I often write about how important I feel it is to plan ahead. When you know you have a bill due or a can’t-miss deadline coming, preparation is key to avoid rushing at the last minute.
At the stroke of midnight on October 1, 2022, government funding for U.S. federal agencies was set to expire. Fortunately, Congress managed to pass a bill funding the federal government through December 16, thus pushing their budgeting deadline back by a couple months. At this point, this should come as no surprise—Reuters reports that according to a government study, a last-minute bill has been needed in 43 of the past 46 years.
But as we enter a new fiscal year, there is something historically notable: According to an October 3, 2022, daily report from the United States Treasury, the U.S. national debt has surpassed $31 trillion for the first time. And that’s just one of many challenges facing our nation in fiscal year 2023.
Each new fiscal year brings with it new challenges and opportunities.
October 1, 2022, marked the beginning of fiscal year 2023 for the U.S. federal government. But this hasn’t always been the case—originally, the fiscal year began on January 1, just like the calendar year. But since January is also the start of term for newly elected representatives, having the fiscal year begin on January 1 didn’t provide new officials much time to participate in the budget process for the coming year. And so in 1843, the date was change to July 1—but once again, it was seen as not enough time. Then in 1976, America’s fiscal year shifted again, and ever since it has begun on October 1.
But while this seemingly allows Congress more time to plan a budget, disagreements can still keep a new budget from being passed (in this year’s case, Forbes reported on September 30, 2022, that a disagreement over the inclusion of Senator Joe Manchin’s energy bill held up the process). But with a temporary funding bill signed by President Biden, Congress has a little more time to look to the coming year and decide how our taxes should be spent—and where cutbacks or tax increases may need to happen to get a handle on our growing national debt.
As a CEO, I understand the challenges that can come with working out the next year’s budget. After all, none of us can see the future, so it can be tough to determine where funds can best be allocated. But just as with our portfolios, a careful study of where things are now and a look at what analysts are saying may help guide Congress to better decisions regarding a federal budget.
America is currently facing several major economic challenges, including a new record-high national debt.
I like to discuss my plans with members of my team to ensure that I have as much information as possible before making a decision. It’s the reason why we provide so much educational content for our clients—a good decision is a well-informed decision.
But when it comes to our federal budget, having all the information when needed isn’t always possible, which is another reason why final voting on a budget may be pushed down the road. For example, the website for the U.S. Senate states, “The President submits a budget to Congress by the first Monday of February every year.” But with 10 months to go until the following year (and 8 months until the next fiscal year), there are sure to be a number of unforeseen changes and challenges.
Some changes may even be positive—for example, Office of Management and Budget reported in August that the 2022 federal deficit would decline by $1.7 trillion by October 1, “representing the single largest decline in the federal deficit in American history,” according to an August 23, 2022, report by the Associated Press. But even a declining deficit is still a deficit, and this past fiscal year’s spending has sent us once again to the precipice of a debt ceiling crisis.
“America’s borrowing binge has long been viewed as sustainable because of historically low interest rates,” writes The New York Times in an Oct 4, 2022, article. “But as rates rise, the nation’s fiscal woes are getting worse.”
Those rising interest rates are just one more challenge being faced by the American economy in fiscal year 2023, as the Federal Reserve continues to increase rates in an attempt to alleviate another challenge—historically high rates of inflation that are impact both consumer and producer costs. Analysts continue to speculate that the costs of tamping down inflation may include an economic recession and increased unemployment.
Add to that natural disaster relief for areas affected by Hurricane Ian, as well as other national and international concerns that may not have existed in February, and Congress’s job of building a budget becomes far more complicated.
The current stopgap bill, for example, includes more than $12 billion in aid for Ukraine, according to a September 30, 2022, article by Reuters.
But with this bill passed and signed into law by President Biden, it is now the job of Congress to come together once again and prepare a final spending budget for 2023. But what if they don’t?
Failure to pass a budget by December 16 may result in a partial government shutdown.
According to Reuters, the last time Congress allowed the federal government’s funding to lapse was in December 2018. For a record 35 days, the federal government partially shut down. Forbes notes that a government shutdown can include disruptions such as delays at the IRS, challenges in food stamp delivery, closed national parks and monuments, and pauses in new Social Security applications.
Considering that the current statutory debt ceiling set by Congress is $31.4 trillion, according to an October 4, 2022, report by the Associated Press, a repeat of last year’s debt ceiling showdown may also be possible, increasing the chances of a partial shutdown.
In an environment where concerns over a potential recession are looming and consumers are seeing the cost of everyday items increase because of inflation, the uncertainty caused by a government shutdown could add undue stress to the economy and consequently, you and your portfolio. Instead, knowing that Congress now has three months before the next deadline, you may wish to gain additional peace of mind by shoring up your portfolio with gold or other precious metals. Gold has historically been used as a hedge against times of economic uncertainty, and with all the challenges facing our nation, now may be the right time to adjust your asset allocation and increase your portfolio’s diversification.
Difficult decisions can take time, but it’s also important to ensure that you’ve done your research and can take action before it’s too late. Congress is able to put off passing a budget for a couple more months—can we say the same about adding additional protection to our portfolios?
To learn more about the benefits of precious metals, CLICK HERE to request a FREE copy of our Gold Information Kit.