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made toward reform. Tighter accounting regulations, tax cuts, historically low interest rates and greater homeland security are helping to restore investor faith and lay a foundation for future economic growth. Fueling the Economy with Cash To combat the economic slowdown and put more money back into the hands of consumers, the Bush administration championed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The act called for progressive tax relief over the next several years in areas ranging from income and estate taxes to education and retirement funding. In 2002, relief came in the form of lower personal income taxes and a higher estate tax exemption of $1 million. The act also motivated some individuals to beef up long-term investments in 2002 through higher retirement plan contribution limits and enhanced education saving opportunities.The benefits of EGTRRA will continue to be felt through 2010, offering taxpayers greater incentive to reinvest in the economy. The Republican victory in the November election may also help clear the way for the administration to cut taxes further in an attempt to jump-start the economy and the markets. Maintaining Rock-Bottom Rates throughout most of 2002, the Federal Reserve kept interest rates at 40-year lows, prompting an explosion in the housing market and making it possible for many automakers to entice customers with low or 0% financing. To further boost the economic recovery, the Fed surprised many investors in early November by reducing key interest rates by an additional half point.. The move could bolster consumer spending in time for the critical holiday shopping season. Lower rates may also motivate investors to move more money into the stock market as returns on money market accounts and other cash equivalents become less favorable. Whitewashing Wall Street the past year will long be remembered for the flood of corporate accounting scandals that weighed heavily on an already-struggling stock market. Enron, Global Crossing, Adelphia and WorldCom were among a handful of giants whose ignoble fall rocked investors' confidence in corporate America. In the summer of 2002, the federal government established the Accounting Industry Reform Act, which created criminal penalties and prison terms for company fraud and document shredding. It also prohibited top executives from receiving personal loans from their companies and established a private-sector oversight board to police the accounting industry. Investor confidence may steadily improve in 2003 as the new regulations force corporations to become more transparent and accountable to shareholders.Securing the Home Front following the devastating terrorist attacks on September 11, 2001, Americans braced themselves for change in 2002. Increased security at airports, border crossings and sporting events offered a continued reminder of the threat of future terrorism. To help manage that threat, the White House established the Homeland Security Council, which President Bush hopes to elevate to cabinet-level status in 2003 by creating the Department of Homeland Security. The new agency would be responsible for securing the nation's borders and information systems as well as protecting against and responding to future attacks. In recent months, unrest in the Middle East has grown as a result of Iraq's history of noncompliance with Security Council resolutions demanding the admittance of weapons inspectors into that country. The future of the conflict depends on Iraq's cooperation with the latest United Nations resolution, a U.S.-backed initiative that threatens disarmament by force if Iraq does not submit to inspections. Though the prospect of war with Iraq is sobering, many Americans see the Bush administration's uncompromising stance as a proactive approach to fighting terrorism. Whatever 2003 brings for the U.S. economy, there are certain to be ups and downs for investors. By sticking to time-tested investment fundamentals and a well-developed financial plan, you may be able to overcome challenges and look to the future with a greater degree of optimism. Lee V. Bethel, CLU, ChFC, REBC, RHU, is President of Comprehensive Benefit Services, Inc. and a registered representative with Linsco/Private Ledger. He is located in Alexandria, VA and can be reached at 703-813-5551 © 1997-2002 Linsco/Private Ledger, Corp. All rights reserved. Lee V. Bethel, CLU, ChFC, REBC, RHU President Comprehensive Benefit Services, Inc. 703-813-5551 (Office) 703-813-6170 (Fax) E-Mail: lee.bethel@lpl.com Website address: http://www.comprehensivebenefit.com Investments offered through Linsco/Private Ledger- Member NASD/SIPC
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