The president faces some significant challenges and opportunities that will affect the economy and stock market in the coming months and years.
Here are some of the major issues and how they may impact your bank account in the coming years.
Iraq
The war in Iraq will continue to drain resources and most sadly, lives until we figure a way out. Right now, there doesn’t seem to be any vision of how that is going to happen.Regardless of your position on the war, it is a drag on the economy and the stock market. Expect that to continue for some time.
Oil
Closely tied to the war in Iraq, is the price of oil. The price of oil has doubled since Bush first took office – not that the two events are necessarily linked.Oil prices are a hidden tax that everyone pays every day because energy prices (not to mention the cost of petrol-chemicals) effect every item we buy.
Although, the high prices have not had a hugely obvious effect yet, they still divert money out of the economy that would go other places. Eventually, sustained high energy prices push inflation up.
Terrorism
Should terrorists succeed in pulling off another Sept. 11, 2001 attack, it could have a sustained negative effect on the market.Even if that doesn’t happen, the fight on terrorism, by definition, will keep the public on edge and uncertain. Uncertainty is never a good thing for the market.
President Bush faces an almost impossible task in the war on terrorism. Conventional means of addressing enemies will not work.
Taxes
The Republicans control both the House and Senate, so Bush should find it easier to make good on his promise of permanent tax cuts.That will be good news for investors and individual taxpayers alike. However, if these cuts and other measures fail to stimulate the economy, the already huge federal deficit will only get bigger.
Bush’s challenge will be to demonstrate how tax cuts during wartime make sense for the economy.
Health Care
Health care costs are a crisis and would be front-page news if anyone had something helpful to offer.Tens of millions of Americans are without health care insurance. Medical bills are one of the leading causes of personal bankruptcy. States are setting up websites to help citizens order prescription drugs from Canada.
With all the attention that was focused on Iraq and wasted on what did or did not happen 30 years ago, the presidential campaign gave little debate to this issue.
Social Security Reform
President Bush has talked about allowing younger workers to invest part of their Social Security contributions in private accounts.Whether he will be able to push through those reforms even with a Republican Congress remains to be seen.
With 76 million Baby Boomers facing retirement in the next 30 or so years, the Social Security system is going to be strained beyond the breaking point.
If the administration is able to push through the private accounts, the mutual fund industry could see a huge influx of new money.
