Robert Kuttner has written much of the column I intended to write on this subject, so I will point you to his excellent column and add a few thoughts.
Kuttner wrote to warn that Obama intends to seek a "grand bargain" causing the U.S. to adopt the type of austerity program that threw the Eurozone back into a gratuitous recession.
Worse, Obama intends to begin to unravel the safety net (Social Security, Medicare, and Medicaid) to convince the Republicans to enter into this Faustian bargain. Just as only a conservative Republican could visit "Red" China, only a Democrat can begin the destruction of the safety net. The difference, of course, is that normalizing relations with China was a good thing while unraveling the safety net is a terrible thing.
Wall Street's greatest desire is privatizing Social Security. Wall Street stands to make scores of billions of dollars annually in additional fees should it ever buy enough politicians to privatize Social Security. The Republican Party's greatest goal is unraveling the safety net. They always wish to attack the most successful and popular programs introduced by the Democratic Party. Their problem is that they know it is toxic for Republican candidates to try to destroy the safety net. Only Democrats, through a "Great Betrayal" can give Republicans the political cover they need to unravel the safety net.
The safety net is so popular with the American people because it consists of superb programs that constantly put the lie to Republican memes that the government is incapable of success. There is no need to allow Social Security to "go bankrupt." The necessary expenditures can easily be made by the Treasury.
There is a need to contain the rise in medical costs, but we know how to do that without harming health outcomes. Most advanced nations attain the same health outcomes at half the expense (relative to GDP) of the U.S. Obama's opposition to the "public mandate" was a grave mistake that needs to be reversed.
Because unraveling the safety net is unnecessary, harmful, and politically insane for a Democrat and politically suicidal for Republicans, the proponents of these terrible policies have long failed in their efforts. Republicans, however, have now found a fifth column within the Democratic Party who they hope will open the door to attacking the safety net. This would provide the political cover that Republicans could use to unravel fully the safety net.
The Republican Party's approach to convincing Obama to commit the Great Betrayal cleverly exploits three human weaknesses. First, Obama wants to be considered a "centrist." Second, Obama yearns to be considered "bipartisan." These first two weaknesses are forms of vanity.
The siren song is "do this and you will become known as the President who acted as a statesman to cut across Party and ideological divides and make the hard choices essential to allowing America to continue to be a great nation -- while 'saving' the safety net."
The third weakness that the Republicans seek to exploit is fear -- and the death of alternatives. The mantra of European austerity proponents is "there is no alternative." The only choice is between austerity and collapse, and that means there is no real choice. The Republican strategy is to create a series of "moral panics." As the name implies, this involves the creation of a special form of panic falsely premised on immorality. (Think: "Reefer Madness" or Professor Hill causing River City, Iowans to believe that the arrival of pool hall demonstrated the imminent moral collapse of their children.) The Great Betrayal can only occur if Obama succumbs to mindless (and innumerate) panic.
The Democratic wing of the Democratic Party has to lead the effort to save America from the Great Betrayal. It is essential to focus on the self-destructive nature of austerity. The irony is that a proponent of austerity has just handed us a coup. Becky Quick, co-host of one of CNBC's business entertainment program, recently wrote a column intended to discredit Paul Krugman. Quick solicited a written statement from former President Bill Clinton to use in her attack on Krugman (who had criticized Quick and her co-host's stream of "zombie facts" when he appeared on their program). Quick reveled in her success in obtaining ammunition from Clinton to attack Krugman, asserting that it constituted a "damning retort to Krugman" and proved the need to adopt austerity. In fact, Clinton's statement stated his agreement with Krugman:
[I]t's important not to impose austerity now before a growth trend is clearly established, because as the austerity policies in the eurozone and the U.S. show, that will slow the economy, cut jobs, and increase deficits....
Clinton is a leader within the Rubin-wing of the Democratic Party that has been seeking to create the moral panic, but even he admits that "austerity now" "will slow the economy, cut jobs, and increase deficits." The Great Betrayal of the safety net will begin if Obama is able to deliver the "grand bargain" imposing austerity that would "slow the economy, cut jobs, and increase deficits" and unravel the safety nets - the four horsemen of the economic apocalypse.
Obama is telling the media that the Great Betrayal is his first, and overarching, priority should he be re-elected. We are forewarned and we must act now to make clear that we will block the Great Betrayal and crush at the polls any member of Congress who supports it.
Do not concede the phrase "grand bargain" to the proponents of the betrayal. We should heed Camus' warning that it is essential to call a plague by its real name if one is to resist it -- and it is essential to resist the pestilence. "[W]hen you see the suffering and pain that it brings, you have to be mad, blind or a coward to resign yourself to the plague." We must refuse to resign ourselves to being betrayed by Democratic leaders. Our actions must make it clear that we are not mad, blind, or cowards. We refuse to fall for their faux moral panics. It is our leaders who are all too often mad, blind, and cowards.