The MacNeil/Lehrer NewsHour

MS. WARNER: Good evening. I'm Margaret Warner in Washington.

MR. MAC NEIL: And I'm Robert MacNeil in New York. After tonight's News Summary, we have excerpts from President Clinton's speech on affirmative action, then analysis by White House aide George Stephanopoulos, Clifford Alexander, and Linda Chavez. Then White House Republican and Democratic leaders Dick Armey and Richard Gephardt debate their different plans to simplify the income tax, and Betty Ann Bowser covers the first day of the Waco hearings. NEWS SUMMARY

MR. MAC NEIL: President Clinton said today that government affirmative action programs have been good for America but he said some of them need fixing. During a speech at the National Archives, Mr. Clinton said he was issuing a directive to federal departments requiring that affirmative action programs meet four criteria.

PRESIDENT CLINTON: No quotas in theory or practice, no illegal discrimination of any kind, including reverse discrimination, no preference for people who are not qualified for any job or other opportunity, and as soon as the program has succeeded, it must be retired. Any program that doesn't meet these four principles must be eliminated or reformed to meet them.

MR. MAC NEIL: The President's proposal was criticized by Senate Majority Leader Bob Dole, who spoke on the Senate floor.

SEN. ROBERT DOLE, Majority Leader: It is not enough to oppose quotas as if a label is what might be offensive. It is a practice of dividing Americans through any form of preferential treatment that is objectionable. Mr. President, leadership is about making the tough choices. It's about staking out a clear and crisp principle and holding firm to it. And, yes, leadership can sometimes mean putting a little distance between yourself and your political allies.

MR. MAC NEIL: We'll have more on the story right after this News Summary. Margaret.

MS. WARNER: The stock market fell sharply today. At the closing bell, the Dow Jones Industrial Average had lost 57 points, to close at 4628. Volume was very heavy. Earlier in the day the Index was down more than 130 points. The market drop was led by a decline in technology stocks. Some market analysts attributed today's decline to fear that the Federal Reserve would not continue to lower interest rates. That fear was based on congressional testimony this morning by Fed Chairman Alan Greenspan, who offered an upbeat assessment of the economy. The Fed recently lowered interest rates 1/4 point, after Greenspan had warned of the risk of a modest recession. Today, he had this to say.

ALAN GREENSPAN, Chairman, Federal Reserve: A month or so ago I noted publicly that a moderation in growth was both inevitable and desirable but that the process could not reasonably be expected to be entirely smooth and that, accordingly, the risks of a near-term inventory-led recession, though small, had increased. More recent evidence suggests that we may have passed the point of maximum risk, but we have certainly not yet reached the point at which no risk of undo economic weakness remains.

MR. MAC NEIL: In other economic news today, housing starts fell a tenth of a percent last month. The Commerce Department reported that new construction fell in all parts of the country, except the Midwest. Ford Motor Company today reported earnings of $1.6 billion in the second quarter of the year. It was the automaker's third best quarter ever. A Republican plan to overhaul the income tax system with a 17 percent flat tax was introduced in the House and Senate today. The plan would apply across the board and eliminate tax deductions. We'll have more on the story with two congressional leaders later in the program.

MS. WARNER: House Republicans opened hearings today on the siege of the Branch Davidian compound in Waco, Texas. The 51-day standoff ended in April 1993, when a raid by federal agents led to a fiery inferno and the death of 80 cult members. The panel heard from former Branch Davidians about life in the compound. The session was also marked by partisan sniping over the role of the National Rifle Association in helping Republican members prepare for the hearings. We'll have extended excerpts later in the program. Former Associate Attorney General Webster Hubbell testified for a second day before the Senate Whitewater Committee. He, again, defended the actions of administration officials following the 1993 suicide of White House Counsel Vincent Foster. Foster had been handling Whitewater matters for President and Mrs. Clinton.

MR. MAC NEIL: The Bosnian Serbs today claimed to have taken the UN-declared safe haven of Zepa. But the Muslim-led government denied the claim. Earlier, a top UN official admitted the UN was not capable of defending Zepa or the Muslim enclave Gorazde. We have a report on the diplomatic efforts from Robert Moore of Independent Television News.

ROBERT MOORE, ITN: The United Nations in Bosnia is now bracing itself for the next wave of terrified refugees. In Washington, Foreign Secretary Malcolm Rifkind and the U.S. Secretary of State have been holding crisis talks, both opposing attempts by Congress to lift the U.S. arms embargo on Bosnia.

MALCOLM RIFKIND, Foreign Secretary, Britain: Clearly at the moment, there are still those on both sides of the dispute who believe that military options will somehow resolve this matter. For those of us who believe that that is untrue, lifting the embargo would put off that day when a political settlement is addressed, and that is something which would be tragic for the people of that country.

ROBERT MOORE: In an increasingly frantic round of diplomacy, the UN special envoy on Bosnia has been briefing NATO countries, with the Bosnian Serbs warning that their campaign against the safe havens is not yet over.

RADOVAN KARADZIC, Bosnian Serb Leader: We are not going to tolerate the strongholds of terrorists in our territory, terrorizing the Serbs and killing innocent people.

ROBERT MOORE: Along the Croatian coast, more British elements of the UN Rapid Reaction Force have been landing, but in the run up to Friday's crucial meeting in London of the major powers, the focus is on trying to reach an international consensus.

MR. MAC NEIL: President Clinton today consulted on Bosnia with the leaders of Britain and France. Secretary of State Christopher said the administration's examining military options there. The Senate is expected to vote by tomorrow on the proposal to lift the arms embargo on Bosnia. The White House has threatened to veto if the measure passes.

MS. WARNER: That's it for the News Summary tonight. Now it's on to affirmative action, a debate on taxes, and the House Waco hearings. FOCUS - AFFIRMATIVE ACTION

MR. MAC NEIL: Affirmative action is first tonight. After a five- month review of federal affirmative action programs, President Clinton has concluded the vast majority of them should continue. Rejecting calls for major changes, he ordered federal agencies to review preference programs and eliminate any abuses or inequities. The President spoke this morning at the National Archives.

PRESIDENT CLINTON: Beyond all else, our country is a set of convictions. We know that from the beginning, there was a great gap between the plain meeting of our creed and the meaner reality of our daily lives. Back then, only white male property owners could vote, black slaves were not even counted as whole people, and native Americans were regarded as little more than an obstacle to our great national progress. Thirty years ago in this city, you didn't see many people of color or women making their way to work in the morning in business clothes or serving in substantial numbers in powerful positions in Congress or at the White House. A lot has changed, and it did not happen as some sort of random evolutionary drift. It took hard work and sacrifices and countless acts of courage and conscience by millions of Americans. How did this happen? Fundamentally, because we opened our hearts and minds and changed our ways, but not without pressure--the pressure of court decisions, legislation, executive action, and the power of examples in the public and private sector. Our search to find ways to move more quickly to equal opportunity led to the development of what we now call affirmative action. When affirmative action is done right, it is flexible, it is fair, and it works. I know some people are honestly concerned about the times affirmative action doesn't work, when it's done in the wrong way. And I know there aretimes when some employers don't use it in the right way. They may cut corners and treat a flexible goal as a quota. They may give opportunities to people who are unqualified, instead of those who deserve it. They may, in so doing, allow a different kind of discrimination. When this happens, it is also wrong, but it isn't affirmative action and it is not legal. There are a lot of people who oppose affirmative action today who supported it for a very long time. I believe they are responding to the sea change in the experiences that most Americans have in the world in which we live. If you say now you're against affirmative action because the government is using its power or the private sector is using its power to help minorities at the expense of the majority, that gives you a way of explaining away the economic distress that a majority of Americans honestly feel. Affirmative action did not cause the great economic problems of the American middle class. (applause) So to those who use this as a political strategy to divide us we must say, no; we must say, no. (applause) But to those who raise legitimate questions about the way affirmative action works, or who raise the larger question about the genuine problems and anxieties of all the American people and their sense of being left behind and treated unfairly, we must say, yes, you are entitled to answers to your questions. We must say yes to that. Now, that's why I ordered this review of all of our affirmative action programs, a review designed to look at the facts, not the politics, of affirmative action. This review concluded that affirmative action remains a useful tool for widening economic and educational opportunity. We also looked at the way we award procurement contracts under the programs known as setasides. There's no question that these programs have helped to build firms owned by minorities and women who historically have been excluded from the old boy networks in these areas. It has helped a new generation of entrepreneurs to flourish, opening new paths to self-reliance and an economic growth in which all of us ultimately share. But as with any government program, setasides can be misapplied, misused, even intentionally abused. There are critics who exploit that fact as an excuse to abolish all these programs, regardless of their effects. I believe they're wrong, but I also believe, based on our factual review, we clearly need some reform. So first, we should crack down on those who take advantage of everyone else through fraud and abuse. Second, we must and we will comply with the Supreme Courts Adarand decision of last month. I have directed the attorney general and the agency to move forward with compliance with that Adarand expeditiously, but I also want to emphasize that the Adarand decision did not dismantle affirmative action and did not dismantle setasides. In fact, while setting stricter standards to mandate reform of affirmative action, it actually reaffirmed the need for affirmative action and reaffirmed the continuing existence of systematic discrimination in the United States. (applause) Third, beyond discrimination, we need to do more to help disadvantaged people in distressed communities, no matter what their race or gender. Now, I have asked Vice President Gore to develop a proposal to use our contracting to support business that locate themselves in these distressed areas or hire a large percentage of their workers from these areas. My fellow Americans, affirmative action has to be made consistent with our highest ideals of personal responsibility and merit, and our urgent need to find common ground, and to prepare all Americans to compete in the global economy of the next century. But let me be clear. Affirmative action has been good for America. (applause) Now, affirmative action has not always been perfect, and affirmative action should not go on forever. It should be changed now to take care of those things that are wrong, and it should be retired when its job is done. I am resolved that that day will come, but the evidence suggests, indeed, screams that that day has not come. The job of ending discrimination in this country is not over.

MR. MAC NEIL: Those were excerpts from the President's speech. Now we have three perspectives on it. George Stephanopoulos, a senior adviser to President Clinton, was in charge of the review process. Linda Chavez, the director of the Civil Rights Commission in the Reagan administration, is now the director of the Center for Equal Opportunity in Washington. Clifford Alexander, the director of the Equal Employment Opportunity Commission during the Johnson administration, is now a lawyer in private practice in Washington. Ms. Chavez, what's your general opinion of the President's position after his review?

LINDA CHAVEZ, Former Director, Civil Rights Commission: Well, Robin, I think this was a ringing affirmation of the status quo. I think the President delivered today what was largely a political speech. He is appealing to his political base. He is attempting to shore up the Jesse Jackson wing of the Democratic Party, and I believe he is ignoring principle. He is--has bypassed the opportunity to take a look at these programs and to wipe out preferences on the basis of race and gender and, instead, has essentially said that we are going to keep things pretty much as they are.

MR. MAC NEIL: How do you respond to that, George Stephanopoulos?

GEORGE STEPHANOPOULOS, White House Adviser: Well, I think the President stood up to the political pressures building up across the country simply to wipe away affirmative action, as has been exploited by many Republican candidates. In contrast, he did act on principle, and he based his judgment on the facts conducted during the review. We still, unfortunately, have a long way to go in the fight for equal opportunity in this country. The President believes affirmative action has helped in that fight, but he has called for significant reforms in the program to make sure that it's done in the right way, and that's why he issued a directive to all government agencies insisting that we have no quotas, no preferences for unqualified people, and no reverse discrimination. He's also set up a new program that will help encourage employing poor people in poor communities, no matter what their race or gender, and that's by making sure that we can use our contracting to reward businesses who place those businesses and hire people from those communities. Finally, as Linda knows, the Supreme Court's recent decision in the Adarand case sets a very strict standard for every government affirmative action program. The President has ordered every single government agency to comply with that, to build up the facts to see whether or not there's a compelling government interest to continue that program, and whether or not the program is fashioned in a way that can meet the Supreme Court test. If a program doesn't meet the Supreme Court test, it must go. This is the beginning of that process, and it's very wrong to suggest this is the status quo. In fact, the President has proposed significant reform. But he's standing by his principles, standing by the need to continue to fight for equal opportunity, and to fight for affirmative action against those who would roll it away.

MR. MAC NEIL: Clifford Alexander, Linda Chavez said the speech was political and intended to shore up the Jesse Jackson wing of the Democratic Party. How do you--how do you see it?

CLIFFORD ALEXANDER, Former Director, EEOC: Well, I don't know what politics President Clinton has in mind. I do think that this was a baby step in the direction of educating Americans about black and white in this country. I believe this President set up a straw man when he created the review of affirmative action programs. There was no need to do that. If he had given a proper definition of affirmative action programs, which actually are non-pejorative, they're not setaside programs, they don't do anything extra for women and minorities, if he had done that in the beginning and stood up and said something about it, it would have helped America. But far more importantly, I think the responsibility is to look at what is the status of race in America today, when we have the situation that we have in tobacco and firearms, when we have the situation that there are 64 white supremacist organizations in the state of Pennsylvania today. Race relations have a long way to go in America, and the President of the United States needs to step forward and start to talk directly to white Americans, not with this sort of phantom idea of reverse discrimination. There really isn't any such thing as reverse discrimination. The law says that if there is discrimination based on color, you as a white person can complain, I can complain as a black person. It does not say there is reverse discrimination, putting discrimination against white people in a different category. It is important, but it is far less significant in America, where we were slaves some hundred years ago, than it is against white people.

MR. MAC NEIL: Linda Chavez, what do you say to that, there's no such thing as reverse discrimination?

MS. CHAVEZ: It may surprise you to learn that I happen to agree with Clifford Alexander. I think when the federal government sets aside a percentage of contracts and tells white male contractors, you need not apply, that's plain old-fashioned discrimination. And that, in fact, Robin, is what happens. You have the Department of Transportation setting aside 10 percent under the Service Transportation Act; 10 percent of the contracts under that Act have to be awarded to minority-owned firms. You have the Department of Labor telling contractors that they have to hire 6.9 percent females. And, you know, it's disingenuous of the President to suggest that these are simply goals, that these are somehow not quotas. When you have the federal government telling a, a firm out there that they stand to lose millions of dollars in federal contracts unless they comply with these numerical goals and they do so within a certain timetable, you are going to get those firms actually employing quotas.

MR. MAC NEIL: Well, are you satisfied that that is going to change under the reforms that the President announced yesterday?

MS. CHAVEZ: No, I'm not at all satisfied that that's going to change. I think the President said a lot of things that are going to confuse the American public. He said, for example, we're not going to give preference to unqualified minorities. Well, the problem is that preferential treatment programs now don't necessarily choose unqualified people because the people who create the programs determine the qualifications. What is at stake here is that lesser qualified minorities and women are being preferred over better qualified white males. And this goes on in every major corporation in America today. All of these companies have these programs in place. It goes on in universities, and ironically, you even have minority groups now suffering. You've got at the University of California, you've got Asian students suffering.

MR. MAC NEIL: I just want to go back to--excuse me, I just want to go back to George Stephanopoulos first, then I'll come back to you. On the question of, of whether what Ms. Chavez described is true, in your view, from your review, and is that--are those practices going to change under the reforms the President announced?

MR. STEPHANOPOULOS: Well, it's conceivable that some individual administrative practices could change after the Adarand review, but let's get some facts on the table. No. 1, in the federal procurement area, 96 percent of the federal contracts go to majority white males, not minorities, and in fact, the goal for federal contracting was only met for the first time this year. It has not been met in the past. It is, in fact, a goal. It is not a hard quota. As for what Mr. Alexander was saying, I think we would agree that we still have a problem of discrimination, both on race and gender in this country, and look at the facts. The ATF is a good example. The President spoke to that today, and he said that if any federal law enforcement--

MR. ALEXANDER: But why doesn't--why doesn't the President as he speaks--

MR. STEPHANOPOULOS: Well, let me finish. Please.

MR. ALEXANDER: Well, let me speak to this point. If the President is serious about it, why doesn't he say, as he did in the situation with affirmative action programs, that he wants the entire federal government to review and see whether employees in the entire federal government have participated in any such racist kinds of operation, and they'll be fired the next day? That didn't take place. It was a throw-away line in the speech. If we're going to get serious about this issue, it seems to me that both sides of it have to be treated with the same kind of vigor, and you have to give attention to the powers that the President does have. In fact, the history of affirmative action, which was not covered appropriately, came in an executive order in 1965. And the government had the right when moneys were given to contractors, to cut federal contracts. This government, under your President, has not cut a single contract, so there--

MR. MAC NEIL: Let's just let Mr. Stephanopoulos reply here.

MR. STEPHANOPOULOS: Please let me respond, and No. 1, on the first point, you're wrong on the facts. The President, the Treasury Department ordered a review three weeks ago of the Bureau of Alcohol, Tobacco, & Firearms. The FBI has ordered a complete review, and the President said quite clearly that if any law enforcement official thinks that that was appropriate behavior, they should think about working somewhere else, so you're simply wrong on the facts.

MR. ALEXANDER: I said every employee of the federal government.

MR. STEPHANOPOULOS: Well--

MR. ALEXANDER: That's not every employee of the federal government. That's what he did with affirmative action; he put out a general review of it through the entire government. He could do the same thing here.

MR. STEPHANOPOULOS: Second of all, sir, we do have a principle in this country that you're innocent until proven guilty. There is no evidence of any kind that anyone else in the federal government participated in that act. If we had evidence, we'll investigate. That's the way we do things in this country, as I think you well know. On the broader issue of affirmative action, goals, yes; quotas, no, to answer Ms. Chavez. We need goals, and goals have worked, but they have to be flexible, they have to be fair. They work in the private sector. The President met just the other day with several chief executive officers of major corporations who said by following the goals, they've been able to improve their businesses, to have greater productivity, to do a better job. But we still have a long way to go. The glass ceiling report shows that 95 percent of the top management positions in American corporations now are still held by white men.

MS. CHAVEZ: If I could just ask Mr. Stephanopoulos a question here--

MR. STEPHANOPOULOS: Sure.

MS. CHAVEZ: --because if you are really sincere about getting rid of preferential treatment on the basis of race or gender, why can't you say that all contracts are going to be set out for competitive bid? And if you want to help minority contractors, why don't you give them the kind of technical assistance that's going to help them to be able to compete on a level playing field, help give them that kind of assistance, instead of setting aside a certain level, certain number of contracts and say that we're going to award these to firms based on the color of the skin of the person who owns the firm, or on the gender of the person who owns the firm?

MR. STEPHANOPOULOS: First of all--

MS. CHAVEZ: And why--if I could just follow up with a second, a second point, when you talk about preference, why is it you are unwilling to say it is unfair to give preference to someone who is less qualified simply on the basis of the color of their skin, or their gender? And that's what I want to know.

MR. ALEXANDER: Affirmative action plans do not provide preference for anyone.

MR. STEPHANOPOULOS: That's exactly right.

MR. ALEXANDER: There is nothing that is preferential in the executive order. And Linda Chavez, you know in any employment affirmative action plan--

MS. CHAVEZ: Clifford Alexander, I--

MR. ALEXANDER: --there is nothing that is stated in it, nothing in the law--

MS. CHAVEZ: You're absolutely right.

MR. ALEXANDER: --nothing in the executive order. Of course.

MS. CHAVEZ: You are absolutely right about that.

MR. ALEXANDER: So then why have a review of affirmative action plans?

MS. CHAVEZ: The departments that, in fact, enforce the executive order have within their regulations stipulated that every single firm that is minority-owned or female-owned is to be considered socially and economically disadvantaged and is able to--

MR. ALEXANDER: I think we're talking about two different things.

MR. MAC NEIL: Let's have Mr. Stephanopoulos. You asked the question of George Stephanopoulos. Let him answer.

MR. STEPHANOPOULOS: First of all, to answer the second part of your question first, this administration has done more than any other administration to make sure that all firms can qualify for loans. And, in fact, we show that there's a great need for that right now. The Chicago fed study just out the other day showed there still is a bias in lending to minorities who are seeking loans. And we think we should do more technical assistance. Secondly, on the issue of sole source contracting, I think you well know, as you've worked in the federal government, that thousands, the--thousands of federal contracts are given out on a sole source basis not just to minorities but to huge defense contractors and many, many other businesses. Sometimes that's the only way to get the business. Again, a very tiny minority--

MR. STEPHANOPOULOS: George, you're being disingenuous here.

MR. MAC NEIL: Excuse me, I would like to--

MR. STEPHANOPOULOS: Please let me finish. A very tiny minority of, of contracts go to minorities right now. 96 percent go to the majority, barely 4 percent go to the minorities.

MR. MAC NEIL: Linda Chavez, I'd like to ask you a question. The President said--and was warmly applauded for it by the group that was there--affirmative action has been good for America. Do you believe that?

MS. CHAVEZ: Well, it depends on what you mean by affirmative action?

MR. MAC NEIL: Well, taking what he meant, the way he defined it.

MS. CHAVEZ: What Bill Clinton means by affirmative action is preferential treatment of people on the basis of race and gender. No, I don't think that's been good for America, and I think one of the reasons that we have as much racial animosity and hostility right now is because Americans are divided by these issues.

MR. MAC NEIL: You believe the racial hostility in this country is now because of affirmative action?

MS. CHAVEZ: As a matter of fact, Robin, there have been academic studies that have done polling where they have actually done a split sample and asked people questions about their attitudes about minorities, first asking them their attitudes about affirmative action and then asking other general questions, and it is remarkable what happens if you--

MR. MAC NEIL: How do you respond, Clifford Alexander?

MR. ALEXANDER: I would say, first of all, it's a bum rap to say that President Clinton believes in preferential treatment. That's nonsense. What I think he perhaps did wrong was to engage in a review as a political reaction to Dole and Gramm and Wilson and all these folks who are trying to appeal to white people and their baser instincts, rather than appealing to the better instincts of the better part of this society. This President, I think, in his review and in his statement which I've read through a few times does nothing that would imply that he gives preferences to any group of people, white, black, Latino, Asian, or any category of people. His actions do not provide that. I do think that when people misuse affirmative action, what they do is, they imply that the black person working next to them is less than they are, that the white person in school has superiority to the black or Latino or Asian person that's in that same school because they allegedly got there because of affirmative action. That plain isn't true. There are examples of people who don't do as well who are minorities and minorities who do better. But if we stop this discussion that implies somehow that when you are involved in affirmative action or support affirmative action that you're giving a preference to a group of people, you lead this country ahead.

MR. MAC NEIL: George Stephanopoulos, you were in charge of the review. Ms. Chavez made the, the claim at the beginning that this was pure politics, the only reason for this was politics. And Mr. Alexander has said it from the other side of the, other side of the argument, that that's what it was, that he was responding to, to pressure from Republican candidates.

MR. STEPHANOPOULOS: Well, I think first of all, the President thinks it's responsible to review every government program. And that's what the reinventing government initiative, headed by Vice President Gore, has been all about. It would be irresponsible not to look at programs and just to continue with the status quowithout an evaluation. Secondly, if what you mean by political is, were attacks coming on these programs and did the President want to make sure that he had a defense based on the facts, then I guess that's a political--that's a political act. He wanted to make sure that when he got in this debate it was fully armed with the facts. He asked us to look at every program, to take an honest look to see how they're working, and that's what we did.

MR. MAC NEIL: That was the first part of my question. The second part is: Do you--do you think that he has, therefore, answered, effectively answered the, the charges that were being made about affirmative action?

MR. STEPHANOPOULOS: I think today he went a long way in putting out the history of affirmative action, how it's supposed to work, as Mr. Alexander says, there is no suggestion of preferential treatment in affirmative action, and in saying that we have a long way to go from here, we can't give up the fight, but we do need to have reforms. I think this is going to be a political issue--

MR. MAC NEIL: And Linda Chavez, do you think--

MR. STEPHANOPOULOS: --for the next 16 months.

MR. MAC NEIL: --do you think, just to conclude this, that the President has in any way defused that issue today?

MS. CHAVEZ: No. I think this issue is very much alive. I think it's going to carry not just into the next election but into the next administration.

MR. STEPHANOPOULOS: Robin, there are going to be an awful lot of Republican politicians over the next year like Pete Wilson who will use code words saying that affirmative action causes tribalism, because they want to stir up the racial divisions that have helped the Republican Party in the past. What the President was trying to do today was to search for common ground, to bring a healing voice- -

MR. MAC NEIL: Okay.

MR. STEPHANOPOULOS: --to this debate. And that's what he's going to continue doing.

MR. MAC NEIL: We have to leave it there. Thank you all for joining us.

MS. WARNER: Still ahead, a tax debate and the Waco hearings. FOCUS - TAXING DEBATE

MS. WARNER: Next tonight, how to reform the income tax system. Currently, Americans' income is taxed on a five-tiered scale, from a low of 15 percent to a top rate of nearly 40 percent, with myriad exemptions and deductions. Some members of Congress have offered some radical reforms. Under a proposal authored by House Majority Leader Dick Armey, all Americans would pay a flat income tax rate of 17 percent. Individuals would not pay tax on interest, dividends, and other income earned from investments, and all deductions would be eliminated. Under an alternative plan offered by Minority Leader Richard Gephardt, income would come to be taxed at five different rates, ranging from a low of 10 percent for families earning $60,000 or less to a high of 34 percent. All deductions would be eliminated, except for home mortgage interest. Investment income would be taxed, and so would contributions to pension and retirement plans and fringe benefits like health insurance. Where is Congress going with these proposals? Congressmen Gephardt and Armey join us now to talk about that. Welcome, gentlemen. Before we debate the merits of each of your proposals, each of you tell me, starting with you, Congressman Gephardt, what is it most of all that you think needs fixing about the current system?

REP. RICHARD GEPHARDT, Minority Leader: I think we need to get the lowest rate for the greatest number of people, and I've tried to do that by getting a 10 percent rate for people earning under $60,000 or 75percent of the American people. I think second, you need to get some simplicity into this system. We think over half the people under our plan would not have to file a return at all. And third, we need to stop the tax game here in Washington, which is individuals and groups ask for and get tax breaks. In order to give them, we have to raise the rates for everybody else. I think that's got to end. We can't micromanage the country and the economy from Washington.

MS. WARNER: Congressman Armey, how do you assess the current system, what needs fixing?

REP. DICK ARMEY, Majority Leader: Well, there's no doubt about it. I think Dick and I both agree people think it's too complex, it's complicated, costly to file, costly to administer. We've got to simplify it, and we have to make it a fair tax code and one the American people will accept. The problem with the code, as they know it today, it is, it is not fair to them; they won't accept it. They have trouble complying with it, and it's too costly to comply. That, plus we need to put something in the tax code that enables a greater inspiration of growth in the private sector of the economy.

MS. WARNER: Okay. One thing you both seem to agree on is the need for simplicity, so let's look at that first. Congressman Gephardt, you are retaining five different tiers, five different tax rates. On the face of it, certainly, Congressman Armey's looks simpler. Why did you--why are you staying with a progressive tiered system?

REP. GEPHARDT: Well, we've always had that, and I think it's fair to do that. I wanted to get the lowest rate for the most number of people we could possibly get. And we were able to get, as I said, a 10 percent rate for 75 percent of the American people. That is a, a great goal to hit, because it means most Americans could look at this system and say, gee, if I can figure out what my personal exemption is, I don't even have to file a return, take the 10 percent out in withholding, and that's the end of taxes, no more April 15th blues, no more worrying over the kitchen table with a bunch of forms. I also believe that we need a progressive system. We've always had one since the income tax started. I think as you make a little more, you have the ability to pay a little more, but my top rate of 34 percent doesn't come into effect until you get to dollars over $265,000 a year. So it's way up there. And that, I think, is appropriate in the income tax system in this country.

MS. WARNER: Congressman Armey, why are you rejecting the whole notion of progressivity?

REP. ARMEY: Well, first of all, I don't reject the whole notion of progressivity. With my tax plan, there is even progressivity as well as fairness. The fact is with a flat rate, if you have 10 times the earning of another person, you'll pay 10 times the taxes. But given a generous family allowance, a person with $33,000 pays no taxes. A person with a family of four, that is, that has $50,000 spends 4 percent of their income in taxes, and at $200,000, they spend 14 percent. So you have progressivity and simplicity and the fairness of everybody being treated exactly the same with the generous family allowance. The other thing is, I have to tell you, you cannot get simplicity with a multiple rate tax system. You must have a single flat tax rate. That's the only way you can get a flat tax. Also, I can promise you that if you leave the playing field for itemized deductions out there with such things as a home mortgage deduction, you will not end up with a, with a simple tax code. You are going to have a very complex tax code. I think people want simplicity, honesty, and fairness, and they get it with my, my code.

MS. WARNER: What about Congressman Gephardt's point that as people earn more, they are in a position to pay more, a higher percentage of their income in taxes?

REP. ARMEY: Well, as I just said, first of all, if you have a 17 percent flat tax, 17 percent of $100,000 is twice as much as 17 percent of $50,000. But given the family exemption, if you have $30,000 in a family of four, you pay nothing in taxes. That's about 20 million low-income Americans. If you have $50,000, you pay 4 percent of your total income in taxes. If you have $200,000, you pay 14 percent. So you get that progressivity as the family allowance dissipates over higher earnings.

MS. WARNER: Before we confuse our viewers with too many numbers, Congressman Gephardt, what about Congressman Armey's point that, in fact, because of his family exemption at the lower end of the scale, there is progressivity built in?

REP. GEPHARDT: Well, I think there is a lot of regressivity in his plan. I think it would hurt the middle class. And let me say why. First of all, I believe that Dick's plan doesn't bring in as much revenue as today's code. We can argue about how much money ought to be brought into the government, but we've got to have an apples and apples argument. So I believe that if he were to bring in as much as today's code, he'd have to either lower that exemption or raise his rate to about 23 percent. Now, if you assume that, I think that's bad for the middle class. Even if you don't assume it, and I put my plan on his level of income coming into the government, I think his plan is much worse for the middle class. I believe that for people earning over $500,000 a year, his plan would cause about $100,000 tax cut for them. But for people earning $50,000 a year, I think their taxes under his plan would go up by four or five thousand dollars. I don't think that's what we need to do. The middle class in this country is having a hard time now. Their wages are not going up. The last thing in the world we need to do is to do tax reform that penalizes the middle class and helps people at the top.

MS. WARNER: Congressman Armey.

REP. ARMEY: Well, let me just say, first of all, I must defend myself. What Mr. Gephardt has just said is if you rewrite my plan and if you change the rates, then you're going to get a bad impact on the middle class. Let me just tell you that we have gone through our numbers. We're going to have joint tax score our numbers, and I can promise you that we will meet our goal of getting within $40 billion of revenue neutrality with the rates and the family allowance structure that I have out there. We will make up that $40 billion in spending reductions and interest cost reductions because of the decreased interest rates that will naturally follow our treatment of interest. And the fact is the negative impact on the middle class that Mr. Gephardt alleges, he alleges by his own admission would happen if you had a 23 percent rate. Nobody is offering a tax plan with a 23 percent rate, unless one of your five is 23 percent. I don't know.

MS. WARNER: But what is your calculation, Mr. Armey, if you weren't able to get these additional spending cuts and certainly in the budget battle now we're seeing how hard it is to get these massive spending cuts, what would your flat rate have to be if you had to come in revenue neutral?

REP. ARMEY: Well, first of all, I, I am confident we will get that. A congress that has the discipline and the foresight to pass a truly flat tax is going to have the ability to make these reductions, especially when most of it comes from the natural reduction in expense that comes from the reduction--

MS. WARNER: But what if you can't?

REP. ARMEY: Well, can't is not something that's in my vocabulary. I just don't live with can't.

MS. WARNER: I see. All right. Let's turn to another big difference between the two plans, and that is, Congressman Armey, you would not tax any income earned from investments, savings.

REP. ARMEY: That's not true, first of all. All income, every dime worth of income that's earned in America is captured in my flat tax and taxed one time with the same 17 percent rate. So it is patently untrue to suggest that there is any part of income that escapes the Armey flat tax.

MS. WARNER: Let me just clarify this. Are you saying that the companies would pay--would an individual, if I had $100 in the bank and I made that year $5 on that $100, would I pay taxes on that $5?

REP. ARMEY: No. The taxes that you have are taxed at their source. It's the same right now as you have withholding. I have a wage and the company withholds the taxes, remits it to the government. If I were a stockholder, they would withhold my taxes and remit it to the government. What would be different under my plan is we wouldn't pay taxes on that income at the time, at the place where it's earned and then a second time when it's distributed to me.

MS. WARNER: Congressman Gephardt.

REP. GEPHARDT: Can I--what's going on here is that Dick is really suggesting that we either get rid of the corporate tax or we get rid of the tax on capital gains or investment income. And I just don't think that's right. I think you need, as we always have, to have a corporate tax and also a tax on capital gains. He's zeroing out capital gains, which is the largest portion of income for people at the top. This is the largest redistribution of income in the history of the country. And, again, in a world where the middle class is working harder every year and making less money and where people at the top are making more and more money, where the disparity of income in our country is getting larger and larger between the people at the top and the people in the middle class, the last thing we need to be doing is trying to give the biggest tax decrease in history to the people who have it made, the privileged few.

MS. WARNER: But Congressman--

REP. ARMEY: Let me just say what Mr. Gephardt is saying is that he believes it's fair to take one person's income and tax it only once and take another person's income and tax it only twice. And he tries to justify this by the unfounded information that it is only rich people that get divided income. 69 percent of the ownership of capital in America is either in the retirement programs of working Americans or in the hands of retired Americans.

MS. WARNER: What about that point, Richard Gephardt?

REP. ARMEY: These are not rich people.

MS. WARNER: What about that point, Congressman Gephardt?

REP. GEPHARDT: Well, the point I want to make is that if you do what Dick's talking about, all I can tell you is that the people who have the massive capital gains are people at the top. They would have massive tax cuts. We believe under his plan people making $500,000 a year would have a $100,000 tax cut from where they are now. So the rich get richer, and the middle class gets poorer. I don't think that's the direction we ought to move.

MS. WARNER: Congressman Gephardt, does your plan, do you believe, have anything that does encourage savings and investment?

REP. GEPHARDT: You bet. We get the lowest possible tax rates we can get. And, again, a 10 percent rate, to me, for 75 percent of the American people is the best incentive I can think of to get people to save. Let's get out of people's way. Let's not try to advise them on every investment they make. Let's let them decide where the investment should be made. That's the best incentive I can think of, rather than trying to micromanage the economy from Washington.

MS. WARNER: Congressman Armey.

REP. ARMEY: Well, my plan, of course, does, in fact, with treatment of both savings investment will encourage much more of both. And even the critics of my plan have suggested that the increase in savings is going to bring down the interest rates and help out, of course, the home buying market. So I am much more confident that the impact on growth from savings investment is there in my plan than I am in Dick's plan. I'd like to study his more, but if it's in his plan, I don't see it as clearly and to the degree as I see it in my plan. Now, that's because I've had more time to work with my details, I'm sure.

MS. WARNER: Congressman Gephardt, let me ask you quickly to respond to another point Mr. Armey just raised, which was the minute you open the door to any deductions, as you are to the home mortgage interest deduction, you're really inviting down the road the lobbyists to come back in and each year to add more and more deductions. Why are you retaining that one deduction?

REP. GEPHARDT: Well, I thought long and hard about that, and I came to the conclusion that that one should be retained. Let me tell you why. First, the American dream is to own a piece of the rock, to have a piece of property that's yours, that you have to take care of, and that is your life savings, and most people in the middle class have done that. Second, it is the most important part of our economy, not only building houses but what's in the house, the furniture and so on, and the things around it. And I don't want to hurt the most important part of our economy. Third, most people's nest egg is that house, and I believe if we take the deduction away, at least for a time, the value of all houses will go down. I don't want that to happen. So when we're talking about investment, let's remember the thing the middle class most invest in, and their No. 1 investment is that house. Let's keep that going but knock everything else out. And on that score, I have a national referendum. If we get all the loopholes on the table and the rates as low as we can get 'em, I'm willing to say we will not raise the rates on the income tax unless there's a vote of the American people to say to do that. That is a major step toward restoring faith with the American people that this tax reform will finally stick.

MS. WARNER: We're just about out of time. Congressman Armey, could you support that referendum?

REP. ARMEY: Well, let me just say first of all, Mr. and Mrs. Home Owner, if you get a tax deduction for your home mortgage, remember, Mr. Gephardt will tax any gain in the value of that to you as a capital gains later. But the idea of a national referendum, I think is, again, a clumsy idea. What we did with our bill is we said it takes 2/3 vote in the House of Representatives to raise the tax, make deductions, add deductions, change the structure, or lower the family exemption, a 2/3 vote to raise that tax on the American people.

MS. WARNER: Gentlemen, we're just about out of time. Very quickly, each of you predict when something like this might pass the Congress, this year, next year. Mr. Gephardt.

REP. GEPHARDT: I think we've got to have a full debate. I think people have to understand these plans. They need to be part of the debate, and that's why this show tonight is a good start.

MS. WARNER: Congressman Armey.

REP. GEPHARDT: And then I think probably it's a 1997 issue after the election.

MS. WARNER: 1997.

REP. ARMEY: I agree with Dick. My plan will be enacted into law sometime in 1997.

MS. WARNER: After the election. Thank you, gentlemen, very much. Thanks for being with us. FOCUS - WACO REVISITED

MR. MAC NEIL: Now, the Waco hearings. Two House subcommittees began joint hearings today on the events surrounding the 1993 government raid on the Branch Davidian compound near Waco, Texas. Betty Ann Bowser has our report.

BETTY ANN BOWSER: Republican co-chairman Bill Zeliff of the House Oversight Committee on Waco tried to get members to focus on the role of law enforcement in the tragedy.

REP. BILL ZELIFF, (R) New Hampshire: Many have tried to take these hearings off track. Once and for all, these hearings are not about the Oklahoma City bombing, the Brady Bill, the militias, gun control, or any other issue. They are about constitutional oversight. We have sought factual information from every available source. We have done so doggedly, and I'm proud of that. I make no apology for seeking the truth. As we listen carefully to every witness and as we search together for the answers to the many unanswered questions surrounding the events at Waco, I would urge my colleagues to back away from the attraction of political rhetoric.

MS. BOWSER: But Democrats quickly shifted to another issue, the role of the National Rifle Association in preparing for the hearings.

REP. CHARLES SCHUMER, (D) New York: From the beginning, these hearings have had the odor of bias hanging over them, and over the last week, we've discovered where that smell is coming from, the National Rifle Association. We have uncovered covert payments by the NRA to high-priced explosive experts, lawyers associated with the NRA being sneaked onto panels, and finally, a witness who was deceived by NRA employees passing themselves off as congressional staffers. It's no wonder that the NRA has tried to hide their role in this hearing. Everyone knows their bias. This is the organization that buys advertisements calling law enforcement "jack-booted thugs."

REP. CARDISS COLLINS, (D) Illinois: This is an unprecedented case of an outside advocacy group using congressional hearings to further their own agenda and at the same time potentially tampering with congressional witnesses. I've called upon the chairman of our committee to immediately take action to remove the stain of this outside involvement. To further wipe the slate clean, the chairman should also disclose all contact staff has had with these individuals. Third, I am concerned that some members--that for some members, the true agenda is not to find the truth about Waco, but, instead, it appears to be an effort to attack the nation's gun laws.

REP. TOM LANTOS, (D) California: Mr. Chairman, members of your staff were directly responsible for the surreptitious and sinister involvement of the NRA in the preparation for these hearings. I think you should have an opportunity to tell the American people what the facts are concerning the NRA members of your staff and preparations for this hearing. Thank you, Mr. Chairman.

REP. BILL ZELIFF: I think that the key thing here is that we will be held accountable for our results, and I think that's the bottom line. So I think with, with--I think we'd like to move forward.

MS. BOWSER: And he never did answer the question. The most dramatic testimony of the day came from a surprise witness brought on by ranking minority member Karen Thurman. She was fourteen-year- old Kiri Jewel, who joined David Koresh with her mother when she was four years old.

KIRI JEWEL, Former Branch Davidian: David was very strict about how we should live. He only spanked me twice, though I knew he spanked other people or had them spanked. He personally spanked me because I said I was going on a diet when I was about eight years old. He used the big wooden boat oar they used for adults, not the wooden spoon they called "little helper." The second time David spanked me and the other kids it involved getting candy from vending machines against his teachings. Before spanking us that time, he bought an enormous lot of candy and made us eat it till we were sick. It was common for David to sleep in a bed with women and children. Sometimes I fell asleep in his room after a meeting, or maybe I'd fall asleep on his bed watching MTV. I didn't even think about it, because the women and girls were all David's wives, or would be, and many of the kids were his too. Even if he wasn't really our father, we were taught that he was our real father. I have slept together with him and my mom and Lisa Ferris. I've slept with him and Iasha Garvis. Iasha was older than I was. She was probably thirteen when I was six or seven. She became one of David's wives when she was fourteen and had a baby for him. When she was pregnant, I never saw her. She was kept hidden because she wasn't an adult.

MS. BOWSER: And then, with her father, David, sitting beside her, Kiri in graphic detail described how she lost her virginity to Koresh at the age of ten, and how he taught her and the other children methods of suicide.

KIRI JEWEL: I asked my mom what would we do if we ever left here. She said, "We'll never leave." So I asked--I never liked it there, but I wouldn't leave my mother, so I figured I'd be there with her till the end. The end meant the great battle between David and his people and the rest of the world. We were always waiting for and preparing for the feds to come in. The people in the group didn't have to train for war but if they didn't choose to, David would ask them why not. Dana Okimoto and Janet McMean were in nursing, and Janet said that maybe Janine, who was also a nurse, could and would provide cyanide so we could all commit suicide if it came down to it. It was also accepted that the best way to shoot yourself, if necessary in this battle with bedlam was to put the gun in your mouth back to the soft spot above your throw before pulling the trigger.

MS. BOWSER: Republican Bob Barr, a former prosecutor, questioned another Branch Davidian, 26-year-old David Tibodeau, who was one of nine Davidians to survive the April 19th fire.

REP. BOB BARR, (R) Georgia: Were you familiar with Mr. Koresh's daily habits, what he did?

DAVID TIBODEAU, Former Branch Davidian: Yeah.

REP. BOB BARR: Including on what occasions and under what circumstances he would leave the compound?

DAVID TIBODEAU: Pretty much. I mean, I lived with him on a daily basis on and off. You know, I had certain things that I did. I was really concentrating on music, and I, obviously, would not be questioning him when he would go to town and things, but there were times when, you know, I would go various places with him. So, I guess, yes.

REP. BOB BARR: Okay. Was there any regularity to his, his leaving the compound? Did he leave certain days, certain days of the week, certain times, or was it sporadic?

DAVID TIBODEAU: It was sporadic. I mean, there would be times when he would not leave at all, when he would just stand and give studies, and there would be other times when he would leave. But it was--he left frequently.

MS. BOWSER: Tibodeau was also asked about the use of drugs in the compound.

DAVID TIBODEAU: There was absolutely no drugs at Mt. Carmel, period, other than alcohol once in a great while when it was--when we worked particularly hard, and, you know, everyone felt that they just needed to unwind. But generally, anything like that was done, there was a sobriety there that was to be practiced, and anything like that that was done was on a very sporadic basis, and David Koresh was absolutely against drugs. David Koresh--

REP. BOB BARR: Is it possible that there was a, a laboratory manufacturing controlled substances you hadn't known about?

DAVID TIBODEAU: Not when I was there. I've been all over that property, and I never saw anything that would even--that I would even think would be. That's absolutely impossible.

MS. BOWSER: Tibodeau also testified on another key point. He said the Davidians never had a "plan" to set themselves on fire that final day. RECAP

MR. MAC NEIL: Again, the major stories of this Wednesday, President Clinton said he backed federal affirmative action programs but called for some reform. The stock market fell 57 points on heavy volume. This evening the House of Representatives voted to block further spending on President Clinton's $20 billion plan to help the ailing Mexican economy. The bail-out had been supported by congressional leaders of both parties. Tonight's House vote against it was 245 to 183. Good night, Margaret.

MS. WARNER: Good night, Robin. That's it for the NewsHour tonight. We'll see you again tomorrow evening. I'm Margaret Warner. Good night.