The MacNeil/Lehrer NewsHour

INTRO

ROBERT MacNEIL: Good evening. President Reagan says he wants better relations with the Soviet Union in spite of the harsh words coming out of the Kremlin. In Lebanon, efforts are still underway to find a way of separating the factions fighting in the civil war. And Israel is feeling the high cost of its occupation of southern Lebanon. We'll have a special report. Jim Lehrer is off; Judy Woodruff's in Washington.

Judy?

JUDY WOODRUFF: In domestic news tonight we'll take a detailed look at some economic statistics, including one that should please the President: unemployment down to 8.2%. And a Reagan administration proposal about Medicare payments that may not please the elderly. We also get a report on the parole of a California muderer that has outraged San Francisco's gay community.

MacNEIL: The Reagan administration indicated today that it wants to improve relations with Moscow, despite the current hardline rhetoric from the Kremlin. The President sounded a positive note after meeting Ambassador James Goodby, who will lead the U.S. delegation at the conference on European security in Stockholm later this month. That conference will discuss ways of reducing the risk of war and surprise attack in Europe. Secretary of State George Shultz and Soviet Foreign Minister Andrei Gromyko are due to meet separately in Stockholm to discuss the recent chill in relations between Moscow and Washington.In a statement after briefing Ambassador Goodby, President Reagan called for a productive East-West dialogue. At the State Department, spokesman Alan Romberg said that despite recent Soviet statements the U.S. had made clear that we are interested in pursuing "a serious, businesslike and constructive dialogue with the Soviets on a full range of issues between our two countries. That will continue to be our approach to the Secretary's meeting with Mr. Gromyko on January 18th." Ambassador Goodby told reporters that the signals we've been getting from the East are relatively positive about the objectives of reducing the risk of surprise attack, despite the current tension in the Washington-Moscow relationship.He amplified later for our reporter David Shapiro.

Amb. JAMES GOODBY, U.S. Stockholm Delegation: The atmosphere is strained, and to the extent that an atmosphere of that type might make us redouble our efforts on all sides to try to reach agreements, perhaps you can visualize that as being an incentive. I'm trying to put as rosy a face as I can on it because I think there really are some possibilities in this conference for reaching agreements that are serious and will have some impact.

MacNEIL: In West Germany today a top Soviet official said that Soviet President Yuri Andropov is recovering from his illness. Badim Zagladin, first deputy in the Soviet Communist Party's information department, told reporters, "He was ill and is getting better. He is working and taking part in all Party affairs." Zagladin also said Moscow still approved the principle of a summit between Andropov and President Reagan, but he added, "I do not see a genuine wish on the part of the United States for serious negotiations that could produce results."

Judy? Medicare-Medicaid Cutbacks

WOODRUFF: Here in this country the unemployment picture continues to brighten. The government reported today that the jobless rate fell again last month to 8.2% of the work force. Officials were calling it the best post-recession labor market recovery in over 30 years. But for certain sectors of society that wasn't much consolation. Among teenagers the unemployment rate did drop slightly, but it's still running at 20.1%, and among blacks unemployment actually rose a tenth of a percent to 17.8%. Janet Norwood, the commissioner of labor statistics, acknowledged that the improving picture overall might be due in part to the fact that fewer people than expected have re-entered the labor force in search of work. Even so, the figures are good news for President Reagan, who wants to get his economic house in order in plenty of time to run for re-election. One way he's doing that is with preparations for a new federal budget with more cuts in domestic spending -- cuts that reportedly could include a $2-billion reduction next year in Medicare and a $1.1-billion cut in Medicaid. The Medicare changes would make short-term hospital stays more expensive for the elderly but protect patients who had to stay in the hospital a long time.

One of the Democrats running for the White House, Walter Mondale, wasted no time in attacking the President for that. Speaking in Florida before two elderly audiences, Mondale said reducing Medicare costs would make Medicare beneficiaries second-class citizens. Accusing Mr. Reagan of planning to repeal Medicare by stealth, Mondale charged, in his words, that the President "planned to go after the health programs right after the election, just like he went after Social Security after the last election. Mondale said that his solution is to establish federal limits on health care costs.

As we said, the President's budget proposal is still tentative, and many argue that the cutbacks are necessary to shore up the financially squeezed Medicare system, which takes care of 30 million elderly and disabled Americans. Here to discuss the reductions being considered by the President are Senator David Durenberger, Republican of Minnesota. He's chairman of the Health Subcommittee of the Finance Committee. He favors reducing the federally-funded health care programs. And Representative Tony Coelho, chairman of the House Democratic campaign committee, who opposes the type of cutbacks being discussed by the administration.

Senator Durenberger, can you explain for us briefly just what kind of reductions the administration is considering?

Sen. DAVID DURENBERGER: Well, I'm not privy to them other than second-hand, but largely they're repetitious of their 1984 budget recommendations.About half of it, as you pointed out, is a catastrophic proposal: charge some small co-payments for each day up to 60 days in the hospital in order to protect people that are in the hospital more than 60 days. The other half of the proposal, again, is like the administration's proposals last year, which include cutbacks and reimbursements for physicians, reimbursement for hospitals and some other changes.

WOODRUFF: Is this the sort of thing that Republicans in the Congress can go along with?

Sen. DURENBERGER: I think Republicans and Democrats can go along with genuine Medicare reform. They have in the past. Last year we voted a major Medicare reform in the way we reimburse hosptals as part of Social Security. The problem this year is not the catastrophic proposal; it's the fact that it comes in an election year in the middle of a budget, and it's not going to look good to the public.

WOODRUFF: Well, that's my question. They didn't make it last year with the Congress. What do you think makes the administration think that in an election year they're going to have any more luck?

Sen. DURENBERGER: I don't know whether they think they're going to have any more luck this year.

WOODRUFF: Well, why would they be proposing it then?

Sen. DURENBERGER: Well, because they proposed it last year; they'll propose it again this year. And on the House side, in Ways and Means, they didn't bite last year. On our side, in the Senate, we didn't either. And it's unlikely that we're going to make any major changes in 1984.

WOODRUFF: Well, Congressman Coelho, what do the Democrats think about the administration proposal, at least what we read as the administration proposal?

Rep. TONY COELHO: Well, basically we're opposed. We think that the President and the Republicans are trying to balance the budget on the back of the elderly and the medically indigent. Here you have a situation where the elderly of this country, who are paying part of the costs of this medical care, are being asked to make severe cutbacks, but we're increasing defense spending dramatically; we continue to provide for tax cuts for the wealthy without any concession by the administration in regard to some reductions on either side there. We basically feel, "Look, we're willing to discuss some Medicare reform, and some serious Medicare reform, but, Mr. President, you have to be willing to make it even across the board. Let's let everybody sacrifice a little bit. We're unwilling to make it just on the elderly."

WOODRUFF: Well, for example, how would the Democrats -- how -- what plan would you --

Rep. COELHO: Well, for instance, we're willing to go along with something on catastrophic. I think David's right that Republicans and Democrats feel that those people who have to be in the hospital over 60 days, that something should be done there.

WOODRUFF: But then how would you pay for it?

Rep. COELHO: But that's only 2%, that's only 2% now, and 98% of the working men and women across this country, or the ones that are less than 60 days in the hospital, and we're saying that there has to be some modifications in some others. We're willing to do some type of cost containment. There is some --

WOODRUFF: Where? What costs would you cut?

Rep. COELHO: Well, we basically feel that there are the hospitals and you have the doctors and so forth all involved, and we're saying, Mr. President, there is more than just the recipients that are involved here. There are also those that participate in the system through hospitals and doctors that need to be sharing in the overall reform if we're going to have some.

WOODRUFF: So you're saying --

Rep. COELHO: Let's not just do it with the elderly.

WOODRUFF: You're saying the recipients don't have to be part of the increased burden?

Rep. COELHO: Well, I'm saying that the recipients shouldn't be the sole person that this burden is put on, and that's basically what the administration is advocating.

WOODRUFF: Do you disagree with him?

Sen. DURENBERGER: Well, I think to be practical about this you have to put it in a larger context than what we've done during the Reagan administration. And during the last three years we have cut about $20 billion out of the growth in Medicare. The cuts came about 52% from changes in hospital reimbursement, about 14% from changes in position reimbursement, and about 21 or 22 percent in extra costs to beneficiaries. So if you look at it in that context, it looks like the hospital has already taken a big part of it; the beneficiaries have taken some part of it; the doctors, I think on both the House and the Senate side, are about to step up and take part of the load also, but that is only looking at it in the budget context. If you look at it in terms of how are the elderly going to be able to afford health care, you have to look at catastrophic. There should have been a catastrophic feature in the original Medicare because it's the lack of catastrophic that makes my folks and a whole lot of other people buying insurance they don't need.

WOODRUFF: But is the only way to pay for catastrophic insurance to ask recipients --

Rep. COELHO: That's the issue.

WOODRUFF: -- beneficiaries, to fork out more money on their own?

Sen. DURENBERGER: That's the way any insurance system operates. The young are paying for the old; and the healthy are paying for the sick, and that is the essence of an insurance system.

WOODRUFF: So, as I understand you, you're saying that's what needed, but that's what's not politically possible.

Rep. COELHO: Well, basically I think that you're going tohave the Democrats advocating some type of cost containment as being part of the contributor on this thing.

WOODRUFF: Can you raise enough money through cost containment?

Rep. COELHO: Well, we have a plan that we think we can. We intend to introduce it. We have a senator on the Finance Committee and we have a congressman on the House Ways and Means Committee, both the committees that have jurisdiction on this, who intend to put in a bill shortly that will address this.We feel it's done ina fair way, but not on the back -- totally on the back of the elderly. That's the issue.

WOODRUFF: What's going on here politically? I mean, you just heard Senator Durenberger say that he thinks the administration is proposing this knowing that it's likely not to pass.

Rep. COELHO: Well, this is part of the administration's unwillingness to adress the issue of lack of revenues, the big tax breaks for the wealthy, and the unwillingness to do anything about the tremendous costs in defense spending. And what they're willing to do is to advocate some reductions in budget so that they can go to Senator Durenberger and to others and say, "Look it, we're doing at least these type of reductions in domestic spending," and so forth, to make themselves look partially good, and the whole budget figure, knowing full well that they won't get them passed. That goes on with every administration.

WOODRUFF: Does that sound like what's going on?

Sen. DURENBERGER: I'm not an expert on that. I don't think they'd be convincing. I think what this administration is trying to do that the Mondale-Carter cost containment administration didn't try to do was to restructure the whole health care delivery system in order to bring down the costs. And Tony and a lot of good Democrats will admit that we need catastrophic in Medicare. It's a question of how we're going to pay for it. We need prospective payment; we need voucher systems. We don't need cost containment. It was a good Democrat, a colleague of yours, Dick Ephardt, who beat cost containment four years ago, and it was the right thing to do.

WOODRUFF: But if you had to wager on whether or not there is going to be some attempt to deal with Medicare's problems this year?

Sen. DURENBERGER: I'd say the ongoing efforts from last year, like prospective payment and all that sort of thing, is going to carry us through '84. By '85 I think we can deal with it realistically.

Rep. COELHO: Let me answer that one by saying that Trent Lott today -- the Republican Whip in the House -- said that under no conditions would anything be done on Medicare in this election year. The Republicans would not support it.

WOODRUFF: All right, thank you. On that note, thank you, Congressman Coelho and Senator Durenberger. Robin?

MacNEIL: President Reagan today broke his silence on the subject that many other officials in his administration have had something to say about.That's the matter of Charles Wick, Mr. Reagan's appointee as head of the United States Information Agency, admitting that he was in the habit of tape recording phone calls. Some of those he taped were top White House officials like James Baker, who made clear they didn't like it. Today, as he was leaving for the weekend at Camp David, Mr. Reagan seemed less upset.

Pres. RONALD REAGAN: I don't think that Charles Wick is a dishonorable man in any way. What he was actually trying to do was be able to immediately transcribe so that he could provide the suggestions that were being discussed to the people that would have to implement them. Ane I haveheard there are some rumors around. Let me just say this. He has done a splendid job. I think the Voice of America, the whole United States Information Agency, is far superior to anything that it has ever been, and he's going to continue there.

MacNEIL: One of the Reagan officials who didn't like the idea of recorded phone calls was Presidential counselor Edwin Meese, who said today this:

EDWIN MEESE, Counselor to the President: Well, I think it's unwise, certainly, to record telephone conversations, and I have not done it and I don't do it now.

REPORTER: Do you think it's unethical?

Mr. MEESE: I don't know. As far as the question of ethics, I think it's not something I would do. Let's put it that way. And I only will speak for my own standards of ethics.

REPORTER: Mr. Meese, how many administration officials come out and say that the taping of conversations when people on the other line --

Mr. MEESE: Don't know about it?

REPORTER: -- is unethical? Why won't you just, you know --

Mr. MEESE: Well, I say as far as I'm concerned I would consider it unethical in my own case.

REPORTER: But you won't say the President thinks it's unethical?

Mr. MEESE: Well, I haven't asked the President whether he thinks it's unethical, but he doesn't do it himself, and I think that makes it clear.

MacNEIL: Well, Mr. Meese's principal purpose in meeting reporters today was to claim that the administration has made significant progress in its goal of cutting waste, fraud and abuse in the federal government.

Mr. MEESE: Since March, 1981, when this group was organized, almost $31 billion in cost avoidances have occurred through the reduction of fraud, waste and abuse. Prior to this administration, the government had been regularly churning out over 15,000 different pamphlets, periodicals and brochures. In other words, expensive, glossy publications that were too often designed as agency promotional pieces rather than having any real value as an appropriate government publication. Over one billion were being printed; in other words, over a billion copies were being printed of these 15,000 different publications, or more than 12 documents for every citizen in the country. Today we are announcing that an additional 1,800 pamphlets, brochures and periodicals have been cut by federal agencies, raising the total eliminations to over 3,800, or one out of every four publications.

MacNEIL: Among the government publications Mr. Meese said he has stopped were Daty's Coloring Book, Wild Wiesel Newsletter and A Tour of Trees at Ft. Leavenworth.

We'll be back in a moment.

[Video postcard -- Whidbey Island, Washington]

WOODRUFF: There is still no agreement on that new security plan being hammered out among the different factions in Lebanon. President Gemayel made no mention of how negotiations are going when he met with foreign diplomats today in Beirut. Despite earlier expectations, he might have an announcement to make.Both Shiite Moslem militia leaders and the Druse militia leader have expressed reservations about the plan, which would separate the warring factions and increase the role of the Lebanese army. Even so, reports from Damascus were that Syrian officials and Saudi Arabian mediators were trying to iron out the details of a compromise agreement.

Meanwhile, there was no letup in the fighting. At least six motorists were injured when Druse shells hit the army-held Chalde intersection on the coastal highway linking Beirut with southern Lebanon. Police said the Druse battle with the army raged through the morning but later tapered off, and the highway was reopened for traffic. The site of the fighting was just 300 yards from one of the U.S. Marine positions at the Beirut airport.

There was diplomacy underway in Israel, However.Prime Minister Shamir met with Special Middle East Envoy Donald Rumsfeld. Neither would comment afterwards, but Shamir was believed to have pressed Rumsfeld on any possible easing of relations between Washington and Damascus following Syria's released Tuesday of the captured U.S. airman Robert Goodman. Shamir also met today with Republican Senator John Tower, who was touring the region.

Robin? Israel's Homefront

MacNEIL: Israel's chief of staff said today that his army could withdraw from Lebanon even if Syrian forces stayed behind. Lt. General Moshe Levy, in an interview with the Ha'aretz newspaper, said the Israeli military favored withdrawing from Lebanon in a single move rather than phases, as has been recently discussed by the government. Israel's official policy still calls for simultaneous withdrawal of Israeli and Syrian forces.

Although the number has never been officially released, Israel is believed to have 15- to 20,000 troops still in Lebanon, all of them south of the Awali River. The cost of that force and how it contributes to Israel's present economic crisis is the subject of a documentary report now by Ann Medina of the Canadian Broadcasting Corporation.

ANN MEDINA, CBC [voice-over]: For the Israelis in Lebanon the days of air strikes and massive tank attacks are now gone. Instead, they watch over their shoulders. In a city of Muslim hate, they're on the defensive. Their job is to stay alive and to avoid the daiy ambushes, snipings and bomb attacks that take place against their patrols.

Within Israel, families are also fighting -- with their time, their lives and their money. Chaim Rochmann has already been to Lebanon, but tomorrow it's his turn to go back.

CHAIM ROCHMANN, Israeli: I don't see the necessity to be in Lebanon. A million dollars a day they're talking about it costs the war in Lebanon. What the soldiers are doing there? Protecting themselves; they're not really protecting Israel.

MEDINA [voice-over]: The Israelis need to protect themselves. The PLO are gone, but there is now a new enemy, the Muslim Shiites who resent the Israeli presence in the south. The opposition is open, fervent and growing. And military resistance now has the spiritual backing it takes to quickly escalate.

This new war is raising questions at home, where inflation is at some 300%. Families are cutting back.Petra Rochmann's allowance, for example, has been cancelled and Eva now makes sure that she saves the little leftover soup she used to throw out. The economy has never been that strong here but recently it reached a new low.

EVA ROCHMANN, Israeli: Since the dollar went from 80 to 100 in one day and since October, I really think about money every day.

MEDINA [voice-over]: Money and the military. The two constants of a country that worries about its borders and creates new ones to protect the old. The latest is the Awali River Crossing just north of Sidon. All traffic, commercial and pedestrian, is checked, regulated and supervised by the Israelis. Four months ago they reshaped a foreign landscape to their needs, but they also created a new front line for their army.

The night before he leaves, Chaim not only resents that new front, he also resents its cost to his family on a day-to-day basis.

Mr. ROCHMANN: The price we're paying is this terrible, terrible inflation. It's a terrible situation to live when you don't know how much things cost; you don't know how much it costs to by bus from here to there. Do you have to take 10 shekels with you or 15 shekels with you? The change of the money! Every day it's a different color; you don't know already. It's a terrible situation to live in, and an unsecure situation.

MEDINA [voice-over]: The government is already regretting the security risks of the new front, and this week will be doing some moving. New barbed-wire fences and telephones are being installed at a new southern headquarters outside of Sidon. It's a quieter place, a safer place, on a non-Muslim hilltop. This could be the first step of larger withdrawal. Defense devours almost a fifth of Israel's national budget, and when the economy suffers, pressures build against military spending. Israel knows it's vulnerable, but is now rethinking its position on the Awali. Despite earlier declaration what they would never retreat from these positions until the Syrians agreed to pull back from theirs, the push to go home is now building, even on the front lines.

[on camera] Two months ago, any kind of an Israeli withdrawal from the Awali would have been considered unthinkable, and now the government is even talking about a complete withdrawal, a plan to pull out without any link to a parallel move by the Syrians. It may not ever happen, but events within Israel are now beginning to affect its policies outside its border. The government is facing a choice, a choice between priorities and a choice which, politically speaking, it may not want to make.

[voice-over] This is what the government is now facing, an unruly and impatient work force here represented by the Histradrut, Israel's main labor group. They want to catch up to the inflation that daily eats away at their income. Inflation is playing havoc with the bargaining process.

EYTAN SHESHINSKY, Israeli economist: It's a hyper-inflation by any definition.

MEDINA [voice-over]: Eytan Sheshinsky is an economist, a current adviser to the government, and right now, a man very uncomfortable with what he sees.

Mr. SHESHINSKY: What you do is you just keep running to stay in place. It's Alice in Wonderland where you have to keep running just to stay in place. So the whole wage bargaining, the Histradrut, the trade union, is engaged in one thing: just to keep up with inflation. The real issues -- productivity, export, the structure, science-based industries, where should Israel go? -- this is not discussed; this is an aside issue. We have to come back to those issues. That's one of the major costs of inflation.

MEDINA [voice-over]: Because of inflation, Israel is facing an economy that can't afford to keep itself going. This cotton should have been bought up almost a month ago. It shouldn't be here. But companies don't have the money to buy it. For example, ATA. It's one of Israel's largest textile companies. Wage cuts, shortened work weeks; they've all been rejected by its workers. Despite orders from Levis and Marks & Spencer, the company is laying off some 500 workers -- cutbacks that mean production problems and fewer exports.

Lower exports in a variety of industries are now one of the country's biggest problems. Even diamonds, always a large source of foreign currency, dropped a full 18% in exports last year. In the past, diamonds had always been a reliable commodity, but no more, and that kind of drop has left Israel with a $417-million trade deficit. And last month the problem got worse.

For 22 days the ports barely functioned. There was no strike, just very long coffee breaks, casual lunch periods and leisurely afternoon breaks. And no overtime. It was a work-to-rule plus slowdown, and it's impact was immediately felt. The fresh produce rotted on the docks and shipping comparies lost more than six million U.S. dollars. December should have been their busiest month.The point of it all was to pressure the government to speed up the cost-of-living payments. Dockworkers and others had been promised an 18% immediate increase, but with inflation going up 1% a day, that just wasn't enough soon enough.

"Why should we have to pay for a bad policy? Why can't we get pay hikes like the ministers and officials do?" And that attitude's been spreading. In the town of B'nai Brach, for example, garbage workers left their rather obvious message on the street. As their protest, they parked trucks in front of city hall. Elsewhere, tax offices, welfare offices, postal offices, even payroll offices just shut down.

There was a bit of irony, however, in the case of B'nai Brach, since the town is mainly made up of Orthodox Jews. In the past they have been the ones responsible for many shutdowns, and have recently tried to stop many government services on the Sabbath, or Shabat, as it's called. Prime Minister Shamir's coalition depends on their support, so they've won a lot of battles. Like El Al; it no longer flies on Saturdays, despite its already enormous economic problems. It's $30 million in debt, and more than 1,000 employees have been laid off.

Politics and strikes appear everywhere, even in the schools. These children should be in their classrooms. It's now after 8, the normal time for the bell to ring, but today school is being delayed for an hour, confusing the mothers a bit, but giving the children one more hour without addition or spelling or geography. This morning the lessons are being taught to the government, not the pupils.

TEACHER: Teachers are the least-paid people in this country.

MEDINA: It seems like striking is a bit extreme here.

TEACHER: Well, that's not exactly a strike. I mean, one hour to come late, just to let them know that we are -- that we are not satisfied with the way they are treating us.

MEDINA [voice-over]: At the 9 o'clock bell, teachers and students obediently go off to classes. There were no loud protests. As one teacher said, "That's not the kind of example we want to set."

That's the curious thing about Israelis. Like Eva Rochmann, many don't like what's happening, but they're not about to rush into the streets. While her husband Chaim is away in the army, Eva worries about her pay cuts at the university, where she's a biochemist. Recently, the entire university was almost shut down but, instead, part of her salary will now be reduced. She says she'll manage.

Individual solutions can work. This is the Arab market in East Jerusalem.Typically, Israelis don't shop here; they go to their own supermarkets in their own neighborhoods. But increasingly they're coming here to bicker and argue like the locals and to pay as little as they can. But individual solutions aren't always there to be had.

You don't see much begging in Israel, even now when the cost of bread goes up every few days. But there's a growing number of lower-income families living in fairly grubby conditions. It's not a major problem yet, but with the high rate of inflation and more layoffs planned, the numbers will grow.

Yigal Cohen-Orgadis the man who must deal with the economy. Brought in only two months ago, he's arguing for a budget to deal with the strikes, the export reductions, the balance of payments and inflation. He wants to do what the government has not done enough of -- cut back. But he may lose. Recently, Prime Minister Yitzhak Shamir made a public point of encouraging trade and industry. With reporters tagging behind him he toured a number of plants and manufacturers, but he did not make any similar public appeal for drastic cuts. In fact, he did just the opposite.

During that same period he made another, more controversial, tour. To highlight his support for the continued West Bank settlement, he was the first prime minister to tour the area since 1977. He was backing expansion in the face of U.S. opposition, but he was also backing large expenditures in the face of government cutbacks. The tour didn't spark much controversy then, but this past weekend the issue of construction has hit home. Settlements are not simply a policy; they are also expensive. Although private companies are now getting more and more involved with the building, the public purse picks up about 68% of the cost of settling a family. According to the department of agriculture, that comes to $120,000.

The Israeli government may want to reshape the Palestinian character of the West Bank, to surround Arabs and to settle in their midst. But it will have to pay a stiff price to do it at a time when it is least able to afford it. The finance minister argued against it; Shamir objected. The reason? Popularity. Over 10 days the contractors here sold some 60 units. Yousef and Louise Sahar are from Montreal and they're being shown homes as they would be in Toronto or Vancouver. They'll probably buy this house and pay $75,000 for four bedrooms instead of twice or even three times as much if they had bought one near Tel Aviv or Jerusalem.

But it's not all economics. The Cohen family have waited three years to move into their new house in Fahr Adoumin, a settlement about half an hour's drive from Jerusalem. Although they don't see themselves as religious settlers, they do feel that they're here for Israel rather than the bargain. They love the desert hills; they love being away from the city; and they love the idea they're Israelis living in Samaria. Approximately 25,000 Israelis now live in the occupied territories. The goal had been to triple that number in less than three years at a cost of more than $2 billion. Some are now saying that's inflationary.

Inflation that's made in Israel has to be stopped in Israel, but it's geting more difficult to ask people to make sacrifices for policies they're beginning to question, especially when the government itself isn't doing the same. On Sundays, all over Israel, reservists gather to join their battalions going to Lebanon. They'll be gone for at least a month. When Chaim Rochmann arrives at his checkpoint he has doubts, not simply about the war or the economy, but about Israel itself.

Mr. ROCHMANN: I don't think this is a responsible government. The government -- what's the government concern? It's to stay in power. And this time they like to sit on their seats; it's nice, it's warm, yes? They're getting high salaries now, and that's what they want, to stay in power. But I think they have to think about zionism. You know, [unintelligible], the state of Israel.

MEDINA [voice-over]: They pinch pennies at home; they go to Lebanon for a month and lose 30% of their regular salaries through inflation, and when they come back they start paying again. That's what the Chaim Rochmanns of Israel are getting a little tired of supporting -- defense budgets, settlement costs, trade deficits. And every Israeli has to pay. Tonight Chaim is probably somewhere in Lebanon, hoping that soon his government will begin making the sacrifices that he has had to.

For The Journal, this is Ann Medina by the highway outside of Haifa.

WOODRUFF: Democratic presidential candidate Jesse Jackson was hounded with questions today about who paid the bills for his trip to Syria. The Washington Post reported that the Syrian government paid part of the hotel bill for the Jackson delegation, which added up to $1,100. Jackson, who was out campaigning today, said if that were so it was done inadvertently and that the Syrians would be reimbursed. Jackson said he had started collecting money to cover any outstanding costs.

Meanwhile, there was a little confusion over whether Navy flier Robert Goodman will appear with Jackson at a rally in New Hampshire tomorrow. The joint appearance had been planned in Portsmouth, where Goodman grew up. But a Pentagon official said that Goodman wouldn't be arriving in time for the ceremony, apparently because of qualms about letting a military officer participate in a presidential campaign rally.

We'll be back in a moment.

[New York, New York]

WOODRUFF: United Press International quoted a source close to the Getty Oil Company today as saying the company's board of directors has agreed to a surprise offer from Texaco to buy Getty. The terms of the deal were not disclosed. But earlier in the day, Texaco offered $125 a share for one large bloc of Getty stock. That surpassed an earlier offer made by Pennzoil and Gordon Getty, the youngest son of J. Paul Getty, who was the founder of the company. They offered $110 a share for all outstanding Getty stock in a proposal to merge Getty with Pennzoil.

Robin? 1984 Economy?

MacNEIL: Today's improvement in the unemployment picture reported earlier in this program is further evidence that recovery is proceeding as the Reagan administration hoped. Optimism about the economic outlook has helped to fuel the surge on Wall Street this week, which continued in more moderate form today. The Dow Jones average of 30 industrial stocks rose 4.40 to close at 1286.64, only half a point below the all-time record, after gaining 28 points for the week.

The consensus among forecasters is that this optimism is justified; the economy will remain healthy for most of 1984. But some prominent economists believe recovery could stall this summer. So tonight we brought two forecasters, one from each camp, the optimists and the pessimists, with their views on what will happen for the rest of 1984. The optimist, Richard Rahn, chief economist with the U.S. Chamber of Commerce in Washington.Our pessimist, Lacy Hunt, chief economist with the Wall Street investment firm of Carroll McEntee & McGinley. He joins us tonight from public station WHYY in Philadelphia.Let's start with your forecast for interest rates. Mr. Hunt, you estimate that the prime rate at the end of the year will be 12.8%. Mr. Rahn, you think it will be around 9%. Mr. Hunt, why so high?

LACY HUNT: Well, one of the main considerations here is that the U.S. economy is very strong today, perhaps exuberantly so, and the strength of the current conditions is beginning to elicit a cyclical response in private credit demands. My own feeling is that the short-term credit demand could go up $140 to $150 billionthis year after rising only about $60, $65 billion in 1983. And this, combined with a federal budget deficit of $175 to $180 billion, will begin to place increasing strains on the money and capital markets, and we will see interest rates move higher.

MacNEIL: Mr. Rahn, why so low, at 9%?

RICHARD RAHN: Well, I have a different point of view of the whole thing. What I see is that we'll have a big increase in personal savings.Corporate cash flow has been improving at a very, very rapid rate, and we'll see that improve over the next year. Also, the federal budget deficit is actually coming down as a share of our gross national product, and the crowding out problem is likely to get less rather than worse. And, given all that, and assuming a moderate monetary policy on the part of the Fed, we see falling interest rates of roughly two points.

MacNEIL: Okay. Let's move on to inflation.Mr. Rahn, you expect it to be at 5.5% at the end of 1984; Mr. Hunt, your forecast is around 7.8%. Mr. Hunt, why the optimism? I'm sorry. Mr. Rahn, why the optimism there?

Mr. RAHN: Well, when you forecast inflation you're forecasting very much what the Federal Reserve is likely to do, and I'm assuming that the Fed is going to have moderate monetary growth. It had very slow growth in recent months, and I expect that to pick up a little bit, but not substantially. If they have moderate monetary growth there is no reason to expect inflation to go up because inflation is nothing more than the money supply growing at a faster rate than the supply of goods and services. We'll continue to have rapid economic growth -- many more new goods and services. If the Fed comes up with enough money to fund that but not so much that they increase inflationary expectations, there's no reason to expect inflation to rise very rapidly.

MacNEIL: Mr. Hunt, why do you think he's wrong?

Mr. HUNT: Well, for a variety of reasons.First of all, the slowdown in the money supply which Mr. Rahn cites, is more of an illusion than a reality. For all of 1983 this country experienced a record increase in monetary growth, and as we move through the course of the year that will become increasingly evident on the inflation rate. In addition, there are other well-known business cycle events that are beginning to unfold. The improving labor market is beginning to influence the wage bargain. Admittedly right now the influence is small, but it's growing. Wages in the month of December, the figures released today were up at about a 6-1/3 annual rate. That's nearly double what it was over the past 12 months. In addition, we're going to begin seeing a slowdown in the rate of growth and productivity and output per worker, and in fact that process has also atarted.In the second quarter productivity growth was better than what it was in the third quarter, and the fourth quarter is going to be less than in the third. And so the process of the strong growth in money supply that occurred on average throughout 1983, interacting with the higher wage cost and the slower growth in productivity, will put upward pressure on the rate of increase in prices.

MacNEIL: Gentlemen, moving on to unemployment, you are both so close and so optimistic there. I'll just mention that, Mr. Hunt, you think unemployment will fall to 7% by the end of the year and, Mr. Rahn, you think it'll go to 7.5% I'm not going to dwell on that but move on to your forecasts for economic growth as measured by the gross national product. Mr. Rahn, you expect a year-end growth rate of 4.8% and, Mr. Hunt, you say only 2.4%. Why are -- half of what Mr. Rahn expects. Why are you so pessimistic there, Mr. Hunt?

Mr. HUNT: Well, let me say --

MacNEIL: May I say that I think the administration's forecast is for 4.5%.Is that correct?

Mr. HUNT: I think --

MacNEIL: Over the year.

Mr. HUNT: I think that those figures which you flashed on the board are the growth rate for the fourth quarter per se, and not for the entire year. I have a very fast growth rate in the first half of the year but then, because of that fast pace of activity, we encounter the rising inflationary pressures and the higher credit demand, and that begins to work in a negative direction on the economy, producing a lower growth rate in the fourth quarter. And I also feel that the inflationary and interest rate problems will become more acute as we move into 1985 and possibly resulting in an even slower growth then.

MacNEIL: Well, why do you think he's wrong, Mr. Rahn?

Mr. RAHN: Well, I do see a faster first half and a slower second half, but my difference or my cycle is not as steep is Mr. Hunt's. Again I think it gets back to our basic notion of what is going to happen with inflation and productivity. Clearly, productivity is slowing down some, but I still expect very substantial productivity gains over this next year, and you can have fairly high wage increases provided you have reasonably high productivity gains without that causing any undue inflationary pressure. We have no evidence that the Fed is going to engage in an inflationary cycle. Now, Mr. Hunt referred to the very rapid growth rate of the money supply starting a year ago last August, but it slowed down in May of this year, and most of that rapid growth will work through in the next couple of months.We've seen a little pickup of inflation; we expect a pickup through the spring. But now we've had a number of months, or six months, of slow monetary growth, and that's going to have an influence on the summer and the fall, and I see no reason to expect high rates of inflation next summer and next fall, given what's happened to monetary growth in recent months. Given that, there is no reason to expect anything other than lower interest rates and those lower interest rates ought to fuel a continually high rate of real economic growth.

MacNEIL: Well, there you have it. Two leading economists giving you quite different views of what's going to happen over the rest of 1984. Mr. Rahn in Washington, Mr. Hunt in Philadelphia, thank you. Judy? Murderer Paroled

WOODRUFF: The man convicted of killing two prominent San Francisco politicians was sneaked out of a prison in California today. Authorities were concerned for the safety of Dan White, who had served time since the murders in 1978. But even though five years have passed, anger is still running high in San Francisco over both White and his punishment. Spencer Michels of public station KQED in San Francisco has a report.

SPENCER MICHELS, KQED: Former policeman and fireman Dan White, elected San Francisco city supervisor in 1977, was the conservative hope in a city dominated by liberals. But, disgusted by city politics, he quit his legislative post claiming financial hardship, and then asked to be reinstated. When Democratic Mayor George Moscone refused to honor a pledge to restore White to office, the supervisor took a loaded gun to city hall.

DIANNE FEINSTEIN, San Francisco acting mayor [November 27, 1978]: It's my duty to make this announcement. Both Mayor Moscone and Supervisor Harvey Milk have been shot and killed. The suspect is Supervisor Dan White.

MICHELS [voice-over]: The 1978 murders of Mayor Moscone, long a liberal at odds with many police, and Harvey Milk, the city's first avowedly gay supervisor, changed the direction of San Francisco politics and provided a martyr for the gay community, which Milk had organized for political action. Gays and others marched by candlelight through the city to the mournful sound of drums.

But San Francisco newspaperman Warren Hinckle saw another, uglier reaction to the killings.

WARREN HINCKLE, San Francisco Examiner-Chronicle: When Dan White shot the mayor I was having a drink, and a lot of people I was with who heard it raised their glasses and said, "Good boy, Danny." San Francisco loved that assassination.

MICHELS [voice-over]: Moscone had represented a grass roots faction in a city deeply polarized between the right and left. For one of his aides the Mayor's murder signaled the end of community activist politics.

COREY BUSCH, Moscone aide: People who put a lot of time and a lot of soul into being active politically in San Francisco, people that were a part of George's grass roots campaign back in 1975, had to step back after the assassination and say, "Why? Why am I bothering?" Because a lot of these people are the same people that were involved for John Kennedy, involved for Bobby Kennedy and supporters of Martin Luther King.

MICHELS [voice-over]: Harvey Milk had been a San Francisco phenomenon, a gay with a well-known sense of humor who refused to accept well-meaning liberal leadership. Instead he preached that homosexuals should be strident in their demands for equal rights and political power.

HARVEY MILK, [1978]: I think a lot of people better realize they have to make an ultimate decision. The decision is to go back in their closet real good, slam the door tight, which some will do, or burst down those closet doors once and for all, and stand up and start to fight, and any which way they can, organize, get involved.

MICHELS [voice-over]: Dan White collided with Harvey Milk first politically then personally. Within hours after the murders, White surrendered to police and issued a tearful confession, claiming he had not premeditated the crimes. Five months later, he went on trial for murder. In court, what had looked like an open and shut case dealt an unexpected shock to San Francisco. The jury felt empathy for White, who was portrayed as an all-American boy, and they accepted psychiatrists' contentions that he suffered from diminished capacity, a psychiatric defense which since has been outlawed by the California legislature. White was found guilty, not of murder, but of voluntary manslaughter, a crime which carried a seven-year maximum sentence.

The community was outraged. Despite pleas to keep cool, thousands of demonstrators marched on city hall, smashed down the doors, set fire to police cars, and rioted into the night.

Meanwhile, White was taken to Soledad Prison, placed in protective custody, and allowed conjugal visits with his wife. Otherwise, he lived a quiet prison life, refusing all requests for interviews.

[on camera] Now, five years after the murders, Dan White is free on one year's parole and San Francisco is edgy and still angry. That anger is especially strong in this neighborhood, The Castro, where many of San Francisco's mor than 100,000 gays live.

SCOTT SMITH, gay activist: I think everybody in the city of San Francisco and anybody -- in any justice-loving people, people that love our system here in this country have to be angry at what he did. I mean, he killed two people. He put his gun two inches from their head and put two bullets in each of their heads and got five years for it. Of course we're going to be angry. We're mad. He did get away with murder. From everything we understand he has never shown any remorse. I don't expect he ever will.

MICHELS [voice-over]: In The Castro gays have organized marches, rallies and vigils to protest White's release. City fathers voted to close the street for the evening, hoping to channel rage and frustration.

RICHARD HONGISTO, San Francisco supervisor: Trying to stop a demonstrations or protests on this matter is like trying to put the lid on a steam kettle. If you push down the steam's going to get out somewhere else.

MICHELS [ovice-over]: Harvey Milk's political successor is Supervisor Harry Britt, also gay and a former minister.

HARVEY BRITT, San Francisco supervisor: When you murder the leader of a movement you do something very personal to people that they're fighting for, and we don't forget easily. The anger is just as strong as it ever was, I think. The difference between now and 1978 is that we've learned how to use that anger a lot of different ways.

MICHELS [voice-over]: Even in Dan White's working class neighborhood, while there is some sympathy for White, it is far from unanimous.

CITIZEN: I think that what he did was definitely a premeditated murder and he should spend the rest of his life in jail over it.

MICHELS [voice-over]: The frustration over White's release reaches from the streets to the state capitol. California's Governor George Deukmejian was disappointed when the U.S. Justice Department recently refused to prosecute White under the Civil Rights Act.

Gov. GEORGE DEUKMEJIAN, (R) California: Justice really did not prevail. I think that, considering the magnitude of the crimes that he committed, that the net result was not an appropriate result, and I felt that there was sufficient evidence involved to warrant the federal government initiating a prosecution under the federal civil rights laws.

MICHELS [voice-over]: In the political fallout after the murders, Dianne Feinstein, more conservative than Mayor Moscone, was catapulted into the mayor's office. She easily won two elections last year, and now she is talked about as a possible Democratic vice presidential nominee. There is no doubt that San Francisco has become more conservative politically, but the scars of the assassinations remain.

DIANNE FEINSTEIN, Mayor of San Francisco: It leaves I guess the deepness of the would because it causes, I think, everybody here to look very deeply into themselves. You know, what could I have done? What could have prevented it? The irony is that you don't come up with any answers.

MICHELS [voice-over]: The California Corrections Department had a hard time answering the question, where could Dan White go on parole? Several communities, including one in Ireland, refused to accept him. To protect his life the department wouldn't divulge his new home, but it certainly will not be San Francisco, for it has been just five years since the city hall murders. While there are few predictions of violence in the streets, there is general agreement that Dan White would have a reason to live in fear.

WOODRUFF: Late today California prison authorities said that Dan White would be allowed to live in the Los Angeles area while serving a year's parole.

Turning now to a final look at today's top stories, President Reagan says he wantsto take some of the chill out of the current relationship between Washington and Moscow. The President called for a productive dialogue between the two superpowers.

The administration had some good economic news today. Unemployment was down to 8.2% in December.

And administration budget makers reportedly are considering a $2-billion cut in Medicare payments for next year.

In Lebanon there is still disagreement over the security plan worked out by President Gemayel. Its official announcement today was delayed while diplomats worked out the snags.

And, finally, in London today fear of IRA terrorists did not deter bargain hunters at Harrod's department store. [voice-over] After a countdown from the customers, the stairways were opened to let the first of several thousand waiting shoppers into the store. From then on it was every shopper for himself. There were no serious casualties, but one woman got a bloody nose in the china department and a few dishes were smashed. After it was all over the head of the store praised his customers for their determined spirit.

[on camera] Good night, Robin.

MacNEIL: Good night, Judy. That's our NewsHour for tonight. Have a nice weekend. We'll see you on Monday night.