Sunday, October 6, 2013

Why They'll Do It: Breaching The Debt Ceiling

Mutually Assured
The Conventional Wisdom is that no one would be suicidal enough to actually breach the debt ceiling. After all, the more you know the more and more catastrophic it gets*. So of course no one would push the button on the destruction of the US Economy.

It's all gamesmanship.

That's exactly the problem.

Prestige, Escalation, and No Way Out
I have written before about the amazingly insightful 1985 computer game Balance of Power. I'll do so again, briefly: in that game you played either the US or the USSR and you made moves on a map of the world. Each time something happened you could either allow it--or object. If you objected, you'd escalate. Incidents were rated in 'prestige points.'

If you backed down, you lost those points. If the other side blinked, they did. In Balance of Power, written by geopolitical experts as, more or less, a teaching game, an incident could rocket from fairly insignificant 'back-channel' discussion (worth very little Prestige) to front-page screaming headlines (tons of Prestige). The winner at the end, assuming there was not nuclear war (which ended the game with a stark all-text screen saying they would not reward failure with pictures of mushroom clouds), was the party with the most points.

This, without the computer and the numbers, is actually how the world works.

This Would Be One to Give 'EM
Right now both sides have placed a maximal stake in the ground--and are maximally visible--with Boehner coming out and declaring that if there isn't some kind of deal they'll breach. Obama has said "no negotiations." This is that last-click in Balance Of Power before either someone wins ... or ... you go to nuclear holocaust.

Why Not Be Rational?
Not coincidentally in 1985 we got the song "Russians" from Sting on The Dream of the Blue Turtles album. It hoped that with escalating tensions the Russians would love their children the same way we love ours and thus both sides would do whatever it took not to push the button. Whatever, that is, that didn't condemn those self-same children to a life of misery and doom under an iron curtain of communism, one presumes (would Sting surrender his kids if pushed far enough? Out of love for them? Right: you don't know until you get there, Sting, do you?).

The Russians, as it turned out, loved having a military more than having a functional economy until they didn't and the situation unwound itself in about the best way possible. We're still hoping for some kind of repeat of that with North Korea. But the problem with the assumption that both sides can just be "rational" about it is the question: What's left over for my people when I submit? (And yourself)?

Here's the answer:
Devil Cheats Market: Understands America! Worst Liberal Crook!! ... also 'kniving!?'
This is a "world cloud" from responses to a study done by Democracy Corps for 'Obama.' Take a good hard look (read the whole thing--it's great). The problem is not, per se, Boehner who probably would only use a few of those words to describe Obama--it's 'the base' who use all of them (well, not 'great' usually and probably not 'leader'--without, you know, qualifiers).

If you think this is "your enemy" then what is left for your children if he wins? The answer is nothing. He will destroy the country, their lives, everything. You hope he loves his kids--but you know when push comes to shove you can't give in. You just can't. The base's oppositional position on Obama is absolute.

Boehner has stared this straight in the face. He knows that unless one of two things happen: (1) the Democrats do manage to pull a straight up-down vote with 18 Republican defectors or (2) Obama blinks his base (and his job--his ass) will never countenance submission.

Obama, for his part, correctly sees this as an existential** threat to not just his administration but American politics in general. He's not going to back down and to a certain extent he's right not to: if the Republicans crash the plane he's somewhat in control of how it lands--if they decide they're the pilots who knows where it goes?

End Game
How does this end? Well, it ends on Oct 16th or so--just before the Trigger Date. Boehner knows he can go right up to the limit and then call for a vote if no one blinks--so he feels safe ratcheting up the tension as high as it can go. The problem is everyone else knows that too. As a result the 'Prestige' of this conflict spirals up because "everybody knows" they won't actually do it. And then when Zero Hour comes everyone waits for someone else 'to back down.' And if no one does things fall apart rapdily. Then there's no time to fix them.
Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That's how it goes
Everybody knows

* I have not seen enough about what I presume are Collateralized Debt Obligations around US Bonds. I presume that should the US default on a payment there would be an avalanche of payment requirements that would not just destabilize the markets but actually annihilate even large financial institutions as their debtors would be unable to pay.

** As I've said before that's "When your English Lit teacher threatens to make you read The Stranger."

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