The NewsHour with Jim Lehrer

MR. LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, another whack of bad weather, Charlayne Hunter-Gault talks to Fred Ostby of the National Weather Service; the sweeping reform of the telecommunications industry, Elizabeth Farnsworth explores the possibilities with Ken Auletta and Richard MacDonald; the rise of Steve Forbes, Margaret Warner reports; Forbes and the rest of the political week as seen by Mark Shields & Paul Gigot, and the magic dancing of Gene Kelly, who died today. It all follows our summary of the news this Friday. NEWS SUMMARY

MR. LEHRER: Excavation began today on a mass grave in Bosnia. A United Nations investigator monitored the search in the northern region of the country where recent flooding has uncovered three graves. There are an estimated 300 such mass grave sites throughout Bosnia. And 27,000 Bosnians are listed as missing. In Tuzla today, thousands of refugee Muslim women demonstrated in front of a local government building. They are demanding to know what happened to their missing families. The women threw stones and blocked two main roads. In China, an explosion killed at least 95 people and injured more than 400. The blast occurred on Wednesday in the Hunan province city of Shaoyang but was announced today by a government official. We have a report from Vernon Mann of Independent Television News.

VERNON MANN, ITN: It happened just after supper-time, a massive explosion that flattened a whole street and shattered windows a mile away. Ten tons of dynamite went up. It had been stored illegally in a warehouse in the basement of a five-story block of flats, that building and others reduced by the blast to a crate of 100 feet wide, 30 feet deep. Soldiers, police, and volunteers worked with picks and shovels, sometimes with bare hands, in their search for survivors. But there's little hope remaining now. Two people were pulled out alive from the rubble 20 hours after the blast. Most of the dead were simply crushed, others killed by flying masonry. Local officials said the warehouse was used by an explosives dealer. Hunan is a mining area and it's not unusual for mine owners to keep explosives in their homes.

MR. LEHRER: Back in Washington today, a federal appeals court threw out President Clinton's executive order on replacement workers. That order prevented the federal government from contracting with employers who hire replacement workers during a strike. The appeals court said that conflicted with federal labor law which permits such hirings. President Clinton issued a statement late today saying he will seek to overturn the decision. In economic news today, the Labor Department reported the nation's unemployment rate rose .2 percent to 5.8 percent in January. The report said some of the increase was related to the severe snowstorms in the East. And much of the country was very cold again today. Low temperatures were linked to 10 deaths. In Minnesota, the temperature reached 62 degrees below zero. Public schools across the state were closed. Record lows were also set in other parts of the West and Midwest. In Chicago, temperatures fell to 15 degrees below zero. Even the South got snow and ice, and Texas roads were covered with snow and sleet. We'll have more on the cold right after this News Summary. Gene Kelly, the great movie dancer, died today in Los Angeles. He suffered strokes in 1994 and last year and never completely recovered. He starred in movie musicals in the 1940s and 50's, including "Singing in the Rain," "On the Town," and "An American in Paris." He was 83 years old. We'll have more about Gene Kelly at the end of the program tonight. Between now and then the weather, the telecom reform bill, Steve Forbes rise, and Shields & Gigot. FOCUS - DEEP FREEZE

MR. LEHRER: We do go first tonight to the extreme cold weather which has gripped much of the country for nearly a week. Charlayne Hunter-Gault has the story.

CHARLAYNE MS. HUNTER-GAULT: The Midwest is accustomed to cold weather, but the record lows experienced this week in Minnesota and elsewhere have even exceeded temperatures in Alaska. For a look at what's behind this phenomenon and conditions hitting the Southeast today, we turn to Frederick Ostby, chief of the National Weather Service's Storm Prediction Center. He joins us from Kansas City, Missouri. Mr. Ostby, thank you for joining us once again. Why is it so cold?

FREDERICK OSTBY, National Weather Service: Well, Charlayne, we have had a tremendous surge of arctic air come down from the North, and it's just plunged all over the middle part of the United States, and is pushing even farther South, and it's been a--of course, this happens all the time in the wintertime, but in this particular case, it, it started out with very extremely cold air up in the North that has come down over the Midwest and is causing all these record temperatures and headlines.

MS. HUNTER-GAULT: Do we have any idea why--what caused this burst of air?

MR. OSTBY: Well, sure, we do, because what we have is when the jet stream, that strong band of winds that goes across the United States at some times it undulates and it--for example, it may move Northward up into Alaska, and then plunge Southward over the United States, the rest of the United States, and so when you get that kind of plunge, that just pulls that very, very cold air down, down over the rest of the United States.

MS. HUNTER-GAULT: How cold is it? I see you're wearing your turtleneck. How cold is it in Kansas?

MR. OSTBY: We're trying to cope out here. We had minus 13 this morning, and we're looking for 15 below tonight, and it never got up to zero today. So it's pretty frigid out here.

MS. HUNTER-GAULT: Well, you know, we just had this historic blizzard in January, I mean, and this one is historic. How, how is the weather going to--how long is it going to keep setting these historic records?

MR. OSTBY: Well, it's--you can't really say in the long-term but we know that in this particular situation when the--and we're going to have snow and ice moving Eastward and up and getting heavier snows up later into the major cities of Washington and Philadelphia and New York, Boston, and so forth.

MS. HUNTER-GAULT: All from this arctic air coming out of the North?

MR. OSTBY: All from--well, what's happening is that the arctic air pushes down, and there is meeting a resistance from warm air down over the Gulf of Mexico, and that kind of produces a battle zone between the warm and the cold air, and produces a great amount of precipitation that we're seeing, a band of, a band of freezing rain and a band of heavy snow, and that heavy snow will be working its way up into, into the Northeast tonight and tomorrow. After that is over, then the cold air will replace the precipitation and things should quiet down as we move into next week.

MS. HUNTER-GAULT: But will we get the kind of floods that we got last time in January that were quite destructive?

MR. OSTBY: Well, you know, rivers are running fairly high now, and with additional snow expected into the Northeast, that certainly will become a concern, but we don't--we don't look for at least in the early part of next week warming with heavy rain that would, you know, make the situation much worse. It looks like we're going to finally get into a period of a little more quiet weather, a little more--a little kinder weather.

MS. HUNTER-GAULT: What--you mentioned Alaska a moment ago. Why is it so much colder here than Alaska? How unusual is that?

MR. OSTBY: Well, it's--that's what happens when the--as I mentioned before--when this jet stream, instead of just going West to East from the Pacific to the Atlantic across the, across the middle part of the country, where it does this kind of undulation, and in so doing, not only bring cold air down over us; what it's doing is taking air from the warmer water, the Pacific, and bringing that up into Alaska, so that's the reason you see that. And this is not unusual, because when the weather gets extreme in one place, extremely cold and get records of cold, you're much apt to have just the opposite in other parts of the world.

MS. HUNTER-GAULT: And of course the cold in Alaska is normally more benign in a sense because it's drier, isn't it? I mean, you don't feel it as much.

MR. OSTBY: When you get in the inland areas and there's not as much, as much wind, but anytime you have the wind blowing and of course, we've had that here in areas of the Dakotas and Minnesota and so forth, tremendous wind chill values, and I even heard they- -that it was so cold they cancelled the Winter Carnival up in Minnesota today.

MS. HUNTER-GAULT: That's pretty cold.

MR. OSTBY: That's what you'd call real cold.

MS. HUNTER-GAULT: Jim mentioned that there have been 10 deaths in this cold, and I know you're not--this is not your--necessarily your territory, but is there any advice to people for--what they should do in these extreme temperatures?

MR. OSTBY: Well, of course, the best thing to do is if you don't have to, the best thing to do is stay in-doors. The thing I think where people can get into trouble is if they're traveling and in their car and maybe they don't have enough warm clothes with them and for example, maybe for some reason the car fails, the engine dies, and you can't get the car started, in those cases, it's really very helpful to have some warm blankets or some warm clothing just in case you have to go outside the car.

MS. HUNTER-GAULT: Well, Mr. Ostby, nothing personal, but I'm not sure I want to see you again, but thanks for joining us tonight.

MR. OSTBY: Okay, Charlayne.

MS. HUNTER-GAULT: Thank you.

MR. OSTBY: You're welcome. FOCUS - UNPLUGGED!

MR. LEHRER: Now, to the overhaul of the nation's telecommunications industry Congress approved yesterday and to Elizabeth Farnsworth.

MS. FARNSWORTH: The telephone and the television, for Americans they are the stuff of everyday life, and the computer is just about that important too. Now, after years of debate, Congress has voted to fundamentally reform the laws governing these basic tools of the communications industry. What will the changes mean? Jeffrey Kaye of station KCET-Los Angeles begins our report.

JEFFREY KAYE, KCET: The high-tech future promised by the telecommunications industry is a nation and world plugged in, wired up, and interconnected.

SPOKESMAN: Hi, Jack.

MAN: Hey, Randy. How are you doing tonight?

MR. KAYE: Technical advances have made it possible to transmit massive amounts of pictures, sound, and data between homes and businesses, schools and hospitals. The new technology has set off a high stakes, high-speed race by telecommunications companies eager to deliver an array of services.

WOMAN ON PHONE: Good morning. AT&T operator, how can I help you?

MAN ON PHONE: Civic Bell. Can I help you.

MR. KAYE: No longer are phone companies content to offer only telephone services; they see television in their future, and cable TV companies don't want to be restricted to television; they'd like to get into the phone business. Representatives from the cable and phone industries sound virtually interchangeable when talking about their plans. Consider Spencer Kaitz speaking for the TV cable industry and Catherine Bernick from Pacific Telesis, one of the seven regional telephone companies.

KATHRYNE BERNICK, Pacific Telesis: We envision ourselves as being a full service provider of telecommunications to our customers in California and Nevada.

SPENCER KAITZ, California Cable TV Association: We want to be a full service telecommunications company.

KATHRYNE BERNICK: We want to offer plain old telephone service; we want to offer long distance service.

SPENCER KAITZ: We desperately want to get into the phone business. It's the only way to be a full service provider.

KATHRYNE BERNICK: We want to offer video programming over our network, including interactive services, and we want to offer the new wireless services, personal communications services, that the FCC has just licensed.

SPENCER KAITZ: We want to provide both wire and wireless. We want to provide hundreds of channels of video, and we want to connect computers so that they can talk with each other at the same speed that they talk internally.

MR. KAYE: But regional phone companies and cable television operations are not the only ones expecting to benefit from new technology and deregulation. Just as the Bell Companies would like to enter the long distance market, the long distance carriers, Sprint, MCI, and AT&T, are hoping to transform their businesses. Alex Mandl is executive vice president of AT&T.

ALEX MANDL, AT&T: We plan to be one of those end-to-end service providers which will include local service, which will include on- line services, which will include the various cable services that we will not necessarily own but certainly can have part of a package. So we clearly see opportunities in the broadest sense of how customers will, will require these, these services to be delivered.

MS. FARNSWORTH: The bill passed by Congress yesterday would transform the laws that regulate each of these businesses. Specifically, long distance and local phone companies will be able to compete in each other's markets. And they can also begin to offer video services over phone lines, competing directly with cable providers. For their part, cable operators can now jump into the phone market and federal controls on cable TV rates will be lifted within three years or immediately, depending on the size of the market. But the bill reaches much further. For broadcasters, it would relax limits on the number of TV and radio stations a single company can own. At the same time, it requires TV sets to be equipped with a device known as the V-chip to block violent programming, and for on-line computer companies and users, the bill imposes criminal penalties for knowingly transmitting "indecent material" to minors. To help us understand what all these changes mean for industry and consumers, we're joined in New York by Ken Auletta, media writer for the "New Yorker" Magazine, and Richard MacDonald, a media and telecommunications consultant. Welcome, gentlemen. Ken Auletta, let's talk about this for a minute from the point of view of the consumer. Most of us have telephone lines for local and long distance phoning coming into our homes. Some people have cable, cables coming into their homes for television. What will change? What will be different because of this bill?

KEN AULETTA, The New Yorker: Well, I mean, I think immediately what we're going to see is the spate of mergers and partnering on the part of all of these industries. But basically you have, you have the cable companies and the telephone companies, both local and long distance, and the wireless companies and the studies and the consumer electronics, and the computer industry and the publishing industry, all of them want to get in each other's pocket and get in each other's business, and they will attempt to do that. Whether that happens immediately or over a period of time which is what I suspect will happen, that will happen, so eventually the idea behind this bill is that the consumer sitting there will have a choice not just the cable service but the telephonecompany providing the cable or the wireless people providing the cable or the computer that providing you your video services. So, so you will have choices and as you have choices, as is true say of long distance today, your prices will come down. That's the presumption.

MS. FARNSWORTH: And Mr. MacDonald, do you think the presumption is correct? Because of competition among all these different providers, prices will go down?

RICHARD MacDONALD, Media and Telecommunications Consultant: Yeah, I think there's going to be a period of everybody sorting out there in-home equipment. I mean, it's kind of like it doesn't really match yet, but that's not going to take very long, and we're talking maybe a year or two to figure out standards and two to three years to get, you know, this kind of technology into production just so you've got the box in the house. And once that happens, especially in local telephone rates in big markets, big urban markets, you're likely to have an awful lot of competition emerge quickly and be very meaningful both to residents and to businesses.

MS. FARNSWORTH: Well, is the theory that in this home--let's take this typical consumer home, or perhaps not so typical because I think cable, most homes still do not have cable service, but let's take a home that does--is the presumption that there would be one line, either telephone or cable, that could do everything, and that this is desirable?

MR. MacDONALD: It's not clear whether there is going to be. It's probably better that it be that way, but what there is going to be a presumption about is that there will be at least a choice between service providers. We may not necessarily have to duplicate the wire in the home but there will be one service provider, or there will be two service providers competing with each other to offer the same types of services, and, in effect, what some of your people on the intro talked about, which is packaging services, could come in through one provider and presumably be done at a cheaper price than it can be done by two, or if both compete hard, you could have two service providers providing each one of those things but presumably over the same wire.

MS. FARNSWORTH: But Ken Auletta, at the same time there's talk of say NYNEX and Bell Atlantic merging, so at the same time as there's talk about lots of competition, there's also talk of mergers, and that--wouldn't that work against lowering prices?

MR. AULETTA: The presumption we're making is that you'll have more competition as people compete to provide some kind of service, some kind of route to your home, a highway to your home. But, in fact, there's another model that could happen, and we don't know if this won't happen, which is that these giant companies--let's say the regional Baby Bells--there are seven of them--may get together as, for instance, Bell Atlantic, as you mentioned, and NYNEX are talking about merging, and in fact, you can create spheres of influence. You may say, look, it is too expensive, guys, for me to get into your cable business, why don't we make a deal with Time-Warner or John Malone and TCI, we'll stay in the telephone business, we'll just go after AT&T and long distance, and--but we'll stay out of your cable business, and you stay out of our phone business. You could have something like that happen because in fact, if you look at the grid of the world, not just the United States, many of these companies are partnered in different countries with some of their adversaries in the United States.

MS. FARNSWORTH: Ken Auletta, still on this subject ofthe phone companies and the cable companies, a lot of the details of this still have to be worked out by the FCC, the Federal Communications Commission, right? Tell us about that. What has to happen now to make all this really, make it become reality?

MR. AULETTA: Well, one of the things that actually amuses me, you hear a lot of this talk about deregulation and let government get out of the way, and what do we need an FCC for, well, one of the reasons you need an FCC, as Rich says, if you're going to have people sharing a wire, which, in fact, is cheaper for the consumer, you don't want every company to go out and invest the same money that AT&T has already invested in building long distance wires, or have everyone do the same local, so if you want to have sharing of that wire, who's going to referee that the local phone company shares their wire with the long distance company, or with the cable company? The government has to do that. So the government is not going to go away, and this notion that it will is fallacious.

MR. MacDONALD: Yeah. In fact, one of the notions that--Ken's notion about spheres of influence actually has all sorts of dangers because presumably that's--there's always the risk you could get collusion or something like that. What you don't--what you want from this bill and what the great advantage, you know, and prize is here is that we'll end up with a really competitive and efficient telecommunications system. That's what we're--that's what the prize is. The costs of that are not all of it may get to, you know, the outer reaches of to markets where there are scare population, markets under 50,000, they're already--part of the bill already allows for consolidation between telephone and cable companies. So what you really are trying to do is capture efficiencies but the risks and one of the prices we're going to have to pay is yes, we're talking about very big companies possibly getting together and we're going to have to be a lot more careful about anti-trust implications of that, and No. 2, there's going to be--it's going to be cheaper presumably for both cable and phone and cellular and all the rest of it in the big concentration-- concentrated markets.

MS. FARNSWORTH: And, Mr. McDonald, on this subject, the boosters of the bill, Vice President Gore, for example, talk about the benefits that will--that there will be more money for investment. I guess, presumably, there will be higher profits and more money for investment. I'm not sure I know the reasoning but is the investment money--is it likely to be put into fiber optic cables going into people's homes which will make interactive TV and all of these things that we see in the ad possible?

MR. MacDONALD: Well, I--

MS. FARNSWORTH: Is that a presumption, I should say?

MR. MacDONALD: Yeah. I think there are two things to look to, two major issues facing both investors and the managements of these companies, as they try to--as they look toward the future, as one entrepreneur told me a couple of weeks ago, he said, we were talking about stress--and he said that his son, who now runs the business, just thinks that all of these developments are nothing more than opportunity and, you know, what can we do next God bless America, and he's worried about competition all the time. I think that kind of attitude is something that both investors and management are going to have to sort out. How much is God bless America and how much is competition going to threaten the value of their investments as we go forward? I mean, after all, if you get- -if you put money into the wrong investment, and we were talking about this, in the wrong box, if you put money into the wrong box, you make the wrong bet, and somebody comes in with a better box, cheaper, quicker, whatever, gets in the marketplace, this competition is real, and they can penalize the losers in a very dramatic way.

MS. FARNSWORTH: Ken Auletta, the cable companies can jump into the phone market, but they also have their rates deregulated either now or in three years. Why was this necessary? And, and what is the significance of it?

MR. AULETTA: Well, the presumption the government is making and Congress in passing this overwhelmingly is that there have been some injustices done to cable that they, they froze their rates two years ago, and that, in fact, cable needs to invest some money to, to build out those fiber optic wires and other things that you spoke of. In order to do that, they may have to raise some rates. In the short run, some people, some consumers will be paying more money. The bet is that in the long run, they will be paying less money as there's more competition. The essential thing that went on here, and it's an important point, government has changed the assumption under which its regulation operate. It used to be they assumed let us try and anticipate all the potential problems and pitfalls we will have and set up regulations to prevent them, and business found that this was an impediment to their moving forward. So now they're saying this is the fastest growing, most vibrant business in America. Our No. 1 export, communications is, change the assumption, and they have changed the assumption. The assumption now is, look, let's lower those barriers, let government get out of the way, let these industries compete and merge if they will, and if we have problems, let's not try and anticipate everyone and cross every "T," then we'll deal with it at the time, but let's get out of the way.

MR. MacDONALD: Yeah, that's a really great point, because I think what's changed, what's allowed them to do it this time around is the fact that 10 years ago they talked about deregulating cable rates and said we'll do it where there's effective competition. Well, they defined effective competition as three TV stations in the market.

MR. AULETTA: Right.

MR. MacDONALD: Now you've got satellite services that can deliver to your home anything cable can deliver, except for the local TV station, with a better image, and CD quality sound, so you can say and the consumer has to pay some money to buy the dish, you're talking about $500, but this is the dramatic change in the landscape of the business that if a cable company makes a mistake by pricing, putting its rates too high, the consumer has a real choice. He goes down to a local store, he buys a dish, it takes a while to put up, but it's done.

MS. FARNSWORTH: So this is--it's really a historic bill, this is a very big deal, isn't it?

MR. MacDONALD: Oh, yeah, this is very important. It is a very important moment in this industry.

MR. AULETTA: But we are jumping off a bridge, and we don't know whether water is down there.

MS. FARNSWORTH: Remember, remember, all the talk a year and a half or two years ago and last year about all of the very excited about interactive TV and there were experiments in various communities? What's really come of that? Not much, as I understand.

MR. AULETTA: Well, you see, but you're getting to one of the big issues here. These companies think they know what the right strategic move is for them to make revenues, but the great mystery out there that none of these companies know, in fact, none of us know, is what does the consumer want, and the presumption they were making a year and two ago was that video on demand was going to be the new hoola-hoop. Well, it hasn't been true. In fact, the new hoola-hoop is the Internet. That's the interactivity--

MR. MacDONALD: Yeah, that's true.

MR. AULETTA: --that's caught on.

MR. MacDONALD: The point is that basically the companies are trying to categorize the consumer and figure out what their, what their behavior is going to be, but people are using Internet as if it's interactive TV. I mean, the Interact is, in effect, interactive TV.

MR. AULETTA: Sure.

MR. MacDONALD: And people use it as if it's a combination of TV plus information service.

MS. FARNSWORTH: And Sen. Dole objected, as you know, to a portion of the bill in its earlier form that he said would have given away a segment of the airwaves to the broadcasters. What's happened to that in this bill and what's likely to happen in the future?

MR. AULETTA: It's been put abeyance, and they say they will deal with it in the subsequent legislation, and I--

MS. FARNSWORTH: Explain what it is here too just briefly.

MR. MacDONALD: The notion is basically that the public airwaves, the frequencies that are going to be allocated for so-called advanced television, either high definition or whatever, are a public good, and that the private broadcaster ought to pay for that. The broadcaster's point of view is that if you don't let us get into these new services, you'll basically disadvantage us so much against the rest of our very very powerful competition that we won't be able to survive. Now, in other licensing of frequencies like the PCS, the so called Personal Communications Services and other wireless type services, the government has raised billions of dollars by auctioning off those services, and what Dole pointed out was, look, this is something that belongs to the people, and people who are private folks who are going to make money off it, ought to pay for it, so he's going to--there's going to be legislation I think that's going to address that issue.

MR. AULETTA: And the lobbying effort against what is called the give-away to the broadcasters will be much more intense because a lot of people who might lobby against it wanted this legislation to pass.

MR. MacDONALD: Exactly.

MR. AULETTA: But now all the phone companies and all the cable companies are going to be loaded for bear.

MR. MacDONALD: That's exactly right. So anybody who's trying to come back to get a second thing done doesn't have all the advantage of--everybody's interested in trying to get this bill passed.

MR. AULETTA: The thing to watch here is the campaign contributions to all these candidates by all of these industries now.

MS. FARNSWORTH: Well, Ken Auletta, Richard MacDonald, thanks for being with us.

MR. LEHRER: Still to come on the NewsHour tonight, the Forbes story, Shields & Gigot, and remembering Gene Kelly. FOCUS - THE FORBES FACTOR

MR. LEHRER: Now, the Steve Forbes story as seen in New Hampshire where he is on the rise with that important Presidential primary now less than three weeks away. Margaret Warner reports.

MS. WARNER: It was a heady rush of curiosity and excitement Monday when 200 friends and neighbors descended on Barbara Pressly's house in Nashua, New Hampshire. They came to meet the new celebrity of the Republican Presidential field, Steve Forbes.

MARILYN HOUSEMAN, Republican: Everything was getting very tired and very used and everybody sounded the same and all of a sudden Forbes came on the scene with something new.

MS. WARNER: Forbes attracted crowds at every stop in New Hampshire this week, crowds of would-be voters and press. They all wanted a good look at the millionaire magazine publisher who has suddenly brought some suspense to the primary race. Last month, this political unknown vaulted into clear second place in many New Hampshire polls, and three surveys this week actually put him first. The polls are notoriously volatile at this stage, but they were enough to land Forbes on the covers of "Time" and "Newsweek" and to jolt the campaign of the previously unassailable front- runner, Senate Majority Leader Bob Dole. Veteran Republican operative Dave Carney, senior adviser to Dole's New Hampshire campaign.

MS. WARNER: Do you think Forbes could beat Dole here?

DAVE CARNEY: I don't know. I don't know.

MS. WARNER: Dole's campaign is fighting back with television ads, questioning whether the neophyte Forbes is fit for the office.

AD SPOKESMAN: The more you learn about Steve Forbes, the more questions you have. Steve Forbes, untested leadership, risky ideas.

MS. WARNER: Forbes relishes his new status.

STEVE FORBES, Republican Presidential Candidate: I think it's a contest between the failed politics of the past and the vibrant vision for the future.

MS. WARNER: Forbes' vision is an upbeat one.

STEVE FORBES: America once again will prove wrong the critics and the skeptics and America once more will take her place as the leader and inspiration of the world.

MS. WARNER: The part of his vision his most eagerly touts is a proposal for a flat 17 percent personal income tax with no deductions.

STEVE FORBES: If we want Americans to have faith again in their institutions, want to have--get rid of this corrosive effect on American life, we have to get rid of that tax code. There's only one thing to do with this monstrosity, you can't reform it, you can't trim it; the only thing to do with this monstrosity is to scrap it, kill it, drive a stake through its heart, bury it, and hope it never rises again to terrorize the American people.

MS. WARNER: Forbes' surge has been propelled by a massive TV and radio campaign. The ads relentlessly promote his ideas.

STEVE FORBES: [ad] So I say scrap the tax code, put in a low flat tax. It's simple. It's honest, and that's a big change for Washington.

ANNOUNCER: Steve Forbes for President.

MS. WARNER: And they just as relentlessly attack his opponents.

SPOKESMAN: [ad] Bob Dole, Phil Gramm, two Washington politicians. It's time for a change. Lamar Alexander, he won't change Washington, he'll fit right in.

MS. WARNER: The 48-year-old Forbes is the sign of a wealthy New Jersey family who now runs the Forbes Magazine publishing empire. Though he accepts contributions, he is financing his campaign himself and refusing federal matching funds. That frees him from the state by state spending limits that restrict other candidates. The Forbes camp says it's already poured nearly $1 million into New Hampshire radio and TV. His rivals say it's twice that. They expect he'll end up spending three times more than any other candidate, even Dole.

TOM RATH, Alexander Campaign Advisor: The buy is breathtaking in its depth and its breadth. I've never seen in all my years in politics in this state or anywhere a buy like this.

MS. WARNER: Former Attorney General Tom Rath is a seasoned Republican activist in the state. This year he's advising Lamar Alexander's campaign.

TOM RATH: Several weeks ago I watched the evening news on a local commercial station and we saw four Forbes ads. I then watched the sports on ESPN, saw four more, I watched Crossfire on CNN, saw two more, and I watched the Weather Channel and I saw three more. I felt like I was being stalked. I think but for his checkbook, not but for his ideas, but for his checkbook he'd probably be a 2 or 3 percent candidate. What we are seeing here in a really rather remarkable way is the tremendous power of dollars poured into reasonably small media markets in intensive fashion, and their ability to move poll numbers.

MS. WARNER: In an interview, Forbes made no apologies for dominating the airwaves.

STEVE FORBES: I've taken my message of growth and opportunity directly to the voters. Mine is an information age campaign. Their campaign is typical of the politics of the past, with huge staffs, mass mailings, and not going directly to the voters.

TOM RATH: He has removed the oxygen from this field. He has made it very hard for the rest of us to get our messages and our identification up because he has so completely engulfed the field with his message.

MS. WARNER: His rivals say Forbes' surge reflects nothing more than the superficial attraction of a new face, the simplistic appeal of the flat tax, and the millions of dollars he's spent to promote votes. But comments by voters here who like Forbes suggest he's also tapping something deeper.

BOB KLEY, Independent: I think Steve has the best chance of winning because he's new on the scene and Washington is disgraced the way it is right now.

MS. WARNER: Bob and Beverly Kley are part of the state's large group of independent voters who can and often do vote in the Republican primary.

MS. WARNER: Then why do you think he'd be any different than anyone else?

BOB KLEY: Well, Steve would be a lot different because he can't be bought.

MS. WARNER: Forbes is mining New Hampshire voters' ongoing anger and frustration with Washington. It's the same kind of anti- politics, anti-Washington, anti-government sentiment that fueled Ross Perot's 1992 Presidential campaign and the Republican victory in the 1994 congressional elections.

MARILYN HOUSEMAN, Republican: He wants to give government back to us and give us a chance to change it.

MS. WARNER: That is very much the message though that all these Republican candidates are carrying. Why is it different coming from Forbes?

MARILYN HOUSEMAN: Because he's not been there and failed us, and these other candidates all have.

MS. WARNER: Retired U.S. Sen. Gordon Humphrey is one of the few establishment Republican figures in the state who have endorsed Forbes.

GORDON HUMPHREY: I think people are looking for somebody fresh; they're looking for someone who will go down to Washington and kick some butt.

MS. WARNER: Forbes' sales pitch for his flat tax proposal tries to exploit those very feelings. He's selling the flat tax not just as a tax cut for most Americans but as a way of stripping power from Washington.

STEVE FORBES: And to change the culture of Washington you have to get to the source of power in Washington, which is simply the major source of power is the tax code. Just remember, it is not your typical American who writes that tax code. It is the lobbyists, the lawyers, the rich, and the powerful.

MS. WARNER: There are plenty of Republicans and independents planning to vote in the primary who aren't persuaded by Forbes, like registered nurse Linda Edelman.

LINDA EDELMAN, Independent: I don't think he's qualified to be President. He's never run for electoral, electoral office. He's never--whatever he's done he's done because he was born into the right family.

MS. WARNER: Now, with less than three weeks to go, Dole and the others have stepped up their efforts to fan such concerns. Dole's latest ad using popular New Hampshire Gov. Stephen Merrill is part of a concerted strategy shared by many of Forbes' rivals. They think they can undermine Forbes' very candidacy with tax-averse New Hampshire voters by tearing apart the specifics of his flat tax proposal.

MAN: [Dole Ad] The typical New Hampshire household will pay $2,000 more in taxes, and we lose our property tax deduction and our mortgage interest deduction.

MS. WARNER: But in the current climate, the attacks are meeting with resistance from some voters.

BARBARA PRESSLY, Independent: The important part of the flat tax for me is not the details of the flat tax, but of the fact that he has identified one of the most ridiculous levels of government that everybody knows is insane.

BOB KLEY, Independent: Well, if he couldn't make it fly, I would still vote for him, because there needs to be a change in Washington, a radical change.

MS. WARNER: And for voters like Rona Sharbineau, Forbes has been inoculated from a tax by ordinary politicians. A former county co- chairman for Dole, she defected to Forbes last month.

RONA SHARBINEAU: Because I don't believe that they have the proof that this won't work. I mean, it's all smoke and mirrors once again.

MS. WARNER: Even Forbes' public presence, which has been ridiculed in the press as awkward, policy wonkish and programmed, seems to work for him. Voters like health care consultant John Arisian find his unpolished, un-charismatic style authentic and reassuring.

JOHN ARISIAN: I expected to see a very wooden personality, and I was pleased to see that I think he's a much more human real person, and I like that.

MS. WARNER: Will this current fascination with Forbes carry through the primary?

GORDON HUMPHREY, Forbes Supporter: It seems to me that we have a classic New Hampshire surprise in the making.

CLAIRA MONIER, Dole Campaign Advisor: I think we do have a boomlet. I do not think it's for real.

MS. WARNER: Privately, Forbes aides say he doesn't have to win New Hampshire; he only has to place such a formidable second that financial contributions to all of Dole's other challengers dry up. Then they say Forbes will have a true head-to-head match with Dole as this Spring unfolds, and with a net worth estimated at $400 million, Forbes certainly has the money to go the distance. FOCUS - POLITICAL WRAP

MR. LEHRER: Now how this Forbes story and other matters political look on this Friday night to Shields & Gigot, syndicated columnist Mark Shields, "Wall Street Journal" columnist Paul Gigot. Paul, how do you explain the rise and the continuing rise of Steve Forbes?

PAUL GIGOT, Wall Street Journal: Well, I was just listening to Margaret's very good piece, and I think you can explain it in some of the comments of the people, the--Washington is a disgrace, he can't be bought, he has the charisma of the awkward, he seems like he's sincere--

MR. LEHRER: Hasn't been there and hasn't failed.

MR. GIGOT: Hasn't been there, hasn't been in sin city USA corrupting, you know, the place by buying things in the tax code and doing deals. Andy Kohut of the DePew Research Center did a poll of New Hampshire voters and found that 71 percent of those voters want a new direction; they're unhappy with the direction of the country. Steve Forbes comes in and says, I want to set that new direction. He comes in with a plan, the flat tax, that has appeal, populist appeal, because it seems to be putting a handcuff on politicians. It would take, as he says, the source of meddling and corruption of the tax code and say to the politicians you can't touch it, leave it alone, because the average Joe can't buy a lobbyist, can't pay a lobbyist to come in and fix it. I think it's a very powerful message, and it overcomes some of his weaknesses as he's a son of a rich man and the old rich-poor populist dichotomy, which we're really familiar with, this is a different sort of populism.

MR. LEHRER: Is it a different sort of populism, Mark? Is that what this is all about?

MARK SHIELDS, Syndicated Columnist: I think I'll reserve final judgment on just how much of a populist Steve Forbes is. Most people grow up in houses with names on them. You don't call populist, I mean, Timber Wood, or whatever else. I think that Paul put his finger on a good part of the deal. It is not a novel appeal. As we watched Margaret Warner's piece on New Hampshire and Steve Forbes, we were reminded that Jimmy Carter in 1976 used the theme that he had never met Tip O'Neill or Howard Baker, leaders of the Congress, he had never taken the law school aptitude test, therefore, he ought to be President. Ronald Reagan was still talking about the puzzle palaces on the Potomac seven years into his Presidency, and the people he had appointed were already there. I mean, it's not a new theme.

MR. LEHRER: Yeah.

MR. SHIELDS: The argument goes like this. You want a neurosurgeon, go down to the Christian Science reading room and hire one. I mean, get someone who doesn't do neurosurgery, and that's basically the pitch. And this is--and Bob Dole's is the other side--

MR. GIGOT: Politics isn't neurosurgery.

MR. SHIELDS: Well, I mean, the question is, is effectiveness, is leadership, is it demonstrated over, over a lifetime? And I think that's the argument that Henry Hyde made against term limits and the House of Representatives so persuasively, so compellingly, it's what to some degree this campaign is about, but his appeal is real.

MR. LEHRER: That's what I was going to ask. At first, everybody said, ah, well, he's just gone to all this TV stuff and all that, and as soon as people get used to him and see him, he's going to go down the tubes, but that's not what's happening at all.

MR. SHIELDS: No. Tom Rath, the former attorney general of New Hampshire, in the piece put it very well.

MR. LEHRER: The Alexander guy.

MR. SHIELDS: That's right.

MR. LEHRER: That Margaret talked to.

MR. SHIELDS: Bob Dole's co-chair there in '88. I mean, he and Warren Rudman, former Senator Warren Rudman is still with Bob Dole, but he made the point. It is like being stalked. I mean, it is wall-to-wall when you go in there. There's no question about it. And he--

MR. LEHRER: What do you mean?

MR. SHIELDS: Every station you turn to, every set that's on--

MR. LEHRER: I see. I see.

MR. SHIELDS: --I mean, you get it. I mean, he said four times on the ESPN--the sports center--at 11 o'clock. The thing about it that is, that is--I think, remains fascinating is this is somebody who didn't introduce himself. Ordinarily, if you've got somebody who is an unknown candidate, they come in with a biographical piece, this is who I am, this is what I've done, this is, you know, here I am, in basic training, here I am in the first job, and driving the first car and all the rest of it, he didn't do that, and his message, Paul's right, is optimistic in person. We heard it in the piece. It's growth, it's pro-growth. It's upbeat. The television spots, themselves, are pretty emphatically and stridently negative. Bob Dole's negative score in Massachusetts, because he's buying Boston TV, has up to 63 percent.

MR. LEHRER: That's because of the Forbes--

MR. SHIELDS: Because of the Forbes television ads.

MR. LEHRER: What about--what does Bob Dole do about this, Paul? What has he done, and what can he do?

MR. GIGOT: Well, he probably can't compete on the flat tax, except to attack the flat tax. One of Steve Forbes's rivals, a campaign strategist, told me this week, you destroy the plan, you destroy the man, and they're going to go right at the flat tax, and they're going to try to challenge it as risky. Some of them--Bob Dole's direct mail in Alaska, which didn't work very well, but they're going to try it, linked Steve Forbes with Jimmy Carter and Bill Clinton, saying two other people we elected who we didn't know very much about--and--and--

MR. LEHRER: Oh, my goodness. And that's going to come from Dole's people?

MR. GIGOT: That's coming from the Dole campaign. So far, though, they have not handled it very well. First they tried to attack him as a rich guy; that didn't work. Then this week they tried to bring in finally a good strategy, Gov. Steve Merrill, very popular, who's endorsed Bob Dole, to say, go after the flat tax, but they did it based on a flawed study that even the guy who wrote it said was quick and dirty and was done for the realtors.

MR. LEHRER: Yeah.

MR. GIGOT: So that's going to give Forbes a chance to come right back at him and say, you know, tell the truth, Sen. Dole, you know, you're just distorting the truth.

MR. LEHRER: Is the reaction within these various camps, the Dole, Alexander, the people who are--Buchanan, the people who are opposed by Steve Forbes, are they stunned about what's going on? Did they expect this guy to go boom, quick?

MR. SHIELDS: There is a sense of being stunned. There's a sense of really reeling from a punch, though. I can't--the spending really does give him an enormous advantage in a small state. He's spent four times as much as the legal limit. Okay. Everybody else is playing by the same rules. The only person--

MR. GIGOT: On television ads.

MR. SHIELDS: That's television ads.

MR. GIGOT: The organization, they've spent a lot.

MR. SHIELDS: But the only person--but television ads is the principal--where money is mostly spent in state campaigns, they're 2/3 of the budget. The--the fact is, Jim, what they're dealing with right now is this sense of my God, what can we do, I mean, we're just overwhelmed, this thing just keeps coming at us, and I've heard a number of Republicans this week say, because of the front- loading of the schedule this year, the compression of it, if, in fact--

MR. LEHRER: Explain that.

MR. SHIELDS: Okay. We will have 75 percent of the delegates chosen by the first week of April.

MR. LEHRER: Okay.

MR. SHIELDS: And it's just that quick.

MR. LEHRER: All right.

MR. SHIELDS: California's moved up. New York's moved up. All the big states have moved up. Texas and every one of them. If Steve Forbes finishes a close second in Iowa, or maybe even wins Iowa and wins New Hampshire, all right, that there would be no catching him, I mean, that he would be on such a roll, and--

MR. LEHRER: Do you see that too?

MR. GIGOT: I think that's too optimistic from the Forbes' point of view. I think that there are still a lot of Republicans who have grave doubts, particularly social conservatives, the cultural right hasn't been heard from now, they're divided. I think--

MR. LEHRER: About him?

MR. GIGOT: But they're divided among the candidates.

MR. LEHRER: Yes, right.

MR. GIGOT: They're divided among Alan Keyes, and Pat Buchanan, and Phil Gramm and Bob Dole, and if Forbes does emerge as the major challenger, I think you will see the party regulars, a lot of the party establishment, and other parts that say, look, we cannot turn over our nomination to somebody like this, and you have them rally around somebody else, and that's--

MR. LEHRER: And not Bob Dole?

MR. GIGOT: It could be Bob Dole.

MR. LEHRER: Could be Bob Dole. I see.

MR. GIGOT: It certainly could be Bob Dole.

MR. LEHRER: I see.

MR. GIGOT: Absolutely.

MR. LEHRER: You're shaking your head.

MR. SHIELDS: The idea of rallying around somebody else, I mean, to stop Steve Forbes. Maybe we can stop the popular wilt--this guy's on a roll, and he's leading in all the polls and everything else, I mean, there are things he's done that are going to come back to haunt him. I mean, he's saying--challenging the other candidates not to take federal matching funds. Now, for a guy sitting on $400 million, that's a pretty easy challenge to issue. And he scolds them as typical politicians taking matching funds. The gipper, Ronald Reagan, the patron saint of the conservative movement, took $93 million in public funds, and Steve Forbes, of course, wouldn't like to answer questions like that. And this kind of drives them in a sense of frustration.

MR. LEHRER: Okay. Yeah.

MR. GIGOT: Phil Gramm in response to that says, well, is he going to take them in the general campaign if he runs against Bill Clinton, you know, the $50 million or something--

MR. LEHRER: This story isn't over is what both of you all are saying. Right. Look, a story that is over is the election of Ron Wyden, Democrat, U.S. Senate, Oregon, replacing Bob Packwood. Are there national political wins to be read from this?

MR. GIGOT: Well, Republicans won't like to here this, but Ron Wyden owes that Senate seat to Bill Clinton. The polling numbers changed dramatically right after the State of the Union. Bill Clinton's State of the Union Speech was so effective in Oregon that his favorables popped up, the President's, and he boosted Ron Wyden right with it, and it had a big effect, and as narrow as this victory was for the Democrat, that was a big part of the explanation.

MR. SHIELDS: Okay. Challenge, how could I challenge Paul's analysis of that? Two things: One, when you've got a race this quick--this close--19,000 votes--

MR. LEHRER: Out of a million.

MR. SHIELDS: Everybody takes credit. I mean, the left-handed agnostics say, we made the difference, we were the key, you couldn't have won without us, and he probably couldn't have, but Ron Wyden was out-spent by Gordon Smith, who's an attractive, congenial, plausible candidate.

MR. GIGOT: A good candidate.

MR. SHIELDS: Articulate, very good candidate. He was out-spent. And I look at it and I say, what was it, and I think the Republicans have to take the warning from this, that the environment was a serious mistake for them in 1995. Being on the wrong side of the environment, when you start tampering with environmental regulations, people start to get antsy and nervous about water, and air and breathing and lungs and kids and--

MR. LEHRER: And there's even a Republican--Linda Duvall, Republican pollster, had a poll that said that very thing, right?

MR. GIGOT: She's not the only one. I mean, Newt Gingrich will tell you that the environment was the single most mishandled issue of the last year for Republicans. The rhetoric was too strident, and the problem for Republicans on the environment, I think they can still do better on this issue than they've done, but it goes at suburban voters who on fiscal issues and so many other issues might be more naturally Republican.

MR. LEHRER: Finally, a story that may be only known as we speak by readers of the "Washington Post," front page story, Dick Morris, the President's political adviser, gave some polling results to, according to the story, to one of Dole's people and said, hey, look, the Senator should make a deal on the budget because he's going to get hurt politically if he does not. Why was that on the front page? Why is that a big deal, Mark?

MR. SHIELDS: It's a big deal, Jim, because you heard Margaret's piece. You can't trust anybody in politics. You can't trust anybody. You know, nothing is on the level. Here you have a guy who's a Republican pollster, forgot he was a Republican pollster- -

MR. LEHRER: Did I paraphrase that story correctly?

MR. SHIELDS: Yeah. What he was doing--the President's pollster, adviser--

MR. LEHRER: Okay.

MR. SHIELDS: --was polling Republican primary voters.

MR. LEHRER: Yeah. I left that out, right.

MR. LEHRER: Now, what's he polling Republican primary voters for? He's the pollster for the--the President isn't in the Republican primary. So is he somehow meddling in the Republican process? Is he trying to manipulate the process? Is he doing it with federal funds that are provided to the Clinton campaign? Is he being reimbursed? Are the American people providing funds for him to do this? I mean, the whole thing is on the level. This thing, I'm telling you, has the shades of manipulating echoes, of manipulating the process, of tampering with the other side's election. The thing that amazed me for than anything else was that Bob Dole didn't come back and say, you know, I'm telling you, Bill Clinton--

MR. LEHRER: Make it public.

MR. SHIELDS: Absolutely. Go public and take it right on. Because he's got to change the conversation in this race.

MR. LEHRER: But the story said that the information never got to Sen. Dole, that it just kept his--what do you think of this story? Were--I--as I was reading this story this morning, I thought, why is this on the front page?

MR. GIGOT: The Morris story is bigger than this because Dick Morris had a back channel--

MR. SHIELDS: Back channel--

MR. GIGOT: --from the White House to the Republicans to Trent Lott, who he used to represent, who's the No. 2 man in the Senate, on the budget for months.

MR. SHIELDS: The 1994 campaign he was his adviser.

MR. GIGOT: And, and I have talked to senior Republicans in the House and in the Senate who thought Dick, hey, Dick Morris was telling us the President wants a deal, the President wants a deal, he's going to do a deal. He just has to make sure it's positioned properly.

MR. LEHRER: But his chief of staff and other people might be saying something else.

MR. GIGOT: They feel--

MR. LEHRER: Okay.

MR. GIGOT: They feel burned.

MR. LEHRER: Hey, guys. I now understand why it was on the front page. Thank you both very much, and we'll see you next week. RECAP

MR. LEHRER: Again, the major stories of this Friday, excavations began on the first of many suspected mass graves in Bosnia, the nation's unemployment rate rose .2 percent to 5.8 percent in January, in part because of severe snowstorms in the East and more extreme weather hit the middle section of the country today. Gene Kelly died in Los Angeles at the age of 83, and the best way to remember the great dancer is to watch him at work. Here at full length is one of his most famous movie scenes. It's from the 1952 film "Singing in the Rain." FINALLY - IN MEMORIAM

GENE KELLY: [singing] I'm singing in the rain, just singing in the rain. What a glorious feelin'--I'm happy again. I'm laughin' at clouds, so dark up above. And the sun's in my heart, and I'm ready for love. Let the stormy clouds chase everyone from the place, come on with the rain I've a smile on my face. I'll walk down the lane, with a happy refrain. Just singin', singin' in the rain. Dancin' in the rain--ya, dya, dya--I'm happy again. [dancing] I'm singin' and dancin' in the rain. [dancing to music] Dancin' and singin' in the rain. [music]

MR. LEHRER: Have a nice weekend. I'm Jim Lehrer. Thank you and good night.