Happy New Year! Your 401k is tanking.

My pension fund's year-end portfolio summary ended on a chirpy note: "All of us at _____ send best wishes for a healthy and happy New Year!" This uplifting message was undermined by the tables of figures revealing that, despite 12 months' worth of my own and my employer's contributions, my retirement savings had about broken even in 2000.

I'm not alone. Over the last two weeks many middle-class Americans have been staring drop-jawed at the red-inked reports put out by mutual and pension-fund managers.

Call it 401k shock, and how we react - with panic, pessimism, indifference, or blame-seeking - will have major consequences for the political and financial future of the country. This is because economics is actually a subfield of psychology. Perceptions drive spending, which drives the economy. The boom of the last decade was largely fueled by consumers splurging more (including on stocks) and saving less because of high confidence in the future.

Now, according to surveys of consumer confidence, people are beginning to feel pessimistic. Last week's ABC News-Money Magazine poll scored the consumer confidence index at its lowest point in the last three years. The "R" word is common on Main Street, Wall Street, and Capitol Hill.

And my friend Tony is worried. Tony, I should note, is my barometer of Americans' economic perceptions. He lives in another state, but we talk on the phone every month or so. Invariably, he sneaks in some boast about his skillful investing.

In our last conversation, however, after Tony had gotten his own 401k portfolio summary with "best wishes for a healthy and happy New Year," his mood was dark. His retirement savings had shrunk, mostly because he had allocated to aggressive (read: riskier) funds.

"How will I tell my wife that we lost a couple of rungs on the wheel?" he moaned.

This is a recurrent joke that Tony and I share about retirement. Picture a huge gerbil wheel on which you keep spinning, hoping it will take you forward. Or, as in Tony's case, squeaking backward. Worse, Tony's financial planning software calculated that if his pension fund prospered at this pace he would have to delay retirement until the year 2250.

I think many friends and co-workers are having such depressing conversations about investment portfolios, pension funds, and college savings plans.

To paraphrase Dr. Samuel Johnson, the 18th-century English philosopher, nothing so focuses the mind as a printed notice that your life savings are in trouble. The gloom could become a tar pit when people decide to stop spending on all goods - from a new car or computer to eating out - and then the recession will really accelerate. But as the dialogue of woe closed, Tony made one comment that sums up the political fallout from the portfolio meteor strike: "Bush will have a big mess on his hands. I hope he can turn things around."

If George W. Bush, elected in questionable circumstances by a divided country, needed a mandate, my friend Tony just gave it to him. If a recession comes, no one will blame a freshly inaugurated president from the party absent from the White House for eight years. Already Democrats in Congress are muting opposition to tax cuts. It's one thing to mug a cabinet nominee or two. It would be suicide for the opposition party to be seen as scuttling the economy for the sake of partisanship.

But the mandate is for action, not lamentation. Mr. Bush must visibly do something, and get Congress and the Federal Reserve to do something. The new chief executive may also have to jettison his laid-back management style. In times of crisis, people want a cavalry leader, not a committee chairperson.

In short, public goodwill comes with a looming expiration date. Next year's 401k's will have Bush's name on them, and then the country will decide if they want to wish him "a healthy and happy New Year."

David D. Perlmutter is senior associate for research at the Reilly Center for Media and Public Affairs. He is the author of 'Photojournalism and Foreign Policy' (Praeger, 1998) and 'Visions of War' (St. Martin's, 1999).

(c) Copyright 2001. The Christian Science Publishing Society

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