The MacNeil/Lehrer NewsHour

MR. MAC NEIL: Good evening. I'm Robert MacNeil in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Tuesday, we have analysis of the worsening economic crisis in Mexico, excerpts from a 100-day speech by President Clinton, a report on the no-frills inauguration of the governor of Colorado, and an overview of the new Washington from Michael Beschloss, Haynes Johnson, Doris Kearns Goodwin, and William Bennett. NEWS SUMMARY

MR. LEHRER: Mexico's financial crisis got worse today. The country's stock market lost more than 6 percent of its value. The same thing happened yesterday. The peso also fell further against the dollar, despite efforts by the Mexican and U.S. governments to prop it up. It has dropped about 40 percent since Mexico's economic crisis began in December. We'll have more on this story right after the News Summary. Robin.

MR. MAC NEIL: There was better economic news in this country. The Labor Department reported wholesale prices rose .2 of a percent in December. They were up just 1.7 percent for all of 1994. That's the slowest rise in four years. President Clinton spoke about the economy today in a speech at a community college in Illinois. He talked about his goals for the remainder of his first term.

PRESIDENT CLINTON: Many people are still worried about losing their jobs. Another million Americans lost their health insurance. Why is that? That is because the wages are still set in an environment that is highly competitive because of technological changes and foreign competition. I want to spend two years working on lifting income and prospects and optimism and real hope for the future among people who are carrying the load in this country. That's what we can do. And that's what the middle class bill of rights is all about.

MR. MAC NEIL: We'll have more about the President's speech later in the program. House Minority Leader Richard Gephardt said today House Democrats were working on a proposal to simplify income tax laws. He said it would fix the tax rate at 10 or 11 percent for most Americans. The proposal was applauded by House Majority Leader Richard Armey, who has proposed a 17 percent flat tax. He said he hoped for bipartisan cooperation and a tax simplification plan.

MR. LEHRER: House Speaker Newt Gingrich has fired the new House historian. It followed reports that Christina Jeffrey criticized a course on the Holocaust for not including the Nazi and Ku Klux Klan points of view. That critique was written in 1986. In a letter, Gingrich told Jeffrey her continued employment would not be prudent or beneficial to her or the House of Representatives. Jeffrey was hired less than a week ago. She said the charges were slanderous and outrageous and she would respond later in writing.

MR. MAC NEIL: The Defense Department announced today 2600 Marines and warplanes will head for Somalia early next month to help evacuate 9,000 U.N. peacekeepers. A spokesman said it will be a force to reckon with and warned Somali factions against interfering with the operation. No final date has been set for the withdrawal. A government and industry conference on air safety ended today in Washington with 540 recommendations on the table, including better pilot training, relieving crew fatigue, and improved maintenance standards. Transportation Sec. Federico Pena said the government would act within 30 days to prioritize the main recommendations and announce a plan for implementing them. He called on industry to do their part.

FEDERICO PENA, Secretary of Transportation: I want to ask the leaders of industry who are here today to within 30 days, that you commit to a timetable for conducting an internal safety audit as part of the special audit which I announced last month. FAA safety inspection teams will work with you to develop these timetables and to detail the criteria to look at; secondly, that you consider the creation in every carrier of an independent safety office reporting directly to senior management as a matter of corporate philosophy and responsibility. I am absolutely confident this conference will help us achieve our goal of zero accidents.

MR. MAC NEIL: The man accused of setting off a firebomb in a New York City subway car last month was arraigned today in his hospital room. Edward Leary pleaded innocent to charges of attempted murder, assault, and attempted grand larceny. Police believe the bombing was part of an extortion plot against the city. Forty-nine people, including Leary, himself, were injured when the homemade device exploded.

MR. LEHRER: The Northern California rainstorm moved South today. Nearly an inch fell in one hour in Santa Barbara County. Mudslides were reported from Southern California to Oregon. At least 20 people, many of them homeless, were rescued by helicopter from encampments along the swollen Ventura and Santa Clara Rivers. At least three were hospitalized for hypothermia. A Red Cross official said more than 2,000 families have been forced from their homes in six Northern California counties. The region has endured seven days of rain, with no break in sight.

MR. MAC NEIL: A two-day cease-fire in Chechnya lasted little more than two hours today. Both sides reportedly violated the truce. Russian troops continued to target the presidential palace in Grozny. We have more in this report from Julian Manyon of Independent Television News.

JULIAN MANYON, ITN: Fighting has now broken out again in the central area just over that bridge behind me over there, and the problem is that there is now so much bitterness and savagery in this conflict that it may be impossible for any cease-fire to really hold at all. At the presidential palace, Russia's troops brought more Russian gunfire. Chechens fired at Russian snipers. But the fighting was far less intense than in recent days, and in the quiet periods, the Chechens took advantage of the lull to push more troops forward and to bring out their wounded. These men, dazed by shell shock, their clothing stained with blood, still swore to fight on. For one woman, the first day of partial truce brought tears and later at least some joy. Temsila Mugmadyev is one of the Russian mothers trying to rescue her soldier son, who is a prisoner of the Chechens. Today in the presidential palace, the Chechens permitted her to embrace him but said that his release, like that of the other prisoners, would depend on Gen. Dudayev's decision. And still unscathed, a Chechen boy volunteer, Rustan Sotayev, is 13 years old and attached to one of the small Chechen platoons that have been battling the Russian army. He claims that he has killed Russian soldiers and says he volunteered because the Chechens' numbers are so few. But for many people remaining in Grozny, the desire is for survival, the prayer that the truce announcement is a move towards peace. For them, even the reduction in gunfire is a sign of hope.

MR. MAC NEIL: CIA Director James Woolsey spent his last day on the job today testifying before Congress. Woolsey told the Senate Intelligence Committee that he could not guarantee that a scandal like the Aldrich Ames spy case would not happen again. He said while extensive precautions were being taken against future scandals, absolute assurances should not be given by any intelligence agency. Committee Chairman Arlen Specter called that statement insufficient. Woolsey resigned last month, following congressional criticism of his handling of the Aldrich Ames case.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to the Mexican economic crisis, President Clinton in Illinois, a no frills inaugural in Colorado, and our changing governments as seen by Goodwin, Beschloss, Johnson, and Bennett. FOCUS - HEADING SOUTH

MR. MAC NEIL: We begin with the chaotic situation in Mexico. The fall of the peso began last month, just weeks after the new president, Ernesto Zedillo, took office. Since then, Zedillo's government has tried to stem the fall and reassure investors. And the U.S. has intervened in currency markets to help prop up the peso. But those efforts are not holding up. Yesterday, the Mexican stock market lost more than 6 percent of its value, today another 6 percent, and the peso continued its fall against the dollar. It has now dropped some 40 percent since last month. To help us understand what's going on we're joined again by John Purcell,head of Emerging Markets Research at Salomon Brothers, the New York investment bank, and Bill Orme, director of the Committee to Protect Journalists and author of a book about Mexico and the North American Free Trade Agreement. Mr. Purcell, when you were both here just before Christmas, I think it's worth asking some of the basic questions again, first of all, what is the immediate cause of these latest drops, because the situation had sort of stabilized for a while?

MR. PURCELL: Yes. I think the -- well, if you're talking about the, the drops in the peso, I think the immediate cause was the size of Mexico's current account deficit and the manner in which the Mexican government chose to, to devalue a little bit when the markets thought they'd have to devalue a lot.

MR. MAC NEIL: That's what -- that's the explanation you both gave us back just before Christmas. Now, what has caused this tailspin in the last couple of days?

MR. PURCELL: There's been an increasing flow of capital out of Mexico, and the markets have now started to worry about something new, which is the rollover of Mexican short-term debt. There's a bond called the teso bono, which foreigners own $17 billion worth, and the market's just not sure that Mexico has enough money to pay that bond or to take out those people who don't want to be rolled over anymore. So there's a threat of, of almost a worry about default on those.

MR. MAC NEIL: And they were offering incredible interest rates today on those bonds.

MR. PURCELL: 20 percent today, which was not enough.

MR. MAC NEIL: And -- but weren't they also offering 50 percent on some short-term?

MR. PURCELL: Overnight rates were 50 percent, and we're expecting to see the so-called setis bonds, which are another short-term treasury bond, to be offered at rates of 40 percent for --

MR. MAC NEIL: And still investors are not buying those?

MR. PURCELL: So far not. I think the thinking is there is a level at which they will, but the Mexican government did not allow the rates to float at 20 percent. They simply set that as the rate and took whatever they could get.

MR. MAC NEIL: Mr. Orme, do you want to add anything to this immediate, the cause of the immediate spiral down?

MR. ORME: I agree with John's analysis. I would probably be a little more dire in the sense that I think we're in the middle of a genuine financial panic in Mexico, which is infecting all of Latin America, and in an irrational way, but it's easy for us to sit here and say financial markets are irrational because perception is reality. It's real money really being withdrawn.

MR. MAC NEIL: Didn't Brazil's stock market take a big hit yesterday, was it?

MR. ORME: Yes. And all of the stock markets of Latin America, save Chile, have sort of taken a beating throughout this crisis, because Mexico's been the locomotive that has pulled the entire Latin American economy back into the mainstream of the world economy over the last few years.

MR. MAC NEIL: Why did the effort by the U.S. and Canada setting up this huge fund that Mexico could draw on to support the peso, why hasn't that worked?

MR. PURCELL: It may be a little too early, because most of that fund has not been used up, only a few hundred million dollars out of, out of fifteen billion, so I would, I would not panic too quickly. I think that the Mexicans have a number of options that they can carry out. The answer to why it hasn't worked so far is that the Mexicans have not been willing to offer high enough interest rates or to intervene at a high enough level.

MR. MAC NEIL: The last time, Mr. Orme, you were here you said this is not really an economic crisis, it's a political crisis. Is that still true?

MR. ORME: It's certainly an economic crisis now, but I think its roots are, in fact, political, and fundamentally the problem is one of confidence, and that's a political issue. The reason the previous government was as successful as it was internationally was the Salinas government won the confidence in the international financial community back to a country whose reputation had been very badly damaged in the previous two governments, and in a very short amount of time, and you can blame this in certain large part probably on the situation that was inherited from Salinas, but, nonetheless, the way this crisis has been managed in the first two months of this new government has squandered much of that credibility, and that is a political issue internationally and, I'd like to add, domestically, that this was a president who was picked without much of a political base. He was something of an accidental president who, after all, came in at the last minute to replace a slain presidential candidate. He did not have, and it's not his fault that he didn't have time to assemble a team around him, or to develop a political following of his own. And people thought that the one thing this guy knew how to do is to manage the economy. And it's probably tragic for Mexico that his first misstep was economic, because it will take years for the Mexicans, themselves, to believe in the peso and the Mexican economy.

MR. MAC NEIL: Where can this lead politically right now, this - - the political aspect of this crisis? I mean, could -- could they get so anxious about the lack of confidence that somehow Zedillo is forced out and they change the government?

MR. PURCELL: I wouldn't rule that out. I think it's highly unlikely. I don't think there's a normal constitutional method of getting rid of a president, but he could resign. I think we're far from that at this point. I think -- I think they will, in act, manage to stabilize themselves. Whether they do it before or after restructuring some of these bonds I think is what the market is mainly concerned about.

MR. MAC NEIL: Do you think now it's just a matter of Mexico saying, hey, wait a minute, to the rest of the world, we've got a good economy here, and we'll pay you some higher interest rates, so have confidence, come back, and people will do that? Do you think that?

MR. PURCELL: I think that's too simple to say. I think that, however, I think they're going to need to spend some of that money to show the market that they're willing to take them out.

MR. MAC NEIL: Spend some of the money that the U.S. and other countries have put to support the peso.

MR. PURCELL: Have put up of this $15 billion fund. And I think that maybe at that point the market would start to turn around a little bit. I don't think it will be the same investors. I think it will be investors who are high risk investors, who look at Mexico and say with these kinds of interest rates, we're willing to take that risk.

MR. MAC NEIL: Incidentally, where does that money come from that the U.S. puts up to support the peso, all those billions of dollars?

MR. PURCELL: Well, it's a loan, and it's a loan that comes from the Federal Serve and that comes out of U.S. funds.

MR. MAC NEIL: I see. Are you as confident as Mr. Purcell that this can be turned around?

MR. ORME: I guess I'm not, because I think that the wild card here is the, again, the political question within Mexico, itself. I mean, let's look at what's happened. You've had for almost fourteen or fifteen years essentially zero income growth in Mexico. You've had a large increase in the early 1980s, because of the debt crisis and a very slow gain. But essentially during the 1994 political campaign, Ernesto Zedillo was telling Mexican workers, who are earning less in real terms than they earned in 1980, that that's all behind us now; we've got the free trade agreement in place; we're going to have 4 percent economic growth; we're going to have real growth in wages for the first time on a sustained basis. Well-being for the family was his campaign theme. Now, they're talking, if they're lucky, 1 or 2 percent in economic growth, inflation of, instead of 4 percent that they had been hoping to have, of 20 percent, perhaps 25 percent, and they've already got the government-controlled unions to agree to cap wages at 7 percent. I mean, this means another steep real wage cut for Mexican workers who have been taking it in the chin for a long time.

MR. MAC NEIL: And does that make the government and its party more insecure?

MR. ORME: It sure should.

MR. MAC NEIL: Even though there may be no constitutional mechanism for change?

MR. ORME: That's right. And it's no secret that Zedillo was never the candidate of the labor faction within the party.

MR. MAC NEIL: Do you agree with, with Mr. Purcell that this is not going to boil over into revolution or into civil disorder, that they will be able to handle it -- you didn't put it quite that way -- but you said there's no constitutional way of getting rid of a president.

MR. ORME: I agree that it's very unlikely that Zedillo would be replaced, because there's no mechanism in the Mexican constitution, there's no vice president, for example, in the Mexican system.

MR. MAC NEIL: And there's no prime minister?

MR. ORME: That's correct.

MR. MAC NEIL: He's everything.

MR. ORME: He's everything, and even if there were to be, you know, God forbid, an assassination, in the first three years, they would have to go through a process of calling a new election, first through the congress, and that's not likely. The real question is whether he can govern effectively. I mean, it's a big country. It's a complicated country, and it's a country that's been used to having all its different regions and factions obedient to the president's office.

MR. MAC NEIL: If the -- do you still both agree, incidentally, the Mexican economy is fundamentally sound underneath?

MR. PURCELL: I think it is.

MR. MAC NEIL: Do you think it is?

MR. ORME: Yes. And, again, the question is: Are we talking six months, or are we talking two years, or are we talking ten years?

MR. MAC NEIL: Okay.

MR. ORME: It's a far more secure economy than it was when the debt crisis started in the early 1980's.

MR. MAC NEIL: How seriously is this going to affect U.S. interests, the peso even lower than it was two weeks ago and the Mexican stock market crashing?

MR. PURCELL: Well, I think, I think first of all a lot of U.S. investors have lost a lot of money. People in mutual funds -- and I think we talked about that last time -- they've lost even more now, and people who -- not just who had shares in mutual funds that were in specifically emerging markets, but any global funds. I think what this is going to do, among other things, is going to keep people from investing abroad. And it's probably in that sense it's going to help some U.S. markets. There's a kind of "buy American" philosophy developing among investors.

MR. MAC NEIL: Is this likely to raise again the cries that NAFTA was not a good deal?

MR. ORME: Absolutely. Already there are Congressmen who were prominent NAFTA opponents who are planning to call tomorrow for a U.S. withdrawal from NAFTA. I mean, that's certainly kicking Mexico when it's down. This would be -- it's already a disaster for Mexico. If the U.S. for some reason were to pull out of NAFTA, it would be a tragedy.

MR. MAC NEIL: But that's not a prospect at the moment that you see, is it?

MR. ORME: I certainly think it's not simply because of the enlightened self-interest of the United States, that obviously the Mexican financial disaster, as John is saying, has direct implications for the U.S. economy and specifically for very important places politically like Texas, which is very dependent on trade with Mexico.

MR. MAC NEIL: Well, we have to leave it there for now. Thank you both. Jim.

MR. LEHRER: Still to come on the NewsHour tonight, a 100-days response from President Clinton, an inaugural in Colorado, and an overview of our changing governments. FOCUS - THE FIRST 100 DAYS

MR. LEHRER: Today was a day Democrats chose to define some of the differences between themselves and the Republicans. President Clinton went to Carl Sandburg Community College in Galesburg, Illinois, to make his points.

PRESIDENT CLINTON: Every American who works hard and obeys the law should be able to get ahead in this new world. It should not be a province of opportunity for a few. To get that done, we face enormous challenges. We must do three things: We've got to have a new economic policy, designed to help the American people compete and win in a global economy in which the government is a partner with people in their private lives and in private business in expanding opportunity. In the first two years, that meant that we had to cut the deficit, because we spent the 1980s dealing with our economic problems, trying to spend our way out of 'em and exploding the deficit. The second thing we need is what I called during my presidential campaign a new covenant, a new approach to our society. It was then, it has been for two years, and it will always remain my contract with you. But -- [applause] -- it -- [applause] -- but it's about more than a tax cut, although cutting taxes are a part of it. I believe what this country needs on a national basis is what I see at the community college here. What those of us in the position to do so ought to be doing is expanding opportunity, but only for those who will exercise the personal responsibility to make the most of those opportunities. You build a community with opportunity and with responsibility, with rights and responsibility. You can't have one without the other and last for a long time. [applause] That's why we have invested so much in education, because education by definition is part of a covenant. You cannot educate somebody who will not be educated. All you can do is throw the life line of opportunity out there, and someone either does it or not. The third thing we've tried to do is to give you a different kind of government, to have the government in Washington change the way the economy is changing, to have it be smaller, yes, but also more effective, to literally reinvent government, to use the Vice President's phrase, by cutting the bureaucracy to its smallest size in 30 years, by increasing our ability to solve problems that the federal government needs to solve. Government is still being used to help expand opportunity but in a less bureaucratic, less mandatory, more empowering way.

MR. LEHRER: Back in Washington, the House Ways & Means Committee heard from Mr. Clinton's Health & Human Services Secretary Donna Shalala. She was asked to explain how the administration's welfare reform proposal would handle people who did not satisfy that plans work-fare requirements.

REP. BILL ARCHER, Chairman, Ways and Means Committee: In the event that a welfare recipient does not show up for work and fails to comply with the work requirement, what sanction do you contemplate?

DONNA SHALALA, Secretary, Health and Human Services: We start by reducing the benefits and eventually if someone does not play by the rules, does not show up for work, does not show up for their schooling or their educational training, they can be cut off of the program.

REP. BILL ARCHER: I am, I am just curious specifically as to the sanctions, and you have said that, as I understood you, that all welfare benefits would ultimately be taken away from these people.

DONNA SHALALA: It can be taken away if people do not --

REP. BILL ARCHER: All right. Then what happens to the children?

DONNA SHALALA: We cover the children.

REP. BILL ARCHER: How do you cover the children?

DONNA SHALALA: With -- with Medicaid and with food stamps and - -

REP. BILL ARCHER: Do you give those -- you continue to give those to the mother?

DONNA SHALALA: We continue to give them to the mother for the child. Let me -- let me say that, that a parent that is unwilling to, to play by the new rules under the welfare reform proposal, who is unwilling to do what is necessary to get into a private sector job, that gets -- that gets both the sanctions as well as in a relatively short period of time perhaps the benefits taken away, but those children eventually within that period of time, the child welfare system has to take over.

REP. BILL ARCHER: Let me be certain about this. Your plan does contemplate that where the mother refuses to comply with the work requirement, that the children can be taken away from the mother, and if you take away the AFDC cash benefits from the mother, you take away the source of support for those children, and under those circumstances, for the children to have adequate monetary support, I hear you saying that the state could then take the children away from the parent, and that the children then, I assume, under current law and under your proposal, could be put in orphanages, is that not correct?

DONNA SHALALA: Let -- let me repeat, this is --

REP. BILL ARCHER: No, but is that correct?

DONNA SHALALA: This is -- the children --

REP. BILL ARCHER: Is that or is that not correct?

DONNA SHALALA: The children would be taken into the child welfare system in foster care, in some cases put into an adoption situation, in some cases put into group homes, depending on their ages.

REP. BILL ARCHER: Could they be put into orphanages is my question?

DONNA SHALALA: They wouldn't be put into --

REP. BILL ARCHER: Not would they, could they be?

DONNA SHALALA: There are -- if they were babies, it's likely they would not.

REP. BILL ARCHER: Not if, could they, or could they not be put in orphanages? It's a very simple question.

DONNA SHALALA: If they were teenagers, they could be put into group homes, which is the modern version of, of residential settings for children.

REP. BILL ARCHER: If they were less, if they were less than teenagers, if they were pre-teens, could they be put into orphanages by the states under your program?

DONNA SHALALA: There are very -- most of the residential settings in this country, most young children are put into foster care in this country. Most of the residential homes are for slightly older, slightly older children.

REP. BILL ARCHER: Could they be put into orphanages by the state? That's a simple question. Yes or no.

DONNA SHALALA: As part of, as part of the overall series of options that a state has before it, the answer is yes.

REP. BILL ARCHER: Yes.

DONNA SHALALA: They would not be put in there because they were born to a teenage mother who was willing to work, who was willing to go to school, who was willing to stay at home. There is a difference between cutting off large numbers of children because of --

REP. BILL ARCHER: I understand but --

DONNA SHALALA: -- being born to a teenager.

REP. BILL ARCHER: -- but simply put, under the sanctions contemplated in your proposal, children could be put in orphanages, is that correct?

DONNA SHALALA: Some children could be put in residential settings.

REP. BILL ARCHER: All right. Well, you can call it whatever you want to, but that, that is the reality as I understood your proposal. FOCUS - SHRINKING GOVERNMENT

MR. MAC NEIL: Now we turn to the view from Denver, as we will doing regularly during this time of historic change in Washington. The topic there today was shrinking government. Tom Bearden reports.

[CHILDREN SINGING "AMERICA THE BEAUTIFUL"]

MR. BEARDEN: It may be appropriate that the background music for Colorado Governor Roy Romer's inauguration this morning included "America the Beautiful." The words were written here. The "purple mountain majesties" refer to the Rocky Mountains.

GOV. ROY ROMER, [D] Colorado: Let's make this the most efficient state government in America, providing the best service to our citizens at the lowest possible cost to our taxpayers. And I want to tell you, we certainly have set a good example for that in this inaugural.

MR. BEARDEN: This event was considerably different than Romer's earlier inaugurations. This was decidedly no frills -- no National Guard jets doing a fly-by, not even a platform over the state house steps. The school-aged spectators had to sit on the steps, themselves. No black tie inaugural ball, just cookies donated by local Safeway Stores after the Governor took the oath of office. It's partly because the Republican-controlled legislature inserted a provision in the state budget that stated flatly that no taxpayer funds could be spent on an inauguration. Rep. Tony Grampsas heads the state's joint budget committee which wrote that provision. He says it was prompted by the voters' unmistakable demand to cut back government spending.

TONY GRAMPSAS, Colorado State Representative: There was just a very clear message. What happened was a couple of years ago, or the last inauguration, the legislature was upset about the cost of it, and the overruns of the cost of it, and it became a very expensive item, so we put a footnote in there stating that we would no longer put any money into the inaugurations, and the footnote held up.

MR. BEARDEN: Grampsas says the refusal to fund the inauguration is an example of how seriously state government intends to pursue fiscal conservatism.

TONY GRAMPSAS: What we're doing is that we're taking a look at where we can consolidate government, what we can rid ourselves of government as far as the operation is concerned, and really pay attention to the central theme that we want to adopt this year, and that is crime and your higher education, and things of that nature.

MR. BEARDEN: The Colorado legislature had almost no choice but to become tight-fisted. That's because in 1992, voters passed a constitutional amendment that set strict spending and taxing limits which cannot be exceeded, except by a statewide election. The mood here seems right in sync with that of voters in the rest of the country who changed control of Congress, but former Colorado Governor Richard Lamm, a Democrat, says while the popular rhetoric is to put down government, western states feast on federal funding and pursue it vigorously.

RICHARD LAMM, Former Governor of Colorado: The West has always been schizophrenic about the federal government. Nobody has been more virulent in our rhetoric against the federal government, but yet we're -- there's never been a bigger bunch of federal money junkies. The rhetoric is for independence and how independent and self-reliant we are, but when you really come down to it, don't take away our military bases, don't raise our grazing fees, don't take our Energy Department facilities, build our water projects, the list is very long. And so I think that the West in a way is, is really harbinger of the kind of dialogue that the national government is going to go through and the whole nation, because I think that we are ideologically conservative, but operationally, we have become addicted to federal money.

MR. BEARDEN: Former Gov. Lamm says that the state may be pursuing fiscal conservatism at the state level but it's certainly trying to get as many federal dollars as it can. Is there a conflict there that something needs to be addressed?

TONY GRAMPSAS: I think he's got a good argument, and, and obviously those are the things that we have to sort out, because we do -- it's really interesting, because last year, or two years ago, when we were presenting the budget, we had a lot of cuts of programs, and we thought they were just simple cuts that we could eliminate some of the size of government. But the, the outrage that we received from the people who are losing those programs and also some of the other legislature was -- I mean, it was staggering.

MR. BEARDEN: Gov. Lamm says even Democrats like him, who used to believe that anything was possible, have become disillusioned with the federal government and that a power shift to state and local levels is inevitable.

RICHARD LAMM: I think the federal government has been a disappointment to even Democrats of my generation. I think that it's become too bureaucratic, it's become too distant, it's become in a way too tied up with special interests. People have simply lost their confidence of the federal government to take something like housing or welfare. There are certain other areas that we can just simply make a trade where the federal government would take this, the states would take this. Let's re-sort out the functions.

MR. BEARDEN: As the inauguration ceremonies wound down, a parade celebrating the official opening of the National Western Stock Show marched through the streets of downtown Denver. The annual event attracts thousands of visitors, and most of them seemed to mirror national opinions about government.

MARVIN KAPUSHION: What I want from my government is I want less government in my personal life, and the government that I do have, I want it work for me. I don't want it just to take care of itself. I want it to do something for me, and especially my kids.

BUTCH MORGAN: Oh, they're always regulating something, you know. They got ahold of the grazing deal. You know, they're trying to raise the, you know, the West is going to be gone if they keep stuff like that up. The Park Service taking over people riding in the federal parks, in the national parks, I mean, they're trying to regulate that, things like that.

UNIDENTIFIED CORRESPONDENT: Do we need government to regulate our life?

BUTCH MORGAN: Oh, I think some, but I mean not to that point. I mean, you take somebody that graduates from Harvard, and he's up here trying to tell us, you know, about conservation up in the mountains where we can run cattle and sheep, and you know, and I think it takes somebody that's been there, that knows. You know, I don't respect that guy telling me, but if some old rancher tells me, then I'd believe.

RON VAN PELT: They want the government to change is what I think, and either you change it and you get it right and you get our deficit down and you take care of our spending and get our taxes down where we can afford to live, or we're going to get you out of there and put somebody else back in is what I read the message as. That's the way I feel about it.

MR. BEARDEN: While these westerners were clear about wanting a leaner, more effective government, they weren't sure what should be cut.

CINDY DIETZ: Oh, gee, give up? I don't know because I don't feel like I get a whole lot now.

MR. BEARDEN: On Thursday, Democratic Gov. Romer will give his state of the state address to the Republican-dominated legislature. Much of the session is expected to deal with the thorny question of exactly how the state and federal governments will redefine their relationship. FOCUS - HISTORIC CHANGE?

MR. LEHRER: Now, some overview perspectives on what is being wrought in government now at both the state and federal level. It comes from four people who have performed similar services for us before: Presidential historians Doris Kearns Goodwin and Michael Beschloss; journalist and author Haynes Johnson; and former Reagan- Bush cabinet official and author William Bennett. Michael, not only no frills government but less government. Has there ever been a time in history when less government was a viable theme?

MR. BESCHLOSS: Not so much of the grassroots. I mean, the amazing thing is this is such a reproach to most of the history so much of this century. You go back to the 1920's and the 1930's during the time of the early New Deal, that was a time when most Americans welcomed a huge government, growing a lot of power, being sent to Washington, even more so to fight World War II. And then you get to the 1950's, Republican Dwight Eisenhower, who you would expect to begin to turn this the other way, that didn't happen. Part of it --

MR. LEHRER: Was that a crucial time, do you think?

MR. BESCHLOSS: I think it was, because many people felt that in the wake of the New Deal and a world war that there would be a turning back once you had a Republican administration in office that would begin to honor the old rhetoric about small government. Eisenhower was the President who was presiding over that administration. He didn't do it. Part of that was the Cold War. In the late 1950's, for instance, there was a great movement in this country to improve education after the panic after Sputnik. Eisenhower was very much against federal aid to education. He thought that that would poison the old idea that schools should be local, but he finally said I hate to do it, but we really have to because we've got to catch up with the Russians.

MR. LEHRER: So, Bill Bennett, what's happened now? Why has this - - has it stopped, the desire for more government, for the government to solve these problems and do all the things --

MR. BENNETT: Well, I think you heard some of it from Denver. People said, I don't know what it does for me in a positive sense, but one of the guys there said I know what it does too me, and it does a lot that bothers me. I think there is a sense of frustration about this monster that has been created, the federal government. There are very few defenders around anymore of big government. I think, in effect, what we have created is a large welfare state which appears in many ways not to work. We are spending more and more money to get results which seem to be more and more unsatisfactory. And Margaret Thatcher has a phrase which was picked up a lot by my team, Republicans this fall: The state takes too much from you in order to do too much to you. And I think that's a very widespread perception.

MR. LEHRER: Doris, what happened to the people who, who used to say, look, we've got a problem, fill in the blank, the government is the only, only organization in society that has the power and the will to solve these problems?

MS. GOODWIN: Well, I think that's part of the problem with the people who are not on Mr. Bennett's team. They are not out there, confident about what government can do anymore, so there's no spokesman on the other side. The only thing we're hearing is less government is better, more efficient, smaller government is better. It's as if they've lost their will to fight. You don't see any liberal Democrats even with buttons saying, I love government. I mean, there's always been cycles in our history where there's more or less respect for the private enterprise versus government. In the 20's, ideologically, people went to the private sector. In the 30's, when the Depression came and the war, as Michael said, they needed government again. But I don't think I've ever seen a time when government has become the enemy as fully as it is now, and I think that's partly because the liberal Democrats and the people who believed in government don't have the articulation of what they still believe government can do. Plenty of those people even feel they know government does good things in their lives, but they can't articulate it unless there's some leader out there that tells them this is what government can do, this is what government should not do.

MR. LEHRER: What's the enemy thing come from, Haynes?

MR. JOHNSON: It's been building for a long time, Jim. I think for 30 years this has been a consistent theme. You go back to LBJ, the great society, excuse me, and this was bloated government, and ever since then Richard Nixon ran against government, Jimmy Carter had zero-based budgeting, the bloated bureaucracy in Washington. What we heard -- Bill's right -- what we heard in Denver is also a conflict. People, well, they don't, they don't like government, but they also kind of want something to do for themselves. I think the enemy is the feeling now, and it's profound, I think all of my colleagues have said that it doesn't work, and it's, it's alien. It's out of touch.

MR. LEHRER: But what about --

MR. JOHNSON: And that's a big, that's a big difference.

MR. LEHRER: What about Michael's point that -- and you just repeated it in a way -- that there's been a lot of rhetoric at the national level, particularly from your team through the years? In fact, Ronald Reagan got elected President, served eight years on this very theme, but now the people have caught up with the national leaders is what you're saying, Mike. Would you agree with that?

MR. BENNETT: Well, I think politicians have caught up with the people on this one.

MR. LEHRER: Okay. I said that wrong.

MR. BENNETT: That's all right. Look, I think the message has gotten, has gotten through. The most -- Doris is right -- the most articulate and eloquent defense of a big government Democrat in the last three weeks was made by Newt Gingrich of Franklin Delano Roosevelt. It's one of the great ironies in --

MS. GOODWIN: A great moment.

MR. BENNETT: -- the last couple of weeks, a cheery moment, and a cheery moment for Democrats.

MS. GOODWIN: That just shows the trouble we're in when that's our great moment.

MR. BENNETT: Right. But part of this too, I think there are some nuances too, part of this is federal government. There's a lot of talk, as you know, about state government, about this devolution of power from Washington to state capitals. There is what Lamm said in your piece there, a great sorting out taking place, and where this will end up we don't know. It's a very pregnant and interesting period.

MR. JOHNSON: But there's also a distrust for people who are here in this capital. We shouldn't pretend it's otherwise. I mean, they really don't believe that they understand their problem. I don't think that's entirely correct, by the way. I think they are close to the public, and we've seen in two years now the most dramatic change in the Congress twice since in 1992 and in 1994, but they still don't believe that somehow the people here understand or can deliver where they live.

MS. GOODWIN: And, you know, given that the people have wanted more decentralization, Washington has not delivered it to them. I mean, it's been ideologically, as you say, part of the agenda for the last couple of Presidents, last four or five, but nobody in Washington has really acted on that yet. They keep getting bigger and bigger, because they're here.

MR. LEHRER: Where do you come down on this, Michael, the chicken and the egg thing? Was it the leadership that Bennett and his folks have been giving at the national level all of these years that have brought the people to their senses or vice versa?

MR. BESCHLOSS: I think you have in a way a dialogue of the deaf, because for many years Republicans from 1945 on would say a great deal about the need for smaller government but at the same time they were very alive, for instance, with very large business interests that benefited a lot from big government. So you had a very great disconnect between rhetoric and reality. I think the people understood that. The interesting thing now is on the national level you see sort of an equally unsatisfactory dialogue, because if we were in a period in which this system were working well, and I think Doris touched on this, you would have the Republican Party, which is traditionally the party of smaller government with its leaders making the case for that, it probably will be in vogue with this for a number of years. And then on the Democratic side, you'd have a party that has traditionally been for big government, with its leaders, particularly the Democratic President, saying perhaps we won't be popular for the next couple of years, but here's the case for big government, this is what brought you civil rights in the 60's and a lot of other things that most Americans, including Newt Gingrich, now approve of. What we've got now is a half debate, and I think until there are other Democrats --

MS. GOODWIN: I think in the past --

MR. BESCHLOSS: -- who do this will continue.

MS. GOODWIN: In the past, the reason why the Democrats were never able to be advocates for decentralization in the past was because of civil rights. They couldn't allow the southern states to take the leadership on a lot of issues when they were still segregating, still discriminating against blacks. But now that the South has changed, it seems to me there's no reason in the world that the Democrats shouldn't be for decentralization. Bobby Kennedy argued that as a central theme in '68, and then we sort of lost it somewhere along the way.

MR. LEHRER: But, Haynes, your point, if I understand it correctly, is that it's not so much the size of government as that okay, we have this big government, but we've still got all these problems.

MR. JOHNSON: Absolutely, Jim.

MR. LEHRER: So let's try something else?

MR. JOHNSON: It -- I don't think it's size. That's a pejorative and that's a whipping -- it's a straw man, if you want to use that metaphor. I think it doesn't work and doesn't deliver as promised, and, you know, we can talk about -- remember during the Reagan years, the Fed spending isn't government, it's something else, but it's good for your district, so you sort of support that. Now we have the situation and a shrinking era in Washington. We're going to exempt or increase defense spending and cut taxes, and somehow, all of that's going to get us smaller government. I'm not sure it's going to work, but it is a different level now. People are -- there's no crisis -- there's no civil rights crisis. There's no depression. There's no World War II. There's no Cold War. So the reasons to give impetus to the federal system, to create programs and deal with the kinds of problems doesn't exist to the degree it did before.

MR. LEHRER: Do you agree with that, Bill Bennett?

MR. BENNETT: Yeah. Plus the evidence of the federal government's involvement in lots of areas is ambiguous at best in terms of making a case for the federal government. Look, there were, as many of us believe, promises made or at least implicit at the time of the great society, promises similar to the kinds of promises our team, my team is making now, and so we shall be judged, that things might get better on the welfare front. Things might get better in crime. Things might get better in other areas, and it looks as if, despite all these efforts on the part of government and an awful lot of money, things aren't getting better. I mean, when I heard people this fall when I went around the country, I didn't hear big protests about big government. That's right. What I heard people saying was, what's wrong with the country, is the country coming apart? What's happening with crime, with violence, with children? Are we coming apart at the seams, and how come this money that we're sending and all this value and programs have not seemed to be making anything better?

MS. GOODWIN: But that's the real challenge for the Republicans, because --

MR. BENNETT: That's correct.

MS. GOODWIN: -- those are real anxieties that people are feeling.

MR. BENNETT: That's correct.

MS. GOODWIN: They're working two jobs and a family. They're not making ends meet. Their streets are less safe than they ever were before, and less government is not an only answer to that. I mean, that may be a symbolic answer right now.

MR. LEHRER: Things have to change, in other words, things have to get better?

MS. GOODWIN: Real things have to change in their lives, and I don't know that anyone has the answer to that. I certainly don't think the Republican Contract for America is the answer for those real anxieties.

MR. JOHNSON: And has to change where they live. Bill talks about crime. You talk about anxiety, economic dislocation, the pensions that may be lost, the health care benefits for the middle class that may not be as sure as it was, those are real.

MR. LEHRER: Let's talk about Newt --

MR. BENNETT: There is a particularity here too. I mean, apart from general historical trends, philosophical issues, there are people who carry issues, and Bill Clinton has walloped the Democratic Party. He has really hurt the case for big government. And I'm not sure that we could have designed a better way to bring down the reputation of big government than this health care thing. I ask Michael, because I'm not a historian, I'm -- I hope I'm not fraudulently here, but I'm not a historian.

MR. LEHRER: No. You said very cleanly --

MR. BENNETT: They're over there. We have opinions. They have facts, right.

MR. LEHRER: Right.

MR. BENNETT: Has anybody done more harm to his party in recent history than Bill Clinton? Is it comparable to what Richard Nixon - -

MS. GOODWIN: Well, Nixon didn't help his.

MR. BENNETT: -- did -- comparable to what Richard Nixon did to the Republican Party, from which we are still smarting?

MS. GOODWIN: Right.

MR. LEHRER: You're on, Michael.

MR. BESCHLOSS: It's hard to see something that would be a better parallel than that because I think Bill Clinton in a way precipitated this argument. Oddly enough, Bill Clinton --

MR. LEHRER: Precipitated it -- you mean, health care -- you agree with Bill Bennett, that the health care reform thing is what really brought it all home?

MR. BESCHLOSS: Very much, and that causes a little bit of a problem, because the Bill Clinton who a year ago this evening was advocating to solve the central issue in this country, as he saw it, health care, was supporting a very great new bureaucracy as the answer. Now, a year later, is saying, you know, government is the problem, and I generally agree with what the Republicans say, I just want to do it a little bit more moderately.

MR. BENNETT: Yeah.

MR. LEHRER: Let's talk about Newt Gingrich for a moment, and also begin with another historian, Doris. Has there ever been a Newt Gingrich before in the history of the United States government?

MS. GOODWIN: Well, I think the last time that a speaker had the kind of partisan power that Gingrich has you'd have to go back to Speakers Reed and Cannon in the late 19th century. They ran the House like the house of corrections. They had every power to appoint everybody to a committee, to recognize characters on the floor. And the reason they had it was that the majority party had discipline at that time, so they could actually bring these guys in like soldiers. After Cannon was revolted against by the House, because he had so much power he'd become a czar, from 1910 on, it really devolved to the presidency and even to the Senate. Once the Senate got to be a popularly elected organ, it had somewhat more power than the House. Up until that time, the Senate was a bunch of aristocrats, so the House was really in sway in the 19th century. But I think what Gingrich has done is by creating party discipline at a time when all the political scientists, myself included, were saying, parties are dead, he has created an instrument for himself in the House that's unlike any we've seen in a long time.

MR. LEHRER: Haynes, somebody -- Mark Shields, in fact, said it on this show the other night, that, that what is -- he's not only running the House, Newt Gingrich is setting the national agenda, the national discussion. I mean, he's in charge.

MR. JOHNSON: Well, it's a perfect example of [a] someone who knows who he is, knows what he wants, has been devoted to it, is brilliant at getting there, and also can use that red light, if there's a red light outthere. I'm serious. The contract you pull out of your pocket, I have here the 10 tablets, I mean, it's going to be -- and do it every day -- the first day of the session was all day long on television. This is using the technology of the present to do something that Doris is talking about, to bring a party that has unity. The Democrats have no unity. They haven't had really in my lifetime, but now you don't know what a Democrat is.

MR. LEHRER: But some people would say Newt Gingrich has more than a party, he also has ideas. Would you agree, Bill Bennett?

MR. BENNETT: You don't need to call on me. These folks are doing fine. [laughter] I'll say --

MR. LEHRER: Take a lob. Okay?

MR. BENNETT: No. He's got plenty of ideas. You know, the joke around town, my part of town, is that this is the result of tenure policy at universities in the 60's. You got all these conservative professors who went into politics because they couldn't stay at the universities, so you've got Armey, you've got Gingrich, you've got Gramm. There's a whole bunch, and then some of us on the outside. No, he's full of ideas and full of vinegar and full of energy, and a certain degree of optimism and idealism, which is very attractive. I think he made a terrific speech. It was a very generous speech both intellectually and politically, extending his hand across the aisle. I think it was a really excellent thing to do. He also showed and has shown through a couple of his mistakes, and it's not just what you show through your successes but what you could show through your mistakes, that he can act decisively, when he makes a mistake admits the mistake.

MR. LEHRER: Today we reported that historian thing.

MR. BENNETT: The historian thing, the book deal. I mean, he says, look, I'm new to this, I'm not appreciating all the impact that my decisions make, and he moves, and he moves along. We'll see. I mean, now, indeed, comes the testing time for us, but there is a kind of cooperation and a kind of discipline at this point, and admittedly still very early, that we haven't seen in a long time. A final point. Ronald Reagan is a tremendous figure for the entire country for Republicans. He is revered, but there is more excitement now about a Republican House among Republicans than there was with the election of Reagan.

MR. LEHRER: What's your reading of history on this, Michael? I mean, has there ever been anything like this before, where the people were excited about the House of Representatives?

MR. BESCHLOSS: No. And I think it has a lot to do really with the decline of the presidency, 60 years from the beginning of the New Deal on, we had a very strong presidency in this country through World War II, through the Cold War. The last three years that has not been so. That's been the fall of George Bush from grace and Bill Clinton's losing the struggle to build authority as President, himself. One of the things that I think shows that perhaps sometimes it is a good thing to have a historian in government, Newt Gingrich knew that there was a moment right now when people were willing to perhaps welcome a moment of congressional government. In an earlier time, in the period of the imperial presidency, Americans and also the media would have been much less willing to listen to what a speaker had to say, even a speaker as thoughtful and articulate as this one.

MS. GOODWIN: Although, Michael, you know, I'm not sure that it's necessarily institutional change and that the people are excited about the House per se. I think Gingrich has offered leadership, and that it's a country that's hungry for leadership, and he stepped up to the plate with ideas, conviction, and energy, and some of the things that Bennett said. And I think if he were to run two years from now for President, and were to be elected President, the power would shift over there. I don't know that the presidency, except for foreign affairs, which are not as important as they were, that's one institutional loss for the presidency, but I think it's the person.

MR. LEHRER: It's the new guy, not --

MS. GOODWIN: I think the real test will be like in the 19th century, when speakers were really popular, they counted all the babies that would be named after them, like Henry Clay or Schuyler Colfax. We'll have to see how many Newts we have. Then we'll know.

MR. JOHNSON: He's not pharaoh yet, Mr. Gingrich, and I think this two years can also turn very quickly against him, if the public feels that it's too extreme or the price of cutting is too radical.

MR. LEHRER: Like the woman in Colorado said --

MR. JOHNSON: Exactly.

MR. LEHRER: -- a cut, oh, wait a minute.

MR. JOHNSON: And everybody who was talking in Colorado tonight was showing an ambivalence about what this means to me. And I think that's going to be the test for Mr. Gingrich, and he's also a hot item, and we know 24 hours is a lifetime in a politician's life, particularly in the age of television.

MR. LEHRER: Do you agree, though, with what Doris and particularly Michael are saying, that it's the weakness of Bill Clinton that allowed Newt Gingrich, as much as Newt Gingrich and his personality and his ideas?

MR. JOHNSON: I do, Jim. I think watching Mr. Gingrich, he did something this last week which the people wanted the President to do two years ago, have a direct agenda, move directly on acting, whether it's symbolic or otherwise, we're going to go one, two, three, and we're going to follow through on these things. Instead, unfortunately, Mr. Clinton got diverted, as we've talked so many times, on gays in the military, the appointment process, and all that. He got off to a very bad start and then did well after that first year.

MS. GOODWIN: It takes a certain courage to come up with a hundred-day agenda. I mean, other Presidents have shied away from that. I remember Lyndon Johnson saying I wish the whole idea of the hundred days could be expunged from the dictionaries, because I don't want to ever be judged that way.

MR. LEHRER: Has there ever been anything like a Contract with America?

MS. GOODWIN: From the House side?

MR. LEHRER: Or anywhere, a President, or President --

MR. BESCHLOSS: Ronald Reagan in 1980, as I think Bill will agree, was about as explicit as any incoming President could be about what he would do when he came to office. In general, you don't find that in the House, because it is so hard to get a myriad of people running from all sorts of different places on behalf of different ideas to agree, and the other thing is that most leaders do not want to take the risk.

MS. GOODWIN: Right.

MR. BESCHLOSS: Newt Gingrich and the Republicans took a very big risk last fall, which was that when they came to power, they might not be able to deliver, and this is something that can't be fuzzed up. We will know in about four or five months --

MS. GOODWIN: Right.

MR. BESCHLOSS: -- whether this worked, or whether it did not. If it doesn't, there are going to be very grave consequences for them all.

MR. LEHRER: But in some ways, hasn't it already worked?

MR. BENNETT: Yeah, I think it's worked. I noticed the commentary about the Republicans in the news shows, for example, and media is not always friendly to us, people talking about the energy, the optimism. You look --

MS. GOODWIN: How are you going to deal with it, all being positive?

MR. BENNETT: Well, it's all right. We're the optimistic party. We -- and you look across at Bonior, who, you know, just he goes from grim to grimmer.

MR. LEHRER: That's the House Minority Whip.

MR. BENNETT: And referred, and referred at one of his press conferences to Newt Gingrich when he was talking about the book deal, he said, Mr. Gingrich simply has to recognize as the leader of the country -- as the leader of the country -- now, maybe he just misspoke, but for practical purposes, he is. I think he would have been a formidable presence as speaker no matter who was President, because he's a very able guy with a lot of bubbling idea, but there's a vacuum at the White House.

MR. LEHRER: And we have to leave it there. Doris, gentlemen, thank you very much. Always a pleasure. RECAP

MR. MAC NEIL: Again, the major stories of this Tuesday, the Mexican peso and stock market fell sharply for the second straight day. Wholesale prices in this country rose just 1.7 percent for all of 1994, and Northern California was hit with more rain and mudslides as wet weather is forecast through the weekend. Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you tomorrow night. I'm Jim Lehrer. Thank you, and good night.