As we approach our debt ceiling, we need to realize the unsustainability of our current fiscal policies. Our national debt is a whopping $14.3 TRILLION dollars. Even the interest alone is hundreds of billions of dollars. We have been mired in two wars for the past eight years, one of which for nearly ten. And in we face over $100 trillion in unfunded liabilities in the long run, for Social Security, Medicare, and Medicaid. As a rule, the Republicans refuse to raise taxes or cut "defense" (read: war) spending, the Democrats refuse to cut spending on anything else, both preferring to kick the can further and further down the road and dump the burden on future generations.
The truth is that we need to both raise taxes AND cut spending. Otherwise it will only get worse. While there are many ways to do this, the least painful (to the general public) of which involves the following:
1) Repeal the Bush tax cuts, at least for those who make over $200,000, create a new tax bracket at $1 million and up, and make the top marginal rate at least 50% (if not 70%) on all income above that amount, with no loopholes. No deductions other than state and local income taxes, and very limited charitable donations.
2) Reduce the corporate income tax rate to 25%, with the first million tax-free, but remove ALL loopholes, and charge a higher rate on companies that outsource/offshore jobs overseas.
3) Remove the cap on Social Security taxes, limit benefits to wealthier retirees, index initial benefits to prices rather than wages, and invest at least some of the trust funds in the stock and (non-government) bond markets.
4) End the Iraq and Afghanistan wars, remove all troops by December, and cut our defense budget in half over the next year or two.
5) Enact a single-payer healthcare system that would finally bring costs under control. Fund it by the same revenue that is currently used for Medicare, Medicaid, and similar programs, plus a modest payroll tax and increased excise taxes (such as alcohol and cigarettes).
These things would quickly close the budget gap, with little pain for the general population, but the ultra-rich would hate all five of these steps. Other things that could be done include:
6) Pass a "financial transactions tax" of 0.25%, just high enough to discourage speculation and raise revenue but not enough to cause significant disruptions.
7) Create a value-added tax (VAT) like most other countries have, possibly offset by eliminating income tax on those who make less than $50,000 or $100,000 and giving a modest "prebate" to everyone regardless of income.
8) End the War on Drugs, at least for cannabis, and tax the hell out of all newly legalized substances. Consider doing the same for other victimless crimes as well.
9) Raise our tariffs on anything made with cheap Third World labor, and use at least some of that revenue to create jobs over here.
10) Cut wasteful subsidies to Big Oil, Big Agro, Big Tobacco, and Big Anything for that matter.
11) Raise the gas tax by a penny each week until it is a dollar higher than it is now, and use the revenue to fund much-needed public infrastructure improvements. Call it "a penny for progress".
Regardless of how it's done, we cannot afford to kick this can any further down the road. And the steps we recommend are the least damaging ways to do it.