January 28, 2009

Obama's No Lose Strategy

The Democrat dominated stinkulus package that Obama is trying to get Republicans to knuckle under on, poses an interesting 4 quadrant strategy for Obama and the Democrats. Interestingly it's almost entirely upside for the Democrats, and the Republicans on the Hill, some at least, seem to be willing to play right into the Democrats' strongest position. That's bad strategy in card games, in Superbowls, in negotiations, in warfare - you name it. The breakdown below is important in terms of explaining Obama's rationale for is actions, how the GOP should react and it's also instructive in terms of the Democrats own thinking regarding the potential success of the stinkulus package.

Below is a 4 quadrant diagram of the situation. There are two interconnected outcomes (1) Whether the Republicans go along with the package (Buy in or opt out), and (2) Whether the stinkulus package succeeds or fails. [Note: Ignore the lack of artistic merit, I'm no artist.]

Obama is meeting Republicans and softly pressuring to avoid listening to Rush and try to work together to get things done. He doesn't need their support to get things done, so why bother? Well it makes sense when you look at the quadrants.

Quadrant 1: The GOP Buys in and the stinkulus package succeeds in halting, or minimizing the recession.

This outcome is a Win/Win - for Democrats. In the end, 2 years from now when elections are heating up, who is going to remember that the Republicans signed on to the package? Do you remember who came in second in the Miss America contest in 2006? Do you care? Who was the 2nd fastest 100m sprinter in the 2008 Olympics after Bolt? In fact you may care more about those thing than politics. So how this scenario plays out for the Democrats is simple - they get to take credit for what is obviously their package anyway. The GOP is dragged along grudgingly but there will be no credit shared in Nov. 2010. It will be positioned as 'The Democrats saved America'. And when the GOP protests that they helped too, the Democrats can say one of two things. Either they say well you did add some small components but we were the real designers and engineers behind the plan, or, they can say, "Yes you did help (in a small way) - and we did what's never been done before - we reached across the aisle and were inclusive in orchestrating this success. That's something you Republicans never did when you were in power and therefore we can be trusted to be bi-partisan and inclusive and you can't. Vote for us."

For Obama, this is a good outcome. On a scale of 1-10, 10 being a great outcome for the Democrats, this would rank as an 8. There is low downside risk to it, (see below).

For Republicans, the outcome ranks a 4. You helped save the economy by buying into a economic pillaging of America that luckily worked, but you get little or no share of the credit.

Net for Dems = +4.

Quadrant 2: The GOP Buys in and the stinkulus package fails to do anything meaningful about the recession.

If the package, as well all expect on the conservative side, fails then this is still not a bad news for Team Obama. They have a great out position here, that goes something like this;

"Look, we all tried here. But these are unprecedented conditions brought about by foolish Republican de-regulation put in play by Bush and his cronies. This reversal of fortune will take more time, and we need a steadier hand at the wheel during these times than the Republicans can provide. Besides, we solicited their input in this thing and tried to be inclusive." The sentence following that can veer into the whole we're more inclusive than they are shtick or into the idea that the reason it's taking longer than expected is BECAUSE of those Republican ideas that are making the recovery slower than it would have been if we just did it on our own. But don't forget, we're bi-partisan.

For Obama this quadrant represents an insurance policy. If the gambit fails, he can spread the blame and then if he wants double down on stinkulus 2.0 more spending and no GOP input. The insurance part means he can lay at least part of the blame at the feet of the GOP (plus Bush as per usual) and mitigate voter anger in 2010 and 2012.

On a scale of 1-10, 10 being a great outcome for the Democrats, this would rank as an 6. There is higher downside risk in that the Dems won't escape at least some of the blame, but perhaps spread enough to the GOP to retain the Legislature, even in significant numbers, despite possible losses.

For Republicans, the outcome ranks a 2. You didn't save the economy you sold out your ideas and your base will be even more angry than in 2008, but you get a share of the blame for the failure in the eyes of Independents and moderate voters, thereby minimizing potential gains in the mid-term elections.

Net for Dems = +4.

Quadrant 3: The GOP opts out of signing on to the the stinkulus package and it fails.

Here's a slightly good news scenario for the GOP, unfortunately it comes at the expense of America. As Rush Limbaugh has said, the Democrats tied themselves to failure in Iraq, and put politics ahead of the national interest. Republicans shouldn't be interested in doing that. But this is the worst possible case for the Obama and the Democrats. The blame is predominantly going to be focused on the failed stinkulus package, as it should. Of course the Democrats will fall back on the idea that the GOP so mangled the economy under Bush that their plan needs more time. Or it needs less GOP portions included, so let's cut them out of it and try again. They also have the opportunity to co-opt Rush Limbaugh's argument about them to their own talking points;

"Look, we're seeing the Republicans gleeful at the failure of this because they didn't sign on to it. Obviously they are putting party first and country second. You can't trust these guys." With Obama on message, and a lapdog MSM, they could pull that off far better than the right (since it seems like very few loudspeakers ever picked up Rush's meme and carried it along).

For Obama and the Democrats there is a high risk associated with this outcome - they will still get the lion's share of the blame but on our 1-10 scale this option nets out for Democrats at about a 4.

For Republicans this option also nets out a 4 - it's okay politically because the Dems will get most of the blame and lose seats, but bad for the country, and a potential backlash for not putting country first.

Net for Dems = +0.

Quadrant 4: The GOP opts out of signing on to the the stinkulus package and it succeeds.

For Democrats, this option is a no-brainer. You get 100% of the credit for saving America, saving the whole world economically. The upside is huge. "We did it, they were no help. Our ideas work, the right has no clue what works or what it's doing, they are out of touch with America and with reality. They are dangerous. Love us. Adore us. We are great."

The problem here is that you don't know if the package will work, it's a gamble and Obama knows it. Chuck Schumer knows it. That's why they still want the buy in from the GOP. They can't swing for home run here in case they strike out. You've heard of 'death by 1000 cuts'? That's the approach Democrats are willing to take. Rather than wiping out the GOP entirely in 2010 and 2012, let's work on that incremental march towards socialism and consolidate the gains we made in 2008. It's the safer bet, and it will still represent progress.

The scoring for this one would be Democrats = 10, Republicans = 0. Net for Dems = +10. But it's just too risky. Perhaps they know the plan can't succeed, perhaps they truly believe it will, but are playing it safe.

In any case if you look at the outcomes net positions you have;

Quadrant 1 - Democrats +4

Quadrant 2 - Democrats +4

Quadrant 3 - Democrats +0

Quadrant 4 - Democrats +10

firstly, you can see that this does seem to be a no lose situation for Democrats. At best Republicans break even under Quadrant 3.

Now if you assume anything other than a 50/50 chance of success by 2010 then that has to be reflected in the scoring. Let's say the Democrats think there's a 40% chance the plan will succeed by 2010. Keep in mind their opinion of Bush and as a result, how badly they believe the economy is messed up right now - less than 50% is a reasonable assumption. Many probably think it will take many years to fix, and some probably understand that the stimulus effect being provided by infrastructure doesn't put shovels in the ground right away, so 3+ years seems reasonable.

So if you run a little formula on the scores by quadrant and overlay the outcome probability you get a weighted score;

Quadrant 1 - 4*40% = 1.6

Quadrant 2 - 4*60% = 2.4

Quadrant 3 - 0*60% = 0

Quadrant 4 - 10*40% = 4

What the Democrats have some influence over is GOP opt in. The success is an unknown, which is why we've estimated it by the percentages above. Quadrants 1 & 2 combined (any GOP scenario) equal a score of 4. Whereas Quadrants 3 & 4 combined equal 4. That looks like to the Democrats it should not matter.


either they don't weight the outcomes the same way I have, and perhaps less confident about their messaging or else they think the chance of success of their plan is significantly less than 40%.

The safest scenarios for Obama are quadrant 1 and 2. The GOP opts in and their outcome is positive if the plan succeeds and even more so if it fails.

This is a simple decision box, that might have been used by Obama. The numbers are easy enough to play around with in terms of the Net + by quadrant and the probability of the outcome. Perhaps it's something like the Obama team used, and that's part of why he's trying to appear accommodating. Scarier still is the possibility that the GOP used a similar thought process and are

1) Willing to accept minimized Democrat gains as opposed to the home run option.

2) Don't have the stomach to stand up against what they believe is wrong

3) Are using a stupid decision box like I just did.

The fact of the matter is that the package is likely to fail. Signing on to it has no upside for Republicans. And they can't do anything to stop it. So why support it? Why not stand on principle, expect that it's going to fail and get busy explaining to people how you will be ready to pick up the pieces when it doesn't save America?

When it comes right down to it, you aren't rooting against America by saying you don't think it will work. You input has already been negated by "I won." So state your belief that this is a bad plan, state what you'd do instead and then stand on the sidelines like you are going to have to do anyway for the next few years and wait. Save your breath for where you can have a real say in matters, and will use that opportunity. If the plan succeeds you've taken a risk and lost by playing your hand that way. But you know what that will signal to conservative voters? You think Obama's plan will work, and you know what that means? You're not really conservative after all.

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