Washington: Over-Leveraged on All Fronts | Commentary

Posted July 23, 2014 at 1:54pm

One of the most frequently discussed concepts in the past six years is leverage. The financial crisis of 2008-09 is regarded by many economists as a crisis caused by excessive leveraging of borrowed funds. This was an “investment leverage” crisis. But we can also see excessive leveraging in the political realm of society, especially in Washington.

An over-leveraged political landscape is reflected in federal debt ceiling debates, health care policy, the Supreme Court’s recent ruling that President Barack Obama’s recess appointments exceeded his legal authority, and Speaker John A. Boehner’s lawsuit regarding instances of possible over-extension of executive constitutional authority.

These exemplify or reflect responses to two kinds of leveraging central to political action. First, management theorists Gary Hamel and the late C.K. Prahalad discussed “resource leverage” in their landmark book, “Competing for the Future.” Resource leveraging involves using resources creatively, beyond allocating scarce resources. The other concept of leverage is “bargaining leverage,” which occurs in policymaking when items are withheld in a negotiation in order to win a concession.

Leveraging, a tool that has been used for thousands of years and which is best regarded as a basic principle of human behavior, has become more prominent in the last generation as traditional structures of authority have dissolved. Moreover, increased partisanship and decreased respect for political officials and institutions have led to excessive use of bargaining leverage. Additionally, use of resource leverage has jumped with the proliferation of new media and information technology.

Examining policymaking from the vantage point of achieving the “leverage mean” — wherein political actors use leverage to advance the common good — allows for assessment of which policy outcomes reflect the destructive use of leverage and what changes could bring the system back into balance.

Over-leveraging is reflected in unheeded bipartisan commission recommendations for budget reform and a 2011-13 health care debate reduced to a standoff regarding repeal of the Affordable Care Act. In both the spring of 2011 and the fall of 2013, House Republicans tried to leverage their approval of an increase in the debt limit to achieve either federal budget spending reductions or defunding the Affordable Care Act, with House Majority Leader Eric Cantor, R-Va., announcing Congress’ “leverage moment” in the spring of 2011.

In the past, neither party had used the debt ceiling as bargaining leverage: Raising the debt ceiling, it was agreed, was critical to maintaining our economic standing in the world marketplace. The accompanying use of excessive resource leverage through new media — consider Sen. Ted Cruz’s, R-Texas, quasi-filibuster in November 2013 — allowed for public awareness of this formerly obscure issue. Excessive leveraging (bargaining and resource) created a destructive wedge issue that led to even more gridlock and polarization.

Excessive leveraging also led to the Senate’s decision in 2013 to embrace what had been called “the nuclear option” to overcome the Democratic Senate’s difficulties in approving Obama administration executive and judicial nominees. “The nuclear option” was a Senate rule change that allowed approval of nominees based on a majority vote rather than the 60 cloture votes required to end debate under filibuster rules.

Although for decades the minority had leveraged the higher vote threshold as a means to block specific nominees, increased polarization between the parties was evident after Obama’s election, particularly for executive nominees. According to The Wall Street Journal’s “Washington Wire,” of the 56 times Senate majority leaders sought to cut off debate for executive nominees between 1967 and 2012, 23 occurred during the Obama presidency. The marked increase in leveraging since 2008 convinced many formerly opposed to the nuclear option that these leverage attempts were excessive.

The only group in this hyper-partisan policymaking realm that is under-leveraging is citizens, as public opinion is manipulated by partisan policymakers more interested in defeating the opposing party than in engaging the public in a discussion about the trade-offs associated with difficult policy choices.

An over-leveraged Washington needs to recognize that pursuing the leverage mean would be good both from the standpoint of politics and policy. Leverage functions best in policy-making when significant good effects are the result of well-positioned forces. The courts, including the Supreme Court, will decide how much Obama has over-extended his legal authority, but the court of public opinion needs to call over-leveraging when it sees it.

David M. Anderson, Ph.D., is the editor of “Leveraging: A Political, Economic and Societal Framework.” Samantha Woolsey Ball, Ph.D., is a contributor to “Leveraging.”