Occasionally we delve into politics in this blog, but not often. Today is one of those days because there are lessons, regardless of your political leanings. First the marketing lesson.
The media and many of the politicians are using the word default to describe what happens to the U.S. Government if the debt ceiling is not raised. This is a perfect use of a single word, which accomplishes their goal … despite it being incorrect. A company that cuts expenses because they cannot get an extension of their line of credit is not in default if they keep making their loan payments. The fact they have to cut expenses is the result of income not catching up with expenses and their lenders not being willing to give them more credit.
The U.S. does not go into default on August 3rd, they simply have to spend a LOT less. What gets cut? I don’t know, and what is even more interesting to me is I’m not sure who has the authority to decide. Since Congress has not passed a budget in over 2 years, I assume the Executive Branch has unilateral authority to decide, unless Congress takes action. But no default will occur unless someone decides the “Dept of Who Knows What They Do” is more important than paying our loan payment.
The marketing lesson, taught by Ries & Trout many years ago, is to tie your message to a single word. In this case the word “default” and the fear it engenders accomplishes their “marketing goal.”
Now to our negotiation lessons. We have done a LOT of negotiation training over the years and most contentious negotiations are not settled until the “deadline.” The NFL negotiations were settled on the last day possible to avoid delaying the season. The Federal debt ceiling will not be settled until on or after August 2nd. Why possibly after? Because everyone does not agree that date is “real” in terms of what it does to the country.
And then there is the word “compromise.” Sounds good, but it is really the basis for lose-lose negotiation (as opposed to win-win). Compromise is defined as you giving up something you want (you lose) in exchange for me giving up something I want (I lose). Most negotiations need some compromise, but this one seems to be based on it. Not the best way to create a solution.