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A True Roadmap to Fiscal Sustainability: The Numbers Don’t Lie

Posted By Kathryn Nix On February 1, 2010 @ 11:22 am In Economics | Comments Disabled

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During his State of the Union Address, Obama said that if “anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know.”  Earlier that day, Representative Paul Ryan (R-WI) introduced his Roadmap for America’s Future Act of 2010 [2], which provides all of the above.

The Congressional Budget Office’s (CBO) analysis [3] of Rep. Ryan’s legislation proves the plan would accomplish President Obama’s goals by reforming entitlements, reining in government spending, and setting the country on a long-term path to economic prosperity. [4]

CBO found that the Roadmap would reduce Medicare and Medicaid spending, slightly increase Social Security spending, and lower tax revenues.  Overall, these changes would reduce federal budget deficits and the federal debt.  Federal outlays would decrease from 26 percent of Gross Domestic Product in 2009 to 19 percent in 2020 and eventually 14 percent in 2080.  After 2030, federal revenues would be maintained at 19 percent of GDP.  By 2080 the budget would experience a surplus of approximately 5 percent.

The Roadmap’s effect on the federal debt is particularly impressive because it reverses the unsustainable course of current policies.  Under the current trajectory, debt would skyrocket in the decades to come, reaching over 200 percent of GDP by 2043 and nearly 700 percent of GDP by 2080.  (Of course, this isn’t actually possible—the country would incur financial ruin well before it reached these levels).  But under Rep. Ryan’s proposal, the debt would peak at 100 percent GDP in 2043 and then decrease to zero by 2080.

Specific to Social Security, revenues would exceed outlays by 2083 and would create a surplus for the trust funds thereafter.  Conversely, under currently law the trust funds would be exhausted by 2042.

Finally, CBO predicts that the economy at large would benefit tremendously under the Roadmap, with real gross national product per person achieving levels 70 percent higher due to the Roadmap than would otherwise occur.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/02/01/a-true-roadmap-to-fiscal-sustainability-the-numbers-don%e2%80%99t-lie/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/roadmap100201.jpg

[2] Roadmap for America’s Future Act of 2010: http://www.roadmap.republicans.budget.house.gov/

[3] The Congressional Budget Office’s (CBO) analysis: http://www.cbo.gov/doc.cfm?index=10851

[4] reforming entitlements, reining in government spending, and setting the country on a long-term path to economic prosperity.: http://blog.heritage.org../2010/01/27/rep-ryan-presents-roadmap-for-a-sustainable-fiscal-future

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