My only complaint about this post from Duncan Weldon is that his caveats are better than the ostensible point. The problem with arguments about the budget is that a very large chunk of the spending side is either made up of long-term capital projects, or worse, PFI-ised capital projects, which often can't and arguably shouldn't be used as in-year balancing items, commitments like NHS spending and pensions that are driven by demographic factors, or else automatic stabilisers like Job Seekers' Allowance that are directly linked to the economic cycle with a minimal lag time.
On the other hand, it's hard to think of a tax that isn't dependent on the level of economic activity. VAT? Corporation tax? Stamp duty? Income tax? Fuel duty? They're all more or less cycle-following. That the government budget is heavily influenced by the macro-economic situation is trivially true, and is determined by the structure of the tax and public sector financial management system. This doesn't change with your views on economic theory - perhaps another case for the idea that one of the groups who got the crisis right were those who saw it in terms of accounting.
I'd also add that worrying about Tory talking points like "deficit deniers" is the counsel of despair. If you're worrying about the other side's nonsense, they've got you where they want you. You need to hang something round the other guys' necks. All this accepted, and I do like Duncan's point that it was indeed the lack of an effective critique of capitalism that led the Blair government to miss the bubble, following this advice would still put Labour in the position of arguing that they would make "nice cuts not nasty cuts".
Which doesn't make any sense at all. I suspect the dividing line between the Continuity Blairites and everyone else on this is as follows: Gordon Brown, Alistair Darling, and Ed Balls actually realised how awful the Tories would be and that there was a real risk of a double dip recession, and that therefore it was necessary to fight the "language of cuts". Balls did get to cut loose on this towards the end of the campaign. I suspect Labour would have done better to define against them on this.
However, conventional wisdom demands that Brown be seen as an egghead with no grasp of campaigning. The media-savvy eye catching initiative peddlers, however, were the ones who ended up campaigning on a line of "cuts! cuts! cuts! but not like those evil Tory cuts!" which wasn't clear or convincing.