Strategic Analysis of the Sequester

One of my Political Behavior students wrote a nice strategic analysis of the sequester and its failure. His theoretical basis was the concept of brinkmanship, originally devised by Thomas Schelling, and concludes that the sequester is a good example of failed brinkmanship.

The essential nature of brinkmanship is to be willing to go closer to the edge of the brink than one’s opponent. Of course no rational person would purposefully go close enough to the brink that they might actually fall off the cliff, which means that even if you’re willing to get closer than your opponent, they shouldn’t believe you’re really willing to get even closer. So brinkmaship requires one or more of the following strategies: a facade (or the reality) of irrationality (e.g., North Korea); an automated response system that can’t be turned off (e.g., the doomsday machine in Dr. Strangelove), or real uncertainty about how far is too far (e.g. (probably), the Cuban Missile Crisis). As Avinash Dixit and Barry Nalebuff put it in Thinking Strategically,

The essence of brinkmanship is the deliberate creation of risk.

The necessary trick is to make the risk credible, and not mere cheap talk. That’s why when the president asks Dr. Strangelove how it’s possible that the doomsday machine can be triggered automatically yet impossible to untrigger, the response is, “it is not only possible, it is essential.”

So what about the sequester? The idea was that the automatic cuts would create too grave a risk for any of the parties to accept, so that each side would end up making the compromises necessary to avoid going over it (or perhaps each side thought that the other side would be the more fearful of approaching it). Obviously that outcome did not occur, and since there is nothing wrong with the theory, there must be something wrong with the execution.

As my student argues, it turns out that the risk was not nearly as significant as the politicians who had created it had believed. From far off it looked terrifying, but up close it wasn’t so bad. He follows the lead of many pundits in emphasizing the role of the Tea Party Republicans who took a good number of seats in the 2010 elections, for whom the brink was not a dangerous fall, but a functional route to their actual preferred goal of spending cuts and no tax increases. But while most of the chattering class is busily pointing at the GOP, I think we should take note that the risk of going over the brink very noticeably was not frightening enough to Democrats to make them willing to agree to large spending cuts. Maybe that’s because to them large spending cuts would be worse than the sequester, or maybe it’s because the sequester itself contains large enough spending cuts that the Democrats see compromise on spending as functionally indistinguishable from going over the brink.

The point here is not to blame the parties or any of the politicians, but to analyze why the sequester didn’t work as anticipated. And the clear answer seems to be that it didn’t create sufficient risk for either party. Not only can Congress not discipline itself to make serious budgetary decisions, it can’t even discipline itself enough to deliberately create actual risk. It’s as though the doomsday machine might was a mere car bomb, or JFK and Kruschev threatening each other with big firecrackers. And there’s probably also a lesson in behavioral economics here about perceived vs. revealed value.

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About James Hanley

James Hanley is Associate Professor of Political Science at Adrian College and a Fellow of the Institute for Social Policy and Understanding. The views expressed here do not reflect the views of either organization.
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5 Responses to Strategic Analysis of the Sequester

  1. Murali says:

    You’ve got a good student there.

  2. Dr X says:

    Impressive student!

    Your post made me think of a film from the 1960s, Hot Rods to Hell.

  3. lancifer666 says:

    Dr Strangelove: Or How I Stopped Worrying and Learned to Love the Bomb is one of my favorite movies. Kubrick was actually going to make a serious drama but saw the inherent absurdities and paradoxes of “mutual assured destruction”.

    I think many Republicans saw the sequester as preferable to a compromise that would increase spending, so I’m not sure that they feel that they went over any “fiscal cliff”.

    It should also be noted that the economy has not deviated greatly from the trajectory that it was on before the sequester. Of course that may be like a guy jumping off of a 100 story building remarking “so far so good” as he passes the 50th floor.

  4. lancifer666 says:

    It also gives the Democrats and the Obama administration a possible excuse if the economy continues to falter, “If only the Republicans hadn’t forced the sequester.”

    The “Blame Bush” excuse it wearing a bit thin. Eve the president, in his comedy routine at the White House Correspondents dinner showed a picture of his future presidential library that wa located next to the Bush library and had a big sign with an arrow pointing to Bush’s library that read “It was his fault!”.

    President Obama has great comic timing and delivery not to mention some pretty good writers.

  5. Troublesome Frog says:

    Well, it was $85 billion out of a $16 trillion economy, so I wouldn’t expect total armageddon, but it was still a silly exercise in cutting of our noses.

    Good analysis, though. The past few bits of brinksmanship have been fascinating and terrifying to watch. This one was relatively benign, which I guess is why both sides agreed to let it happen. As long as they don’t start playing games with the debt ceiling again, I’m sort of in favor of this kind of brinkmanship. Making people follow through on their rhetoric and accept the consequences of their policy preferences is a helpful reality check. Something about knowing what you want and deserving to get it good and hard.

    I’ve been particularly interested in this since I first saw it done a couple of years ago. When one side puts out a crazy over the top piece of legislation that chooses signaling over good policy, everybody on the other side simply votes “present” and dares them to pass it.

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