Bush’s Agenda
As Bush details his coming agenda ...
A note of caution. Though his victory has emboldened him to unveil ambitious plans ...
Bush is still unlikely to get his way on many of his more expensive proposals.

The biggest roadblock: The deficit. Bush’s proposal to cut it in half within five years is a pipe dream, and reforms that he seeks would push the deficit higher. Fiscal conservatives on both sides of the aisle are sure to team up to rein in the president.
There are also political constraints. Despite GOP gains in the House and Senate, Senate Democrats still have the clout to veto much of what the president is eager to accomplish in his second term.

Topping Bush’s to-do list: Simplifying the tax code. Doing so will be difficult even within the Republican camp. Business lobbying to keep many existing tax breaks will be fierce and tough to resist.
He may wait on making tax cuts permanent because of concerns about the deficit. When he makes his pitch, including estate tax repeal, odds are that he’ll succeed. He’ll be able to get the votes he needs.
Partial privatization of Social Security will be an uphill fight for Bush. To win approval for his plan to let young workers invest money in private accounts, he’ll have to reassure a largely skeptical public. And he must find a way to pay $2 trillion in transition expenses.

But many bills idling in Congress will gain fresh momentum, given Bush’s decisive win and the wider Republican margins in Congress.
Tort reform is one. Expect caps on medical malpractice awards, limits on class-action lawsuits, and an asbestos litigation trust fund.
Energy legislation will get new life, with U.S. companies winning incentives to increase production. Look for another effort to open more of Alaska to oil drilling, but the Senate will block it.
The Patriot Act is sure to be renewed, too, with few changes. Bush will tout it as vital to keeping Americans safe from terrorism.
But an amendment banning same-sex marriages will fall short, even with a big push from the president. Changing the Constitution requires a two-thirds vote in Congress ... a high bar to overcome.

The messy war in Iraq is the biggest threat to Bush’s legacy.
A successful Iraqi election in January is crucial to any hopes Bush has of allowing U.S. forces to begin a slow withdrawal next year. U.S. soldiers launched a major assault on hostile territories in Fallujah to secure a safer environment for the election.

Travel
Business executives will travel more next year but spend less. We expect travel to go up 10% over this year and expenses, 4%. Flying coach, using low-cost carriers and cheap, nonrefundable tickets, and traveling by car or train for trips of less than 500 miles or so are well-established business practices now. Also, nearly 70% of firms take advantage of video- and Web-conferencing technology to cut costs.

Worried about getting stuck with a ticket from a failed airline?
Don’t be. Congress will step in, extending an expiring law that requires competing airlines to honor tickets from defunct carriers. But rivals are obligated to do so only IF they have space available. And they can charge a fee to process tickets of up to $50 per round-trip.

Inexpensive elective surgery abroad is attracting more Americans, many of whom are combining their medical procedures with vacations. Most popular: Cosmetic and other surgeries not covered by insurance. Many of the doctors performing the work have been trained in the U.S.
It’s a growing business, with a variety of options available. A South African travel agency, Surgeon and Safari, arranges airfares, lodging, and safaris and hooks up patients with appropriate doctors. About 3% of Singapore’s visitors each year are there for medical reasons.

Time-share suites are being added to many resort hotel projects as a way for developers to cash in more quickly on their investments. Time-shares have high occupancy rates because they’re paid for in advance and are less vulnerable than other lodging to tourism’s ups and downs. Developers don’t have to rely on hotel bookings to get their money back.
Guests who own their units get hotel amenities at a lower cost, an attractive option. Time-share firms find it easier to sell to them than to the people whom they typically host on weekend junkets.
More time-shares are being built in cities popular with tourists, such as NYC, Boston, New Orleans, Las Vegas, S.F., and Vancouver, Canada.

The economy
The S&P 500 is poised to gain another few points by year end, now that uncertainty about the election outcome has passed. Investors expect Bush to continue his market-friendly tax policies.
But Bush’s reelection won’t spark a long, sustained rally. Post-election euphoria will subside as the economy begins to cool this winter, shifting Wall Street’s attention to corporate profit growth. Earnings growth will fall off next year as GDP decelerates to 3% from 4%.
High energy prices are a big drag on the economy and profits. The potential for more supply disruptions will keep traders on edge. Prices for crude oil, gasoline, and other fuels won’t come down much.
Look for long- and short-term interest rates to rise gradually. By the end of next year, the 10-year Treasury yield will climb to 5.5% from 4.2% now. Fixed-rate 30-year mortgages ... to 7% from 5.7%. The prime will go to 6%-6.5% and the 90-day Treasury yield, to 3%-3.5%.

Job growth in coming months will be more modest than the net gain of 337,000 jobs in Oct., which was buoyed by post-hurricane cleanup work. We still see an overall job gain of 2 million in 2005 ... monthly gains of 150,000 to 200,000.
Manufacturers are soon going to ramp up hiring to handle growing orders. Construction firms and services will keep hiring at a fast clip.
Odds are Bush will escape his “job loser” stigma by Inauguration Day in Jan. or soon thereafter. It appears now that the U.S. will have regained the 2.6 million jobs lost since Jan. 2001.

The dollar will soften further early next year as traders fret about the whammy that high energy costs are putting on U.S. GDP growth. Also weighing down the dollar: Hefty U.S. budget and trade deficits.
It’s not likely to be a steep slide, though. Euro-zone leaders and other U.S. trading partners are prepared to keep that from happening. Any serious weakening of the greenback would damage their own economies.
A weaker dollar brings cheers from U.S. exporters, of course, for the edge it gives them over competitors. But it’s booed by importers. Import prices are up 11.7% since the dollar began falling in Feb. 2002.

© 2004 The Kiplinger Washington Editors, Inc.