U of A experts look into their crystal ball and make pedictions for 2005

Published 12:00 am Monday, January 3, 2005

As we get ready to turn the calendar page onto another year, a group of experts at The University of Alabama are taking their turns at predicting what we can expect in 2005.

And if 2004's predictions are any clue, you may be wise to heed their words. This time last year, the experts predicted an increase in gas prices (correct), growing popularity of hybrid vehicles (right again) the reelection of George W. Bush (another one) and Republican gains in the House and Senate (that's four for four).

For this year, the experts are predicting tax cut proposals; an adjustment of the U.S.'s goals for Iraq; a resurgence of American-made cars; and more school choice options for parents.

Hispanic population

The Hispanic population in Alabama will continue to grow throughout the decade, according to Annette Watters, manager of the Alabama State Data Center.

Watters said the state can expect the growth in the Hispanic population to continue to be uneven across the state. While Hispanics make up about 2 percent of the total American population, in 43 of 67 counties, Hispanics represent 1 percent or less of the total. In the counties with the highest concentration, Hispanics represent between 4 and 8 percent of the total population.

"Alabama has seen many new Hispanic residents in recent years, but not as many as other states," Watters said. Alabama ranked 33 of 50 for the number of Hispanics who moved into the state between 1990 and 2000.

Convenient food

The most popular food trends for the upcoming year will be convenience - heat and eat - foods that are both healthy and fresh.

"Individually packaged ready-to-eat foods that require no utensils will lead the list of most wanted foods attributes by consumers, even ahead of nutrition and health," Dr. Ralph Lane, professor of human nutrition, said. Food-savvy consumers will continue their demand for upscale casual culinary concepts that are flavorful, colorful, fun and somewhat indulgent, he said.

Tax reform at forefront

Four areas of the code will be under scrutiny as tax reform takes center stage in 2005.

"Among the items that I think Congress will at least consider in 2005 is the alternative minimum tax," said Dr. William Samson, accounting professor at UA's Culverhouse College of Commerce. "That certainly needs to be modified because it is now starting to affect many taxpayers that it wasn't intended to hit."

The AMR is an extra tax some people have to pay on top of the regular income tax. It is designed to prevent people with high incomes from using special tax benefits to pay little or no tax. But for various reasons, the AMT reaches more people each year, including some people who don't have a very high income or many special tax benefits.

Samson said Congress may also work on the Social Security problem.

"The proposals that need to be adopted are changes to the expected retirement dates for the full payout of Social Security," Samson said. "By changing the expected retirement from 65 to a bit longer - say 67, phased in over time such that the change applies to younger workers, much of the strain on the system which is projected to be removed."

Samson said there may action on a proposal that would impact those who do not itemize.

Dr. David Lanoue, professor and chairman of political science at UA, said a growing deficit will not stop President George Bush from proposing additional tax cuts.

"At the very least, there will be a proposed reduction of certain taxes that aren't popular with the Republicans," Lanoue said. "Bush may, during the State of the Union address, come out with a more radical plan than may include some version of the flat tax."

Iraqi elections postponed; U.S. shifts goals

An election will be held in Iraq in late January, but continued violence in that country will prevent a broad-based national election in 2005, predicts a UA foreign policy expert.

"I suspect we will postpone the election, at least the national election," Dr. Donald Snow, professor of political science at UA, said. "We'll hold something that looks like an election Jan. 30 but it will not be the grand, national election we've been advertising."

Snow said 2005 is the year of "Iraqification."

"We are going to turn the country over to the fledgling Iraqi police force even though, as in Vietnam, we know it will not work," he said.

Snow said the U.S. will reexamine its goals in Iraq in order to begin significant withdrawal of American troops.

"A free and Democratic Iraq becomes the reasonable chance for a free and democratic Iraq," Snow said of the changing goals.

Snow said he doesn't expect the U.S. military to enter into disputes in any other countries, such as Iran.

"We are stretched thin," he said. "As we continue to lengthen the time of tours, the bleeding in the military is going to become a hemorrhage. The number of people who are not going to re-enlist, particularly in the reserve, will grow."

Alabama's economy expected to grow

More jobs will be created in Alabama in non-agricultural employment in the coming year, but the textile and apparel industries could again take hits.

Alabama's economy will grow by 3.3 percent next year, marching the expected national growth rate but below the state's 2004 growth rate of 3.7 percent, according to Ahmad Ijaz, econometric analyst in UA's Center for Business and Economic Research.

The U.S. economy grew by some 4 percent in 2004 and is estimated to grow by 3.3 percent in 2005.

"For 2005, we think non-agricultural employment in Alabama will increase by 1.4 percent, adding over 25,000 new jobs," Ijaz said. "Most of the job growth is expected to be in retailing and other service-related businesses, primarily professional and business services. Most of the job growth in manufacturing is expected to be in automotive related industries."

Residential construction is expected to remain strong at least through the first half of the year, Ijaz said. As interest rates gradually increase, residential construction activity, including mortgage refinancing, is expected to decline slightly to 2004.

American-made cars will see resurgence, hybrids will grow in popularity

Sale of American-made cars, including those manufactured in the United States by foreign car companies, will be strong in 2005 and the demand for hybrid vehicles will continue to increase.

"American-made car sales are booming, including Hondas made in Alabama, Nissan Titans and Armadas made in Mississippi, Camrys made in Kentucky and Hyundais soon to be made in Alabama. There will be a trend of foreign car manufacturers moving production facilities to the US," said Dr. Clark Midkiff, associate professor of mechanical engineering and director of the Center for Advance Vehicle Technologies at UA.

Midkiff said the big three American car manufacturers will see a resurgence.

But the long-time leaders of the road - SUVs - could suffer is gas prices remain high.

"I think SUV sales are hurt by higher fuel prices to some extent, but much more by fears of non-availability or fuel price volatility.

In other words, if fuel prices hit $2 per gallon, it would temporarily hurt SUC sales. But if it stays around $2 or only very gradually rises, people will adjust psychologically and continue to buy the SUVs."

Fueled by gas worries, the popularity of hybrid vehicles continues to climb This year, the introduction of the second-generation Toyota Prius coinciding with rapidly rising fuel prices resulted in huge demand for the Prius and other hybrid-electric vehicles with waiting times as long as eight months and premiums of up to $5,000 above the list price for the Prius.

Alabama voters will remove racist language; gay marriage ban proposed

Alabama voters will get a second chance to remove racist language from the state constitution in 2005 and a revised version will be "overwhelmingly approved" during a special referendum, predicts Dr. William Stewart, professor emeritus of political science at UA.

During November, voters narrowly defeated Amendment Two, which would have removed racist language, after concerns arose that added wording referenced a right to public education could lead to a future tax increase without voter approval.

"Revised Amendment Two legislation will be introduced promptly once the 2005 regular legislative session convenes," Stewart said. "There will be strong opposition from African-American legislators to removing the right to public education language. I predict, however, that ultimately a "cleaned-up" version of this amendment will be approved by the assembly and put before voters in a special referendum some time in 2005," Stewart said.

Stewart said the gay marriage issue will also come to the forefront.

"I do expect a state constitutional amendment banning gay marriages to be proposed during the 2005 Alabama regular legislative session," he said. "I think that it will probably be placed on the 2006 primary ballot. However, whenever the measure is placed on the ballot, it will pass by an overwhelming vote, just as it passed back in November in all of the states in which it was voted on."

School choice and teacher shortage hit hard

More parents with students in grades K-12 will be able to choose which school they want their child to attend. You can also expect a shortage in both teachers and administrators, according to Dr. James McClean, dean of UA College of Education.

The changes will be driven by the No Child Left Behind Act of 2001. NCLB mandates that parents of children enrolled in schools where adequate yearly progress is not made for two years must be notified and have the option of moving their children to different schools, with the school system providing transportation.

NCLB will also impact both current and aspiring teachers.

"Many teachers will be taking additional courses or preparing to take tests to become highly qualified, while others who are eligible for retirement are taking advantage of that alternative rather than address this issue," McLean said. "Thus, many more educators will be retiring than would normally be expected."

Gas prices remain high

The price of oil in 2005 will be volatile, with the Organization of Petroleum Exporting Countries (OPEC) driving up the costs above $25 a barrel.

Dr. Peter Clark, associate professor of chemical and biological engineering at UA said OPEC's push for increased pricing will raise the cost of energy worldwide. World demand is also high, he said, and there will be competition for existing oil supplies.

"This means gasoline prices should remain high. There will not be a return to prices around $1 a gallon in 2005."

The price of natural gas will also remain high. Supplies are tight, Clark said, and the infrastructure is not in place to import large quantities of liquefied natural gas to alleviate the problem. New drilling activity will help, but it takes time to bring gas from new discoveries to the market.

"Consumers should expect to pay more for heating this winter," Clark said.

"Utilities that have not made adequate efforts to dampen price swings by entering into long-term contracts will have to raise their prices more drastically than those utilities that have planned for price volatility."