We have a poisonous political climate, and that makes it difficult to talk about the effects of the recent tax cuts without triggering pro-Trump or anti-Trump passions. But talk about it we must, because strategic planning is about looking for a path forward within the larger political and economic context.
I found during Jerry’s and my years in the financial planning business that our educational systems doesn’t do a very good job of educating people on how the economy works — even well educated people often fail to make the connection between federal tax policy and the individual fortunes of a family, a non-profit, or a business.
The Trump administration has pushed through a major tax cut whose benefits go primarily to wealthy people and corporations. Less money will be available in the federal budget for things like mental health care, which is the focus of the non-profit for whom I’m working. The next 3-5 years aren’t about arguing or negotiating about how to divide the pot. Rather, the issue is a much smaller overall pot.
The three biggest drivers of the federal budget are middle class entitlements like Medicare and Social Security, defense, and interest on the debt. We don’t have a choice about paying interest on the federal debt, which is held primarily by countries with large sovereign wealth funds like China and Saudi Arabia. The current administration is all-in with increasing the defense budget. There is a strong constituency among older white American voters to support Medicare and Social Security. That means dramatic cuts in the small slice of the budget that remains, which includes federally funded mental health programs.
All non-profits who depend on federal dollars will have to contend with reduced funding, and develop a plan to increase individual donations in significant ways.