Ceiling the Deal: Quid Pro Keystone

The debt ceiling drama is inexorably drawing to its next installment, and the question remains: when and, more importantly, how will a deal get done?  To keep matters simple, President Obama and Congressional Democrats have stood by the long-standing pledge to not negotiate on the debt ceiling, but some Congressional Republicans have been pushing for concessions in return for a debt ceiling increase—in particular, approval of the Keystone XL pipeline.

The State Department released its final report on the environmental impact of the proposed Keystone XL pipeline (fact sheet here) last week.  In a nutshell, the report is a “win” for pipeline supporters.  The idea of a “Keystone approval in return for debt ceiling increase” deal is not new, of course.  What I want to discuss briefly is the procedural details of the deal and their strategic (electoral) implications.

A key question in this game is whether Congress explicitly attaches Keystone XL approval to the debt ceiling increase or not.  Congress could pass a combined bill, or perhaps an implicit deal will be struck: President Obama approves Keystone XL and Congressional Republicans approve a “clean” debt ceiling increase, without (too loudly) claiming a quid pro quo.

I have reason to suspect that President Obama is trying to set up exactly such a deal: he said in June that the criterion for approving the pipeline is that is “not significantly exacerbate the problem of carbon pollution.”  The State Department report provides an argument that it won’t.  Furthermore, President Obama said that “the net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.

However, White House press secretary Jay Carney said today that Obama’s decision on the pipeline would be free from “ideological or political influence.” And the current spin regarding Secretary of State Kerry is that (1) Obama has asked him for a recommendation on the project and (2) that Kerry may be conflicted regarding his principles and partisan motivations.

The strategic question here for my purposes today is

Does Obama value “not bargaining” over the debt ceiling—a signaling of resolve, etc. that I have touched upon in various other posts (such as here)—more than the potential gain from allowing moderate Democratic Senators to vote for a bill (perhaps with a debt ceiling increase too) mandating approval of the project? [1] [2]

With respect to the first point, I think all three sides (Democrats, Republicans, and Canadians) are playing a bit of a game of chicken: nobody wants to be seen as “giving in” if they don’t have to.  I won’t work this through in detail, but the basics of “chicken” as pretty simple: each player would prefer to look tough (not give in) and have one or both of the others give in.[3]  At the same time, each player would prefer to give in if they knew that neither of the others were going to give in.  The best case scenario in this situation, it seems, is the “win-win” scenario of (1) Obama looking “presidential” and “job-creating” by solemnly approving the Keystone project at the same time as (2) Congress passing a “dirty” debt ceiling increase that mandates approval of the pipeline.

The devil, of course, is in the details: the timing has to be managed appropriately so that neither side is “clearly” trying to save face.  I think this can be accomplished by having the Senate vote for a Keystone approval and clean debt ceiling increase separately, then have the House vote under a special rule to approve both and send them to the President, during which time the President would unilaterally approve the pipeline, so that he could explain that he was essentially signing a clean debt ceiling increase.

Will it work out this way?  Oh, I’m sure it will be different.  But with the benefit of being “up close” in temporal terms, I would be somewhat surprised if we don’t see action on both the debt ceiling and the Keystone project in the next week.

With that, I leave you with this.


[1] In 2012, a majority of the Senate voted in favor of such an approval, though it failed to get the 60 votes required to move forward.

[2] I thought about discussing why Obama might want a visible and positive Kerry recommendation, versus why he might want a negative and visible one.  The basics of one such argument are provided by my colleague Randy Calvert’s seminal article from 1985, entitled “The Value of Biased Information.”  I’ll come back to this argument at another time, I’m sure.  (And, to be honest, I have already stood on Randy’s shoulders elsewhere.)

[3] Usually, “Chicken” is described as a two-player game.  With more than 2 players, it becomes clear that Chicken is really just “private provision of a public good,” or the “who takes the trash out game.”  This is not the same as the Who Let The Dogs Out? game, which has no pure strategy equilibria (Baha Men (2000)).