I think part of your argument is true: Europe benefits from being in the American sphere of defence, but, I also think this is a red herring as the USA is more than rich enough to have both a strong military and look after its population.
The other major budget problem is welfare/comunal programs. These have been hyperinflated over the last 20-30 years or so. I personally believe one of the reasons it works so much better in Europe is the fact that any given program is orders of magnitude smaller than American attempts. To improve quality-of-life to the level the article wants, I think America need to trim (trim, not cut) military spending and stop welfare spending entirely and let the states handle it (with parameters of course, but it would be a far less unwieldy beast for them handle).