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The Negotiator: Solving the US debt problem

Wharton's negotiation guru tackles Washington's most urgent challenge.

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WASHINGTON, DC - Majority Leader Eric Cantor (R-VA), speaks while flanked by House Speaker John Boehner (R-OH) at the U.S. Capitol, on July 19, 2011. House Republicans introduced a cut, cap and balance, plan would raise the debt ceiling $2.4 trillion, but only after significant spending cuts, and a constitutional amendment requiring a balanced federal budget. (Mark Wilson/Getty Images)

As we've known for months now, lawmakers in Washington D.C. will need to lift the debt ceiling by Aug. 2. If not, the United States — and the world for that matter — could experience economic Armageddon, according to President Barack Obama, Federal Reserve Chairman Ben Bernanke (a man not prone to hyperbole) and many others.

As that deadline approaches and politicians continue to squabble, the stakes are higher than ever. Standard & Poor's – whose top ratings on U.S. credit saves the country many billions in borrowing costs — has lost patience with Washington. On July 14, the agency warned that in addition to boosting the debt ceiling, it wants to see an end to the "political stalemate" over America's $14.3 trillion debt. "[If] Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future," S&P said it could take the unprecedented step of downgrading the country's creditworthiness.

With only days remaining to cobble together a compromise, write it into law and rush it through Congress, the pressure is on.

To get ideas on how to solve the debt standoff, GlobalPost turned to Stuart Diamond, one of the world’s leading negotiators. Diamond teaches the most popular class in the prestigious Wharton MBA program, and he’s the author of Getting More, a New York Times bestselling negotiations book. His techniques have helped solve the 2008 Hollywood writer’s strike, earn companies billions of dollars, and coax four-year-olds to willingly brush their teeth and go to bed.

So they might even work with Congress. (The interview has been edited and condensed by GlobalPost.)

GlobalPost: Obama’s negotiating style has been similar to the one he deployed in the healthcare reform debate: delegate the deal-making to others, and jump in at the last minute when things aren’t going well. Is this smart?

Diamond: It certainly gives him the chance to be perceived as saving the day, but if he's capable of saving a process before it becomes a crisis, he should be in there earlier. Why wait until things are at an extreme, when parties are mad at each other, and therefore not cooperative, before jumping in and trying to save the crisis?

The best approach is to have a process from the beginning, something that's calm, collaborative, structured, and reasonable. The two parties have already agreed about a trillion dollars in savings, if what I read in the newspaper is correct. Using what they agree on as a foundation to improve, rather than focusing on disagreements, is a good start.

Conservative Republicans have succeeded in blaming the debt on runaway spending by President Obama. But according to an analysis by the Washington Post, that’s not true. Half of the debt was caused by recessions and by tax cuts – mainly enacted under President Bush. Another $1.3 trillion came from the unfunded Iraq and Afghanistan wars. Obama’s stimulus — a favorite target of Republicans — added just $719 billion. So the Washington Post attributed $7 trillion of the debt to Bush, and only $1.7 trillion to Obama (the rest came from elsewhere). What would you advise Obama to do with this information?

Diamond: I would advise Obama to state the information, and then to say it was incapable and ineffective people who made those decisions in the past, and smart, effective people who can figure out what we should do now. Conflict is about the past. Building profit and opportunity are about the future. Whoever's at fault for the past is irrelevant. We face a big deadline, on which the economy depends, and we have a lot of rebuilding to do. Any moment we spend arguing over the past is wasted, when we could be articulating and developing good ideas.

In recent weeks, Tea Party Republicans have been standing in the way of a deal. Some appear untethered from reality — they think that failing to raise the debt ceiling won’t actually be destructive. So what should President Obama do? And in general what do you do when you’re negotiating with a group with a strongly held position that could be catastrophic?

Diamond: Congress and the president need an incremental solution. The president’s $4 trillion