The NewsHour with Jim Lehrer

Good evening, I'm Elizabeth Farnsworth. Jim Lehrer is off this evening. On the NewsHour tonight, the Medicaid debate, Margaret Warner talks with four experts, including Senators Don Nichols and Bob Graham. Two Kora watchers dissect the political scandal there, and Paul Solman reveals what is and isn't a Rembrandt. It all follows our summary of the news this Thursday. Major funding for the NewsHour with Jim Lehrer has been provided by the Archer Daniels Midland Company, ADM, supermarket to the world. And by New York Life, yet another example of the wise investment philosophy New York Life has been following for the last 150 years, and by the Corporation for Public Broadcasting, and by the annual financial support from viewers like you. There was more heat but little light in the budget debate today. At a news conference house

freshman Republicans laid blame on both sides for the delay in the budget negotiations. We say it's time to lock the president, the speaker of the house and the majority leader in the same room and not let them out. They produce a budget agreement that balances a budget over seven years using honest numbers as everyone committed to on November 20th. Those freshman Republicans have refused to vote for a stopgap spending bill that would temporarily end the partial government shutdown. The two Republican congressional leaders told reporters they will meet with the president tomorrow afternoon. How speaker Newt Gingrich said he was optimistic about the talks for a number of reasons. The fact that we met last week and had a pretty reasonable meeting and the fact that by tomorrow afternoon we'll have the staff work done in being position I think to go basically nonstop and start tomorrow and just keep meeting with the president in the room so that you have the principles making the decisions. As I said, I mean I've looked at what the differences are comparing where we are and where the president is. If there's a will to get it done, this is a two or three day negotiation. This is not a three

month negotiation. Because of the budget deadlock, hundreds of thousands of federal workers will get partial pay. The workers affected are those who are furloughed and those who are designated essential, but whose agencies have not been funded. Paychecks issued to them tomorrow or next week will contain pay only for work done before the December 16th shutdown. President Clinton vetoed the defense authorization bill today. It authorized spending for weapons the president has said he does not want. White House spokesman Mike McCurry said the anti-missile nuclear defense system was a sticking point. In Bosnia today, the opposing forces met the NATO deadline for a pullback from Sarajevo. Rebel, Serb and Bosnian government troops withdrew from all the front line areas specified in the Dayton Peace Accord. Colin Baker of Independent Television News reports. A moment of [inaudible] symbolism on the confrontation line in the heart of Sarajevo. A French general giving a press conference on a bridge between the two former warring factions and telling the world that NATO's first deadline has now been complied with. For those who live on this line,

they may now stand in their small gardens in relative safety for the first time in three and a half years. Their security guaranteed by [inaudible] troops who will man and patrol the now deserted positions. So, NATO's first deadline has passed successfully. Now, the international force faces another problem, the weather. American engineers in Županja on the Croatian border with Bosnia had their camps swept away by floods. The engineers have been trying to build two pontoon bridges to allow the U.S. First Armored Division into Bosnia, and it's unlikely they'll be able to rebuild before the weekend. Pentagon officials announced today defense secretary William Perry will travel to Bosnia next week. He will visit Sarajevo and the U.S. base in Tuzla. President Clinton today suspended economic sanctions against Serbia and Montenegro. The president did so in a letter to Congress. He said suspending sanctions was a key part of the negotiated peace in Bosnia. The U.S. government deported a record number of illegal aliens last year. An immigration and

naturalization service report said nearly 52,000 aliens were turned out of the country. That figure is up 15 percent from last year and 75 percent from 1990. The report said nearly two-thirds of last year's deportees were aliens ejected after serving jail or prison terms. Deputy Attorney General Jamie Gorelick spoke at a Washington news conference. 32,000 fewer criminal aliens on the streets of America makes a huge difference. Bear in mind also that this is part of a larger program. We turn back in one form or another a million and a half people a year. This is just one form but it is a very important form because these are folks that have are entitled to a judicial process. They have gone all the way through that process and have been found deportable and have been detained and deported. Another report released today concerned the smuggling of aliens. It said trade in human cargo earns smugglers billions of dollars in profit each year. The report was issued by an interagency

working group that includes the State Department and the INS. That's it for the new summary tonight. Now it's on to the Medicaid debate, political scandal in Korea and Rembrandt revealed. Changing the structure of Medicaid is our lead focus tonight. Margaret Warner has the story. One of the sharpest confrontations in the current budget battle between President Clinton and the Republican Congress has developed over the future of Medicaid. This federal and state-funded program covers the health care costs of about 36 million Americans, the poor, the elderly, and the disabled. We begin with this background by Fred de Sam Lazaro of public station KTCA. Medicaid was created in 1965 as part of a larger welfare bill to provide health insurance for low-income Americans. Shalandra Burt just turned 18 making her ineligible to remain on her mother's

private health insurance policy. Pregnant with her first child, the Detroit woman is now eligible for Medicaid coverage. Right now it's kind of convenient but once I get back on my feet now and go to college and get a degree, get some kind of education and get another job to make some money then I'll probably be able to buy insurance then. The level of benefits Burt and receives is determined by the state. Those benefits vary among states which are allowed to administer Medicaid according to their own criteria within broad federal guidelines. The federal government provides matching funds, a share arranging from 50 to 85 percent depending on the average income of the state's residents. Today the total tab for Medicaid is $155 billion a year but only one third of those dollars are spent on the poor, the original intended beneficiaries.

Next number, B13. Two-thirds of the Medicaid dollars actually go to elderly and disabled Americans who've become impoverished by their need for long-term care and eventually qualify for Medicaid. Eugene Feingold is a professor of public health at the University of Michigan. A Medicaid-based long-term care very often from middle class people who can't afford the cost of medical care or the long-term care and actually that's the bulk of the spending in Medicaid is not for welfare people but rather for middle income and other people who are getting long-term care and can't afford to pay for it. I've been here now going on starting my sixth year, and I love it here, all at my nurses and doctors. I'm so thankful for them all. 87-year-old Tommy Warner, a former construction worker, is one of 3.7 million elderly Americans

who receive benefits from Medicaid. At this Detroit nursing home the cost of a semi-private room and board is about $2,700 a month. Warner's Social Security and pension cover only a fourth of that cost. Under Medicaid rules, a beneficiary savings and other assets must cover the rest until those funds are exhausted. Medicaid then takes over. It pays most of Warner's bills that his pensions don't cover. Nursing home director Lowell Schrupp. Most of the people who are on our campus receive assistance from the state or the federal government. One man or another in our nursing home about 90% of our 120 people who reside here are on Medicaid programs. We want to start having you type all the letters you can reach. Over the years, Medicaid eligibility has also been extended to some 4.9 million disabled Americans, including six-year-old Joshua Grist who is visually impaired and has cerebral palsy. All right, let's see a type of

few more letters and then we'll be finished with our typing. Joshua spent most of his first three years in hospitals undergoing surgery on 38 separate occasions. He's since stabilized enough to live at home with his mother Angie but also with considerable home health care services paid for by Medicaid. He has 16 different medications. We carry medications all the time and in case he goes into a severe seizure or in case his airway shuts down. Oxygen is a regular part of his life wherever we go. We carry oxygen. He's regularly on a feeding pump. He's on monitors to monitor his heart rate monitor, his respiration rate to measure the level of oxygen in his blood to make sure that he's processing oxygen. Okay. A few years ago Joshua Grist would likely not have survived his medical challenges but the modern medical technology that sustains him comes at a cost. Technology has been one of the biggest factors that is driving up the cost of Medicaid. Another factor is growing enrollment in the program. Having a contraction?

Yeah. The state of Michigan for example extends Medicaid coverage to most uninsured pregnant women and their children, not just those on welfare. This has increased the cost of Medicaid especially for the federal government. Many states have been able to manipulate the matching fund formulas to increase the federal share of the jointly financed program. As part of their seven-year plan to balance the budget the Republican-controlled House and Senate have passed a bill that would end Medicaid's entitlement status, block granted to the states, and slow the growth of spending in the program from the current 10 percent a year to about 4 percent annually. That would save 162 billion dollars over seven years. President Clinton has proposed far more modest savings and says he cannot sign the Republican bill. Here to debate the issue now are Republican Senator Don Nichols of Oklahoma, a member of the Senate Budget Committee. He joins us from Capitol Hill. Democratic Senator Bob Graham of Florida, a member of the Senate Finance Committee. Ron Pollock, Executive Director of Families USA, a National Healthcare Consumers Group,

and Gail Wilensky, a Senior Fellow at Project Hope Healthcare Education Foundation. Under President Bush she headed the Healthcare Financing Administration, which administers Medicaid. Welcome all of you. Senator Graham, why has the future of the Medicaid program emerged as such a major sticking point between the President and the Republican Congress in this budget fight? Because Medicaid is the ultimate safety net under the entire healthcare system of America. Because Medicaid has been a great success. It has helped dramatically reduce infant mortality. It has provided healthcare financing for millions of poor children who would otherwise have been without it, particularly those whose parents have lost their privately financed healthcare coverage. And it is dealing with the needs of an increasingly aging society. And so rather superficial proposals to change it dramatically, primarily in order to ravage its cost and its capacity to render important services have made it a centerpiece of this budget debate. Senator Nichols, why do you think this is emerged

as such a sticking point? Because you both want to find some savings, the President and the Republican Congress, and yet it's, to listen to the President speak, it really is a major bone of contention. Well, it is one of the real challenges we have. You can never balance the budget if you have a program that is just growing totally out of control. The cost of the federal government in the last several years has just exploded. Growth rates of 28, 29 percent, 13 percent, 8 percent is just exploded. And for lots and lots of different reasons, some of which are maybe good reasons, some of which are not. You have exploding populations, people that are receiving benefits that maybe shouldn't be receiving benefits and so on. So it needs to be curtailed. You can never balance the budget if you're going to say, well, we're going to allow all these entitlement programs to continue to grow in cost without any limitation, any growth whatsoever. Now, both the Democrats and Republicans have some ideas trying to rein in the growth. And there's significant difference. And I guess we'll talk about those. But, you know, two-thirds of the federal budget

market are entitlements. And if you don't control the entitlements, you'll never, ever end up balancing the budget. Okay, let's take the first of the major differences, which has to do with how much money the Republican plan would say versus the administration's plan, which Senator Graham has also been very involved with. And it's the difference between the savings of 54 billion under the Democratic alternative and 163 billion under your alternative Senator Nichols. Let me just ask you, because I want to narrow this down. Can you at a time of expanding population need, which as we just saw in the tape piece, and you just mentioned, there is kind of an explosion of demand, how can you actually continue to cover all these people and the new people if you reduce the rate of growth from 10 to 4 or 5 percent? Well, let me just one, bring you up to date on some of the figures. You know, one of the things that we've tried to do is to get President Clinton to use Congressional Budget Office figures, which so far he hasn't agreed to do, or at least hasn't agreed to put down a budget that's balanced using the CBO figures. So we're using sometimes different numbers. But the Congressional Budget Office has

scored our proposal now, and it's not $160 billion. It's $116 billion in savings from the President growth assumptions. Some of the Democrats in Congress, and I complimented them because they do have a budget, it calls for $62 billion. So the difference of about $50 billion. Now there's still significant policy differences. There's differences as far as who determines eligibility, who's entitled to receive Medicaid, who defines disabled, for example. We say the state should, they say the federal government through the SSI program should. But those are differences, I think that we need to negotiate, but they're not quite as big as maybe your opening comment indicated. All right, Senator Graham, do you think the population that needs to be served can be served under their proposal, under that amount of money? No, and some of the reasons why a partnership between the states and the federal government is important for the future of Medicaid is exactly because of the expanding population, and the fact that that population is not expanding at the

same rate everywhere. For instance, my state happens to be a fast growth state. So we have many people coming to Florida who are going to require Medicaid services. Then you have economic circumstances. We had a major depression in New England at the end of the 80s and in California in the early 90s. That resulted in their Medicaid roles ballooning in order to meet the economic distress. In my state of Florida, after Hurricane Andrew, our Medicaid role grew in South Florida by about 10 percent as a result of people whose jobs were blown away as well as their homes. The current partnership is able to respond to those and other unforeseeable specific circumstances and therefore assure that people in need will have access to health care. Now, let me let Gail Wilensky and Ron Pollock in now. Gail Wilensky explained to us though both of these proposals seek savings. How actually in the program can savings be made? Well, there are lots of ways, fortunately, and there is and should be a debate about how much

we really can save. Under the program, as it is existed, there are a lot of rules and regulations that have been put in place by the federal government, usually for perfectly good, well-intended reasons that cause the states to spend more money or to spend in ways they wouldn't want to if they could. Managed care, a very common option, is something that states have to come to the federal government, ask permission. They want to do things different ways in different parts of the state. They have to get permission to do that. There are many, many, thousands of things that require states to do something one way when they think they could do it better. Now, it's very important to understand this because many governors, mostly Republicans, I'll grant, but many governors have said we can stand a slower rate of growth and spending if we don't have to follow all these rules and regulations put in place. We can do things better. We need to grow it, and personally, I think that the new numbers we're hearing talked about 110, 116 billion dollars over seven years are now within the doable range. I was uneasy

at the numbers level, not about the concept, but the numbers level at 170 billion. That was less than inflation in population growth. I think there are savings to be had that was pushing it a little far. Ron Pollock is Gail Wilensky right that you could, if you give the states this flexibility, you could realize all these savings without hurting the populations you're trying to cover? Well, I think you can achieve some savings. There are some savings, I think, that we can all agree on. I think there's broad consensus among Democrats and Republicans, and I think you can achieve some savings, but not the kind of savings we're talking about here. Now, one of the things that we're I think missing in the numbers debate is that not only is there going to be a cutback on the federal government side, but there's also going to be a major cutback on the state side. The Kaiser Commission on the Future of Medicaid, a nonpartisan group, estimated that if you include the federal dollar savings and the state dollar savings, we're talking about double the dollars

that we're just talking about in the federal debate. Now, one thing I found interesting, I just received a letter that's being circulated throughout the state of Virginia from the Medicaid Director in Virginia who has asked people who are involved in the Medicaid program to figure out how they're going to triage the system. And these are the kinds of decisions that governors are being forced to make. The kinds of questions they ask are, should we limit the number of days that a person is in the hospital? They suggest perhaps 15 days. Should we limit the number of doctors visits? They suggest perhaps three days? Should we cut prescription drug coverage? Who should we provide coverage for? Seniors, children. You're talking about rationing health care. There is no question that we are going to see with these kinds of dollars. We're going to see a very substantial reduction in the number of people who here or for had this guarantee a cover. Let me let Senator Nichols in here. Speak to that point if you would. Is that really what you're heading toward?

Is that where the states are heading? Rationing health care for Medicaid recipients? Margaret, a lot of the governors and legislators have told us, has said Medicaid is just exploded. It used to be about 10% of their budget a few years ago. Now it's about 20%. In many cases, it's the largest item in their budget and exploding because of federal mandates. And they're saying we can live with less money, just cut off some of the strings, and we can do a better job in providing the health services for people who are falling through the cracks, who need some help, but give them the latitude. Right now you have the federal government mandating coverage for a lot of people that maybe shouldn't be receiving coverage. Senator, do you anticipate these governors once they're freed from the federal regulations having to make the kinds of choices that Ron Pollock just outlined? No, I think they can do a better job with dollars growing, but dollars don't have to grow at such a high percentage rate. And what they're saying is give them flexibility, so they don't have to spend so many of their resources making applications for HCFA, for the Health Care Financing Administration, to get waivers so they can have permission from

the federal government as if only the federal government is concerned about the less fortunate. The governors and the states are just as concerned, if not more concerned, about low-income people or people that need health assistance, and then the federal government. And they're closer to the people so they can make better determinations on who should be eligible. We have a lot of people, for example, the number of... I'm sorry, that's an interesting point. I want to get Senator Graham himself a former governor to speak to that, which is of course under the Republicans' proposal, this would go block grant to the states. They would have total freedom to spend it as they wanted. Under your proposal, the federal government would retain a lot of control. Why is that necessary? The key issues in this debate are the ones that you have raised. They are the issue of the partnership between the federal government and the states. The issue of flexibility at the state level to use those dollars, and how many dollars will be available to be used. I can appreciate the fact that there can be savings by giving states greater flexibility. While I was governor, we initiated a community-based program for the elderly, which would

allow many people who otherwise would have been in nursing homes to be served better and less expensively in their homes. In this debate, President Clinton is proposing to give the governor as virtually every degree of flexibility, which they have asked for, including no longer having to get waivers to use managed care, no longer having to get waivers for community-based services for the elderly and a whole array of other new authorities that will be given to the states. You don't have to give up, however, what is a very important part of the state flexibility, and that is that if you get in trouble because of a depression or a hurricane or some other event outside of a state's control at that very moment when you're crippled, you don't then have to suffer the additional indignity and lost to your citizens of losing health care for thousands of your people. Let me let Gail Wilensky weigh in on this point of how the states are going to respond because you just heard Ron Pollock say that the states themselves, now they'll be free to cut back on their own spending, are going to. How do you think the states are going to

respond? States that have ideas in hand that have been applying to the federal government for permission will go out quickly and try to make changes. Some of the states that haven't been as aggressive will probably take a little longer to decide what they want to do. We have made it very difficult for states to try to make the best use of the money that they're putting up and that they're getting from the federal government. It makes no sense everywhere we look. Arizona, a place that has not just for acute care for moms and kids, managed care, very innovative programs for a long-term care in the disabled populations, which much greater savings than they've even seen in their acute care population, still is on a research and development waiver that's the only way that we can do it. It makes no sense. The question is who should make these decisions, the federal government or the states. If you think the states are just looking for ways to hurt their poor and block grants will make it very difficult. Let me raise one of the point because we're going to run out of time and get you to answer Ron Pollock. The other major difference

between the two is the Republicans would end the entitlement status of Medicaid, your proposal would not. Why is it bad to end the entitlement status, which of course is a guarantee of coverage for anyone to meet certain criteria? Well, first of all, it provides real flexibility to the states. It provides flexibility to the states because the money goes with the people and it's like insurance. If you're insured, you want to know personally if you're going to be insured. If you only have a block grant rather than a guarantee of coverage, then the circumstances could change and your eligibility could change. If there's a recession, you might not get coverage. If there's high unemployment. Because it just wouldn't be enough money in the pot. There wouldn't be enough money, or if there is a natural disaster like Senator Graham was talking about, you might not get the coverage. I don't think the issue is ultimately whether we should provide more flexibility to the states on things like managed care. What Gail said is absolutely right. I think the states should get some more discretionary authority about the system, how they deliver health care. But what's really key here is that people who have come to depend on the Medicaid program, senior citizens

and nursing homes, children who are maybe in a working family, but that working family does not have private health insurance and we're increasingly seeing that. The Medicaid program guarantees to them that they will get coverage no matter what. That's the crux of the issue. Let me ask Gail Wilensky very briefly on entitlement status. Why did the Republicans want to eliminate that? This is a decision. They want to let states closer to the people make as to how to best provide care to those in need. I don't think you're hearing governors saying we don't want to do this. You had to listen to what the governors are saying when they come to Washington. We can do it better. Don't tell us we don't care. We can do it at slower rates of growth. That's what's being talked about. It is the guts of the issue. Who ought to make this decision? The federal government is an entitlement. The states providing care to the people as makes sense to them and closer to the state. If the states are going to protect these people, there'd be nothing better than to tell those people right now that they'll be guaranteed that coverage. That's the key. Before we go, I want

to get the two senators, senators and equals. I'll start with you. Can the two of you see the outlines of the deal here and what would it be? Well, we need to make a deal. I say make a deal. We need to pass a budget and we need to rein in entitlements and this is included and to touch on the entitlement issue. Because of federal entitlements under SSI, you see the number of drug addicts and alcoholics has grown from 23,000 to 136,000 in last five years. Federal eligibility has greatly expanded these programs well beyond our capacity to pay. So we need some reform, some restraint and I think turning over to the states will make some common sense decisions because they really are closer to the people. Before we go, I have to get Senator Graham, what do you think of the outlines of the deal here? The outlines of the deal are going to be a continuation of the federal state partnership, the conservative, the conservative democratic budget and the bipartisan budget of Republican and Democratic senators, both favored the maintenance of a federal state guarantee. You mean an entitlement? I mean, entitlement. I think that the dollar

sum will be in the range of 60 to 70 billion dollars reduction in this program, which I think will not be easy, but can be secured. And I believe the greater flexibility to the states as to how to use their money, but still have access to the federal government in a time of need. Those are going to be the ingredients of the Medicaid settlement and it will be an important part of achieving the goal of a balanced budget. Well, thanks. We're going to have to leave it there. Thank you all for very much. Still to come. Crime and punishment in South Korea and Rembrandt revealed. Next tonight, South Korea. Over the past few months and unprecedented political drama has unfolded in South Korea. Two former presidents have been arrested and some of the country's top business leaders have been charged with bribery. We'll have two analysts explain what this all means for

Korea and the United States, but first this background report from Ian Williams of Independent Television News. On a rocky hillside in southwest Korea, a graveyard spreads just about as far as the eye can see. One area has been separated off and has become a place not only of mourning, but of pilgrimage for thousands of Koreans. Here lie the victims of one of the bloodiest incidents in modern Korean history. An incident the memory of which the authorities have until now preferred to leave buried along with the dead of Gwangju. In May 1980, tens of thousands of citizens of nearby Gwangju rose up against Korea's then military junta. Tanks and crack paratroopers were sent to crush the rebellion. Officially more than 200 died and 2,000 were injured. Local people claim the real figures are much higher. Near the graveyard, Gwangju has placed

caricatures of those it holds responsible. Foremost among them, Roh Tae-woo and Chun Doo-hwann, the men who headed the junta that ordered the 1980 crackdown that who went on to become successive presidents of Korea. For weeks, there have been often violent protests in GwangjuGwangju and Seoul demanding the arrest of Chun, who came to power by where the military coup 16 years ago today ruled Korea with an iron hand until 1988. In spite of these protests, Chun was considered virtually untouchable. Then the unthinkable happened, who was arrested and accused of military rebellion in relation to the coup and massacre. This reversed the policy of letting the matter rest in the name of reconciliation. Earlier, the man who ruled Korea from 1988 until 1993 had also been arrested. He too is facing charges relating to the massacre. But the immediate reason

for the detention of Roh Tae-woo was for massive, almost unbelievable corruption during his term in office. Corruption in which Chun has also been implicated and which has provided the trigger for the wider push for justice. The origin of this drama seemed modest enough, beginning in the Korea National Assembly and in the person of opposition MP Park Chung-hee. For months, his lonely claims that no operated a large slush band thrives from Korea's big industries fell largely on death-years. The breakthrough came in late October when he was handed a bank statement linking North to a secret account containing millions of pounds. It couldn't be North. Within days, Roh Tae-woo was tearfully confessing to a massing 400 million pounds in kickbacks to which

most of Korea's major companies had contributed in exchange for government favors. Luxury hotels in Seoul have become the venues at which scores of business leaders are now being interviewed. The authorities say the discretion is so as not to alarm the markets. Yet what's emerging is a picture of systematic, routine bribery in which few did not participate. The boss of the giant Daewoo Corporation is one of seven tycoons who've so far been charged but left that liberty for the good of the economy. Daewoo's defense, like those of other companies, is they had no choice. It was the system, a sort of survival tax. Since the government had control over every aspect of the economy, they had little choice but pay off officials from the president downwards. You know, many businessmen, ordinary person, cannot be expected to act as a religious person.

So, I believe the circumstances is more important in determining the way of act and conduct. So, in a sense, did it during that period? Did it become almost an established practice? Yes. Kind of. Investigators are already probing several 1980s arms deals in particular where the kickbacks were involved in a multi-billion-pound deal to buy F-16 fighters. The American contractor denies the charge. Two things now do seem clear. This particular tiger economy, much discussed and often admired in the West, has been driven at least in part by an enormous system of bribery and graft. And from the streets of Seoul to the graveyard of

Gwangju, the rapid economic growth that's being created here, has not been able to buy off a popular desire for justice. Since that report was filed, former presidents Roe and Chun have been indicted for their involvement in the 1979 military coup, which brought Chun to power. Prosecutors are still investigating their roles in the 1980 Gwangju massacre. Indipements are expected in the next few weeks. Former president knows bribery trial began last week. Chun is to be indicted on bribery charges tomorrow. Now, to help peel back the layers of this story, we turn to veteran Korea watchers, Tony Namkung, director of the Seton Hall Institute on Korean Affairs at Seton Hall University, and Don Oberdorfer of Johns Hopkins University School of Advanced International Studies and author of a forthcoming book about Korea. Thank you both for being with us. Tony Namkung, first, how important is what's happening? It's not exactly news that there's been

corruption in Korea. The president Chun went to a Buddhist monastery for two years to atone for corruption charges he admitted to before, but is the scale of this different? Well, I find the title of this segment a little amusing Crime and Punishment, because what we're seeing here is not a typical crime in the legal sense and not typical punishment. What we're seeing is an entire system that is indeed itself on trial, an entire way of life, which can perhaps best be characterized as being twin-layered. The bottom layer being essentially a replica of the Japanese iron triangle that is the collusive practices that exist amongst the industrialists, the bureaucrats, and the politicians, the top layer being the chorus of mechanisms in place, namely the military, the intelligence agencies, and the police. In combination, this way of life is now being challenged. So what's new here is really that it's all being challenged at the same time?

Yeah, so in that sense, this is something that goes far beyond a mere criminal act that is being tried. Do you agree with that, Don Oberdorfer? Yes, well, you probably know I spent 38 years in journalism, and an editor told me once the greatest stories in the world are proving what everybody already knows. In this case, everybody knew that there was extensive corruption, if you call these kinds of payoffs corruption, most people do. But the scale of it was absolutely stunning, $600 million. Park Chung Hee, the dictator who took over in 1961, had payoffs to his, and his administration, Chun Doo-hwan who had followed had payoffs to him, and everybody knew it. But two things. One, the scale is immense, and secondly, the proof, which was never there before, has suddenly put this thing into a different context, and I think it's a political earthquake in South Korea. Why do you think it's happening now? Well, partly it's due to the current president, Kim Young-sam. When he came in, he instituted a real name law, a law which required that bank accounts actually

be in the name of the person who owned them, and not be in phony names, or somebody else's name. And that was the thing that really threw this corruption issue on the table, because under that old system you had never found out who owned this money that president knows now admitted was his. So that's his reforms, I think, had an effect on that. Secondly, Korea's grown up. Korea is the first country in the modern era to go from a developing country to a developed country. It's about to join the OECD, the Rich Man's Club in Europe. It gives foreign aid. It has billions of dollars of investments abroad. It is second in the whole world in shipbuilding, and fifth or sixth in either various other things such as electronics, the export of various kinds of steel, automobiles. This is a big country now. The politics have not kept up with this, because the politics as Tony said were based on an old system of

favors, and you get a favor in return. But now that's changing, and the whole system is changing now, and I think we're going to see a Korea that's quite different in a few years. Do you think that's what's happening now? Do you agree with that, or are there other factors? I agree, basically, with that, but there are more immediate factors. The constitutional court was set in the last week of November to rule in favor of the complainant from the Gwangju massacre, who had sought to appeal the prosecutor's decision of July 1995, saying that there were no grounds to prosecute these people. The very day before Kim Young-sam, the president of South Korea, announced that he was going to go after these people with a special law. A second dynamic that we need to keep in mind here is that Kim Dae-jung, his long-standing arch-rival, arch-nemesis, has declared himself to be presidential material once again having retired from politics

permanently. Nothing would motivate Kim Young-sam to move in this direction as much as the specter of a Kim Dae-jung presidency. So part of this is politics on the part of the current president? Yes, very much so. Before I get any more or right away to the Gwangju massacre, I want to ask you some more about the economy just for a minute. What's the effect of charges against 35 leading business, businessmen? I mean, the people that have really made the Korean miracle in some ways? What is the effect on the economy of this? Well, the reverberations have yet to be felt in full, clearly capital spending in 1996, which I think is projected at about 8.1 billion dollars will go down. How much down? It's hard to say, but already we're seeing interest rates go up both in the case of loans that banks are making overseas and in short-term loans in the Korean market itself. And so we're seeing some actions taken by the finance ministry to try to encourage

greater foreign access, foreigners access into the Korean capital markets. This will have an effect on growth rates in 1994. But more than that, this is very unsettling to businessmen. It's welcomed certainly by small and medium-sized businesses who feel that now that perhaps the playing field will be level. But for the conglomerates, it's an extremely unsettling period. And does it affect the U.S. at all, both U.S. thinking of U.S. Korean relations, but also there's a chance that there will be charges against general dynamics because of this F-16 issue? Well, if they are charges against general dynamics or some other American companies, it may have some effect. But back in the 70s, there were not just charges. There was proof of several American corporations giving bribes and paying off money in the Park Chung-hee administration, and it didn't have any permanent effect. I doubt that it's going to have a lasting economic effect in the sense of the future of the country. It will be positive in the sense of

putting things on a more modern, sensible business-like procedure in Korea. I think the central issue for the United States and all this has to do with the South Korean attitude toward North Korea. Up to now, the U.S. has taken the position that it really doesn't want to move ahead with North Korea much faster than the relations between South and North move ahead. Under current circumstances, it doesn't look like the South is really in position to move ahead with the North. There's too much confusion at home, and the North isn't been that interested either in moving with the South. And that is the major issue on the Korean peninsula, of course. That's right. So now the United States government has got to decide how and when and whether to move ahead with the North, knowing that the South-North relationship is not going to be moving very much in the next year or so. Somehow, it's got to get off this dime, and that's going to be a very

difficult thing to do. What do you think about that, Tony Namkung? What about the North-South relationship? And the agreement between the framework agreement is going ahead, right? The light-water reactor, the various agreements having to do with the nuclear power issue. Yes, the light-water reactor agreements were signed only very recently on the 15th of December. These issues are much more closely intertwined than we think. North Korea's greatest primary beef with South Korea has been precisely this Japanese-like structure of collusion and corruption. And to the extent that the U.S. can maintain a stabilizing influence, now that it has the KEDO, the light-water reactor agreements with North Korea, and there's some efforts small and modest, but important efforts being made to improve relations with North Korea, to try to maintain that sense of balance on the peninsula. To the extent that the U.S. can play that role without being taken an equidistant role, but keeping track of both Koreas as it were, the better the

prospects for genuine political reform in the South, which would then result in an easing of tensions between North and South Korea. And how does the Gwangju massacre play into this? This was a massacre in 1980. Both presidents, both ex-presidents, one in prison, one in a hospital because he's on a hunger strike, are now being investigated in connection with it. 200 people are said to have died, but some people say many more died. How does that play in all this? And I'm interested because it raises the whole issue of impunity that so many countries, which were once military dictatorships face. How do you think it plays into all? And to both the North-South issue and the political issue, and so I know that's amazing. Well, in a way it doesn't play into it very directly. It's really a separate subject from the corruption scandal, but the corruption scandal, plus I must say, as I understand it, docu-dramas, which have been showing on South Korean television about the Gwangju incident and about the takeover of a military

coup by General Chun, have impelled the current president, Kim Young-sam, to move on this other front, which is also widely popular. So you have these two things. You have some of the- Like an unraveling. You have some of the same people involved in them. It doesn't involve the business community, however, but they are wrapped up in a different way. I have to interrupt you. I'm sorry. We've got to go. Thank you both for being with us. Finally, tonight, getting real with Rembrandt. Paul Solman has the story. Now playing at the Metropolitan Museum in New York, an exhibition that looks at one of the raging controversies in art. What is, or isn't, a real Rembrandt. We've invited historian Simon Schama here to help make the distinction. Over the decades, the Met has acquired 42 supposedly real

Rembrandt's. But in recent years, their authenticity has come into question. The museum is now down to 18 authenticated Rembrandts, and the official world count, 700 or so, around the turn of the century, is down to 300. Now to put you in the picture, and on the hot seat, we're going to start with a Rembrandt not Rembrandt take-home quiz. Ready? Okay, starting with pair number one, which is the real Rembrandt, A or B? Pair number two, again, A or B. You make the call. Pair three for the last time, which is Rembrandt, which is not? The answer's in just a few minutes, but first, a really real Rembrandt, Aristotle contemplating the bust of Homer, as seen by real Rembrandt expert Simon Schama. This is real Rembrandt. Now, real Rembrandt takes a kind of standard issue project, and first, it re-thinks it in a way no one else could have imagined, and then it re-works it. The actual

painting is the kind of painting that nobody else would have dared. The center of this painting is a chain, and people say, well, you know, the guy in Italy who wanted this painting said, give me a philosopher. Rembrandt gives him a gold chain as the kind of narrative storytelling part of the painting. You know, a complete astonishing theatrical coup is what a real Rembrandt is. Now, I look at it and I think, oh, the thoughtful, penetrating gaze. Well, you know, everyone says, oh, he looks kind of sad and wistful. This is a man under pressure, and one thing that makes a real Rembrandt is that whatever time you live in, whatever society you live in can be Amsterdam or Italy. This was meant for an attending collector in the 1650s or New York or America. In the 1990s, some elephant element will connect with our own kind of human condition. This is a story of a man who's under pressure. It's Aristotle or philosopher. Why is he under pressure? Because he owes his job to the state, to the king, in particular to Alexander

the Great, who's shown hanging from that chain. What do you think about chains? Chains are both things if it's kind of heavy gold jewelry. You're wanting to put on yourself, but a chain is also a chain. Something that binds you to somebody else. So everybody, every man is going to see that chain. And I think Rembrandt's brilliance is that he kind of infiltrates himself into the kind of public imagination, into the way you and I would look at a painting. You start by looking the sadness of the gaze. You notice what the hands are doing. You think, hmm, chains. Now, you know, there's something sad and heavy, and God is that chain heavy, heavy about that chain. So you don't have to be, you know, a scholar about Aristotle, to have the feeling that there's something melancholy and sorrowful and heavily chained about this painting. Hanging next to the philosopher, a not Rembrandt, though it even passed muster with Holland's supposedly definitive Rembrandt research project in 1976. But to the med itself, X-rays and auto radiographs suggested

not Rembrandt techniques. The image itself came under attack in 1982, the museum demoted the auctioneer. And I remember as a young person coming to the med and this retune. Yeah, what's what's that Rembrandt about? When you start to look at it closely, the sleeve there is a mess. It's not defined with anything like the precision that Rembrandt would give it. It's a kind of wild piece of painting, but it's not exactly describing something. There's a strange face of a head back there in the darkness. Rembrandt would always have, as in the Aristotle, a bust that meant something, that did something that spoke a particular way. It's a kind of smushed out face. Then the face of the figure itself has very, very strong light and dark patches. One thing Rembrandt would do would have a wonderful journey from the dark to the light. Very carefully done. This is someone who said, ah, the Rembrandt way to do it is brilliant light, deep, deep dark, and there's a very sharp frontier between the two. But this painting was accepted

by virtually every expert in the world in 1982 as a Rembrandt. That's right. And it's a rather beautiful painting. It's a lovely painting, yes. So show us a truly egregious non-rembrandt. One right over here. Yeah, this is a painting that really flunks even the wannabe Rembrandt test, because it's by someone who's been looking at Rembrandt. He's got an idea of gold color, and it's a dramatic idea, it's Pontius Pilot, supposed to be washing the hands, but the painting stops at the idea and a vague sense of a color. You look at the detail, look at the face of that head of the kid who's holding out the jug, and it's the most kind of elementary sketchy rendering. The figures of the kind of cast spectators at the window there are done so crudely and so sketchily. None of it adds up as a kind of dramatic moment at all. And take a look at that chain. The chain that Rembrandt and the Aristotle was able to do with weight and texture and glitter is there just a kind of wild attempt to suggest a kind of material. Okay, so then how did the

Metropolitan Museum of Art accept this as a Rembrandt in 1913 from Benjamin Altman? At that time, earlier in the century, anything really that look brownish, goldish, had a kind of fuzz around the edge, was sort of emotional painting. Because people thought Rembrandt worked alone, he was the solitary artist that must be him, must be him, maybe him in a bad Wednesday morning, but it's got to be him. And an awful lot of stuff even worse than this got taken under that rubric. Any element of economics here in the sense that he must have gotten a heck of a tax rate off for giving this to them there? Yeah, no, I think actually like all collectors, you're the economics correspondent now, but you have a soft heart too. He truly felt like, you know, all sorts of other people that this was the real thing. That dreamy look, which we now look as though someone who's, you know, thinking of Christmas or something, for someone like Mr. Altman would have been the Rembrandt gaze, mysterious, off there soulful. So a clear not-Rembrandt,

as with so many likely painted by a member of his workshop. But these Rembrandts are beyond dispute. The syphilis-deformed Gerard de la Ressa, the Amsterdam woodworker, Herman Dumer, and woman with a pink. This is the real thing about as good as it can get, Rembrandt in the 1660s. It's about, it's a mood piece. This is a painting about the sweetness of married love, and she's carrying a pink in her hand because that was the symbol of married affection. So what has Rembrandt done? He's lit the flower, which in some senses, you know, echoes this beautiful, kind of red color of the cloak too. So the flower becomes almost, becomes the outward version of the love she's feeling inside her. Rembrandt, you know, moves you. You feel kind of overwhelmed. This is thought by artists who are going to be very old, fashion idea, but it's a deep truth. Beyond all the bits and bobs, beyond all the pieces of nice finicky painting, there is a central

emotional part that face those eyes, the painting builds this like a song. And if you hear this, if you see it, you've got the real Rembrandt. People like myself who have, over the years gone to museums, seen and say Rembrandt, and therefore been validated in their emotional response to the painting because it's a Rembrandt. I mean, have we been doped when the turns out that the painting was de-attributed? No, absolutely not. I mean, there are many so-called experts, art historians, scholars who also were persuaded by those paintings, and many of them, many of the not Rembrandt's, are very beautiful, fine paintings. They are just not quite this fine. And now, finally, time for the answers to our quiz, pair one. On the left, the real Rembrandt, a brutally candid self-portrait in which light moves to dark with subtle drama. By contrast, the drama on the right is considered theatrical, the woman, almost a prop. On to pair two,

and again, on the left, the real Rembrandt, with personality and brushwork, especially in the lace and head that you just don't see with anyone else, whereas the fellow on the right is a type, with armor that's well painted, but not amazing. Finally, pair three, and again, its Rembrandt's flora on the left, her flowers gathered in her skirt. The symbol on the right is by comparison a bit muddy. For those of you who pass the test, congratulations. For those of you who failed though this consolation, some of the world's greatest experts once thought all six were Rembrandt's. And speaking of art expertise, let's give the final word or image to Rembrandt himself, and his drawing of a 17th century art connoisseur, the guy with the dunkey ears on the left. Rembrandt, the man some think of as the world's greatest artist, apparently had the world's greatest contempt for so called art experts. Again, the major stories of this Thursday,

Republican leaders on Capitol Hill said they would meet President Clinton tomorrow afternoon to work on a budget deal. And in Bosnia, opposing forces met the DeNado deadline for a pullback from Sarajevo. We'll be back tomorrow night with General William Nash, the American commander of NATO forces in Northeastern Bosnia, and we'll also be joined by our political regular shields and she go. I'm Elizabeth Farnsworth. Thank you and good night. Major funding for the Newshour with Jim Lehrer has been provided by the Archer Daniels Midland company, ADM Supermarket to the world. And by New York Life, yet another example of the wise investment philosophy New York Life has been following for the last 150 years, and by the Corporation for Public Broadcasting, and by the annual financial support from viewers like you. This is PBS.