After grinding to a Speakerless halt, the U.S. House of Representatives has regained a limited form of functionality. How long this remains true is the big question.
There are a relatively small, yet vocal, number of Representatives that are laser-focused on reducing federal spending. They also are demanding that all of the annual appropriations bills which make up the federal budget be passed separately instead of glued together in a thousand-page omnibus bill solely negotiated by leadership.
That slows down the budgeting process tremendously, and they have now extended the September 30th deadline and the November 17th deadline to January 19, 2024 (for roughly half of federal agencies), and February 2, 2024.
This unusual arrangement will help Congress prioritize which bills needs to pass first, but is no guarantee that the budget will be completed by the time we are one-third of the way through this fiscal year.
Running persistently large federal budget deficits is inflationary, directly working against the Federal Reserve’s efforts to bring inflation back under control. The more borrowed money that is pumped into the economy, the higher the consumer demand for goods and services.
Sustained large deficits have also caught the attention of debt ratings agencies as our future ability to both pay required interest or refinance maturing debt gets more difficult as our debt level accelerates. If bond traders start requiring higher interest rates to compensate for this higher credit risk, it will increase borrowing costs for everyone (since government debt generally has the lowest interest rate due to its low default risk).
At this time, it appears neither political party has a plan to address the gradually rising risk that excessive debt presents.
While Congress has passed very little legislation, the Internal Revenue Service has been busy issuing two new notices that could impact your financial plan.
First, starting in 2024, federal law requires “catch up” contributions for those age 50 or better contributions for those making over $145,000 per year to be Roth contributions. However, payroll providers are still building the technology necessary to implement this law. Thus, the IRS issued a notice that this provision will not be enforced until 2026.
Second, 2024 contribution limits increased due to inflationary adjustments. Employee contributions for employer-sponsored plans, IRAs, and Roth IRAs will all increase by $500 for 2024.
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