The author argues that the recent deficit crisis in USA is the result of a shift from the New-Deal-based economic model of the early post-war period to today’s neoliberal, free-market model, a shift initiated under Ronald Reagan and continued under the presidents who succeeded him. The new model has generated slow growth, rising inequality and rising deficits. Rising deficits in turn created demands for austerity. This crisis can be resolved by raising taxes on upper-income households and large corporations, cutting war spending, and adopting a Canadian or European style health care system and there is no need to accept austerity as is being prescribed.
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