In continuing my discussion on this topic from a few weeks ago, I now turn to a look at government revenue and economic growth. The average income tax rate for an American citizen is approximately 13 percent. In order to cover current government expenses this tax rate would have had to double – without even including the negative effects that higher tax rates would likely have on GDP growth. Is a doubling of income tax rates realistic and/or politically palatable? Absolutely not. Are higher tax rates not only likely but also necessary? Most likely, yes.

Most investors classify themselves as long-term investors, but at the first sign of trouble most investors also are usually ready to push the sell button. This irrational behavior is frequently cited in reviewing mutual fund flows.