Yes, of course people paid income taxes in 1999. That doesn't mean that the money wasn't uselessly squandered.
RP recommends cutting back the spending sufficiently to eliminate the segment of gov't revenue that comes from personal income tax. The rest of the revenue from corporate taxes, excise taxes and tariffs will cover what's needed, after large amounts of the increased spending have been eliminated.
By the way, Ron Paul is a vigorous student of economics of the Austrian School, and has authored 4 books(I think it's 4) on economics, even though his main practice is that of a medical doctor, and being a Congressman.
Here's a quick anecdotal reply copied from Ron Paul's Library website.
""Only about 42 percent of government revenue is collected through the personal income tax. During the course of the Bush presidency, government spending has increased by about 75 percent. Cutting spending to the same level it was at seven years ago would make it possible to render the personal income tax unnecessary."
Ron Paul, October 2007
I'll have to do some digging thru some archives to get the CBO numbers, and such.
There are other economists who agree with this, and it's not just a wild hare.
The problem is that cutting gov't spending is like pulling teeth, because all the gravy-train riders and lobbyists put up a ruckus, and the Congressmen who get their power(and lobbying money) from their influence on gov't spending don't want anything to do with it.
On top of that, a more vibrant economy that isn't taxed to death actually provides more revenue to the treasury via other taxes already in place, and it's been proven that increasing taxes beyond where we are now actually reduces revenue to the treasury. And to say nothing of stopping the debt bleeding that we are doing now, with the multi-trillion dollar deficits that are currently running.
The spending must stop, or it's over.
I think the real question here is not "how it can be done by reducing spending?".
The real question is "how can we possibly survive if we DON'T reduce spending?"
You point out that the debt service figure is already insanely high, yet we continue to roll-up even more insanely high record-setting deficit spending, compounding the problem by leaps and bounds. At some point, the debt service will be so high that there's not enough money to fund the programs, and they WILL be cut then.
There's no way to sustain this. It's absurd to the extreme.
The choices are "cut spending" or "die".