I don't disagree with what you're saying here. But one issue that I see is that Americans (probably more than most other nationalities) have a tendency to talk about "socialism" as if it's some sort of disease. Just mention the word (especially around those of a certain political persuasion or ideology) and they'll react like Pavlov's dogs. Some, who you would think would know better (Sarah P@lin, Michele Bachmann, et al), don't even seem to know the true or proper definition of the word. Now, it's not an economic/political system that I agree with either, if it was applied in such a way that it would *replace* capitalism or republican democracy. But in this republic (res publica = "the people's affairs"/those things held in common by the people) and others, we have ALWAYS had a certain amount of "socialism" (even before that word came into common usage). In the ancient Roman Republic, there was "socialism". It was the first major nation (as far as I know) to implement a PAID, volunteer, standing army that was supported by mandatory tax receipts. But the Roman Republic's economy was based on conquest and trade. We have never had lassiez faire capitalism in this nation or any other. And (as far as I know) there are no purely socialist or purely communist major nations either. At best, you might find some little backwater, banana republic of a country, that has managed to make some "pure" system half-way work for a few years. But that's about it. Every major nation (G20 and below) has a mixed economy of some sort.
When we talk about curing the deficit, and one side (at the extreme) says that the deficit cannot be cured by revenue increases alone (taxes), it's going to take spending cuts... and the other side (at the extreme) says that the deficit cannot be cured by spending cuts alone (domestic entitlement cuts), it's going to take revenue increases - I would say that they're both half right... and they're both half wrong.
To (truly) get a handle on the deficit, we are going to have to address spending AND revenues. I believe that's also what the bipartisan Bowles-Simpson commission found. But the extremists in both parties only want to hear "truths" that match whatever predetermined notions they already have in their heads. If taxes are raised too high, would that negatively affect GDP? Yes! Whether you want to use the Laffer curve or some other econometric measure, I think that can easily be proven. But "too high" is the operative phrase. By contrast, if you cut spending too much, that also would negatively affect GDP. Think about what GDP actually is and what the contributing factors actually are, and that will seem obvious.
If we're not just going to keep playing political games, and actually want to cure the deficit, we HAVE to get a handle on both sides of the equation! On spending, the first type of spending to attack (IMO) would be fraud, waste and abuse. It's not "fair" for people to be able to take from the "people's pot" when they have no intention of contributing, or they don't deserve it to begin with. But eliminating ALL of the fraud, waste and abuse won't do it (alone). So, things like the bloated military aid, that we hand out to anyone who asks (or lobbies/bribes) for, probably also needs to be severely cut. Why are American taxpayers being forced to act as the policeman of the world? That's "socialism" too - and it's not even going for the benefit of "the people" (here). On revenues, you won't cure the deficit by implementing the Buffet rule either. But that's not a reason not to implement it. It makes no sense at all for a guy who manages a million dollar real estate portfolio to have a higher effective tax rate than a guy who manages a billion dollar hedge fund. It makes even less sense for the hedge fund manager to have a lower effective tax rate than the administrative assistant who arranges his appointments. Righting that wrong won't fix the deficit (by itself), any more than eliminating waste, fraud and abuse in Medicaid/Medicare will. But people need to stop using the faux litmus test of "the magic cure-all bullet" to decide if implementing an idea puts us on the right path or not. $100 billion here and $200 billion there still adds up pretty well, even on my ancient HP-12C.
No one thing is going to fix the problem. The sooner we accept that reality, the better off we will all be.
