The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight: The Senate's campaign finance debate-- Kwame Holman reports; David Brooks and Tom Oliphant react. Terence Smith tells about a new wrinkle in newspaper competition: Giving it away free. And Gwen Ifill updates the controversy over the President's faith-based charities initiative. It all follows our summary of the news this Wednesday.

NEWS SUMMARY

JIM LEHRER: President Bush sent Congress a warning today on patients rights. He said he would not sign any of the bills now being considered. The President raised the issue at a cardiologists' meeting in Orlando, Florida. He said he opposed letting patients sue health insurers for millions of dollars in punitive damages and unlimited damages for pain and suffering. He predicted that would trigger a flood of lawsuits.

PRESIDENT GEORGE W. BUSH: Excess and frivolous litigation does harm to our health care system. It clogs the courts and consumes time and money. It undermines the trust between doctor and patient. It drives up insurance premiums for everyone. To make sure health care coverage remains affordable, I will insist any federal bill have reasonable caps on damage awards, and the caps in proposed legislation before Congress are too high and will drive up the cost of health care in America.

JIM LEHRER: Mr. Bush said he favors an immediate review when insurance companies deny coverage, and after that, the recourse to sue, but within limits. Democrats responded at a news conference in Washington. They said the President's plan did not offer enough protection for patients, and they accused him of giving in to insurance companies and health maintenance organizations.

SEN. JOHN EDWARDS: We're not interested in continuing to talk about this issue. This is an issue that is critically important to the American people. We need to actually do something about it. And we are still willing to talk to the President. I think his language today is very unfortunate because unfortunately it sends a sign-- all these folks have talked about the fact that our legislation is supported by every health care group in America that supports real patient protection. To my knowledge the only support for his position is the HMO's, and ultimately he's going to have to decide whose side he's on on this.

JIM LEHRER: There's no word on when the House or the Senate will take up patients' rights legislation. The Senate voted today to control the cost of political advertising. It was part of the ongoing debate on campaign finance reform. By a 70-30 vote, they toughened a law that says broadcasters must charge political candidates their lowest rates. The new provision would guarantee candidates' ads are not bumped in favor of advertisers who pay more. We'll have more on this story right after the News Summary. Prices at the retail level were higher in February. The Labor Department reported today the Consumer Price Index rose 0.3%. That was slightly worse than expected. The largest increases were for food and prescription drugs. On Wall Street, the inflation news dampened hopes the Federal Reserve would cut interest rates again soon, on top of its half- point cut Tuesday. The Dow Jones Industrial Average fell 233 points to 9487, its lowest close in 2 years. The NASDAQ lost 27 points, to close at 1830. Ethnic Albanian rebels declared a unilateral cease-fire today in Macedonia. They did so just a few hours before a government deadline for laying down their arms. There was no immediate response from the government. The rebels have been attacking targets near the border with Kosovo for more than a month. NATO asked today for another 1,400 peacekeeping troops for Kosovo to stop the rebel forays into Macedonia. The U.S. has about 300 troops just inside the Kosovo border. But Defense Secretary Rumsfeld said today the Bush administration is not considering adding more. At a Pentagon news conference, he was also asked about sending American peacekeepers into Macedonia.

DONALD RUMSFELD: We have no plans to send troops to Macedonia. There are, as you know, a series of things that the United States and that NATO have and are doing with respect to the difficult situation along the border. But the answer to your question is no.

JIM LEHRER: At the capitol today, the NATO Supreme Commander, General Joseph Ralston, said the alliance should not get into a combat role in Macedonia. He told a Senate hearing the United States and NATO should instead provide intelligence and military advice. The Bush administration today targeted more environmental rules imposed at the end of President Clinton's term. The Bureau of Land Management said it wanted to lift restrictions that force mining operations to post bonds guaranteeing they'll clean up after themselves. On Tuesday, the Environmental Protection Agency rescinded new standards cutting arsenic in drinking water. But today, Senate Minority Leader Daschle promised a fight to overturn that decision. The U.S. Supreme court ruled today employers can force workers to take job disputes to arbitration instead of court. The 5-4 decision overturned a lower court ruling in California. It could have broad effects nationwide because employers have increasingly turned to arbitration to avoid expensive legal battles. Also today, the high court said public hospitals may not test pregnant women for drugs and then give the results to police without their consent. The ruling was 6-3 in a case from South Carolina. And that's it for the News Summary tonight. Now it's on to campaign finance reform in the Senate, giving away the newspaper, and the President's faith-based proposal.

FOCUS - DEBATING REFORM

JIM LEHRER: Day three of the Senate campaign finance reform debate. Kwame Holman begins.

KWAME HOLMAN: The call to achieve campaign finance reform now has enough voices in Congress that Senate leaders were convinced to set aside this week and next to talk about it, and almost nothing else.

SPOKESPERSON: The Senator from New Jersey, Mr. Torricelli.

KWAME HOLMAN: New Jersey Democrat Robert Torricelli was first to the Senate floor this morning, with a measure that would require broadcasters to sell air time to candidates and political parties at their lowest rates. Torricelli argued the soaring costs of buying airtime is one reason candidates need to raise more and more money.

SEN. ROBERT TORRICELLI: Philadelphia and New York City, the two media networks which serve my state of New Jersey, the cost of some political ads increased 50% between labor day and election day. Television stations, recognizing that unlike an automobile manufacturer or soap manufacturer that can advertise anytime of the year, a candidate has no choice but to communicate with the voters in those weeks between Labor Day and election day; they have a captive market and they take full and unconscionable advantage.

KWAME HOLMAN: Torricelli also would bar TV stations from bumping political ads in favor of more lucrative ads like car commercials. However, opponents such as Oklahoma Republican Don Nickles warned the Senate would overstep its bounds by trying to legislate TV airtime.

SEN. DON NICKLES: We're saying we want to have that rate for politicians in October and early November when maybe the demand is very great. The rates might be four times as much, three times as much. You've got the new shows on TV. I look at this-- maybe it sounds kind of nice and somebody says "this is just really enforcing what the existing language is." I say, "hogwash." This amendment is worth millions, and everybody should know it. This amendment is worth millions to candidates.

KWAME HOLMAN: Nonetheless, there was wide bipartisan support for the measure, with 22 Republicans joining 48 Democrats to approve it. However, few Senators are willing to predict what kind of campaign finance reform may emerge at the end of two weeks of scheduled debate. There's already been dramatic evidence of that uncertainty during just the first three days.

SPOKESMAN: I believe that's acceptable.

KWAME HOLMAN: Senators John McCain and Russ Feingold are the architects of the primary campaign finance reform initiative. But the other 98 Senators are free to tweak, twist, refine, rewrite or even reinvent it if they so choose.

SEN. PETE DOMENICI: Madam President, I believe it is in order now for me to send an amendment to the desk.

KWAME HOLMAN: The contribution made by New Mexico Republican Pete Domenici on Monday was an attempt to level the playing field for candidates who face wealthy opponents willing to pour millions of their own dollars into a campaign. For instance, Republican Congressman bob franks couldn't come close to matching the $ 60 million of personal funds Democrat Jon Corzine spent in their head-to-head race for a New Jersey Senate seat last year. Franks lost. Domenici suggested lifting current contribution limits and in some cases eliminating them for a candidate, depending on how much the wealthier opponent decides to spend.

SEN. PETE DOMENICI: It's an equalizer amendment. It's a fair-play amendment. It's a "let's be considerate of a candidate who isn't rich" amendment.

KWAME HOLMAN: But Russ Feingold argued that would just add fuel to the central problem of runaway campaign spending.

SEN. RUSSELL FEINGOLD: I share the concerns, but we need to do this in a manner that doesn't suddenly put together an act of modification that we don't completely understand.

KWAME HOLMAN: Feingold urged the Domenici amendment be tabled, or put aside. And he continued to lobby them even as the vote got under way. Feingold managed to persuade several Democrats, including New Jersey multimillionaire Jon Corzine himself. Feingold changed the mind of Illinois' Dick Durbin as well.

SEN. RICHARD DURBIN: Well, let me tell you what happened. Russ Feingold came to me and said we'd like to talk to you about this amendment. I said for weeks now the two things I want to include in this relate to the multi-millionaire candidates and the cost of television. I said so it's no surprise. But he said I'm open to this concept. But can we back off of the Domenici language and talk about how to modify it? I think John McCain said about the same on the Senate floor. It was based on that assertion by Russ Feingold that he could support it, that I did back off and say, all right, I went to Senator Domenici and said I can't support you now but let's keep trying.

KWAME HOLMAN: However, Feingold had no success changing the mind of Minnesota's freshman Democrat Mark Dayton, also a millionaire.

SPOKESPERSON: Mr. Dayton? No.

SPOKESMAN: He didn't feel comfortable with it, and that's fine. We're not going to get every Senator's vote on every issue, and that's fine.

KWAME HOLMAN: But Feingold ultimately prevailed. The move to table the Domenici amendment passed by three votes.

SPOKESMAN: The motion to table is agreed to.

KWAME HOLMAN: When Senators vote to table a matter, it's usually the last they see of it. But supporters of the Domenici amendment took their idea off the floor and fine-tuned it.

SEN. MIKE DeWINE: We went back into the Republican cloakroom -- Democrats and Republicans. In about a half hour to 35, 40 minutes, members of the Senate just went back and forth. We probably had, what? 10, 12 members of the Senate -- and basically outlined for the staff where we could reach agreement and told the staff where we wanted to go. So it was something that does not occur, I don't think, too often in the Senate, and that is that members actually got together and just thrashed the thing out directly. What can you accept? What can we accept? We got the broad parameters and then staff went out and after we went home and ate dinner, we continued to work.

KWAME HOLMAN: Domenici and his supporters returned the next morning with a rewritten amendment that would increase the $ 1,000 limit individuals are allowed to contribute to a candidate, depending on how much personal money the opponent decides to spend. It also would take into the account a state's voting population in determining the limits.

SEN. MIKE DeWINE: Our population-based calculation allows the individual contribution limits increases to kick in sooner in states with smaller populations where candidates get, frankly, more bang for their buck. $ 500,000, for example, in a campaign in Wyoming goes a lot further and can buy a lot more television airtime and direct mail pieces than it can in Ohio or in California.

KWAME HOLMAN: And because the amendment does not eliminate spending limits, most Senators, Feingold and McCain included, said they could live with it.

SEN. JOHN McCAIN: I am pleased we worked it out, I am pleased that we are now ready to move forward as soon as the language comes over, and we can vote on this amendment and move on to other amendments.

KWAME HOLMAN: Senators have had a much easier time agreeing on what they don't want included among their campaign finance reforms. Yesterday they rejected a proposal from Utah Republican Robert Bennett. He wanted to prohibit Political Action Committees, which direct hard money contributions to candidates, from using unregulated soft money to pay their operating expenses.

SPOKESMAN: Who seeks recognition?

KWAME HOLMAN: The Senate also rejected a suggestion by Oregon Republican Gordon Smith.

SEN. GORDON SMITH: My amendment simply prohibits Senate and House candidates from accepting campaign contributions from lobbyists when Congress is in session.

KWAME HOLMAN: A sizeable majority of Senators, however, sided with Fred Thompson of Tennessee, who thought Smith's amendment might be unconstitutional.

SEN. FRED THOMPSON: My concern is this: We have to clearly have a compelling governmental interest to override the first amendment rights of people to give money to candidates. They clearly have that right here. And we are clearly overriding it. The question is whether or not there is a sufficient governmental interest.

KWAME HOLMAN: Senators have been debating and voting on amendments at the rate of one every three hours. And along with their rapid pace of legislating, they've managed to keep the debate remarkably free of partisan attacks.

SEN. MITCH McCONNELL: Mr. President, I have been very pleased by the debates so far on this subject and frankly, somewhat surprised. The comity in the Senate has been excellent.

KWAME HOLMAN: And if there was any question about that, Senators Kennedy and Hatch provided an answer during an otherwise contentious debate over yet another amendment this afternoon.

SEN. ORRIN HATCH: That brought tears to my eyes, honest to goodness.

JIM LEHRER: And now some analysis of the campaign finance debate by Brooks and Oliphant: David Brooks of the "Weekly Standard" -- Tom Oliphant of the "Boston Globe." First on today's action on TV rates, where does that fit into campaign finance reform, Tom?

TOM OLIPHANT: Well, this would be the supply side if you consider the money the demand side. And I think one reason that this proposal passed is because it fits so easily. In other words, if you're going to reduce, in effect, the amount of money coming into campaigns and you really reduce it if you eliminate soft money and don't do anything about what amounts to a loophole in current broadcast law that allows TV stations to really sock it to candidates in the final stages of the campaign, what have you really done? So the amendments seemed to be a logical proposition and I think that was the reason it passed so overwhelmingly.

JIM LEHRER: Logical in that it keeps TV stations from raising the rates during the time that the candidates really need it.

DAVID BROOKS: Right, it guarantees the Senators or anybody the lowest possible rates, and there is a substantive argument. As long as they have to spend the huge amounts of money on the ads they're going to find a way to raise it soft money or not. But there's also sort of a special interest here; if there's one special interest the U.S. Senators feel sympathy for, that's U.S. Senators. And they don't like paying these high TV rates just like the other amendment that passed. They don't like the thought that some bazillionaire is going to run against them. So these were the two amendments that are deep to their hearts and they both passed.

JIM LEHRER: Explain the zillionaire amendment. What was that really all about?

DAVID BROOKS: You're Joe Senator from New Mexico, say. You've raised $5 million and suddenly Joe CEO decides he'll run against you and spends $ 65 million. You cannot raise that amount of money with the hard money limits so you are just cheated. This is to get --sort of even up the playing field to raise the limits so you can compete with Joe Zillionaire.

JIM LEHRER: That of course just puts more money into it, does it not?

TOM OLIPHANT: It does. I think it's important for another reason, Jim, and that was the first instance and there probably will be more before the next two weeks are up where the Senate voted to increase the limits on a form of giving that we call hard money. The question is how much....

JIM LEHRER: Hard money meaning it goes directly to the candidate --

TOM OLIPHANT: Direct contributions.

JIM LEHRER: -- soft money goes to other organizations and the party and it's done in a more general way.

TOM OLIPHANT: Many Democrats went along with this. In fact, Dick Durbin of Illinois, a fairly liberal fellow, is one of the strongest supporters of it. But others were quite upset about it because they're worried that this is the camel's nose under the tent and that there will be more raising of the ceilings as the debate unfolds. So you had a kind of a cautionary statement from the Democratic Leader Tom Daschle after this happened. But I think because self-interest was involved, I think it transcended part of it.

DAVID BROOKS: The Republicans have a hard money advantage. Democrats are, you know, don't want to raise it but they're going to have to at the end of the day.

JIM LEHRER: It does have a kind of in-house quality to it, doesn't it, listening to them debate over whether or not that... of course, there are 15 zillionaires, as you call them, in the United States Senate participating in this very debate and if there's 15 and then there's what -- what's 15 from... No, no, no.

TOM OLIPHANT: 85.

JIM LEHRER: 85. Never mind. There are 85 who aren't. But everybody's got a stake in this. This is not like patient's bill of rights.

DAVID BROOKS: This is one subject they really know. These guys spent six hours a day raising money. They know about this subject and this debate has been utterly amazing -- that it's all out there in front of us. It's so complicated. I spoke to Senate staffers today and they're talking about the Hazel desegregation amendments, the Domenici hard money compromise, the this and that. You can't understand a word they're saying just because there's so much going on. And it's all... They don't know what's going to happen. It's just an amazingly complex thing that's going on up there.

JIM LEHRER: This is their subject though.

TOM OLIPHANT: This is the family business. But I do think after three days the first outlines of a trend are apparent, Jim. There does appear to be a coalition on the floor of that Senate that supports McCain and Feingold. It's shaky. It hasn't been tested in the strongest way.

JIM LEHRER: Support McCain/Feingold in that "stop soft money."

TOM OLIPHANT: Yes, and take the constitutional risk, perhaps, maybe not, of regulating the expenditures by these outside groups at the end of campaigns. I thought late today you could see the coalition functioning. There was an amendment from the left by Paul Wellstone of Minnesota involving public financing in theory. Many Democrats voted against it not because they disagree with him but to keep the bill pure. There was a Hatch proposal from the right about labor unions. Many Republicans were voting against it, again not because they disagree with Hatch but because they happen to support McCain/Feingold. The test will get much tougher in the next few days but I think you can see the coalition in action.

JIM LEHRER: Do you agree?

DAVID BROOKS: I absolutely agree. There is a working coalition in the early going when they had to table the Domenici blah, blah, blah the Democrats were able to keep their side, the Republicans. So the Republicans... the reformers really feel some momentum. There's talk that some of the opponents may try to move up these poison pills to block the momentum.

JIM LEHRER: And the number one poison pill is the labor union amendment, is it not?

DAVID BROOKS: I would say there are two I think. One is something called non-severability, which essentially says if the Supreme Court strikes down part of this law, if it becomes law then the whole thing goes kablooy which the opponents want. Second, the hard money; we talked about raising the hard money caps. Those are the two possible poison pills. And they may come quite soon but maybe next week.

TOM OLIPHANT: There's another element to the dynamics so far that I think relates to what David just said. That is you do not see Trent Lott, the Republican majority leader, and Tom Daschle, the Democratic leader, very much in all this. I know they're back stage and everything. But what I think is going on is that the Senate is legislating. We're actually getting to see this happen. And I think this coalition is... exists almost despite the political parties. Whether it has the will to persevere or not we'll have to see. But it is impressive that the leaders are not a factor right now.

JIM LEHRER: So when you say the coalition is there, it isn't that they all got in a room before this started and said, okay, here's the battle plan guys, we'll do this amendment. It's working its way out right in front of us.

DAVID BROOKS: It's way too complicated for any sort of organized battle plan. It's just in the cloak room how do we deal with the next five minutes? But it does seem to be holding together.

JIM LEHRER: But one of the Senators said in Kwame's piece that this doesn't happen very often in the UnitedStates Senate. He's right, is he not?

TOM OLIPHANT: I can't remember except when I was a baby covering Congress in the early 1970s a debate in the Senate that was entirely open where the legislation, if not being written on the Senate floor, at least was subjected to whatever breeze could come through the chamber. So for the public, this really is a rare opportunity to see what the Senate looks like.

DAVID BROOKS: It's interesting that it's recently civil. The scripted debates are more partisan. Here they're actually talking to one another. We saw at the end of the segment Hatch and Kennedy hugging. Kennedy viciously attacked Hatch's bill saying it was incompetently written. Hatch then comes around and says I don't need lectures from the distinguished Senator from Massachusetts. He was furious. As he went on the ham in came out. He started playing to the crowd and he said I love the Senator from Massachusetts as few in this chamber do. And that got a big laugh. The natural friendship and the bonds of Senatorial courtesy eased things up and we had the hug.

TOM OLIPHANT: Also the discipline. In other words, at any given moment, you may be with a guy on one amendment and not with him on the next, so given the fact that you've got to get through these two weeks together somehow, I think it tends to damp down the natural passions on all sides of this.

DAVID BROOKS: There's still McCain there. McCain is a potential live wire.

TOM OLIPHANT: Yes, though what's so fascinating to me is that McCain is in the back rooms negotiating with people over there. This person who doesn't call himself Miss Congeniality in the Senate is actually being the diplomat.

JIM LEHRER: Is he running it?

DAVID BROOKS: I think it's a lot of people. It's Feingold's playing a very active role. Fred Thompson; there are a lot of people -- Susan Collins. And then the staff, you know, the Senators go home and the staff is up there all night.

JIM LEHRER: I won't hold you to this but I'm going to ask the question nevertheless, do you have a feeling that something similar to McCain/Feingold is actually going to be enacted into law?

TOM OLIPHANT: I really do, Jim. Absent some sudden change of opinion on the principle alternative that his good friend Chuck Hagel of Nebraska is trying to push without a lot of converts to Hagel's alternative, this thing really looks like it could fly in the Senate.

DAVID BROOKS: NCAA brackets perfectly. And I wouldn't have said this four days ago but I agree with Tom. It looks a lot more likely now.

JIM LEHRER: Come back to the point that I raised a moment ago. The big poison pill... it was said going in that it was the labor union not being a... a law that would not allow labor unions to use money for political purposes without the consent of the membership. What's going to happen with that?

TOM OLIPHANT: It doesn't look very strong. I think there's been a lot of political testing of that idea, both in the country and in Congress in recent months and year. I think the real test is when the... the inevitable effort to raise these hard-money caps that haven't been raised in 27 years, Mitch McConnell of Kentucky....

JIM LEHRER: Hard money I mean that's basically $ 1,000.

TOM OLIPHANT: That's right. Mitch McConnell said they haven't been changed since the days when a Mustang cost $ 2700. When that happens, do you peel Democrats off the bill, off what I've seen so far I would say no. And it surprises me.

DAVID BROOKS: They look like Major League hip hypocrites after all these years of saying we're against this. The public won't see why or why not. They'll just see the Democrats when push came to shove abandoned reform.

JIM LEHRER: Should the public see this as something very important, David?

DAVID BROOKS: Moderately. You know it's not the end of campaign finance reform. I think most people acknowledge it's a band-aid. There's already a parlor game in Washington. How will people get around these new rules -- it's a step but I wouldn't see it as a major form of campaign finance....

JIM LEHRER: Will the end result be less money in the political process which is what john McCain has staked his whole future on?

DAVID BROOKS: There's a big river going down and you erect a beaver dam over one of the riverlets. It'll go somewhere else.

TOM OLIPHANT: To mix metaphors, Orrin Hatch likes to compare it to natural gas, that it's going to find a precipice, some kind of place to come out. John McCain is more optimistic. His view is that this is the gateway to the ability of Congress to work its will on so many other issues where there may be consensuses in the middle that are being blocked by the kind of influence that money can buy.

DAVID BROOKS: And he says it will take 20 years before the lobbyists find a way to outfox it.

JIM LEHRER: David, Tom, thank you both.

FOCUS - FREE PRESS

JIM LEHRER: Still to come on the NewsHour tonight: Free newspapers, and the Bush charity initiative. Media Correspondent Terence Smith has the newspaper story.

TERENCE SMITH: The newspaper industry has a problem, and it's not money. Despite the competition from television, cable, and the Internet, many newspapers make upwards of 20% profit a year. But they are losing an essential commodity: Readers.

JOHN MORTON: Financially, it's very healthy, but clearly there are some long-term problems, notably circulation, which has, for the last ten years, been gradually declining.

TERENCE SMITH: Industry analyst John Morton says increased newspaper prices in the early '90s started the circulation decline. He expects that to continue, but he sees an even more serious problem looming.

JOHN MORTON: You find that the nation's schoolchildren are being trained to get information from a computer screen. And when they come of age, it will be a second nature for them to pick up a computer and look at... for information, as it was for our generation to pick up a newspaper.

TERENCE SMITH: So what will foster a newspaper habit for this generation and the next? Some publishers think they have come up with a solution: Give the paper away.

SPOKESMAN: It's free, it's fresh, it's the evening edition of the "Daily News Express."

TERENCE SMITH: More than 90,000 copies of the breezy "New York Daily News Express" are distributed free at key transit stops for afternoon commuters.

MORTIMER ZUCKERMAN: I actually thought it was an exciting thing to do, an intriguing thing to do as a media experiment. To try something in the afternoon-- a newspaper in the afternoon and a free newspaper in the afternoon-- and to see if you could make the newspaper work as an editorial product.

TERENCE SMITH: Mort Zuckerman, a real estate magnate and self- described media junkie, is publisher of the "New York Daily News."

MORTIMER ZUCKERMAN: Frankly, it's worked out better than we thought. Everything has been against it. Every afternoon newspaper has croaked. And to go in, as they say, at a price point that's called zero, you really have to rely on our advertisers. And we're very pleased with the way it has works.

TERENCE SMITH: Mort Zuckerman knows a fundamental truth of newspaper: Upwards of 80% of revenues for most papers comes from advertising. Circulation is important mainly to attract advertisers. So the morning edition of his "New York Daily News"-- which once sold two million copies a day but now is down to 700,000-- is trying to lure new readers with its free afternoon paper.

EDWARD KOSNER: You get a lot of updated business news, both market news and business related news. Occasionally there are things that happen in sports. You get a handy entertainment and movie guide. You get the cream of the gossip.

EDWARD KOSNER: Can you write something?

TERENCE SMITH: Ed Kosner, editor-in- chief of the "New York Daily News," says advertisers are comfortable with the "express"...

SPOKESMAN: So this is otherwise okay?

TERENCE SMITH: ...Because they already know the "Daily News." And the "Express" targets an audience retailers want: Commuters who are outside the "News'" traditional city base.

SPOKESMAN: I met the senior VP, I met the CFO.

EDWARD KOSNER: I mean, the people who are going in and out of Grand Central and Penn Station, those are people with jobs and income, and they are good prospects for some upscale advertiser, which they are getting.

TERENCE SMITH: Publisher Zuckerman says the free afternoon paper thus far has had a minimal effect on the circulation of the morning edition. But it certainly caught the attention of the "Daily News'" traditional rival: The "New York Post." To compete, the Rupert Murdoch tabloid cut its newsstand price in half. The free newspaper experiment is also working outside of New York. In wealthy, tree-lined Palo Alto, California, the freely- distributed "Palo Alto Daily News," started in 1995, now has a circulation of 30,000. It has spawned offshoot free dailies in three neighboring California communities.

DAVE PRICE: Our advertisers, we think, get more bang for the buck. In other words, if you spend even 25 cents for a newspaper or 50 cents or whatever, you covet the thing, you feel territorial about it, you're not as apt to give it up to a friend. Whereas, if it's a free paper, you are going to go through it and then you'll leave it for the next guy.

TERENCE SMITH: Dave Price is editor and publisher of the "Palo Alto Daily News."

DAVE PRICE: There, right now, he's interviewing a person who's helping out a lady that was in today's paper who got carjacked, and she's helping with a car.

TERENCE SMITH: He thinks local news coverage is the key to success.

DAVE PRICE: The bread and butter of what we do in this newspaper is coverage of local issues that matter to people here.

REPORTER: Anything else going on?

REPORTER: Do you know how many officers tried to qualify?

DAVE PRICE: And nobody else is doing it. If you want to find out what is going on locally, our paper is the one to look at.

TERENCE SMITH: While free daily newspapers are relatively common in Europe, they are a newer phenomenon in the United States. Here, publishers face two problems: They have to convince the readers to trust the editorial content, and they have to persuade the advertisers that the people who get the paper for free actually read it.

JOHN MORTON: With a free paper, you know, you... You don't know how well read it is, how well, widely distributed it is. A free daily is, in industry parlance, is a "throwaway" and advertisers are concerned about that.

TERENCE SMITH: But Price says, over time, readers come to trust the product, and advertisers follow.

DAVE PRICE: You have to report the news, and do it all the time, and do it consistently, and on a fair basis, and be consistently accurate. And ifyou do that, you are going to get a track record with people.

TERENCE SMITH: So even though it's free?

DAVE PRICE: Yeah, if you are consistent.

TERENCE SMITH: The "Palo Alto Daily News" does not claim to cover national and international news in the way a major metropolitan daily would. But Dave Price is not apologetic

DAVE PRICE: Your average Joe has time for one newspaper. So what we're hoping to do is create a package that not only has all the local news, but also has an adequate summary of national and international news so that they feel as if they are getting their full diet of that type of information.

TERENCE SMITH: 50 miles up the California coast is a publisher who has built his business on free newspapers. His new challenge is resurrecting the nearly moribund "San Francisco Examiner" and continuing it as a paid daily.

TED FANG: It's all about delivering a market to advertisers. If you can deliver a newspaper that the market reads, advertisers are looking for that, whether it is a free newspaper or it's subscription- based.

TERENCE SMITH: Ted Fang, whose family distributes the free "Independent," is locked in a lopsided struggle with the larger and more powerful "San Francisco Chronicle," now owned by the Hearst Corporation. Despite his success with the "Independent," he argues that the venerable "Examiner" will prosper as a subscription newspaper.

TED FANG: There are businesses that would like to target more toward subscribers, people that subscribe to a newspaper. A lot of department stores fall into that category, airlines and banks fall into that category. And so the "examiner" is going to fill that niche while the "independent" fills a different niche.

TERENCE SMITH: Back in New York, Mort Zuckerman confesses that his decision to distribute a free afternoon version of the "Daily News" was, in part, defensive.

MORTIMER ZUCKERMAN: We sure as heck didn't want someone else coming in to build up their reach to a wider audience.

TERENCE SMITH: Metro, for example?

MORTIMER ZUCKERMAN: Yes.

TERENCE SMITH: "Metro" is Metro International, a European based company that is the colossus of the free newspaper industry. It publishes free tabloids in 18 cities around the world, including Toronto and Philadelphia, and has targeted scores of cities for expansion, including some in the U.S. "Metro" papers are economically successful, but critics complain that such free tabloids carry only the semblance of news.

TERENCE SMITH: What's the editorial quality of these free newspapers?

JOHN MORTON: I would say, sparse and sparser. The "Metro" is the sparser one. You know, a major story there would be three paragraphs long. A lot of it is picked up from wire services, they do very little original reporting.

TERENCE SMITH: And others question whether additional free newspapers will cannibalize an already declining number of traditional newspaper readers.

SPOKESMAN: The "Daily News," thanks be to god, is profitable, but it's not gigantically profitable. And I think if you had another newspaper there, there would be more blood in the streets.

TERENCE SMITH: But Ted Fang believes there is room for both free and subscription papers, especially in cities with mass transit systems.

TED FANG: While the "Metro" model may have a place in the American newspaper industry, I don't think it will supplant anyone. The readerships are different and they serve different advertising needs, and serve different audiences.

TERENCE SMITH: In Philadelphia, thus far, Fang seems correct. That city's "Metro," distributed in the subwaysystem, has had little effect on the city's established subscription newspapers. But if advertising confidence in free distribution builds, free daily newspapers may spread. To find out, check a transit stop near you.

FOCUS - RELIGION & POLITICS

JIM LEHRER: Finally tonight: President Bush's faith based proposals, and to Gwen Ifill.

SPOKESPERSON: Lord, we just bless you. We just give you praise and glory and honor, God, for who you are.

GWEN IFILL: The President's plan to steer more federal funds to church-based programs was bound to draw controversy. The idea, as envisioned by the White House, would instantly create a constitutional balancing act.

PRESIDENT GEORGE W. BUSH: We will encourage faith-based and community programs without changing their mission. We will help all in their work to change hearts while keeping a commitment to pluralism.

GWEN IFILL: Known as Charitable Choice, the plan would give money to religious groups that provide a host of social services, including housing, juvenile justice, child care, senior citizen services, and hunger relief. The plan would also provide new tax incentives to promote charitable giving. But faith groups would not be allowed to use the federal dollars to promote religion. The White House has enlisted support from several groups, relying especially on black ministers.

ROBERT FRANKLIN: Religion changes hearts, and this initiative may have the effect of urging the best in the American spirit among Hindus, Buddhists, Christians, Muslims, Jews, and others, to step forward and say "let's lower the walls and the boundaries and the hate, and let's connect as citizens of care and compassion."

GWEN IFILL: The plan's supporters were prepared for the objections raised by groups opposed to any mingling of church and state, but officials were caught off guard when first the Reverend Pat Robertson, then other conservatives, began to object, Robertson writing in a "Wall Street Journal" opinion piece: "The genius of faith-based groups lies in their religious mission," he wrote. "If government demands institutions give up their unique religious activities their very raison d'etre may be lost." The Reverend Jerry Falwell, founder of the now-defunct Moral Majority, supported the Bush plan, but worried government money could go to "bigots."

REV. JERRY FALWELL: I'm speaking of the Aryan Nation, which would call itself religious, but are racist, and some Muslim groups that might be anti-Semitic. No racist, no bigots should be given ten cents, no matter who they are, and it's easy to prove. When someone has shown that they're bigots - that they're racist - that they're anti-Semitic, it's a matter of record. It's easy to prove.

GWEN IFILL: The apparent split within the religious community has slowed, but not derailed, one of President Bush's key early initiatives. Some on Capitol Hill want to move ahead on the tax incentive provisions that everyone seems to agree on, but wait on the rest.

SEN. JOSEPH LIEBERMAN: We think it's better to wait a few months, a period of time, to work with the administration and others to see if we can resolve the questions that have obviously been raised in this very interesting, in some ways controversial but nonetheless important debate that's going on.

GWEN IFILL: But a split remains even in Congress. House leaders today unveiled a charitable choice bill that mirrors the entire White House package.

GWEN IFILL: We pick up the debate over an expanded government role in faith-based charity with Mayor John Street of Philadelphia, and Gary Bauer, President of American Values, a pro-family think tank. They support expanding Charitable Choice; also, Rabbi David Saperstein, director of the Religious Action Center of Reform Judaism, and Marvin Olasky, a former Bush adviser and senior fellow at the Acton Institute for the Study of Religion and Liberty. They have raised questions about the White House proposal. We did ask White House officials to appear on tonight's program, but they declined our invitation.

Mayor Street, is this initiative, as you see it, which you support, is it in trouble?

MAYOR JOHN STREET: Well, I don't think so. I really look forward to the President pushing on with his initiative. In my city we have a huge need for additional services for children, additional services for people who otherwise might go wanting. I mean, I have 100,000 children who are in desperate need of after-school programs. We have 7,000 people in our prisons who have children that are... That desperately need help. Right today we have 500 people who are members of faith congregations who are helping provide desperately needed services to those children. I think that it's an idea... it's not a new idea, but the thrust is definitely headed in the right direction, and I look forward to the opportunity to get more faith- based organizations in my city involved in providing additional services to people who desperately need it.

GWEN IFILL: Mr. Mayor, what do you say to the critics like Pat Robertson who have said that expanding this Charitable Choice program is akin to opening a Pandora's box?

MAYOR JOHN STREET: Well, you know, the floodgate arguments have always been raised about anything. I think that there are enough lawyers, there are enough people around who are watching everything that the government does to make sure that we do it in a way that's fair, reasonable and that respects the Constitution of the United States and everybody's rights. In my city, we spend hundreds of millions of dollars on an annual basis with faith-based organizations to provide a variety of services. We look forward to expanding the opportunity to get those folks involved in the provision of desperately needed services and, as far as I can tell, there are enough people watching everything that we do so that if there's any question about the legitimacy of our programs, then those people can step to us. In our city we have already had conversations with representations of the ACLU and other groups that have concerns, and we're going to work with them. We'll meet their concerns but we're not going to sacrifice a great opportunity for people in our city because some skeptics raise some questions. There will always be somebody that's against everything.

GWEN IFILL: Marvin Olasky, you have written that you consider this program to be potentially religious discrimination. What are your objections to it?

MARVIN OLASKY: Well, I'm 5/6ths in support of the program and I'm in support of the principles that President Bush has been enunciating for the past few years. My concern is that the way the program is being envisioned by some would allow discrimination against evangelicals, conservative Catholics, orthodox Jews, orthodox Muslims. If you say that, yes, we support all kinds of programs, we're in favor of pluralism but any kind of program cannot allow for free religious expression, you can't, for example, counsel a person by pointing to scripture verses and considering those normative for life. If you can't do that, then that excludes lots of programs. A few programs would be able to segment their work. They'd be able to say, well, at a certain time we have prayer and at a certain time we have some kind of thanksgiving or something else of that sort. But there are a lot that just would be rendered ineligible in a lot of the most effective programs so the goal here is to help poor inner city kids and other folks in need of this help. It's desperately needed as Mayor Street says but we should not be starting out by excluding some of the most effective groups.

GWEN IFILL: Religious discrimination, Gary Bauer?

GARY BAUER: Well, I don't think it has to be religious discrimination, Gwen. I think this is a great initiative. And like any great initiative it's going to have a few bumps in the road. As you know, in Washington there's an old saying, no good deed goes unpunished. I think the President has performed a good deed here. With this initiative he is attempting in some ways to reverse the last 35 years of hostility to religious faith in the public square. We've not only had government reticent to help religious organizations who are doing a great job feeding the hungry and helping the poor and so forth, but even large American corporations in many cases won't give their charitable donations to religious groups even though all the research shows those religious groups are some of the most effective ones out there. So I think the initiative is going to go forward. I think there's plenty of safeguards to guard against some of the things that some of the skeptics have raised. I'll go even further than that. I think at the end of the Bush presidency, they will... the conclusion will be that this initiative ends up being one of the most important signature initiatives of this administration when all is said and done.

GWEN IFILL: How about that, Rabbi Saperstein?

RABBI DAVID SAPERSTEIN: We all agree that there ought to be robust religious involvement in providing services to the poor and that the government can partner with them. What we profoundly disagree is whether or not only one part of the President's proposal is good or bad for that effort, and that is direct government funding of churches, synagogues and mosques in providing the services. The Supreme Court of the United States has never upheld that kind of direct aid for good reason. They think it's bad for religion and bad for government. With government money comes government rules, regulations, monitoring, interference, control. As Marvin Olasky said, either you compromise your mission or you are taking government money to perform that mission. And that is problematic in and of itself.

GWEN IFILL: There's not a middle ground to be found there?

RABBI DAVID SAPERSTEIN: Not really. The best way to do it is to stick to the 4/5ths or as Marvin said 5/6ths of the President's program we all agree on -- using the tax system to generate more support for churches and synagogues in this work, training programs, information sharing programs, technical assistance programs, but not the direct government funding. One way the President unifies the country around all the things we agree on and makes a real difference. The other way, he will divide America and the kind of angry words we heard from Jerry Falwell about Muslims and Gene Rivers, a wonderful inner-city pastor accusing people who disagreed for being racist. That's exactly the divisiveness that giving money and letting your religious groups compete for it will result in America. That's bad for America.

GWEN IFILL: Speaking of some of the reaction to this, Mayor Street, let me read to you what John Dilulio, who's head of the White House program had to say about critics of the program. He said that predominantly white ex-urban evangelical leaders and national parachurch leaders should be careful not to presume to speak for any person other than themselves and their own churches. Obviously this was not welcome, this kind of comment, was not welcome by people in evangelical ex-urban churches. What is your response to it?

MAYOR JOHN STREET: Well, my response is that we will never get everybody to agree on anything, and no matter what language you use, no matter how delicate you are, no matter, you know, what you say and how you describe what you want to do and what kind of terms, somebody is going to have some concern about it. I've got a school system where 20,000 children on any given day can miss school. We have... we will have a program and we are getting ready to announce it whereby faith-based organizations have agreed to contact every one of those 20,000 children within 24 hours of an unexcused absence. This kind of response is great. And this is the kind of work that is desperately needed in order for us to help these children. You know, there are children out there that need help. There are families that need help. And it is amazing to me that there are some people who, for whatever reason, don't want to see great work being done by good people in order to help deserving folks. You know, I commend the President. I think that there will be compromises made along the way about all kinds of different... the details of all of these programs. We respect the Constitution. We don't want to do anything wrong. But I don't think that we need to get caught up in the niceties when there are so many people at risk in this city and in this country.

GWEN IFILL: Gene Rivers who Rabbi Saperstein just referred to, Gary Bauer, said that this is breaking down into an argument over race and class which would seem to echo what Mr. Dilulio was saying.

GARY BAUER: Well, any big idea is going to generate a lot of emotion and a lot of pounding on the table and so forth. But, look, we've overcome bigger issues than this. There's already in the law restriction on government bureaucrats trying in any way to eliminate or scale back the faith-based content of a program that's receiving federal money. If that provision in the law isn't strong enough, then it can be strengthened. I think the Mayor is absolutely right. The bottom line here is... are real people, people with drug addictions, prisoners that our current system sends right back to prison. We're taking the programs that work the best, which are inevitably faith-based programs, and we're saying to them you're on your own, you can't come up with money... you're not going to get help from anybody in the federal government even though your programs work, you've got to do it by yourself. By the way these programs over here, they fail but, man, we'll just keep throwing money at them. It doesn't make any sense. The Mayor sees these problems in his city every day. I think the President saw the same thing and he knows that at the end of the day you don't just treat hunger, you don't just treat homelessness; you don't just treat drug addiction. You treat the heart and soul of the individual involved. I think we can work this out.

GWEN IFILL: Rabbi.

RABBI DAVID SAPERSTEIN: But right now some of the biggest, most effective, best social service delivery programs are a partnership between the religious community and the government. That is Catholic Charities, the Jewish Federation System, Lutheran Social Ministries. They get literally billions of dollars either in grants or government benefits that flow to them, through people, come to them and they deliver some of the best programs going but they do it by the rules everyone else does with no exceptions. You don't discriminate in who you hire. You don't put, other than the religious act of helping people, religious prostelization or instruction or prayer into it. If you want to do those things you do it with private money. So my challenge to the Mayor is nothing in the program that's being presented suggests one more person is going to be helped. There's no more money going into the program. They're going to take it away from Catholic Charities, Lutheran Social Ministries and federations and give it to churches and synagogues. I would rather keep the money where it is and then stimulate the churches and synagogues through the tax system to give more money. The President has that in his program. That ought to be the focus of it -- not violating the Constitution.

GWEN IFILL: Let me give the Mayor a chance to respond to that. What about that argument that not one more person is being helped than is being helped now?

MAYOR JOHN STREET: I couldn't disagree more. I think more people will be helped. I don't think anything that the President has proposed and certainly nothing we're doing in Philadelphia is designed to take money from one good program and put it in another good program. I think what the President is saying is that why should these faith-based organizations be discriminated in any way? Why shouldn't they have a great opportunity to help us meet our mission? When we get involved, when we get faith-based organizations involved in the delivery of these services I believe you get a different kind of commitment from the people who are providing the services. These are people who are motivated by a certain sense of love, a certain sense of compassion, a certain need, a certain desire to go out and help and spread a certain good feeling of love and commitment. I don't know that you can buy that on a straight contract cost basis. We have had just such a wonderful experience, and I... If we could find a way-- and I believe you can-- to respect the Constitution, then I think we should. I think we can do it. We ought to get these out.

GWEN IFILL: That's what I want to ask Marvin Olasky about that. How do you find a way?

MARVIN OLASKY: Well, David Saperstein who is politically liberal and I'm politically conservative we are agreed that the way to go here is with tax credits. That's something where the government won't be putting its thumb on the scales and saying I prefer this religion, I discriminate against that religion. It's going to be a level playing field as President Bush has insisted upon -- and let individuals decide what they want to contribute to. There are questions, I know Mayor Street I suspect have questions and others would have questions about what will happen to some of the urban black churches that may not be well known outside their own areas and will taxpayers in the suburbs and other places send money to them? I edit World which is the fourth largest newsweekly in the country, the evangelical newsweekly. We're publicizing - Herb Lust's church in Philadelphia; we're having a cover story on Tony Evans' church in Dallas, our goal is to publicize these organizations so that people all over the country will be wanting to contribute to these and wanting to use tax credits in that way.

GWEN IFILL: What about the possibility of vouchers that followed an individual who can spend it wherever they want to whether in a religious or non-religious institution?

MARVIN OLASKY: Vouchers are also useful because there the organizations that are effective are receiving the vouchers from the clients, the people that they're helping. You could even tie these to results so let's say an after school program that helps kids increase their reading level by a grade would get additional support in that way. But there you're paying by results. It's harder sometimes for an organization to make it with vouchers and tax credits rather than perhaps if they have a friend in the White House or somewhere else getting a big grant. But that's the American way of earning the business and the trust of clients and taxpayers and others. That respects individualism.

GWEN IFILL: Gary Bauer, the White House seems at least to be taking a baby step back from all of this and letting Congress take the lead. Is that a good idea?

GARY BAUER: Well, I think when you get to this kind of controversy that it makes sense for the legislative process to begin and then we can hear this debate on Capitol Hill. But I don't see any sign that the White House is backing off from the initiative. I don't think they should back off. And again I think the kind of concerns that are being raised today by good people are things that can be worked out by good people. I would just ask our viewers tonight to imagine two programs feeding the homeless, one says while they're feeding the homeless, Jesus loves you and the other just feeds the homeless and somehow we're going to penalize the one because it mentions a faith- based idea. It doesn't make any sense.

GWEN IFILL: Well, we'll have to leave that argument there for tonight. Thank you, gentlemen, for joining me.

RECAP

JIM LEHRER: Again, the major stories of this Wednesday. President Bush warned he would reject the patients' rights bills now before Congress. He said he'd insist on capping the damages patients can seek when care is denied. Late today the Senate killed a proposal to make unions get permission from members to use their dues for political activities. It was part of the campaign finance reform debate. We'll see you online and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.