April 1996 € Volume 23 € Number 2


Missing Art


Congress and Clinton need to sharpen their negotiating skills and close the budget deal


By Carlton Henry



Will the Federal government be open in May when INFORMS converges on Washington? Budget negotiations, at this writing, are stalled once again but the GOP leadership indicates that compromise is likely. The failure of the 1996 fiscal year budget negotiations that resulted in the prolonged shutdown of the federal government and threatened to place the Treasury in default has been an unusual series of events -- even by Washington standards. One estimate is that each workday in a state of "shutdown" cost the government about $200 million.

The inability of Congress and the president to reach agreement on a budget deal threatens to undermine one of our most successful collective decision-making procedures, the budget process. Despite its complexity -- the arcane language, accounting and legislative protocol -- the budget process has traditionally functioned well. Continuing resolutions and stop-gap budget measures occur, but the legislative and executive branch have been able to resolve differences well short of prolonged shutdowns.

The relentless nature of the budget cycle is one of the reasons for its success as a government procedure. Just as one fiscal year budget passes from the president and winds through Congress, another budget is formulated. Old budget issues can be quickly revived, supported or diminished with additional data. New issues emerge as changes in the economy can dramatically alter government spending priorities; one budget estimating rule is that a one percent increase in the unemployment rate tends to increase federal outlays by about $25 billion.

So why the breakdown now? It's too easy, in my opinion, to place all the blame on divided government and contrasting ideology. Who could be more divided than Ronald Reagan and Tip O'Neal? The most surprising aspect of the whole drama has been the failure of the face-to-face negotiations between the president and the congressional leadership. Where is the art of negotiation and the desire to "close the deal." This is not to suggest that Donald Trump be brought in, though he does have a management text available -- "The Art of the Deal." Besides, with the current national debt at $4.9 trillion, the country couldn't afford to pay his usual percentage.

The Washington Post chronicled the budget talks with a revealing series of four articles detailing the roles and activities of the major participants. One interesting note is that former Secretary of State and Budget Director George Schultz first discussed and then sent House Speaker Newt Gingrich a paper on how to negotiate. According to the account in the Post, Schultz compared the budget negotiations to his dealing with the Soviets during the early 1980s. Reportedly, Speaker Gingrich recalled Schultz mentioning that, "They always wanted a reward just for coming to the table." The analogy was that President Clinton wanted the reward of keeping the government open for continuing the negotiations. Schultz reportedly counseled, "You don't give rewards for that."

As reported in the Post, the focus of the negotiations rarely proceeded to the point where collective discussion supported the realization of mutually beneficial bargaining improvements. Bargaining, what the system analysis text explains as exploring preferences and trade-offs, was never fully engaged.

Instead of consulting Donald Trump, and without discounting the advice of Secretary Schultz, the parties in the budget negotiations might also be well served to read "Getting to Yes: Negotiating Agreements Without Giving In" by William Ury and Roger Fisher. It's one of those classics often referenced by OR/MS instructors. It addresses a common problem, after the analysis (or after the revolution): How best to proceed.

"Getting to Yes" mentions three criteria to evaluate a negotiation method: "It should produce a wise agreement, if agreement is possible. It should be efficient. And it should improve or at least not damage the relationship between the parties. (A wise agreement can be defined as one that meets the legitimate interests of each side to the extent possible, resolves conflicting interests fairly, is durable, and takes community interests into account.)"

One of the central tenets of "Getting to Yes" is that position bargaining -- successively taking and then giving up a sequence of positions -- while useful for revealing wants, usually fails to produce timely agreements. Ego becomes identified with position; "saving face" adds another level of complication, drawing out the process. As more attention is paid to positions, less attention is devoted to meeting the underlying concerns of the parties. Agreement becomes less likely.
The book advocates resorting to principled negotiation or negotiation on the merits, which consists of four basic points: 1) Separate the people from the problem; 2) Focus on interests, not positions; 3) Generate a variety of possibilities before deciding what to do -- invent options for mutual gain; and 4) Insist that the result be based on some objective standard.

The budget negotiations did finally focus on the estimates from the Congressional Budget Office as the baseline for determining a seven-year-balanced budget. Now it's time to address the other three points.

Carlton Henry is an independent OR consultant based in Washington, D.C.


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