The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MAC NEIL: And I'm Robert MacNeil in New York. After tonight's News Summary, Business Correspondent Paul Solman examines the state of the U.S. economy, Spencer Michels reports on the UN's 50th anniversary, and Elizabeth Farnsworth discusses today's move in California to roll back affirmative action. NEWS SUMMARY

MR. MAC NEIL: Bosnian Serb Leader Radovan Karadzic today warned that any attempt to free the UN hostages by force would result in slaughter. The Serbs reportedly detained a civilian UN worker for the first time today. They continued to hold more than 300 UN peacekeepers. Secretary of State Christopher rejected a Serb offer of talks on the crisis. He said the Serbs are looking for concessions from NATO. Meanwhile, more British forces arrived in neighboring Croatia to reinforce the troops already in Bosnia. Britain's Defense Secretary said Britain and France are setting up a rapid reaction strike force to protect UN peacekeepers there. There was another day of heavy fighting in Gorazde. Thirteen civilians were wounded. Several shells hit a UN-occupied building in the so-called safe haven area. There were no casualties. Jim.

MR. LEHRER: In economic news today, Americans' personal income rose .3 percent in April. Consumer spending was up the same amount. But orders to U.S. factories fell 1.9 percent in April, the biggest drop in nine months. All three reports came from the Commerce Department. K-Mart announced today it will eliminate 5800 jobs and close 72 stores. It's part of the discount retailer's restructuring plan.

MR. MAC NEIL: President Clinton took a ride in big sky country today on a horse called Fire Power. He donned jeans, boots, and a cowboy hat as he made the campaign-style visit to the Billings, Montana, area. He was there to renew his attack on budget cuts recently passed by Congress. He said the cuts endangered farmers and U.S. competitiveness in agricultural markets.

MR. LEHRER: The governor of California eliminated several affirmative action programs today. Governor Pete Wilson called it a new chapter in the journey toward a colorblind society. He said affirmative action amounted to reverse discrimination. His executive order prohibits preferential treatment based on race or gender in state hiring and contracting. He also asked California's colleges and universities to change their affirmative action admissions policies. We'll have more on this story later in the program.

MR. MAC NEIL: Authorities in Russia today launched a criminal investigation in connection with Sunday's earthquake on Sakhalin Island. They're looking into whether poor building construction led to the high number of deaths. Six hundred ninety bodies have been discovered so far, and officials said the toll will probably reach about two thousand. Rescue workers pulled six more survivors from the rubble today, including a three-month-old girl. Officials said they would search for survivors for another five days. Those are the top stories in the news. Now it's on to the U.S. economy, the UN anniversary and affirmative action in California. FOCUS - UPS AND DOWNS

MR. LEHRER: First tonight, the U.S. economy and what all of the recent numbers about it really mean. Our economics correspondent Paul Solman is in charge.

MR. SOLMAN: If it's economic data you want, it's there for the taking whenever you want it. Today, for example, factory orders down, personal income and spending up, however, although only moderately. K-Mart announced it's eliminating 5800 jobs, closing 72 stores, but the Dow Jones Industrial Average closed at an all time high. Now, overall, the economy as measured by GDP is still growing but much slower than previously, hence our question: What do the numbers add up to and what do they tell the experts about the economy? And we have some experts, predictably enough, with us. Lawrence Lindsey is in Washington. He helped set the nation's monetary policy as a member of the Federal Reserve Board of Governors. Sandra Shaber forecasts the economy's ups and downs for the WEFA Group, a business consulting firm in Philadelphia. And that's where she is. David Munro does the same for the financial newsletter "High Frequency Economics," which comes out every day out of New York. And David Gordon studies the labor market as an economics professor at the New School for Social Research, also in New York, and he's with us here in our studio. Now, Lawrence Lindsey in Washington, most of the recent signs suggest an economy that's slowing down. What do the numbers tell you, and by extension, I suppose, the Fed?

LAWRENCE LINDSEY, Federal Reserve Board Governor: Well, I think it is true. The economy is slowing down. I think it's slowing to a sustainable pace, one which is probably appropriate for this stage of the business cycle.

MR. SOLMAN: So you like what you see. You think you guys in the Fed, you people in the Fed have been doing a good job?

MR. LINDSEY: Well, our job is to -- well, it's been described as taking away the punch bowl before the party really gets going. I would say the key there is we want people to have a good time but not wake up with a hangover. And so far, it looks like that's pretty much what's happened.

MR. SOLMAN: This is the -- this is the famous -- to use another cliche -- this is the famous soft landing, right, that we hear so much about, and we should ease into a period of relative economic - - it's not boom, but it's not bust -- it's just a soft landing, a nice, easy end to the good times.

MR. LINDSEY: It sounds like a good description.

MR. SOLMAN: And you believe that's what's happening?

MR. LINDSEY: I think that's what's happening right now.

MR. SOLMAN: Sandra Shaber in Philadelphia, I take it you don't fully agree with this prognosis?

SANDRA SHABER, Economic Forecaster: Most of the numbers point to the kind of soft landing we're talking about. That means an economy that has slowed down enough to avoid inflation and at the same time avoid a slide, which would take us into a deteriorating job market and more unemployment. I think that's where we're heading. But there are still some things to worry about. And I think for good planning, we ought to look at some of the worrisome signs.

MR. SOLMAN: And the worrisome signs to you are what?

MS. SHABER: First and foremost, there has been, in fact, some deterioration in the job market, and it's going to be the next couple of months that tell us just how good or bad the job market is. The job market is really central to much of our economy.

MR. SOLMAN: And when you say there's deterioration in the job market, you mean people are losing jobs, or not getting them as fast as they should be, or what?

MS. SHABER: We're not putting extra jobs on. We're not growing extra jobs the way we did last year. The job market has slowed considerably since the beginning of the year. And we've even had some uptick in the unemployment rate. Not only does that mean fewer paychecks, but it certainly strikes fear into the hearts of lots of people, and as a result, we've seen an erosion of consumer confidence just in the last month.

MR. SOLMAN: So you look slightly worried but not terribly worried. Is that a fair description of how you feel?

MS. SHABER: Well, the -- there are signs to worry about, and what we ought to do is base our planning, whether we're consumers or businesses, we ought to base our planning on the soft landing, a moderate to slow growth economy, but we should be doing some contingency planning and asking ourself, well, what if those signs point to a harder landing than what we're talking about now.

MR. SOLMAN: Okay. We'll get to what we might do for that, but, David Gordon, you've been on the show before, and you've been somebody who's warned about the Fed overdoing it, i.e., raising interest rates too high, slowing the economy too much, and causing not a soft landing but a hard landing, and you haven't thought too much of the boom that's been going on in the interim.

DAVID GORDON, Economist: To build on the metaphor that Lawrence Lindsey used before, or to divert it, it's not that they're taking away the punch bowl before the party gets out of hand. It's that a lot of -- millions of Americans were never invited to the party in the first place. The problem with the growth that we've been experiencing in the 1980's and in the 1990's, straight through this spring, is that real hourly wages have been falling for most Americans, for the vast majority of workers. What's that meant is that workers have had to work extra time, more people in the family have had to work, job insecurity has been rising. Much of the employment growth over the last three, four years has been so- called contingent workers, temporary workers, people who don't have benefits, don't have job security. I have a colleague who's been doing some training sessions on economic issues with working people. Recently he had workshops involving about a hundred workers, and he asked them: How many of you, or who would put up your hands to say that you feel secure about your jobs over the last five years? Zero. Not one out of those hundred workers feel content as they look forward to the future.

MR. SOLMAN: Now, you've, you've talked about this. We've done a taped piece with you talking about this very thing. Are you now worried that as the economy begins to slow, it will really exacerbate this situation, make it much worse than it is, or is this just something we have to live with as sort of the economic tenor of the times?

MR. GORDON: Well, there's part of the cycle, and there's part of the trends. The cycle is that the economy is slowing down, and that is going to drive up the unemployment rate probably, though, as usual, it's hard to project. And that means that a lot of the people who've been experiencing job insecurity are going to feel it worse. But the longer-term trends have been going across the cycles. Wages declined through the long expansion of the 1980's. They've been declining in real terms since the recovery in 1990, 1991, '92, and so we have to worry at least as much about the longer-term trends, and I would say worry even more about the longer-term trends than the short-term events of the recent months.

MR. SOLMAN: So do you think that the Fed overshot -- I'll get to David Munro in just a second -- but do you think that the Fed overshot by raising interest rates too high?

MR. GORDON: I think the Fed's priorities are very misplaced. I think that with respect to the Fed, as far as the American people are concerned, the chickens are coming home to roost. They don't really set policy with an eye on the interests of the vast majority of Americans. They set it with respect to inflation rates and frankly, primarily with respect to the interests of the financial community. That's their priority, not the rest of America.

MR. SOLMAN: We'll let the Fed respond in a second, but David Munro, let's just get the last take here on the soft landing or not, the cycle he's talking about.

DAVID MUNRO, Economic Forecaster: Let me pull together just a few of the comments that have been scattered around here, because economists have been talking about a slowing down of growth, but still growth, a soft landing, which like in flying is something that's more comfortable than a bust and probably more long-lasting than a boom can ever be. In essence, as Sandra suggested, we've got numbers that are reasonably decent right now on the economy on the labor markets, but they're just a little worrisome. They've weakened some, and I think we need to notice that the numbers at this point on how fast people are losing jobs, jobless, unemployment claims such as we had today are not strong, but they're not consistent with a recession either, and the same is true of many of the other numbers we're getting at this point. The Fed, I think, cannot be imagined to be the sole hand on the tiller of the economy. It's the fact that as has been suggested here consumers are more wary than they were in the past. They're not as spendthrift as in the past. Business people planning capital spending, the same is true. They've all become a little less cyclical than in the past. Remember, two years ago we were all talking about how sluggish this expansion was. It was evolving slowly. At this point, it's kind of settling down a bit slowly, and as I think Mr. Lindsey suggested, we really have an outcome here that's a little better than I've seen in some past experiences, not perfect. David is quite right.

MR. SOLMAN: Well, you're economists. You're never going to say it's perfect, I'm sure of that. Mr. Lindsey in Washington, do you think that the Fed has -- that you, among others, and the extent to which your hand is on the tiller, have moderated the famous business cycle, the ups and downs of the economy? I mean, are you confident that you've got a better hand on the tiller, a better handle on the economy?

MR. LINDSEY: Well, I hate to make the prediction and have it turn out to be false. One thing I'd point out, though, is that the worst years for real wages for 1979 and 1980, when they collapse, those are the high inflation years at the end of the Carter administration. I think the worst thing we can do for American workers is to go back to high inflation, a point to respond to Mr. Gordon. The point about having a softer landing, again, the trick here is to moderate, andI think we have. We had inflation peak to double digits in the early 80's, 6 percent in the late 80's. I think we're going to have a peak of inflation in this cycle that's perhaps 3 1/2 percent. And the same thing is true on the down side. We had, as you remember, 9, 10 percent unemployment in the early 80's. We got up to 7 in the late 80's, and this cycle I doubt that we'll get that high. So I think in general, yes, we have managed to moderate the cycle over the last 15 years.

MR. SOLMAN: But Prof. Gordon says that basically you're entire policy, you've moderated the cycle, but the problem is that millions of people aren't invited to the party to extend, you know, use his metaphor extending yours, and that you don't care, I mean, that your policy isn't geared toward caring about lots and lots and lots of Americans.

MR. LINDSEY: Again, the worst time American workers had since 1973 were the years 1979 and 1980, when real wages collapsed. We don't want to repeat that. In fact, they rose during most of the 80's. It took the entire decade of the 80's to make up for those two disastrous years of high inflation, and we don't want to see those return. I think we're acting in the interests of all Americans by doing that.

MR. SOLMAN: Prof. Gordon is shaking his head here, so I'll acknowledge him out of turn. Yes, why are you shaking your head?

MR. GORDON: Well, first of all, real wages increased for all employees, as I've tried to point out on this show several times before. It makes much more sense to look at -- if you're talking about the vast majority of Americans -- to look at real wages for production and non-supervisory workers, about 80 percent of employment. The real wages for all employees include the salaries of top management, and we know they've been doing well. They were in the party from the beginning, so that's not the issue. He raises the threat of the kind of inflation we had in '79-'80. That was too a large extent driven by OPEC. Those aren't the conditions that persist now. Markets are very slack. Product prices have not been increasing. Inflation is just not the risk that the Fed keeps sounding and warning about in the current period, so I think that the Americans don't have inflation to worry about, and people would like to get on the ride and join the party.

MR. SOLMAN: Sandra Shaber, you're looking at numbers. What, what does this mean for real people? Are -- you've mentioned before that you're a little worried now about employment. Anything else you're worried about?

MS. SHABER: When we get down to about 2 percent growth, and that's 2, 2 1/2 percent growth is about where we are right now, that's about half of last year. I think one of the important things to look at is what kind of effects it -- that kind of growth has on people and the point is that the effects are really quite uneven. They're uneven in terms of industries, in terms of demographic groups, in terms of regions. For example, once we get down towards 2 percent growth for the nation, that begins to look and feel like a real recession in parts of the country, particularly the two coasts will feel it. Retailing and consumer spending, the automobile industry, those are, those are sectors that I follow especially closely. They're really being adversely affected. Many mass merchandisers are being adversely affected, so you can talk about a particular rate of growth for the nation, translate that down to real industry, real jobs, and real regions, and, and the effects are really quite uneven, quite different.

MR. SOLMAN: David Munro.

MR. MUNRO: Sandra and David are both quite right. The problem is we can't have everybody at or above average. That's a long-term problem, and it would be nice if we could narrow the differences. But when you look at the overall pattern of the economy and its total growth rate at around 2 percent right at the moment, that's kind of what its speed limit is for a steady, sustainable kind of expansion, and that really is pretty decent when you think that, well, sometimes we've gotten up to 5 percent, or we had 4 percent as an average last year, but that was, in effect, tightening up the system, that was making it more difficult to keep the game going. And, of course, 2 percent growth is an awful lot better than a 5 percent reduction for the country as a whole, where rather than having just a hint of a recession in Eastern New England or in California, you have an all out recession, and you head toward 10 percent declines in every small town's business.

MR. SOLMAN: So in terms of specifics, just very quickly, if you could tick off, who will get hit here? Do you agree with Sandra Shaber?

MR. MUNRO: At this point, yes, but what you're having is a generalized slowing of the expansion, but it's a slowing that in the weakest parts of the country feels like the evaporation of what was a very sluggish recovery and is, in fact, just exactly that.

MR. SOLMAN: In D.C., Lawrence Lindsey, what's the Fed looking at now, if you can tell us. I know there are proprietary issues here. You don't have to say a lot of things, but in terms of what you think the important variables are, Prof. Gordon has challenged your attention to inflation, what are you -- are you people looking at something different then, or different variables than you were looking at in the past, or are you looking at consumer confidence, the same things we've heard about for years?

MR. LINDSEY: Oh, I think we're looking at the same variables. Our goals continue to have a sustainable rate of growth. In the long run, we're all better off if we have no boom-bust cycle, but maximum sustained growth without inflation. That's our goal.

MR. SOLMAN: Let's get a few predictions, and then we can talk for a second about whether they mean anything. Sandra Shaber in Philadelphia, what's your prediction for the next few months say?

MS. SHABER: We're going to see continued growth and at a fairly modest pace. If we start looking at some of the sectors, though, there will be some erratic numbers, part of them by region, part of them by industry. One key sector that we all should be walking, by the way, is what happens to our exports. We all -- at least many of us -- thought that that would be an important pillar of growth this year. We're still all counting on it, so we're going to have to see what our trading partners do to help us out there.

MR. SOLMAN: And David Munro, in terms of predictions.

MR. MUNRO: I think we're going to see the economy come to just a very small fall for three to six months and then return to something like a 2 percent growth rate. The two classically cyclical industries are here domestically. Housing, where we're down about 15 percent from last year, that's a soft cycle for that industry, and the word from the industry is maybe the worst is behind us, the biggest fall-off. The auto industry is probably running even with last year and will probably end up this year about the same. In some bad years, it's been down 10, 15, even 20 percent. Again, that's a pretty soft landing in another key cyclical industry.

MR. SOLMAN: As we rap up, Prof. Gordon, with all due respect, do you believe any of these predictions? You've been around doing economics for a long time. Are you skeptical of these kinds of statements, not these specifically but just the genre of --

MR. GORDON: Well, I think some of the longer-term trends in the economy are the most important. I think one of the most important recent developments that will certainly affect the next several months is the mania toward budget cutting that's been affecting state and local governments and indirectly through the federal government. I think that over the next six to nine months, we're going to see massive additional payroll cuts at state and local governments, which, of course, are going to hit hardest the people who depend on those services and the people who are employed in those sectors. That's something that will be new that we really haven't seen before, and that, if I would make a really tough prediction, is going to lead to some real outcry.

MR. SOLMAN: And so maybe a harder landing at least for the sector of people affected than everybody here is saying?

MR. GORDON: Certainly for those people affected it's going to be a disaster.

MR. SOLMAN: I'm afraid we've run out of time. The next time perhaps. Thank you all very much for joining us.

MR. LEHRER: Still to come on the NewsHour tonight, the UN at 50 and affirmative action in California. FOCUS - A GOLDEN ANNIVERSARY?

MR. MAC NEIL: Next tonight, the United Nations at 50. Various commemorations have been underway in San Francisco, where the UN was founded at the end of World War II. The anniversary comes at a time when the organization is once again struggling to keep the peace in troubled parts of the world. Both advocates and opponents would like to see major changes in the UN and the U.S. role in it. Spencer Michels has a report from San Francisco. It was prepared before recent events in Bosnia.

SPENCER MICHELS: Three months of celebration began in April at San Francisco's Civic Center, the very spot where the United Nations was born in the spring of 1945. With costumed children parading and bands playing, former President Gerald Ford and his successor, Jimmy Carter, arrived to kick off an exercise in both national pride and international concern, for while the UN still inspires enthusiasm, it has many critics worldwide. In the U.S., its detractors allege that American sovereignty is diminished by its participation in the world organization. President Carter, concerned that such criticism could decrease the U.N.'s effectiveness, sees no such threat.

JIMMY CARTER: [April 1995] Every vote for peacekeeping, every sending of a single troop to a foreign country must be approved by the United States of America. We have a veto in the United Nations Security Council, and we are free to exercise it at any time we disagree with any proposal made for the UN to take action. So when someone says that we've taken away the sovereignty of the United States and the UN has become uncontrollable, it's an absolute lie. And it's designed to turn the people away from this tremendous institution that had its birth here on this very site.

MR. MICHELS: Sovereignty has been an issue from the beginning. In 1945, delegates from sovereign nations like the U.S. had to decide how much of their independence they were willing to cede to the world organization. While World War II wound down, nearly 300 diplomats from 50 nations assembled to hammer out an agreement, a charter for the UN. Another world organization, the League of Nations, had been established at Geneva to keep the peace after the first World War. But it had failed, partly because an increasingly isolationist America had refused to join. President Franklin Roosevelt pushed Josef Stalin and Winston Churchill to support a new world organization, but FDR died the very month the delegates began arriving. And when the charter was signed, it was Harry Truman who came to San Francisco.

HARRY TRUMAN: [June 1945] There were many who doubted that agreement could ever be reached by these 50 countries differing so much in race and religion and language and culture. But these differences were all forgotten in one unshakable unity of determination to find a way to end wars. [applause]

MR. MICHELS: The charter, itself, the original table used for the charter's signing, and a painting of the event are the centerpieces for an exhibit at San Francisco's DeYoung Museum. A young-looking naval officer, Harold Stassen, who had resigned as the governor of Minnesota to join the military, was part of the American delegation. Today, at 88, he is the only American, British, or Russian delegate still alive. The former Eisenhower administration official and frequent candidate for President, still keeps a keen eye on the organization he helped create.

HAROLD STASSEN, UN Charter Signer: There was a concern of some who said, well, if you ever get a United Nations going, they'll soon become a world government, and they'll dominate America, and they'll come in with foreign forces and do terrible things to us. There was a fringe of opinion like that.

MR. MICHELS: Stassen dismisses that argument, as does Berkeley resident Ruth Russell. She was 33 and an American foreign service officer in London, when the UN charter was signed. Later, she wrote the definitive history of how sovereign nations put their differences aside [A History of the United Nations Charter].

RUTH RUSSELL, Historian: Nobody wanted the war to start again, and, therefore, they would certainly go a long way toward making compromises.

MR. MICHELS: On her desk, Russell keeps a picture of Woodrow Wilson, who lost his battle to get America to join the League of Nations. It serves as a reminder to her that isolationism, which Wilson fought against, is not dead.

RUTH RUSSELL: Isolationism is still -- right now, it's a very important factor, because it is making too many people feel that if we resolve our national problems and maintain a strong military posture so that we can win any war, we will -- won't have to worry about our world position.

MR. MICHELS: Russell thinks today the UN's very existence is in jeopardy.

RUTH RUSSELL: I'm very pessimistic, because I see no signs of the necessary cooperation developing. Sovereignty is the freedom to do anything you like, bad or good, and what most governments like to hang on to their sovereignty for is an excuse to do what other people may not want them to do.

MR. MICHELS: In '45, optimism was high. Although San Francisco offered to become the UN's permanent home, in those days, it was too far from Europe. New York got the nod. Now, at 50, the UN has 185 member nations, employs 51,000 people, and will spend a total of more than $9 billion this year. Critics like historian Peter Duignan say the organization is too big, too bureaucratic. He is a senior fellow and international specialist at the Hoover Institution at Stanford.

PETER DUIGNAN, Historian: They're not only inefficient -- we've known that -- they're not only ineffective -- we've known that -- but they're corrupt, favoritism, old boys' network, high salaries. They're overpaid. Everyone's overpaid in terms of their skill, in terms of what they do, no government agency could afford to pay these people if the taxpayers were in charge.

MR. MICHELS: At the University of California at Berkeley, political science professor Ernst Haas says the UN suffers from the same problems any large bureaucracy does.

ERNST HAAS, Political Scientist: Corrupt, there are instances of corruption, of personal corruption in the UN. There are some egregious cases of personal corruption. There are egregious cases of personal corruption in the U.S. government too. Does that mean we shut down the U.S. government?

MR. MICHELS: You don't take it terribly seriously?

ERNST HAAS: No. I don't think that those are important objections.

MR. MICHELS: Hoover Institution's Duignan says another major problem at the UN has been the attitude toward the U.S..

PETER DUIGNAN: It's failures far outnumber its successes, and there had been a forum of anti-Americanism all during the Cold War, little, tittle tin pot dictators in Latin America and Africa, bribed or ideologically supportive of the Soviet Union, kept attacking the United States.

MR. MICHELS: Duignan's criticisms of the UN are mild compared to some of those coming from Republican Congressmen. In February, the House of Representatives approved a bill to effectively reduce American payments of $1.67 billion to the UN and to prohibit American troops from serving under foreign commanders. In the floor debate, Republican Congressman Henry Bonilla criticized America's pro-UN leaders.

REP. HENRY BONILLA: They said they have made America a follower, much like a dog following its master, always loyal to every whim and command. So have our leaders abandoned our independence and answered the call and the demands of the United Nations, an organization unsuited to military command and unable to take a firm principle -- any position on any principle.

MR. MICHELS: While the Senate has yet to act on cuts in America's UN participation, UN supporters say congressional critics don't see the whole picture.

ERNST HAAS: They see the UN somehow -- a UN not under American control -- they see that as a rival to the United States, instead of looking upon it as an aid to American policy.

MR. MICHELS: Berkeley's professor Haas says congressional criticism of the UN is petty.

ERNST HAAS: If you've been used to running the world pretty much as you choose, the temptation is to pick up your marbles and go home when you have to compromise a little bit, kind of childish.

MR. MICHELS: Behind some of the new controversy is the expansion of UN peacekeeping operations since the end of the Cold War, and along with it, increasing American participation and American combat deaths in such countries as Somalia. The UN is now running 17 military peacekeeping operations at a cost of $3 billion, far more than was anticipated when the charter was signed. The U.S. picks up a third of the bill. Most of the peacekeeping operations have not created controversy, and of the 63,000 UN troops, fewer than 5 percent are American. But the risk of expanding peacekeeping and involving U.S. soldiers in potential civil wars alarms American supporters as well as critics of the UN.

ERNEST HAAS: When the UN intervenes in a civil war in which the parties have not decided to call it quits, but they're going to continue fighting, that's a lost cause. Bosnia's an example of that. Somalia is an example of that, Rwanda probably. Haiti, I'm not sure, too soon to call it.

MR. MICHELS: If the United Nations doesn't go into some of these situations where people won't quit fighting, how do you end it? Who does go in?

ERNEST HAAS: You don't. You wait till one side wins. If people are determined to kill each other, they're going to kill each other, and no outside force that anybody is willing to mount is going to keep 'em from it.

PETER DUIGNAN: The UN and the U.S. should not intervene in any civil war because you cannot maintain objectivity and the symbol of impartiality. For us, we must always say, is our national interest involved? It is not, in my view, involved in Bosnia Herzegovina. Forget that. As bad as it is, leave it to the closer neighbors.

MR. MICHELS: UN charter signer Harold Stassen has his own solution, which he has published [United Nations, A Working Paper for Restructuring by Harold Stassen].

HAROLD STASSEN: There ought to be a small what I call police peace force of volunteers, young men and young women from the member countries who have volunteered to come in for five, for example, five years of service.

MR. MICHELS: How big a force?

HAROLD STASSEN: I suggest a totality worldwide should not be more than like 250,000. In other words, this is not a war making force, but it's a police peace force.

MR. MICHELS: Stassen also wants a permanent corps of mediators who can rush in with the troops to trouble spots.

HAROLD STASSEN: You see if you can get into a dispute before anybody gets killed, and Eisenhower used to point that out very dramatically from his experience, you have a better chance of solving it.

MR. MICHELS: Two hundred fifty thousand troops plus mediators, how do you pay for that? Who pays for it?

HAROLD STASSEN: I have suggested a one half percent charge on the export and import of oils and minerals and goods and materials around the world.

MR. MICHELS: Those proposals have not been widely debated. Perhaps more pressing is the question of whether to expand the Security Council. That's the critical UN body which is primarily responsible for peacekeeping. It has five permanent members, each of whom has a veto, a scheme devised at San Francisco. Harold Stassen says it's time that Germany and Japan, our World War II enemies, be admitted to that exclusive club.

HAROLD STASSEN: It's very important that they be given that status, both for the effectiveness of the Security Council of the future, but also equally important, so that you do not develop among the population of those two great countries the feeling that they're not getting their proper recognition, because that atmosphere, a feeling that they're not being fairly recognized, is the atmosphere out of which neo-Nazi groups can grow inside a country.

MR. MICHELS: Expanding the Security Council or improving UN military actions is completely beside the point for some Americans. They want the U.S. to leave the UN altogether. But quitting the UN is the last thing on the minds of these San Franciscans who partied recently to celebrate the organization's birthday. They are part of the majority of Americans who support the UN. A recent poll showed 67 percent voicing strong approval of UN peacekeeping, though that is down from 84 percent more than a year ago.

ERNST HAAS: If the UN didn't exist now, you'd have to invent it, because there's no substitute for it, and the fact that it doesn't work in every instance still doesn't mean that without it, the world wouldn't be a lot worse off.

MR. MICHELS: San Francisco has already started the celebration for the anniversary of the charter signing. The San Francisco Ballet organized a successful "United We Dance" Festival with 13 dance companies from around spending a week performing in the city. Dozens of activities, including visits in June by President Clinton and Harold Stassen, speak to the fact that while the UN may remain controversial, it has achieved a measure of permanence and acceptance its founders envisioned.

MR. MAC NEIL: We'll have a Newsmaker interview with UN Secretary General Boutros Boutros-Ghali tomorrow night. FOCUS - AFFIRMATIVE ACTION

MR. LEHRER: Now affirmative action in California. Today, Republican Governor Pete Wilson signed an executive order dismantling some of the state's affirmative action programs. We'll join that debate in California after this report by Jeffrey Kaye of public station KCET-Los Angeles.

JEFFREY KAYE: With the stroke of a pen on an executive order, California Gov. Pete Wilson today established himself as the first national political figure to begin dismantling affirmative action programs. The governor, still mute after throat surgery in April, had cabinet secretary Joanne Kozberg read a prepared statement.

JOANNE KOZBERG, Secretary of Consumer Affairs: We must replace the outdated policies of preferential treatment with a new vision, based upon justice, upon individual merit, and upon the fundamental civil right of equality under the law.

MR. KAYE: Wilson's order eliminates preferential programs that exceed those required by federal and state law, requires state employment and contracting decisions be based on merit, reduces specific goals in contracting and in hiring in state agencies and departments, and disbands an estimated 100 advisory committees that encourage preferential treatment.

JOANNE KOZBERG: These special preferences are now eroding the very foundation of the American dream. Gov. Wilson is strongly committed to vigorously and conscientiously enforcing our civil rights laws, but granting preferential treatment based on race or gender is also, by definition, discrimination.

MR. KAYE: The back drop of this morning's event was a state- operated fire station. Wilson was treated to a demonstration by employees at the California Department of Forestry & Fire Protection. Wilson's order will eliminate the Department's goal of firing 50 percent women and minorities as entry level workers.

CONSTANCE RICE, NAACP Legal Defense Fund: I consider the governor's order more of a stunt than anything else.

MR. KAYE: Supporters of affirmative action, such as lawyer Constance Rice of the NAACP Legal Defense & Educational Fund, said the impact of the executive order will be more symbolic than substantive.

CONSTANCE RICE: Well, the governor last time we checked was still subject to United States Supreme Court law. He's also subject to federal statutory law and California state law. All California departments and entities are required to have in place equal opportunity programs, programs that make sure that California's subdivisions and entities are complying with the civil rights laws. That means they've got to have plans, they've got to have affirmative action goals, where they're justified by law.

UNIDENTIFIED MAN: I support the executive order in that I feel - -

MR. KAYE: But at today's event, the governor heard support for his executive order and criticism of the department's affirmative action program by a carefully chosen group of employees.

CANDACE GREGORY, Division Fire Chief: It's difficult to get a job or a position when affirmative action has been going, because some people think you got that job because of affirmative action, not because you were the best qualified person for that job.

MR. KAYE: Engineer Timothy Pleasant said that because of hiring goals, his department has been forced to hire less qualified applications.

TIMOTHY PLEASANT, Fireman: Because of the fact that we need to hire a certain quota of a certain under representative group. For us to see supervisors in the fire station is really difficult when we're going on emergency situations, and we have to not only do our job but then do the seasonal's job who was hired and does not have the qualifications to be there.

MR. KAYE: The department chosen by the governor to illustrate affirmative action problems is, according to critics, very much in need of affirmative action. Of its 3400 employees, 81 percent are white. Only 2 percent are black. 20 percent are female.

CONSTANCE RICE: We're talking about departments that had to be sued to be opened up to women, and now because that department has changed its culture and is now beginning to get what, 20 percent women, they want to shut it down, why is it trying to exclude and eliminate job programs that actually form a pipeline to make sure people are included? Now, this is an agenda. It's a blueprint for the road map back to exclusion.

MR. KAYE: Do you think you've done enough, given those numbers, 2 percent black, 80 percent white, in terms of affirmative action?

RICHARD WILSON, Department of Forestry: I think that we've done a good job, and I think the department shows it. I think that what shows here is that it's a slow process to open this up and that this department has been making progress steadily, and this will allow progress to continue.

MR. KAYE: For his part, Gov. Wilson sees his order as a first step. The likely presidential candidate has endorsed a proposed statewide amendment that would make affirmative action unconstitutional.

MR. LEHRER: Now, for more on this, we go to Elizabeth Farnsworth in Sacramento.

MS. FARNSWORTH: Jim, joining me are Willie Brown, the Democratic speaker of the California Assembly, state assembly, and Ward Connerly, a member of the University of California Board of Regents and the owner of a management consulting firm. Thank you, gentlemen, for being with us. Mr. Connerly, the governor consulted closely with you, I understand, on developing this executive order. Why is it necessary now?

WARD CONNERLY, California Board of Regents: Well, I think that the governor realizes that California, indeed, the nation, has developed a system of affirmative action that has become entrenched and that it is providing not just equal opportunity, it's providing preferences, and that it's tearing California apart, and that he wanted to strike the first -- send the first signal, if you will, that it's time to evaluate what we're doing, and to change those things that he has the capability as governor of changing.

MS. FARNSWORTH: Well, let's just get into one specific. The California Department of Transportation must end under this executive order its policy in seven districts that encourages officials to award contracts of $500 or less to women or minority- owned businesses. What's wrong with that? I mean, that's -- why end that program?

MR. CONNERLY: One would say that since the amount is so small what harm is being done? The reality is whether it's one dollar of public money, everyone should have the opportunity of bidding on that. There should be an equal opportunity for everyone, the individual, not because of the group that you belong to.

MS. FARNSWORTH: Okay. Mr. Speaker, what's wrong with that?

WILLIE BROWN, Speaker, California Assembly: Well, first and foremost, Mr. Connerly and the governor are using the advent of the affirmative action programs as a means by which to gain attention for the governor's political purposes. There are no incidents or examples that one could cite that would warrant installing in the Constitution such a sweeping order of abolishing all affirmative action programs as if we are a color-blind society. We are not.

MS. FARNSWORTH: Well, this doesn't go quite that far, right? This is --

MR. BROWN: Well, it goes as far as the governor can possibly go. The governor would --

MS. FARNSWORTH: He rescinds several executive actions, right?

MR. BROWN: No question about that, and I think the governor would tamper with the 13th, 14th, and 15th Amendment if he could and if he thought it would benefit him politically, and I think Mr. Connerly and people like that would support it.

MS. FARNSWORTH: Well, let's just take specifically this action now. What's wrong with doing what he did now, the rescinding three executive actions and dealing with some specific --

MR. BROWN: Because there's no basis in which to do that. There are no incidents of any kind of programs that are so excessive as it relates to racial minorities in the state of California or women that it prompts any action whatsoever. Mr. Connerly is wrong. Anywhere there has been and at any time there has been any kind of a violation of the spirit of the affirmative action program by either a preference based on race, preference based on sex, or any of those kinds of excesses, there have been court challenges and other kinds of modifications that have stayed out of the political arena and avoided in any manner inflaming the concept of racism. To do it the way the governor and Mr. Connerly are supposing to do it is simply to continue that process.

MS. FARNSWORTH: Mr. Connerly, how do you respond to that?

MR. CONNERLY: Well, the Speaker brought up the 14th Amendment. What does the 14th Amendment say? What does the 14th Amendment say?

MR. BROWN: Are you asking me a question?

MR. CONNERLY: I'm asking you a question. What does the 14th Amendment say?

MR. BROWN: The 14th Amendment says that each of us are entitled in one manner or another to equal opportunity; there must be equal protection of the law afforded all citizens in this country, all residents in this country, all persons in this country, and Mr. Connerly, the basis of the Civil Rights Act absolutely has its roots in the concept of equality, of opportunity, i.e., as was the case with you, when your company sought a contract from the state of California and qualified as a minority firm, able to do business in this state, you were, in fact, being the beneficiary of a program that was designed to undo years and years of discrimination against firms like yours. That's sustained and supported by the concept contained in the 14th Amendment and all the things that have flowed from that. That's essentially how you benefited, Mr. Connerly. That's how you got where you are. That's how you ended up being on the Board of Regents at the University of California, and because there are only two of us on the Board of Regents at the University of California. It seems to me that's not a good indication that it's time to close that opportunity for other people.

MR. CONNERLY: Mr. Speaker, it shows how ill informed you are not only on the 14th Amendment and how you're loose with the 14th Amendment, but your recitation of, of the contracts, had you read the Chronicle's second story in which they corrected their facts, you would have known that the Chronicle was absolutely false in their information, and you would have seen their correction. With respect to my being on the Board of Regents, I didn't ask to be on the Board of Regents, and I think that the harm that you do, all women and all minorities, is that you presume that because they are minorities and that they succeed in any way that it's because of affirmative action. That is a great disservice that you do to all of us and loosely championing the cause of affirmative action. We're not talking about providing equality of opportunity. We're talking about ending a system of preferences that is entrenched, that accounts for 70 percent of the population of this state who are receiving preferences and those who stand on the sidelines saying, let's continue at all cost I think do great harm to the state of California and the nation.

MS. FARNSWORTH: Mr. Speaker, let me interrupt here one minute. Would you not change anything in the state's affirmative action law or executive orders at the moment?

MR. BROWN: Every day of the week that you are a governmental official, you have to be prepared to re-examine every statute, every program, every policy, and every regulation, and you have to make those regulations work consistent with the tenor of the times and the need. What you cannot do is block yourself into a bar for using a legitimate tool that has worked in other places, that has worked on occasions for women, that has worked on occasions for racial minorities. You can't have yourself hamstrung and limited and have that tool not available. Mr. Connerly is wrong. Most women and most racial minorities have gotten where they've gotten based on their skills, their abilities, and their reaching qualification levels. Affirmative action doesn't even apply unless you are, in fact, otherwise qualified. You cannot take a person who is an engineer and have an opportunity for an engineer to be selected and this non-engineer applies, and the non-engineer gets it because he is of a particular race or he is a woman. If he is an engineer and he is otherwise qualified and the good old boys' network has always barred other than white engineers from being a part of the deal, then affirmative action steps in and says, based on the fact that you have continuously and consistently discriminated, we are going to say you now have to show some diversity, only take qualified engineers. So Mr. Connerly is wrong. There is absolutely no concept that any of us or no view that we have of ourselves or no psychosis that we develop because somehow every time one of us achieves something, we think it's affirmative action. I'm the speaker. I didn't get to be the speaker by virtue of affirmative action. I got to be the speaker in spite of barriers erected based on race. That should not be, however, the life experience of every African- American who comes along. Affirmative action is designed to make sure that if there's no other alternative, if you prove discrimination, if there has been a pattern of discrimination, the courts or the elected types or the appointed types or the regulatory bodies can step in and use that simple, insignificant tool. Politicians, like the governor and Mr. Connerly, are trying to use the alleged abolition of that for their political purposes. That's all this is, nothing else.

MS. FARNSWORTH: I'm going to get into politics in one minute. How about the University of California? I want to ask both of you this. The governor cannot mandate big changes in the affirmative action policies of the University of California, but he can ask you all who, who are on the board of regents to do that. How do you think this will affect the University of California, Cal-State, the various campuses of Cal-State, and also the community college system?

MR. CONNERLY: It depends on what my colleagues, including the speaker, end up doing with affirmative action at the university. But I think the university is a classic example of why we need to do what the governor is calling on us to do because contrary to what the speaker is saying about qualifications, we wouldn't have the No. 1 basketball team at UCLA if we did not have special admits, and we do admit 5 percent of our students who are not qualified, they don't meet the standards of the university. So -- and I look at the speaker and I think he's absolutely right --

MS. FARNSWORTH: Let's talk about sports for a minute. Hasn't that always been true, that in some cases in many universities sports people, people who are very good in sports were brought in and given a little extra push so that they could both get up to speed in sports and also play whatever sport they were playing and that applies to all races?

MR. CONNERLY: They're there -- athletes and musicians are there because of special talents. That's their talent. That's their merit. To select someone who does not have that talent, who has a 2.8, and who happens to be -- to have the advantage of being born black or Chicano is not because of any special talent, that's wrong, and we need to end that.

MR. BROWN: That isn't what the university does.

MS. FARNSWORTH: How about that?

MR. BROWN: For all the years that the university has been in existence, we've always had a special admits program. You can either be the child of an alumnus, you can be the child of a professor that we're recruiting to attend the university, you can be a child of a heavy contributor, someone who's endowed the university, you can have special skills. You can either be great in music, you can be great at athletics, you can be great in another artistic category, and that's 5 percent, and we've always had that, and it's done no damage to the university in any fashion. And let me further tell you that in the process of doing that, we've only used a small piece of that operation for purposes of trying to create diversity among students on the basis of race and culture.

MS. FARNSWORTH: How small a piece? Do you know any figures?

MR. BROWN: Very small. Yes, I do know. I can give you exactly the figures. In 1993, the University of California admitted 21,000 new persons, fresh persons. Not one person who qualified under what we call the normal process in this state was denied admission, not one, not one. On the University of California's campuses, we took in every student who was in the top 12 1/2 percent of their class. Then we took the 5 percent, and as usual, we did all the things that I've just described. Of the 830,000 African-American students entering the University of California in this period, about 76 or 77 percent of those students came in under the 12 1/2 percent rule, which is the regular process of admissions, i.e., they qualified on the competitive exams and what have you. Fewer than 225 students came in under the so-called 5 percent, and that included all the athletes, that included all the musicians, et cetera. Distributed throughout the nine campuses of the University of California was fewer than 20 students per campus, 20 students per campus. UCLA has twenty-seven or twenty-eight thousand students all total. Berkeley has a similar number of students, so you can't even find the so- called preferential treatment that Mr. Connerly talks about. Let me also tell you that the Bakke decision barred the University of California from --

MS. FARNSWORTH: The Supreme Court decision in the Bakke case.

MR. BROWN: -- absolutely, in 1978, from admitting anybody just on the basis of race or gender. So we don't -- we're not playing with that at the university at all.

MS. FARNSWORTH: Okay. Briefly --

MR. CONNERLY: Let me just say this. Let me just say this. I wish the speaker would spend more time learning about the university and, therefore, he wouldn't be as loose with his facts as he is. We don't admit anybody on the basis of their faculty, of the student having a faculty member of a father or a mother who is on the faculty. We don't admit anybody because of their parents contributing to the university. That's flat out wrong. It's just flat out wrong. It doesn't happen.

MS. FARNSWORTH: Okay. We'll have to debate that one another time. I want to get on to the politics of this and the significance of it nationally. Why did Gov. Wilson do this now? Because of his throat problems he can't speak, is he -- the critics of course are saying that he just wants to get his presidential campaign going, is that true?

MR. CONNERLY: Well, I don't know what the governor's motivation is, but of those who say that he may be doing it for political reasons and those who say that the speaker may be taking his position because of political reasons, who can say? But I can tell you this, that the issue of affirmative action is one that the people of this nation need to debate. It is the ideal subject for the people to have a dialogue about. Too long we've made these decisions on the basis of executive orders and court decrees, and the voters are never weighed in. If the governor had political motivations in bringing it to the fore front, I say, amen, I applaud him. If the speaker wants to do that because of political motivations, amen, that people ought to debate it. They ought to say whether or not they want to give a preference to some other people. That's a legitimate public policy issue.

MS. FARNSWORTH: The politics and also the significance of this nationwide -- we have just a little time left.

MR. BROWN: It won't take me very long. First of all, you said at the outset that this was an act addressed on the limited things that were done with the so-called executive order, so Mr. Connerly is wrong. We pass statutes in this state. I am an elected official in the state, unlike Mr. Connerly. I passed a vote that constituents directed me to so do. When Pete Wilson was the mayor of San Diego, he did the same thing in directing programs to extend the opportunity to racial authorities. Last September, during the course of his campaign, he reaffirmed that in terms of his commitment to women and racial minorities. He is always looking for an issue that will divide and conquer with reference to scapegoating and all the other things that we politicians do better than anybody else. Gov. Wilson is motivated, in my opinion, by that and that alone, not the so-called good government that Mr. Connerly wishes to address.

MS. FARNSWORTH: That's all the time we have. I'm sorry, Mr. Speaker. We have to go. Thank you both very much for being with us. RECAP

MR. MAC NEIL: Again, the major stories of this Thursday, Bosnia's Serb leader threatened a slaughter if any military attempt was made to rescue UN peacekeepers being held hostage. The Serbs detained a civilian hostage for the first time. In this country, personal income and spending rose .3 of a percent in April, but factory orders fell 1.9percent. President Clinton said Republican- sponsored budget cuts endangered farmers and U.S. competitiveness in agricultural markets, and California Governor Pete Wilson eliminated several state-sponsored affirmative action programs. Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you tomorrow night with a Newsmaker interview with UN Secretary General Boutros-Ghali, plus political analysis by Shields & Gigot. I'm Jim Lehrer. Thank you and good night.