Once in a while politicians succumb to the delusion that they really are masters of the universe. Then reality bites. In the early 1990s the loudest member of President Bill Clinton's notably self-confident team, James Carville, aka "the Ragin' Cajun", had to acknowledge that the administration couldn't buck the bond market, the trade in government borrowing known as Treasury bonds in the United States and gilts in Britain.
"I used to think if there was reincarnation," said Carville, "I wanted to come back as the president or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody."
Alistair Darling has to tread a fine line next week when he delivers his pre-budget report (PBR). Gordon Brown and his protégé, Ed Balls, the schools secretary, are howling for dividing lines with the Tories that will get Labour's disillusioned core vote out next year. Yet our chancellor knows he must also reassure the markets. In PBRs of old, Chancellor Brown used to crush the opposition with his repeated bellowing: "Better than France, better than Germany" etc. Now Britain is "worse than France, worse than Germany". We are the only country in the G20 technically in recession and our structural deficit is unmatched.
Leaks from the Treasury suggest Darling will keep to the public spending targets he adopted in the last budget. He may also highlight a few areas that will be exempt from cuts (the betting in Labour's ranks is that the National Health Service will be spared). As for the rest, no details will be given where the axe will supposedly one day fall.
Class war is Gordon's battle cry. His linking of David Cameron's Eton education to Tory tax privileges for the rich at PMQs reminds us that before he became prime minister, Brown was once a formidable Commons performer, the proud owner of a great "clunking fist". Although Brown's ratings remain dismal, our YouGov poll today reveals that 47% agree Cameron is "too wealthy and privileged to represent ordinary people". The fist has a target.
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That was the rhetoric. Amid the usual contradictory reports, briefings tell us to expect class war measures too. Bear in mind that those earning a little above £100,000 a year are already scheduled to pay an effective tax rate of 61.5p for every pound earned. So perhaps Darling plans an attack on the mega-rich in the City to embarrass the Conservatives rather than cut the deficit.
If that is the case, Tory high command will step round the traps: helpfully marked TRAP in large capital letters. The rich will finalise their plans to move their money in the unlikely event of Labour victory anyway. Aspirational voters, knowing that taxes on the rich rarely raise revenue above a certain threshold, may conclude No 11 will soon be gunning for them instead - it was Tony Blair's great electoral achievement to convince them otherwise.
The markets, however, seem a little uneasy. On Monday an investment analyst at Morgan Stanley took fright at a couple of odd polls that showed the Tory lead narrowing. The prospect of a hung parliament and weak government spooked the bank into warning of a sterling and gilts crisis. On Wednesday UBS warned of higher interest rates if Labour kept to its course. On Friday Citigroup's preview of the PBR worried that Britain's sovereign debt will have to be downgraded. Got the appetite for a financial crisis, anyone?
Many economists think these fears exaggerated. The money men take into account that Labour must play politics before an election. But they also think one of Britain's strengths is a tradition of strong single-party government. The thought of a weak coalition or minority government failing to tackle the deficit after the election gives them the jitters. Are their fears justified?
A curiously sampled rogue poll last week gave the opposition a narrow six-point lead and got Labour supporters in the press to break out the bubbly - sorry, the prosecco (champagne is now only for toffs and me). But our YouGov poll gives the Tories a satisfactory 13- point lead, although at 40% they can hardly assume to be cresting a wave of popularity. Distaste for Brown and Labour, at an abysmal 27%, seems to be the dominant emotion.
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To gain a majority Cameron needs a larger swing than Margaret Thatcher achieved in 1979, when she was the beneficiary of the largest post-war swing to the Tories. Most people are betting on Labour losing, but that doesn't automatically mean the Tories will win convincingly. John Curtice of Strathclyde University believes that at 10 points the party's lead "would not be sufficient for Cameron to be sure he would secure an overall majority".
Different methodologies generate different predictions. Colin Rallings and Michael Thrasher, who advise this newspaper on election results, have shown how a tiny difference in swing might be a decider. If Labour crept up to 30% during the course of a general election, a 12-point lead could give Cameron a landslide. At 11 points he has an overall majority and at 10 points it is hung parliament time. That said, a poll taken in marginal constituencies a week ago indicated that the Tories are piling up votes in the right places: a 10-point lead in swing seats means they win big.
Everyone remembers the hung parliament of February 1974, but the elections of 1950, 1964 and October 1974 produced governments with insufficient majorities to survive. On the five occasions in the last century when no single party had won a majority outright, the result was not coalition but a minority government. The Conservatives would be looking to increase their tally in another general election just as Harold Wilson did within 18 months of his narrow victory in 1964. Wilson became a past master at this game. He also ran a minority government after February 1974, securing a fragile majority in October. His party had lost its narrow lead by 1977 and was propped up temporarily by a pact with the Liberals, who didn't enter government but ensured that Labour was sustained against a vote of no confidence for a couple of years.
Tory high command, while exuding no complacency, is not playing for a score draw. It has seen big leads narrow before, only to have them bounce back again when Brown drops the inevitable brick. Even in a hung parliament it is hard to imagine the Conservatives wouldn't form the largest party. The initiative would be theirs and Cameron would look to a second, decisive election pretty sharpish. In the meantime Nick Clegg has said that his Liberal Democrats would prop up the party with the most votes, ie the Tories. We could expect George Osborne to introduce a raft of measures acceptable to Clegg and Uncle Vince Cable.
Yet let's pretend Labour wins. Here we go back to Citigroup's PBR preview. "If fiscal consolidation matches that outlined in the budget (including vague medium-term spending cuts), we forecast that the fiscal deficit will still be 7%-8% of GDP in 2013-4 ... with the public debt-GDP ratio hitting 100% soon after. Since the budget, other groups (IMF, OECD, European commission, CBI, major ratings agencies) have warned that more needs to be done to return to fiscal sustainability.
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"We suspect that in practice a rise in the debt-GDP ratio to 100% would have highly painful consequences. It would almost certainly lead to one or several sovereign credit downgrades and worries about long-term inflation risks, with marked upward pressure on gilt yields that would crimp economic recovery."
Post-election, Chancellor Darling or Chancellor Balls, however much they would like in principle to delay a squeeze, would need nerves of steel to do it. Brown long ago cast aside Prudence in the good times. In the bad times her guardian is a club-wielding bond market. Tory cuts versus Labour investment? If you think you're hard enough, chancellor.