun historical note is that the party that overplays its hand usually is empowered and unified by the experience and becomes a much more potent extra-governmental force. Usually with guns. Yeah, you knew I was going there.
No, there’s really no solution to this particular problem. Fortunately, this particular problem is only a consequence of another problem, one we’ve been struggling with meaningfully since 1980. Fundamentally, we’re not disagreeing on what to do about the economy; we’re disagreeing about what it means to be elected.
This is the source of our problem. The voters put in Obama as the executive. They also, more recently, put the Democrats in charge of the Senate. At the same time, they put the GOP in charge of the House. Question: whose agenda gets advanced given this split system?
Well, in the past, our electorate seems to have split majorities in the houses and holding of the Presidency in order to minimize the risk that radical policies get followed. This resulted in nobody doing anything too crazy, but it also meant that nothing happened on real issues like healthcare and tax reform. At Microsoft, they have this term “Strategy Tax” — that is, any strategy levies “taxes” on subsidiary or marginal activities, keeping these from being all they can be in the name of the larger strategy. I also say there’s such a thing as a “Lack of Strategy Tax” — that, as you delay making decisions about a difficult questions, your possible responses become more and more limited, until you’re stuck with only responses you considered non-optimal or even unacceptable earlier. In effect, your past you levied a tax on your future you by not making a decision.
And that’s the problem with the path we followed through the ’80s, ’90s, and ’00s: we didn’t do anything too radical, but we levied a lack of strategy tax on our future selves, in things like healthcare; taxation; the responsibilities of government; how to grow jobs; social mobility; education; and more. And now we can see that those taxes have either come due, or are about to come due. Yet, by doing nothing, we’ve left ourselves only a set of edge responses.
And that’s the fundamental source of our problem. Our solutions are all a bit crazy, at least compared to what we’ve generally agreed to in the past (at least during quieter times). That means that someone needs to take the reins and either lead or pull us to the uncomfortable truth of what we do next.
Except here we went and split our government, and now nobody is clearly in charge. Did we elect the GOP and their crazy answers when we put them in charge of the House? Did we elect the Democrats and their crazy answers when we left them the Senate? Did we put Obama in charge of it all when we elected him back in ‘08? That’s the discussion we need to have. And, if we can have it in the next week or so, then we’ll resolve the situation. However, most countries that have this discussion without shooting at each other (or, without shooting at each other much) take months to years to resolve this situation.
And that’s why I’m not worried about the debt ceiling talks. No way are we going to resolve the underlying problem; no way are we going to come to agreement on proximal problems; nope, we’re going to default for sure. I might as well worry about Tuesday following Monday. Nope, the only thing I plan to worry about is: what do I want to make for my Debt Default party? Who’s on the invite list? I think that Court and I have a great deal of overlap in both our circles and our squares as we negotiate those out.