Nate Silver strikes again: Obama's Price is Right Negotiating Strategy?

[backscatter712]

Everybody's complaining about Obama's proposals on the economic stimulus package. Nate Silver isn't really complaining - again, he's bringing out his knowledge of game-theory to show that Obama's again playing chess instead of checkers, or alternatively, playing tight-aggressive poker at a table full of fish.

http://www.fivethirtyeight.com/2009/01/obamas-price-is-right-negotiating.html

Now consider what Obama told CNBC the other day:

Obama also confirmed that he plans to lay out a roughly $775 billion economic stimulus plan on Thursday but indicated that the amount could grow once it gets taken up by Congress.

"We've seen ranges from $800 (billion) to $1.3 trillion," he said. "And our attitude was that given the legislative process, if we start towards the low end of that, we'll see how it develops."

Obama isn't picking these numbers out on accident. This range -- $800 billion to $1.3 trillion -- is most likely the range of outcomes that his administration considers acceptable. He says that "given the legislative process", he's deliberately chosen a number on the lower end of that range.

What does this mean? It means he wants the Senate Democrats to do his dirty work for him. All of the sudden, the administration, which is about to spend at least $800 billion, gets to play the role of the fiscally prudent tightwads, negotiating against the Senate Democrats. This has at least two benefits. One, it requires less of the administration's political capital to sell the package. And two, it completely co-opts the conservative opposition. Unless you're Paul Krugman or Greg Mankiw, you probably don't really have any idea whether $300 billion or $800 billion or $1.2 trillion is the right amount to spend; the numbers are too large, the scope of the stimulus too unprecedented, to provide for any absolute frame of reference. So the frame of reference is relative rather than absolute. If you're Mitch McConnell or Mary Landireu or Bob Corker and you see that John Kerry thinks that $800 billion is too little -- well then, 'gal darn it, this Obama fella must be doing something right.

...

I call this a Price is Right negotiating strategy. When bidding on an item on The Price is Right, you want to come as close as possible to the item's price without going over. But if you do go over, your bid is invalidated. Thus, it is worse to bid $1 too much than $100 too little. Here, analogously, the risks of overbidding seem to be considerably greater to Obama than the risks of underbidding.

Daily Kos also has a diary discussing this article here: http://www.dailykos.com/storyonly/2009/1/9/183316/8610

Not bad strategy at all. Going the initial Obama-highballs, then the Rethugs lowball route probably would have degenerated into a Republican filibuster, followed by a Reid cave and we'd at best be stuck with a piddly-assed tiny stimulus that would have been mostly tax cuts for the rich.

Do it this way, let the Senate Democrats do all the screaming, and the Republicans all of the sudden don't have as much room to maneuver. If they filibuster, they look bad because Obama was obviously trying to accomodate them. In the meantime, the Democrats can scream and yell (and I encourage DUers here to scream and yell with them - that just makes the strategy work even better) and Obama will shrug his shoulders and say "Well, if you insist, I'll let the stimulus be bigger." If the Rethugs object, then Obama says "CHOP CHOP!!! WE DON'T HAVE TIME!!! THE ECONOMY NEEDS STIMULUS NOW!!! MOVE MOVE MOVE!!!" with a few more highly public press conferences and speeches demanding action on the stimulus package.

Damn, it's nice to have someone on our side who's smart enough to think of this!

[Patsy Stone]

1. I like this bit...

Until Obama takes the Oath of Office and actually starts doing stuff, it is easy for any of us to filter his actions through our preferred narrative about the incoming administration. Is this all some clever jujitsu negotiating ploy from the Boy Genius Campaign? Or is it a sign that the Obama administration just doesn't get it, fetishizes centrism and bipartisanship, and will need constant babysitting from the noble netroots? Neither characterization is liable to be entirely accurate, of course.

But I'm more inclined to argue for the former on the case of the stimulus package. The median expectation a week ago seemed to be that we'd wind up with a stimulus of about $800 billion. Now the question seems to be whether we'll end up at $800 billion or somewhat above $800 billion.

That doesn't mean that those of you who think we need more than $800 billion ought to shut up about it (in fact, Obama's whole strategy falls apart if you do). But for the time being, it would seem, that number has nowhere to go but up.

[backscatter712]

3. I voted for Obama because he's smart and knows how to play the game.

He showed it through two years of campaigning, and now he's starting to show his talent even before he takes the Oval Office.

[Patsy Stone]

4. He ran a fabulous campaign

and I have no doubt he'll be a wonderful president. I never thought he was anything but a left leaning pragmatist, so I'm not as disappointed as some. Admittedly, a few of his choices so far have given me "huh?" moments, but I think I'll wait until he's been there at least a week before making a final decision on the overall success of his administration.

Thanks for posting this, btw. It was a great read.

[monmouth]

2. AHA! And thank heavens Paul Krugman is in the game! Great post....n/t