The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. I'm Robert MacNeil in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Friday, five regional business journalists assess how the economy is doing where they are, Charles Black for Bush and George Stephanopoulos for Clinton exchange charges about the conduct of the presidential campaign thus far, and David Gergen and Wendy Sherman analyze those answers and other political developments. NEWS SUMMARY

MR. MacNeil: The nation's unemployment rate dipped by .1 percent in July, down to 7.7 percent. The Labor Department said payroll jobs grew by 198,000, the biggest increase in more than two years. Analysts said the improvement was largely due to a summer program for youth that provided 60,000 jobs. That program ends in September. The head of the postal service today announced 30,000 managerial positions would be eliminated over the next three months. Marvin Runyon said the agency hopes the cutbacks will prevent postage rates from going up in the near future. He made the announcement at a Washington news conference.

MARVIN RUNYON, Postmaster General: If we don't do anything and just continue to operate the way we are, the plan is to be $2 billion in debt by the end of fiscal year 1993. The actions that were taken today with a restructuring and some of the other things that we're doing to decrease that deficit will make it possible for us to hold the rates constant in 1994. If we do nothing now, the rates will have to be increased to somewhere between 34 or 35 cents in 1994.

MR. MacNeil: We'll have more on the economy right after the News Summary. Jim.

MR. LEHRER: In the presidential campaign today, the second Clinton-Gore bus tour wrapped up in Minneapolis. Earlier, Clinton told a rally in Lacrosse, Wisconsin, he's committed to family farmers. In Columbus, Ohio, Vice President Quayle told a business group Clinton's economic policieswould lead to the loss of nearly $2 million jobs and billions of dollars in new taxes. Yesterday, Clinton said such charges were untrue. We'll talk to key Clinton and Bush campaign advisers later in the program.

MR. MacNeil: President Bush said today he did not want to see the U.S. bogged down in guerrilla warfare in Bosnia, but he also said the U.S. would not rest until all detention camps in the country were open to inspection. At the United Nations, Bosnia's ambassador released a memo showing U.N. peacekeepers knew of the camps at least a month ago. In the memo, peacekeepers said Serbs had begun summary executions of Muslims as far back as April as part of an ethnic cleansing campaign. The memo went to senior U.N. peacekeeping and human rights officials in Yugoslavia, but not to the Security Council in New York. Meanwhile, there was heavy fighting in Bosnia overnight and U.N. peacekeepers were among the targets. Vera Frankel of Worldwide Television News narrates this report.

MS. FRANKEL: Western threats of military action to support relief efforts have failed to curb the nightly battles across the city. The U.N. headquarters in Sarajevo took several direct hits during the barrage. There was no official speculation on who may have been to blame, but there was little doubt that the peacekeepers were the intended target.

MIK MAGNUSSON, U.N. Spokesman: There's no question, this was a direct attack on us. There's no room for doubt.

MS. FRANKEL: In all, four French soldiers taking showers at the time of the attack were wounded, one seriously. The injured were flown out of Sarajevo later in the day. Despite worldwide outrage over the Yugoslav conflict attacks like these are certain to reinforce Western fears of getting bogged down in an unwinnable war. Now Sarajevo is without electricity and running water and relief flights are suspended, and day after day, people continue to die. While the world considers action, the people of Sarajevo feel any help will be too late.

MR. MacNeil: Warring factions in Mozambique today announced an end to their nearly 16-year civil war. The agreement followed three days of talks in Rome between the country's president and the leader of the right wing rebels. The cease-fire is scheduled for October 1st. The war began shortly after the Southeast African nation gained its independence from Portugal. It has cost more than 600,000 lives and driven a million people into exile.

MR. LEHRER: A new U.N. weapons inspection team arrived in Baghdad today to an uncertain future. An Iraqi official said yesterday U.N. inspectors would not be allowed in government ministries. A three- week standoff occurred last month when another team was blocked from the agriculture ministry. The new team's leader insisted the United Nations could go anywhere it wanted under the Gulf War cease-fire agreement. And that's it for the News Summary tonight. Now it's on to the economy, a presidential campaign debate, and Gergen and Sherman. FOCUS - GOOD NEWS, BAD NEWS

MR. MacNeil: First tonight, what is the correct message on the state of the U.S. economy? President Bush said this week that it's better than the media say, claiming "There is a distortion out there about how good things are or how bad things are." Bill Clinton retorted that "The President says things are great: you're just too dumb to see it." So are the news media hiding the good news? To discuss that, the new unemployment figures and state of things in their areas, we have five people who actually write and edit the economic news. They are David Warsh of the Boston Globe, Bob Cox of the Wichita, Kansas Eagle, Cathy Taylor of the Orange County California Register, John Pepper of the Detroit News, and Marilyn Geewax of the Atlanta Constitution. Marilyn Geewax, are the media making the economic situation sound worse than it is?

MS. GEEWAX: No, I don't so at all. I think that people live real lives out in the real world. And no matter what the journalists tell them, they know what's happening in their daily life. They know if they're working more overtime, if their home sale prices are falling, what's happening with their savings. They're aware of the real economy.

MR. MacNeil: How do you feel about it, David Warsh, in Boston?

MR. WARSH: Well, I agree. I think that it's the indicators that are telling us that the people feel generally bad about the economy, the confidence indicators, more than anything else.

MR. MacNeil: Bob Cox, does the President have any point in saying that we are in the media emphasizing the bad news and de- emphasizing the good news?

MR. COX: Well, I don't think so. It's hard to tell from Wichita, Kansas, what's happening in the other parts of the country. But in Wichita, and in the state of Kansas, things generally are pretty good compared to what we read elsewhere. So here we're certainly not having a recession.

MR. MacNeil: How do you feel about it, Cathy Taylor in Santa Ana, California, in Orange County --

MS. TAYLOR: Well, out here in Orange County, we're having just about the worse downturn in our history. Our unemployment is at 6.7 percent. That's the worst since August 1983. We've got people at the consumer credit bureaus, 2600 visited through May. That's up 40 percent from a year ago. So we are hurting. We usually outperform the nation, but not this time around.

MR. MacNeil: Go back to you, Marilyn Geewax in Atlanta, what is the economic situation locally for you? What is the news there, as you see it?

MS. GEEWAX: Well, I think that the Southeast in general seems to be slogging through a weak recovery, but our real problem is in commercial real estate. There's a tremendous glut of office space and retail space. For example, in downtown Atlanta right now we have a 30 percent vacancy rate in our offices. And that's just terrible. That kind of thing has a ripple effect through the whole economy. For example, developers don't build new buildings, so they don't get loans, and that hurts the banks. They don't hire construction workers. They don't buy goods such as carpeting and furniture, which ripples through the whole Southeast. And just this past week on the home real estate sales, we had some terrible news from the National Association of Realtors. They said that Georgia had the single biggest falloff in the whole nation in sales of existing homes in the second quarter. You throw that in with the loss of defense jobs and the possible closing of military bases, the weakness at Delta, the loss last year of Eastern, and I think that we have some real problems here.

MR. MacNeil: But Bob Cox, you say in the Midwest it just doesn't look like that?

MR. COX: Well, certainly not in Wichita. For the last couple of years, folks around here have described the economy here as sort of an island of prosperity. Now, that may be taking it a little bit too far, but we've had good unemployment and employment figures. We've actually had real employment growth. We are still having employment growth. We have had positive retail sales compared to the national economy. But that may be an aberration. Indeed, right now there are some indications that maybe the recession is starting to catch up to us here in Wichita.

MR. MacNeil: But in Boston, David Warsh, is the recession beginning to leave your corner of New England?

MR. WARSH: Yeah. I'd say it seems to be a recession. It's begun to be a very slow, sputtering expansion like the national aggregate. The news in Boston is that it's been the most beautiful summer in anybody's memory, just absolutely lovely, and that's not attributable apparently to the volcano that spewed the ash two years ago. But the down side of that is that the retailers complain that the cool weather has kept inside; we didn't have that July heat. The Fed did its monthly survey this week and we found that 40 percent of the businesses in Boston said they were a little bit ahead of last year and 40 percent were down. So there's this funny sideways feeling to it that I think is the problem that we fear nationally, that we're in a recovery, but it isn't really going anyplace and our unemployment, like the national rate, is stuck up there stubbornly high.

MR. MacNeil: So what you're confirming in your various regions really is what the Fed said earlier this week, that it's very different in different parts of their 12 regions. They said it's spotty and very different. Well, let me ask you this. President Bush said in his interview on Wednesday, where he made the complaint that I just reported, "The American people think we're in a recession and we're not. We've had four quarters of positive growth." How do you react to that, Marilyn Geewax?

MS. GEEWAX: Well, I think that the President is trying to put a good face on this, but when you really talk to people, if you go out into the community and listen to what people are saying, I don't see that they're all that influenced by the media. For example, we had -- at our newspaper, we did these focus groups with average citizens where we reporters and columnists sat on the other side of a glass mirror and watched what people said without the presence of the media there to bear down on them or to try to lead their questions. And they asked a group of 12 housewives from all different economic backgrounds what did they think was happening in the country? A woman said name all the good things and name all the bad things. And that group of 12 women could not think of one good thing to say. Every single one of them said that they were worried about jobs; they were worried about crime; they were worried about any number of things, but they just couldn't think of anything really positive to say. And that wasn't us journalists telling them what to say. That was their response.

MR. MacNeil: Cathy Taylor, when you hear in Santa Ana the President say the American people think we're in a recession and we're not, what is your reaction to that?

MS. TAYLOR: Well, I think an economist -- and technically we may be in a recovery, just as technically the recession began in July 1990 -- there's a measure of that -- but, boy, if we are in a recovery, it sure is the slowest one we've seen in a long time. The indicators are just everywhere that it's going to be a slow comeback for California. And we're not looking for too much to pick up until either late this year or early next year. Look at June, the bleakest month we've seen in a long time. Hughes Aircraft announced they were going to lay off 9,000 of their 60,000 workers out here. Another aerospace company in Orange County said it was going to shut down 300 workers. Ball Corporation, where they make the mason jars, they're going to close in Santa Ana, 300 workers. It's a very tough time.

MR. MacNeil: And also things aren't so great in the other counties around you in Southern California, isn't that true?

MS. TAYLOR: No, we've got a real stew pot here not only of the recession, but also of concerns about the structural business climate in California. Workers compensation: We are fifth highest in cost to employers, yet we are 44th when it comes to paying worker benefits. Our business relocation and retention, there's concern that there are companies leaving, being attracted by other states, because of the high cost here. And all these things are sort of playing together right now. We have a situation where I feel like it's almost surface tension on the top of water in a glass, where it could just run over at any second. These are the things that are on the business community's minds right now.

MR. MacNeil: Bob Cox, in Wichita, when you hear the President say the American people think we're in a recession and we're not, you would, from your local perspective, agree with him, right?

MR. COX: Well, I think we're -- I think the rest of the country is seeing what the Midwest saw the last five or six, seven years. And, if you'll remember back to the early eighties, the mid eighties, the Midwest got clobbered, the Texas region got clobbered, the central valley of California got clobbered. Agriculture and oil were in the tank. Those industries are slowly recovering. The recovery is slow. At the same time most the East and the West Coast were having booms in real estate prices, things were generally quite good. Now, their turn in the tank, they're getting clobbered, their recovery's going to be real slow just as ours is. Our economy here is okay. It's not a boom, but it's a long ways from being a bust.

MR. MacNeil: David Warsh in Boston, we just report -- all of us -- the economic statistics as they come out, as issued, most of them in Washington. Just looking at those statistics, how does the economy look to you, the ones that have come out over the last six weeks or so on the sort of positive versus negative side?

MR. WARSH: Well, it looks uncomfortably slow. I think a large element of this is the administration's having somehow lost control of the narrative thread in all of this. Cast your mind back to the end of the Gulf War, and that was a time when we were all taking it for granted pretty much that the recession was over. The financial markets believed it, the administration believed it, and the consumer believed it, to judge from consumer sentiment surveys. It didn't come. By November, we were beginning to talk about a double dip recession and still the administration didn't push very aggressively on the line that some special action was needed. So here we are in the summer before the election. Analysts are seriously talking about a triple dip. That doesn't show up in the statistics of the last few weeks. It's conceivable. It doesn't seem to me likely, but that double dip surprised us all too. So I think the administration is in the position of having hope that we would be enjoying ebullient 6 percent growth, which is the normal rate coming out of a recession, and finding that it has 2 1/2 one quarter, and 1 1/2 the next quarter, and goodness knows what in the third quarter.

MR. MacNeil: Marilyn Geewax, when you look at the figures, the leading indicators, factory orders, economic growth in the various quarters, housing starts, inflation -- when you look at all those things, not just in your area, but nationally, as a business writer, what do you think about the economy?

MS. GEEWAX: Well, I think beyond the statistics --

MR. MacNeil: Sort of positive versus negative.

MS. GEEWAX: You have the positive numbers. Durable goods are up. Factory order goods are up. But you have to look at what's sort of been put forth as a good number. For example, the mortgage interest rates are at 8 percent. Well, that sounds like good news, but people aren't buying houses. When I moved to Atlanta in 1985, if the interest rate had been 8 percent then, the housing market would have been just blistering. At the time, interest rates were in the double digits and houses were still selling literally in a day in my neighborhood. Now, we're at 8 percent mortgage rates, and the President could point it out as an accomplishment, or that's something good, but the fact is people don't respond to the 8 percent interest rate. There's something worse going on in the economy. People lack confidence and they lack confidence for real reasons. Personal income just has not been rising.

MR. MacNeil: Bob Cox, when you look above your horizon at these national statistics I've just mentioned, how does the economy look to you?

MR. COX: Slow, weak, transforming itself from the inflationary era of the seventies and eighties to an era of much lower growth, much slower expansion and an era of totally different expectations that people are just now coming to grips with in a lot of places.

MR. MacNeil: And Cathy Taylor, when you look at the national picture and the statistics that come out every week, a couple of times a week, what do you see?

MS. TAYLOR: Well, California has always stepped outside many times in many instances of what the nation is doing. So when we look at what the housing market is doing, we tend to concentrate on what's going on here, because our median price is higher than the national median. Our procedures for buying a house are different than in many other states. So a lot of times what's happening in the nation doesn't affect us, except for like things like distribution. It's very important to things like our distribution sector as to how well the rest of the nation is picking up. And that will benefit us as other parts of the country strengthen.

MR. MacNeil: Well, just take today's statistic. Does a 1/10 of 1 percent drop in the unemployment figure for July, is that -- how positive a sign is that to you? Did you hear my question, Cathy?

MS. TAYLOR: I'm sorry. I didn't hear the end of it.

MR. MacNeil: I was just wondering how positively you see today's statistic, the unemployment rate dropping by a tenth of a percent.

MS. TAYLOR: One month's figure I do not take much stock in. I try and look at two or three months at a time. It -- to me, it pretty much means that it's staying about the same, that it's not a sign that we've turned the corner or anything like that.

MR. MacNeil: And, David Warsh, how do you see today's unemployment figure?

MR. WARSH: Oh, as neutral. It would have been terrible for the Bush campaign if it had been up, but it wasn't down very much, and it doesn't do very much to change the expectation. People just don't know when this thing is going to end, when this sideways movement will end.

MR. MacNeil: Bob Cox, how do you see it?

MR. COX: No real trend there. It didn't get any worse -- that's the good news.

MR. MacNeil: And, Marilyn Geewax, the unemployment figure today.

MS. GEEWAX: In a sense, it's statistically insignificant, but I don't think that it is insignificant in the political sense. I think there's virtually no chance that by November the unemployment rate could be any lower than 7.5 or 7 percent at the absolute best. So I think this was very bad news for the Bush campaign. Well, I'd like to thank you, all four, for joining us. Jim.

MR. LEHRER: Still to come on the NewsHour tonight, Black for Bush versus Stephanopoulos for Clinton, and Gergen and Sherman. FOCUS - '92 ELECTION - BUSH/CLINTON - FAIR PLAY?

MR. LEHRER: Now a turn to a competing pair of official campaign perspectives on sleaze in the 1992 presidential campaign. What is it? Is it already here, and if so, who started it, and how much more of it is likely to come are just some of the questions. President Bush was asked about it all at a White House news conference this morning.

SUSAN SPENCER, CBS News: Mr. President, there was the flap this Monday about the memo that -- or the fax, rather, that was sent to news organizations from your campaign and you subsequently denounced or disavowed it -- you didn't want to get involved in the sleaze business, et cetera. There are many in your campaign who are quite happy with the impact that that fax had and seemed to think that tactically this was quite beneficial and that you were able to distance yourself from this. Is that a pattern we should expect, or are you confident that this is now never going to happen again?

PRESIDENT BUSH: The pattern you should expect is after my being hounded and pounded for nine months by my principles being ill defined and what I stand for being ill defined, you're going to see some hard hitting attacks which are going to fairly define his positions. And that's what you should look for.

JOHN HARWOOD, Wall Street Journal: You mentioned that you had been -- your principles had been ill defined by your opponents in the campaign. As you know, there's been some talk even within your own party that a problem has been that you haven't gone forward and said what you really stand for, what you're going to fight for in a second term. Why do you think after so many years in public life and four years as President there are still these questions out there about what George Bush really stands for?

PRESIDENT BUSH: I'm not sure I know the answer to that, but they'll sure know it by the time they go into the voting booth in November and they'll see the record and the record will be an accurate record, and it'll be a positive record. And I'm not going to permit the Democratic Party and the Democratic National Committee and the Democratic nominee to ill define it. And so I can't answer as to why -- maybe some of the answer can be -- you know, little seminars we can discover that expos facto, but now what I'm going to do is join the fray and go after him and define his record. I mean, and that's going to be fun. I'm looking forward to it, and then I'll contrast it with not only what have we done, but what do I want to do.

MR. LEHRER: Judy Woodruff takes it from here. Judy.

MS. WOODRUFF: We look at the tone of the campaign so far with two top aides to the candidates. In Little Rock, George Stephanopoulos, the communications director for the Clinton-Gore campaign, and here in Washington, Charles Black, a senior political adviser to Bush- Quayle '92. George Stephanopoulos, have you and others in the Clinton organization been ill defining George Bush's record?

MR. STEPHANOPOULOS: The problem with President Bush isn't what we're saying about him; it's what the American people know about him. It's what the American people know about the condition of the country. Look at what the President just said. He said that the American people are in for a "Read my lips, Willie Horton" campaign one more time. He said he's going to go on the attack, he's going to go out, trying to find his opponent, and that he's going to enjoy it. This is a very familiar pattern with George Bush. It goes all the way back to 1964 when he ran against Sen. Yarbos, saying he was for socialized medicine and because he was for the Civil Rights Act, he was for only 14 percent of the people. It's only after these campaigns that George Bush says he regrets it and wishes it were better. And I think that the American people deserve better than that.

MS. WOODRUFF: Charles Black, is that what the President is going to do, launch another -- in the words of George Stephanopoulos -- "Willie Horton, Read my lips" kind of campaign?

MR. BLACK: Well, what we're going to do, Judy, is run on the issues. And we're going to talk about Gov. Clinton's proposals, about his record in Arkansas. For example, we've talked a lot recently about his economic plan which proposes more taxes and more spending, the same approach to the American economy that the American people have rejected in the last three elections. So when we talk issues and talk about Gov. Clinton's positions, they scream negative campaign. The American people want a debate on the issues.

MS. WOODRUFF: When the President said -- and he's now said it a couple of times -- that he wants to keep this campaign out of the sleaze business, what does he mean by that?

MR. BLACK: He means no personal attacks on Gov. Clinton, which is a very fine rule, and it's a rule we're happy to abide by. Believe me, there's more than enough ammunition on the substance of the Clinton record and on the substance of his issue proposals for us to run on. There's a dramatic contrast between the philosophies of these two candidates and two very different approaches to present to the American people on the issues.

MS. WOODRUFF: So no personal attacks on Gov. Clinton --

MR. BLACK: No personal attacks.

MS. WOODRUFF: -- or Sen. Gore, presumably, you mean?

MR. BLACK: Same rule.

MS. WOODRUFF: George Stephanopoulos, is that your definition of sleaze?

MR. STEPHANOPOULOS: I think that's fair and I think that Charles is right. There is a dramatic difference between President Bush and Gov. Clinton. Gov. Clinton has bold new ideas to move this economy forward. President Bush is stuck in the past. He's got no economic plan. He's got the worst economic record of any president since Hoover. He had the second largest tax increase in history signed in 1990, 159 billion dollars. He's raised taxes in the middle class and tried to cut them on the rich. We're happy to run on that record.

MS. WOODRUFF: All right. Well, let's go to the incident this week, Charles Black, that got so much attention, this fax that was sent out to all the news media by Mary Matalin, who's your deputy campaign manager, and included the term "sniveling hypocrites," it called the Democrats, referred to so-called "bimbo eruptions," a term that you all have lifted apparently from what someone said in the Clinton campaign. Straighten us out on what has happened, because today Mary Matalin, after the White House apparently repudiated what she did, she is now saying today that she'd never apologize, she has no intention of apologizing, and, in fact, the President told her it was perfectly legitimate, what she did. So where --

MR. BLACK: Mary did not apologize and neither did the President for our effort to set the record straight when Gov. Clinton and representatives of his campaign make negative attacks and false attacks on the President. All Mary's memo did was cite Gov. Clinton's own words, the words of his own representatives and his own staff in demonstrating that they had made vicious personal attacks on President Bush. Now, there was one thing in there, even though it came out of the words -- the words came out of the mouth of a Clinton staffer -- that did relate to the personal life -- and Mary said she regretted saying that -- that's what the President thought crossed the line. So we won't do that again. But examples such as Gov. Clinton accusing the President of tax evasion, Maxine Waters calling the President a racist, Ron Brown accusing the President of racial division, those are false, personal attacks. And we wanted to set the record straight that it's they who began the negative campaign, not we.

MS. WOODRUFF: And I want to ask George Stephanopoulos about those things, but before I do, just to get it straight, what -- so the White House statement that there had been an apology is not the case, because Mary Matalin is now saying there is no apology, we intend to continue.

MR. BLACK: Well, I don't think that's what Mary said. Mary said there was no apology for setting the record straight and answering the attacks and distortions and false claims of the Clinton campaign. She did in her statement on Monday say she apologized for the tone which appeared to cross the line beyond which the President doesn't want us to go. But we're going to keep doing this every day to point out, to set the record straight about the distortions of Gov. Clinton and his campaign.

MS. WOODRUFF: George Stephanopoulos, how does the Clinton campaign read all of this?

MR. STEPHANOPOULOS: Well, I think what you just heard is that they're going to try and have it both ways for the rest of the election. They're going to come out. They're going to get the attacks out in the open, and then try and run away from them. It's a familiar pattern. It's the same old politics and nothing's going to change. I think what the American people want from President Bush is what is his vision for the country, where are his ideas, how come he has no economic growth plan that's going to move this into the future? How come he talks about a health care plan, but hasn't submitted one to Congress? How come he talks about a welfare reform plan but can't even send somebody up to Congress to testify for it? The American people want something different, they want change, and Bush isn't providing it.

MS. WOODRUFF: He's saying that you all are trying to have it both ways. What you're saying, you're against personal attacks, but --

MR. BLACK: I don't know what he's getting at there, but there he just gave us Exhibit A of distortions. Of course, we have plans before Congress on the economy and on health care, but Al Gore's cronies in Congress and the Democratic Party won't pass the President's reforms. We have reforms to address every major problem that the American people are interested in, and it's the Democrats in Congress who have blocked them. And I'll be happy to send copies of all of them down to Georgia if you would like. Look, what we are doing is we are refusing to let Bill Clinton, Al Gore, and their representatives make vicious, personal attacks on the President and have them go unanswered. This negative campaign began last fall when Bill Clinton and five other Democrats running for President started attacking George Bush every day.

MS. WOODRUFF: And you're saying they were making personal attacks then?

MR. BLACK: It's a relatively personal attack for the Democratic nominee to call the President a tax evader. When a co-chairman of their campaign calls him a racist, that's a personal attack. They're both false and I think George will tell you that right now.

MS. WOODRUFF: George Stephanopoulos, did the President accuse - - did Bill Clinton accuse the President of being a tax evader?

MR. STEPHANOPOULOS: He didn't use those words and it's a simple statement of fact. George Bush owns a house in Maine, but claims Houston as his -- as his residence for tax purposes, where he simply uses a hotel room as the residence. That's just a simple statement of fact.

MS. WOODRUFF: Well, don't many Americans do something similar to that, who have several residences?

MR. STEPHANOPOULOS: I don't know. Well, I don't know. President Bush does have several residences, and he was just pointing that out. I think it was reported in Money Magazine and in several other reputable publications.

MS. WOODRUFF: What about the statement by your co-campaign chairman, Maxine Waters, Congresswoman Maxine Waters, that the President's a racist?

MR. STEPHANOPOULOS: Well, I think that what she was referring to was the President's policies. And I think that unfortunately we do have division in this country and Gov. Clinton has said throughout this campaign that we have to end the division; we have to heal the country; and bring the country back together again.

MS. WOODRUFF: Well, how are those statements different from what you all are saying that the Bush campaign is saying?

MR. STEPHANOPOULOS: President Bush set the standard on April 10th. He said he wanted his campaign to stay out of the sleaze business. He said he issued written instructions to his staff to stay out of the sleaze business, and it was President Bush, himself, who asked a staffer to call the statements fact. That's the issue. President Bush is the one who made it an issue.

MR. BLACK: Well, listen, we have a clear set of rules. We're going to stay away from personal attacks, and we hope they will not repeat the kind of personal attacks that I just cited. There's plenty to talk about on the issues. We have plenty to say about Gov. Clinton on taxes, spending and other issues, and that's really what the voters are interested in. We hope to keep it on the issues.

MS. WOODRUFF: But you all put out these news releases, for example, and we get them from both campaigns every day. For example, today or yesterday -- today, "Boy Clinton and his bag of tax tricks," and the "Boy Clinton pander mobile sputtered into tax land," is this the sort of rhetoric do you think that lifts the campaign?

MR. BLACK: Well, Mary Matalin has a very colorful, humorous way of writing things, but the basic facts in there which are documented are about Gov. Clinton's record on taxes and his false claim about the President on taxes. Every word in there is documented. I think most reporters who get the releases tend to find them more entertaining and readable because we put some humor into it.

MS. WOODRUFF: Every word is documented, George Stephanopoulos, would you --

MR. STEPHANOPOULOS: Absolutely untrue. They have tried to say that Gov. Clinton is for the biggest tax increase in history. Frankly and factually, the biggest tax increase in American history was signed by Ronald Reagan in 1982. The second biggest tax increase in American history was signed by George Bush in 1990. They say that Gov. Clinton is calling for a payroll tax to pay for his health care plan. It's simply not true. They created it out of thin air.

MR. BLACK: Well, how are you going to pay for it?

MR. STEPHANOPOULOS: You're going to pay for it through tough cost controls by taking on the insurance companies and real reform, something that President Bush hasn't done --

MR. BLACK: What about the trial lawyers, when are you going to take on the trial lawyers?

MR. STEPHANOPOULOS: -- in four years as President. Under President Bush health care costs have exploded and he hasn't done anything to stop it. We have a plan to stop it.

MS. WOODRUFF: Well, how do the American people know -- both of you keep talking about the American people -- but, Charles Black, where do you draw the line? And you say it's personal statements about the other side, but the Willie Horton, the so-called "Willie Horton" business that came out in 1988, President Bush -- I was on the campaign trail with him that year - - referred repeatedly to Willie Horton in his speeches that he made. That wasn't a personal attack on Michael Dukakis, but it became a theme that later became associated as dirty campaigning.

MR. BLACK: It was a very substantive issue. The question was whether Gov. Dukakis's policy of allowing prisoners who were sentenced to life without parole, allowing them to go on weekend furloughs, whether that was a smart policy. It was brought to our attention by Al Gore, of all people, who first attacked Gov. Dukakis on it during the New York primary. That's a totally legitimate public policy issue. To Gov. Dukakis's credit, he didn't run from his position like Gov. Clinton tends to. He pleaded guilty, yes, for those kind of furloughs.

MS. WOODRUFF: But is there a line -- is what I'm asking both of you -- George Stephanopoulos and Charles Black -- is there a line beyond which the campaign will not go this year, or can we expect Katy bar the door?

MR. BLACK: There sure is, and a whole lot of reporters in respectable publications have written things about Gov. Clinton that we won't get into and I won't comment on, because we consider them in the realm of his personal life, as opposed to on the issues.

MS. WOODRUFF: George Stephanopoulos.

MR. STEPHANOPOULOS: Judy, I'll answer it right now. If President Bush and Charles Black want the election to be about the economy, which is what most Americans care about, Americans care about their jobs, about education and health care, we're ready to go at the Bush record on jobs, education.

MS. WOODRUFF: Sounds like we may have lost George Stephanopoulos, but what he was saying that if you all want to talk issues, they'll talk issues. Is that what the campaign is going to be about?

MR. BLACK: Oh, absolutely. And we're out there every day, every single day, the President and his representatives and his surrogates, and our campaign representatives are talking about the issues. The Clinton economic plan versus the Bush economic plan is probably the central issue of this election, and we're talking about it every day. We go to Houston next week to write our platform. Unlike the Democrats, who write theirs in a closed, smoke-filled room, we write our platform in public, with the press and the American people present, and we'll be talking about issues all week and tell the American people what the Republican Party stands for.

MS. WOODRUFF: Sniveling hypocrites, are we going to hear those kinds of terms, more from the Bush campaign?

MR. BLACK: Well, again, that's the kind of colorful language to put in press releases to help get the reporters' attention. Not all of them are that anxious to read boring facts and figures, so they help jazz up the facts and figures, but every fact and figure in there is documented usually from news sources.

MS. WOODRUFF: All right. Well, Charles Black and George Stephanopoulos, even though you're not with us technically, thank you too. Thank you both. FOCUS - THE WEEK IN POLITICS

MR. LEHRER: Now to wrap up the political week Gergen and Sherman. David Gergen is the editor at large of U.S. News & World Report, and sitting in for Mark Shields tonight, who's on vacation, Wendy Sherman, a Democratic strategist and a frequent guest on the NewsHour. First, David, how would you score this little encounter we just listened to?

MR. GERGEN: Oh, I think they pretty much came to a draw, Jim. I think this is a warm-up for the slug fest that's still coming, the kind of attacks on Bill Clinton's record, his Arkansas record, in particular. His economic plan, is going to be much fiercer in the next two weeks as we go into the platform here and to the Republican Party and particularly at the Republican convention.

MR. LEHRER: Fiercer than what?

MR. GERGEN: Well, I -- I think fiercer than anything we saw in Willie Horton or anything we've heard so far in this campaign in terms of the Democrats. The Republicans feel that they have -- that there is a major vulnerability with Bill Clinton in his economic plan. They feel that if it's fully explained, they can make the argument it's full of new taxes, it's full of new spending. It's going to lead more regulations and that sort of thing. And, you know, frankly, they feel they can make the argument. Many people you talk to within the campaign now say basically we can go to the American people and say things may not be so good now, but they could get a lot worse, and they will get a lot worse if you elect Bill Clinton. That's going to be a major theme that we're going to hear in the Republican convention.

MR. LEHRER: Do you agree with that, Wendy, that this is the Republican hope?

MS. SHERMAN: Well, I think that Republicans have to make that argument because the economy's so bad they have to say the other side is worser than I am, and when you can't defend what you have, you have to attack your opponent. I think though that one of the things that we heard in this play, going back and forth, is really the Republican's a little bit on the defensive because of all of this slamming that's been going on, all this punching. David and I talked last week about George Bush putting on the gloves. Well, he's put on the gloves, but he's sort of punching into the air and trying to make some hits. And I think first we had Marlin Fitzwater say that Bill Clinton was reckless and then we had Mary Matalin and her famous memo. Now we have George Bush this morning saying, I'm going to do whatever it takes; I can hardly wait to go, sort of echoes of his David Frost interview. So I think we have a ways to go here in this campaign to get back to the issues.

MR. LEHRER: David, are both campaigns missing the boat? I mean, have they misread the public if they think -- or is a strong negative campaign still the way to win elections in this country in 1992?

MR. GERGEN: Well, Jim, I think it's fair for the Republicans, and the Democrats have had their shot at George Bush -- I think it's fair for the Republicans to come back and take their shots at the Bill Clinton record and his proposals. I mean, that is part of politics, and the public deserves to hear the other side of that story. I don't think there's anything wrong with that. Frankly, the question then becomes: Is that enough to win in the campaign? And my argument right now would be that is not enough to win this campaign for this Republican group. They have to go beyond that. And if I may, Jim, even among their own ranks, there are now many Republicans who are arguing the President also has to come forward with a much more positive, audacious plan. He's going to receive a memo in the next few days from a major group of conservative leaders within his own party, signed by people who are right at the top, right at his own side in this campaign, saying, Mr. President, you have to adopt a much bolder plan than you have so far on the economy, and you have to do -- you have to lower tax rates, you have to go for lower spending, you have to go for less regulation. This is -- you know, there are many Republicans who are saying it's not enough to go with a negative campaign, you have to go with something much more positive. And he's going to be under a lot of pressure within his own party from conservatives in the next few days to do that. They're going to push him for changes in the platform.

MR. LEHRER: Changes in the platform?

MR. GERGEN: They want changes in the platform and they want to fight in the convention floor, if necessary, to get a more audacious, bolder plan. They think that's the way to win.

MR. LEHRER: Do you agree that's the way to win, Wendy?

MS. SHERMAN: I do think that it's not enough to say that your opponent is a worse evil than you are. You have to put forward some vision. And right now, George Bush hasn't been able to defend the past or present a future. And right now the convention array looks like the nostalgia hour, and I think that may make people feel good, but it doesn't tell them what he's going to do, what his vision of leadership is, and where, how he's going to get people out of the economic doldrums we heard at the beginning of this NewsHour that are very real.

MR. LEHRER: You know, and the President said, and I would think everybody would agree correctly, that he -- for nine months, throughout the Democratic nomination process the debate that we had -- for instance -- every 90 seconds they would turn -- the Democratic candidates would turn from each other and beat up on Bush for a while, and that's all the public has heard for nine months, so he's got -- he's got a long way to go, has he not? I mean, they left this thing -- they, meaning the White House and the Republicans, left this thing lay too long, did they not?

MS. SHERMAN: I think they let it lay far too long, and I think part of what David's talking about, the conservatives coming back, are even within his own ranks, people are very frustrated, very panicked, and everyone is waiting for Godot in the form of Jim Baker to somehow rescue this presidency. And we hear there's going to be a great fanfare, that Jim Baker's helped make the world safe and now he's going to come on my team and we're going to make America safe and go forward. Well, I think they have a lot of work to do to bring the American public back.

MR. LEHRER: But, David, do they risk coming back strongly this kind of childish business that Judy referred to of calling Clinton "Boy Clinton" and all of that, has kind of a food fight quality to it, are they going to ruin their whole opportunity, if they're not careful?

MR. GERGEN: My personal taste does not run to pander mobiles and, you know, pollution across the Midwest. I don't think that's the way Republicans traditionally win elections. I think that you should be aware, Jim, on this Mary Matalin squabble that's gone on in the last few days, while the President has essentially walked away from it, there are many people in the base of the Republican Party who loved it. You know, she's been getting tons of calls saying, right on,keep right out there, because they've been looking for somebody to carry the fight to the Democrats.

MR. LEHRER: Who's been looking? Who?

MR. GERGEN: Well, some -- some of the grassroots folks around the country, Republican activists at the local level have been waiting for someone to throw down the gauntlet, to put the gloves on, as Wendy's been saying. They think Mary Matalin is a heroine to some people now. As I say, I think a lot of us would look upon that as say -- and I think if you really asked Mary Matalin in her heart of hearts, she would say it is a bit sophomoric, that's the way I get the attention of the press, as Charlie Black just explained. But I don't think they're going to win with that, and I frankly think it's almost static in the system. What's really going to make the difference is the discussion, the frank discussion of what the Clinton economic plan means and whether they can win that debate with the American people that the plan will lose jobs, not create jobs. And then I think even more important is whether they listen to the conservatives, listen to the Vin Webers, and the people like Malcolm Wallop and Jack Kemp and others who want to say, who want a much more audacious economic plan. That's the issue I think that's really going to come down squarely on the President's desk.

MR. LEHRER: How would you say, Wendy, that the -- how well the Clinton people have done thus far in explaining their economic plan? I mean, it seemed to me that they took some real hits on that this week from Vice President Quayle again today, as well as President Bush earlier in the week.

MS. SHERMAN: I think they're ready to defend that plan and I think they're going to defend it by first saying we have one, and the President does not, and I think George Stephanopoulous this evening began quite clear point by point they're ready. When Bush calls it a spending plan, talk about how it is not, and in very specific terms. Around taxes, Bush has no credibility on the tax issue, and the only taxes that Bill Clinton --

MR. LEHRER: Why not?

MS. SHERMAN: Well, because he said, "Read my lips, no new taxes," and then turned round and raised taxes. And so for him to turn to Clinton and say, but you're going to raise taxes, I would never do that, in essence, no one believes. And Clinton is very clear his taxes are on those who earn more than $200,000, and a millionaire surtax and quite frankly, the American people believe in those taxes. But I think they're very ready for a substantive discussion, but they do have to make sure that they do what they started to do again this week, and that is go out and do message. The punch- counter punch that everybody engaged in over the last few days had to happen from the Democratic side to prove that this wasn't the campaign of 1988, that Bill Clinton knew how to fight back. But we not only have to prove -- Democrats not only have to prove that they're not going to lose '88; they have to prove they can win '92, and he's got to get back on message and stay there.

MR. GERGEN: I agree with that. That's a very good point, because he's going to lose momentum, otherwise, from Clinton's point -- one of the things that's been interesting about the campaign so far, Jim, is it's almost as if the parties have changed roles. Only a few years ago, everybody used to marvel at how well organized the Republicans were, how hungry they were. They worked around the clock. They were always ready. They were always ready to hit you. This time the Democrats were much hungrier in many ways than the Republicans appear to be, much better organized. They have been really going at it. Now, from the Republican point of view, the good news that many Republicans are talking about this week is they finally -- the thing that George Bush is focusing on the campaign - - the thing that's turning into a campaigner, that he was missing in action on the campaign trail. He purposely stayed out of the campaign for a long time. His time clock, as I say, wasn't ready. He thought it wasn't -- he wasn't ready to campaign. But they now feel he's focusing and I think the campaign's going to pick up steam in the next couple of weeks. These next two weeks are crucial for Republicans.

MR. LEHRER: But when you say campaign's going to pick up steam, is it going to pick up steam in a positive way, or in a negative way, after Clinton or both?

MR. GERGEN: Jim, at the moment, I think the major thrust is going to be on the negative side. That's what's going to be different. I think they will really go hammer and tong after the Clinton economic plan and after the Arkansas record. The question remains: Are they also going to adopt bigger, bolder economic plans, or just try to repackage what they've got? I don't think we know the answer to that right now. I don't think they know the answer to that right now. There are divisions within their own ranks about what to do next on the economy.

MR. LEHRER: Wendy, another issue that came up -- it was an unexpected issue -- and that was the one of foreign policy on Yugoslavia. How do you read the -- what has happened on that -- first of all remind everybody what happened -- we should -- that Clinton said -- he came out in favor of limited military even maybe air strikes to get the humanitarian aid in.

MS. SHERMAN: Right.

MR. LEHRER: As you said, Marlin Fitzwater called that reckless and the Clinton people said, wait a minute, we were just quoting the Secretary of Defense, and now the President has done certain things. Who's -- what --

MS. SHERMAN: Lo and behold, Marlin Fitzwater called Clinton reckless and I guess now the President is too, because he's supporting a resolution in the United Nations to leave open all options, including military force, if need be. I think that Clinton got a piece of the upper hand on this by taking some leadership on foreign policy, having the President have to follow his lead. I think though at some point events get out of control of all of us and, in fact, we are now moving back to what has been the President's turf, which is foreign policy, both in Bosnia and the Serb concentration camps, which is really what they've become, and in Iraq and Israel is about to come before in the next few days, and I think that the Clinton campaign will probably stand very close to the President when they think it's appropriate and point out differences and this Thursday I understand that Clinton's going to give a major foreign policy speech in California and point out how his foreign policy is different than Bush's. And I think the timing of that speech is very good because that's what's going to be happening.

MR. LEHRER: What do you think about that, David?

MR. GERGEN: Well, there's no question that Marlin Fitzwater, who has a very good record as press secretary, did step in it when he went after Bill Clinton and said that Clinton had been reckless in calling for an authorization of force. And, in fact, the administration now says in private -- he doesn't want to make a big public thing -- we just blew it. And it goes to this question of not being well enough organized. There's a disconnect between the campaign rhetoric and the reality of policy making, and they often go up and say things in the campaign mode that have no connection with what they're trying to do on the policy side. So he got out in front and I think he made a mistake, and frankly, it helped Clinton. Clinton can now say every time he's accused of not being experienced enough or not ready to play the foreign policy game, as they were accusing of, well, look, I got out in front in Bosnia and a week later the President embraced my position. So I think that Wendy is absolutely right, one up for Clinton. I think she's also right though that the focus is changing and the President is experienced in foreign policy, and I think how he handles this, I - -

MR. LEHRER: And he is, in fact, President of the United States.

MR. GERGEN: He is, in fact, President of the United States.

MR. LEHRER: And he'll be seen functioning --

MR. GERGEN: And leader of the industrialized world, and Jim, I - - the suspicion is growing in Washington, or the expectation is growing in Washington, we will be using military force in Iraq.

MR. LEHRER: In Iraq?

MR. GERGEN: In Iraq, possibly -- probably air power, and possibly in Bosnia, before not necessarily tied to the elections but tied to the events that are going on now. I talked to the Senator today. He's quite close to this. He said, look, I think the chances are pretty good we're going to go into both, none or both, before the election season's over, so we're going to have a lot of foreign policy issues. And one of the interesting questions, of course, is as all of these complications come up, how -- and this question was posed by the President today in the press conference -- how do you move Jim Baker from Secretary of State to the White House if you've got all these pots boiling -- it becomes more complicated?

MR. LEHRER: Do you agree that that becomes a very tough move?

MS. SHERMAN: I think it's a very tough move. I think people were concerned and people on the Hill were very concerned about how in this era of foreign policy and everything that was going on in the world, Jim Baker could move and that gets heightened by all of these situations undoubtedly.

MR. LEHRER: Well, they could turn it back around, could they not, and say that because of these things we've decided we've rethought this and Jim Baker's definitely going to stay as Secretary of State?

MR. GERGEN: They could. They could do that and that would be a real loss to the campaign and to the morale of the campaign. I want to emphasize in terms of if we use military power, the expectation is that it will be limited air strikes; it will not be ground forces.

MR. LEHRER: You still think that the Baker thing is so set and such a done deal that, to use his term, he'll never come unglued?

MR. GERGEN: I think it's all but a done deal, and I will tell you, Jim, I think they are continuing to envision something larger than simply coming over and overseeing the campaign. I had an argument yesterday with somebody in the campaign and it seems to me that they could well move toward making him, and this could do a lot of good for George Bush. There were rumors yesterday they're going to put Jim Baker on the ticket. There are a lot of new Quayle rumors in the last 24 hours. I don't think that's going to happen, but I think they are envisioning something larger for Jim Baker and possibly he could become the domestic czar for the second term and frankly, I think that would help George Bush in his campaign.

MR. LEHRER: All right. We'll leave it there. Thank you all very much. ESSAY - THE GREATEST

MR. MacNeil: Finally tonight, with U.S. athletes having one of their greatest Olympics ever, Roger Rosenblatt weighs in with some thoughts on the greatest athlete ever and a former Gold Medal Olympian, Muhammad Ali.

MR. ROSENBLATT: Watching the Olympics, I find myself thinking of Muhammad Ali or Cashes Clay, his name back when he won the Olympics Gold Medal in Rome in 1960. Ali took the Gold in the light heavyweight class by beating a Polish coffee house keeper. Will Marudov, the Olympic sprinter who won three Gold medals in Rome, recalled in Sports Illustrated how Ali cherished his medal. He slept with it; he never took it off. She added, "Everybody wanted to see him. Everybody wanted to be near him." That was true all Ali's life. [Star Spangled Banner Music] It's true today.

SPOKESMAN: Muhammad Ali.

MR. ROSENBLATT: Earlier this year, Ali turned 50, and his talk slurs and his mind winds slowly, and sometimes he looks like an old stuffed bear rolled out to make the children laugh, but everybody wants to be near him. He was, after all, the greatest athlete of our time. The Olympics clarifies, like nothing else, the definition of a great athlete. These kids in Barcelona are technically the greatest for having qualified for the games in the first place. So what made Ali, who called himself the greatest, the greatest? More than the records. More than the comebacks. More than the surprising power or the speed. More than any single element of style. It was, I think, his union with the sport.

SPOKESMAN: A very even play. Ali, a sneaky right hand, another sneaky right hand. This time -- [crowd yelling loudly] --

MR. ROSENBLATT: All great athletes change their sports the way say Bobby Hull changed hockey, or the way Magic Johnson changed basketball by becoming a play making giant in the backboard. But Ali became the sport. [crowd cheering wildly] You could not think of another boxer at the time if you thought of Ali, not Joe Frazier, to whom Ali lost, not George Foreman who beat Frazier. Both Frazier and Foreman were great adversaries, but if you wanted to see boxing, there was only one greatest. Ali's feat was to camouflage, to disguise the brutality of boxing, whereas, Mike Tyson only emphasized it. Ali disguised boxing's brutality with his dancing and he did it with his mouth, the little taunting rhymes.

MUHAMMAD ALI: He's going around claiming to be the real heavyweight champ, but after I'm finished, he'll just be a tramp. Now, I'm not saying this just to be funny, but I'm fighting Ernie, because he needs the money.

MR. ROSENBLATT: They diverted one's eyes from the essence of boxing, which is, of course, to knock one's opponent silly. [crowd cheering] Mainly though, Ali accomplished his diversion with his nature, his soul. Big money and four marriages aside, he was always the innocent, the intuitively honest man. No Vietnam for Ali. And what was that name, Ali, anyway? It was his. That's what. He was a good man. One sensed that, above all. A good man in boxing is hard to find. The reasoning went, if Ali was a boxer, then boxing must be good. The reason boxing survives its brutality is that it makes sport as simple and basic as possible: Two men, an enclosed area, one victory made clean by the sight of one man up, one down, and out. Ali, in this light, was the basic athlete, the kind the Greeks had in mind when they came up with the Olympics. But he was more, a perfect coordination of mind and arms and legs integrated for the purpose of turning something ugly into something beautiful. [crowd cheering] He would say, "You remember. I'm so pretty." I'm Roger Rosenblatt. RECAP

MR. LEHRER: Again, the major stories of this Friday, the Labor Department reported the nation's unemployment rate fell .1 percent in July to a 7.7 percent rate. The Postal Service announced a major reorganization that calls for the elimination of 30,000 managerial jobs, and President Bush said he did not want to get bogged down in a guerrilla war in Bosnia, but he repeated his demand for all Serbian prison camps in Bosnia to be open to international inspection. Good night, Robin.

MR. MacNeil: Good night, Jim. That's the NewsHour tonight. Have a nice weekend and we'll be back on Monday night. I'm Robert MacNeil. Good night.