Hesitant but hopeful.

CHIEF EXECUTIVES were buoyed by President Bush's re-election. But now that the burst of excitement is over and the serious work of governing is at hand, CEOs seem to be in a waiting and watching frame of mind.

Overall CEO Confidence declined 1.9 points to 168.9 in January, still quite high in comparison with the benchmark of 100 that was established when the index was launched in October 2002 (see graph, top left).

Perhaps of most concern is that the gap in perceptions about business conditions in the future, meaning one-quarter ahead, are in stark contrast with CEO perceptions of the present. Future Confidence declined to 155.3, or 4.4 points, while Current Confidence climbed 1.9 points to 191.5. That gap of 36.2 points, the widest ever recorded, suggests that overall confidence could ebb in coming months. "The world is full of gyrating variables that directly affect the economy," wrote Michael A. Zeher, president and CEO of Pharmaceutical Formulations in Edison, N.J., voicing a concern that many of his counterparts shared. Some 480 readers responded via email to this month's survey. (For full results, go to www.chiefexecutive.net.)

One of the major issues that CEOs are watching is how the Bush administration approaches the federal budget deficits, and the future of Social Security looms large in that debate. An overwhelming 89 percent of our respondents believe that Social Security should be reformed (see pie chart, middle). "The current system simply no longer is capable of meeting expectations," emailed Ron Rittenmeyer, former CEO of Safety-Kleen and now managing director of the Cypress Group in New York. "It must be changed to allow individuals to both save and protect their own future."

The creation of more tax-sheltered retirement accounts, which individuals manage themselves, was, in fact, the most popular reform favored by respondents (see lower left).

But there was debate about just how those accounts should work. "Any mandatory individual accounts should have to be invested in TIPS-type securities so that investors are not at risk of loss of principal," said Robert M. Franko, president of the Beach Business Bank in southern California. "Asking individuals to invest in the equity market, even in 'professionally managed accounts,' is a mistake."

Of course, the skeptics made their voices heard. "I support President Bush, but I am strongly opposed to private savings accounts," said one respondent who asked not to be identified. "Individuals who make poor investment decisions while self-directing their own private savings accounts will expect to be bailed out at retirement anyway, which will end up costing the government more."

One other respondent put it more directly, saying, "The government will screw it up."

Another reader suggested that the way to make sure the government doesn't mess it up is to put Alan Greenspan in charge when he retires from the Federal Reserve. "Mr. Greenspan will soon be looking for new ways to occupy his time," wrote Neil Eiderschein, a partner at SBC Advertising in Westerville, Ohio. "How about a new independent post to create the world's largest private investment fund?"

RELATED ARTICLE: THE NUMBERS

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Bonus Question

Do you think the U.S. should reform Social Security?

Yes  88.7%
No   11.3%

Note: Table made from pie chart.

Increase Competitiveness

What fundamental changes in Social Security will improve the
competitiveness of American business? Please rank your choices in order
(1-Top Priority)

Increase payroll taxes/benefits                                  11.7%
Decrease payroll taxes/benefits                                  12.6%
Means tested benefits (pay poorer retirees-reduce trust size)    13.6%
Adopt private savings accounts (mandatory savings)               21.0%
Increase availability of tax-sheltered retirement accounts       23.0%
Eliminate Social Security; adopt individual retirement planning   9.7%
Make no changes                                                   8.4%

Note: Table made from bar graph.