Negotiating Against Yourself: Obama and the Debt Ceiling

For those wishing to learn how to negotiate with a boss, a business partner, a landlord or a used car salesman, former speechwriter

David Frum explains on CNN why observing President Obama and then doing the exact opposite is the path to success. Ouch. JL:

"Why aren't the Democrats rebelling?

The debt ceiling negotiations have amounted to a succession of retreats and concessions by President Obama.

At this point, the president confronts two possible outcomes in the coming weeks:

Outcome 1: The president and congressional Republicans reach agreement on a budget package weighted overwhelmingly in favor of the GOP. The president opened negotiations by offering $3 of spending cuts for every $1 of tax increases. His current offer tilts even further to the GOP: $6 of spending cuts to $1 of tax increases.

Better still (from a Republican point of view), the spending cuts come from programs Republicans dislike, like Medicaid, rather than programs they like, like the farm budget. The tax increases meanwhile are designed to be as acceptable as possible to the GOP: no increases in tax rates, but instead trimming some of the less defensible deductions in the tax code.

Outcome 1 represents a very big win for Republicans over the future shape of the federal government, and a correspondingly big defeat for the president.

Outcome 1 also represents the president's best-case scenario.

The worst-case is Outcome 2. Republicans reject the president's concessions as insufficient. They refuse to lift the debt ceiling. Denied the legal authority to borrow further, the federal government exhausts its cash sometime in the next three to four weeks.

At that point, the United States will face some kind of federal bankruptcy: paying some claims, deferring others, plunging the U.S. government into financial crisis and probably plunging the whole world into renewed economic crisis.

How in the world did the president arrive at this disastrous predicament?

You can blame his opponents if you want. Yes, the House Republicans have played politics very rough. Not since the era of the Vietnam War has a house of Congress used the threat of national bankruptcy to gain its way on a policy point.

But the roughness of the president's opponents does not excuse the president's own mistakes and weakness. On the contrary: from the point of view of the president's supporters, the roughness of the president's opponents makes all the more inexcusable the president's mishandling of the situation.

As Marc Ambinder of the National Journal suggested at the time, the president could have included an increase in the debt ceiling in the December deal to extend the Bush tax cuts. The Republicans dearly wanted that extension. Obama did not use leverage when he had it -- and so he became a victim of leverage when he lacked it.

Then, as Republicans discovered the power of their new tool, the president decided to assume they were bluffing, that they would never actually do anything so reckless. Waking up to the reality of the situation too late, he commenced bargaining by offering what he assumed would be an irresistible deal. Wrong again. The Republicans did resist. So Obama offered an even better deal -- which predictably only whetted the GOP appetite for still more.

Obama never publicly branded the debt ceiling as "if the Republicans force this country into bankruptcy." He issued no public call to constituencies like the financial industry to bring pressure to bear on the issue. He did not warn that he would manage any crisis in ways that Republicans would not like. ("If the Republicans in Congress deny me the authority to pay everybody, then I'm going to have to choose some priorities. I don't think it's likely that Texas-based defense contractors will find themselves at the top of my list.")

Instead, he appealed again and again to Republicans' spirit of responsibility. Good luck with that.

Talks have now broken down altogether. The crisis is drawing close. And once again Obama is throwing away his leverage.

Obama's team is publicly discussing what they are calling the "constitutional option," contesting the validity of the debt ceiling altogether.

Section Four of the 14th Amendment provides that the public debt of the United States shall "not be questioned."

Some experts argue that the very existence of the debt ceiling raises questions about the public debt, by empowering Congress to repudiate borrowing made necessary by Congress' own taxing and spending decisions. (The debt ceiling, for you history buffs, is a concept invented as a temporary emergency measure during the First World War, one more confirmation of the ancient rule that there is nothing more permanent than a temporary measure.)

It's not a crazy argument -- and just for that reason, the president's team is crazy to be talking about it.

The "constitutional option" talk signals two immediate things to the House GOP:

(i) they can be as intransigent as they want at no ultimate cost to themselves, because the president will invent a solution to the crisis they caused;

(ii) the president dreads financial crisis more than they do, so he can always be counted on to blink first.

Public talk of the "constitutional option" creates a third even more dangerous incentive:

It opens the door to a future in which the president and the secretary of the Treasury issue bonds over the refusal of the House of Representatives. Yet Article I, Section 7 of the Constitution provides that "all bills for raising revenue shall originate in the House of Representatives." Bonds raise revenue. You don't need a crystal teacup to foresee how the Tea Party will react to a bond issue in disregard of the debt ceiling. They will accuse the president of trashing the U.S. Constitution, and somebody will commence impeachment proceedings.

This shift of topic is pure win-win for the Tea Party. Unperturbed by the risk of national bankruptcy, they can now hurl charges of tyranny and usurpation against the president through 2012, reserving impeachment as a back-up plan should the GOP candidate somehow lose.

Some may say: What could a president do faced with such implacable opponents? But the opponents didn't start implacable. Back in January, Speaker John Boehner said the possibility of a government default was "not even on the table."

The president's weakness, however, empowered the most radical Republicans. Would one more hard push extract one more big concession? The answer was always, "yes." So the radicals pushed -- and pushed again -- and incidentally pushed would-be dealmakers to the side.

Through it all, Obama has played nice, again and again entreating his Republican opponents to emulate his example and play nice too. It's not what Lyndon Johnson would have done. It's not what Franklin Roosevelt would have done. I doubt it's what Hillary Clinton would have done.

Which brings me back to my starting question: Why don't the Democrats rebel? Presumably, they elected Obama to stand up for their shared principles. But he's not standing up. He's rolling over. Or being rolled.