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Peter, good to see you. You're talking through the headlines today, preparing your finances for the debt ceiling showdown. The federal government has less than a month left before an economically devastating default on its debt. So we knew the state would come.
We've chatted about it before. We hit our debt ceiling back in January. So June is the deadline to increase the debt limit. The big fear here, of course, for most people is that federal spending will stop. Take a look at government spending here.
These numbers are from 2022, though. So a lot of us rely on Social Security and Medicare. How should we be preparing right now for the eventuality that the government defaults on its debt? Well, a little bit of a difference there between hitting the debt limit and then defaulting on the debt.
Right. We've hit the debt limit many, many times before. And when that has happened, Social Security payments, Medicare, Medicaid has continued. Even if some government employees were sent home for a temporary period of time, which, by the way, even those workers received back pay when a negotiation was finally reached. The potential for default, on the other hand, may be a little bit more concerning. We likely would continue to see for a good period of time that Social Security payments and Medicare payments and Medicaid stay intact and paying.
However, the status of the dollar would certainly be called into question if America defaulted on its debt. And by the way, as you mentioned, Aaron, we did a segment on this topic back in either late January or early February when we once again passed that debt ceiling. And there was the same deadline in place. We are now that much closer to the deadline, but not any closer to any kind of agreement or compromise. And what's the point of that agreement and compromise anyway? What's the point of even having the limit if every time we reach it and cross that line in the sand, they just erase it and draw a new line in the sand?
No family could operate that way. Oh, I've maxed out my credit card. Well, don't worry, I'm just going to arbitrarily raise my credit rate and be able to continue spending and putting things on credit. We need to have some financially fiscally responsible policies and discussions about how to actually curb and control this. Because I saw this highlight video of the Great Recession and I was amazed because in the montage they were showing the debt clock back then clicking away at eight trillion dollars, which seemed astronomical back then. But to put it in perspective, in today's debt, kind of kind of an insignificant amount. I mean, we just keep clicking away with with no real discussion about how to handle this problem with in and of itself. And that is very concerning. Right. So here's a live look at the US debt clock as we tick upwards of thirty one trillion dollars.
Boy, the good old days, right? The great boy, Peter, it gives me so much anxiety to look at those numbers. So I want to know, though, should we be considering more defensive investments right now? Because, of course, this showdown and any default will lead to certain market volatility. Yeah, well, I mean, when we've had these debates and crossed that threshold previously and then things were were being discussed and before agreement was reached, there has been market volatility because of the pressures that this puts on the economy and the question about our ongoing financial stability and continuing ability to meet our obligations. Look, Congress, the the people who could actually address this issue and reassure the American public and the markets that there are reasonable, responsible adults at the wheel here, instead of doing that, they're playing chicken with the world's largest economy and they are debating each other. They are raising their points, but they're not being responsible in addressing this.
But guess what? Eventually they will, because, A, Washington likes spending and B, their number one job is to get reelected. So at some point in time, they'll probably come out with a an increase to the debt ceiling yet again, along with some pork filled package where both sides to get to spend even more money. They'll shake each other's hands. They'll pat each other and themselves on the back and say, we did it. We averted crisis. And they will continue with the policies that got us here repeatedly. I think 86 times in in the last five decades or so since like 1960 that we have reached, crossed and broken this debt ceiling and then just raised it. They will do it again.
And it begs the question, what's it worth? Is it is it really beneficial to continue on with these kind of policies and and is anybody ever going to be realistically, financially, fiscally responsible enough to address these issues? I don't think that we see that any time in the near future, but I do see that eventually we'll come to some compromise that will release some package. There will be volatility in the days leading up to that as the debates rage and it looks like there's certain doom ahead. And then it's always interesting when that agreement is met, how the market reacts. Does the market say, OK, we're once again on good footing and bounces upwards? Or does it say, hey, this actually is no improvement and continues on with the same problem of fiscal irresponsibility and then and then bounces down. So, yes, I think volatility in the short term leading up to any agreement. Certainly as we get closer and closer to that deadline and then be interesting to see how the market reacts when an agreement is eventually reached. Well, we will revisit the topic then for the third time. Probably not the last time then, though, Peter. Unfortunately not.
Right. This was valuable to talk through. Peter, somebody has questions about whether their finances are prepared for what's coming.
What's the best way to reach you? Yeah, a lot of people are risk adverse. A lot of investors are risk adverse. Even those that have been typically comfortable taking risk are looking at things and taking a step back and saying, maybe I don't need to have as much money or risk on the table. And that's why we take the approach that we do of identifying opportunities.
Yes, but protecting what's important in the portfolios that we put together for our clients. And if you have any questions about that, would like to take a look at your investments, your positions, your retirement accounts. Give a call to Rashan Planning 919-300-5886, 919-358-86. You can visit online, book a call or a consultation at rashanplanning.com.
It looks like richonplanning.com and there's a button right at the top to be in touch. Or you can email me peter at rashanplanning.com. And Erin, I always appreciate you giving me the opportunity to throw the contact information out there for those that would like to discuss or be in touch.
Yeah. Well, thanks for making time to talk, Peter. Good to chat with you. Always a pleasure, Erin. Thank you. Thanks for having us.
Whisper: medium.en / 2023-05-13 12:13:23 / 2023-05-13 12:16:43 / 3
