The U.S. economy will get through the recent soft patch and grow by 4 percent this year, despite record oil prices. Businesses will learn to live with the threat of terrorism and rev up spending. And Florida is strong enough to rebound from the triple whammy of hurricanes.
Those were among the forecasts offered Thursday evening by Lynn Reaser, chief economist and senior market strategist for Banc of America Capital Management, during a presentation in Tampa.
Reaser's talk to the Florida Venture Forum was billed as an outlook on the economy as the presidential election approaches. In an interview before her speech, Reaser suggested the economy is more likely to be affected by the Federal Reserve Board and the balance of power in the Senate than by the next occupant of the Oval Office. She also said the economy generally affects the outcome of the election far more than the election affects the economy.
That said, Reaser offered the following insights:
Where can the president impact the economy?
First is tax policy, with the Bush administration favoring retention of the current tax cuts and Kerry focused on removing the tax advantages for higher income households.
Second is the regulatory climate and the possibility of tort reform.
Third would be the progress of trade arrangements. But even those impacts are unpredictable. Bush imposed tariffs on steel and Clinton turned out to be much more free trade.
Fourth, the energy sector. What kinds of efforts are made to give certain incentives for development or impose costs on industries which are heavy energy users?
Fifth, in health care, what approach will be adopted by the government? Will it play a bigger role or will private insurance companies?
Sixth is the whole budget issue. What kind of rules will we impose or reimpose on spending? And what approach will be adopted to address long-term Social Security issues?
Why is the outcome of the Senate election so crucial?
In the Senate you need 60 votes to break a filibuster or else we're going to see gridlock proceeding on many of these issues.
Some of the more popular measures could be adopted, as we have seen with the popular tax cuts, but even that measure was not easy to get through Congress. Energy legislation died. Bankruptcy reform withered. That could continue to be the story in 2005 without that 60-vote supermajority.
What economic success would you advise the Bush campaign to stress?
I'm not advising either campaign, but I'd point to the ability of the economy to recover from the shock of 9/11. That's not totally the result of the administration's policies, but it deserves credit for helping to restore confidence and providing assistance in the areas hardest hit.
The tax cut was also very well-timed, as the economy was still lacking. A year ago, companies were extremely cautious. They were concerned about terrorism, the instability in the Middle East and especially Iraq, and the remnants of the scandals in the accounting industry.
The tax cuts helped to restart the economic engine, along with aggressive lowering of interest rates and the lower value of the dollar.
What would you advise Kerry's campaign to focus on?
Certainly one can look at the job performance, but that is not necessarily the total fault of the administration. It's in large part due to the fact that productivity gains have been so good. But the Kerry campaign can fault them for lack of job growth.
Kerry's stronger trump card is international: the ongoing instability in Iraq. But companies have factored those fears into their decisionmaking process, and capital spending is back on track.
Kris Hundley can be reached at hundleysptimes.com or (727) 892-2996.