Osborne will struggle to debate the IMF head-on

Without being able to turn to now-slain canards, the chancellor's arguments fall apart.

George Osborne is to make one of the most direct responses yet to the IMF's interventions into UK politics this week, according to the Guardian's economics editor Larry Elliot:

The Treasury intends to reject the IMF's call for an easing in the pace of deficit reduction and will insist that any change in the strategy is both unnecessary and counterproductive. Alarmed at the flatlining of the British economy in 2011 and 2012, the IMF said last month it was time for Osborne to do more to boost economic growth and urged that he should rethink plans to cut the government's structural budget deficit by 1% of national income in 2013-14.

The chancellor was stung by the criticism, which was seized upon by shadow chancellor Ed Balls as evidence the government had damaged the economy with an over-aggressive austerity approach.

It's an argument which the chancellor is ill-equipped to take public, since the IMF is pushing the one policy which Osborne has no real response to: apolitically arguing for a modest increase in deficit-funded investment.

Elliot reports that Treasury officials will be relying on the time-worn "credibility with the financial markets" response. That's one which might play well with the public, but has little-to-no relation to the real world. In fact, Britain's Bond yields are depressed, just like the rest of the non-Eurozone developed world's, by the financial climate. Investors, scared of the prospect that they might lose everything in another bank run or stock market collapse, buy up bonds in countries which control their own currency just to have a safe place to store money. The situation has even been called a "reverse sovereign debt crisis", to reflect that fact that, in many cases, yields are so low that governments are being effectively payed to look after money.

(The rush to safe assets is also likely what prompted Apple to issue its own $17bn worth of bonds; multinational companies are safe enough that investors are happy to park their cash there, too.)

The Chancellor and Treasury are more at easy arguing within the British political context, where the mantra "more debt is bad" is so ingrained into the debate that they don't have to try to justify it. That's why the Conservative party feels they can torpedo any of Labour's plans just by pointing out that they are aiming to "borrow more to borrow less" (despite the fact that that's an entirely reasonable suggestion, as anyone who has consolidated debts, installed double glazing, or taken a season ticket loan will tell you): the opposition flounders in the face of such an attack, unsure whether to argue that they aren't really borrowing; that they are borrowing, but it will result in less future debt; or that they are borrowing and that's better than the alternative.

The IMF has no such qualms. It is telling the UK that borrowing more is good, and challenging the government to actually go back to first principles and explain why its debt reduction program must take eight years, compared to the initial plan of five. Why not nine? Or ten? Or 12?

Faced with having to justify his most basic beliefs, the chancellor is forced to retreat to canards long since slain. The "financial markets" are not rewarding the UK for austerity, nor will they punish it for slowing the pace of fiscal consolidation. In the meantime, the UK economy is very definitely feeling the hit of the lack of any coherent plan for growth over the last three years; and it feels like that pain will last a lot longer.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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What Donald Trump could learn from Ronald Reagan

Reagan’s candidacy was built on more than his celebrity. Trump not only lacks experience as an elected official, he isn’t part of any organised political movement.

“No one remembers who came in second.” That wisdom, frequently dispensed by the US presidential candidate Donald Trump, came back to haunt him this week. Trump’s loss in the Iowa Republican caucuses to the Texas senator Ted Cruz, barely beating Senator Marco Rubio of Florida for second place, was the first crack in a campaign that has defied all expectations.

It has been a campaign built on Trump’s celebrity. Over the past eight months, his broad name recognition, larger-than-life personality and media savvy have produced a theatrical candidacy that has transfixed even those he repels. The question now is whether that celebrity will be enough – whether a man so obsessed with being “Number One” can bounce back from defeat.

Iowa isn’t everything, after all. It didn’t back the eventual Republican nominee in 2008 or 2012. Nor, for that matter, in 1980, when another “celebrity” candidate was in the mix. That was the year Iowa picked George H W Bush over Ronald Reagan – the former actor whom seasoned journalists dismissed as much for his right-wing views as for his “B-movie” repertoire. But Reagan regrouped, romped to victory in the New Hampshire primary and rode a wave of popular support all the way to the White House.

Trump might hope to replicate that success and has made a point of pushing the Reagan analogy more generally. Yet it is a comparison that exposes Trump’s weaknesses and his strengths.

Both men were once Democrats who came later in life to the Republican Party, projecting toughness, certainty and unabashed patriotism. Trump has even adopted Reagan’s 1980 campaign promise to “make America great again”. Like Reagan, he has shown he can appeal to evangelicals despite question marks over his religious conviction and divorces. In his ability to deflect criticism, too, Trump has shown himself as adept as Reagan – if by defiance rather than by charm – and redefined what it means to be “Teflon” in the age of Twitter.

That defiance, however, points to a huge difference in tone between Reagan’s candidacy and Trump’s. Reagan’s vision was a positive, optimistic one, even as he castigated “big government” and the perceived decline of US power. Reagan’s America was meant to be “a city upon a hill” offering a shining example of liberty to the world – in rhetoric at least. Trump’s vision is of an America closed off from the world. His rhetoric invokes fear as often as it does freedom.

On a personal level, Reagan avoided the vituperative attacks that have been the hallmark of Trump’s campaign, even as he took on the then“establishment” of the Republican Party – a moderate, urban, east coast elite. In his first run for the nomination, in 1976, Reagan even challenged an incumbent Republican president, Gerald Ford, and came close to defeating him. But he mounted the challenge on policy grounds, advocating the so-called “Eleventh Commandment”: “Thou shalt not speak ill of any fellow Republican.” Trump, as the TV debates between the Republican presidential candidates made clear, does not subscribe to the same precept.

More importantly, Reagan in 1976 and 1980 was the leader of a resurgent conservative movement, with deep wells of political experience. He had been president of the Screen Actors Guild in the late 1940s, waging a campaign to root out communist infiltrators. He had gone on to work for General Electric in the 1950s as a TV pitchman and after-dinner speaker, honing a business message that resonated beyond the “rubber chicken circuit”.

In 1964 he grabbed headlines with a televised speech on behalf of the Republican presidential candidate, Barry Goldwater – a bright spot in Goldwater’s otherwise ignominious campaign. Two years later he was elected governor of California – serving for eight years as chief executive of the nation’s most populous state. He built a conservative record on welfare reform, law and order, and business regulation that he pushed on to the federal agenda when he ran for president.

All this is to say that Reagan’s candidacy was built on more than his celebrity. By contrast, Trump not only lacks experience as an elected official, he isn’t part of any organised political movement – which enhanced his “outsider” status, perhaps, but not his ground game. So far, he has run on opportunism, tapping in to popular frustration, channelled through a media megaphone.

In Iowa, this wasn’t enough. To win the nomination he will have to do much more to build his organisation. He will be hoping that in the primaries to come, voters do remember who came in second. 

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war