Should we cut spending or raise taxes? Yes.

The federal government is set to take in a record amount of cash this year, 2.7 trillion in revenues. It seems the Democrats have the extra revenues they want. Yet, they say they need more to make the budget work. Republicans say spending is the problem and are calling for cuts. So who's right, Republicans or Democrats? The answer is yes.

LOS ANGELES, CA (Catholic Online) - Neither Republicans or Democrats have been able to come up with a solution to the budget problem which has triggered a series of automatic spending cuts known as the sequester. These spending cuts are expected to impact the economy over the next several months.

Democrats say they need new revenues, a.k.a. taxes, to ensure there's enough money in the budget. They're right. Despite the record amount of revenue projected by the IRS, around $2.7 trillion, it's still not enough.

There are three basic reasons why the Democrats are right. First, the $2.7 trillion is just a prediction, and does not accurately reflect what the government will actually collect. Not all of the money gets paid. Second, inflation has reduced the purchasing power of the money, which means that while $2.7 trillion is a lot, it does not buy what it used to in 2007, when the government collected $2.6 trillion. Essentially, the government still has less purchasing power than in 2007.

Finally, programs such as Socials Security and Medicare, as well as massive expenditures by the government in other areas, continues to grow. Health care costs are out of control to the point that health care executives simply appear greedy, while the government continues to spend billions on pet projects and entitlements.

Meanwhile, Republicans want to see cuts in spending. Using the simple analogy of a household budget, Republicans say the government is maxing out its credit to support a lifestyle that is well beyond its means.

Cuts sound like an easy solution, however the programs targeted for cuts are dear to many people. Few want to see cuts to health care, and in fact they want to see more spending, not less. This is feeding a cycle of upward spiraling health care costs. With Obamacare ready to take full effect in just 10 months, it is likely that higher costs will be passed on to consumers via higher premiums and higher taxes.

Of course, the quality of care will not increase. It is a sad fact that the United States pays more for its healthcare than any other industrialized nation in the world, yet remains well behind even socialized countries in quality of care. Only for a select few, with premium plans, does care remain better.

So what needs to happen?

The only way the budget will be sustainable in future years will be to cut programs that the middle-class finds popular. That means Socials Security and Medicare, among others. Likely means testing will have to be introduced and at some point the spiraling costs will need to be addressed.

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Insurance companies, which are growing ever fatter on the largesse of government money and approaching employer mandates, not to mention public necessity, are the only winners in a crisis that is approaching scandal.

Welfare spending is an issue as well, as it has been revealed that large segments of the population are now chronically unemployed or under-employed. The purchasing power of minimum wage has eroded so far that those earning the lowest wages require government assistance to support families.

Of course, the largest quantity of welfare is paid out to private contractors

Yet, cuts to these programs are unpopular. Politicians who support them will soon see themselves ushered out the door, especially those who hail from blue districts. Naturally, this goes against every fiber of being for a political creature, whose chief interest is clinging to power. It is a side-effect of a broken political system which rewards clever manipulation and doublespeak rather than wise governance.

Of course, one way to close the gap quickly is to blend spending cuts with new taxes. These would not the supposedly "new" taxes that came about as a result of the expiration of the Bush-era tax cuts, but rather genuinely new taxes. Nor does this include the massive new, backbreaking tax that is Obamacare.

In addition to these new revenues, the government should look closely at those agencies which provide services at growing costs to the people. While price controls are always a bad idea, there may need to be carefully considered reforms in healthcare and other industries that promote affordable services, such as healthcare. For example, healthcare itself (not research) should be a non-profit exercise. Instead, the entire apparatus is shifting into overdrive as insurers and providers cash in.

Fundamental to this is a reform in the political system itself. Bought-and-paid-for politicians will not solve the problems they were paid to create. For that, it falls to us, the citizens, to replace them with ethical actors who will govern wisely, rather than profitably.

Of course, given the average level of political interest in learning how to understand doublespeak and stay informed on the byzantine politics of the time, that's even more unlikely than the coming crash.

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