Obama and the $14 trillion debt ceiling

Barack Obama and Republican leaders are playing a game of chicken over the $14 trillion debt ceiling.

None of them wants the US to default on its debts, but neither wants to be the one to back down. Whoever blinks first will lose.

Obama’s tactics are an interesting lesson in how to approach this type of game.

As President he will take the blame if no agreement is reached and he allows the US to default. The Republicans will take very little of the blame so they are in a stronger position.

Obama has been quoted as saying “let’s put politics aside” and “do some tough stuff”.

He is implying that if there is no deal then it will be because Republicans have been too selfish to ‘put politics aside’ and too weak to ‘do some tough stuff’.

He is trying to change the payoffs in the game so that more of the blame goes on the Republicans if they don’t do a deal. If the blame for a default is shared more evenly then it is more likely that a resolution can be reached.

Today’s takeaway: Making the outcomes worse for your opponents can change the game and make them change their strategy

(If you want more explanation of ‘chicken’ I have written about it before here).

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