Sunday, July 24, 2011

Does the Breakdown of Talks Signal That A Debt Deal May Be Near?

This is just a hunch, but a deal on the debt ceiling may be approaching precisely because the Republicans have broken off talks with the White House. Ever the optimist, I want to view this as last-minute posturing; the parties are testing one another's resolve. A game theorist might describe it as a game of chicken in which neither "driver" - Boehner or Obama - has yet swerved, so that their cars remain on a collision course. One, probably both, are still likely to swerve before it's too late. As California Republican Dan Lungren, a nine-term representative in Congress observes (here), "I've been here long enough to see us go to the brink many times, and normally we find some way to avoid going over the top."

Each party has an incentive to hold-out for marginal last minute concessions by the other, even if the bulk of the deal is already agreed (which may or may not be the case). With last minute concessions in hand, members of each party could return to their constituents claiming some sort of political victory (or, at least, non-defeat).

On the other hand, I could be completely wrong, and we could be locked in a state of abnormal politics in which ideological purity trumps incremental change.

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