THE BLOG
12/18/2013 10:18 am ET Updated Feb 17, 2014

Progressive Economic Policy: Cuomo vs. de Blasio, Supply-siders vs. Demand-siders

The political desert that is Washington is a direct function of its intellectual empty-headedness. It would be nice to blame Tea Party austerity, but there's no articulated, progressive, economic counter narrative to rely on. That's left it to the states. In New York a real battle over economic policy is shaping up between Andrew Cuomo and Bill de Blasio. It's our best chance to change the national economic debate.

In New York, de Blasio has embraced the Left's conventional tax-the-rich theory proposing a limited increase to pay for universal pre-K. Cuomo is heading in the opposite direction. He's proposing business and estate tax cuts that will go to the top 1 percent of taxpayers. (He's also talking about property tax cuts, which is a much more complicated subject.) Cuomo's opposing the de Blasio tax plan.

It's a smaller version of the sterile Washington debate. Cuomo has repeatedly cut business taxes, arguing that these reductions stimulate economic activity. He's doubled down with huge subsidy programs for corporations, usually cash but often tax preferences. It's a repeat of the conventional right-wing, supply side argument that we've heard from the organized Right since Reagan: Provide benefits to large corporations and investors and economic activity will follow and lift all boats.

The problem is that there's almost no evidence that it works. In New York at least, the areas where the economy is strongest are the areas where taxes are highest. The biggest subsides have gone to corporations that can't or won't leave New York, the best examples are the $10 billion or so given to the Yankees, Mets and Nets for sports stadia.

So just as Cuomo is giving us more of the same, de Blasio is facing decisions that will define his mayoralty fast and firmly.

It's not that he's out looking to make an example of anything. His predecessor, Mike Bloomberg, is leaving town in the midst of a strenuous effort to shovel billions in subsidies to assorted favored developers and corporate socialists, for things like ferris wheels, malls, office towers and God help us, another Yankee sports stadium (an awful deal for a soccer stadium in the Bronx benefiting the third richest man in the world).

All this forces de Blasio to make quick decisions about corporate welfare, just when he's deciding whether to fight for his income tax increase, and just when Cuomo will strong arm his estate and business tax cuts.

Here's an idea for de Blasio: Just say "no" to the corporate welfare stuff. Use it as a way to articulate a real progressive alternative to supply-side subsidies. Call for "demand-side" economic development, where increased income to middle-income and poor people stimulates demand for products that require employers to hire people to meet that demand. That increased income comes from paying a living wage, keeping municipal employment at decent levels and investing in basic infrastructure like roads and subways, rather than special corporate projects. Demand for goods and services will rise, employment will rise, tax revenues will rise.

There's an example Washington could follow. Here's what could happen there: End federal tax subsidies and grants for projects that steal economic growth from one region and move it to another. There is no federal interest in subsidizing the move of a manufacturing plant from Washington to North Carolina. Increase federal help for distressed municipalities so that public employment doesn't continue to fall and depress demand. Expand federal participation in genuine infrastructure build out.

That leaves plenty of things to fuss about: entitlement reform, tax overhaul, health care cost containment -- there's no shortage of controversy. But it will be great to have a simple and understandable model for economic growth, "demand-side" economics, New York style, as a counter to the failed austerity policies of the last three decades.

Cuomo and de Blasio will probably try to accommodate each other. Too bad. De Blasio got elected as the avatar for a new kind of economy. Now's his chance.