Credible Commitment, Painful Triggers, and the Debt Ceiling Compromise

President Obama signs the Budget Control Act of 2011, which threatens automatic spending cuts distasteful to both parties.

The resolution of the debt ceiling standoff in Congress provides a nice illustration of the problem of credible commitment and the unusual steps that are required for political leaders to overcome this problem.

The problem of credible commitment is ubiquitous in domestic and international politics–it afflicts individual leaders, political parties, countries, ethnic groups, and IGOs–and it centers on the difficulty actors have in credibly (believably) promising to do something that appears not to be in their interests.  For example, Israel could seek to achieve a two-state solution with the Palestinians by promising that if the Palestinian state had no army or foreign troops on its territory, Israel would never reoccupy the Palestinian territories.  But given Israel’s military superiority, its past behavior, and its likely desire to reoccupy territories such as the West Bank if it perceived threats coming from those territories, this commitment is not inherently believable.

In order to overcome this problem and make an inherently unbelievable threat or promise believable, an actor needs to set up mechanisms that increase the likelihood that it will abide by its commitment.  This has been called a strategically self-imposed constraint, and it involves “tying one’s hands” in some way so that backing down from the commitment becomes difficult.  In the game of chicken, referenced in a previous blog post on the debt limit showdown, this would involve removing the steering wheel and throwing it out the window to signal that even if one wanted to swerve it was now impossible.

Public pledges to act a certain way create audience costs (particularly in democracies) such that backing down will make the leader look weak or untrustworthy to key constituencies and carry serious political costs.  In the case of the U.S. Congress’ promise to cut the deficit, public pledges were not deemed sufficient constraints and Congress resorted to an interesting “trigger mechanism” that will unleash automatic, deep cuts in the event Congress fails to agree on specific spending cuts.  Significantly, the automatic cuts would slash $600 billion from defense spending (anathema to Republicans) and $600 billion from domestic programs (a bitter pill for Democrats).  The hope is that these blunt automatic cuts would be so distasteful that even a bitterly divided Congress would keep its word and reach agreement on a plan to cut spending by $1.5 trillion.  As an Economist blog post summarizing the deal concluded, “The thinking is that these cuts would inflict such pain on both Republican and Democratic pet priorities that they will labour mightily to come up with an alternative.”

However, as one advocate of a balanced budget pointed out, “Anything Congress does, Congress can undo. They can’t really bind themselves. You really have to have a political will to make these things work or they won’t.”  Is this critic right?  Will this trigger threat prove effective, and if not, is there any way for Congress to bind itself?

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s