Legislative Hostage-Taking

Abstract

Legislative hostage-taking–whereby the minority party refuses to pass a bipartisan policy unless another divisive or contentious policy also passes–has become a frequent occurrence in Washington. We develop a dynamic, two-period model of legislative bargaining and electoral politics to provide insights into why hostage-taking occurs, which policies are held hostage, and which policies are demanded as ransom. A key insight is that (credible) hostage-taking can only occur if the divisive policy benefits the voter and that, when it occurs, it is always welfare-improving for the voter. In fact, the voter would benefit if hostage-taking occurred more often than it does in equilibrium. We also show that hostage-taking has the potential to generate perverse policy distortions (``money burning''), which may reduce the voter's welfare.

Keywords: Gridlock, Bargaining, Hostage-taking, Policymaking

JEL Classification: D72, D78