With midterm elections now in the rear-view mirror, the 114th United States Congress, which will have a markedly different makeup from those of years past, will soon be in session. Both the House of Representatives and the Senate are now controlled by the Republican Party, while Democratic President Obama remains in command of the White House until his term ends in January 2017. In other words, we could be set up for quite a battle between congressional Republicans and President Obama.
Both Congress and the Supreme Court will undertake five extremely important votes in 2015 that could affect your investments, alter your 2015 taxes, and even determine whether many Americans keep their jobs.
Let's take a closer look at how these five votes could change your fate in 2015.
Vote No. 1: 2016 Budget
Considering that it took until mid-December to avoid a government shutdown and approve the 2015 budget, I can only imagine what will happen when President Obama presents his budget for congressional approval sometime in February.
The 2016 budget is particularly important for two reasons. First, investors will be looking for meaningful reductions in the annual spending deficit, especially with one party once again controlling both branches of Congress. An increase in the budget shortfall from 2015 to 2016 could be viewed negatively by investors.
Perhaps even more importantly, the budget determines how much federal money goes to each sector. For example, the defense industry nets nearly one-fifth of all government spending and is reliant on federal contracts to drive innovation and jobs growth. In fact, since 2001 the total federal funds apportioned to the Department of Defense has risen from $316.2 billion to $575 billion by fiscal year 2015. Any cuts in the defense budget could result in job losses, possibly boosting the U.S. unemployment rate.
Vote No. 2: Tax extenders
Congress could also have a big say in whether or not businesses and individuals can claim a number of tax breaks known as tax extenders in 2015.
Just last month Congress passed the Tax Increase Prevention Act, which is meant to extend 55 tax breaks retroactively through Dec. 31. Ultimately, it may not do much good for businesses, which may be skeptical that they can take advantage of these tax breaks, considering they may not be there when they file their 2016 taxes.
If Congress and the president are unable to come to an agreement on extending these taxes in 2015, then businesses can kiss bountiful research-and-development credits goodbye, and they could also see ample green-energy initiatives go dark. On the individual side, residents in states with no income tax would lose the ability to write off sales tax, while people short-selling their homes would have to claim the difference between the short-sale price and the amount they still owed to their lender as income on their fiscal 2015 taxes.
Vote No. 3: The debt ceiling
Beware the Ides of March (March 15, 2015), for that's the time when the U.S. will once again hit its debt ceiling.
Because the U.S. budget entails spending more money than it's bringing in via revenue, our national deficit continues to grow. In order to meet expenses, the U.S. government continues to borrow money. As of this writing the U.S. national debt had crossed a whopping $18 trillion -- nearly $154,000 per taxpayer. In order to continue meeting its debt obligations and paying its bills, the government will likely need to raise the national borrowing limit for the 79th time since 1960.
What happens if the debt ceiling isn't raised? The government will essentially furlough a good chunk of federal employees to start with and could even go so far as to default on its interest payment obligations to other countries. Were that to happen, there's no telling what would happen to U.S. investors, but it wouldn't be a good thing for the stock market or the nation's borrowing capacity.
Vote No. 4: Federal ACA subsidies
However, Congress won't make every major vote in 2015. In June the Supreme Court will review a case concerning the legality of offering subsidies through federal exchanges under Obamacare.
According to the plaintiffs, the language of the Patient Protection and Affordable Care Act establishes that subsidies are to be used for coverage purchased on an "exchange established by the state." Since 37 states are currently choosing to use Healthcare.gov -- the federally run marketplace -- as their health exchange, the Supreme Court will have to determine whether these subsidies belong solely to state-run exchanges or the federally run exchange can legally dole out these subsidies.
If the Supreme Court rules against the plaintiffs, things would likely stay the way they are now. In the event that the Supreme Court rules in favor of the plaintiffs, then 87% of the 5.45 million people who signed up for Obamacare through the federal exchange in 2014 may find themselves without subsidies and exposed to considerably higher premium costs. If this scenario plays out, Obamacare's survival could be severely tested, as many of those receiving financial assistance likely wouldn't be able to afford health insurance.
Vote No. 5: The Highway Trust Fund
Finally, there will be a critical congressional vote on what to do with the nation's Highway Trust Fund. The Highway Trust Fund is responsible for providing federal funds to assist in the construction and maintenance of roads, bridges, mass-transit systems, and portions of America's energy infrastructure -- and it's currently burning through more money than it's bringing in through gasoline and diesel taxes.
Last year Congress voted to keep the fund solvent until May 2015, essentially kicking the problem down the road for the 114th Congress to deal with. One simple solution to deal with the revenue shortfall is merely to reduce the amount of money that leaves the Trust Fund each week (about $1 billion). However, a reduction in federally appropriated funds to states could be a big problem, as infrastructure jobs comprise about 10% of the U.S. workforce. Less money for contracts means potentially fewer workers needed.
Without question, this will be a pivotal year for American consumers and businesses. Congress and the Supreme Court hold the fate of the American people in their hands. Mark your calendars, because I can almost guarantee that these votes will come down to the wire.