The Wall Street Journal-20080126-The Week Ahead - Our Take On Coming Events
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The Week Ahead / Our Take On Coming Events
State of the Union:
With a Modest Agenda, Bush
Has Eye on Legacy and November
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By John D. McKinnon
Unlike some predecessors, President Bush has always used the State of the Union address as a chance to sell a few big themes, rather than a catalogue of political baubles.
Expect fewer tchotchkes than ever when he delivers his final State of the Union address Monday night. With Democrats now in control of Congress, no one's buying much anyway.
Mr. Bush will keep the focus mostly on now-familiar principles, seeking to buttress public support for some of his big works in progress that are at risk of ending with his presidency. They include making his tax cuts permanent and reforming entitlements at home. They also include building a new alliance with a democratic Iraq and creating a more hopeful world abroad, for instance by pursuing a peace deal between Israelis and Palestinians. He also is expected to stress that the nation should remain engaged in the highly competitive global economy, and support trade deals with friendly countries like Colombia.
"His address will advocate his philosophy of trusting Americans, [and] empowering them to make good and wise decisions, especially when it comes to keeping more of their hard-earned money," press secretary Dana Perino said Friday. "He'll say that America must continue to support those around the world who oppose terrorism and promote freedom; doing so will make America safer."
He is also likely to tout his administration's efforts to combat disease and poverty in the Third World, especially in sub-Saharan Africa, where he travels next month. He thinks his achievements there haven't gotten the credit they deserve.
People close to the White House say one reason for keeping the State of the Union relatively uncluttered is to keep the political stage clear for the eventual Republican presidential nominee. The day after his address comes the Florida primary, which may clarify a bit the jumbled race for that crown.
To be sure, the president will nudge Congress on unresolved legislative issues such as bilateral trade deals, housing, health care, education, foreign-intelligence surveillance and development of new domestic energy sources.
He will also roll out a few relatively small-bore new proposals on which the White House believes legislative action is possible. Mr. Bush is hopeful that the recent bipartisan agreement on an economic stimulus package could be a template for a few more legislative accomplishments before the 2008 campaign takes over. But none of the new ideas will be major.
And, as he heads into a final year when he is likely to accomplish little in the Democratic-run Congress, even his abbreviated agenda of new ideas will be partly for political effect. The speech will largely look beyond the Capitol -- to maintaining his war on Islamic extremism abroad, gaining ground on the economy and other hot-button issues in his party's uphill election fight against Democrats this fall.
Energy:
As U.S. Thirsts for Oil, OPEC Might Tighten Spigot
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By Neil King Jr.
Talk about lousy timing. President Bush and his energy secretary, Samuel Bodman, separately traveled through the Middle East earlier this month asking Saudi Arabia and other big oil exporters to boost output -- just in time for the supply-demand backdrop to change. Indicators are now pointing to an upturn in global oil supplies, and forecasters are saying demand won't be as strong as they previously thought, as the global economy slows.
The upshot: When the Organization of Petroleum Exporting Countries meets Friday in Vienna, the group probably won't heed the administration's loud call for a production boost. Quite to the contrary, some players within OPEC are talking now about the potential need to cut production, if not at this gathering, then perhaps at the club's regular session in March.
The administration has argued for months that surging oil demand in many parts of the world has left global stockpiles unusually low. That squeeze, Mr. Bodman told the Saudis and others during his recent Mideast trip, has sent oil prices soaring to levels that are now putting a dent in the U.S. economy.
But when OPEC ministers and most oil analysts now look at the market, they see a far different picture. Stockpiles are now rising rapidly in the U.S. Seasonal winter demand, typically at its high point now, is about to taper off. High energy costs, combined with economic unease in the U.S., are already damping the thirst for oil, not just in the U.S. but in most of the developed world.
At the same time, production is expected to ramp up soon from non- OPEC suppliers such as Brazil. Biofuels, ethanol in particular, are also expected to make a notable impact this year for the first time ever, adding as much as 400,000 barrels a day, according to some estimates.
Then comes the simple fact that prices are falling. From an all-time intraday high of $100.09 on Jan. 4, prices for the U.S. benchmark crude on the New York Mercantile Exchange have since slid down to around $90. OPEC, which now supplies just under 40% of the world's oil needs, is not known for upping production in the face of falling prices.
"The administration's timing could not have been worse," says Larry Goldstein, an economist at the Energy Policy Research Foundation. "In this current environment, I can't see how OPEC could possibly agree to an increase in output quotas."
OPEC officials are saying the same thing. No, they haven't decided yet what they will do in Vienna on Friday. But neither are they inclined, they say, to give President Bush his wish for more oil.
Restaurants:
Coffee, Burgers
Are on Menu
For Investors
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By Janet Adamy
Restaurant investors may get answers to two of the industry's big questions in the coming week: Is McDonald's Corp.'s long success streak nearing an end? And how will Howard Schultz pull off a turnaround at Starbucks Corp.?
McDonald's is scheduled to report fourth-quarter earnings on Monday. But Wall Street will pay closer attention to how much the hamburger chain's same-store sales increased in December. Earlier this month, a reputable independent survey of franchisees showed sales at McDonald's U.S. restaurants open at least a year rose 1.8% for the month, the lowest figure in the survey's six-year history.
That number suggests McDonald's may not be as insulated from a downturn in consumer spending as investors had thought. Last year, McDonald's was one of the few major restaurant chains to post strong sales and earnings results even while consumers tightened their belts. "We have been what I would call recession-resistant, certainly not recession-proof," McDonald's Chief Financial Officer Peter Bensen said at an investor conference earlier this month. It is an especially bad time for McDonald's customers to become more cost-conscious given that the chain plans to start selling lattes, cappuccinos and other upscale coffee drinks for as much as $3.29 this year.
Starbucks, meanwhile, is expected to unveil more details of its turnaround plan when it reports fiscal-first-quarter earnings on Wednesday. Mr. Schultz retook the chief-executive post earlier this month amid a precipitous slide in the coffee giant's stock.
Wall Street hopes he will detail how much Starbucks will slow down the rate at which the company builds stores in the U.S. Although news of Mr. Schultz's return sent the company's shares up 8% the day after it hit, it also signaled to some analysts that Starbucks's holiday season may have been worse than expected. Mr. Schultz has stressed that there is no quick fix for Starbucks, and Wednesday's report could indicate just how deep the company's problems really are.
More broadly, investors want to know what direction Mr. Schultz is taking the company now that Starbucks faces increased competition. The chain said this past week that some stores in Seattle are testing a $1 cup of brewed coffee and offering free refills of brewed coffee.
It is a risky move given the nature of the Starbucks brand, with the possibility of diluting its upscale appeal. (Customers across the country already have started asking their baristas if they, too, can get the deal.) Investors want assurance that Starbucks isn't moving toward a price war, a strategy that has decimated profits at other food and beverage companies.
