Handicapping the “stimulus”

Let’s play a little politics. The U.S. Congress is currently considering a large (~USD$900B) debt and spending plan designed to re-invigorate the U.S. economy. What can a gimlet-eyed, game-theoretical approach tell us about the plan’s prospects in the Congress?

2010

The next major poltical events in the U.S. are the 2010 mid-term elections, when the entire House and 1/3rd of the Senate stands for election. It seems likely that the outcome of these elections will be determined by the state of the economy in 2010, and by associated economic questions.

If the 2010 economy is strong, for whatever reason, Democrats are likely to do well, and Republicans poorly, irrespective of the outcome of the “stimulus” debate. On the other hand, a weak economy will profit the Republicans, but only to the extent they can offer a coherent critique of the Democrat handling of the economy.

Payoffs

If we stipulate a weak 2010 economy (the only conditions under which the following political calculations make much of a difference, we can build the following matrix:

To expand on this a little bit:

If the “stimulus” passes over Republican objections, Republicans in 2010 can blame the (stipulated) weak economy on Democrat policies; this message will be consistent with their earlier opposition to the “stimulus” plan. This is the “we told you so” scenario.

If the “stimulus” passes with Republican support, Republicans will have to mute their criticism of Democrat policies, since they endorsed those policies in 2009. This is the “I was for it before I was against it” scenario.

If the “stimulus” is defeated because of Republican opposition (i.e. a filibuster) then Democrats will be able to blame Republican obstructionism for the weak state of the economy.

If the “stimulus” is defeated because of a loss of Democrat enthusiasm, it ceases to be an issue; Democrats can still be hammered over the economy (as the party in power) but without the specificity of a centerpiece legislative package.

Of course, the economy might recover too – but, in that case, the Democrats will claim credit for it no matter what happens with the “stimulus” plan. Politically, it doesn’t matter what either party does if the economy has recovered by 2010.

Predictions

Republicans will oppose the “stimulus”, but not block it. Most likely, the “stimulus” will pass, although there is an outside chance that Democrats will be unwilling to make themselves hostages to fortune by passing the plan along party lines. There will be efforts to get Republicans on board, but they will prove futile, as the political calculus mandates opposition.