Budget Deficits – Yours and Ours

Markets may again be reflecting concern over a renewal of the rancor and wrangling over budgets and debt limits in Washington, which suggests that investors should focus on the potential impact on portfolios. Budgeting is simple in theory but difficult in practice. Spending more than you are taking in, whether it results in a budget deficit in Washington or an increase in the debit balance on your credit card is, by and large, the same thing.

Efforts to bring spending into line with income is no easier in Washington than it would be at your house, where competing interests resist reductions in their particular favorites.

Washington believes that one of the options is supporting spending through tax increases. At home, children probably would prefer that their parents get better jobs rather than managing family spending. Whether in Washington or at home, a realistic assessment of available income and a prioritized list of expenditures is probably the best formula for success. This is a process that usually benefits from even handed leadership.

At home, this may come from the head of the household.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA