Friday, December 21, 2012

Plan B

Last night, the Republican House leadership withdrew the tax part of their so-called "Plan B," which would have raised the top bracket percentage only for people making over $1 million annually. Plan B was withdrawn because they didn't have the votes to pass it. In negotiation parlance, Plan B was akin to the Fisher/Ury concept of BATNA (the best alternative to a negotiated agreement). In mediation, however, I find it more useful to focus the parties on the MLATNA (most likely alternative to a negotiated agreement), because parties who fail to make a deal can't count on getting their best alternative outcome. (In the budget negotiations we are now watching, the MLATNA would refer to the most likely scenarios that will occur if the president and the speaker cannot come to terms and pass a deal through Congress. More on those likely alternatives below.)

The withdrawal of Plan B is being portrayed as a failure for Speaker Boehner, but Plan B was actually a pretty clever gambit on his part. To get more of what the Republicans want out of a budget deal, Boehner proposed an alternate plan better for his side than the plan the speaker and the president were negotiating. Boehner thought he might pressure Democrats to agree to his alternative, otherwise they might be blamed for the failure of the negotiations. But first he had to get his caucus to support Plan B.

The real failure is of the Republican caucus to back the plan. This failure is almost incomprehensible, given that the only alternatives that currently seem available are either acquiescence to a negotiated agreement that would be worse than Plan B from the Republican point of view, or the dreaded fiscal cliff. If we go over the fiscal cliff, Republicans lose all their leverage on tax cuts. Taxes will go up automatically for all Americans. And the only alternative on the table will be the Democratic proposal to reduce tax rates for all but the top 2%. How could the House not bring that up for a vote once all the rates have gone up?

Here's what Representative Dan Burton said about that:
"If we go over the fiscal cliff, the president just comes back and says, 'OK, we're going to give tax cuts to everybody under $250,000.' Who's going to vote against that? Everybody'll vote for that. Everybody. Because it will be just a fait accompli. You won't be voting on whether you're going to do away with a tax cut, you're going to be reimposing tax cuts for everybody under $250,000. So the Republicans are in an untenable situation."
What explains the mentality of the House Republicans who rejected the best option they seem to have in these negotiations? Once they decided that none of the available alternatives are good enough for them, they are probably left with a worse alternative than Plan B. I've frequently seen this mentality displayed by participants in settlement negotiations. I tried to settle an employment discrimination case a while back, for example, in which the company offered x dollars, but the guy thought he should get more like 5x. The amazing thing was that this plaintiff knew he was almost certain to lose the whole case if he went to trial. He was very clear-eyed about it, and yet still could not accept the company's offer even though it was almost certainly better than any available alternative. It just didn't meet the standards of what he felt he was entitled to. A rational person should always choose x if the only choice is between 0 and x. But people are not all that rational. If they have an unshakeable belief that they are entitled to 5x, they would sometimes rather take 0 than settle for less than they believe is right.

That's what the Republican House majority chose to do last night. They decided they would rather have a big tax increase imposed on their constituents than compromise their "no tax increase" principles in the slightest. They rejected the possibility of agreeing to the tiniest possible tax increase that their leadership could possibly propose. This is not rational thinking. But it's not surprising either. The real world will find its way of imposing itself on the Republican House majority. But they are not going to be a willing partner to that process.

To be fair, I should mention that Plan B was probably doomed anyway, since the Democrats in the Senate said they probably wouldn't even have brought it up for a vote. And President Obama threatened to veto it. Still, it's got to be way worse for the Republican bargaining position if they can't even agree among themselves to support a plan that is the least damaging of all realistic alternatives to their beliefs. It's like refusing to agree to have your smallest toe amputated, even when you know that you will either die or lost your whole leg if you don't. It's amazing to watch a political party do that to themselves.

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