Griper Blade: Budget Politics and Chicken Game Theory

Think of budget politics as a game of chicken. In chicken, the player most willing to accept the consequence of not veering off is the player who will win -- every time. In other words, the one most willing to destroy themselves is the one most certain to win. In budget politics, this has been Republicans. They've been willing to drive the nation off a cliff rather than accept compromise, while Democrats have been unwilling to let disaster happen. So dems caved to Republicans every time.

The problem for Republicans is that this strategy has burned them once. They have destroyed themselves. Crack up like they did with the debt ceiling and you start to lose your nerve. "All or nothing" doesn't seem as smart after you've learned that the alternative to all is nothing plus a busted nose. Party discipline begins to fray and those who question the wisdom of kamikaze politics begin to break ranks. Meanwhile, the other player becomes emboldened.

Washington Post:

Democrats are making increasingly explicit threats about their willingness to let nearly $600 billion worth of tax hikes and spending cuts take effect in January unless Republicans drop their opposition to higher taxes for the nation’s wealthiest households.

Emboldened by signs that GOP resistance to new taxes may be weakening, senior Democrats say they are prepared to weather a fiscal event that could plunge the nation back into recession if the new year arrives without an acceptable compromise...[CLICK TO READ FULL POST]