As President Barack Obama begins his campaign for tax hikes, Republicans are losing the political battle over the “fiscal cliff”--but not because Obama won re-election. Rather, they are losing for three reasons that have little to do with the election: first, they have no good alternative to negotiating; second, they have accepted Democrats’ frame for the debate; and third, they have failed to mount a broader media and cultural strategy.
No alternative. Success in negotiation depends on having a good alternative to talks--what negotiating experts call a Best Alternative To a Negotiated Agreement (BATNA). Having a good BATNA means you have credibility when you threaten to walk away from a deal; your opponent will have to offer you better terms to keep you at the table. Each side should therefore work to improve its own BATNA--and worsen that of its opponent.
The sequester agreement in the Budget Control Act of 2011 was meant to create a bad BATNA for all--entitlement cuts for Democrats, defense cuts for Republicans. For most Republicans, more defense cuts--on top of previous Obama cuts--are unacceptable. But many Democrats--most recently, Obama advisor David Plouffe--agree, in principle, on the urgent need for entitlement reform. The BATNA hurts them less than Republicans.
That gives Democrats additional leverage. And do not be fooled by the vigorous protest from the left that greeted Plouffe’s comments. That is more a “good cop-bad cop” tactic than a real objection, a way of demonstrating to Republicans that Obama’s hands are tied and that he cannot afford the political cost of deep concessions. It is also a way of signaling that Obama may see a political upside in quashing a deal--unlike Republicans.
Framing the debate. The negotiations are now about the meaning of “revenue,” rather than about how to reduce runaway federal spending. President Obama says “revenue” and means increases in tax rates for the wealthy; when House Speaker John Boehner uses the same term, he means cutting loopholes and deductions while keeping rates the same. But both sides are talking about making the rich pay more to close the gap.
Aside from the fact that the wealthiest Americans bear a disproportionate share of the federal income tax burden--disproportionate even to their disproportionate wealth--and the fact that taxing the rich at a 100% rate would not solve the deficit and debt problem, there is a principle at stake here: that the government does not have an inherent claim to wealth and income that Americans have earned through their own labor and risk.
Arguably, the wealthy--like the rest of us--owe only for what provides the opportunity for all to earn and enjoy income in safety. Furthermore, too much of today’s public spending hurts the public--creating waste, reinforcing cronyism, and building dependency. But Republicans lost the chance to frame the debate around spending last year when they dropped the “Cut, Cap, and Balance” plan after obstruction from the Democratic Senate.
Media and culture. Democrats blocked “Cut, Cap, and Balance”--but the Tea Party was blamed for obstructionism. Obama destroyed a grand bargain by insisting on increased tax rates--but House Republicans suffered more media criticism when ratings agencies lowered the U.S. credit rating a few days later. Today, more Americans blame the GOP for the fiscal cliff impasse even though the sequester was Obama’s original proposal.
More is at work here than simple media bias. The Democrats have consciously pursued a media and cultural strategy to reinforce the idea that Republicans are the guardians of the rich--even though the wealthiest are actually a Democratic constituency. In the summer and early fall of 2011, for example, after the downgrade and with the economy creating net zero jobs, Occupy Wall Street began--and the Democrats latched on.
The movement failed, but Democrats salvaged the “99% vs. 1% meme,” setting a trap that Mitt Romney fell into with his comments about the “47 percent” last spring. Obama has also made the effect of spending cuts visceral for many Americans; Republicans have failed to describe the cost of debt in similar terms. That media and cultural edge allows Obama to rig the game in his favor. It’s time Republicans found an answer.