Is your house in order for the 2030s?

The US government's fiscal year starts on October 1, so every October I sit down with the Treasury's year-end numbers. I've done it since I started Resilience Talk in 2023. Last October, I put fiscal 2025 next to 2023 to see what two years had changed. Here's what I found, along with a few things that have shifted since.

A prediction from 2023

Back in 2023, interest rates were starting to creep up. I predicted that net interest on the national debt would balloon into the top three items in the federal budget unless we started reducing the deficit.

By fiscal 2025, net interest was approaching $1 trillion. It had already passed national defense and sat in fourth place by a hair, behind Social Security, health and Medicare. It isn't the outcome I wanted, but the theory is holding up.

Different stories, same math

Between 2023 and 2025, total receipts grew by about $1 trillion. You could read that as a stronger economy. But spending grew by about the same amount, from roughly $6 trillion to $7 trillion, and the deficit stayed close to $2 trillion.

Set aside the back-and-forth about which administration is worse, and the Biden and Trump fiscal pictures are basically on par. As I put it on the show, "The stories have changed… the philosophies have changed. But when we look into what is actually going on within… income and spending, which is essentially Congress, nothing has changed."

The economist Jude Wanniski described this as the two Santa Claus theory. One side wins votes by lowering taxes. The other wins votes by offering more government services. Both get what they want, and that's unsustainable.

The third-grade math

The fiscal 2025 deficit, about $1.775 trillion, is now larger than our second-biggest source of revenue at about $1.748 trillion. It's nearly impossible to close a gap that size with a growing economy or some creative new income idea.

My own preference would be lower taxes and less spending, so businesses and families have more to invest. But the arithmetic points to hard choices: roughly $1 trillion less in spending and $1 trillion more in taxes. That only gets us to parity. It doesn't produce a surplus.

Ray Dalio describes where this leads in How Countries Go Broke. Eventually a country has to deleverage. Spending comes down, taxes go up and the value of money falls. That's a depressionary cycle.

Is your house in order?

In 2023, I took a talk to family business roundtables called "Is Your House in Order? And How to Thrive in the 2030s." A lot of forecasters were converging on the same idea, and they still are: the 2030s could bring a major reset.

ITR Economics is one of them. They forecast a downturn deeper and longer than 2008, with GDP falling 7 to 10% over as long as six years. Nobody alive today has lived through that. The drivers they point to include baby boomers leaving the workforce and leadership roles, a new generation of leaders, shifts between China, India and the US, AI, the solvency of government benefits and government debt.

This isn't Chicken Little stuff. It's a look at the reality of the numbers, and we still have time to prepare.

What's changed since

Two updates. First, the Supreme Court ruled against the administration on its tariffs. Some tariffs are still being applied in other ways, and some of that money is being paid back, so it's still in flux. Second, AI has advanced enormously in the past year. It's too early to say for sure, but it looks like it could bring real productivity gains with fewer people, which may ease some of the strain as boomers exit ownership and leadership.

Over the next few episodes, I'll take a deep dive into this year's fiscal numbers.

[Listen to the full episode of Resilience Talk](https://www.secondnature.solutions/podcast?utm_source=second-nature&utm_medium=blog&utm_campaign=ep-54-economic-trends-2030s&utm_content=blog), and if this resonates, [subscribe to my newsletter](https://www.secondnature.solutions/join?utm_source=second-nature&utm_medium=blog&utm_campaign=ep-54-economic-trends-2030s&utm_content=blog).