Create a free account to continue

Ethanol, Healthcare Reform Expected To Play Role In State Of The Union Address

According to the Prudential Equity Group, Tuesday’s SOTU will include an emphasis on green technologies and a tax-based healthcare reform.

As President Bush's State of the Union address approaches, there's no shortage of opinion as to what he'll be talking about. While the economy and Iraq are sure things, observers also believe the President will spend more than just a little time discussing how the nation can lessen its dependence on foreign oil, and also touch on some sort of tax-based healthcare reform.

While some are hoping for policies on carbon dioxide emission controls, Bush will most likely stress green technologies as a means to reduce CO2 emissions and combat climate change, according to Jim Lucier of Prudential Equity Group.

Lucier also expects more visits from the President in coming days to companies that are exploring alternative energy, as Bush had done last year at Johnson Controls and ECD Ovonics’ United Solar manufacturing plant.

President Bush will also strongly emphasize the capacity for cellulosic ethanol. In order to meet the reduction targets for oil imports, cellulosic ethanol will be needed to surpass the capacity that is currently available from corn, Lucier said.

However, Lucier notes that Bush is not expected to set any flex-fuel vehicle mandates, incentives for E85 infrastructure, or any other initiative that would increase short-term ethanol demand.

Moreover, according to Lucier, the White House believes that the 140 billion gallons of gasoline annually is more than enough to absorb the 5 billion gallons of 10 percent or less ethanol, thus preventing a buildup that would cause prices to drop.

Additionally, other energy alternatives, such as wind, solar power and plug-in hybrid electric vehicles (PHEVs), should get more attention as they are moving away from R&D stages towards commercialization. Bush may also adopt a national Renewable Portfolio Standard for electric power and by mid-summer, he will sign one or more bills on energy conservation, fuel-efficiency and renewable energy, Lucier said.

On healthcare, Prudential analyst Kim Monk thinks the State of the Union will include a proposal to change the tax code, creating a healthcare insurance deductible of $15,000 for families and $7,500 for individuals to be deducted from income and payroll taxes annually.

The current healthcare system has untaxed health benefits from employment, while after-tax dollars are used for individuals who purchase insurance on their own. The new system would have workers with employment-based health insurance pay taxes on the amount that exceeds the standard deduction. Those taxes would then go to cover the tax deductions and coverage expansions for the uninsured, Monk said.

The drawback of that system is that health plans and providers may suffer if consumers limit policies because of potential taxes, Monk notes.

Monk added that President Bush is also expected to follow the examples set by Governors in states like Massachusetts and Pennsylvania that are sponsoring initiatives to create universal coverage in their states. He is expected to increase funding for healthcare proposals like those in Massachusetts, as well as preventing Congress from touching the Medicare drug benefit.