What if you had a an income of $10,000 per month, but spent $20,000 per month? How long would the credit card companies or banks let you play that game before they cut you off? Later this week, the White House will outline its spending plan for the next fiscal year which begins on 10/1/2021. In the top left of this CHART, courtesy of J.P.Morgan, you can see that is essentially where the Congressional Budget Office is forecasting our country will be in 2021. So, how is this possible? Well, the government basically has an unlimited credit line from the Federal Reserve and you can see how the increased government spending has effected the Federal Reserve’s balance HERE What the longer-term economic impact for our country will be is a big question where there is much spirited debate among economists.
In the second paragraph of the WMR you will read about some big changes to the Child Tax Credit. It is good to be aware of these changes because, if you qualify, you will begin receiving monthly payments for each child in July of this year. Normally, you get the credit when you file your tax return, but as part of the American Rescue Plan Act, for the tax year 2021, they will pay those credits in advance via monthly payments. Not only are they advancing the credits, but the credit amounts are also increased. There is discussion of making these changes permanent and not just for the 2021 tax year. As a financial planner, my very first thought was this is a really nice opportunity for some families to begin funding college or investment accounts for their children. Kiplinger put out a good article last week than answers a lot of the frequently asked questions around these changes. You can view that helpful article HERE.
As always, we hope you find the Weekly Market Review both informative and interesting. Have a great week!
Trevor N. Coe, CFP®