Labour needs an answer to Osborne's charge that it would "borrow more"

If the party wants to attack Osborne on this territory, it needs to explain why and how it would borrow for growth.

The loss of Britain's AAA credit rating was a humiliating moment for George Osborne but as this afternoon's Commons clash with Ed Balls demonstrated, the Chancellor's position is stronger than it first appears. After asking Osborne an urgent question on the downgrade, Balls declared: 

He has gone in a weekend from saying he must stick to his plan to avoid a downgrade, to saying the downgrade is now the reason he must stick to his plan.
It was a neat line but Osborne had little trouble resolving this apparent contradiction. In its explanation of the downgrade, Moody's warned against "reduced political commitment to fiscal consolidation". Citing these words, Osborne said that while there would be no "reduced commitment from this government", Labour's answer to "too much borrowing" is "to add to it". The difference, of course, is that while Labour would borrow for growth (in the form of tax cuts and higher infrastructure spending), the coalition is borrowing to meet the cost of failure (in the form of lower growth and higher long-term unemployment). 
 
The problem for Labour, however, is that Ed Balls and Ed Miliband, aware that voters may not easily accept their distinction between "good" borrowing and "bad" borrowing, are unwilling to make this argument explicitly. Osborne ridiculed their approach as "an economic policy that dares not speak its name". The Chancellor's cause is aided by the fact that more voters continue to blame the last Labour government for the cuts than the coalition. Fearful of giving the impression that they would, in Osborne's words, make "the same mistakes" again, Labour will not openly declare that it too would borrow more (although, as Osborne noted, Ed Balls briefly did on the Today programme on Saturday) .
 
Rather than becoming trapped in a technical debate about the deficit, Labour would be wiser to focus on living standards, but if it wants to continue to attack Osborne on this territory it will need a much better explanation of its own approach. Without explicitly declaring that it would borrow for growth (and explaining why), the party merely reinforces the impression that borrowing is always and everywhere an economic ill. And that only strengthens Osborne's hand. 
Ed Miliband and Ed Balls at the Labour conference in Manchester last year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Leader: Trump's dangerous nation

From North Korea to Virginia, the US increasingly resembles a rogue state.

When Donald Trump was elected as US president, some optimistically suggested that the White House would have a civilising effect on the erratic tycoon. Under the influence of his more experienced colleagues, they argued, he would gradually absorb the norms of international diplomacy.

After seven months, these hopes have been exposed as delusional. On 8 August, he responded to North Korea’s increasing nuclear capabilities by threatening “fire and fury like the world has never seen”. Three days later, he casually floated possible military action against Venezuela. Finally, on 12 August, he responded to a white supremacist rally in Virginia by condemning violence on “many sides” (only criticising the far right specifically after two days of outrage).

Even by Mr Trump’s low standards, it was an embarrassing week. Rather than normalising the president, elected office has merely inflated his self-regard. The consequences for the US and the world could be momentous.

North Korea’s reported acquisition of a nuclear warhead small enough to fit on an intercontinental missile (and potentially reach the US) demanded a serious response. Mr Trump’s apocalyptic rhetoric was not it. His off-the-cuff remarks implied that the US could launch a pre-emptive strike against North Korea, leading various officials to “clarify” the US position. Kim Jong-un’s regime is rational enough to avoid a pre-emptive strike that would invite a devastating retaliation. However, there remains a risk that it misreads Mr Trump’s intentions and rushes to action.

Although the US should uphold the principle of nuclear deterrence, it must also, in good faith, pursue a diplomatic solution. The week before Mr Trump’s remarks, the US secretary of state, Rex Tillerson, rightly ruled out “regime change” and held out the possibility of “a dialogue”.

The North Korean regime is typically depicted as crazed, but its pursuit of nuclear weapons rests on rational foundations. The project is designed to guarantee its survival and to strengthen its bargaining hand. As such, it must be given incentives to pursue a different path.

Mr Trump’s bellicose language overshadowed the successful agreement of new UN sanctions against North Korea (targeting a third of its $3bn exports). Should these prove insufficient, the US should resume the six-party talks of the mid-2000s and even consider direct negotiations.

A failure of diplomacy could be fatal. In his recent book Destined for War, the Harvard historian Graham Allison warns that the US and China could fall prey to “Thucydides’s trap”. According to this rule, dating from the clash between Athens and Sparta, war typically results when a dominant power is challenged by an ascendent rival. North Korea, Mr Bew writes, could provide the spark for a new “great power conflict” between the US and China.

Nuclear standoffs require immense patience, resourcefulness and tact – all qualities in which Mr Trump is lacking. Though the thought likely never passed his mind, his threats to North Korea and Venezuela provide those countries with a new justification for internal repression.

Under Mr Trump’s leadership, the US is becoming an ever more fraught, polarised nation. It was no accident that the violent events in Charlottesville, Virginia, culminating in the death of the 32-year-old Heather Heyer, took place under his presidency. Mr Trump’s victory empowered every racist, misogynist and bigot in the land. It was doubtless this intimate connection that prevented him from immediately condemning the white supremacists. To denounce them is, in effect, to denounce himself.

The US hardly has an unblemished history. It has been guilty of reckless, immoral interventions in Vietnam, Latin America and Iraq. But never has it been led by a man so heedless of international and domestic norms. Those Republicans who enabled Mr Trump’s rise and preserve him in office must do so no longer. There is a heightened responsibility, too, on the US’s allies to challenge, rather than to indulge, the president. The Brexiteers have allowed dreams of a future US-UK trade deal to impair their morality.

Under Mr Trump, the US increasingly resembles a breed it once denounced: a rogue state. His former rival Hillary Clinton’s past warning that “a man you can bait with a tweet is not a man we can trust with nuclear weapons” now appears alarmingly prescient.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear