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On the fiscal cliff, neither side should compromise

Democratic PartyRepublican PartyFiscal Cliff (2013)Barack ObamaU.S. Congress

"Compromise or confrontation?" So ran a recent headline on CNN.com, above a story about the "fiscal cliff" and a confrontational-looking picture of President Barack Obama. The implication was clear: Our leaders must compromise or confront each other on the precipice. Even clearer, in the view of most Americans, was the solution: Compromise, already! Endless confrontation has made the need for compromise as obvious as the election results.

Or has it? Actually, decades of negotiation research have cast doubt on the conventional wisdom, showing that compromise vs. confrontation represents a false choice, and compromise a false ideal. Yet, most of us still subscribe to the "cult of compromise."

But wait — a cult? Didn't we learn, as children, that if we wanted three cookies and mom said one, we should shoot for two? Isn't it obvious, as adults, that when Republicans want to cut $3 trillion and Democrats $1 trillion, they should cut $2 trillion? In short, haven't we always learned to split the difference, each side giving ground?

Yes, and for good reason: Compromise is better than confrontation. Two cookies are better than a scolding, and $2 trillion is better than falling off the cliff. But better is far from best. Compromises of all sorts suffer from a major problem: They leave both sides unhappy. Two cookies are one too few for us and one too many for mom. And $2 trillion in cuts is $1 trillion too little for Republicans and $1 trillion too much for Democrats. Put simply, compromise does not satisfy everyone; it satisfies no one.

We would despair, except that research identifies a third and better solution: integration. If compromise means giving each side 50 percent of what it wants, integration means giving each side 100 percent. How is that possible? Well, calls to compromise stem from the assumption that both sides only care about one and the same issue (e.g., cuts) and have opposite preferences on that issue (e.g., large versus small cuts). If that assumption is true, then compromise is the best solution.

How true is that assumption, though? In how many negotiations do both parties only care about one issue and nothing else? Calls to integrate arise from the more realistic assumption that both sides care about several issues (e.g., budget cuts and additional revenue), and value these issues differently. Thus, Republicans probably prefer to make large cuts and raise little revenue, whereas Democrats probably prefer small cuts and lots of revenue, but the two sides probably prioritize the two issues differently. Republicans might place a higher priority on maximizing cuts than minimizing revenue, whereas Democrats might prioritize maximizing revenue over minimizing cuts.

These preferences pave the way for integration. The two sides could agree to large cuts in exchange for lots of revenue. This would not give each side 100 percent of what it wants, but it would give each side 100 percent of what it wants most. Both sides should prefer this solution to confrontation. More importantly, both would probably prefer it to compromise, as they can claim complete victory on their No. 1 priority, as opposed to partial victory on a potentially lesser issue. Integration trades two issues, whereas compromise splits one. We almost always prefer an integrative solution if we can find one.

Integration is the collective wisdom of numerous negotiation researchers. It's not pie-in-the-sky; it resembles some of the real solutions suggested by the Simpson-Bowles commission and the more enlightened members of Congress. So why has it not happened? Because some of our leaders have insisted on negotiating one issue at a time. Parties discussing a single issue cannot possibly integrate by trading multiple issues; they can only compromise by splitting one. Any attempt at a "grand bargain," then, must necessarily involve a multi-issue tradeoff.

Compromise versus confrontation is a false choice; integration is better than both. An old story by management theorist Mary Parker Follett captures this message concisely. Two sisters, fighting bitterly over a single orange, decide to divide it in half. One sister then squeezes the inside of her half for juice; the other peels the outside of her half for garnish. Only then do they realize that compromise left each sister half-satisfied; integrating by giving one sister the outside and one sister the inside would have made both better off. Let's hope that the budget negotiations prove more fruitful.

Brian Gunia is an assistant professor at the Johns Hopkins Carey Business School. His email is brian.gunia@jhu.edu.

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    Democratic PartyRepublican PartyFiscal Cliff (2013)Barack ObamaU.S. Congress
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