The U.S. government is incurring an ever higher budget deficit and it will be up to American citizens to carry the burden. With taxes increasing, inflation rising and the dollar falling, investors may want to change their ETF portfolio strategies in order to protect themselves.

The Obama administration is estimating that the federal budget could double over the next decade and Moody’s Investor Service is warning that the U.S.’s AAA credit rating “could come under downward pressure” as a result, according to The Wall Street Journal. The increasing amount of government debt could set off a “triple whammy” of weak economic growth, higher inflation and higher tax bills, says Laurence Siegel, director of Research Foundation of the CFA Institute

Value investing is one of the oldest and most popular equity strategies, mastered by legendary investors like Warren Buffett and Benjamin Graham and embraced by countless professional money managers and individual investors. The rise of the ETF industry has presented investors in pursuit of superior dividend yields dozens of options, each offering a unique twist on value investing strategies.

While some investors pursue value strategies regardless of the economic environment, others view dividend paying equities as the first level of safe haven investing. When mild signs of economic turmoil emerge, investors tend to gravitate towards stocks that provide a meaningful current return in lieu of those that offer potential for significant growth and capital appreciation. If more troubling signs emerge, assets tend to move further down the risk continuum into bonds and precious metals. Regardless of their specific goals, dividend hungry ETF investors have plenty of funds to choose from.

The Fed model compares the forward earnings yield of the stock market with 10-year government bond yields. The model assumes that investors view stocks and bonds as competing assets and will purchase whichever asset has a higher yield, according to an article in Quarterly Review of Economics and Finance May 2009 issue.

Income investors will always be in a dilemma over whether to purchase fixed income securities such as bonds, or to buy stocks with competitive yields. Companies that pay generous dividends tend to perform well in an era of mild inflation.