A Hard Sell in Bush’s Neighborhood

WACO, Texas —  If President Bush’s Social Security initiative is going to ring bells anywhere, it ought to be a hit with the Better Investment Group of Waco, which meets once a month at Uncle Dan’s Rib House to discuss earnings growth over barbecue and beans.

The group, which calls itself the BIG club, is dedicated to the proposition that individual investors can and should profit handsomely from putting some of their savings into the stock market.

That’s exactly what Bush is proposing as part of his still-emerging plan for addressing Social Security’s funding problems. Younger workers, he says, should be able to divert a portion of their payroll taxes into personal accounts containing stock and bond mutual funds. In return, their traditional Social Security benefits would be trimmed. But the personal accounts would build up over time, Bush says, and would supplement traditional benefits on retirement. Yet here in Bush’s central Texas stamping ground -- his Crawford ranch is nearby -- some BIG members have misgivings about the president’s proposal.

“I’m on Social Security, and it’s probably the best investment I’ve ever made,” said the club’s president, 75-year-old Maurice Labens. “As long as I live I’ll have some income from it, even if I live to be 150. I’d hate to see that get messed up.”

Judging by the reaction of Labens and other club members, Bush has some serious explaining to do before he can convince the country that personal accounts should be part of the solution to Social Security’s long-term funding shortfall.

Of eight club members contacted last weekend, two expressed unqualified support for the president’s personal account proposal.

The rest were opposed or uncertain, citing concerns about most Americans’ ability to manage personal accounts, the effect the accounts would have on government finances and traditional benefits, and the possibility that conservatives were seeking to dismantle New Deal social programs. Some wanted to withhold judgment until the White House got more specific about what it had in mind.

The mixed feelings evident in this group in the shadow of the president’s Crawford retreat reflect concerns expressed by participants in national opinion polls. And they underscore the challenges facing Bush as he tries to overcome opposition to his personal account proposal.

Although the White House has asserted that support will grow as the president makes his case, at least two recent surveys have suggested that opposition to personal accounts was high among those who considered themselves well-informed about Bush’s plan.

The Better Investment Group of Waco is one of about 20,000 local groups chartered by the National Assn. of Investment Clubs, which helps its members choose stocks by analyzing the stocks’ past performance and growth potential.

The organization encourages its members to invest a fixed amount of money in stocks every month, regardless of market conditions. It says its 220,000 members have a combined portfolio value of $117 billion and consistently outperform the stock market.

The Waco club was organized about 40 years ago. Its portfolio, currently worth about $231,000, consists mainly of blue-chip bellwethers such as General Electric Co. and McDonald’s Corp.

Of the club’s 19 members, 76-year-old Carl Kuhnle Jr. has been with the group the longest. A retired mechanical engineer, Kuhnle thinks Bush’s personal account proposal is a great idea.

“If I’d been given that option when I was 20, 25, 30 years old, I’d have jumped all over it,” Kuhnle said.

“That sounds like a good way to go.”

Others were less enthused.

Some said they weren’t opposed in principle to letting workers invest some of their Social Security taxes, but they were concerned about the effect of Bush’s plan on the government’s finances and traditional Social Security benefits.

Some said they were not convinced most American wage earners would make good decisions about investing their payroll taxes, even if the choices were limited to broadly diversified mutual funds, as Bush has proposed.

“I have serious reservations about whether people will do their homework,” said Roy Smallwood, a 52-year-old physics and chemistry teacher at China Spring High School. “Even if they’re given only four or five choices, I don’t think they’ll invest the time it takes to understand which funds are right for them.”

John Withers, 82, said even BIG members occasionally abandoned their disciplined investment principles and bought stocks based on hunches or hearsay, sometimes with painful consequences.

“People will come into the meetings with stocks nobody has ever heard of and say, ‘I know somebody in New York who thinks this is a great deal, and it’s only going to cost us a couple thousand dollars,’ ” Withers said.

“Depending on how many people are attending that night and who they are, it’ll be adopted,” he said.

Club president Labens, a Waco City Council member and retired appliance store owner, said he could not support Bush’s personal account proposal as long as the president refused to spell out the specifics, something the White House has preferred to leave to Congress.

“If I came to you and said, ‘We’re going to make you a millionaire, but we’re not going to tell you how it’s going to work,’ how much credibility would I have?” Labens asked. “You wouldn’t go out and start buying big automobiles all of a sudden.”