This Week’s Blog Is Written By Scott D. Heins, CFP®, IAG Chief Investment Officer
October 1, 2025

As of this writing at 6:30 am on Tuesday, September 30, we are T-minus 17.5 hours away from the end of the federal government’s fiscal year. It appears very likely that the “nonessential” portions of the government may be temporarily down after midnight tonight.

Some federal programs are funded on autopilot. They are called mandatory (or entitlement) programs. Congress passes a law that commits the federal government to paying for their expenses indefinitely. Examples of these include Social Security, Medicare, Medicaid, veterans’ benefits, and interest on the national debt.

Other federal programs are created by laws authorizing their creation, but they are funded on an annual basis. These are called discretionary programs whose funding must be renewed every year.

Back in 1985, mandatory spending made up about 53% of all federal spending and discretionary spending made up about 47%. Thus, the process for passing annual budget legislation (called appropriations bills) was considered vital. Those annual bills had a real impact on how much the government spent in any given year.

Fast forward to today and we find that mandatory spending makes up around 73% of all federal spending, leaving Congress only 27% to tinker with through the annual appropriations process.

Certainly, 27% of $6,826,260,000,000 is still a significant sum to us commoners, but on a relative basis its Congressional importance has been halved over the last 40 years. And it shows by the increasingly insincere efforts Congress makes to pass discretionary spending bills every year.

They have consistently stretched their deadline into the new fiscal year using continuing resolutions that ultimately give them enough time to assemble a monstrously thick spending bill to fund the discretionary programs through September 30 of the following year.

As of this writing, the U.S. House of Representatives has passed a continuing resolution to keep the federal government up and running at current funding levels through November 21, 2025. However, the U.S. Senate requires 60 votes to move this legislation forward, and politicians of both parties rarely pass up the opportunity to score political points on must-pass bills. Expect plenty of grandstanding, hand wringing, and political punches until enough political pressure builds to force the clog through.

The financial markets have been through these enough times where a short-term shutdown tends to have minimal impact. If the shutdown is measured in weeks instead of days, we could see some additional volatility in the financial markets as uncertainty builds.

This, too, shall pass. All it takes is for Congress to agree on either a continuing resolution (the end of which could bring another shutdown) or a budget through September 30, 2026. It will happen. We just don’t know how long it will take for our elected representatives to set politics aside and fulfill their responsibilities.

In the meantime, prepare for delayed processing or closed attractions for most federal programs or locations until further notice and psychologically prepare yourself for some potential market volatility in the coming weeks.

Quote of the week: Alexis de Tocqueville: “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

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