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May 25, 2011

May 25, 2011 | News Releases on

The Heritage Foundation’s “Saving the American Dream” Plan Cuts Most Debt, Taxes & Federal Spending

Washington, D.C., May 25, 2011— Of all the plans released today at the Peter G. Peterson Foundation’s 2011 Fiscal Summit, the Heritage Foundation’s proposal reduces the national debt by the most and keeps federal spending and taxes at the lowest levels.

Heritage’s report, “Saving the American Dream: Heritage’s Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” lays out bold policy recommendations in Social Security, Medicare, Medicaid, health insurance, the tax code and federal spending. It is part of the Peterson Foundation’s Solutions Initiative, which convened six research organizations to provide long-term fiscal plans that were reviewed by an independent scorekeeping team led by Barry Anderson (former Acting Director of the Congressional Budget Office), and included experts from the Tax Policy Center and other analysts.

When compared with the others, Heritage’s plan achieved the lowest debt level by 2035: 30 percent of Gross Domestic Product, less than half of the current debt-to-GDP ratio. Without fiscal reform, the national debt is projected to grow to 91.5 percent of GDP by 2035, according to the baseline adopted by the Peterson Foundation.

Federal debt also dropped by 2035 under plans presented by the Bipartisan Policy Center (38.2 percent), The American Enterprise Institute (59.6 percent), Roosevelt Institute Campus Network (63.6 percent), Center for American Progress (42.3 percent), and Economic Policy Institute (81.7 percent).

Projected Federal Debt Levels in 2035

The Heritage plan also lowered federal spending—the real cause of the nation’s fiscal woes—to 17.7 percent of GDP, falling from expected spending of 28.3 percent by 2035. The American Enterprise Institute lowered spending to 22.8 percent, Bipartisan Policy Center to 23.7 percent, Roosevelt Institute Campus Network to 24.8 percent, Center for American Progress to 23.2 percent, and Economic Policy Center to 27.8 percent.

Projected Federal Revenue Levels in 2035

Additionally, the Heritage plan rejects tax increases as a solution to our nation’s spending problem and keeps federal tax levels at 18.5 percent of GDP—the lowest among the plans and below the projected baseline of 23.3 percent in 2035.

Projected Federal Spending Levels in 2035

Composition of Projected Federal Spending in 2035

Tax levels in other plans dropped from the Peterson Foundation baseline. The American Enterprise Institute lowered tax levels to 19.9 percent, Roosevelt Institute Campus Network to 22.9 percent, and Bipartisan Policy Center to 23.1 percent.

However, these tax levels are all above America’s historical tax average, which has been slightly more than 18 percent. Compared with the projected baseline, taxes rose for plans by the Center for American Progress (23.8 percent) and Economic Policy Institute (24.1 percent).

“The Heritage plan quickly brings the federal budget in balance, keeps it permanently balanced, and starts paying down the debt—all without increasing taxes,” said Stuart Butler, a co-editor of Heritage’s plan and Director of Heritage’s Center for Policy Innovation. “Instead, we solve our spending and debt crises by immediately getting entitlements under control, reshaping the role of government, and creating a simple, growth-oriented tax system with greater savings incentives for all Americans.”

“We also preserve and strengthen our nation’s safety-net programs without imposing massive tax hikes on future generations to do so, which would rob them of the American Dream,” Butler said.

Heritage today launched a new Web site,, to highlight how its fiscal plan reshapes the federal government to better serve young adults, seniors, families, entrepreneurs and low-income workers. Read the full “Saving the American Dream” report here.

The Heritage Foundation’s Saving the American Dream 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 May 2011.

The spending and revenue estimates have been extensively reviewed by a team of independent scorekeepers, led by Barry Anderson and including William Menth and the staff of the Urban-Brookings Tax Policy Center. The Urban-Brookings Tax Policy Center assessed the revenue effects of each plan. The Urban-Brookings Tax Policy Center and the other members of the scorekeeping team do not necessarily endorse any of the estimates made by the participants of their own plans.

The Heritage Foundation is the nation's most broadly supported public policy research institute, with more than 710,000 individual, foundation and corporate donors. Founded in 1973, it develops public policy solutions that advance free enterprise, limited government, individual freedom, traditional values and a strong national defense.

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