Successful negotiations require give and take. A successful negotiator has to be realistic as well as understanding the strengths and weaknesses of both their position and the other party. Win-win negotiations are optimal but they are not always possible.
I have done a lot of negotiating over the years and was fortunate to attend an excellent course on negotiating early in my legal career. One of the first exercises in that course involved each of us being given facts about a legal case we were asked to settle with another party. We were split into pairs with one lawyer acting as plaintiff's counsel and the other as defendant's counsel. There were about 24 attendees so there were about 12 different negotiations going on. Each plaintiff's counsel was given the same facts. The same was true for the defendants. We were given an hour to reach a settlement.
After the hour we came back and reported on the settlement in each negotiation that invovled a suit for personal injury. The range of settlements were astounding even though the facts were the same in each case. As I recall, the plaintiff's got anywhere from $1,000 to $1,000,000. It was quite a lesson in the art of negotiations.
That exercise really showed that successful negotiations are not so much about the facts but how you use the facts. They are also about understanding yourself and your adversary in the negotiation. Most particularly, knowing your adversary and putting yourself in their head. Most people worry too much about their position. Winning a negotiation usually involves knowing the true motivations and vulnerabilities of the other side and playing against them.
I also learned that there are two predominant negotiating styles that most people use. There are those that look at a negotiation as a win-lose proposition. They understand that there will be give and take so they give very little up front. They know you have to meet in the middle but they want that middle to be closer to them when it is reached. Every inch they give is painful to them but they have a lot of room to negotiate.
The second style people use involves those that look for the win-win. They try to look at all sides of the issue and have a sense of where the middle is when they begin the negotiation. Their first offer is likely to be close to the middle because they want to be fair from the outset and look for the middle ground with the other party. They typically do not have as much room to negotiate because of where they start.
It is important to know what negotiating style you feel most comfortable with. However, it is even more important to figure out what style your adversary is using. Negotiations involving individuals with similar negotiating style usually work out well. However, negotiations where one person is using win-lose and the other is deploying win-win can turn out badly. That is particularly true for the win-win person negotiating with the win-lose. There is a real danger in getting taken to the cleaners. Therefore, a win-win negotiator must change their style if it is a win-lose negotiation or they will be the one to lose big.
That brings us back to Speaker Boehner and Senator McConnell.
Boehner immediately stated after the election that he would accept raising tax revenue in a broad deal. He also seemed to take Obamacare off of the table by saying "Obamacare is the law of the land". That seems an awfully soft negotiating position considering the facts.
McConnell has been more direct and blunt. He has stated that Republicans "won't agree to any tax increases that will hurt the economy". He then adds that "we Republicans in the House and Senate think we have a voter mandate not to raise taxes". That seems an awfully hard nosed and unrealistic position considering Republicans lost seats in the Senate and the Presidency.
Of course, we also have Obama insisting that he has a mandate to raise taxes on the rich because of his re-election. He also likes to always state that this is necessary to achieve a balanced approach with spending cuts to cut the deficit.
What are the facts?
Both sides need a deal or we are heading for real fiscal and economic crisis.
If it comes to this who will be blamed? Nobody wants this to occur. However, it is important to not be the party that is blamed if a deal is not reached. The House Republicans have the most to lose right now because they all have to run for re-election in two years. Obama never has to face the voters again.
63% of voters in the Presidential election stated that taxes should not be raised to help cut the budget deficit. This included 37% of Obama's voters and 61% of Romney's.
On the other hand, when asked in the same poll if income tax rates should be raised, 13% responded they should be increased for all, 35% not increased for anyone and 47% wanted to increase them only on the rich (that is a real shock!).
Asked about Obamacare, 49% stated that it should be repealed in whole or part with 83% of those voting for Romney. 44% of all voters want to leave Obamacare alone with 87% of Obama voters saying they wanted it retained.
How would I approach the negotiation?
No one is a stronger fiscal conservative than I am. No one is a stronger opponent of tax increases. However, I am a more concerned about the budget deficit than higher taxes on the rich. I am not opposed to paying more if it will really help. I just don't want more tax money thrown down a government rat hole. I think most voters who voted for Romney would agree. They are willing to contribute to solve the problem but want 100% assurance it will not continue to feed the government monster.
Therefore, agreeing to a tax increase on the rich is a huge bargaining chip for the Republicans. However, if they put that on the table they better get something very, very, very big in return. The only thing big enough is Obamacare. This is big, but more important, it is symbolic. A close second would be a Balanced Budget Amendment with a hard cap on tax and spending at no more than 18%-20% of GDP ( I am always willing to negotiate!).
If I was negotiating with President Obama I would hold a press conference and state the following.
President Obama has long stated his desire to increase taxes on the rich. As Republicans we do not agree that raising taxes on any American is prudent or smart with the economy this weak . We strongly believe that keeping tax rates low for everyone is the best economic policy that we can have to insure a strong economy that will create investment and jobs.
However, we face a looming fiscal cliff in a little over a month. We must work together to see that this does not occur. President Obama has stated that he favors a balanced approach to solving the budget. We take him at his word that he is willing to follow through on that pledge. He has stated that he is willing to cut spending for $3 for every $1 of revenue. We think that is too low and would like to see it higher but that is what negotiations are about.
To show our good faith in reaching an agreement, we will agree to President Obama's proposal to increase taxes on those making more than $250,000. This is estimated to result in revenue of $823 billion in revenue over the next 10 years according to the Congressional Budget Office. In return, we want President Obama to agree to repeal Obamacare. The country and our economy cannot afford this program that will add over $1 trillion in added costs over the next ten years as well as add an additional tax burden on Americans of over $800 billion over the next ten years.
In addition, we want President Obama to propose an additional $3 billion in spending reductions to replace the sequester on defense and discretionary spending that is scheduled to take effect on January 1. The combination of the repeal of Obamacare and the $3 billion in spending cuts will give us a balanced approach to avoid the fiscal cliff. We will also avoid the draconian cuts to Defense that we both agree are totally unacceptable.
Mr. President, we know you don't want to compromise on Obamacare. We just as resolutely do not want to increase taxes. It is the core issue for our Party. However, it is time to put our differences aside for the good of the country. There is not a lot of time left to avoid the cliff. We are making the most meaningful concession we can upfront to demonstrate our good faith. For the future of America, it is now your turn to show that you are willing to do the same. The American people have again put their faith in you to provide the leadership we need at this critical time. We have done our part to show our willingness to meet you more than halfway. It is your turn to lead.Why do I suggest this approach?
- It puts the Republicans on the high ground in the negotiation. By immediately conceding President Obama's biggest demand he is put on the defensive. He is placed in the position of having to respond and the spending cuts have to come from him.
- It makes it clear that the Republicans must get something very, very big in return for their concession on taxes. Many in the Republican party will not like the tax increase but if it leads to the repeal of Obamacare in the deal it will feel like the Republicans won.
- As it stands now the Republicans have taken all of the criticism for being nothing but obstructionists. This offer puts that onus on President Obama and the Democrats. If a deal cannot be reached the blame will be on them. The Republicans merely need to keep repeating that they gave Obama and the Democrats what they wanted on taxes. They need to show they are really serious about deficit reduction and our country's future.
- The majority of Americans still want Obamacare repealed. For Republicans, over 80% want it repealed. This strategy would be welcomed by the Republican base. However, would Democrats risk increasing taxes on all Americans just to save Obamacare? I doubt it. Even though Obama does not have to seek re-election every other Democrat does. I don't think Obamacare will look very attractive to Democrats when every middle class family would have to pay for it if the Bush tax cuts were to expire on everyone. That would be the practical effect if a deal was not reached. That is not a very good record to run on.
- Those inside the Washington Beltway and the political class would undoubtedly be aghast at this offer. They think Obamacare would be a non-starter with the White House. However, I think most Americans would think it is imminently reasonable. It is horse trading at its very essence. You can't get something big without giving up something big.
- A fallback position might be to agree to a one year tax on the rich in return for a deferral of the implementation of Obamacare. This would be conditioned on reaching agreement on a broad tax and entitlement reform package in 2013. If the conditions were met, a trigger would reinstate Obamacare with all provisions being pushed back one year. If not, we are back where we are today a year from now.
There is an interesting sidenote to all of this when it comes to taxing the rich that a BeeLine reader sent me. If you look at the ten wealthiest counties in the United States, eight of those counties voted for President Obama. In all eight of those counties Obama's margin was larger than the 50%-48% margin he had nationally.
If these rich liberals want to pay higher taxes why should the Republicans deny them the opportunity, especially if that concession provides real leverage to really accomplish something of substance. Perhaps the Republicans should focus more on repealing Obamacare to help entrepreneurs and small businesses and getting the deficit down now so that taxes will not need to be increased in the future for everyone.
Boehner and McConnell are riding into the Not So OK Corral on two pretty good horses. However, they need to learn to horse trade like the Democrats who like to give you a horse in the trade that you find can't run (spending cuts that never materialize) or a horse that they promise will be great in a few years (spending cuts that only take effect in years 6-10 in the budget cycle). Of course, the tax increases always take effect from day one and never go away. The Republicans have quit trading because of that past experience. That is not an option anymore. They have to horse trade. I like the President's favorite horse. If he wants mine, he should be willing to give it up.
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