Heritage Foundation releases debt-reduction plan

The conservative Heritage Foundation released its proposal for addressing the country’s long-term debt problem Tuesday morning, one day after House Speaker John Boehner (R-Ohio) called for trillions of dollars in spending cuts in exchange for lifting the debt ceiling.

The Heritage Foundation says that its plan, “Saving the American Dream,” would balance the federal budget by 2021 and reduce the federal debt to 30 percent of GDP by 2030 by cutting federal spending roughly in half and without raising taxes.

Those targets are similar to the ones proposed by the conservative Republican Study Committee in its 2012 budget proposal. By contrast, the 2012 budget blueprint drafted by House Budget Committee Chairman Paul Ryan (R-Wis.) would balance the budget by 2035; it would also lower the federal debt to about 64 percent by 2030 and 48 percent by 2040.

The Heritage plan would not make any cuts in defense spending, would repeal the national health-care law and would completely overhaul federal entitlement programs as well as the national tax code, instituting a flat tax.

On Social Security, the plan would enact a flat payment for those who work more than 35 years and gradually increase the retirement rage; wealthy seniors would receive reduced or no benefits. The proposal would also change Medicare into a defined-contribution plan and would transform Medicaid into a tax-credit and voucher program.

The full plan is available here.

Heritage is one of six organizations that received grants from the Peter G. Peterson Foundation to create their own comprehensive deficit-reduction plans.

The six groups – which include the conservative Heritage Foundation and American Enterprise Institute; the liberal Center for American Progress, Economic Policy Institute and Roosevelt Institute Campus Network; and the Bipartisan Policy Center – will present their plans May 25 at the Peterson Foundation’s 2011 fiscal summit.

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