Fivethirtyeight, now nestled under the longingly protective wing of the New York Times, forecasts that the Democrats are likely to lose seven or eight seats. The seat that keeps them in a majority (including independents) is that of Senate majority leader Harry Reid in Nevada. If that goes then the Republicans will have a majority. In 1994, the Democrats lost eight Senate seats and this was seen as catastrophic.

Real Clear Politics meanwhile is forecasting a net gain of 28 with 35 toss-ups for the Republicans. If the Republicans perform as well as RCP is forecasting and takes 12 of the toss-ups then it will be in a majority in the House. The Democrats lost 54 in 1994 so the performance may be slightly better than that but that will do very little to console Democrats if they lose the House.

By way of comparison, the Democrats took 30 House seats and 6 Senate seats in their stunning 2006 success. So it’s looking bad.

Despite the growth of private sector jobs over the last eight months and the return of growth, the economic recovery is not yet tangible enough to convince many Americans that President Obama’s economic policies are sound. How he must regret not pitching for a larger stimulus in the earliest part of his presidency. His desire to see a $50billion transport infrastructure stimulus is relatively small fry and won’t get through a pre-election Congress anyhow.

So the economic message is fuzzy. Healthcare is misunderstood with Republicans more throatily campaigning on the issue than Democrats. The only thing that can save the Democratic majorities is a bit of the Obama campaigning magic (his approval ratings are negative but only marginally so) and a vigourous turnout operation.

All is not lost for Obama and the Democrats but don’t underestimate what a Republican takeover of Congress could mean as the President will inevitably have to compromise- unfunded tax cuts for the wealthy, a fiscal policy more in step with Europe and potentially deflationary as a result, and little chance of sensible immigration reform or climate change policies.

To put it another way, the next few weeks matter.

Let’s get the less interesting part of the discussion out of the way first. Tony Blair asserts that a New Labour agenda- keeping direct taxes down, being more aggressive about closing the deficit, major public service reform, and maintaining a liberal interventionist foreign policy- would have won Labour the 2010 election. I wouldn’t go that far but I certainly think that it would have won more seats than the party actually won for two reasons. Firstly, that would have been a clear agenda. Labour’s election pitch was, frankly, all over the place. The New Labour approach would have recognisable, distinct and would have nudged Cameron off the centre-ground as he struggled to be heard. Secondly, the Labour renewal debate seems to be determined to ignore a central fact- while Labour did lose working class voters more than the middle and professional classes, it lost them, in part, because they had lost faith in the the state and Labour’s governance of it. I wrote about this last week and Peter Kellner touches on the same point. A purist New Labour agenda would have appealed to these voters (and ps he is the only Labour leader to win an election in my lifetime.)

So I suspect on this one that Tony Blair is mostly right when looked at from the perspective of political positioning (leadership, incumbency, party strength, record etc also need to be taken into account!) For me, this is the least interesting of the debates that the book has provoked. Just because a set of positions give you greater electoral strength, it doesn’t make those positions right necessarily. And one of the arguments above makes the point about clarity. Other positions have clarity too and are mainstream- there are alternative strategies and positions that can build a coalitions. One of New Labour’s errors is to suppose that there is one path to electoral success. There are in fact many. Physics created this universe but there are many other universes with different rules (doffs cap to Stephen Hawking.)

The New Labour 2010 agenda as outlined in ‘A Journey’ – which is essentially a liberal agenda which is why it chimes with the Coalition to such a degree- has four elements: liberal, global markets; liberal interventionist foreign policy; public service reform, and engagement with emerging economies and powers. I’ll leave the last one out as it’s basically motherhood and apple pie (though Tony Blair does have some important reflections on the EU all of which I agree with.) I’ll take the others in turn.

1) Liberal, global markets

Many people will tempted to stop reading Blair’s account of the credit crunch when he asserts that, “‘the market’ did not fail. One part of one sector did.” I’ll not waste much time on that other than to say that these markets seem to have a habit of popping in many and varied ways- housing boom and busts, stock market exuberance, banking system failures, hedge fund crashes, asset bubbles bursting, etc- and in many places. So we need to be a bit more watchful about the nature of market forces than Tony Blair implies.

It is worth reading on beyond that point though. He argues for an increase in VAT and a more aggressive response to cutting the budget as soon as possible on the basis that a high and continuing deficit will impact confidence. Martin Woolf takes on this argument this morning in a column praising Ed Balls’ Bloomberg economy speech last Friday. Actually, on this one Tony Blair has a point. The wolves are not at the door but that does not mean that they will not be and being caught with a large deficit without a serious reduction plan in that process is disastrous. This is not just about funding the deficit, it is about confidence in the UK economy as a whole. Deficit reduction is not the be all and end all- and done the wrong way is economically and socially damaging as the Coalition will in all probability find out- but it is not something to be blasé about either.

There is a deeper and in some ways more important point also. Blair’s economic approach is the right one for those who have market power and are able to compete in the global economy. There is little in it to consider the destinies of those who are less advantaged. New Labour’s prescription was to run with the global market then redistribute its rewards. That’s not good enough. Opportunity, worth, and security need to be redistributed beyond that and what public policy mechanisms can be used to spread opportunity and raise the life outcomes of all. The New Labour prescription stopped short in this regard and, as consequence, found itself minimising the consequences of equality rather than tackling it at source. Quite apart from the individual and social consequences of this which are severe, there are economic consequences- more unequal societies suffer from high debt, insecurity, and demand deficiencies. This needs to be acknowledged as part of a credible economic growth policy going forward.

2) Public service reform.

Here Tony Blair is on much stronger ground. Strangely, he completely undersells his argument and even neuters it to a certain extent by turning it into a discussion about efficiency and the involvement of the private sector in public services.

It is actually more profound than that. It is about a complete readjustment of the relationship of the individual with the state where a much greater space for individual empowerment and civic action is created. Essentially, it is about humanising the state by making it a series of local relationships that insist upon responsiveness. It is easy to see why he found the sell difficult- he never found a way of popularising the mission. David Cameron is trying to achieve that through the ‘big society’ and is struggling- not least because the context is severe cost-cutting.

The craziest thing about public service reform is that it became a threatening rather empowering thing to many of the public sector professionals who could make it work. This is because it was too often more centralising than decentralising. The Coalition is going for a very different approach- one I suspect that Tony Blair wishes he had pursued. Labour will need to engage energetically and constructively with this if it is to respond to what is a desire to see a different and more personal type of state- one that responds to both individuals and civil society.

3) A liberal, interventionist foreign policy

It is to Tony Blair’s credit that he refuses to duck responsibility for the Iraq War. But there is one downside to this that I hope he will find a way of resolving. That is we are denied his full and frank reflections on how we should approach an Iraq-like situation in the future again. As Robert McNamara, Secretary of Defense during the Vietnam War has argued:

“We of the Kennedy and Johnson administrations who participated in the decisions on Vietnam acted according to what we thought were the principles and traditions of this nation. We made our decisions in light of those values. Yet we were wrong, terribly wrong. We owe it to future generations to explain why.”

Perhaps a Blair penned equivalent to McNamara’s In Retrospect could be a worthwhile project for him in the future. Liberal interventionism has to be distinguished from neo-conservatism. There are liberal interventionists who were for and some who were against the Iraq invasion. The problem at the moment is that there are times- Sierra Leone, Kosovo, and even Afghanistan- where it is right to intervene because we need to protect our own security or we can, with proper analysis, international support and a credible exit strategy, alleviate suffering. Those arguments are currently difficult to make anywhere but in the US as liberal interventionism which relies on smart power has become fused with neo-conservatism which relies on hard power in the general mindset.

So that’s it- a reflection on Blair’s postscript. Two final things. I agree with every word Tony Blair says about the pitfalls of oppositionalism- you get short term cheers but saddle yourself to unsustainable positions in the long term.

And I profoundly disagree with those who argue that it is time to ‘move on.’ The issues that Tony Blair confronts in this book – extremism, economic collapse, the nature of the state – are still pressing challenges. His perspective is important and has significant merit – it shouldn’t be accepted wholesale but most definitely should not be dismissed. Unfortunately, the serious aspects of this book have been dismissed all too readily. If you read just one thing, read the postscript and take it seriously – David Cameron and Nick Clegg are. And they will in the US and elsewhere. These issues will not go away. We all will have to take his perspective seriously eventually so best start now.

Balls v Osborne is a economic death match. Only one can win and if you lose then you are politically broke. This is the argument of my LabourList column this week. Just because George Osborne has decided to bet all his chips on one strategy, it doesn’t mean that Labour should do so also. It is just not sensible economics or politics to go for this win or lose approach. If Labour goes down that road it will be left in the invidious position of secretly hoping for a economic downturn- it would be politically broke if there was a recovery. That’s exactly what George Osborne wants. Labour would be advised not to play his game. Even if the bet comes off, Labour would be tarnished in the process as the doom-mongers of British politics. And the outcome is anything but certain (and, for the record, OBR forecasts show a much greater chance of the recovery following George Osborne’s rather than Ed Balls’ path.)

No-one can predict the direction of the economy over the next few years with any degree of certainty. In essence, both have a point. The economy does still need fiscal support and a high and continuing deficit does pose a different but by no means insignificant risk. Both extend their position to its logical- and extreme- conclusion. And that is a mistake.

George Osborne has taken an enormous risk with the UK economy apparently with no plan B. For his plans to succeed they require three years of export and private sector investment growth at a level not seen since the mid-1960s. And this at a time when our main export economy is stagnant and the pound has appreciated again. He may get lucky and Labour should always remember that- the UK’s is still an open and dynamic economy that could respond energetically in the next few years. The issue is not *will* happen. The issue is the risk associated with that.

Ed Balls in his Bloomberg speech last week not only took the historical lessons- and these can be contested relatively easily- but turned the risk that George Osborne’s growth projections will be missed into a certainty. On that basis he proposed an equally risky economic strategy as a response. Should the tide turn and the UK had not demonstrated that it was serious about tackling the deficit then that would be a dire situation to be in.

A better approach for Labour is to demonstrate that it is serious about tackling the deficit at the earliest possible moment that didn’t jeopardise the recovery. Let George Osborne take the risk. And for the Chancellor, he’d be advised to contemplate a Plan B. Just in case.

“…party tribalism may have a strong intuitive appeal to activists in all parties, but it can have important costs for progressive political outcomes, nor is it as dominant in the Labour tradition as is commonly assumed.”

So Katwala’s cautionary note is important. If Labour history is used as a means to reject a pluralistic political strategy then that would be grave error. It is not clear what the posture is of any of the potential leaders when it comes to constructing a broader political dialogue and perhaps, if only in defined areas, building a set of new alliances. Their response to this question will be critical in determining the success of their leadership.

The importance of Labour’s renewed interest in its history is to build a greater common understanding of its roots and its values. There is a democratic republican strand to Labour thinking, while not entirely hidden, has tended not to be explicitly articulated. In practice, this has meant that Labour has not embraced political reform- within the party and the political system more widely- quite as it might. And it has meant a certain reticence in challenging concentrations of economic power and wealth once nationalisation ran out of political and economic steam.

By reaching back to this obscured democratic republicanism, first Jon Cruddas and now David Miliband are engaging with a renewed discussion of what it means to be Labour. They are also reaching beyond the limits of Labour’s redistributive capitalism model in Government. Ed Miliband’s new ‘social democracy’ speech also interrogated those limits. The archaeology is actually about reinforcing the foundations.

It would be a tragedy if the conclusion of this exercise was that Labour should pursue a majoritarian path. The UK is an increasingly pluralistic society and a majoritarian politics sits increasingly uneasily with that. At the very least, the future for the party means finding ways of building a centre-left dialogue that is open and forward-looking. Across the political spectrum there will be increasing unease at the impact of the fiscal strategy pursued by the Coalition. If Labour’s response is ‘we told you so, now make the Vichyist Lib Dems pay’ then that won’t be convincing at all. This is not to suggest that the Coalition’s policies should not be critiqued and in the strongest terms when they get it wrong.

But the alternative has to be a Labour party that is confident in its identity and purpose while open and conversational in its political strategy. This renewed historical interest will underpin the former and offer some support for the latter. History is never conclusive nor can it provide a definitive direction. It provides meaning but no sure answers. Labour is on its own once it looks to the future again. Misread or misuse history then instead of grasping the future, it will remain stuck in the past.

Let’s take a look at what has happened in the last decade with regards to job creation (source: Labour Force Survey):

Let’s take 1999-2007- pre-credit crunch/ recession and boom time. In that time the UK private sector economy only created 1,520,000 private sector jobs. So what hope is there that it will create 2.5million by 2015 in a period of slow growth, fiscal consolidation, potentially rising interest rates, and while the European economy is stagnant? Not very high would be my guess. This is a Budget that will not create jobs at the very best.

My LabourList column on ‘unavoidability’ in recent-ish political history- it normal precedes disaster- is now online.

Of course, Margaret Thatcher did sever the link between earnings and benefits. And the Coalition repeated a similar trick by index linking benefits to CPI instead of RPI. The result will be long term suffering for many. But not even Thatcher launched a such a deep and sustained attack on both state services and welfare simultaneously as George Osborne has done. She never pretended that what she was doing was ‘fair’ or ‘progressive.’ I miss her honesty. At least people knew what we were dealing with and could respond accordingly.

And remember. There are real people behind these attacks. Particular groups will be hardest hit. I outlined the impact on single moms yesterday. And if you are in any doubt about how tough being a single mom is then just read Lisa Ansell’s blog today:

“I accepted that poverty was part of parenting a pre-school age child on my own. When I was exhausted, had 4 stomach ulcers, and was barely sleeping, my doctor advised me to give up work.

I did.

I came home. I claimed Income Support. I lived on £127 per week. For the first time since my daughter was born, while I had no money, I had time to get to know her. I had time to parent her. This year has been wonderful. I was better off on income support, because I didn’t pay council tax, or have the cost of working-but mainly because I got to spend real time with my daughter, for the first time since she was born.”

As one of the many excellent comments, Anna Hedge, put it in response to my blog last night:

“Parenting (particularly lone parenting) *is* a job.When done with care it brings tremendous rewards for parent,child AND the rest of society.Stable care up until the age of 7 has been shown to have significant long-term positive impacts on a child’s academic achievement and future contribution to society, both financially and socially.”

But any group that disproportionately relies on benefits will be marginalised, plunged into poverty, and facing despair. This is not the way it’s meant to be. Not in a decent, relatively wealthy society. The basic post-war compact on support and advancement for all in exchange for doing the responsible thing was broken yesterday. Not only lone parents, but also those who are poor, mentally impaired or incapacitated, the disabled, certain minority groups, and anyone relying on benefits to get by. In London, there will be an acceleration of gentrification of inner London and a ghettoisation elsewhere as a result of the horrendous changes in Housing Benefits. People will have to leave the communities where they live, grew up, and belong. Fairness?

And Labour missed the ball yesterday. It was playing the wrong game. It’s eye was too firmly set on what the economic impact of these measures would be- and they will, to certain extent lower growth and employment in the short term- but it’s lost the moral language of ‘we’re all in this together.’ As a consequence it failed to present a coherent and cogent argument for retaining social support structures in some degree of resemblance to where they are.

Welfare reform is necessary- it always is. But it should be focused on giving people support into work that they can adapt to their important commitments at home. The ‘welfare reform’ proposed yesterday- which is actually about recasting the state and dividing the ‘deserving’ from the ‘undeserving’ welfare recipient based on nothing at all- actually seeks to humiliate and kick those who are already down. The sugared pill at the end of the budget of relinking pensions to earnings a year earlier than Labour had planned and increasing child tax credit was scant consolation though it provided a less flimsy shield than the yellow tied yes men sat behind the Chancellor could achieve alone.

It was a constant discussion during his time as Leader of the Opposition whether David Cameron was progressive or a Thatcherite in disguise. We now know the answer. He’s Thatcher on heat. Not so much neo-Thatcherite as uber-Thatcherite. And it will get worse. George Osborne is deliberately offering a welfare v services choice; turning the many against the unfortunate few. This Government is intent on ripping apart the social solidarity that this country still has. Labour will need to say why that soldiarity- a potentially flourishing togetherness- is so important. This is a battle between a vision of a united Britain and a cruel and divided country. Up for the fight?

This is the context. But from Labour’s perspective, to simply oppose each and every cut is not credible. Not least this is the case because Labour committed to £39billion of (mainly unidentified) cuts before the election.

And so as we look at the Conservative Government’s emergency budget what should be the way of defining whether a cut is a ‘good’ or ‘bad’ cut (or tax increase)? Here are a list of possible benchmarks (and many of them are interrelated):

1. Does the cut harm the short or long term prospects for economic growth?

2. Does it have a significant impact on employment?

3. Does the cut hinder the UK’s transition to a low carbon economy and ability to meet its energy needs?

4. Does the cut increase child poverty on the traditional 60% of median earnings measure?

5. Does it hit the least well-off disproportionately? (i.e. does it increase inequality?)

6. Does it make people less healthy, reduce dignity in retirement or help for the disabled?

7. Does it harm educational prospects?

8. Do the cuts harm the ability of the UK to meet its foreign policy and international development commitments?

9. Is the burden of cuts overall disproportionately borne by particular regions?

10. Does the cut impact upon community safety?

There. I should emphasise that the focus of the above is on impacts and outcomes not on inputs. For example, the fact that ‘community safety’ is specified does not mean that there should be no cuts from the Home Office or Department of Justice budgets. It is just that such tests much pass a ‘community safety’ test. ID cards were an easy cut in this regard.

If cuts are starting to impact on these critical outcomes then tax rises will have to be revisited (at the right time given requirement 1) but those rises will have to pass test 5- that they do not increase inequality. It seems to me that these tests provide- given a degree of objectivity and realism- Labour with a basis on which to critique the Emergency Budget and Autumn Spending Review.

Finally, the Government was at pains to emphasise that the task is monumental and we are all in this together. And yet, it has just carried on regardless making decisions on our behalf. Could this Budget not have been a ‘Green Budget’ instead of an ‘Emergency Budget’? They could have outlined two or three different scenarios for cuts v tax increases given their overarching (and very risky) economic policy. There could then have been public discussion about these enormous decisions. Instead, as always they are just plowing ahead regardless. It’s amazing how often the ‘new politics’ looks just like the ‘old politics’ but with a few blokes wearing yellow ties hanging around.

Cuts will happen though all the mood music on the deficit is better than expected as Fraser Nelson pointed out yesterday. Deficit reduction is absolutely necessary and unavoidable- when the time is right. Better forecast deficits do mean that masochistic cuts- like the Forgemasters loan, the abolition of the Future Jobs Fund, the 2 year Job Seekers’ Guarantee and the 6 month young persons’ guarantee- can be avoided for now until there is a better sense of how the economy will go.

Government expenditure or investment (the Forgemasters cash was a loan for goodness sake!) that keeps people in work or invests in current and future growth should be protected. Absolutely. But these are no longer the calculations that are being made. It’s about the deficit and nothing else.

And it’s clear what is going on to anyone with eyes in their head. Despite better deficit forecasts and undershooting the cuts are going deeper and deeper and becoming more and more damaging. And next week we’ll get tax rises that hit the poorest hardest too it would seem. What is going on? Well, George Osborne is deliberately administering pain now so that he can cut taxes later. And who will those tax cuts focus on? You can bet that the top rate of tax will be the first to go followed by an increase in inheritance tax thresholds that are targeted on the wealthy few and maybe a marriage tax credit too? All these things are regressive in their impact.

We will all have to pay for this in lost growth and economic output. And the least well-off will pay as they they lose their jobs and social support. It’s cynical and the Liberal Democrats gleefully collude in this. This isn’t a Coalition. It’s a Tory Government with Liberal Democrat Ministers. And it’s becoming clearer by the day.

There’s more on Canada and deficit reduction on Left Foot Forward by Eugene Lang (who I had the pleasure of meeting at a conference in the US last week.)

You may also wish to see a short video that Orange have done of the digital campaign report launch/ awards event on Tuesday. You can see me in action…..for the first time since Making your mind up! Nuff said. Here’s the vid:

And here are some thoughts on the Report from Mark Pack.

“In the space of just one week we have found and agreed to cut £6billion of wasteful spending across the public spectre.”

Correcting himself quickly, he continued apace with his job slashing announcement. And yet the spectre still hung over the courtyard of HM Treasury. Certainly, the assembled Mandarins (though many look more like digital entrepreneurs nowadays) seemed to be distracted. Maybe it was being out in the sun after so many years toiling in darkness. Or maybe they were looking at David Laws- yes, him with the sense of humour- and seeing some strange impish mythical creature.

Certainly, whatever was unleashed in that moment- let’s accept it was some form of spectre- had positively haunted Vince Cable by the time he was sat opposite Jeremy Paxman on Newsnight yesterday evening. He had the look of a haunted man. Gone is the swashbuckling economic exuberance. Instead all that seems to remain is inner terror.

His response when asked by Paxman whether he admired his colleague, George Osborne- oh, the humiliation- was the high pitched protestation of a guilty man in the dock presented with a hitherto hidden piece of evidence.

“It is not admiration. As a colleague we have a very good businesslike relationship.”

Ouch. And this wasn’t just the awkwardness of the curmudgeon. At its source is two elements: his lack of regard for his colleague, George Osborne, and an inner unease with yesterday’s announcement. That’s my hunch. Nothing more. But watch the interview and you’ll see. The only time in the whole thing that Vince Cable lights up is when taking about- the very welcome- investment in 50,000 apprenticeships. And at the end of the interview he offers the thanks of a torture victim set free by his interrogator.

For in his heart of hearts Vince Cable knows two things that the HM Treasury slashers don’t (no, I’m not going to get all Freddy or Jason on you.) Firstly, yesterday they actually took an enormous risk with the recovery- quite possibly an unnecessary risk. What this Coalition has chosen to do is replace potential job losses in a year’s time as a result of the planned national insurance increase for employers with certain job losses now. That will reduce growth, tax revenues, increase unemployment and benefit payments, and claw back some of the deficit reduction to some extent. As Paul Mason explained on the same edition of Newsnight, the cuts are a third of already anemic UK growth in 2010.

They may get away with it. And in fairness Cable and co are right that the turbulence in European sovereign debt markets does shift the risk. Equally, Cable knows that these cuts- though limited on the surface- actually cut deeper than may first appear. And that could have all sorts of impacts. 100,000 job losses is not insignificant. And though the sovereign debt situation is concerning, the early signals are that the UK is a safe haven rather than in the line of fire. But we do have to accept that can change very quickly (though the UK’s debt profile is longer term than Greece et al so it is more shielded.) However, Cable has also seen what happened in Japan when they cut public expenditure too early (which I’ve covered before.) You can end up with catastrophic consequences- and much greater debt.

So, despite the shifting international context, Vince Cable knows that the Coalition has taken an enormous risk. And very probably an unnecessary one. At the very least they have begun to undo Labour’s success in limiting the impact of the recession on unemployment.

And he also knows that an age of austerity could have a deleterious effect on both public services and the future growth potential of the UK if it is done too brutally or in the wrong fashion. The early signs are not particularly good. We all welcome the elimination of waste and the Coalition has transferred the theatricality of the Prime Minister into a governing philosophy by sending ministerial cars to the knacker’s yard. Fine. There will be tough choices but the mantra has become cuts above all else and Osborne-Laws seem to rather enjoy the machismo of it all. It’s a muscularity that is reserved for the least well-off- so Child Trust Funds go while generous pensions and savings tax breaks for the well-off remain.

And finally, Vince is haunted by one other rather important thing. His major contribution was a billboard ad, the focus of which was very clear. In the pit of his stomach he knows the spectre of the HM Treasury courtyard will not disappear into the ether quietly. It will come back again and again. And this will be its form:

The haunted look will remain and deepen. What possible exorcism could there be? For Vince Cable, salvation may only come on the backbenches once again. It’s personal. It’s political. It’s about pride and it’s about credibility. The haunting of Vince Cable has only just begun.