Lousy Negotiating Skills Are Not the Problem

America wakes up this morning with the specter of a self-inflicted national default behind us, at least until 2013, according to the deal announced last night.

That is unequivocally a good thing for our economy not to mention our national sanity. It's a good thing in the same way that ceasing to bang yourself on the head with a hammer would be a good thing.

But really, what the h-e-double-hockey-sticks (sorry, I've got young kids) was that about?!

If your conclusion is that Democrats got rolled because the President is a lousy negotiator, I disagree. Not on his negotiating skills... as someone said in comments, I wouldn't want him in the auto showroom with me when I'm bargaining for a better price. I disagree that better negotiating skills would have made a big difference. The problem goes much deeper.

What did we just go through and what does it mean for our national politics, our fiscal and economic policy?

  • First, a small but influential group of extreme conservatives are so intent on shrinking the federal government that they would credibly threaten national default;

  • Second, Democrats, including the president, do not have a strategy to counteract such extremism, so they accepted a plan far less balanced than they would have liked -- the final deal could well turn out to be $3 trillion in spending cuts over ten years, with no revenue increases to offset the cuts.
  • Third, and perhaps most importantly, like every debate about the size of government, it's impossible for normal people, if not the "experts," to figure out what anyone is really talking about and therefore to judge the deal.
  • What does it mean to cut $3 trillion in government spending? How will it affect retirement security? Education? Jobs in the short run and investment over the long run? Does it put us on a sustainable fiscal path.

    We're about to agree to cut $1 trillion from something called discretionary spending. That probably sounds great to some folks and bad to others. But what does it mean?

    The president bragged on this very point last night, telling America that discretionary spending as a share of the economy will come down to its lowest level since Eisenhower. As if we've all been walking around thinking, "if only we could get this budget category down to Ike levels, everything would fall into place."

    In fact, these cuts will hurt our ability to pursue what I view as most positive aspects of the president's economic agenda -- investment in infrastructure, clean energy, research, education. They will pinch programs that are already budget constrained...programs that help low income people with child care, housing, and community services. (One piece to watch for here -- defense spending is also in this category, and is supposed to account for about one-third of the cuts...that helps, of course, take pressure of these other parts.)

    Then, in part two of the deal, we unleash the gang-of-twelve who are assigned to come up with $1.5 trillion more in deficit savings.

    They'll be hitting the entitlements -- Social Security, Mcare, Mcaid -- and more defense, but if they deadlock -- a non-trivial probability -- automatic cuts ensue.

    The White House, showing a bit of actual bargaining skill, tells us that "the sequester would be divided equally between defense and non-defense program, and it would exempt Social Security, Medicaid, unemployment insurance, programs for low-income families, and civilian and military retirement. Likewise, any cuts to Medicare would be capped and limited to the provider side."

    OK -- that sounds good. But it just raises deeper questions: after you've already taken $1 trillion out of the system, how the heck do you come up with $1.2 trillion in cuts without hitting these rich targets that Republicans are obviously gunning for?

    And remember, these automatic cuts are spending only. No revs allowed. Which raises another question: can we really achieve fiscal sustainability without new revenues? That one has an answer: no.

    Here's the point of all this:

    This was an ugly debate where reckless ideologues got the better of the grown-ups in the room who were not willing to risk the economy to protect the government.

    But before you go blaming the grown-ups, and I totally agree they're terrible negotiators, understand that the grown-ups had virtually no-one behind them. Sure, there was me and Jon Cohn and Ezra Klein and a bunch of others who tried to explain the stakes, but as usual, we were marching in front of a parade with few behind us.

    If too many Americans don't believe in or understand what government does to help them, to offset recessions, to protect their security in retirement and in hard times, to maintain the infrastructure, to provide educational opportunities and health care decent enough to offset the disadvantages so many are born with...if those functions are unknown, underfunded, and/or carried out poorly, why should they care about how much this deal or the next one cuts?

    Those of us who do care about the above will not defeat those who strive to get rid of it all by becoming better tacticians. We will only find success when a majority of Americans agrees with us that government is something worth fighting for.

    This post originally appeared at Jared Bernstein's On The Economy blog.

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