Tough Time to Sell Mix of Stocks, Social Security ; Bush's Plan May Get Support from a Coming Report by a Bipartisan Panel

Article excerpt

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- 1970s.

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. …