01/08/2014 10:21 pm ET Updated Mar 10, 2014

Cuomo vs. de Blasio: The National Struggle Begins in New York

The sharp collision between Governor Andrew Cuomo and new Mayor Bill de Blasio is echoing well beyond the borders of the Empire State. The two men have staked out sharply conflicting views of how to run an economy, and to the victor will go national credentials as the next wave of Democratic Party leadership.

The conflict is not complicated. Cuomo has consistently adopted economic policies that Paul Ryan would embrace. They're the expression of austerity/tea party economic philosophy. The economy will benefit and jobs will be created if state spending is reduced, state taxes are cut (especially for businesses and the wealthy), corporate subsidies are increased, and public sector unions are bashed.  His latest foray is a series of tax cuts that include lowering the estate tax, property tax cuts for corporations, and big cuts in the corporate income tax, announced in his State of the State message today.

De Blasio just upset New York's political establishment and chattering class by winning a primary and a general election on precisely the opposite grounds. The issue, he says, is income inequality and underinvestment. He proposes a high-end income tax increase to fund universal pre-K, and giving municipal workers some kind of raise (Bloomberg refused to negotiate, leaving them at 0 percent for the last three years). Give the middle class more income and stimulate spending, demand and jobs, he says, and economic growth will follow, and not just on Park Avenue.

Right back at you, says Cuomo. No income tax surcharge. (He gets to play in this because local income tax increases need state approval.) Maybe some money for pre-K, but no real increase in state aid that de Blasio needs to fund the labor contracts.

Right back at you, says de Blasio. It's not just about pre-K; it's about the city's ability to chart its own economic path, and it's about inequality. He won't back off.

There are two fascinating elements of this conflict. The first is that the two men genuinely like each other. But Cuomo insists on being New York's alpha male and went out hard and early against the surcharge and aid increases. de Blasio can't back off without disappointing the coalition that got him elected.

The second is Cuomo's national ambition. If Hillary steps aside, he will run for president in 2016 in the Democratic primary. The family name is associated with the left wing of the party; how did we get tea party austerity out of that genealogy?

It isn't like Cuomo hasn't thought it through. He's developed a "progractionary" theory of Democratic politics. On social issues and identity issues he's left-left-left. Gay marriage, gun restrictions, abortion rights, and now medical marijuana -- he's the darling of many of the social-issues constituencies that play so heavily in national Democratic politics. With enough enthusiastic support from women's groups, gay activists, gun control advocates, etc., he plans to stitch together a coalition that won't much care about economic issues. And in a general election those austerity policies may help with Republicans and independents in swing states.

Progressive on social issues, and reactionary on economic policy: "progractionary."

De Blasio wishes no harm to Cuomo. But he's unlikely to roll over if Cuomo persists in opposition to the surcharge and municipal aid.

Will Cuomo back off? Is there a bargain to be had? Where are the unions, New York's powerful Working Families Party and the forces focused on income inequality? Can a Democrat who cut estate taxes and state spending win a primary in Iowa or Wisconsin?

Since Occupy Wall Street forced Americans to look at the relationship of the 1 percent to the rest of us, the political class has been trying to harness that energy within conventional political dynamics. Obama did it brilliantly. Hillary is listening, Biden is listening, Governor O'Malley is listening. "Income inequality" is the catchphrase of the day. Can Cuomo turn this on its head and win in spite of his economic record?

The temptation for the two men to bargain away the conflict is real. But de Blasio can't maintain his national status by backing off his economic message. Don't underestimate the power of a compromise. But it's hard to figure out what that looks like without one of the two backing down.