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Obsidian Planning

Obsidian Market Update 05/20/2023

Economic Update

The Debt Ceiling Debate

Before we dive into the question of maintaining, raising or extending the country’s debt limit (or ceiling), let’s look at some basics.

Debt Limit Defined

According to the U.S. Department of the Treasury, the debt ceiling is “the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.”

Debt Limit Origin and Adjustments

Congress first instituted a limit on government borrowing in 1917 and, since 1960, has raised permanently, extended temporarily, or revised the definition of debt limit 78 times: 49 under Republican presidents and 29 under Democratic. Most recently, President Donald Trump raised the limit three times.

Current Debt Limit

In December of 2021, the Congress raised the debt limit by $2.5 trillion to $31.381 trillion to cover debts through January 19, 2023. To avoid hitting the limit, Janet Yellen, Secretary of the Treasury, used measures that she expected would allow the U.S. to continue to pay its bills until “early June.”

Has this happened before?

Yes, Congress and the White House have faced off over the debt limit at least 10 times in the past 13 years and most recently reached a last-minute agreement in 2021. If the parties fail to reach an agreement and the government “shuts down,” functions not funded through an appropriations bill—except for emergency functions (e.g., national security, law enforcement and emergency medical care)—will be scaled back or cease. In past shutdowns, the Treasury Department delayed paying contractors and federal workers, yet serviced the government’s debt. The country’s creditworthiness remained intact.

What happens on June 1, 2023?

If her projections are correct, Yellen informed Congressional leaders that, unless Congress acts to increase or suspend the debt limit, “Treasury will be unable to pay its bills.”

What is the X-Date?

The actual date that the limit is reached is called “the X-Date” which the Bipartisan Policy Center estimates could be between early June and early August.

Who wants the debt limit maintained?

The issue isn’t as much about who wants to maintain the debt limit as it is about what members of the Congressional majority want from the Biden Administration in exchange for an increase or extension in the debt limit.

The Give-And-Take of Negotiations

On May 6, all but six Republican senators sent a letter to Senator Chuck Schumer indicating their opposition to raising the debt ceiling “without substantive spending and budget reforms.” Three days later congressional leaders and President Biden met to negotiate a budget deal. In return for approving an extension or increase in the debt limit, Republicans want several concessions. The two sides are also negotiating the expiration date on the any increase to occur before or after the 2024 Congressional elections.

An Ongoing Process

Negotiations between the executive and legislative branches will continue, possibly up to and beyond the X-Date. We’ll be watching carefully and assessing if or how a failure to reach an agreement or delay action could affect you and your financial portfolio. As always, please feel free to reach out to us at any time with questions or concerns.


Let’s Go to the Movies!

At the height of their popularity, there were more than 4000 drive-in theaters in the United States. Today, that number has dwindled to around 330, with only one in operation in Maryland, and six in Virginia. While it’s hard to beat the detail and depth of sound in an indoor theater, it’s also difficult to replicate the experience of watching the big screen from the front seat of a car or bed of a pick-up truck.

This Summer’s Flicks
Hollywood has served up a family-size serving of summertime movies for viewers to enjoy—indoors or outside. For kids, Walt Disney released The Little Mermaid in May and will follow up in June with Elemental. Fans of non-stop action are flocking to Guardians of the Galaxy, Vol. 3 and Fast X. Harrison Ford will make his final appearance as Indiana Jones in Indiana Jones and The Dial of Destiny, and Tom Cruise returns as Ethan Hunt in Mission: Impossible – Dead Reckoning.

Which movie will break out as this summer’s blockbuster? We have no idea but, in the words of film critic Roger Ebert, “We’ll see you at the movies!”

How We Help

Beneficiary Designations: Ignore at Your Heirs’ Risk!

It’s rare for any of us to set up all our bank/financial investment accounts and enter into insurance contracts simultaneously. Instead, we enter these arrangements when the need arises; perhaps a new savings account to earn more interest, a life insurance policy before signing a will and an employment benefit plan when starting a new job.

As a result, few of us have a comprehensive overview of our beneficiaries, and, our failure to see the big picture can lead to unintended consequences.

Unintended Consequences

Three life events—marriage, divorce, and the birth of a child—often radically change our choice of beneficiaries. Yet, in the emotional rush of all three events, few of us think to update our beneficiary designations. That failure could mean that a current spouse could be denied benefits in favor of an ex-spouse, or one of our children is excluded.

There are also tax laws and events in other people’s lives that can affect our choice of beneficiaries. For example, a beneficiary could become estranged from us or incapacitated by addiction. Under current federal estate tax laws (sunsetting in 2026), few of us are subject to federal estate taxes, but several states, including Maryland, impose inheritance taxes that depend on the relationship with the beneficiary and the size of the inheritance. By reviewing designations as a whole, you and your heirs may be able to avoid these taxes.

The Many Benefits of a Beneficiary Review

When we meet with you for a beneficiary review, we determine whether 1) you have named beneficiaries on all accounts, 2) beneficiaries should be added or subtracted, 3) beneficiary designations are consistent with your estate planning wishes and documents, and 4) designations are set up to minimize taxation and maximize privacy.

Beyond managing these financial/legal issues, some clients also use these meetings to educate their children about financial planning and their future inheritance. Of course, the choice to include children is yours, but we are happy to help your children become smart financial decision makers. Just give us a call and let’s meet.

Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member ​FINRA/SIPC.​ Obsidian Personal Planning Solutions, LLC, and Obsidian Personal Planning Solutions, Inc, are not affiliated with Triad Advisors.

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