Game On: How Democrats Should Respond to Bush’s Campaign to Reform Social Security

What is a responsible opposition party to do in reaction to President Bush’s campaign to reform Social Security? Sober commentators with moderate political views and a preference for civil talk across party lines have, in recent weeks, given a clear answer: Democrats should acknowledge that the solvency problem is real; offer a genuine alternative to the Bush policy; entertain the “sweetner” of personal accounts in order to achieve progressive benefit cuts; and, in the words of one Washington Post editorial-page writer, stop “braying over what must be left on the table or taken off.” That is, Democrats shouldn’t let the disconnect between Bush’s call to save Social Security and his embrace of personal accounts stand in the way of good-faith bargaining that could ultimately assure the system’s solvency.

All of which sounds eminently reasonably—and is, if you understand game theory, exactly wrong. Democrats would be wise to embrace the tactic analyzed brilliantly by Robert Axelrod in his classic 1985 book, The Evolution of Cooperation. Axelrod assessed possible strategies in the famous Prisoner’s Dilemma game, which consists of a situation where mutual cooperation produces better results than mutual refusal to cooperate. The catch is that each individual player obtains the best results by defecting from cooperation when his opponent elects to cooperate. Given this temptation to defect, the trick becomes determining how best to induce cooperative behavior. Amazingly, the simplest of all strategies Axelrod tried in a computer tournament proved best: reciprocation in kind. He called this strategy—doing whatever the previous player did—”tit for tat.”

The lesson for Democrats? If they believe that Bush’s single-minded embrace of personal accounts is a defection from a cooperative game to deal with the solvency of Social Security (and it is), they should respond in kind: by withholding any specific proposals on benefit reductions and revenue increases until the President withdraws his insistence on personal accounts. If Bush’s interest in solvency is genuine, he will then have no choice but to bargain.

Advocates of bipartisanship would have Democrats eschew this hard-nosed strategy and immediately enter negotiation—but that means being led directly into the trap of an ambitious and skillful president. During his first term Bush accomplished more (in the way of bold policy departures) with less (in electoral and public support) than any president in contemporary history. Now Bush is again attempting to accomplish a lot (restructuring the nation’s social insurance system in the name of saving it) with no trace of a popular mandate. Rather than imitating the bipartisan effort under President Reagan to make the system solvent, Bush is taking the first steps toward eventually replacing the present system and the pattern of political allegiances that have developed around it. He champions personal accounts as a better deal for younger workers but rarely mentions any of the painful steps—such as benefit reductions—that must be taken to achieve solvency. And so Bush is implicitly selling personal accounts as a cost-free means of adapting FDR’s prize achievement to the twenty-first century world.

According to the Republican script, this is where the Democrats are supposed to come in: To be responsible, Democrats will offer proposals to make the system solvent; that gives the administration political cover for the painful steps needed to balance revenues and benefits over time; and by appearing to offer concessions on the question of solvency, Republicans can more easily insist on personal accounts as part of the final package. In other words, the Democrats’ willingness to offer specific alternatives and negotiate on terms set by the administration would likely increase the odds of Social Security’s privatization, the very aspect of Bush’s plan that Democrats deem most dangerous.

It’s not just Social Security that’s at stake here. Down the road, Democrats and Republicans will face similar Prisoner’s Dilemma situations on Medicare and Medicaid. Game theory suggests that cooperation, paradoxically, is more likely to come if the Democrats engage in “tit for tat” than if they are suckered into immediate negotiations. The prospects for a genuinely bipartisan solution on Social Security will brighten if Democrats first just say no.