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Wall Street shrugs off Bush's speech

Analysts see political hurdles to initiatives

Cattle in a feed lot at a Nebraska ethanol plant. The president called for greater use of ethanol. (Nati Harnik/Associated Press)

WASHINGTON -- Wall Street appeared largely unimpressed by President Bush's State of the Union address, signaling skepticism toward the political and technological impediments to some proposals, particularly his calls for cutting gasoline use and boosting ethanol consumption.

Other businesses, including health care service providers and domestic automakers, will also have to wait and see how the Democratic Congress responds to the president's agenda, though economists predicted yesterday there would be few drastic changes before the 2008 presidential election.

"What happened in the market today -- outside of ethanol producers -- is what would have happened if there was no speech at all," said Peter Morici, a professor at the University of Maryland's business school.

Bush's health care pitch included a call for a tax deduction of $7,500 for individuals and $15,000 for families regardless of whether they buy their own health insurance or receive medical coverage at work.

"The question is: Will the Democrats let them go through?" Morici said.

The answer appears to be "no," with Democrats arguing the proposal could encourage employers to drop health insurance plans, or drive healthy workers to buy their own and push prices higher.

While ethanol companies' stock prices rose leading up to the president's speech, they fell yesterday in part because Bush's alternative energy proposals were not as large as some had expected, and because doubts have been raised about whether the US ethanol industry can affordably meet the higher targets using feedstocks other than corn.

Analysts said the call for a sharp escalation in the use of ethanol will have little immediate impact on major oil companies , primarily because it'll be used as a partial substitute and not a replacement for gasoline.

The health care taxation plan is the most appealing to the private sector, analysts said. The second part of the provision aims to curb health care spending by taxing any benefits over the $7,500 and $15,000 marks, and it could drive many Americans to individual-oriented plans offered by UnitedHealth Group, Wellpoint Inc., and Aetna Inc.