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On Leadership

Where Washington’s debt ceiling negotiations went wrong

By Stuart Diamond,June 27, 2011

Stuart Diamond: Political leaders have been unable to reach a solution… (MANDEL NGAN/AFP/GETTY…)

This piece is part of a leadership roundtable with Post columnist Steven Pearlstein and five expert contributors — Governor Mitch Daniels, former Senate leader Tom Daschle, Harvard professor John P. Kotter, former Congressman Slade Gorton and Wharton professor Stuart Diamond — about the leadership issues at the core of the U.S. debt debacle.

What could have been a leisurely and productive process to solve the national debt problem has turned into a deadline crisis due to numerous avoidable negotiation mistakes by Democrats and Republicans.

The parties have frittered away months of collaborative brainstorming opportunities by fighting each other over the $14.3 trillion national debt. Now, with an August 2 default looming on interest payments, each 1-percent increase in the interest rate resulting from a default would cost $143 billion a year. That’s the value of all 3.6 million jobs lost in the recent recession. Washington got itself to this precipice, and now needs to back itself off the ledge.

The first mistake our political leaders made is goal confusion. The question is no longer whether to raise the debt limit or cut spending. Congress is out of time for that debate. Moody’s Investors Service, which rates debt for lenders, said it could lower the U.S. credit rating as early as July if Congress does not develop a process to avoid default. July 1 is this week. That means we need a detailed, step-by-step agreement process now, or interest rates could rise before August 2. The response so far? Republicans walked out of talks last Thursday, and a “golf summit” between President Obama and House Speaker Boehner failed to produce collaboration by their parties. Come July, we’ll start playing daily roulette with the entire U.S. economy.

Impending deadlines like this increase conflict and actually reduce creativity, information processing and agreement quality. What Washington needs to do at this point is decouple the debt limit from the spending debate, increasing the debt limit until December 31. This will maintain a less intrusive deadline but provide time for creative problem-solving in a calmer environment.

Another negotiation flaw plaguing the debt issue has been how laden the debate is with emotional buzzwords. Emotional people are physically less able to listen, which in turn means they are not often persuadable. They focus less on goals and more on retribution. If Vice President Biden’s task force was unable to calm down, it was right to turn this over to different bipartisan negotiators with fewer hotheads, but they need a better process. Threats cause emotion and are useless in negotiations like these.

Research by Robert Cialdini, author of Influence: The Psychology of Persuasion , found that when negotiators create human connections, 90 percent of the time they produce agreement (versus 16 percent if they don’t personally connect). Washington should study this data point. Civility isn’t just a nice leadership attribute; it actually increases listening, reduces emotion and better enables future compromise, even amid disagreement.

Additional studies , such as one by George Washington University’s Charles B. Craver, have found that when parties collaborate, the size of the pie can increase by 400 percent—that is, the end value of the deal can be four times better than it would have been otherwise. Partisan attacks do not create this value; brainstorming does. There is no “us v. them” when all of us are facing a common crisis.

Part of what created such an early impasse between the parties is that they began the talks over hard issues like Medicare and taxes that immediately promoted conflict. These are too big, with too many constituencies. Starting with easy things would have created a sense of accomplishment and motivation: Cut the waste found by the GAO; negotiate with lenders to reschedule debt; provide incentives (like a small percentage of the value) for groups and individuals who find new revenue or savings; publish a daily debt reduction graphic, with $2 trillion in cuts as the goal.

And yet instead Washington is trying to solve the whole thing at once, which only increases complexity, perceived risk, time and failed agreements. Scalpels are almost always better than sledgehammers, and Congress could have taken a few months to cut $2 trillion thoughtfully through a series of small, incremental steps that are both easier to accept and less risky.