"Fee for service" is the essence of a free market system, but it breaks down when government sets prices that can be wildly out of date, given innovations. Further breakdown occurs when prices are hidden and patients pay a small percentage of actual price. One would think that third party payers other than government would be sensitive to price, but insurance companies' costs are used to justify increased premiums, thereby increasing long term profitability. Corporations until recently have been able to absorb increased healthcare costs by reducing salary increases, or moving low wage jobs to part-time. The only answer is a complete free market overhaul, where patients pay the bills directly, backed by the knowledge and negotiating power of a group. For more on a new form of healthcare organization called "Group Self-Insurance" see: http://www.youtube.com/watch?v=tIZIXPL3HxI

The mal-incentives in the redistribution process are the main problem. The effective tax rates created by means-tested programs in some cases exceed 100% (see "Julia's Mother" chart). Unemployment benefits encourage people not to work. Disability benefits encourage faked injuries. We must recognized that we have a dependent society, created over the last 100 years of progressivism. We need a plan to migrate back to a society where individuals reassume personal responsibility. For answers see: http://www.youtube.com/watch?v=9OaQH0CjURM

An incremental approach to cost cutting will not work. The beneficiaries of each agency or program slated for cuts are far more motivated to preserve or increase spending than are the cost cutters. It's time to clean house. We need a new tax code that incorporates the need for a safety-net, while eliminating or reducing current mal-incentives in means-tested programs, unemployment benefits, and disability insurance. We need to fix entitlements, while honoring existing commitments. For answers see: http://www.youtube.com/watch?v=9OaQH0CjURM

While I completely agree with the substance of the article, reducing the corporate rate while leaving individual rates where they are would result in income shifting from salaries to perks (i.e. travel, entertainment, dinners, and other non-taxable benefits). Making perks taxable to the individual might make such a plan more politically acceptable. Finally, I agree that capital gains and taxes on dividends should be abolished, but if you eliminate the corporate income tax, you should increase such taxes up to individual rates. For a new approach on taxes, see: http://www.youtube.com/watch?v=ESzXZ0LUumY

An incremental approach to cost cutting will not work. Program cuts release a hornet's nest of people who benefit from the programs cut. As we saw with the sequester, cutting $80 billion out of a deficit of $1.3 trillion was described as a disaster. A clean sweep should include everything. However, since we are stuck with a dependent society, it must be replaced with something better that changes incentives. This can be done through a revised tax code. My recommendation would be a highly progressive flat tax, that replaces all deductions, means-tested programs, and 1/3 of Social Security and Medicare benefits. For more on this see: http://www.youtube.com/watch?v=ESzXZ0LUumY

Dan: I agree that in the long run cutting spending increases growth. However, in the short run those in government jobs must be let go. For a period of time they will ride unemployment and means-tested benefits, before actually becoming productive in the private sector. It is true that people will lose jobs, but the only reason they had those jobs was that "stimulus" money put them in the wrong jobs to begin with.

While Reich is correct that the "marginal propensity to consume" is lower for the rich, their propensity to invest makes up the difference. The poor may well consume a higher percentage for food and shelter, but investment in capital goods supports the jobs of people who then consume.

The biggest difference between the 19th and early 20th centuries is Social Security. Before SS, people saved for their retirement. Now money that would otherwise have gone into long term investment portfolios is taken by the government and spent immediately. Saving takes a conscious effort to forgo consumption now in the expectation of having something to fall back on in the future. With a nanny state taking care of "everything", why not spend now? The perpetual inflation tax doesn't help either.

The biggest problem for those of us who want smaller government is that people will lose jobs. The MSM will use such stories to "expose the horrors" of government reductions. What they are missing is that government spending has mis-allocated those people into the wrong jobs. Given a GDP of $16T and budget deficit of $1.3T, at least 9% of the economy has been mis-appropriated by bloated government, removing those resources from productive jobs that would grow the economy. This is another case of the "seen" (government jobs) verses the "unseen" (private sector jobs not created).

I run a successful dog walking business in Massachusetts, and under "Romneycare" I must pay a portion of employee healthcare if I exceed 11 "full time equivalent" [22 employees working 20 hours a week]. As a result, I have opened 3 doggie daycare centers to reduce staffing. We still have walkers making an average of $14/hr. If I am forced to pay healthcare costs, that rate will be cut by $2/hr., to keep my net cost the same. However, the state will see reduced tax revenue on the reduced salaries paid. Nationwide, the federal government will experience reduced tax revenues; either from reduced salaries as above or, if increased costs are passed along through price increases, a reduction in the number of units purchased.