The Conservatives are sure that this is a "tidal" moment, as one No 10 insider put it last week. They think that, finally, the weight of water has turned and is breaking Ed Miliband's flimsy defences. The dyke cracked on Friday, when my colleague Andrew Grice reported that Ed Miliband is preparing to "bet the house" by promising at the next election to outspend the Tories.
Labour's rebuttal was unconvincing. "That is not our policy; it's not our position," said Ed Balls. He said it was wrong to suggest that "we will decide now", when "we don't know how bad the economy is going to be then". But that wasn't what The Independent reported. Miliband and Balls must have a view about what they would do, and the importance of Grice's report is that their view is – unless the economy changes dramatically – that they will go into the election promising to borrow more than the Tories. Miliband is certainly capable of great indecision, which was the unintended implication of Balls's denial, but I think Miliband is "minded" to go one way. On this, his dreamworld idealism coincides with Balls's confidence in his own judgement as an economist.
Normally, I would agree with David Cameron's advisers that Miliband and Balls are in the middle of making a serious mistake. I do not know what Tony Blair said to Ed Miliband when they met last week for their polite "showdown" after the former prime minister's article in the New Statesman. That was the article in which Blair urged his successor not to "tack to the left on tax and spending". We Blairites tend to favour sound money. One of the reasons I liked Bill Clinton was that he balanced the budget. One of the times I felt proud of Gordon Brown was when he used the £22bn from the 3G auction in 2000 to pay off some of the national debt.
On the other hand, we fiscally responsible types also have to show a little humility. On our world view, Labour should have done worse at the last election than it did. I mean, 29.7 per cent of the vote was not a great result: a mere 1.4 points higher than the share won by Michael Foot in 1983. But it was enough, the way the votes were distributed, to deny the Conservatives a majority. Which suggests that the voters, far from worrying about borrowing, were more alarmed by the Tory plan to cut public spending so deeply.
Before last week, I thought that Labour's plan was to accept Tory spending plans but not to say so until about January 2015. This would allow them to oppose all they like now, but to pose as fiscally responsible in the election campaign. I thought that Miliband might make two or three symbolic spending promises, possibly on student finance and building houses, but that, crucially, these would be funded. That is, they would be paid for by devices such as the mansion tax.
That might have been the plan at one stage. But it assumed that, by the time of the election, the economy would be growing at a reasonable pace. Instead, it is quite possible that growth will still be sluggish in 18 months' time, which is when the important decisions will have to be finalised. In which case the serious Keynesian economists will still be saying that, although it sounds odd, it makes sense to borrow more now to borrow less in the long run.
Lord Ashcroft, the Conservative who pays for a lot of opinion polling, wrote last week: "After nearly 50 years in business I know a tough sell when I see one."
But I can see how Miliband and Balls might convince themselves that outspending the Tories is an election-winning proposition. Miliband thinks he knows better than Blair, and Blair, ever tactful, might not have done enough in their private chats to disabuse him. Blair might even have told him what he has said to others, which is that he accepts that leaders would come along after him and Gordon Brown who would dismiss what they did as old hat.
Balls, meanwhile, thinks of himself as the lone voice who held out against adopting the euro and who has been vindicated by its crisis. He also thinks that he has won the argument about when to cut the deficit. He caused knowing Blairite eyebrows to be raised in the leadership campaign in 2010, when he said that even Alistair Darling's "less far and less fast" plan was too austere. Balls thinks that the failure of growth to pick up since then makes his case – although there are many other possible causes, including the eurozone crisis.
So I think Miliband and Balls have made their decision, because of the need to respond in June to George Osborne's spending review, which will set the plans for 2015-16 – that is, the financial year that includes the election and most of the year afterwards. They think they can make the case for easing off the pace of deficit-cutting. They may even be right as a matter of macro-economics.
You have to wonder, though, whether Labour's economic credibility is too damaged by association with the financial crash. They will be attacked, in the pitiless light of an election campaign, as returning to the tax, spend and borrow bad old Labour days.