The next New Deal

The Gilded Age of George Bush ends; the era of reform with Barack Obama begins. The great realignment is at hand, with prospects rising for a Democratic president and Congress with expanded majorities to initiate a new era of historic patriotic reform.

Let’s revive and revolutionize the auto industry with the next JFK moon shot to create a new generation of fuel-efficient cars that reach 100 miles per gallon or better within five years, and create a wave of new jobs to lift the economy and conserve historic energy.

Congress should return after the election, as the Speaker suggests, to enact a major economic stimulus of at least $150 billion, to give a booster shot to our domestic economy.

The Federal Reserve and global central banks should give the world economy a booster shot with another coordinated interest rate cut of 50-100 basis points. Now.

We need sweeping reforms of Wall Street to protect the integrity of markets, restore the integrity of credit rating agencies and bring stability and fiduciary trust back to banking and investing.

The Treasury Department has adopted the Plan B for Buffett plan I outlined in a recent column. This plan will help stabilize banking while protecting taxpayers, and could well make money for the treasury.

This plan can be applied to the auto industry beyond the recent bill. Government can provide substantial capital to auto companies to achieve a five-year, 100 mile-per-gallon goal. This can be done through government purchases of preferred stock, a 5 percent dividend for taxpayers and warrants to purchase the common stock of auto companies, with the warrants later auctioned to private investors at a profit to taxpayers.

With banks, government financing must be accompanied by an effective foreclosure freeze, as I proposed last year and Sens. Hillary Rodham Clinton (D-N.Y.) and Obama (Ill.) have proposed. With auto companies, government financing should be focused on a revolution in fuel efficiency with a five-year, 100 mpg target.

This would create a wave of jobs and promote massive energy savings. The common stock of auto companies would soar, reaping a profit for taxpayers by auctioning the warrants, and through revenue from taxes of newly hired workers.

This Buffett-like formula works for banking and auto companies because of historically distressed industry assets. It merges the interests of companies and taxpayers behind JFK-like goals.

While some progressives get nervous, we can provide a capital gains tax holiday for private investors who buy distressed housing assets, including a foreclosure freeze, and who invest in auto companies that reach the 100 mpg goal within five years. This moves massive private capital into public-spirited missions and puts more private capital on the side of historic energy savings, major job creation and support for homeowners.

The Gilded Age is ending. Americans will no longer tolerate an economy in which only the few boats rise while many boats are sunk in oceans of corruption, scandal and economic injustice.

For Democrats, a new era of patriotic reform led by a Democratic president and Congress will require navigating stormy financial seas. This will demand powerful reform, financial acumen, and policy creativity that merges public and private capital to effect the next New Deal.

Budowsky was an aide to U.S. Sen. Lloyd Bentsen and Rep. Bill Alexander, then chief deputy whip, U.S. House. He received an LL.M. degree in international financial law from the London School of Economics, and can be read on The Hill’s Pundits Blog and reached at brentbbi@webtv.net .