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Notes for a Manifesto: How Austerity Conservatism Will Screw Us

The enormity of last week's super-storm is just beginning to sink into political consciousness. Hurricane Sandy should transform what Americans expect from their government, and give the party of government activism new force.

As soon as the election is behind us, the country faces a major struggle over what the super-storm portends and requires. But that struggle will be as much within the Democratic Party as between Democrats and the right, because of the deadweight of austerity politics.

I. The Three Faces of Conservatism.

In this political season, progressives are actually battling three forms of conservatism -- and two of them have made deep inroads in the Democratic Party, especially the presidential party.

The first variety -- call it Yahoo Conservatism -- is epitomized by the Tea Party and Rep. Paul Ryan, and by Mitt Romney's intermittent, clumsy efforts to impersonate it.

Its credo is: cut taxes, privatize social programs, slash government, bash immigrants and gays, deny climate change, dictate reproductive rules, move America in the direction of theocracy, and valorize gun-slinging both at home and globally.

This face of conservatism doesn't represent most Americans. And on the Yahoo front, Barack Obama has done pretty well at pushing back. With Hurricane Sandy, Yahoo conservatism looks even stupider.

But this is not the only brand. The second face is Wall Street Conservatism.

The collapse of 2008 gave the incoming Obama administration a rare chance to remake the financial system. Instead, the team led by Larry Summers and Tim Geithner elected to prop up the big banks that caused the collapse, and not change their business model. Despite the financial fraud and federal rescue, no major banker got fired at government insistence, much less faced prosecution.

The Dodd-Frank Act, which was actually stronger than the legislation that the Treasury sent Congress, is getting weaker by the day, thanks to lobbying pressure to water down regulations that is not being resisted by the administration (with a few heroic exceptions like Gary Gensler at the Commodity Futures Trading Commission and Martin Gruenberg at the FDIC.)

The mortgage mess continues to drag down the recovery and the Administration won't push stronger relief for fear of the impact on bank balance sheets and the bond market. Executive paydays are richer than ever.

So Wall Street conservatism has infected the Obama presidency. If Obama had not so identified himself with Wall Street, he might have peeled off some of the right-wing populists recruited by the Tea Parties as well as many more independent voters who don't like the reign of the one percent any more than progressives do.

Wall Street conservatism also overlaps the third face of the right -- Austerity Conservatism.

The day after the election, the pressure will be on the White House and Congress to cut a grand budget bargain. The Peterson Foundation has spent half a billion dollars to persuade opinion leaders and voters that austerity is the only road to recovery.

The latest face of the elite austerity lobby, nearly a hundred corporate CEO's working with the detritus of the Bowles-Simpson Commission (the fiscal zombie that just won't die), are spending another hundred million dollars in their campaign to press politicians to "Fix the Debt."

The economics of the proposition are insane. We can't depress our way to recovery. But the Obama Administration has drunken a lot of this Kool-Aid. Obama has pledged to cut the debt by $4 trillion over a decade. It was Obama who appointed the Bowles-Simpson Commission, which helped create this pressure.

Friendly Democratic leaders are already being advised that the administration will offer a grand bargain of tax increases, budget cuts, and hits to Social Security and Medicare to head off the "fiscal cliff" created by the Republican refusal to bargain over the budget. This grand scheme is the long commended recipe of the ultimate Wall Street austerity Democrat, Robert Rubin, whose protégés litter the Obama Treasury and White House.

Seemingly, Wall Street Conservatives and Austerity Conservatives are disdainful of Yahoo Conservatives. The former tend to be relatively liberal on, say, gay rights, reproductive choice, gun control, and they even support some higher taxes. Yet they are doing the bidding of Yahoo conservatives by weakening the Democrats as a party that might actually produce a recovery, and might actually speak for ordinary people devastated by the continuing slump -- which will only deepen if Austerity conservatism prevails.

If Obama wins and he strikes a grand budget bargain with the Republicans, it will paralyze the government's ability to respond to the worst continuing disaster since al-Qaeda's attacks of 9/11.

II. Sandy Changes Everything -- Maybe

The new normal of rising waters and other consequences of intensifying climate change has arrived a generation ahead of schedule. As Americans grasp what has occurred and the likelihood of more intense storm surges in coming years, it will become clear that we need massive public investments to keep our coastlines above water.

America, as I recently wrote, just became a much larger version of Holland.

But below-sea-level Holland, which spends tens of billions on flood prevention, is a thriving, prosperous society. Water control systems are one of its major exports.

For starters, we will need a planning process to identify what combination of storm barriers like Rotterdam's, sea walls, dikes, and pumping systems are necessary to prevent calamities like Sandy from becoming regular events. In addition to physical barriers, we will need to invest large sums in protecting subways, tunnels, power stations, and water and sewer systems.

Beyond that, America will need to get serious about investing in renewable energy, which is the ultimate preventive measure. But climate change has already gone far enough that we have to defend our communities in the meantime.

The money needed will easily reach into the trillions of dollars. And for now, just about nothing is on the books. FEMA's entire budget for this fiscal year is $12.5 billion, and the immediate damage of the storm is $50 billion. The infrastructure spending of the 2009 Recovery Act is nearly used up.

If this were a military threat, we'd simply find the money, through a combination of bonds and surtaxes on the wealthy. After the attacks of 9/11, military spending rose by between two and five trillion dollars, depending on what you count.

It just happens that the money that we need to invest in protecting our coasts and reducing carbon emissions can also power the recovery that the economy needs.

But if Obama and the Republicans strike the grand bargain commended by the austerity lobby, there will not be a penny available. Instead, there will be budget cuts for the next decade.

Many of the corporate CEOs behind Fix the Debt could not work from their flood-damaged, dark Manhattan offices this past week. Maybe they should re-think their priorities.

III. Obama's Challenge -- and Ours

Once the election is behind us, a re-elected Obama can proceed to negotiate the grand budget deal as if nothing had happened. Or he can give a major address pointing out that super-storm Sandy changes everything; that all prior bets are off.

The demands of a post-Sandy America serve to strengthen his hand, and reveal government-bashers as fools. He can simply refuse any budget deal that fails to recognize the new reality of what really threatens America and the needed government response, and invite public pressure to build on the Republican obstructionists. Chris Christie will not be the only GOP convert.

When Obama was elected in November 2008, in the aftermath of the worst financial debacle since the Great Depression, history dealt him an opportunity to drastically reform Wall Street. He didn't take it. As a consequence, the 2012 election is much closer than it should be.

Now, Sandy has given him a change to reboot -- and to be the insurgent president we hoped we were electing last time. He may realize this on his own. And if he doesn't reboot and simply pursues fiscal business as usual, progressives need to put a lot of boots on the ground to insist that he seize the opportunity.

If the fix is in for a budget deal that precludes government's ability to spend serious money on climate remediation, flood protection, and a shift to a non-carbon economy, the United States of America is just plain screwed.

Few presidents get a do over. Let's see whether Obama grasps the challenge and the possibilities.

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