The current proposal goes partially in that direction by indirectly increasing taxes through elimination of deductions. But the tax code must be fundamentally revised. Why? Because it's become highly regressive. In fact, the share of GDP (equivalent to the national income) which is comprised of taxes, is far lower than it's been over the past 20 or 30 years, particularly for the rich. And all of that needs to be changed. There is a stimulus in Obama's program, which is a good idea, but it's much too small. And this crazy concentration on deficit reduction, when the really serious problem is massive unemployment, is a very serious error. One can easily understand why the banks and insurance companies and all the fat cats like it, but it's completely wrong for trying to extricate ourselves from our very serious economic crisis. The deficit itself is not really a major issue, by any means. In fact, I don't even think it's a serious issue, at least in the short term. But if you do want to take it seriously, it's pretty easy to trace it to its roots.
Deficits, health care, and the economy
Dean Baker, a very good economist, has done the calculations which show that if the United States had a healthcare program similar to those of other industrial countries, which is by no means a utopian dream, not only would there be no deficit. Instead there'd now be a surplus! And the military budget is now probably half the deficit, thanks to all the insanity that followed 9/11. It's way out of line with anything needed, certainly for any defensive purpose, and also for any justifiable purpose. Ron Paul, who you heard before, was quite right about that. The U.S. is spending about as much as the rest of the world combined on military spending -- technologically very advanced, new destructive techniques developed far beyond what any other country has. First of all, it shouldn't be done, on principle, but it also ends up being harmful to us, essentially for the reasons Ron Paul mentioned. And it's very expensive of course. So, that plus the hopelessly dysfunctional healthcare system -- these are fundamental problems that have to be addressed if we are to extricate ourselves form this economic crisis before it gets much worse.
If all this had been addressed a long time ago we wouldn't be in the pickle we're currently in. At the time of the healthcare reform, depending on how the question was asked, the large majority of the population was in favor of some form of national healthcare, which would be incomparably more efficient and more humane than what we currently have. But Obama just dropped that. The public option remained a possibility and was supported by almost two-thirds of the population. But Obama just dropped it. (Reliable investigative reporters claim that he made a secret deal with the big health insurance companies and Big Pharma to drop it in return for their promise not to spend billions of dollars on negative TV advertising that would prevent his reelection.)
So, everything, really, is in the hands of the insurance companies and Big Pharma. We continue to have roughly twice the per capita healthcare costs of comparable countries, yet some of the poorest health outcomes. What we are stuck with is a large, almost unregulated, privatized system that generates billions of dollars in profits for its owners, who, with all that money, can hire as many lobbyists as they need to get their way in Congress. Yes, it's highly inefficient system and it's also a very inhumane system -- not to mention the tens of thousands of people without insurance, and many more with not enough insurance. But that can be changed, and should be changed. And if it was, the deficit issues would largely disappear.
Our national debt and the economy
Yes there's a long-term debt problem and we can easily trace that to its roots, too. Ronald Reagan, who fiscally was totally irresponsible with his extravagant military spending and mammoth tax cuts for the rich, tripled the U.S. debt and shifted the U.S. very quickly from the world's leading creditor to the world's leading debtor. George W. Bush continued this folly with his equally insane fiscal policies, including more huge tax cuts for the rich, and the wars that he told his biographer he would launch if he ever became president.
Ultimately the way to deal with our financial problem, in the long term, is with appropriate economic growth -- sensible economic growth. Yes, that can be done, but it's not going to be done through deficit reduction programs or tampering with entitlements, as is currently being suggested.
Infrastructure development is significant, and Obama at least mentioned it. He talked about work sharing, which is quite an important proposal. But will anything actually be done? Work sharing was effectively done in Germany, and it cut down unemployment very sharply, led to substantial economic growth, even through the recession. Those are options that could be pursued. At least Obama mentioned it ("keep hope alive") But they should be pushed harder. They should be expanded. There are elements there that could turn into a constructive program -- but not until the core issues are dealt with.