Raising taxes makes no sense, unless you would like the entire nation to end up like Detroit. Removing more money from the private sector at a time when the private sector needs as much as possible will increase the strain on existing entitlements.
What is needed is major regulatory changes, elimination of several federal departments, scaled in elimination of entitlement programs, and a tax structure that is more competitive in relation to foreign counterparts. Anyone proposal that does not include those factors are not serious attempts to address the problems we face. Real solutions aren't pretty, but they are necessary because of the excesses Progressive politicians implemented over the last century. It took decades to build the problem, it will take decades to fix it. The sooner we start, the better off we'll be.
The first step is to eliminate every federal department that is not Constitutionally justifiable. If it is not enumerated or "necessary and proper" to carrying out an enumerated power - its gone. End of story. If you want it back - pass an amendment to the Constitution.
The budget proposed by the Obama Administration last week proposed spending $3,800,000,000,000. Their anticipated revenue for the fiscal year is $2,240,000,000,000. That leaves a deficit of $1,560,000,000,000. There isn't a tax increase in the world that could raise enough to cover that difference and not completely destroy the productive capacity of the economy.
The time has come for Keynesian economics to assume its rightful place in history right next to the Mercantilist system on which it is based. Keynes' assertion that deficits, inflation, and destruction of the productive capacity don't matter because "In the long run we're all dead" wasn't good enough in the 1930s and we are paying the price today. Obama advisers Romer and Summers have both noted in their academic work that the "multiplier" for direct government spending is less than 1. They conveniently forget that fact when they take government jobs.
First on the chopping block: Dept of Education ($71.5 Billion), Dept of Energy ($28.4 Billion), Dept of Homeland Security (cut from $53.7 Billion to around $25 Billion), Dept of Housing and Urban Development ($47.5 Billion), Dept of Labor ($116.7 Billion includes 'Stimulus' Spending), Corps of Engineers - Civil Works ($6 Billion), NASA ($17.7 Billion), National
Science Foundation ($7 Billion), Small Business Administration ($23.9 Billion), Corporation for National Community Service ($1.4 Billion), EPA ($9.2 Billion). Totaling a savings of around $286.5 Billion. If states and private charities wish to pick up the vacuum that eliminating these departments MAY leave, so be it. Otherwise, the 9th and 10th amendments specifically left responsibility for them to the states.
*Social Security Administration and Dept of Health and Human Services would be phased out as the programs were eliminated. These two departments alone cost approximately $800 and $900 Billion respectively. That is 76% of collected revenue for this budget. The full force of the Baby Boomers hasn't even hit the budget yet. In short - we can't sustain this level of spending. They are the biggest portion of our population. As they retire, revenue will fall and expenditure will increase. Social Security will have to be indexed to life expectancy as it was when the program started. It was created with the intention that half of the payers would never receive a dime and that everyone paying in would strategically save so that the system was only a supplement.
**TARP should be eliminated immediately and all loans given called in. That is why we have bankruptcy. So the smaller banks can take the place of the ones that grow too big and collapse under their own weight when they make bad decisions.
All other departments should be cut by at least 30% Defense from $718.8 Billion to $503.6 Billion. Interior from $13.1 Billion to $9.17 Billion. Justice from $31.3 Billion to $21.9. National Intelligence Program is entirely off budget, I can't make suggestions. State Department from $53.8 Billion to $37.1 Billion. Department of Transportation from $75.3 Billion to $24.8 Billion. Treasury from $93.4 to $37.4 Billion (Tax code simplifications would eliminate much of the IRS burden).
Spending cuts noted would lower the deficit by $638.23 Billion to $921.8 Billion. Revenue increases from increased economic activity would likely still leave a deficit of around $450 Billion in the first year, $100 Billion the second and surpluses thereafter as the full effect of the changes took effect and the US once again became the beacon of economic activity it was in the past.
Spending should be frozen at those levels until revenue justifies any expansion.