TPM:
Echoing President Obama’s refusal to negotiate on the debt limit, Sen. Chuck Schumer (D-NY) warned Republicans on Friday that Democrats have no intention of giving in to any of their demands in exchange for lifting the nation’s borrowing limit to pay its bills.
At first, it sounded like Schumer was echoing Obama's apparent belief that the election resulted in a Democrat dictatorship in which Obama gets to decide by fiat what issues are negotiable and which aren't, but then I realized Schumer is really setting the debt ceiling up as a chicken game:
“I think that risking government shutdown, risking not raising the debt ceiling, is playing with fire,” Schumer told reporters in the Capitol, in response to a question from TPM. “Anyone who wants to come and negotiate, and say ‘we will raise the debt ceiling only if you do A, B, C’ will not have a negotiating partner. And if then they don’t want to raise the debt ceiling, it’ll be on their shoulders. I would bet that they would not go forward with that.”
Here's how a chicken game works:
...two teenagers are driving towards each other on a crash course. The point of the game is to overcome fear and stay on course. The driver that gets scared and swerves away is the loser. The driver that stays on course is the winner and gets the admiration of onlookers. The problem, of course, is that if both stay on course, then both will crash and die.
There are strategies for winning a chicken game. Unfortunately, as Kimberly Strassel observed in today's WSJ, it not clear that the GOP has a strategy--let alone a good one--for the debt ceiling fight.
The first step in developing a winning strategy will require the GOP to decide whether it really wants to play chicken:
In the abstract, the debt ceiling is a powerful tool for forcing the president to give in to spending cuts. The Obama Treasury can't pay the bills without say-so from the Republican House, so the House holds all the cards.
In the non-abstract, failure to raise government borrowing limits means U.S. default—and with it potential credit downgrades, market panic and resulting economic distress. Is the GOP willing to inflict that on the economy? If Republican members instead run for cover, as they did with the cliff, the GOP will have been exposed as bluffers, and the administration will never again have to fear the debt ceiling. Republicans have to consider if they are willing to take that risk.
If so, they need to take some pages out of game theory:
In the game of chicken, your flexibility is a weakness. One of the best solutions is to prove that you will not change course .... Limiting your options, and metaphorically becoming immovable like a lighthouse, can show the other side that you will not back down.
In the driving story, a teenager could become immovable by publicly showing he is forcibly locking himself into staying on course–either by using a steering wheel lock or even by detaching the wheel and throwing it away. ...
If you can’t credibly limit your actions, the next best option is to get a reputation for being tough so people don’t bother messing with you.
Unfortuately, the GOP has caved to Obama so often that a mere threat is no longer credible. They will have to find a way to locking themselves into a course that ends with Obama swerving or letting the country default.
Alternatively, maybe the GOP should embrace the Democrat/mainstream media argument that conservatives are nuts. Here's a mild example of the left's meme:
What bears stating even more strongly, though, is how far we've come from 2011, when the Washington establishment viewed the Republicans' threat of credit default as as the utterly brazen and unprecedented step that it was. ... Even after the crisis had passed, official Washington looked on the Republican strategy with a mix of awe and horror -- I was part of a major effort at the Washington Post to reconstruct the year-long tale of how the House GOP came to embrace this previously unthinkable approach.
Here's a more extreme example:
The Republican leadership can credibly claim that most of its members are crazy enough to believe that if the U.S. defaults, nothing very bad will happen. Their claim is credible because the current composition of the House Republicans is the result of a long selection process that has weeded out its sane, moderate, conservative members. This fact forces Democratic leaders to rethink their position. They cannot win or even play the negotiation to a draw. They must concede.
I don't believe that to be true, but in this case I say that the GOP ought to embrace the image.
You see, there's a version of the chicken game known as brinkmanship and the way you win that version is by convincing your opponent that you're nuts:
The [game] involves a credible threat of the risk of irrational behavior in the face of aggression. If player 1 unilaterally moves to A, a rational player 2 cannot retaliate since (A, C) is preferable to (A, A). Only if player 1 has grounds to believe that there is sufficient risk that player 2 responds irrationally (usually by giving up control over the response, so that there is sufficient risk that player 2 responds with A) player 1 will retract and agree on the compromise.
So there are the GOP's choices:
- Give Obama his way on the debt ceiling, in which case the USA accelerates towards becoming Greece and the GOP become pointless as a political party.
- Fight but cave, as they have done so often, in which case the USA accelerates towards becoming Greece and the GOP become pointless as a political party.
- Find a way to throw the steering window out of the window of their car.
- Convince Obama that they really are crazy (like a fox).
In the long run, options 3 and 4 are not just brave politics but also good economic policy. As John Taylor explained the last time around, linking the debt ceiling to spending cuts just makes good economic sense:
If politicians just increase the debt limit now without simultaneously correcting that rapid spending growth, then they will be expected to do so in the future. In contrast, if they tie any increase in the debt limit to a halt in the explosion of spending, then people will give them better odds that they will control spending in the future. Linking the debt limit vote to spending thus establishes a precedent and valuable credibility.
All of which helps us avoid becoming Greece long enough to try convincing the American people that they cannot keep voting themselves fiscal presents.
The last time we went through this exercise, I counseled the GOP not to play chicken with Obama. But when facts change, I change my opinions. It's become clear that Obama and the Democrats cannot be trusted to cut spending. It's become clear from what Obama and Schumer are saying that the Democrats are going to insist on turning the debt ceiling into a chicken game.
The Republicans have been forced into playing chicken over the debt ceiling, The only question now is whether they will swerve first. For the sake of the country, I hope not.
