America's 'Debt Cancer' And Why Taxes Are Heading Up: Financial Advisors' Daily Digest

by: SA Gil Weinreich

Summary

Debt cancer and debt chemo – and two other non-optimistic takes on the trend toward greater debt.

Why taxes are headed up and corporate profits down; and, how Social Security income is taxed.

Why advisors should pay as much attention to limiting client losses as in aiding their portfolios’ growth.

Yesterday we linked several articles from SA contributors that tended to cluster around gloomy market forecasts. Today our crowdsourced platform seems to be clustering heavily on considerations related to the problem of excessive debt.

Despite the lugubriousness, the commentary is quite interesting and incisive. Lance Roberts, for example, argues that the U.S. economy is suffering through a "debt cancer" that limits the economy's growth potential.

"The economy currently requires nearly $3.00 of debt to create $1 of real (inflation-adjusted) economic growth," he says, suggesting that the "medicine" needed to restore the economy to health involves a painful "clearing process" that policymakers have been putting off by pulling forward future consumption.

SA contributor Kevin Wilson addresses the same issue in "'Til Debt Do Us Part," bringing research studies and even investment recommendations to elucidate the issue.

"Arguments that massive debt won't bankrupt the US or certain other countries may be true enough in the short run…but that does not preclude a persistent or even permanent decline in GDP levels or prospective growth, plus the potential for ever higher taxes to service the debt," Wilson writes.

And Dr. Vincent Malanga and Dr. Lance Brofman similarly address the implications of increasing global debt on economic growth.

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