updated 5 March 2021
In March 2020, the US government passed three bills providing financial support in response to the COVID-19 pandemic. The $2.3 T stimulus package was the world’s largest at 13% of US GDP. However, this was not all; the Federal Reserve Bank (‘Fed’) loosened monetary policy and dramatically reversed interest rates, while the largest bill, the CARES Act, made funds available until the end of July. It was clear that panic over economic health overlapped with that over physical death.
Governmental compromises are rich venues from which we can learn negotiation skills. However, many public negotiations are conducted between a host of parties, making their machinations challenging to decipher.
Negotiation consists of Preparation and Engagement to form Partnership: we seek agreement to get something done together. We can learn from successful negotiations as well as those that fail.
Context and Personality in Preparation
The Fed reacted quickly to the economic fallout, virtually eliminating bank interest rates and restarting quantitative easing (buying their own securities; ‘QE’), to the tune of $700 B. They based these market stabilization measures on hard data, reflecting similar actions during the 2008 Great Recession.
Preparation consists of understanding context and establishing personality. Context is the surrounding environment; personality, the style of negotiation. Their components are interrelated but have an order.
The alignment of people in a negotiation is more important than the number of people, whether as individuals (‘actors’) or groups (‘parties’). The Fed behaved uniformly and used history to prepare; Congress, less so.
Straightforward Goals and Tangled Pathways
Declining financial markets and rising mortality accompanied the March stimulus bills. As the S&P500 dropped to nearly 2200, US COVID-19 deaths climbed toward 1,000. Congress’s approaching Easter break reinforced their urgency toward action. Within two months, the S&P500 bounced back near March’s peak, US deaths approached 100,000, and the House passed an additional $3.4 T stimulus bill. The Senate and President declined action.
Preparation involves two aspects: the goals we seek to achieve and how we try to solve them. Goals are part of negotiation’s context, while solving is of style. We first set our destination and then chart a course.
Negotiators come to the table with different goals and seek to find a compatible route to achieve something greater. When the goals are radically different, finding the path to a common solution is rocky, at best.
Searching for the Upper Hand Among Knotty Alternatives
Financial markets imperfectly reflect economic activity. The drivers of economic health are as diverse as those for human health. Within the Senate and Executive, opinions and influence differed widely about how to address the nations’ health. Pushes for state aid competed with legal liability and individual support, blocking further bills. As CARES benefits expired at the end of July, the narrowing number of days before elections compounded complexity.
Two additional aspects of preparation are leverage and the presentation of choices. Leverage is part of negotiation’s context, while choices are of style. Our capability for influence suggests how we might make choices.
Comparing apples to oranges is dicey; blackberries to raspberries, more straightforward. Too many choices are confusing; too few, constricting. Agreement is delayed when conflicting options shroud practical advantage.
Dominating Competition Before Submissive Framing
Summer progressed, the S&P500 approached an all-time high, and so did deaths. Some parties sought a framework for economic health, others, human health. Competing parties, and factions within the parties, pursued their individual desires, achieving little. Without the clarifying focus of urgency to bring various parties together, the government community lacked alignment.
Preparation's two most aspects are the contextual interaction of cooperation and competition and the personality styles imparted by different frameworks. Negotiation's context dominates over its subservient personality.
For US stimulus efforts, dominant competition eclipsed dependent framing. The parties negotiating for additional stimulus failed to prepare their understanding of context or establish personality and failed to succeed (for better or worse).
In the second post of the month, I’ll follow the US COVID-19 stimulus negotiations into Engagement.