Wednesday, December 5, 2012

So You Say We're Going Over A Fiscal Cliff? I CALL.



O RLY: No new taxes?
I know you’re all “Fiscal Cliff”-ed out (it’s more of a slope, but whatever). Lord knows I am, too, if it weren’t for one thing that I hold very dear: game theory. These ongoing negotiations over next year’s budget – which involves ending the Bush 43 era tax cuts for everyone and the automatic triggering of drastic, across-the-board cuts of government entities (in case you’ve been walking the Appalachian Trail or something all year) – is the most tangible example we have seen in a while of game theory at work in everyday life; you know I couldn’t resist.


Although we know my politics are proudly liberal, this isn’t a political piece: It’s a game theory piece. House Republicans do not want tax increases of any kind. The White House’s proposal calls for letting the Bush tax cuts expire for all but the top 2% of income earners (who would still receive the same tax cut for the first $250,000 in income). There are a handful of other details to the competing budget plans, but that is the main sticking point.

Stacks on stacks on stacks
President Obama, freed from the burden and emboldened by the mandate of winning re-election, has incredible stack leverage at this point. Due to that deal President Obama made to preserve the debt ceiling in the face of obstinate Tea Party-influenced Republicans determined to blow it up, the long-term view of it is now bearing fruit. If Obama does nothing, he can essentially fold his way into the money, his stack is just that big; i.e. he gets the tax cuts he wants. But if a deal isn’t struck, the other 98% that sees its taxes increased will be upset, and most likely blame the GOP for not compromising for the benefit of the country.

If Rep. John Boehner and his Republican coalition carry out their bluff of riding us over the so-called Fiscal Cliff just to save tax breaks for the top 2%, he’s pretty much shipping light with 18 big blinds into the president’s 99 big blind stack. I might not call with J9o, but Obama’s pretty much holding AQ or better here. The prospect of going over the Fiscal Cliff and having the public being mad at Democrats is pretty slim. Add to the fact that he’s termed out in four years, and really there’s no political downside to taking America over the Fiscal Cliff. I’m never folding my AQ to a guy who’s clearly shipping light into my 99 big blind stack: I call.

So enjoy these next few frenzied weeks leading up to our year-end deadline for solving this media-amplified pseudo-crisis. There will be many surreptitious and overt references to poker and game theory, from “so-and-so is overplaying his hand” to “so-and-so will fold to political pressure.” Just a friendly reminder of how game theory affects most aspects of life – and why I love this silly little game called poker.

1 comment:

  1. There really is something to game theory and how it applies to some situations. I'm not much of a poker player but I've learned much from my father that spends his weekends with my relatives playing texas hold em, he always tells me his poker tips and how it relates to real life.

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