Letter to Stakeholders, October 2021
Thursday, October 6, 4:07 pm EST. Just over 10 years ago, the world faced the very real prospect of the United States of America, defaulting on its debt. The sleepy routine of raising our country’s self-imposed spending limit was suddenly a partisan flashpoint. Political leaders were threatening not to budge. Economic recovery from a recent financial crisis hung in the balance.
Debt Ceiling “Crisis”
August 2nd, 2011 was the last time we experienced a “close call” with our country’s self-imposed spending limit aka Debt Ceiling. Our resulting, US debt downgrade (our first in history) was a serious enough issue to spur my ill-fated run as an Independent for U.S. Congress. So, what is the “debt ceiling” and why should you care? Well, history is repeating itself so the White House was kind enough to put together a debt ceiling explainer. Essentially the debt ceiling is like your credit card limit. The debt ceiling has everything to do with our national credit card [debt] limit; currently set at an unimaginable $28.4 trillion. We hit that accumulated US debt figure on August 1st and now our political leaders are debating whether to pay for our recent "charges" and/or continue the business of Federal Government.
Why it Matters
Beyond the quaint custom of paying our creditors – foreign countries, other investors – raising the debt ceiling is important on a macro-economic level. Our country is known and respected for many things, none the least of which is economic stability. As my investment advisor peers know, when there is a market crash, the world “flocks” to invest in US debt as a “safe haven.” When we studied finance, we used the interest from bonds as the “guaranteed” discount rate in present and future value calculations. Since World War II, the strength of the US economy made the US dollar the world’s reserve currency. The “Full, Faith and Credit” of the United States of America is important to the world and has been critically so, for decades. President Joe Biden and JPMorgan CEO Jamie Dimon and other CEOs met this week to reinforce this very important point.
December 3, 2021
The date above will hopefully be irrelevant. Earlier today, U.S. Senate leaders agreed to extend the debt limit another $480 billion; which should pay the government’s bills until December 3rd. The politics is still rather gut wrenching because Republicans will then expect Democrats “raise the debt ceiling” higher through reconciliation, all by themselves.
Politics, Policy and Money
To the casual observer, this political back and forth was always going to end up with a solution. Surely, they would make it work. Right? After all, raising the debt ceiling has been a bipartisan exercise for decades and practically perfunctory for our country’s first 150 years. But as the last 5 years have shown us, “unprecedented” events are no longer unlikely.
Our firm is uniquely passionate about the intersection of politics and money. We pay as much attention to political mindsets as we do the economic markets. We know that bad things can happen. In spite of this, we will continue to apply our latest education – we are forever learners – while straining our most rational thoughts, to optimize the management of your money.
Earlier this year, our firm had the distinct pleasure of interviewing principles from the Arlington Community Foundation for the second time. Anne Vor der Bruegge is their Director of Grants and Initiatives and this past month she was able to launch the Arlington Guaranteed Income pilot in partnership with the Arlington County Department of Human Services. This program allows families in Arlington fill the gaps between their income (as it grows) and their subsequently reduced government benefits. This reduces what’s called the Economic "Cliff" Effect (video explainer).
Sharing Financial “Tips”
Here are the financial tips you can share with friends and family for this month:
- Holiday Shopping. If you are a gift giver, buy now
- Tax Planning. After October 15 is a good time to schedule tax planning with your CPA
- Virginia Governor. Virginia clients, it’s time for another election. Vote Early
Enjoy the start of Fall!
Jason J. Howell, CFP®, CPWA®, CSRIC®
Jason Howell Company (JHCo.) is an independent, family wealth management firm run by two owners who consider it their family business. Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® are both married to patient wives and are dedicated to their kids.
The firm owners believe that busy, dual income couples should feel good about the wealth their building for their families. "Feeling good" begins with implementing a sustainable investment strategy (SRI, ESG) and continues with turning family values, standards and rules around money into a family governance structure that creates harmony for everyone involved. In meetings, the two owners strike the right balance between attention to detail and keeping serious subjects "light."
Jason Howell Company: Feel Good About Your Money™
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