Are debt reduction and economic growth compatible? Many believe that this is a valid concern for investors today. At the last minute the US congress appears ready to pass legislation temporarily increasing the debt ceiling. This will be coupled with substantial reductions in social and military programs. The staggering multi-trillion dollar US debt has been a drain on the US economy and a threat to economic growth. The prospect of a debt reduction is encouraging for US investors. However, an abrupt decrease in national cash flow could lead to economic contraction. Here is where the concern about debt reduction and economic growth lies for many investors. Fundamental analysis of the situation starts with defense stocks as the president has promised troop withdrawals from Iraq and Afghanistan. No new military involvement is on the immediate horizon. That will likely mean fewer bullets and, probably, a reduction in manpower. It may also mean a reduction in research and development for new weapons systems as the nation attends to concerns at home. Stocks of defense contractors will likely feel the pinch of reduced military appropriations. The reductions in military spending will likely also have a ripple effect throughout the economy. Less money spend on military salaries or on paying engineers to develop high tech weapons means reduced spending throughout the economy. In this regard there will be an inverse relationship between debt reduction and economic growth. Social …