Deficit hawks have tended to treat the notion of solving the medium-term fiscal probably entirely through taxes as some impractical left-wing scheme. Michael Linden and Michael Ettlinger point out that this would work perfectly well:
The United States is an extremely low-tax country compared to the other economically advanced countries in the Organisation for Economic Cooperation and Development. Over the past five years, the United States ranked 29th out of 33 member countries of the Organisation for Economic Cooperation and Development in total tax revenue as a share of our economy, with only South Korea, Turkey, Mexico, and Chile collecting less than us. In fact, U.S. tax revenues were a full 8 percentage points of gross domestic product below the average OECD developed or developing country.
But we don’t need to raise as much revenue as the average OECD country in order to pay all our bills without borrowing. We could balance the budget, with plenty of room to spare, by raising only as much revenue as Canada does. Over the past five years, Canada ranked 22nd in total tax revenue collected, placing them in the bottom third of OECD countries.
Combining Canada-level revenue with the spending levels in the president’s fiscal year 2012 budget plan would produce an immediate budget surplus that would grow from about 0.6 percent of GDP in 2012 to 1.6 percent of GDP by 2021.* At that rate, debt as a share of GDP would fall from 63 percent currently to under 40 percent 10 years from now. In fact, we could even get to a balanced budget by 2015 with revenue levels about 1 percentage point lower than Canada’s.
In the much longer run, we have a problem with health care inflation that can't be solved just by jacking up revenue. The problem, specifically, is that we're not getting higher value for our health care spending. But in the meantime, the budget-cutting exercises all seem to show that there simply isn't a lot of fat in the government. Cutting spending is hard because most of the actual spending is popular, serves a vital purpose, or both. The long-term solution is not to imagine we can reduce the federal workforce by a third with no ill effect or skimp on infrastructure but to pay for the programs we need.