WASHINGTON, DC – Following the release earlier this month of the Joint Economic Committee’s Joint Economic Report, Cato Institute experts praised the work of the Committee.  

Romina Boccia, Director of Budget and Entitlement Policy, Cato Institute said:

• “The 2026 Joint Economic Report makes an important contribution by clearly identifying the demographic and fiscal realities driving America’s growing debt burden. The major federal entitlement programs, Social Security and Medicare, were designed for a different era when relying on a growing workforce to fund rising benefits for the elderly was feasible. Ever-higher taxes to avoid politically difficult benefit changes would undermine opportunities for younger workers and weaken economic growth. The report highlights an underappreciated aspect of levying the payroll tax rate on all earnings: about 400,000 senior STEM professionals, between the ages of 44 and 64, would get hit with higher marginal taxes, potentially accelerating early retirements. Congress should focus instead on reforms that strengthen growth, expand the productive workforce, and modernize Social Security and Medicare to reflect today's demographic reality. I am especially grateful to the committee for considering our recent Cato book, Reimagining Social Security, for 'structural reforms to these benefit systems that would restore fiscal balance without increasing senior poverty'. Serious budget reform begins with confronting the math, and considering the inevitable tradeoffs, and this report does so clearly and constructively

Chelsea Follett, Policy Analyst and Managing Editor of HumanProgress.org, Cato Institute said:

• “The JEC report is correct to recognize that higher government spending would be the wrong response to falling birth rates. Evidence from abroad shows that generous financial incentives and family subsidies have delivered limited gains at a high fiscal cost. Research suggests that achieving even a modest increase of 0.2 births per woman in the United States could require roughly $250 billion in annual government subsidies. For perspective, that is about the same as the U.S. Army's annual budget. A far better way to support growing families is to remove the many government regulations that drive up the costs of raising children and needlessly complicate family life."

Celebrating its 80^th anniversary, the Joint Economic Committee, under the leadership of Chairman David Schweikert, filed its annual Joint Economic Report in response to the 2026 Economic Report of the President. The Joint Economic Committee was created by the Employment Act of 1946, and pursuant to that Act, it is required to file an annual report with findings and recommendations responding to the President’s Economic Report. The Employment Act also recognizes the importance of a Congressional counterpart to the President’s Council of Economic Advisors, the Joint Economic Committee, to reflect the diverse array of opinions of constituents nationwide. Since 1946, 31 Chairmen from 20 states have led the Committee, and nearly 300 members from 48 states have served on the panel. It has welcomed almost 11,400 witnesses to testify before it on pressing economic matters, from economic stabilization in the 1940s, to the rise of the internet in the 1990s, to artificial intelligence last year.

“Our nation faces a dangerous fiscal trajectory that threatens the promise of a better tomorrow for future generations, as well as current retirees,” said Chairman Schweikert. “Years of inaction have left us unprepared for predictable challenges, especially an aging population straining federal programs. I’ve outlined a ‘Unified Theory for Fiscal Solvency’ to confront these realities and lay the groundwork for correcting our nation’s fiscal trajectory. Today, we’re borrowing roughly six percent of our economy to fund exorbitant spending levels that are simply unsustainable. Without immediate, honest action, we will suffer catastrophic consequences in only a matter of years. Congress must face the math and act now by charting a new economically responsible path to secure our nation’s future for generations to come.”

The Republican Section of the 2026 Joint Economic Report outlines its findings and recommendations in five key chapters.

• Chapter 1, “The Intergenerational Imbalance and Growing Dependence on a Shrinking Workforce,” observes that the Federal government’s central focus has shifted from national security and infrastructure to transfers of money from some individuals to others. Spending programs are built on the demographics of the past, and they continue to transfer dollars from the dwindling number of younger people to the growing number of older people. We find that almost three out of every five dollars transferred to individuals already ultimately go to the elderly, and future trends are almost certain to be increasingly problematic. Raising taxes only deepens this imbalance, whereas growing the economy and the tax base offer some potential for correcting course.

• Chapter 2, “An Update on Federal Healthcare Policy,” assesses the role of healthcare spending in driving fiscal deficits. Last fiscal year, the Federal government spent nearly $2 trillion on healthcare, making up over 28 percent of all spending. At the turn of the century, that figure was less than 20 percent, indicating healthcare is not only costing us more dollars but also clawing into a greater share of all Federal spending. Over that same period, personal health expenditures have increased by over 220 percent, straining Americans’ wallets and showing that many Federal policies have not been working to lower costs. These policies have distorted market incentives and led to a tremendous windfall for intermediaries. Innovation remains the key to solving these problems.

• Chapter 3, “The Fiscal and Economic Health of Medicare,” explores Medicare in more detail and focuses on the Medicare Advantage program. As a massive share of the U.S. population moves above retirement age, Medicare is in trouble. One trust fund on which the program relies is set to become insolvent within a decade, and the other is reliant on taxpayer transfers, meaning the U.S.’s aging is directly at odds with the program’s financial sustainability under its current design. These problems form a trilemma between three goals: affordability for seniors, fiscal solvency, and medical innovation. While these goals are currently mutually incompatible due to current policy, reforming Medicare Advantage would facilitate achievement of all three. Unleashing market forces in the program can set right a program that is currently held captive by a bleak demographic situation.

• Chapter 4, “Driving Production Through Human Capital and Innovation,” analyzes the role of the labor force in driving future economic growth. A large and healthy labor force is critical to grow the economy and reduce the national debt, but nearly two decades below the replacement level fertility rate have stalled population growth and complicated the math. Other countries face similar demographic predicaments and are actively recruiting talent, including away from the U.S. To preserve its potential and prosperity, any country must attract and retain those most likely to contribute to its economy. In many ways, American policies are not fit for this purpose. A points-based system would allow the U.S. to better position itself to win the global competition for talent and ensure those granted entry to the country complement Americans in the workforce. At the same time, unprecedented advancements in technologies like artificial intelligence will make the workforce more productive. Taken together, the labor force of the future will meet American needs and drive growth to help correct the nation’s fiscal situation.

• Chapter 5, “Putting Innovation at the Center of Pro-Growth Tax Policy,” details how we can build a tax code that maximizes productivity and innovation to solve the core problem. While last year’s tax reconciliation bill made meaningful progress, more must be done to ensure the market is unshackled by government. The Federal government must ensure its tax policies harness the strengths of the market and reward ingenuity, not incumbents. For example, a border tax adjustment could achieve many of the same goals as tariffs, but through a more growth-oriented framework.

The Republican section of the 2026 Joint Economic Report can be found here.

The entire 2026 Joint Economic Report can be found here.

The 2026 Economic Report of the President can be found here.

 

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