Starting with this post from Mark Kleiman, who says:
3. Basic negotiation theory starts with the question, “What happens if there isn’t a bargain? How good or bad is that for each side? In jargon, what is each side’s best alternative to a negotiated agreement (BATNA)? The worse the BATNA, the stronger the need for a deal, and the weaker the bargaining position.
4. Right now, the good guys want a bill and the bad guys don’t want a bill. It’s hard to imagine any bill that’s better for Mitch McConnell than no bill. So the obvious outcome of bargaining is no deal, or a very, very bad deal for the Democrats.
But that's not what's been going on. The main thing to understand is that Mitch McConnell isn't part of the bargaining -- and neither were Grassley or Enzi, appearances notwithstanding.
The negotiations that have been going on in the Senate from the start are between liberal Democrats, marginal Democrats, and Olympia Snowe.
And the tricky part for getting a bill passed (which I think all sixty-one of those Senators want) is that the political incentives of the marginal Democrats are to avoid supporting a Democrats-only bill, but the GOP rejectionist strategy means that a Democrats-only bill is the only one available. So there's been a major incentive for Democrats to demonstrate as clearly as possible that they are open to a bipartisan bill, even though everyone "knows" that it ain't gonna happen.
On top of that, there are real differences (on both substance and procedure) between liberal Democrats and marginal Democrats in the Senate. Liberals may not like that, but Ben Nelson isn't just a fraidy cat; he really does have different preferences.
Mark wonders why reconciliation isn't an obvious path. The answer is that reconciliation, while totally legitimate in one sense, would certainly be seen as a partisan move, and there are a lot of Democrats who wouldn't be happy about being the 50th vote for a bill opposed by all 40 Republicans and 10 moderate Democrats. Indeed, because there's very little separating the, oh, 43rd most liberal and the 58th most liberal Democrat, it may well be about as easy getting to 60 as it is getting to 50.
So the current strategy is driven mainly by the distribution of votes in the Senate. That doesn't mean that Obama, or Reid, or Baucus is always following the best possible negotiating strategy, but only that a good critique has to start with recognizing who the real players are in this negotiation.