Senate Passes Fiscal Cliff Game Off To The House

Playing a winning hand? (Photo credit: Wikipedia)

The U.S. Senate early this morning reached an agreement raising tax rates on households earning more than $450,000 a year and postponing the budget cuts called for in the Budget Control Act of 2011.
Assuming the Senate passes the bill it shifts the debate over the “fiscal cliff” to the House of Representatives, where, the Washington Post reports, Rep. John Boehner, R-Ohio, vowed to set a vote in a few days, after the incoming House members review the legislation.
The measure would fix a variety of problems triggered by the 2011 Budget Control Act, which Congress passed and President Obama signed as a way around the deadlock over increasing the nation’s borrowing limit. That law set up “automatic” tax increases and spending cuts, including severe cuts in military spending, if Congress failed to come up with alternative legislation before Jan. 1. Congress of course failed to do that, as Republicans held out against increases in tax rates and President Obama and Democratic leaders refused to consider significant spending cuts.
The Senate deal represents a partial victory for Obama, the Washington Post reports:

Obama praised the emerging agreement even though it would raise only about $600 billion over the next decade by White House estimates — far less than the $1.6 trillion the president had initially sought to extract from the nation’s richest households.
The agreement “would further reduce the deficit by asking the wealthiest 2 percent of Americans to pay higher taxes for the first time in two decades. . . . So that’s progress,” Obama said.

The brinkmanship also represents a massive game-theory experiment that the men who wrote the Constitution largely anticipated when they drew up the document that dictates how the federal government is run. While politicians and the press talk about “automatic” tax increases and the “Bush tax cuts,” the fact is that each Congress must set tax and spending policy. To increase the pressure on elected representatives, the Constitution assigns responsibility for initiating tax bills to the House of  Representatives, where members are elected every two years.
Academicians have long studied how individuals and groups act when the stakes are high and the rules allow for various strategies to achieve victory. The Budget Act of 2011 represents one strategy, albeit an ineffective one: Delay.
The filibuster represents another. While technically a parliamentary rule in the Senate prohibiting members from ending debate without a 60-vote majority, it can also be viewed as the minority’s strategy for blocking legislation it really, really doesn’t like.
Southern Democrats famously used the filibuster to block and delay civil-rights legislation in the 1950s and 1960s. President Obama accuses the Republicans who hold a narrow majority in the House of similarly using their control over fiscal legislation to block the will of the majority who voted for Obama and his pledge to raise tax rates on households earning more than $250,000 a year.
One theory has it Congress has gotten more obstructionist in recent years as powerful party leaders like Lyndon Johnson have given way to “individualist” politicians who are interested only in their next reelection.
Some have even called for an end to the Constitutional provisions that make it so easy for minorities to block the policy goals of the majority. Georgetown Law School Professor  Michael Seidman argued in a widely circulated New York Times op-ed that we should “give up on the Constitution” with its “with all its archaic, idiosyncratic and downright evil provisions.” (Jonathan Adler at Volokh points out Seidman is only proposing abandoning the parts of the Constitution he doesn’t like.)
The filibuster isn’t a constitutional provision, but it flows from the constitutional power of the Senate to run its business as it sees fit. And it provides a good case study of how Congress wrestles with the tw0-party system, majority vs. minority power, and fiscal policy. The increasing frequency of filibusters, especially since the Senate modified the rules to allow them to be halted by a 60-vote majority in 1975, has been cited as evidence that members are using blocking tactics for increasingly trivial ends.
But that may not be true, according to this interesting 2006 article by Charles Shipan of the University of Michigan. He examined the frequency and duration of filibusters before and after the 1975 reform in the context of the ample research on game theory in other settings. He found that the filibuster represents a “war of attrition,” which academics have studied in contexts such as animal contests, patent disputes and nuclear war.
In all cases, Shipan says, the “war of attrition” represents a sort of information-gathering exercise in which each side is trying to determine how much the fight means for the other side. In a situation of perfect information, both combatants know what the payoff is for the other side and the one with the lower payoff value quickly folds because the fight isn’t worth the pain. Southern Democrats used the other side’s knowledge of their vociferous opposition to civil rights to block legislation with just the threat of having to sit in session listening to Robert Byrd read the phone book to them.
The problem arises when neither side knows how valuable the payoff is to the other side. In that case, the strategy of the strong is to engage in war to the end, every time, since there’s a chance the player on the other side is weaker and will give up. The contest must be engaged for each side to learn the other’s feelings, however. Shipan argues the increasing frequency of brief filibusters since the Senate made it easier to end debate with a cloture measure shows how the minority is using the filibuster to signal its strength to the majority.
The battle over the fiscal cliff strikes me as a similar exercise. President Obama hasn’t said it, but my guess is he thinks he must pass higher tax rates on wealthier households as part of a long-term bargain to curb spending on programs that benefit the middle class and the poor, like Medicaid and Social Security. But he faces a minority that strongly believes spending cuts must come first.
The Budget Control Act of 2011 represented the failure of either side to determine how serious the other was. But Congress can’t pass “automatic” tax increases, no matter how much it wishes to do so, just as it can’t blame President Bush for the tax policy it has affirmed every year since he left office. With the Senate’s action today, the game of determining how serious the Republicans are passes to the House. Members there will likely vote to delay the final reckoning for a few more months, but the game is merely postponed, not ended. The strength of each side will eventually emerge, helped by the voices of the voters in 2014.