I don't have an Economics background, so it's just my personal opinion.
I could not understand how we can solve our financial crisis without somehow increase in taxes. I don't think cutting expenses alone will do it.
I heard people saying they want smaller government. I could not understand that either. What are we going to do? cut medicare and other entitlement that people really loves.
All you need is algebra.
Can we balance the budget by only cutting expenses? Yes.
Can we balance the budget by only increasing taxes? Yes.
After that, it's tough to avoid people's political views.
What's not to understand about smaller government? The Feds are involved (IMO) in all sorts of areas that they should just get out of (and the worst part of this, is it distracts them from real beneficial programs). And the comment about people 'loving' their entitlements goes to the heart of politics - it should not be a question of what people 'love' (who would not 'love' Other People's Money?), it should be a question of what does the govt need to provide to maintain a stable environment where people are free to pursue their dreams.
I just read about a more local issue, our IL Tollway system is doubling their Tolls. It was described as a 'jobs program' geared towards getting votes. Those in control want that tax money so they can dish it out to their favorite contributors. The basic function of providing suitable infrastructure is farther down on that list.
Cutting the budget in one fell swoop does not seem realistic to me. Restructuring our govt and what people should expect as 'services' could be done over a 20 year period though, I think.
Raising taxes w/o deep cuts would have consequences too. We are seeing the effect in IL - some companies that can move are moving. Some companies with enough clout are asking for tax breaks and getting them (with the threat of moving). I'm certain that many other companies are planning that any future expansion will take place in another state.
How would you raise Federal Taxes 40%? Where would it come from? I don't think there are enough Buffets around to fund that. Can you do that math?
So yes, it gets political.
edit/add - I find it interesting that you seem convinced that we can't do it by just cutting expenses. Yet, you also seem convinced that we can do it by raising taxes. What makes you so certain that one can and the other can't?
-ERD50