Thursday, May 19, 2011

Playing a High Stakes Game

Everybody acknowledges that Republicans are playing a high stakes game that could wipe them out politically by embracing the budget cooked up by Paul Ryan. Take a look at this video and ask yourself whether Democrats are returning the favor:



I know that Ryan Republicans are making a pitch to voters about taking on entitlements that’s fallen flat before. Evidently, they’re betting nearly all their electoral chips that times have changed because the prospect of public insolvency has never been less remote.  They're hoping that puts them in a position like that of an investor shorting mortgage-backed securities in late 2007 on the theory that a situation that can't go on indefinitely won't go on very much longer because a critical mass of people are bound to figure out that it can't go on indefinitely.

If this video is any indication of how Democrats are going to respond, they’re taking the other side of the same bet hoping that they aren't another Lehman Brothers.   I don’t know of any way to arrive at a reliable estimate of the odds.  And I suspect that neither do the bettors because their trusty risk-management models might not be any more applicable to the political situation than Lehman's were to the housing market in the summer of 2008.

3 comments:

Lone Wolff said...

Obama doesn't strike me as a guy to who'll stand by a large unhedged position on the budget. He'll portray himself as the honest broker standing between Ryan Republicans and liberal Democrats. That will probably end up being better for Obama than it will be for the Democratic Party.

Anonymous said...

But Medicare in something like its present form can go on indefinitely if we're wiling to raise tax rates to Clinton-era levels and close some of the more egregious loopholes.

DannyP said...

But Obama's the guy who won't raise taxes on any family making less than $250K.