“Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by Stuart Butler, Ph.D. , Alison Acosta Fraser and William Beachis one of the finest papers I have ever read. Over the next few days I will post portions of this paper, and today are some of the conclusions of this study.
Achieving Fiscal Balance
The Heritage plan achieves fiscal balance by ensuring that tax receipts will
match government expenditures. If no action is taken, the deficit in the current
law baseline is 3.2 percent of GDP in 2021 and 5 percent in 2035. The Heritage
plan balances the federal budget by 2021, with spending and revenues each
reaching 18.5 percent of GDP. The budget stays balanced without exceeding those
levels through the entire time frame. This leads to a sharp reduction in debt as
a percentage of GDP. In the extended baseline scenario, debt climbs to 91.5
percent of GDP by 2035. The Heritage plan reduces the debt by two-thirds to 30
percent of GDP. A smaller national debt results in savings to taxpayers as
interest payments fall sharply from an annual share of 4.6 percent of GDP to 1.7
percent in the Heritage plan, a savings of more than $1 trillion each year.
Reduced interest payments on the national debt account for almost one-third of
the reduced government spending, which is a result of the strong budget reforms
contained in the Heritage plan.
Stuart M. Butler is Distinguished
Fellow and Director of the Center for Policy Innovation, Alison Acosta Fraser
is Director of the Thomas A. Roe Institute for Economic Policy Studies, and William W.
Beach is Director of the Center for Data Analysis, at The Heritage
Foundation. The editors are grateful to the team leaders who worked with policy
experts throughout The Heritage Foundation to develop this report: J. D. Foster, Ph.D., Norman B. Ture
Senior Fellow in the Economics of Fiscal Policy; Rea S. Hederman, Jr., Assistant
Director and Research Fellow in the Center for Data Analysis; David C. John, Senior Research Fellow in
Retirement Security and Financial Institutions; Robert E. Moffit, Ph.D., Senior
Fellow in the Center for Policy Innovation; Nina Owcharenko, Director of the
Center for Health Policy Studies; and Brian
M. Riedl, Grover M. Hermann Research Fellow in Federal Budgetary
This plan was developed as part of the Solutions Initiative and funded by the
Peter G. Peterson Foundation.
The Peterson Foundation convened organizations with a variety of perspectives
to develop plans addressing our nation’s fiscal challenges. The American
Enterprise Institute, Bipartisan Policy Center, Center for American Progress,
Economic Policy Institute, The Heritage Foundation, and Roosevelt Institute
Campus Network each received grants. All organizations had discretion and
independence to develop their own goals and propose comprehensive solutions. The
Peterson Foundation’s involvement with this project does not represent
endorsement of any plan. The final plans developed by all six organizations will
be presented as part of the Peterson Foundation’s second annual Fiscal Summit in