It feels like the partial government shutdown has only just ended, but another one may soon begin. When President Trump agreed to reopen the government, the law he signed imposed a new, Feb. 15 deadline for Congress to hammer out a government funding deal. That ticking countdown clock creates a particular type of game, one of bargaining and high-stakes negotiation. At issue is a proposed and sharply contentious wall on the U.S.-Mexico border that Trump wants Congress to fund and House Democrats would rather not. “I’ll get it built,” Trump said in his State of the Union address on Tuesday night.
Since economist John Nash revolutionized economics, bargaining has been the stuff of game theorists. What makes a deal more likely to happen? And what makes it more likely to fall apart? The fruits of that study hold a couple of lessons for reading the news, and the tea leaves, coming out of the White House and the Capitol over the next few days.
One thing is a near certainty: If an agreement is reached, it will be at the eleventh hour.
Why would an agreement come late? The deadline is partly to blame. Bargainers have little incentive to agree early. Suppose that you and I are bargaining over something and the deadline is a month away. Whether we agree now or in, say, an hour doesn’t matter to us. We are basically indifferent on the timing of a deal. The same will be true tomorrow and the next day. The only time we’ll ever have any incentive to agree earlier rather than later is when there is no later. That’s when we’re truly, finally up against it, with the clock ticking down. In other words, we probably shouldn’t expect a deal on funding the government before Valentine’s Day.
What’s more, in Congress’s case, the political players may have a strong disincentive to agree early. “Obviously neither side can do anything before a deadline … because they are playing to their internal constituents who will always think they didn’t fight as hard as they could if they settled ‘early,’” Jeremy Bulow, an economist at Stanford, told me.
This last-minute pattern is often seen in bargaining contexts outside of government, too, including pretrial deals between prosecutors and defense attorneys that are struck on the courthouse steps or labor agreements between management and workers that are reached just before a strike.
It matters, too, what each party thinks the other might want. Outcomes of bargaining games are largely predicated on beliefs — my beliefs about what deal you’re willing to accept, and vice versa, or what theorists call “private information.” The specific beliefs the parties hold about the private information of the other — and whether they are accurate — can determine whether a deal happens and the contours of any deal.
The miscalibration of these beliefs is one thing that can lead to a breakdown in negotiations. If, for example, Trump believed he could get $5 billion for the wall from congressional Democrats, he might ask for $5.5 billion, comfortable in the fact that, even with the clock ticking, he could reduce his demand to $5 billion. But if he was wrong, and the Democrats were only willing to part with $3 billion, he might run out of time, no deal would be made and the government would shut down again. (This doesn’t take into account Trump’s other, extreme option: declaring a national emergency to secure funding for the wall.)
Similarly, Democrats could misunderstand how willing Trump is to return to a shutdown (or declare a national emergency). “Trump has a reputation for ‘my way or the highway’ for getting his deal, and that can be an effective bargaining strategy,” William Fuchs, who is an economist at the University of Texas at Austin and studies bargaining, told me. “If people know that it’s his way or no way, people tend to cave in.” But the reopening of the government last month after the 34-day shutdown, and the fact that Trump was willing to do so without getting the money for the wall, may have put a big dent in Democrats’ willingness to think Trump is intransigent. But it may not have put a dent into Trump’s own willingness to be intransigent.
Even if a deal is made, who “wins” is likely to be ambiguous, as all parties try to spin the terms and declare their own brand of victory to their voters. “Government negotiations often are resolved by making things ambiguous so both sides can claim a win or retain an issue,” Bulow said.
In other words, any deal that is made will likely be one that is open to partisan interpretation. Even if the Democrats “win” this particular negotiation, they would probably need to make some concessions to Trump — and vice versa. Fuchs said the injection of a particular ambiguity — redefining what “the wall” is — was a potential outcome. Say “the wall” became increased drone surveillance at the border. Democrats could declare victory for not funding more physical border barriers, while Trump could declare victory for ramping up border security in one way. Trump, for his part, does appear willing to rethink the project: He has said we’ll “build a Human Wall if necessary.”
In addition to these lessons, there are caveats. First, this theoretical discussion, as often seems to be the case during the Trump presidency, may be moot. Trump has threatened to declare a national emergency if the wall isn’t otherwise funded, an extreme move that the game theorists I spoke to said was hard to account for and without an empirical precedent to study. And, second, the real bargaining game is of course a bit more complicated than the one we considered above. There are more than two players — though the Republicans in the Senate have appeared to be aligned with Trump, with Majority Leader Mitch McConnell saying in early January that the Senate would pass only shutdown-ending bills that Trump would sign.
Finally, this theoretical discussion also prompts a deeper question: Why are we playing this particular game? Why, specifically, is a partial shutdown the outcome that arises in the absence of an agreement? This seems, as an economist would say, inefficient — a little bit of miscoordination can lead to a big consequence. Perhaps, as is the case elsewhere, the previous budget should remain in force if no deal is reached. Or perhaps the parties should be forced into mediation, as is sometimes the case in the private sector. To an economist, these ideas to remake the system sound like attractive efficiency boosters.
“I’m surprised I don’t read more about this on the front page,” Fuchs said.
From ABC News: