In bargaining theory, a “disagreement point” or “threat point” is the policy which is implemented if no agreement is reached. Typically, it is bad for both sides, but may be worse for one. The disagreement point has a profound impact on the outcome of negotiations, even if it never comes to pass. (In theory-land, say in Nash or Rubinstein bargaining, there is never disagreement, but the threat of disagreement is a crucial determinant of the outcome.)
Obviously, in our government’s current situation, the disagreement point is a shutdown. TV pundits have been speculating for weeks about which side this hurts more. But this isn’t the only imaginable disagreement point. The system could decree that, say, last year’s budget gets extended automatically if no new budget is passed. This would drastically impact the negotiations (favoring the Democrats in this particular case.) My question to anyone who knows the history of government better than I do is: How did we come to have a system where the government shuts down unless a new budget is passed each year? And do other countries differ on this point?
The Leisure of the Theory Class 
3 comments
April 8, 2011 at 6:32 pm
Anon
Is that what’s happening here? I thought it was shutting down because they weren’t passing the law raising the debt ceiling. Is that later in the year?
April 8, 2011 at 6:43 pm
Jonathan Weinstein
No, the debt ceiling is another important negotiating point, but in that case, the “disagreement point” is that if they don’t raise the debt ceiling, the US defaults on its debts. That would be much more catastrophic than the shutdown which will happen if they don’t pass a budget tonight.
April 8, 2011 at 8:51 pm
Eran
In israel I think the government can continue for three months with the previous year’s budget, and then, if they still don’t pass a new budget the parliament dissolves and a new election is held.
The negotiation also looks very different from what we see today in Washington (though I guess the difference has more to do with the parliamentary system than with the disagreement point): Nobody in the parliament wants to cut government expenditures. Regardless of which party controls the government, the `deficit hawks’ are always the prime minister and his treasury secretary, and the parliament members each have their own demands for public money.