"The New Budget Plan Is a Sham"

James Galbraith weighs in on the discussion over the deficit, in particular, the president's proposal to balance the budget by 2012:

Bush's parting gift, by James K Galbraith, Commentary, Guardian: ...The only part of [George Bush's] corrupt, incompetent, washed-up presidency that deserves any credit, in my view, was his willingness in 2001 and 2003 to defy economic opinion and the deficit-manic editorial page of the Washington Post, proposing first tax cuts and then spending increases on a massive scale.

These the economy desperately needed, as the Internet bubble collapsed and the shock of September 11 took hold. ... The tax cuts were plutocratic and the spending increases had a large military element - but for the growth rate of the economy, it's the magnitude that counts. ...

But now, in the new budget plan, Bush promises to take it all away. He will (he says) propose to cut spending - alongside new tax cuts to extend the old ones - sufficient to balance the budget by 2012... The details are not yet public but they will have to involve sharp cuts in domestic programs, in capital investments, in public services and in social security and medical care. If enacted, the new program would ... completely tie the hands of the new Congress, and also of whoever is elected president in 2008.

And that is the point... [T]he new budget plan is a sham. It was got up not from economic conviction but for political reasons. It's a clever sham, playing on the Democrats' fatal weakness for taking cheap shots at the deficit. It's a put-up-or-shut-up over-to-you move for the new Congress, which has been talking a "fiscal responsibility" line. It will put deficit hawks like Hillary Clinton in a spot: if she endorses the plan and is somehow elected anyway, her presidency would be doomed. But it's a sham, any way you slice it.

Indeed, if there were ever a roadmap for economic failure, this is it. A balanced budget in 2012, achieved by spending cuts rather than by economic growth ... would mean stagnation and social disillusion for the incoming Democrats. And that would lead to the resurrection of the Republicans in 2012. Call it Bush's make-up gift to the party he destroyed.

Some Democrats have smelled the rat. John Edwards, newly declared presidential candidate, ... suggests that we should attack some of the actual problems left untouched in the Bush era: health security, Hurricane Katrina, climate change. And then, after that, let's see what can be done about the deficit... Obviously, Bush's tax cuts should not be made permanent, and so long as the economy is growing, some of them should be rolled back or allowed to expire.

Edwards has said that, under good conditions and if Congress acts on the major priorities, the deficit might be kept roughly where it is. Since the present deficits have been plainly consistent with low long-term interest rates and economic growth, that's plainly a sensible view: good economics and good politics, too. The Democrats should follow Edwards on this point...

Democrats ... should ... refus[e] the bait of a phony bipartisanship that would lead to economic failure and political suicide. ...