Keep in mind though that the Clinton surplus was aided by the dot com tax gains.
Oh totally; we had "dangerous" surpluses because we had a combination of rapid economic growth and higher taxes to capitalize on that growth. Now we have neither.
From my perspective the solution to our current budget debacle just seems so obvious. President Bush, taking his cues from Alan Greenspan and company, reigned in the surpluses with massive tax cuts which were supposed to pay for themselves by spurring further economic growth. Which might have worked had we not already been in a growth spurt. Instead the economy slowed, he pushed for huge new unfunded social wellfare programs, and then a couple of unfunded wars. A bad combination of reducing revenue and increasing spending, and look what it got us. A predictable budget deficit.
So the solution is to reverse the process, roughly. If we restored the Clinton tax rates, cut Medicare part D and the war spending, we'd be close to balanced with even moderate economic growth. Instead, I suspect we'll cut more government programs, like education grants and scientific research and veteran's benefits, in order to preserve a much lower tax rate, or a slightly lower tax rate and slower economic growth. It's just a matter of how you make the trade offs. The current mood seems to favor protecting business interests at the expense of the poor people who support those businesses, but that could change.
The defense spending is a tricky one, because you can't very well just turn off the spigot. That one has to be gradual cuts, with retraining programs and such for all of the people who will be put out of work.
The entitlements spending is easier for me to swallow. Yes, we're going to have to raise the retirement age as average lifespans continue to increase. The benefit payouts promised to social security recipients in good times turned out to be unsustainable, so they'll have to be scaled back with something like the chained CPI. Despite Democratic bellyaching, neither of these things seems all that earth shattering to me.
The tax rates are probably politically impossible given the recent round of negotiations. Instead of raising the marginal rates, I suspect they'll instead cap deductions and maybe slow the rate at which the brackets increase every year. Together, those are effectively the same as raising the tax rates even though the percentages will look the same to the majority of people who aren't really paying attention.
So the path to the grand bargain seems pretty clear to me. A minority of new extremist Republicans basically ruined Boehner's negotiating position, so he'll either boot them or they'll get wise to how they're hurting their cause by refusing to accept some of what they want and so being force fed none of what they want. Once that is done, I think the next round of negotiations will grant a one year continuing resolution (aka reduced spending in light of inflation) and a moderate increase in the debt ceiling that is largely but not 100% offset by cuts to discretionary spending. The real question is whether or not the two sides will also agree to trade entitlement cuts for tax reform as outlined above. Balancing the budget requires that they do so, but I'm not terribly optimistic that current politics will allow it.