Congress Models Itself on the Cuban Missile Crisis
The prospect of mutual disaster is a key feature of the chicken game.
(Photo: theatlanticwire.com)
The politics of the U.S. Congress can be harsh, but we do not usually
associate it with the adversarial bargaining of international relations theory,
much less with the tactics of “brinkmanship,” as Secretary of State John Foster
Dulles used to call it. Times have changed. What we have been seeing in Washington
these past few days is best described as brinkmanship or, in the terminology of
game theory, the chicken game.
Mathematicians and economists began using “game theory” back in the 1940s
to examine how the strategic decisions of different players interact to shape
outcomes. Different situations and their incentive structures were represented
as stylized “games.” In the 1960s economist Thomas Schelling popularized the
application of game theory to international politics, especially in the realm
of deterrence theory, in the books Strategy of Conflict (1960) and Arms and
Influence (1966). In fact, his discussions were so insightful and led to the
spread of game theory to so many different fields that he was awarded the Nobel
Prize in Economics in 2005. But that is another story.
The chicken game was inspired by the supposed practice of 1950s youths of
driving straight at each other in souped-up jalopies. Fans of old movies might
recall the scene in Rebel without a Cause, but that was a modified chicken game
in which both drove toward a cliff. In the movie, for purposes of plot
development, they wanted an outcome in which one character died and the other
survived. The key element of the classic chicken game, however, is that
disaster is mutual. Everyone survives or no one survives. The key to winning is
to convince the other driver that you will not swerve, thereby forcing him to
swerve to avoid mutual disaster. Whoever swerves first is declared the loser.
While both players prefer to win outright, a less-satisfactory but sometimes
acceptable outcome is when both swerve simultaneously. The real problem, of
course, comes when neither side swerves.
In the Cuban Missile Crisis, the threat of mutual disaster was the
prospect of nuclear war, and the issue at hand was whether the Soviet Union
could be forced to withdraw its missiles from Cuba. In the present clash, the
threat is a potential default on the debt of the U.S. government. While less
obviously a disaster than nuclear war, default could trigger numerous wide-ranging
economic consequences. While it is difficult to predict all the consequences
with precision, since the U.S. government has never been so foolish as to
follow this route before (or at least not before 2011), the mere need to reduce
spending suddenly to the level of revenues could have an economic impact
comparable to that of the housing bust of 2008. Moreover, the inability to
borrow would mean that government spending would have tocontinue falling as the
economy (and hence government revenues) fell, generating a downward demand
spiral. Aside from that, you cannot simply understand a U.S. default as
comparable to the default of, say, Argentina, appropriately scaled up for the
size of the economy. U.S. treasury bonds are a cornerstone of the global financial
system. Many countries keep at least some of their foreign reserves in U.S.
bonds, totaling about $5.4 trillion. A political decision not to make payments
(there is no economic necessity forcing this decision) would throw global
finances into turmoil. Recall the consequences five years ago when banks could
not say with precision how many collateralized debt obligations they owned or
how much of each CDO was based on bad mortgages. Now imagine a situation in
which U.S. treasury bonds have become the “toxic asset.” Remember, too, that
much of the world economy is already shaky or just beginning to recover from
the last crisis. So far markets have refused to believe that it will happen,
but a U.S. default, or even a serious suggestion of a default, could be a very
serious matter, indeed.
The Issues
The present stalemate in Congress, in a sense, is not about issues. It is
a consequence of the previous chicken confrontation, in the summer of 2011.
Like this one, that episode involved a threat to default on the debt of the
U.S. government. That time, President Obama, after initial reluctance, agreed
to negotiate with the Republicans in Congress.
That clash had two basic outcomes. The more direct policy outcome was
$1.2 trillion in spending cuts over 10 years, followed by comparable cuts in
the form of “the sequester.” The sequester—a system of automatic,
across-the-boards spending cuts—was designed to be unacceptable to all sides so
as to force a compromise in negotiations on the budget, but both sides eventually
came to view the sequester as somewhat less onerous than the other side’s
budget demands. In fact, the sequester is itself something of a budget
disaster, albeit not comparable to a default. Beyond the arbitrary nature of
these particular cuts (which nearly everyone recognizes as a problem), the
entire notion of cutting spending during an economic downturn has a
counterproductive impact on an already inadequate level of demand. First you
need to revive the economy, and then you can afford to deal with the deficit.
That, at least, is the Democratic perspective (shared by more than one Nobel
Prize–winning economist). The Republicans, on the other hand, have insisted
that the current deficit is an immediate threat and that spending must be cut
regardless of economic circumstances.* As a result, the Republicans have now
convinced themselves that the sequester was a policy victory. It is this
fundamental difference in the understanding of what the current economic
situation requires of the budget (and perhaps a subsequent belief that those on
the other side could not possibly mean what they say) that has made budget
negotiations so maddeningly unproductive.
The second, and perhaps more important, consequence of the 2011 clash was
that it convinced at least some Republicans of the general usefulness of the
chicken game in these circumstances. That is why I say the current crisis is
not really about issues, it is about strategy, tactics, and the rules of
government.As early as last spring, Republicans in Congress began debating what
they should demand in return for not allowing the government to default when
the debt ceiling came due in the fall. The decision for the strategy came
first, and then followed the discussion of what the issue should be. To be
sure, Republicans have been divided over the wisdom of this. Speaker Boehner,
himself, advised against it months ago. The speaker, however, does not
necessarily decide these things. He has a highlyfractionated caucus, even
though the factions divide more on tactics than on policy. (Tea Party
Republicans are distinguished from other Republicans less by their policy
preferences than by their disdain for politics and compromise.) It is in the
nature of divided parties that they do not leave decisions in the hands of a single
leader who might favor one faction over another. It is also in their nature
that even small factions, being necessary to maintaining a majority, can have
outsized influence. In this case, a relatively small but aggressive faction
appears to have kidnapped the party and set it on a course that more
experienced Republicans advised was unlikely to succeed. Once that course has
been set, changes of direction are politically costly and difficult to
undertake.
Ultimately, the House Republicans—urged on by Ted Cruz and Mike Lee in
the Senate—decided to demand the “defunding” of Obamacare, thus attempting a de
facto repeal of a law that they did not have the strength to repeal by
constitutional means. Yet, when push came to shove and success appeared unlikely,
they were just as happy to switch goals to budgetary issues. As their
bargaining chip, they initially relied on a refusal to fund the government
after the expiration of a continuing resolution on October 1, but with the need
to raise the debt ceiling by October 17, the question of default immediately
became part of the bargaining.
For the Democrats in Congress and the administration, the issue could not
be simpler. For them, the objective is to stop the emerging Republican strategy
of instigating artificial crises to achieve goals that they cannot reach by
constitutional means. Democrats believe that the president’s willingness to
negotiate to prevent default in 2011 led directly to the present challenge.
They do not want to repeat that mistake.
The Tactics
Thus in the current confrontation, default is the mutual disaster to be
avoided. If default occurs, the consequences will gravely injure all parties to
the argument and nonparties as well. The tactics are to convince the other side
that you are not going to do anything to prevent default, and therefore the
other side must make the concessions needed to avoid the predictable outcome.
The other side must swerve.
For the Democrats, giving in to Republican demands would be “swerving” on
the specific issue, but making any meaningful concession at all risks being
interpreted as “swerving” on the underlying strategic question of putting up
with extortion. The Democratic tactic has been simply not to negotiate. They
certainly should not agree to negotiate too quickly or on major aspects of
policy, nor should they accept the premise that avoiding mutual disaster is
somehow a concession to the administration. Preferably, they should not
negotiate at all. To negotiate, to make concessions on policy, is to swerve and
allow the other side to win, and it will be followed by further demands—further
artificial crises—in the future. In the background lies the prospect that if
Democrats did negotiate, they could make their own demands, including a partial
or full dismantling of the sequester.
For the Republicans, “swerving” means dropping their demands. Republican
tactics have included a repeated insistence that negotiations under such
circumstances are perfectly normal, thus trying to create an impression among
voters and the media that the Democrats are being unreasonable. They have
offered to fund parts of the government that “both sides agree on” as a
concession, even though that is the same as their original demand, which was
not to fund the part they did not agree on. They have also treated the changing
configuration of their demands (such as switching from Obamacare to budget
demands) as a concession that must be reciprocated. Most important, even vital
to their strategy, however, is the refusal to admit that the threat of mutual
disaster is real. If you can convince the other side that you do not believe
default would be so bad, then you leave it to the other side to do what is
necessary to avoid the disaster. Hence, we hear a litany of arguments about how
the administration could avoid any negative consequences if it wanted to, how a
failure to raise the debt ceiling might not even result in default, and even
how default could have a stabilizing effect on stock markets. Some of the
people making these arguments may believe them and others may not, but that
does not matter. The arguments do not need to be credible or viable; in fact,
convincing the other side that the arguments were true would be
counterproductive. The purpose of the arguments is to convince the other side that
Republicans are not going to swerve to prevent the disaster. Unfortunately for
the Republicans, they are not completely irresponsible. Boehner has said that
he cannot allow a default to occur. These remarks were made in private,
although they did not remain private, and were presumably intended to prevent
panic in the stock markets. It is probably to counter that admission—to rebuild
the bargaining leverage lost—that some of the more outlandish statements
regarding the benign consequences of a default have been made.
Avoiding Disaster
The real problem comes when the cars are closing in, the moment of impact
is nigh, and no one is swerving. Both sides having tied their political
fortunes (and, they may believe, the good of the country) to a particular strategy,
their reluctance to swerve and their belief that the other side will fold in
the endcould last too long.
One possibility is for the side that is winning to offer a symbolic
concession to the losing side to lighten the costs of failure and make swerving
less painful (to make it appear a bit more like both sides are swerving
simultaneously). For instance, if the Republicans decide that they have lost
and that it would not pay to resort to the chicken strategy again in the
future, then it would be beneficial to Democrats (not to mention the rest of
society) to throw them a bone and allow them to back down gracefully. Disaster
must be avoided, and humiliating the other side needlessly can come back to
haunt you. On the other hand, if they have not come to that conclusion, then
easing their exit could be counterproductive. Determining which situation is
true will be a problem that may be resolvable only through quiet backroom
contacts with a good admixture of lucky guessing. The fractionated nature of
today’s GOP makes the problem harder because there are some members who always
thought the idea was stupid, there are others who will never be convinced, and
the size of a faction does not necessarily constrain its ability to determine
party strategy. Thus a less than perfect victory may well be necessary to avoid
disaster. As always, the inevitable loose ends will have to be dealt with
later.
*The Republicans generally fail to acknowledge that the deficit has been
falling steadily and is now about half of what it was in 2009. The decrease is
in large part a predictable consequence of recovery, inadequate as that
recovery has been, since rising economic activity generates higher tax revenues
and reduces the need for emergency outlays. It is also worth noting that the
Republicans were less concerned about deficits and debts when they were in the
White House. While the debt has increased by about 70 percent under Barack
Obama (under economic conditions in which deficits are beneficial), it tripled
under Ronald Reagan and doubled again under George W. Bush, both of whom ran
deficits in good times and bad.
by Scott Monje
Source: http://foreignpolicyblogs.com/2013/10/16/congress-models-itself-on-the-cuban-missile-crisis/
Comments
Post a Comment