BATNA, Politics and the Debt Ceiling Talks

Posted by By at 29 July, at 19 : 59 PM Print

Best Alternative To a Negotiated Agreement, or BATNA is the course of action taken by a party or parties if they fail to reach an agreement.  In effect a party should not accept an agreement worse than BATNA. Politics meaning “of, for or relating to citizens” is how groups of people make collective decisions.  These two concepts are forces upon the debt ceiling negotiations between the House and the President.

The players and their constituents

The Republican-controlled House of Representatives is in some ways a house divided:

  • Traditional Republican legislators lead by Speaker Boehner know the art of politics is getting things done by passing laws as close as ideologically acceptable to the legislator and his constituents. Since Washington rewards longevity, these Republicans hold most of the leadership and either by disposition or political economics are the voice of Wall Street and old money.
  • Within the Republican House is the freshman class known as the Tea Party Caucus who won their seats by promising tax cuts and reducing spending. The Tea Partiers are closely tied to the districts they represent and dependent on local fundraising.  Polling says those districts’ views on the debt support their representative and expect them not to budge or their reelection next year is in doubt.  Their districts’ views are the minority views of Americans but the majority of those districts’ voters.
  • The President has the most difficult position.  He is the leader of his party. He must cater to the people who will reelect him. However he is responsible for the economy, and the whole country is his constituency even if almost half did not vote for him.
  • The Senate is an important but secondary player because the Democrats control the Senate and the President is the voice of the party. Nevertheless, the Senate will have to sign on to any compromise and could effectively veto a House Bill, on ideology, that the President could other wise live with.

The Politics

The traditional Republicans want lower taxes and are willing to cut government programs enough to bring lower tax rates home to their districts without being the ones to dismantle the Social Security and Medicare entitlement programs. They know neither Wall Street nor Main Street will be happy if bond payments and Social Security Checks are missed.

The Tea Partiers want fewer taxes and to significantly reduce government spending. They do not have the experience to know the electorate is short sighted. Miss a Social Security check or see the nations credit rating drop, and no one can predict whom the voters will blame.   In January of 1996 in eerily similar circumstances a popular movement lead by then Speaker Gingrich threatened a government shutdown over raising the debt ceiling.  At the brink the public turned on the Republicans, paving the way for a Clinton landslide. A poll in the July 28, 2011 New York Times suggest history may be repeating itself.  The Presidents approval rating has remained steady at about 45% where the House Republicans as a whole have slipped from 30% to 25% in the last two months.

The 2012 election is another actor on negotiations. Senate Minority Leader Mitch McConnell (Republican KY) famously said in October of 2010 “the single most important thing we want to achieve is for President Obama to be a one-term president.”  No doubt some of the Republican posturing is with McConnell’s goal in mind.

The Democrats ideologically want to maintain social programs and selectively raise taxes to cover the cost. The President does not want a short term Debt Ceiling Deal because he does not want to give a political advantage to the Republicans six months from now when he is in the middle of his reelection campaign and the Debt Ceiling will again need to be raised.

All the players are playing chicken to see who will fold and who will take the blame.

The Players’ BATNA

  • Traditional Republicans’ BATNA if the debt ceiling is not raised is to hope individual spending bills get passed quick enough for the executive branch to manage the cash flows before there are any defaults.  They will feel pain from Wall Street.
  • The Tea Party Caucus has little ground to move if they are to hold to their campaign promises. They made the rookie politician error of promising an absolute. Their BATNA is no debt ceiling raise and let the chips fall as they may.
  • The President –in good times and bad – by dint of the office whether he caused the issue or inherited it, the buck does stop on the desk in the oval office.  Presidents unfairly get the credit or the blame for what happens on their watch. Mr. Obama is fighting for his reelection on the debt-ceiling raise. The President has no good BATNA either politically or for the good of the country.

Law Professors Eric Posner and Adrian Vermeul (at the University of Chicago and Harvard respectively) have argued Obama could suspend the debt ceiling law “…the president would derive authority from his paramount duty to ward off serious threats to the constitutional and economic system”.

While the players have different ideologies on how to manage the government’s finances it is assumed the proposals are made in good faith for the best interest of the country. The truth is Americans do not want to pay for the government they demand.  The electorate has a disconnected view on how much we rely on government subsidizing our food, energy, health, transportation, and old age. But most unfortunately, politics and negotiating tactics are taking precedence over statesmanship, and the BATNA is not acceptable.

Photo by Nancy Pelosi

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This post was written by:
- who has written 13 posts for Rock The Capital
Andrew Stein is the Principal of Stein Consulting Group, an organization that advises on government, energy, and financial policy. Mr. Stein, is Chairman of the Board for Sustainable Energy Fund and is the Economic Advisor for EFMR Monitoring Group. Mr. Stein has over 20 years of real estate banking experience. He has a Bachelor’s Degree in Business Administration from the University of Pennsylvania’s Wharton School of Business. - Email Andrew Stein

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