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Obama's Insane Hostage Bargaining Strategy

The media has been focusing on the narrative of liberal disaffection with President Obama, and his speech lambasting Paul Ryan's budget took some of the pressure off that discontent. But this does seem to be obscuring Obama's inexplicable strategy of letting Republicans use the debt ceiling vote to jack him up for policy concessions. A Wall Street Journal story yesterday reported the White House is doing this, and some liberals doubted the reporting. But the story has held up.

I don't really blame the Republicans for this, either. If Obama is going to begin by saying he'd like a straight vote on the debt ceiling but is willing to make policy concessions, what do you expect the Republicans to do? Keep in mind, the assumption that the Congressional minority can use the debt ceiling as a hostage to win substantive policy the president opposes is entirely novel. Obama has introduced this new development.

Indeed, the whole idea that one party can use the threat of taking action that both sides oppose in order to win a concession that only they support flies in the face of basic game theory. It can work if you apply the "madman strategy" of persuading your opponent that you're crazy enough to do something that would harm your own interests. But a political party in a robust democracy shouldn't be able to use the madman strategy as a normal practice. When you're competing for votes in an open system, you have to convince a majority of the public that you're not a madman.

Republicans are getting to signal that they're madmen inside Washington for the purpose of negotiations without signalling it outside. Obama's strongest response would be to insist that he will only allow a clean vote on the debt limit, substantive concessions are off the table, and any consequences from failing to raise the debt ceiling are entirely the GOP's fault.

Now, if Obama concludes that Republicans really are crazy enough to default on the debt -- which I doubt, but let's play along -- and he cannot risk the severe consequences to the economy, then his second-best play is to raise the cost of that craziness. He should launch a public campaign lambasting the Republicans for their willingness to inflict permanent harm on the U.S. economy, spelling out all the devastating effects they're risking. And he has to spell this all out to the financial industry.

But quietly assuming the GOP's willingness to inflict massive harm on the economy, and negotiating on that basis, without making them pay a political price is a shockingly weak play. The real madman here isn't John Boehner.