- The Washington Times - Wednesday, December 31, 2003

Forecasting is a risky business at best, especially in a world where terrorism is unfortunately common. While there are too many uncertainties to predict the distant future, it is possible to make reasonably sound judgment calls about near-future events based on analyzing shorter-term trends. With that, here are my predictions for 2004.

The economy: I expect the U.S. economy to surprise all the experts and turn in a much stronger performance than the current consensus forecasts. I see 5.5 to 6 percent growth for the year, propelled by the tax cuts, declining oil prices, a more rapidly expanding global economy (especially in Asia), new free trade agreements, and a slightly more stable international situation in key trouble spots.

Here at home, stronger growth will sharply increase tax revenues, and that will shrink the federal budget deficit and help ease the tighter fiscal situation in the states. Unemployment will continue to decline (I see it at about 5.4 percent) with the arrival of jobs in health care, financial services, the building trades and the technology field.

Spurred by much stronger corporate earnings and a sharper upturn in capital investment, the Dow will skirt 11,000 by year’s end. Inflation will remain tame but interest rates will rise somewhat, though they will still remain relatively low.

A big factor in the U.S. growth rate will be exports. Growth rates in Europe, Japan and elsewhere in Asia will be higher than expected, and that will encourage faster U.S. export sales. India, Russia and China will be among our biggest customers.

Iraq: The guerrilla war being waged by Iraqi and foreign terrorists in and around Baghdad and elsewhere in the country will continue for the time being, but that won’t stop the movement toward a free, independent, pro-Western Iraqi government.

Look for a handover of authority to a provisional government sooner rather than later, perhaps this spring, with elections and a constitution to follow. Stepped-up training and recruitment of Iraqi soldiers and police, and a growing private anti-terrorist militia, will keep al Qaeda killers and Saddam Hussein loyalists at bay as the new government takes hold. With that, the ground role of the U.S. military will decline. Our role will gradually be reduced to military training and supply, infrastructure assistance and, when needed, military backup.

The war on terrorism: The likelihood of terrorist attacks in the United States and Europe is increasing, but anti-terrorism forces are stronger, smarter and more broadly deployed. Anti-terrorist technology is getting better, too. Chemical, biological and explosive sensors will be much more effective in guarding transportation industries and the nation’s infrastructure.

Our defenses are a work in progress that will only improve over time, and that includes the proactive military engagements we have undertaken in the heart of terrorist activity in the Middle East.

Congress: Getting a budget passed that will gently apply the brakes on spending would be a big achievement, but don’t hold your breath. Congress always spends more in an election year. Don’t expect much in the way of new legislative activity.

President Bush will call for final action on his remaining agenda, which includes tort reform and an energy independence bill. There will no doubt be some beef inspection reforms passed. Mr. Bush will call for further reforms to broaden portable, tax-free savings and retirement investment accounts, and some action on that could happen before the year is out.

Elections: This is shaping up to be a major year for Mr. Bush and the Republicans, and promises further retrenchment for the Democrats.

No incumbent president has ever lost re-election when the economy was growing at 4 percent or better and unemployment was falling into the 5 percent range. If Howard Dean is the Democratic nominee, as appears likely, Mr. Bush will win an electoral vote landslide — sweeping the Southern and Western Plains states and picking up key states in the Midwest and Northeast. California remains up for grabs.

Look for Republicans to strengthen their control of the Senate, picking up at least three of the five open Democratic Senate seats in North and South Carolina, Florida, Louisiana and Georgia. The House will remain in Republican hands with little change in the political lineup.

Thus, Mr. Bush will enter his second term with the larger political mandate he needs to pursue a more ambitious agenda: making his 10-year tax cuts permanent, strengthening Social Security by creating individual retirement investment accounts, and proposing health insurance for all uninsured workers via tax credits.

The coming months will no doubt pose many dangers for the United States, both at home and abroad, but we’ve never backed away from such challenges before. In many respects, 2004 is shaping up to be a much better year than 2003 — as long as we keep the terrorists frightened, defensive and on the run.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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