When Ed Skiba first heard President Bush's idea to augment Social
Security with investments in the stock market, he was skeptical.
Now, with market averages down from 14 to 64 percent since last
March, the resident of Tarrytown, N.Y., is sure it's not a good
idea. "Scary," he says.
As the president begins to try to sell a key part of his campaign
platform, he'll need to convince voters like Mr. Skiba that
investing even a small percentage of their Social Security in the
market is the right thing to do.
Mr. Bush will likely get some support for his side of things this
fall, when the bipartisan Commission to Strengthen Social Security
issues its final report. It is likely to include a recommendation
that individuals be allowed to augment their Social Security with
investments in the stock market.
A recent draft of the report, in fact, says the only way to save
Social Security "is to provide opportunities for individuals to
save money for their retirement."
Although the commission's report will soon set the stage for a
national debate, Republicans don't expect the White House to
introduce the Bush proposal early next year. "The plate is full,
and it's very difficult to find time to debate it this year," says
Rep. Sam Johnson (R) of Texas, a key member of the House
subcommittee on Social Security. But he adds, "It will have to be
early next year, not late, because it's an election year."
The delay could be advantageous for Bush, because most investors
are staring at red ink this year. According to the Washington trade
group Investment Company Institute, the net assets of stock funds
declined by $67.95 billion in June and are down more than $470
billion for the year - the worst percentage drop since the mid-
Despite this drop, however, investors have yet to panic and pull
out of the market. One sign of this would be investors selling
their mutual funds and moving into cash.
But so far, mutual funds have only experienced negative cash
flows in two months - February and March. "It seems they are still
sticking to their investment goals and strategies," says Chris
Wloszczyna of the Investment Company Institute.
What polls say
While investors may be keeping some of their funds in the market,
they are losing their appetite for investing Social Security
retirement funds in the market, according to AARP, formerly the
American Association of Retired Persons, which tracks public
opinion on the issue through polling. "There has been a large
erosion of support since last year," says John Rother, director for
legislative and public policy.
Fifteen months ago, Mr. Rother says, the NASDAQ average was at
its peak. Many young people, and their stock brokers, had never
seen a down stock market. …