The Strategy of Grand Bargains

I admit I do not share all of President Obama’s priorities, but I do agree with him on the strategy of change. This may sound like an oxymoron. But those who know me have heard my theory on this. I call it the Theory of the Incremental Piss-off Factor. This law of nature says that your competitors will not be THAT MUCH MORE pissed off if you change the game A LOT to really fix the problem rather than just mess around with them at the edges.

I subscribe to this theory and have used it successfully myself to plot strategy in competitive markets, to design new products that seek to be game-changers and in negotiating the settlement of complex business or regulatory problems. Using this strategy successfully requires a creative mind, good conceptualizing skills, and a sense of timing that is learned best in perfecting your skills at poker.

The President is playing his hand well these days and using THE THEORY in his new budget proposal which is changing a lot Washington has come to know and love. That screaming you hear is from sacred cows and their lobbyists some who anticipated a bad outcome from the Administration and got it like the Oil & Gas lobby facing the loss of about $31 billion in tax credits and deductions.

Now it’s tough to argue that the oil industry needs tax incentives from the Government especially in this economy. And if all the Budget did was revoke some tax credits the oil boys would probably swallow it. But the Administration is rubbing their nose in it by imposing these “revenue enhancements” in the form of nuisance fees and higher costs such as adding excise taxes on Gulf of Mexico drilling for new resources; raising permitting fees on development projects on federal land; and cutting tax deductions for repair, site prep, and transportation costs of drilling among other things. Those who oppose more domestic energy production cheer. But there is a corollary to THE THEORY that I learned the hard way while negotiating for the City of Austin at the Texas Legislature over environmental and growth management issues. The corollary: “Give the People What They Want—and Give it to them Hard!”

Some of the President’s friends on K Street are beginning to be careful what they wish for too as the corollary kicks in from some of these budget game changers. Ask the UAW about the pressure it feels to make concessions once unthinkable to try to save the jobs of thousands in the auto industry. Ask the ethanol lobby which feels the sand slipping from beneath their feet as the cost of subsidies pile up in a market awash with ethanol and the opponents beat the drum of wasteful energy use and impacts on food prices from corn-based ethanol products. Attempts to limit crop subsidies cause howls from AG interests and their farm lobbyists. Do we really need a sugar subsidy?

I for one hope the President’s budget slays many of these earmark champions and forces a transparent competition between trade-offs we can afford and those we can’t. Let’s hope for a head to head contest between policies that create jobs and those that featherbed or prop up declining industries unable to compete.

The real test of wills ahead is the clash over job creation versus environmental regulations. All that stimulus money being appropriated to jump start the economy now faces an endless array of EIRs, CEQA’s and other studies of impacts that take time. In the law of the Incremental Piss-Off Factor I wonder if we could negotiate a grand bargain that includes acceptance of changes in priorities in energy, health care, transportation and other sectors of the economy in exchange for a reduction in the environmental permitting burden or as least a cost benefit test requiring the fair balancing of environmental and economic interests in making decisions—and a deadline for completing the process. Now that would be change we could believe in.

I didn’t think so, but it was worth a shot!