Game theory has always been relevant to American politics, and politics generally. The basic rule in a multiple player game is “create a coalition that has a majority of the voting interest,” and you win. Because of division of powers, in the US, this is more complex than in a parliamentary setting. But let’s take as an example the US House of Representatives.
Imagine for a moment that the House has the following breakdown:
Corsair Capital highlighted its investment in a special purpose acquisition company in its first-quarter letter to investors. The Corsair team highlighted FG New America Acquisition Corp, emphasizing that the SPAC presents an exciting opportunity after its agreement to merge with OppFi, a leading fintech platform powered by artificial intelligence. Q1 2021 hedge fund letters, conferences Read More
- 45% Democrats
- 45% Republicans
- 10% t-party Republicans
I don’t think that set-up is far from the truth, but how would anyone get a majority there? In this stylized example, there are only three ways to do it:
- Democrats ally with Republicans, and the center rules. “La grande coalition”
- Democrats ally with the t-party — good luck with that.
- Republicans ally with the t-party. (And any proposal gets shot down by Barack Obama, if not the Senate.)
The fourth possibility is that nothing happens, which has been my default view for some time, and we go over the cliff and hit the debt ceiling.
This is why a small part of our legislators can play such a big role. One can argue that it is unfair, but they are playing by the rules, and the results are not all that different from what European countries with multiple parties experience. You have to assemble a coalition in order to govern. Often it is one small party near the center or the edges that holds the balance of power.
Thus, in situation like this, how could it get resolved? Obama needs to talk to the Tea Party and agree to something mutually acceptable. Ronald Reagan reached across the aisle to Democrats. Bill Clinton did deals with Republicans. Obama needs to do a deal with the t-party, or strike a deal that non t-party Republicans and Democrats could accept.
My view here is different than most, but in my view there are two more intransigent parties here: Obama and the t-party. If the the non-t-party Republicans and Democrats in the House could agree, that proposal could go through the Senate, and be signed by the President. Boehner should not negotiate with Obama, but Pelosi.
The alternative is going over the fiscal cliff, which I have argued for a longish amount of time might not be so bad, though Congress will regret ceding control of spending to he Executive Branch. At least the budget will be balanced, and we will have more certainty on economic policy. Also, it will force a better negotiation, and sharpen the concerns of voters.
If we really want to improve our nation, we need to take action to remove the entrenched powers of the Republicans and Democrats, so that other parties can get some representation. We need to have laws such that anyone can submit a redistricting map, and so long as the map meets the test of other laws, the map with the shortest amount of internal boundaries wins. Maryland, which is a poster child for corruption, would be far better governed if the power was taken out of the hands of entrenched political interests, and given back to the people. Or at least a computer, which can be neutral.
Governments mostly reflect cultures, leaving aside gerrymanders and such. If we want to improve the US, we need to improve our own moral nature individually. If we are weak and lazy as individuals, so will our government be, and it will be our fault collectively that we let a great nation fail. If a culture fails, the nation will not be far behind.
By David Merkel, CFA of Aleph Blog