A Perfect Fiscal-Policy Storm Brewing: Analyst Jeff Bush cautions that Trump’s second term could trigger a convergence of rising interest costs, ballooning federal debt, and aggressive tax-cut proposals — creating a “perfect storm” that may force hard choices around spending and entitlement programs.
Neither Party Has a Debt Plan: “There’s not one Democrat, there’s not one Republican, that has a plan to pay off a dime’s worth of debt, not one of them,” Bush maintains.
Advisors Should Prepare Clients for Policy Shifts: Given the potential for significant policy changes affecting taxes and social programs, Bush advises financial professionals to proactively assess and adjust clients’ financial strategies to navigate the evolving economic landscape.
President Donald Trump signed more than 150 executive orders during the first four months of his second term, but financial advisors and clients needn’t concern themselves with much of the noise, according to Jeff Bush, a 30+-year veteran of the financial services industry and a bipartisan political analyst.
“That 1½% popular-vote victory has given Donald Trump all the confidence he needs — not that he needed more — to push forward his agenda here in 2025, but you’ll need some legislative help to get a lot of that work done,” Bush, principal of the Washington Update, told attendees at the Financial Services Institute Forum and Capitol Day on May 20.
And he doesn’t see that happening that easily for number of reasons.
For example, although President Trump promised to continue the Tax Cuts and Jobs Act pretty much as is, “he had added additional sweeteners — things like no tax on tip income or overtime, or no tax on Social Security,” said Bush. “All those things come in additional revenue cost to the federal government, and we’ll talk more about that.”
Bipartisan Barriers
Although Republicans won 53 seats in the Senate, the filibuster rule requires 60 votes to move a piece of legislation forward in that chamber, Bush noted. “Even if they’re able to keep their whole coalition together, they’re going to have to find seven Democrats to move along with them to move any agenda forward,” he said.
An exception to the filibuster rule is reconciliation bills, used for budgets and taxes, which only require a 50/50 simple majority (Vice President Vance can break ties), “and that’s the lion’s share of what Donald Trump is trying to accomplish here in 2025,” said Bush.
Yet Senate majority leader John Thune (R-SD) “is not a traditional MAGA type of Republican, and I think that could prove to be a real friction point between he and Donald Trump as we move through this tax reform.”
More Cracks in the Republican Party
Bush also voiced what he refers to as Axiom #1: “The moment either party garners enough support to control the legislative and the executive branch, all those little cracks, all those little fissures within that party’s ideology start to split wide open,” he said. “We saw that to some degree with a budget bill back in March, but now that we’re in tax-bill time, we’re really seeing those cracks split wide open.”
One of these cracks is the ongoing rift between Republicans in red states and Republicans in high-tax blue states over how much to raise the allowable deduction on federal tax returns for state and local taxes (SALT), or whether to eliminate the SALT cap that President Trump imposed during his first term.
An Aimless Democratic Party
Bush calls out problems on both sides of the political aisle. Right now, “the Democrats are leaderless and message-less,” he said. “And it brings us to Axiom No. 2: The most abhorrent thing in any political party is to be considered irrelevant, and that’s where the Democrats are right now. They are wandering through the woods trying to figure out who they want to be.”
“I think this tax bill could be the impetus to get the Democrats on the same page to then face off against Donald Trump later this year,” Bush added.
‘The Perfect Fiscal-Policy Storm’
“The United States entered what I call the perfect fiscal policy storm of 2025 where we’re literally trying to get tax reform done on top of two budget debates, on top of the debt-ceiling value,” said Bush, calling this “a monumental lift.”
Not only is there a lot of pressure on Capitol Hill around these issues, there’s also a lot that doesn’t make sense and a lot of hypocrisy, he said.
“We’ve heard Republicans say, ‘We’re the party of fiscal reform. We’re the party of fiscal restraint. We want to get our country back on solid fiscal foot,’ but they’re passing a bill that adds to the debts,” said Bush. “In order to understand why this is such a challenge for our country, we have to start from the same understanding of where our country is at this point, and it really boils back on the budget.”
In 2024, the U.S. brought in about $5 trillion in revenue but spent $6.8 trillion, resulting in a $1.83 trillion shortfall, Bush noted. That annual budget deficit of $1.83 billion is then added to the accumulated federal U.S. debt, which is approaching $37 trillion, he continued.
“But let’s be honest amongst ourselves: Who can honestly say they can get their head around what $37 trillion is, right?” he asked the audience. “None of us can, and if you and I, as financially learned individuals, can’t get our head around what $37 trillion is, then what does the average American think about that? Nothing.”
“The federal government counts on the fact that it’s such a nonsensical number that the average American literally does not even give it consideration,” Bush continued.“We can’t afford to do that. We’re the financial knowledge in this country, and we need to help our fellow Americans.”
Drunken Sailors, Red and Blue
Although the Republicans are trying to pass this off as a “spending problem only,“ the nation’s accumulated federal debt as a percentage of our economy is “roughly on par with where we were at the height of World War II, when we were fighting fascism over the entire globe,” he said.
After World War II, that figure declined to its normal level because the federal government paid off the maturing war bonds Americans purchased to finance the war, and then the government retired that debt, Bush said.
“But I’m here to tell you right now today, with where we are, there’s not one Democrat, there’s not one Republican, that has a plan to pay off a dime’s worth of debt, not one of them,” he said. “And you know the old saying ‘drunken sailors spend like drunken sailors.’ Well, clearly, they’re both guilty of that.”
Bush shared slides with a breakdown of mandatory and discretionary spending figures, a “budget scoring breakdown” that assumes the static cost or gain of each legislative provision, tax-policy data and more data.
As for that sovereign wealth fund that President Trump is intent on launching, “most countries fund those sovereign wealth funds with budget surpluses. Does anybody think the United States would bring a budget surplus? Right? So the question is, where’s that money going to come from?” said Bush.
Social Security and Medicare
President Trump “actually tries to do what he campaigned on,” says Bush, noting that this included promises of no cuts to Medicare or Social Security benefits. Still, when Bush travels around the country to speak with organizations, “clients are absolutely paranoid that their Social Security benefits are going to be harmed in some way,” he said.
Bush isn’t worried that Social Security will go bankrupt, and he often tries to explain this to people, he says. But Social Security’s combined trust funds, [used to pay for benefits and administrative costs in future years] are poised to be depleted by about 2035. Bush expects Social Security reform to arrive around 2033 but cautions new legislation could bump up the solvency issue before 2035.
First, passage earlier this year of the Social Security Fairness Act opens up greater Social Security benefits to more Americans without providing additional revenue to cover this, he noted. And although President Trump campaigned on the premise of no taxes on Social Security income, this tax helps fund Social Security, says Bush.
Congress will have to deal with this operations issue if legislation eliminates taxes on Social Security income, said Bush, and to find additional revenue he thinks the government will have to raise taxes for corporate taxpayers.
Medicaid Cuts Can Impact the Wealthy, Too
Where Bush expects to see a lot of change pertains to cuts to Medicaid. He also sees a continued push towards Medicare Advantage, as “It’s just more cost effective for the federal government,” he said.
After his presentation, I asked Bush how concerned financial advisors and their clients should be about cuts to Medicaid, and what they need to know. Could this affect families who spend down assets to pay for nursing home care?
“I definitely would say advisors need to be aware of these Medicaid cuts,” Bush said. “To your point, the client may be wealthy, but they may be supporting mom or dad in that long-term-care situation, and that’s where Medicaid cuts could come into play.”
And “if Medicaid cuts come into play, those nursing homes, those providers, are going to have to make up that revenue somewhere, which makes it more expensive for everyone who is paying directly or through their long-term-care policy,” he added.
Concerns for the Disabled
I also asked Bush whether cuts to Medicaid will impact families with children or other family members who are disabled and rely upon Medicaid services.
“I don’t see a lot of efforts right now to impact the disabled, but the challenge with defining disabled is a huge spectrum — all the way from mildly disabled to profoundly disabled,” said Bush. “Are those people treated differently? Is there a bifurcation of those types of services provided?”
He also pointed out that Medicaid is a federally funded, state-based program, “so where you’re going to see changes are in the 50 states — how they interpret the federal funding and how they apply that within their state.” The state offerings are already inconsistent and “so sadly, it could exasperate that,” he said.
“In this very strong red-blue divide that we’re developing in our country, there are disparate experiences depending on what side of a river you live on. And that was never really the intent. The intent of our 50-state Republic was that the best ideas would bubble up from the 50 states and then be broadly applied. And that’s not what we’re seeing now.”
Jerilyn Klein is editorial director of Rethinking65.
