Tuesday 26 August 2008

(Another) lesson from America

Yvette Cooper took the first shot at denuding the Conservatives of their charming PR-veil on Monday last week, deriding "Cameronomics" as Labour gear-up for their autumn re-launch. Such negative attacks are crucial if Labour's re-launch is to convince voters of the vacuity behind the "frisbees and photo ops", but they also beg the question of just how Labour will choose to constitute the positive aspect of their re-launch.

Labour could do far worse than to look - improbable as it might seem - to the US, where congressional Democrats (among others) scored a interesting victory last month with the massive housing bill signed into law by President Bush. Notable, first and foremost, for the lifeline it extended to the delightfully named mortgage giants Fannie Mae and Freddie Mac, the bill also threw a lifeline to home-owners and first-time buyers, in what the New York Times called "perhaps the boldest attempt to aid troubled borrowers since the creation of the Home Owners' Loan Corporation in 1933 as part of the New Deal".

Whilst perhaps not obviously admirable for satisfying the chief imperative of propping up Fannie and Freddie (which was surely necessary), the housing bill is admirable for the $4bn it promises to states and cities to buy and redevelop abandoned and foreclosed properties (the measure, indeed, that Bush signed the bill in spite of), and for the $300bn pledged to allow hard-up homeowners to switch to fixed-rate, government-backed mortgages which should allow 400,000 homeowners to avoid foreclosure.

It is worth dwelling on how the political ground seems to be shifting, even ahead of November. 45 House Republicans - and, of course, Bush - supported the bill. Treasury Secretary Henry M. Paulson Jr., appointed by Bush in 2006, and an architect of the bill, serves as a startling demonstration of how fast economic priorities can shift in a crisis: a former investment banker at Goldman Sachs, he was as recently as November 2006 ridiculing the "excessive regulation" that "slows innovation, imposes needless costs on investors and stifles competitiveness". Now - if we are to believe Senator Jim Bunning of Kentucky - he is a socialist! ("When I picked up my newspaper yesterday, I thought I woke up in France. But no, it turns out socialism is alive and well in America.")

Socialism it is not. But along with the aggressive slashing of interest rates and the $150bn working its way into Americans' back pockets, it represents a certain boldness in dealing with the current economic crisis which is eluding this Labour government. This kind of boldness Gordon Brown must draw on if the re-launch of his government is to be a success. Difficult times evidently soften even the most ardent free-marketeers; as a social democratic party Labour cannot afford to abrogate its commitment to fairness at this crucial moment.

To be sure, Brown finds himself in a much different political climate. For instance, there was a media frenzy when it emerged that Brown's fiscal rules would have to be broken; in contrast, the Housing Bill raised the federal debt limit by $800bn, to the enviable soundtrack of relative (mainstream) media silence.

So what way for Labour? Their languishing poll results suggest they have no further to fall, so this autumn they have nothing to lose by acting boldly. For example, the current uncertainty over the windfall tax on oil company profits could be dissolved if they learned from another bold American, Obama, who backs a similar windfall tax to help those struggling to meet energy costs (see also former minister Chris Leslie backing the tax in the upcoming Fabian Review). Creating a fairer Britain must be at the heart of the re-launch.

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