The Dumbest Game of Chicken, Ever

Obama’s trying to tank the markets to win the budget fight. Problem is, that might not work -- and Republicans just don’t care.

Since the Republican Party took over the U.S. House of Representatives in 2010, its battles with Barack Obama's administration have taken on Wagnerian levels of grandiosity. Increasingly, the current political showdown over the federal budget and the debt ceiling looks less like a domestic policy disagreement and more like a militarized dispute between two enduring rivals in world politics. Both sides say they want a deal that raises the debt ceiling and funds the federal government -- but their behavior suggests that they're willing to risk a protracted conflict to get what they want. Indeed, at this point, both Republicans and Democrats seem to care more about politically crippling the other party than they do about, you know, promoting the general welfare of the United States. Ordinarily, relative gains concerns this extreme appear only in the fevered dreams of realist international relations scholars.

Over the past few weeks, both sides have articulated their tactics and strategies. Looking at their strategies to date, however, this international relations theorist reaches a disturbing conclusion: Obama seems far too clever for his own good, while the Republicans might just be stupid enough to claim victory.

Let's start with the president. As a general rule, sitting American presidents don't talk down the economy -- but last week, Obama made an unusual exception. In an interview with CNBC, he said, "This time I think Wall Street should be concerned," concluding that "when you have a situation in which a faction is willing to default on U.S. obligations, then we are in trouble." It is certainly true that both public sector and numerous private sector analysts have warned about the calamitous consequences of a debt default (though not everyone is convinced). Although Obama was breaking with tradition, the president's logic for trying to scare financial markets seems pretty clear. If markets start to panic, then both Wall Street and Main Street will start to pressure the GOP caucus in the House to acquiesce to what Obama wants: a clean debt-ceiling increase. In essence, the president wants the stock market to impose economic sanction on the Republican Party.

There are past examples of financial-market gyrations forcing politicians to do something they otherwise would not have. As the 2008 financial crisis started to snowball, Congress tried to pass the Troubled Asset Relief Program (TARP), only for it to founder in the House of Representatives. Expecting passage, markets were surprised: The Dow Jones industrial average experienced its largest single-day loss in history. The S&P 500 and Nasdaq both lost approximately 9 percent of their value. A week later, the House passed a revised TARP bill. A similar dynamic played out during the episode that most closely mirrors the current deadlock -- the 2011 showdown over the debt ceiling.

It would seem that this is the sort of dynamic Obama wants to see play out. But there are two things getting in the way of the president's "panic Wall Street" strategy: theory and practice.

Despite the president's warnings, financial markets have not panicked so far. Part of the problem comes with the fact that traders don't make money by acting as Obama's messenger. In theory, Congress yields after markets tank -- when Congress acquiesces, market rebound. But in a world that assumes traders possess rational expectations, there is not much individual incentive for them to heed Obama's advice. No matter how a trader hedges the bet, Obama is in essence asking investors to bet on markets going down when, if the strategy works, they will not stay down. That's not a great bet for traders to make. As Neil Irwin, economics editor of the Washington Post's Wonkblog, has pointed out, "you don't become a hotshot hedge fund trader by making bets based on what 'ought' to happen or what seems to make sense on some academic level. You only make money if you guess the direction of markets correctly. And if this standoff ends not with a bang but a whimper … then the current prices in asset markets will look about right."

The practical problem is that it's far from clear whether members of the House GOP will feel any particular pressure to budge. Over the past decade or so, the Republican Party's voting coalition has shifted from business interests to more ideologically pure groups. Republican-friendly business interests have already been screaming bloody murder about GOP hard-line tactics -- but to little avail. Indeed, House Rep. Dana Rohrabacher (R-Calif.) told the Associated Press that "it wouldn't make any difference" if business interests started pressuring him. In recent years, the GOP caucus has successfully insulated itself from all outside pressures but their party's ideological base -- rendering Obama's strategy impotent.

There's an even bigger problem with the Republican Party, however: It might have no endgame for the current crisis. The architect of the current strategy, Sen. Ted Cruz, did not offer a way out when angry Senate Republicans confronted him behind closed doors last week. A surprising number of Republican representatives seem convinced that Obama will surrender his biggest domestic policy initiative, the Affordable Care Act, just to reopen the government. The interest groups that foisted the current strategy on House leaders thought the shutdown strategy would be politically popular, but polls suggest the opposite. Some members of the GOP caucus, like Ted Yoho of Florida, actually profess to believe that if the debt ceiling weren't raised, "it would bring stability to the world markets." Economist and New York Times columnist Paul Krugman believes these sorts of political miscues reveal the outright stupidity of the Republican leadership.

The thing is, in this kind of showdown, true ignorance can yield a bargaining advantage. If Republicans truly believe that their cause is just, their strategy is popular, and nothing bad will happen, then it is impossible to pressure them to come to the bargaining table. In The Strategy of Conflict, economist Thomas Schelling observed that in a game of chicken, one driver could gain an advantage from throwing the steering wheel out the window. It appears that Republicans have come up with an even more extreme version of that gambit -- insisting loudly that they are immune to car crashes.


National Security

The Guns of October

I played every game about the Yom Kippur War, so you don't have to. Here's what I learned.

It was at 2 p.m. on the sixth day of October 1973 -- the afternoon of Yom Kippur, the Jewish Day of Atonement -- when a barrage from 2,000 artillery pieces along the Suez Canal signaled the start of an epic war. It was epic as a chapter of history, when an overconfident Israel saw its vaunted army and air force battered by an Arab surprise attack, only to reverse the fortunes of war in a week with a counteroffensive that left the Egyptian armies surrounded and Damascus in range of Israeli artillery. It was epic in its military implications, as the Yom Kippur War shaped the way that the U.S. military would fight for decades. And, it was epic in its what-ifs: What if Israel had mobilized its reserve troops sooner? What if the Syrian tanks had not paused on the Golan Heights after breaking through the thin Israeli defenses, and had clanked down toward Haifa and Tel Aviv? What if the Egyptians had pressed their initial advantage and drove on southern Israel?

This month marks the 40th anniversary of the Yom Kippur War (or the Ramadan War, as the Arabs called it, in an ironic simultaneity of dueling religious holidays). Not surprisingly, such a dramatic conflict has spawned numerous wargames that allow armchair generals to simulate the conflict. Like an array of spotlights, each game illuminates different facets of the struggle.

For example, the most pressing question for Israel in 1973 wasn't how to fight, but where to fight. Vastly outnumbered by the Egyptians in the south and the Syrians in the north, Israel confronted its ultimate nightmare; fighting simultaneously on widely separated fronts, creating a strategic dilemma of where to send its hastily mobilized reserves. "Bar-Lev," a board game first published in 1974 and later updated in 1977, is probably the best simulation of the Yom Kippur War. The game begins with the Israeli defenders badly outnumbered, but each turn the Israelis get new reserve troops which must be sent to either the Sinai or Golan fronts. The dilemma for the Israeli player is that once a unit is allocated to a front, it is committed; it takes at least a whole turn to transfer it to the other front, and a tank battalion in transit from Golan to Sinai is one less desperately needed battalion on either battlefield. Thus the Israeli player must anticipate his needs. If the war is going well in Sinai, it is easy for an Israeli player to send all his reinforcements to the Golan, only to be caught flat-footed by a lucky Egyptian attack. To play Bar-Lev is to understand why Israel has always feared fighting the combined Arab armies on its borders.

Any Yom Kippur wargame must also simulate a contradiction: the ability of Israeli units to outfight their Arab counterparts, and yet at the same time, show how the Arabs were able to nullify those advantages so much that Israel could only achieve a tactical victory by war's end (some might even argue a draw). In Bar-Lev, Israeli units are often stronger and move faster than their Arab counterparts, especially the Israeli tank formations. The Israeli Air Force (IAF) can decimate the Arab air forces in aerial combat at virtually no loss, and then go on to pound Arab ground troops. But the game also gives the Arabs certain advantages, such as a combat bonus for their infantry when fighting Israeli tanks (reflecting their huge quantities of Soviet-made anti-tank weapons). More important is their huge number of surface-to-air missile and anti-aircraft gun batteries, creating an air defense system denser than those faced by U.S. pilots over North Vietnam. The Israeli player can choose to preserve his air force by staying at high altitude and dogfighting the Arab air forces; the Israeli Air Force will be toasting plenty of new fighter aces, but that will be cold comfort to the hard-pressed troops on the ground. Or (as was historically the case), Israeli jets can come in low and support the ground troops, but will take heavy losses from flak. The Israelis relied on the IAF to be the "flying artillery" that saved the ground troops, but instead in Bar-Lev, it is the tanks and infantry who have to knock out the Arab air defense network before the Phantoms and Skyhawks can do their work.

"You can ask me for anything you like, except time," Napoleon told his generals, an admonition that the Israelis have always appreciated. The longer the conflict goes on, the more the Israeli economy grinds to a halt, the greater the expenditure in blood and munitions (the latter of which must be resupplied by the United States), and the higher the risk that the superpowers and the U.N. will impose a cease-fire that will favor the Arabs. Thus time is a crucial feature in Multi-Man Publishing's two October War games:  "Heights of Courage," which covers the Golan front, and "Yom Kippur," which covers the Sinai battles. In "Heights of Courage," the game is played over 17 turns. But after Turn 8 (Oct. 12), dice are rolled to see whether the international community imposes a cease-fire. Because the Syrians make their gains during their initial assault, they can grab the Golan and then dig in, placing the burden on Israel to race the clock to recapture lost territory before the war ends.

Time is both an Israeli enemy and ally in 1981's "Suez '73," perhaps the most insightful Yom Kippur wargame besides Bar-Lev. The game simulates the vicious Battle of the Chinese Farm on Oct. 15-19, when an Israeli counteroffensive found a weak spot in the Egyptian defenses that allowed the IDF to cross to the Egyptian side of the Suez Canal, tear a hole in the Egyptian air defense network, and surround the Egyptian armies on the Israeli side of the canal. Each 12-hour game turn can be divvied up into 10 "impulses" or mini-turns where each player can move his units and conduct combat. While the Egyptians can only get a maximum of three mini-turns, the Israelis can get up to 10, allowing the IDF to accomplish much more over those 12 hours than its enemies.

However, time is also as dangerous a foe as the Egyptian Sagger anti-tank missiles. In Suez '73, the Israelis have only eight turns to accomplish the following: carve a corridor through two fortified Egyptian infantry divisions, heavily reinforced by additional tank and anti-tank units; move slow and bulky mobile bridges down a single road already clogged with tank columns needed to penetrate those Egyptian defenses; erect a bridge over the Suez Canal under Egyptian artillery fire; send tank and infantry units to form a bridgehead on the western bank; and send out raiding columns to destroy Egyptian air defense sites. Egyptians don't need to defeat the IDF on the battlefield, just delay it. To play Suez '73 is to understand why Israeli commanders always seem to be in a hurry, even if it means taking risks.

Ultimately, and in real life, Israel's narrow victory rested on its battlefield performance. It was not that the Arabs couldn't or wouldn't fight -- the Yom Kippur War disproved that unfortunate myth of 1967 -- but that superior training, tactics, and initiative allowed an Israeli unit to accomplish more than its Arab counterpart. In Suez '73, every unit has a numerical rating for "proficiency" that affects everything from how well it shoots to how well it rallies under fire. Israeli units, especially elite formations such as paratroopers and commandos, have higher proficiencies that give them an edge in combat. In 1977's "Arab-Israeli Wars," Israeli superiority is shown through mechanisms such as morale, which means that an Israeli Centurion tank platoon disrupted by enemy fire will rally and return to the fight sooner than a Syrian platoon of T-62 tanks. But the Arabs usually have numbers on their sides, and quality versus quantity can be a tough fight.

These are essential facets that shaped the Yom Kippur War. But part of the fascination of wargaming is discovering the small historical details. In Suez '73, the Israeli Ha Sinai reconnaissance unit, equipped with captured Arab vehicles, can slip past the Egyptian defenders guarding the road to the Suez Canal. And in Heights of Courage, the Israelis have the "Force Zvika" piece to inflict extra losses on the Syrians; this reflects the exploits of Lt. Zvi "Zvika" Greengold, who with one or two tanks managed to seriously disrupt the Syrian offensive (dice are rolled each time to see whether he survives).

Fascinating and compelling as these October War games are, there is a touch of ancient history about them. Thousands of tanks churning dust storms through the Sinai desert seem almost as anachronistic as Napoleon's Old Guard at Waterloo. Warfare today is ballistic missiles, laser-guided bombs, chemical weapons, and cyberviruses like Stuxnet. A nation's strength is now reckoned more by its quantity of hackers than infantry battalions. The year 1973 was the mid-point -- chronologically and militarily -- between the mass warfare of the Battle of the Bulge, and the high-tech combat of Desert Storm and the Second Iraq War.

Since 1973, Israel has never faced such a dire military situation. And perhaps not coincidentally, the quality of its military -- or at least of its regular tank and infantry troops -- has never appeared quite so brilliant, especially in the 2006 Lebanon War. Perhaps necessity is the mother of battlefield prowess, but that's a bargain that most Israelis and Arabs would rather not make.