kiplinger connection
Building Industry • Federal Spending • Global Business

Building Industry: Businesses will spend 8 percent more this year in construction.
Federal Spending: At $58 billion, education will be 10 percent of 2008 defense budget.
Global Business: World-wide steel-production consolidation will stabilize hot-roll prices.

Building Industry
After a slow 2007 ... much brighter prospects for remodelers. Two-thirds of U.S. homes are more than 25 years old, the most ever, despite the wave of new-home starts. And they’re not just in the Northeast and Midwest, but all over the U.S. By 2015 or so, remodeling will account for nearly 50% of all home construction work ... a boon for contractors.
Businesses will sink about 8% more money into building this year, a nice rebound following the dismal growth rate at the end of last year. Lower costs on some construction materials and plenty of stockpiled cash will nudge firms to pick up the pace, though it won’t equal last year’s.

Federal Spending
Bush’s FY 2008 budget includes war costs for the first time since the U.S. invaded Afghanistan and Iraq. Previously, war spending was largely “off budget,” making federal expenditures appear lower than they really were. But members of both parties are still skeptical of budgeted war costs, believing they’re too low.
Our table shows changes in priorities from FY 1968 and FY 1983. Direct payments to individuals are double their budget share of 1968, while defense’s share is less than at the height of the Vietnam War and in the middle of President Ronald Reagan’s defense buildup.

Congress will probably give Bush whatever he asks for the war. Sure, the ranks of vocal critics of the White House’s Iraq strategy are growing. But few want to be accused of abandoning the troops.
The same goes for defense spending overall, though some items may be downsized by lawmakers: Orders for costly combat fighter jets, work on a missile defense system and Navy shipbuilding, for example.
Also getting the thumbs-up: A near doubling of border agents. A near tripling of R&D funding for alternative energy projects. And more money for Amtrak as well as rail transport within cities.

But lawmakers won’t be just yes-men. Items likely to falter: Making Bush’s individual and estate tax cuts permanent. Major changes to Medicare and Medicaid. And a bid to end grants for tech innovation.

Global Business
Congress won’t discourage foreign investors in U.S. firms when it clarifies the circumstances under which CFIUS ... the Committee on Foreign Investment in the U.S ... examines foreign takeovers.
That’s a relief to U.S. businesses that rely on money from overseas to upgrade and expand their operations, helping to create U.S. jobs.
In fact, new legislation is likely to boost foreign investment. Clearer rules for CFIUS to follow will grease mergers and acquisitions.

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Steel industry mergers are poised to pick up, with foreign firms doing most of the buying. SeverStal, Russia’s leading steelmaker, plus Russia’s Evraz, which just bought Oregon Steel Mills, are hunting for new targets, possibly including the Canadian-American firm Ipsco. Others on the prowl include Germany’s premier steelmaker, ThyssenKrupp, which is likely to prevail in acquiring Dofasco, Canada’s top producer.
More consolidation spells firmer prices as competition dwindles. That plus low inventories will increase the price of hot-rolled steel to an average $650 a ton by July before it eases to $600 by year end.