Insights into the Debt Ceiling Negotiations Drama
This year marks my 50th as a professional negotiator. Starting in the media department of Foote Cone & Belding in the waning days of the ‘Mad Men’ era, I was tasked with negotiating rates for print, radio, and television spots for the agency’s clients. We were very early buyers into the news program 60 Minutes. I recall the pride of accomplishment when we made a very favorable ad buy because, at that time, we had a key element of all negotiations…leverage. We had the cash; CBS needed it.
Other agency jobs at the biggies, like BBDO and a division of Interpublic, sharpened my bargaining skills. Hundreds of deals needed to be made with directors, celebrities, and media outlets for clients like Pepsi. Serious money was at stake as a 30-second commercial cost a small fortune.
These skills led me to The William Morris Agency, which was a negotiating mecca. Aside from signing clients and finding them projects, fighting, arguing, and even softly threatening the other side was what I did 24/7. The studios, production companies, and corporate interests all fought back. Deal point for deal point, paragraph by paragraph, sometimes for months.
For most of my career, my business partner and I had a boutique bi-coastal talent agency representing scores of television writers, producers, and celebrities for whom we made deals. We were involved in motion pictures, books, and personal appearances too. I can’t be sure, but my guess is if you added up the total economic value of every deal we did, it would be in the billions.
That’s why absolutely nothing about the recent federal budget negotiations really interested me. I understood it would play out the way it did from the very first. Like Chat GPT, I could have written the entire script if you had given me the keywords.
Here are some rules that all negotiations follow. This one was no different.
Only Equals Can Negotiate
This means both parties must have the power to “walk away.” If the discussion is between non-equals, it is usually “take it or leave it.” Steven Spielberg can negotiate with a studio. A first-time screenwriter cannot. Since the House, Senate, and President are equals, who, no matter what they say, must pass a budget, the negotiations become more like Kabuki theater than real life. The government does not run without financial authorization.
Never Confuse Posturing With a Real Position
If I had a dollar for every time a business affairs executive told me they would never do this or that or that my client’s request was a “non-starter” or that this was their final offer…only to have them totally backtrack and give me exactly what I wanted, I would be rich. The converse happened too. My initial absolute demands were met with indifference and sometimes ridicule. Different sides posture for various reasons. Often, they have constituencies that need them to go through the motions. Clearly, House GOP Freedom Caucus members wanted everyone to believe they were ready to default. Some of them may have believed they should default, but many were playing to their constituents. Rabid dog behavior is a valid negotiating tactic, as it makes everyone feel they “went to the mat.” About 99% of the deals I closed were when, at the end of the back and forth, when the posturing was exhausted, a final “take it or leave it” was put on the table. At that moment, either party had the right to walk away. No one could argue “bad faith” or have recourse. The negotiations were over. Until that moment, take everything else with a few large grains of salt.
This is necessary as it keeps the narrative flowing. In politics, it keeps journalists employed and media companies monetizing the drama. Janet Yellen really did everyone a huge favor with her run-out-of-money-to-pay-the-bills June 1 deadline… or was it June 5? Without that ticking imaginary clock, the posturing game might have gone on longer than Jeopardy or The Young and The Restless, i.e., forever. Janet the Merciful spared us this agony because the deadline sharpens everyone’s mind and gets the deal done. The media’s relentless depiction of missed social security checks, and closed airports, not to mention mortgage rates in double digits helped too. What politician wants an actual fiscal apocalypse to bankrupt their local Ford dealer? What representative wants his grandmother to miss a Medicare appointment? Much better to pretend they were willing to have a fiscal calamity than actually having one.
Without the previously mentioned “gone to the mat” posture, each side’s constituency will think they caved too early or easily. In order to maintain that this was the “best possible deal,” everyone has to believe over one hundred percent was given. Anything less means “money was left on the table,” and resentment will occur. In my experience, more agents and lawyers have been fired because the client believed they did not get everything than any other reason. As we are now seeing, both Democrats and Republicans are touting their “wins” and boasting of their success in changing or protecting various budget items. To me, this was inevitable from the start. It was also what the seasoned Wall Street pros thought. Otherwise, the equity and bond markets would have tanked.
So the debt drama, like season four of Succession, has ended with winners, losers, and lots of buzz and journalistic hyperbole.
I wish I could have been more of a nail-biting observer of the debt drama, but, as expected, at the end of the day, those who needed to make a deal did so.