The Election, National Debt, & the Future

One of the economic forecast sources that we follow is ITR Economics. Their forecast accuracy is 99% for the US economy about 15 months out, which is pretty darn good!  Their latest forecast is fairly optimistic. 

(For those asking the question – & regardless of your political views – the answer is ‘no,’ the outcome of the Presidential race and/or tax policy will not adjust the forecast. Only another Black Swan event like Covid would alter the forecast.)

By the end of 2025, ITR believes the following:

1. The US Economy will be in a period of continued but slowing growth (so no recession).
2. Commercial construction will continue to grow.
3. Residential construction will be recovering.

That said, ITR has also been predicting a Depression sometime in the early 2030s due to factors outside of our control, largely:

• Baby Boomers being a significant minority in the workforce (e.g. finally retiring, collecting social security, and consuming health care – we can’t do anything about this); and
• US National Debt reaching the point of unsustainability thus requiring action (something could be done about this with political will and some pain today but that’s very unlikely to happen regardless of political party – more about this below).

So, with this in mind, our advice is to continue to push forward creating and building wealth and liquidity but create a longer-term plan to reduce leverage in anticipation of not having access to debt and experiencing reduced cash flow in the early 2030s. 

More about ITR can be found here https://itreconomics.com/2030s-great-depression/.

Our webinar this week will also touch on a lot of this, so consider registering now.

On the National Debt note: As the debt is obviously correlated with what the government takes in (taxes and fees) and what it spends, just a reminder to everyone that the tax rates we currently enjoy expire at the end of 2025 without an act of Congress (regardless of political party). Even if one party controls both branches of government, it is unlikely that either candidate, Trump or Harris, will get everything they ask for. The Senate did not pass a tax proposal that the House overwhelmingly passed, primarily due to the Republicans in the Senate (remember, the Republican’s control the House – so the House Republicans passed something the Senate Republicans would not). Given the filibuster rules there will have to be some compromise.

Running a quick comparison of an S-Corporation making $600,000 in taxable income now, versus post 2025 if things just go back to the way they were, 7% to 8% - so around $40,000 – in round numbers – of additional tax. If you take this same logic against your taxable income, you can see the result. This generally holds true at all S-Corp income levels AS LONG AS payroll costs are at least as much as your S-Corp taxable income. Point being – to prepare for the worst – as it won’t likely get worse than this under either candidate proposal, just don’t spend the extra 8% today. That way, you won’t miss it.

Fun side fact if you’d made it this far as we try to be neutral in stating that both parties have been horrendous with fiscal responsibility for a long, long time, except for the last two years of Clinton with Gingrich and Lott controlling the House and Senate.

Looking at per capital debt (the national debt divided by citizens, which is the true measure of whether it’s getting worse or better):

a.) Under Obama, the worst increases were actually early, related to recovery from the recession. The actual effects of the ACA weren’t until 2014 when the exchanges and subsidies were implemented, at which point the per capita debt increased, but significantly lower than in the early years of his presidency.

b.) Under Trump, the per capital increases were as bad as Obama’s recession figures pre-Covid. They did spike for obvious reasons during Covid.

Here’s a breakdown of the approximate per capita national debt increase by year from Bill Clinton’s first term (1993) through Joe Biden (2024). Interesting to note that the increase under Clinton was less – in totality – that the increase per year in other administrations. To put a bow on tax rates versus spending cuts, under Clinton that same S-Corp $600k business owner would have paid about $60k more than today.

It’s funny. Killing the national debt seems to be a bi-partisan party. Going back to Eisenhower to Carter, both parties were responsible based on the measurement of the outcome, regardless of commentary at the time. Then they stopped, except for a period under Clinton, when we got on a sugar high.

The following breakdown shows how the national debt per capita increased each year based on rising debt levels and population growth:

### **Bill Clinton (1993–2001)**:

1. **1993**: $17,100
2. **1994**: $17,725
3. **1995**: $18,373
4. **1996**: $18,900
5. **1997**: $19,150
6. **1998**: $19,045
7. **1999**: $18,950
8. **2000**: $19,200
9. **2001**: $20,350

### **George W. Bush (2001–2009)**:

1. **2001**: $20,350
2. **2002**: $21,480
3. **2003**: $23,150
4. **2004**: $24,625
5. **2005**: $26,860
6. **2006**: $29,550
7. **2007**: $31,750
8. **2008**: $33,900
9. **2009**: $34,640

### **Barack Obama (2009–2017)**:

1. **2009**: $34,640
2. **2010**: $39,090
3. **2011**: $43,993
4. **2012**: $48,877
5. **2013**: $52,471
6. **2014**: $54,747
7. **2015**: $56,604
8. **2016**: $59,063
9. **2017**: $61,470

### **Donald Trump (2017–2021)**:

1. **2017**: $61,470
2. **2018**: $65,740
3. **2019**: $69,207
4. **2020**: $81,568
5. **2021**: $84,589

### **Joe Biden (2021–2024)**:

1. **2021**: $84,589
2. **2022**: $89,425
3. **2023**: $94,580
4. **2024**: $103,000 (estimate)

Just food for thought. Again, let’s focus on the things we can control and prepare for a potentially bumpy road ahead -- regardless of who’s in office.