Discussion Board

Update 01/30/2019: As we may know by now,  last Friday the Trump administration and House leader Nancy Pelosi struck a 'deal' that would open up the government through the 15th of February. This resulting impact of this deal is Trump conceding entirely to Pelosi after she held firm on revoking the SoTU speech in the House chambers. It is clear that Trump's expected value's on another tree were greater than holding - something we mentioned when we stated that this conversation regarding the SoTU brinkmanship was part of a larger game of the partial government shutdown. Trump will be delivering the State of the Union address on Feb. 5th 2019 from the House Chambers. 

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A Game Theoretic and Behavioral Economic Analysis on State of the Union Brinkmanship

Authored by Donald L. Willyard

Written 16 Jan. 2019.

               On January 16th, 2019, United States Congresswoman and Speaker of the House Nancy Pelosi (D-CA) issued a letter to President Donald Trump regarding his upcoming State of the Union address which is scheduled to take place on January 29th. The letter cited, according to Speaker Pelosi, that due to the shutdown affecting Secret Service and Homeland Security personnel, there was a security risk if the State of the Union address were to take place. Speaker Pelosi, through her letter, therefore left the following options to President Trump:

  1. Give his blessing to Senate Republicans to pass either a fully funded appropriations budget or, at the least, a continuing resolution (“CR”) that would allow the government to open back up and continue to operate at its full force for three weeks while negotiations occur in Washington. Doing so would allow the President to deliver his State of the Union address as scheduled in the House chamber before a joint-session of Congress.
  2. Continue the shutdown, which would result in his State of the Union address being rescheduled by Speaker Pelosi.
  3. Release the State of the Union in a written format – a practice that was once tradition, but discontinued by President Woodrow Wilson in 1913.

One may ask, does Speaker Pelosi have the authority to deny President Trump the opportunity to deliver his State of the Union address? The answer is – Sort of.

The State of the Union address comes from Article II, Section 3 of the U.S. Constitution where it states that the President “shall from time to time give to the Congress information of the state of the union, and recommend to their consideration such measures as he shall judge necessary and expedient.”

               So where is Speaker Pelosi’s leverage? For a President to deliver an address to a joint-session of Congress, it must be at the invitation of the Speaker. Speaker Pelosi can, as a political tool, utilize her authority as speaker to withdraw or extend an invitation to the President based on his adherence to her demands.

               One may think that, based on this, Trump is facing a binary choice of either comply or not comply, which would result in either his address occurring or not occurring, respectively. I contend that the option is not binary, and even predict that President Trump will opt for neither of these options. While the rules of this game of brinkmanship may seem defined, there is one element that is not – must the State of the Union address be delivered at the House chambers before a joint-session of Congress? The answer is no.

               While Woodrow Wilson discontinued the timely tradition of the written address, there have been quite a few circumstances that have led to Presidents delivering the State of the Union in alternative formats. To start, many presidents skip the State of the Union address after being elected to their first term, such as Reagan in 1981, George H.W. Bush in 1989, Clinton in 1993, George W. Bush in 2001, Barack Obama in 2009 and Trump in 2017. Other circumstances include, but are not limited to, when President FDR submitted a written speech due to his declining health, or when Eisenhower, due to a recent heart attack, submitted a written speech and delivered a seven-minute televised summary of the address to the nation. The point being made is simple: While the address is typically delivered in the House chambers before a joint-session of Congress, Trump could take his business elsewhere.

               The President has made it clear that when it comes to the media, he commands a lot of authority. This was recently seen when President Trump took to hijacking the major networks to deliver a national address regarding a humanitarian crisis at the border. The networks had the option of refusing – but did not want to face the political fallout of doing so. Trump has the option of delivering his State of the Union address from the Oval Office if he so desires, either in full or in summary form (such as how Eisenhower did).

               Trump may also opt for another delivery method – to deliver the State of the Union address to the public in a rally format. I believe this option is ideal for the President as it, in addition to being able to be broadcasted across the nation, allows for audience participation. State of the Unions, while known for their content, are also known for the seemingly endless (frequently partisan) applauses. A rally would allow for the President to receive immediate positive feedback to his address.

               These two options are far more favorable over conceding victory to the Democrats in the partial government shutdown but are obviously less desirable than having the setting of the House chambers and standing before a joint-Congress. This all can be visualized through an extensive form representation of the game ‘brinkmanship.’

P = Pelosi, T = Trump 

hyperlink to image: click here

               While we cannot assign values to the terminal nodes, and instead indicate preference through smile images (reflecting positive, neutral and negative), we can make some assumptions regarding expected values based on the decisions of our actors. Namely, Pelosi has already made the decision to make a demand on Trump to end the shutdown or have his speech blocked. This, assuming Pelosi is a rational actor, means the Speaker has assigned an expected value (EV) that exceeds the options of simply allowing Trump to deliver the address with no such threats.

               Continuing along the tree, we can see the options that lay on the horizon. President Trump can respond to the Speaker’s demands by conceding and ending the shutdown in order to deliver his speech. This would be most optimal for Speaker Pelosi, as it gives her what she wants without needing to execute her threat. This however would present the biggest loss to the President, because even though he could make his full address as intended, it would be at the expense of his much desired Border Wall funding. This presents us with the alternative option: Trump could opt not to concede to Pelosi’s demands.

               Speaker Pelosi, if Trump refuses to concede, can walk back her words, likely under the guise of “being reassured by DHS/USSS that security will not be a problem.” This however comes at the expense of likely making the Democrats appear weak on threats and would be a political victory handed to Trump since he would both be (a) continuing the shutdown in hopes of receiving wall funding, and (b) deliver his address as intended. Pelosi therefore is best served by sticking firm to her threat of cancelling the scheduled State of the Union address.

               President Trump can then choose one of two options. If he refuses to deliver the State of the Union address, he is giving Pelosi what she wants – which in essence is a Democratic victory. Trump therefore is left with the option of delivering the State of the Union in an alternative format. While not as prestigious as being able to deliver it in the House chamber, it is still something (which is reflected via the neutral designation). I’ve also placed the assumption that the alternative format would be televised to reflect the known preference of the President in his desire to attract the attention of both the media and American electorate. Conducting rollback analysis, it is relatively clear that the President will opt for the terminal node that gives him something, rather than accept either a loss on border wall funding or the loss of his speech. All other modules/nodes that could give the President a win are selections made by the Speaker, who would be acting out of interest and irrational if she conceded to President Trump.

               Without true expected values, it is hard to determine which is worse for Speaker Pelosi:

  • Holding firm on her commitment to cancel the State of the Union address before a Joint Congress, handing Trump a win if he delivers the address in an alternative format, or;
  • Walking back her comments, saving face in the aforementioned manner.

               Both options, while leading to a continued shutdown, at least do not hand the President a complete win by providing border wall funding. Pelosi may opt to hold firm and eventually get the President to end the shutdown absent a wall. I suspect that Pelosi is better served by walking back her comments and stating that there is no longer a security threat, however there are further consequences that come by walking back her comments. By allowing the President to deliver his address in the House chamber with an on-going shutdown, he will likely use it as an opportunity to lambast Democrats sitting in front [and behind] him, painting them as obstructionist – all without the opportunity for an immediate rebuttal. Pelosi, out of political fear of giving the President this prominent stage, may opt to take the loss on the away field instead of the home front. This home-front antagonization may have fueled Speaker Pelosi’s decision to make the ultimatum to begin with, as she Pelosi must believe the expected value in that branch to have exceeded the EV of the non-provocation option. The EV calculations being made by President Trump and Speaker Pelosi reflect the truth that this ‘game’ of State of the Union brinkmanship is actually a subgame of a larger one regarding the shutdown. When considered as part of a larger game, Speaker Pelosi must have come to the conclusion that pursuing this course of action (provocation through threatening to block the SoTU) led to better outcomes than her other options.

Therefore, following all of the above analysis, I find the equilibrium to be, and predict that:

               Speaker Pelosi will hold firm on her comments, to which the President will announce publicly that he will hold the State of the Union absent from Congress and instead do it through a televised format. As most games of brinkmanship, this has led to a worse outcome for both due to continued aggression against the other.

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Comments

  • Donnie:

    Excellent analysis.  As a rising economist, you are aware, no doubt, that the true measure of of your belief in your own analysis is willingness to bet real money on it.  So, I propose the following:  Dinner with Professors Rodriguez, Sacco, and me.  Trump executes SoTU on TV, I pay. Any other outcome, you pay.

    John

    • John, 

           As the rich millionaire I hope to be - I accept. As the broke college senior I am, I will "get back to you later" - haha. My analysis leads to Trump delivering the State of the Union through some alternative format. A written SoTU or a written SoTU with a televised summary I'd still qualify both as falling within this branch of alternative format (although my personal predictions given my analysis is that he will still include some televised element). I am keeping close tabs on this, as well as the overall shutdown, as the 28th approaches. As sure as I am in this analysis, an astute economist such as yourself knows that any major change in the larger game of the shutdown can shift EVs to where Trump or Pelosi may pursue an entirely different branch of the larger game tree that isn't this subgame. All in all - We'll see. Thanks for your response!

      D

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