Perverse Incentives

According to Republican Representative Jim Gerlach of Pennsylvania, Ernst & Young has a report out that says raising tax rates on the rich could cut 700,000 jobs over the next ten years. The Republicans want to use this as an argument against raising rates. But President Obama was re-elected despite an abysmal jobs performance, and his administration is poised to issue new regulations, held up until the elections were over, that will undoubtedly cause more job losses. Clearly his agenda of a better quality of life regardless of economics is based on his practical experience with "voter-nomics" that shows him the unemployed will vote for the party of entitlements, not the party of jobs. The worry is the Republicans are using arguments that are meaningless to the President, and overestimating their leverage. The White House is now insisting on a more permanent resolution of the debt ceiling, one of the few leverage points the Republicans have. This implies the cliff negotiations may drag into the new year, creating more volatility in the market in the meantime, and more layoffs, which will be used by the White House to blame Republicans.