WASHINGTON, May 10, 2011 /PRNewswire-USNewswire/ -- With the nation's spending and debt problems on the verge of destroying the American dream for future generations, the Heritage Foundation today released a comprehensive plan to balance the federal budget, reform entitlement programs and recast the tax code to promote long-term economic growth.

The new report, "Saving the American Dream: Heritage's Plan to Fix the Debt, Cut Spending, and Restore Prosperity," constitutes "a complete rethinking and realignment of the federal government," said Heritage President Edwin J. Feulner.

"America is on the brink of national decline because Congress has been spending beyond its means," Feulner added. "But we do not have to accept decline and the death of the American Dream. Our new report shows how—by getting entitlements under control, balancing the budget and, therefore, reinvigorating the economy and America's sense of self-reliance."    

The Heritage plan lays out specific policy recommendations in Social Security, Medicare, Medicaid, health insurance, the tax code and federal spending.

A key element of the Heritage plan is replacing today's complicated tax system with a simpler, flat-rate system. The new rate would subsume all federal payroll and most excise taxes while eliminating the current double-taxation on savings. The aim is to encourage savings and investments to spark economic growth.

"Faster growth through economic freedom will enable more and more Americans to build both a solid and secure life and retirement for themselves and the means, as a community, to help those who worked hard but did not have the means to support themselves in retirement," the report said.

Heritage's plan also reworks Social Security and Medicare. Rather than serving as income-replacement programs with unsustainable spending levels, Heritage's plan reshapes them to work as "real insurance programs," ensuring that America's seniors will never spend their last years in poverty nor face financial ruin due to catastrophic health care costs.

Additionally, the plan stops the spiraling increases of non-defense government spending by limiting the federal government's role in local issues, shifting more functions to the private sector and eliminating duplicative and inefficient programs. Additionally, it holds defense spending at 4% so that the government's core constitutional responsibility of protecting the nation is not compromised.

Heritage's economic modeling forecasts the plan:

• Balances the federal budget in 10 years and keeping it balanced forever
• Preserves tax revenue levels at no more than 18.5% of the economy
• Reduces the nation's debt from 70% and rising to 30% within 25 years and continuing downward thereafter  
• Reshapes the size of the federal government by about half within 25 years
• Eliminates the Patient Protection and Affordable Care Act while creating an affordable health care system for the nation as well as families and individuals
• And provides powerful incentives for workers to save, invest and create more wealth

"The good news is that we can do this. We can guarantee economic security to middle-aged and older Americans even as we reduce the crippling debt that we have piled onto the shoulders of the young," according to the report.

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 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.

SOURCE The Heritage Foundation