Using Game Theory to Resolve the Stalemate in Washington:
Game Theory pertains to the strategies people use during every day interactions with others. It analyzes the consequences of those strategies, exposes the traps, and suggests ways to avoid them. Right now, congress is debating over funding government and raising the debt ceiling. Essentially we have a real life interpretation of the Prisoner’s Dilemma.
In the Prisoner’s Dilemma, Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement without a way to communicate. The police admit they don’t have enough evidence to convict the pair on the principal change, so they plan to sentence both to a year in prison on a lesser charge. The prisoners are offered a plea deal. If both stay quiet, each serves 2 years in prison. If one confesses and the other denies, the one who confesses goes free and the other goes to jail for 3 years. If both confess, they both serve 1 year in prison. Betraying your partner by confessing rewards more than cooperating with the police, so all purely rational self-interested prisoners confess and take the lesser sentence.
For the sake of argument, let’s say we have House Speaker John Boehner on one side and President Obama on the other. So we have them on opposing sides and the battlefield of public opinion in the middle. What is on the line in this situation is the possibility of the United States defaulting on its loans. By defaulting on the loans, everyone in the world, without hyperbole, loses. It would likely cause a global financial collapse that would make 2008 blush.
Boehner doesn't want to pass a clean continuing resolution or debt ceiling increase without significant budget cuts and Obama doesn't want to defund The Affordable Care Act or sign a non-clean debt ceiling increase. Economists and the general public are less concerned about how a deal gets done as long as it gets done.
What we have is tantamount to the Cuban missile crisis or two cars driving full speed at each other playing chicken. Swerving and giving in to the others demands is worse than not swerving, unless neither swerves, because then we’re all dead.
We do have an extra player in this game though, and that is the public. If Obama can shift public opinion so they blame Boehner and the republicans, he may be willing to allow a financial collapse. Given the tide of public opinion at the present moment, Boehner doesn’t even appear to have that option.
If Republicans continue fighting right up to the debt limit, they will have to answer to voters for the economic mayhem a default would cause. Obama on the other hand doesn’t have to worry about reelection. For Obama to back down and gut Obamacare, he would have sacrificed his greatest achievement and confirm his lame duck status. He’s not likely to give in.
Using this logic, (which I’m unsure we can consider Congress logical) Republicans should back down quickly and just take when they can get. Obama should offer republicans some minor concessions like giving into the keystone pipeline, cutting the medical equipment tax, or agreeing to revenue neutral budget negotiations. A positive resolution from this situation could have history reflecting very positively on President Obama and less critically on Republicans, which would be a win for both of them.
This type of rational solution seems so simple in Theory, but Theory hardly ever survives its first brush with reality. We've also come to learn that rationality is something that may be a thing of the past in Washington.