The MacNeil/Lehrer NewsHour

MS. HUNTER-GAULT: Good evening. I'm Charlayne Hunter-Gault in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Friday, Defense Sec. Cheney will be here for a Newsmaker interview, then Jeffrey Kaye reports on a dispute about a Japanese company building a new Los Angeles train, two pollsters explore where President Bush stands and why, and David Gergen and Mark Shields analyze that and other political developments of the week. NEWS SUMMARY

MR. LEHRER: The U.S. trade deficit fell in November to its lowest level in almost nine years. The Commerce Department reported today the deficit was $3.57 billion, down more than 43 percent from October. The imbalance with Japan fell by more than a billion dollars. U.S. and Chinese officials signed a trade agreement today. China promised to provide new copyright and patent protections for U.S. products. U.S. companies have complained Chinese copyright violations have cost them $430 million a year. The Bush administration has threatened to impose heavy tariffs on Chinese goods if it did not stop. Trade Rep. Carla Hills said this about the new agreement.

CARLA HILLS, U.S. Trade Representative: Both countries are going to benefit from this and I think we not only have solved a problem, but have built a relationship that will enable us better to deal with the issues that come between China and the United States.

MR. LEHRER: In another year end economic report, the Federal Reserve Board said today industrial production fell 1.9 percent last year. It was the first yearly drop since 1982. President Bush today announced a job training initiative. He said it would cut down on bureaucracy by centralizing the more than 60 current federal programs. Administration officials said the program would not involve much new spending. Charlayne.

MS. HUNTER-GAULT: Russian President Boris Yeltsin today said he had agreed to split control of the former Soviet navy with two other republics. He said Russia would divide the Black Sea Fleet with Ukraine and split the Caspian Sea Fleet with Azerbaijan. His announcement came as 5,000 officers of the former Soviet army converged on Moscow to press for a unified military. James Mates of Independent Television News filed this report.

MR. MATES: The Soviet Red Army that once terrified the West is still revered and admired by many Russians old enough to remember the last war. Hundreds cheered outside the Kremlin this morning as senior officers went in to tell Boris Yeltsin that one army, not a dozen small ones, was needed to defend the new commonwealth. This general told us that the army doesn't want to be split up into different nationalities. "There will be very heated discussions inside," said this Colonel. Heated discussions began sooner than he predicted as a group of Yeltsin's supporters moved through the crowd, brandishing the flag of the Russian Federation. But it was the red flag of the old Union that led the protest to the Tomb of the Unknown Warrior. To these people, the Red Army is the last remaining symbol of the old Soviet Union, of a system which they believe brought them security and stability. Inside, the Palace of Congresses looked more like a military parliament as 5,000 officers listened to speeches complaining of the way the armed forces and their men were now being treated. Into this anger stepped Boris Yeltsin, trying to soothe their fears but reminding them the old Union was gone forever.

PRESIDENT BORIS YELTSIN, Russia: [speaking through interpreter] The August coup made the existence of a single state impossible. But Russia is still advocating that the commonwealth should have one united military command.

JAMES MATES, ITN: But Russia may not get its way. Republics like the Ukraine insists it wants its own army independent from Moscow.

MS. HUNTER-GAULT: In the republic of Georgia, 6,000 supporters of ousted President Gamsakhurdia marched in the capital today. They disbursed after security forces fired shots in the air. Gamsakhurdia returned to the republic yesterday and vowed a battle to retake power from the opposition. The ruling military council has dispatched troops to Western Georgia, where Gamsakhurdia is reported to be assembling a militia. In the republic of Uzbekistan, soaring food prices have sparked riots. Thousands of students fought police in the capital city last night. Two students were reported killed and several wounded. The riots came just hours after Uzbek authorities removed government price controls and introduced rationing coupons.

MR. LEHRER: Iraqi President Saddam Hussein admitted today that Iraq lost the Gulf War. But he said in a Baghdad speech it had won a moral victory. He vowed to rebuild his armed forces and restore Iraq to a position of power among the Arab nations. A bomb exploded in Northern Ireland today, killing at least seven people. Police said it was planted along a remote country road. The victims were in a van carrying construction workers employed at a nearby British army base. There was no immediate claim of responsibility.

MS. HUNTER-GAULT: Israeli Prime Minister Yitzhak Shamir today predicted his government would move up the November general election. This week, two far right parties quit the coalition government to protest the Mideast peace talks. Their withdrawal destroyed Shamir's parliamentary majority. Some officials had predicted the instability would slow the peace process, but Shamir said he wanted it to go forward.

MR. LEHRER: President Bush went to Atlanta today to mark the birthday of Martin Luther King. He joined family and friends of the slain civil rights leader at a center named for King. Several of the speakers called on the President to focus his attention on the problems of minorities. King's daughter, the Rev. Bernice King, said this in a prayer.

REV. BERNICE KING: Lord, please have mercy upon us, for how dare we celebrate when the ugly face of racism still peers out at us. Lord, please have mercy upon us for how dare we celebrate in the midst of a recession when nobody is even sure whether their job is secure.

MR. LEHRER: Mr. Bush said civil rights laws had helped move the country toward a colorblind America but more needed to be done.

PRES. BUSH: Yes, too much prejudice, racism, and anti-semitism and blind hatred still exist in our land. Martin preached something different, but they still exist in our land. And as President, I'm trying, and all of us must try and must pledge to root out bigotry wherever we find it, speak out in whatever community you are.

MS. HUNTER-GAULT: Still ahead on the NewsHour, Defense Secretary Cheney, a controversy over a Japanese train deal, Bush's plunging poll rating, and Gergen & Shields. NEWSMAKER

MR. LEHRER: Defense Sec. Dick Cheney is first tonight. He just returned from talks in Europe about the nuclear and other problems arising from the breakup of the old Soviet military. He returned in time to mark yesterday's first anniversary of the beginning of the Gulf War, to join the growing debate over how much can be cut from his defense budget, and to be with us now for a Newsmaker interview. Mr. Secretary, welcome.

SEC. CHENEY: Good evening, Jim.

MR. LEHRER: On this cutting the defense budget, the issue now is only how much, is it not?

SEC. CHENEY: Well, it's important for everybody to remember that we already embarked upon a massive change in our military strategy and our force structure in the defense budget, beginning with a program that the President introduced last year, we're embarked upon a 25 percent reduction of the total force structure, cutting hundreds of billions of dollars out of the five year defense program. So we're already on a fairly steep flight path. The question now is whether or not we can make some additional changes in light of the developments in the last few months inside the Soviet Union, the breakup of the Soviet Union basically.

MR. LEHRER: The Washington Post ran side by side stories on the front page this morning. One of them said that President Bush was prepared to recommend in the state of the union message next week or week after next $50 billion in cuts, additional cuts, over the next five years. Senate Majority Leader Mitchell has called for $100 billion in cuts over the next five years. In-between is Sen. Graham with a plan for $74 billion in cuts over the next five years, and then there's Sen. Kennedy out there with a plan for $210 billion over the next seven years. What's the Cheney plan?

SEC. CHENEY: Well, first of all, the Cheney plan is the one I recommended to the President that the President will put forth in his state of the union speech in about two weeks. And he really ought to be allowed to make those announcements. It's not fitting for a Defense Secretary to preempt the President but clearly, what we have here is some recommendations from members of Congress, some members of Congress, who never voted for the defense budget, didn't support it at the height of the cold war, and now are sort of in an effort to try to cut it even deeper than we're already proposing to cut it. It's very, very important that we proceed carefully and cautiously in accordance with a plan, in accordance with a military strategy, instead of just sort of willy nilly cutting the defense budget, because there are other demands for those dollars. And I would suggest that some of those who are suggesting huge cuts are going far beyond anything that is possible if we want to protect and preserve our essence of our military capability.

MR. LEHRER: But you're not suggesting that in the new world order, the old world military order should still be there, are you?

SEC. CHENEY: No. And, remember, again, Jim, if you follow our plan, we are getting rid of a million people, nearly a million people in five years, over 500,000 --

MR. LEHRER: That's what's already on the table.

SEC. CHENEY: It's already being done.

MR. LEHRER: All right.

SEC. CHENEY: I've eliminated 85,000 civilian jobs in the last 24 months. We're closing over 400 bases worldwide. I've shut down over ahundred production lines and different weapon systems. That's already in the works. That's already being done. Those steps have already been taken. But we're also trying to protect and preserve the essence of the kind of capability we think we'll need in the future. It'll be a lot smaller. We've made major changes.

MR. LEHRER: How much smaller?

SEC. CHENEY: Well, if you look at the overall force structure, it's about 25 percent. It's a bigger cut in the army because the changes that have occurred in the world affect the army most. We go from 18 divisions down to 12 divisions. That's a third. In the air force, from 36 wings down to 26 wings. In the navy from 600 ships, which was the old goal in the mid eighties, down to 450. So we're already embarked upon major changes. And I can only take it down so fast and still protect the essence of that capability. If we try to take it down too fast, we'll break it. We, in effect, end up with an organization that simply won't function because you're not doing it in accordance with a plan over a specified period of time and to rush to get money out now, you end up, in effect destroying what is the finest military force the nation's ever had.

MR. LEHRER: Mr. Secretary, what do you say to those who say, look, we have had a defense, we have now, in fact, a defense structure that was based on two premises, the possibility of a massive ground war in Europe, the possibility of a massive strategic nuclear attack by the Soviet Union, neither one of which exists anymore? Do you first of all concede that?

SEC. CHENEY: Yes. And then what I would say is that today, in Europe, we deactivated two divisions. We have four and two-thirds divisions over there. Two divisions will be sent to the Persian Gulf to defeat Saddam Hussein and redeploy to Europe what came out of Europe. Two of those divisions, of those four divisions, were deactivated today, their flags folded, the Third Armored and the Eighth Infantry Division. They are no more. With respect to nuclear weapons, since September 27th, we've taken our bomber force off alert. I have deactivated 45 percent of our land-based intercontinental ballistic missiles. We are withdrawing all of our tactical nuclear weapons from around the world, destroying all the battlefield systems, and destroying all the sea-based systems here at home. There are dramatic changes already in the works. And before somebody goes out, like Sen. Mitchell or Sen. Kennedy, and says, look, we can take out a hundred billion or two hundred billion out of the defense budget, they really ought to sit down and take a careful look at what's already been proposed, see that it's being done in accordance with a strategy, that it's one of the most drastic changes in U.S. military posture in history, but we're trying to do it right this time. Every time we've done it in the past, we've gotten it wrong.

MR. LEHRER: But the laypeople would say to you, Mr. Secretary, wait a minute, if all of this is needed, we've constructed this military might for these two eventualities, big ones, neither of which exist, why can we only cut 25, why can't we cut 50 percent, why can't we cut more?

SEC. CHENEY: Because we've got to go back and remember that we just fought a major war in the Persian Gulf, sent 540,000 people halfway around the world that had absolutely nothing to do with the Soviet threat. The Soviets were on our side this time around. The point is there are still bad guys in the world. There are still nations out there that will present a threat to the American interest, and we have to protect and preserve the essence of that capability. Now we can take it down and we are taking it down very dramatically. We're going from spending 26 or 27 percent of the federal budget on defense down to spending 17 or 18 percent of the federal budget on defense. That'll be the lowest level of defense spending since before World War II. So it's already a very aggressive program to adapt our strategy and our force posture to the new realities in the world. But, having said that, there's enormous uncertainty about what's going to happen inside the Soviet Union. They do still have somewhere between twenty-five and thirty thousand nuclear weapons. We've just seen on your news segment tonight there's this huge debate raging whether they're going to have a unified military or whether they're going to break it up among the republics. Nobody knows what the outcome's going to be in the Soviet Union in the years immediately ahead. So what we've done is to move and make those changes that we think we can safely make, make those changes that can be reversed should we have to reverse them in things go haywire someplace in the world, but to proceed in a cautious, orderly manner in accordance with a careful plan.

MR. LEHRER: Well, strictly from a defense point of view, forget international politics, domestic politics and everything, just strictly from a defense point of view, which would be better for the United States and its military and defense interest, a bunch of armies over there in the old Soviet republics, or one central army?

SEC. CHENEY: I think from our perspective, that having several republics democratically governed would significantly reduce military assets clearly is a move in our interest. We've encouraged them to retain central control over their nuclear systems and they've done that. And they've worked out those arrangements.

MR. LEHRER: Are you satisfied that that's going to work?

SEC. CHENEY: So far. It's a hard to predict the future, but so far they've been very responsible. But with respect to the Soviet Union, former Soviet Union, this is a nation that had the largest army in the world and devoted an enormous amount of resources to it. Clearly, Ukraine, an independent democratically governed Ukraine, has no interest in maintaining that kind of military establishment. Russia, if it's going to be successful in its economic reform efforts, cannot afford to maintain that kind of military establishment. If they keep an army as large as the one they've had in the past, then by definition, they're never going to achieve their economic goals.

MR. LEHRER: So -- but from our point of view, we would much rather it go the way it's going, right, for the Ukraine to insist on having their own army and --

SEC. CHENEY: We've got to be a little careful here, because these are decisions that the former Soviet Union and the people of the former Soviet Union are going to have make, but I think, clearly, it's in our interest and in the interest of democracy in the Soviet Union to demilitarize, not to get totally rid of the military. They need some, but there's no reason in the world why they need forces of the size they've had in the past. They've occupied Eastern Europe with it, invaded Afghanistan, amassed a huge inventory of nuclear weapons. There's no threat to them in the world to justify that kind of military expenditure. And we demonstrated, I think, repeatedly now, President Bush has with his leadership, for example, September 27th on nuclear weapons, we're not a threat to the Soviet Union, we, in fact, are prepared to work with themto help them redirect those resources to peaceful uses.

MR. LEHRER: Is there any indication from any of the leaders within the republics that they feel otherwise?

SEC. CHENEY: No, at this point, they've all at least paid lip service to the proposition that they're going to abide by the international obligations, that they're interested in economic reform. And I think we have to be a little bit cautious at this point. I think some of the republic leaders, without going into individual names, but I think some of the republic leaders may, in fact, be latecomers to the democratic cause, if you will, people who previously were part of authoritarian regimes and are now governing the new era. That hasn't been sorted out yet. The basic political structure is still an open question. Hopefully, democracy will succeed. Hopefully, they'll be able to govern themselves the same way we've governed ourselves for 200 years. But the jury's still out on this. We came very close last August to having the hardliners restore their power and control over the regime. It was a very close run thing. So when we look at that in terms of our strategic posture, in terms of our military requirements, yes, we can make some changes, we are making those changes, but let's go about it in a prudent way. Let's not rush out there now and harvest the so-called "peace dividend" beyond what we've already done.

MR. LEHRER: Saddam Hussein and Iraq, how would you assess the extent of his military threat to peace in the area and, thus, to U.S. interest, as we speak tonight?

SEC. CHENEY: I think as we speak tonight, he is not a threat to any of his neighbors. I think the fact that we just last spring destroyed 2/3 of his army, stripped away most of his offensive capability, destroyed a good part of his air force, today you'd have to say that Saddam Hussein, as currently constituted, his forces clearly do not represent a threat to his neighbors. What you worry about, of course, is the long-term outlook, the possibility that if sanctions were lifted, if he were allowed to begin pumping oil again and to use those resources generated from selling oil to regenerate his military machine, over a period of time, five or ten years, he could recreate what we destroyed in Desert Storm.

MR. LEHRER: What about the nuclear threat?

SEC. CHENEY: Well, the nuclear threat was clearly much more serious than many people thought. He had a much more aggressive program of trying to develop that than anybody anticipated. But as long as we have an inspection regime operating, as long as we have U.N. inspectors going in there periodically, as long as we're forcing him to cough up those assets, then I think there's no prospect that he can regenerate. If he were left to his own devices though, if there were no inspection regime, then, clearly, he would be in a position to go back without sanctions and rebuild that capability.

MR. LEHRER: Mr. Secretary, many Americans, and I include myself in this group, thought at the beginning or not at the very beginning but a few days, a few weeks into the ground war, I mean, in the air war, that the nuclear capability of Iraq had been destroyed. What happened?

SEC. CHENEY: Well, we took out what we knew about. We went after the Osirek reactor, for example, that the Israelis had hit in 1981. And we looked at our intelligence capabilities, we assessed what he had, what we knew he had, and we went and we could target those things, and we did successfully target them. What we found was that we did not have complete information about how extensive his program was. There were things that he had invested in, programs that he had put in place to develop highly enriched uranium that we did not know about in advance. We uncovered that since the war. We've been able to find that through the inspection process, and that's been one of the success stories of the post war period, is uncovering how extensive his program was.

MR. LEHRER: Mr. Secretary, a year later, does it annoy you, sitting here as you had to just a moment ago, watching the News Summary and the story that I reported, Saddam Hussein still very much running his country, still in all his finery, does that bug you?

SEC. CHENEY: What bugs me, Jim, isn't that so much as it's what I've seen, a sort of a pattern of a year after the operation now of commentators, many of them were opposed to the operation in the first place. I'm not casting any aspersions in terms of your program, but now coming back saying, well, you didn't get Saddam or you stopped too soon, or you didn't stop soon enough, an awful lot of second guessing after the fact. The bottom line is we did exactly what we set out to do. We halted aggression in the Gulf. We defended the world's supply of oil. We liberated Kuwait. We stripped Saddam Hussein's offensive capabilities away from him and restored the United Nations so it's an effective organization. There's a peace process going in the Middle East today. Our hostages are free from Lebanon. And there are an awful lot of very, very positive things that came out of the decision the President made a year ago. And we should not lose sight of the tremendous accomplishment that that represents.

MR. LEHRER: It doesn't bug you that he's still running Iraq?

SEC. CHENEY: Oh, I think, my own personal view is that he will not last forever. I think he's under enormous pressure, and I think he doesn't control the Kurds in the North, he's got a very weak hold on the South, where the Shiites are concerned. The sanctions are still in force and very effective. He's under enormous pressure. We've seen him sort of shrink the base upon which he relies or within the country, itself, and I think it's only a matter of time. But I think to some extent having Saddam there is a reminder of the power of the United States and the coalition we put together. It's a reminder here was a man who a year ago occupied 20 percent of the world's oil reserves and stood a threat to the Persian Gulf and was defying the entire world, and every time I see him, I see a broken man.

MR. LEHRER: Finally, a personal question, if I may be allowed one. Every story that's being written these days about the 1996 Presidential race, you're always on the list as a possible Republican Presidential nominee. Is that -- should it be that way? Should you be on the list?

SEC. CHENEY: Jim, we haven't even gotten into the '92 campaign yet.

MR. LEHRER: I know. I know.

SEC. CHENEY: And I think we'll just reserve that question and come back and you can ask me about that.

MR. LEHRER: But do you think of things like that?

SEC. CHENEY: I read the stories, of course. On occasion, I've said the thought never crossed my mind. But it's really, it's a matter to be looked at in the future. There's nothing at this point for me to be doing, other than what I'm doing, which is the best job I can for the President. I'm pleased to serve in his administration. 1996 is a long way away and we'll worry about it in the future.

MR. LEHRER: All right, Mr. Secretary, thank you.

SEC. CHENEY: Thank you.

MS. HUNTER-GAULT: Still ahead, a dispute over a Japanese train deal, Bush's plummeting popularity, and Gergen & Shields. FOCUS - BUILD AMERICA

MS. HUNTER-GAULT: Next tonight, the flap in Los Angeles over awarding a major transit project to Japan's Sumitomo Corporation. the firm beat out an American manufacturer to win a $121 million contract to build metro rail cars. Transit officials said they had an obligation to award the contract to the most qualified bidder. Local politicians say the job should have gone to the American company, given the current economic climate. Correspondent Jeffrey Kaye of public station KCET-Los Angeles has our report.r

MR. KAYE: Eighteen thousand passengers a day ride the Blue Line, which runs 22 miles between Los Angeles and Long Beach. County officials have been happy with the performance of these trains, so when they decided on a contractor to build 41 cars for the new Green Line, they picked the same manufacturer, Sumitomo Corporation. The decision was not a popular one.

HAL BERNSON, Los Angeles Councilman: The real issue here is it's time to start supporting American goods and American jobs. It's time to stop exporting our dollars to Japan.

MR. KAYE: The only other company in the contest with Sumitomo was Morrison-Knudsen of Boise, Idaho. The engineering giant is the only remanufacturer and builder of trains in the United States. It didn't get the contract, even though its bid was $5 million lower, promised more U.S. jobs and more minority business participation.

NATE HOLDEN, Los Angeles Councilman: Let's turn this whole situation around. Do you think that a local government in Japan would sit back and allow Morrison-Knudsen to come and build trains with their unemployment rate being what it is today, even though their qualified bidder was the lowest? No, they would not.

MR. KAYE: Los Angeles city council members were among the dozens of outraged politicians who jumped on the issue after the Sumitomo contract was awarded.

ZEV YAROSLAVSKY, Los Angeles Councilman: It will cost us local American jobs because, as has been pointed out, the Morrison- Knudsen firm, which was the other bidder, offered to provide and guarantee three times as many jobs in this country than the Sumitomo Corporation.

MR. KAYE: The Sumitomo contract stipulated that 22 percent of the work would go to U.S. firms. That compared to 66 percent promised by Morrison-Knudsen. Ella Williams, the woman on the left, would have been one of the beneficiaries of a Morrison-Knudsen contract. Late last year, the Southern California businesswoman was riding high. Her growing data management company had one contract with the Los Angeles metro rail system and she was hoping to land another.

ELLA WILLIAMS, Businesswoman: [November 1991] For once in my life, I'm at the right place, at the right time, and I'm the right color, and I'm the right sex, because they're serious about minority participation.

MR. KAYE: Had Morrison-Knudsen secured the Green Line contract, Williams' company would have been offered a $3 million subcontract writing repair manuals for the new trains. Now, Williams says she won't have jobs for the 17 people she would have hired.

MS. WILLIAMS: Well, of course, I think it was the wrong decision because America's in trouble, and everyone knows that. People are hurting and it's not so much your neighbor out of a job now, it's you. So people when they read about this in the paper, that this contract of this magnitude has gone to a Japanese company, they're outraged.

MR. KAYE: Ironically, the Green Line was planned to take commuters through what was once a thriving manufacturing corridor. Green Line trains will run down the center of a 20 mile freeway now under construction. One end is close to LA Airport, near a region dominated by aerospace firms, a sector of the economy in rapid decline. Overall, Los Angeles has lost 100,000 manufacturing jobs over the past three years. The picture mirrors much of American manufacturing nationwide. In fact, local officials had so little confidence in the state of the U.S. transit industry that their goal for the Green Line cars was that only 15 percent of the work be done domestically.

RAY GRABINSKI, LA Transportation Commissioner: The American government has not seen transportation manufacture as something that was important to this country. And now, all of a sudden, you know, in 1992, while millions are out of work, it's suddenly become fashionable to be involved in transportation.

MR. KAYE: LA Transportation Commission Member Ray Grabinski voted for Sumitomo. He and other members of the LA County Transportation Commission said it was the best choice responsible public officials could make on behalf of the taxpayers. And they went on a public relations offensive, arguing the reason they gave Sumitomo the contract was Sumitomo and its subcontractor, Nippon Sharyo, had more experience.

ED McSPEDON, Los Angeles Transit Official: Nippon Sharyo has been building rail cars for the world market for 96 years. They've built and delivered successfully over 40,000 rail cars worldwide. Morrison-Knudsen has been in the rail car business for 10 years. Up until the last two years, that business has been rehabilitating old cars, overhauling and upgrading oil rail cars. Only in the last two years have they gotten into the new car market.

SPOKESMAN: We're not talking about a Honda to a Ford Taurus like I drive, okay? We're talking about a Mazarati rather than someone who used to put kit cars together.

WILLIAM AGEE, Morrison-Knudsen: Well, that's patently untrue. It's a red herring and it's false.

MR. KAYE: William Agee is chief executive officer of Morrison- Knudsen.

WILLIAM AGEE: Morrison-Knudsen has been in business for 80 years and every product that we've ever been involved with is the highest quality. Nobody in the world has produced a Green Line car, so we were all even as it relates to the Green Line car. And as I mentioned before, the most technologically complicated part of this job is the automatic train controller, which is going to be produced by Union Signal & Switch, whether it's us or our competitor. But on top of that, we today are delivering new transit cars to the CTA in Chicago, which are as complicated, technologically advanced, and as important for the parts that we're responsible for as the Green Line car.

MR. KAYE: But LA County officials weren't swayed by that argument when they heard it. They say they relied on a panel of technical experts who recommended that Sumitomo build the automated driverless trains. Ray Grabinski, who's also a member of the Long Beach City Council, says he voted for Sumitomo reluctantly.

RAY GRABINSKI, LA Transportation Commissioner: I think a lot of us really in our hearts wanted to go with Morrison-Knudsen. I represent a city that has a port and in that port city what I see sliding in and sliding out are American jobs and American money. And I'm sick and tired of it. And so it's not easy for me to come down and try to explain why we've given a contract to someone like Sumitomo, because I find them technically a little better than the American company. That's a very difficult decision to make.

MR. KAYE: Do you think you should reconsider the decision?

RAY GRABINSKI: I think because of the controversy it should be reconsidered.

MR. KAYE: The controversy also prompted county transportation officials to initiate talks between Sumitomo and Morrison-Knudsen. Under discussion is a possible role for the Idaho company and its subcontractor, General Electric. A Sumitomo/Morrison-Knudsen agreement would forestall the political battle. The California state assembly has joined the chorus, asking that the contract be reconsidered. Politicians and the public are also paying closer attention to more fundamental issues.

ZEV YAROSLAVSKY, Los Angeles Councilman: Both at the state level and at the local level, and I'll speak for our city, I'm now formulating legislation that would provide domestic content preference for our contracting process, for our bidding process. I don't think there's any reason why we shouldn't do that. When we say we want to get the lowest responsible bid, part of the definition of responsibility should be local jobs, and I mean local, here in Southern California, and preferably in Los Angeles, and certainly American jobs.

MR. KAYE: Businesswoman Ella Williams says she also has more of a "buy America" attitude.

MR. KAYE: What kind of a car do you drive?

MS. WILLIAMS: Unfortunately, I drive a Toyota Camery, but this is my last Toyota Camery.

MR. KAYE: Don't you think the folks who voted for Sumitomo did so for the same reason that you leased your Toyota?

MS. WILLIAMS: Yes, but I'm also willing to give America a chance to win me over, and I have to do that by saying I'll go out and buy an American car. I'm going to give you another chance.

MR. KAYE: Morrison-Knudsen officials hope they'll be given another chance to build trains for the Green Line. Negotiations with Sumitomo continued late today. FOCUS - HOW'S HE DOING?

MR. LEHRER: Now, some Presidential politics Republican style. On Wednesday, President Bush took his first campaign trip to New Hampshire, the site next month of the season's first Presidential primary. He has two problems in New Hampshire, bad economic times and a primary opponent, columnist and former Presidential speechwriter Patrick Buchanan. Buchanan is hammering away at the "now taxes" pledge he wants the President to sign.

PATRICK BUCHANAN, Republican Presidential Candidate: The key thing is as the headline demonstrates, this headline right here, the key thing is the fellow would not sign the tax pledge and he says he needs a Republican Congress to guarantee that he won't get in new taxes. You know, the buck stops here, is what Harry Truman said. It stops at the Oval Office. The President can stop any tax hike he wants and if he's going to get another tax hike, the only reason is because he wants it, and he believes in higher taxes and bigger government and I don't.

MR. LEHRER: The Bush trip Wednesday to four New Hampshire cities was aimed at countering those kinds of charges. Here's an excerpt from what Mr. Bush said to the Rotary Club in Portsmouth.

PRES. BUSH: I think it's important to the people that are hurting that their President knows and the President cares and in this case, the President is going to do something about it. [applause] I vowed I would come over here tonight and be calm, but I tell you something, I'm a little sick and tired of being the punching bags for a lot of lightweights around this country yelling at me day in and day out! [applause] And I'm sick of it! And they want a fight, they're going to have one! [applause] I mean it. [applause] They want to do something for the middle class, rich against poor and all that, pass the incentives that I'm talking about. It'll get this country and this state back to work. That's my challenge to 'em and that's going to be the challenge to the entire nation. and I'm going to try and work my heart out to do my level best. And I hope I've dispelled the idea that we don't care, because we certainly do.

MS. HUNTER-GAULT: Even as the President was on the offensive in New Hampshire, a bipartisan poll released on Wednesday showed Bush's popularity tumbling. In this second of a series of surveys called "Battleground 1992" only 35 percent of the registered voters polled said Bush deserved reelection, down from 52 percent six months ago. To flesh out more of the poll results, we're joined now by its authors. Celinda Lake is vice president of Greenberg-Lake, a Democratic polling research and polling company in Washington, D.C. The firm is working for Democratic candidate and Arkansas Gov. Bill Clinton. Ed Goeas is the president of the Terence Group, a Republican survey research group. Mr. Goeas was Jack Kemp's pollster in 1988. And starting with you, Mr. Goeas, six months ago, your poll predicted Bush winning the 1992 election, at the end of the Gulf War, his popularity was, he seemed unbeatable. How could he drop so far so fast?

MR. GOEAS: Well, I believe there are several things. First of all, what we've seen in the last six months, when we were in the field in June and July, what we were seeing is that the American public was focused on the Gulf War and that was giving the President very high numbers at that period of time, even though we were nine months into a recession. Since the Gulf War though, they've really focused on the economy. And as they've focused on the economy, we've seen the traditional decline that you normally see with those in power at the White House. And that's the effect that it's having.

MS. HUNTER-GAULT: Ms. Lake, is that where the President is most vulnerable? I mean, is the public blaming him for the recession, or what?

MS. LAKE: Yes. In fact, what was remarkable after the Persian Gulf was that voters did not blame the party in power for the recession. What you see now is that voters blame the Republican Party and George Bush for the recession.

MS. HUNTER-GAULT: Why was it that they didn't at that time? Were they just blinded by the --

MS. LAKE: I think they were distracted by the Persian Gulf War. And I think what heightened the sense of blame was their sense of incredible failure on this President's part to take the same traits and the same leadership qualities that he showed in the Persian Gulf and apply it here at home. At first, they were puzzled by that. Then they were frustrated. Now they're just angry about it.

MS. HUNTER-GAULT: Mr. Goeas, is it the economy or -- well, let me put it this way -- how much of it is the economy and how much of it is the Democratic challengers putting that into stark relief?

MR. GOEAS: Well, it's really a little bit of both. What we've seen since the summer is that the focus on the economy has grown from 35 percent up to 62 percent. So that's a great deal of it. Another part of it though is that the Bush campaign is getting off to a slow start or just getting off the ground now. And what we've really faced in the last four or five months is very heavy Bush bashing on the part of the Democrats with little or no not only offense but defense coming from the Presidential campaign, because they were waiting to start that campaign. Just so that we don't get off track in terms of what the numbers say, I believe what we saw was a field that was very heavily tilted to President Bush now being a level playing field. It's not that that field has moved very strongly to favoring the Democrats and that's what we're facing.

MS. HUNTER-GAULT: Are the Democrats, Ms. Lake, getting any positive results from this problem that Bush is having now?

MS. LAKE: Oh, I think there's been tremendous movement. I think after the Persian Gulf, Democrats could have legitimately asked themselves, are there enough people out there to beat this President? Today there are clearly enough people out there to beat this President. We also see that on every domestic issue, except national defense, Democrats in Congress are seen to be performing better than George Bush. It's an incredible time when Democrats can aggressively take on this President.

MS. HUNTER-GAULT: Do the polls indicate that the public feels that way about the Democrat, and is there any one in particular that they feel offers a stronger challenge than another, or is it just any Democratic, anybody but Bush at this point?

MS. LAKE: Well, obviously, I think Bill Clinton is a particularly strong candidate, but I think --

MS. HUNTER-GAULT: But what do the polls suggest the voters think?

MS. LAKE: Realistically, I think most voters don't know any of the Democratic candidates yet. What you see is, and Ed was partially right on this, it's the failings of George Bush that are really being demonstrated here as much as the strength of the Democrats. What it has provided for Democrats is an incredible opportunity to take the economy and take middle class issues and draw a sharp contrast with this President.

MS. HUNTER-GAULT: Mr. Goeas, what did the poll find in terms of the public's confidence that George Bush can do something about the economy?

MR. GOEAS: Well, we didn't really explore it to that extent. I think what we're seeing right now is they're feeling badly hurt by the economy and they want something done and they want some leadership there. And I think there is still plenty of time for George Bush to go out and to really deliver that message to the voters.

MS. HUNTER-GAULT: What's happening to George Bush's core group of supporters, and how do you identify them?

MR. GOEAS: Well, again, what we've seen is a move away from George Bush but not necessarily towards the Democrat Party. They are extremely volatile at this point. Where we have seen the biggest declines are from some of our traditional bases. Young voters have softened up quite a bit. The urban voters have softened up quite a bit, and even some of the ethnic voters.

MS. HUNTER-GAULT: Softened up meaning undecided or not as, not as strong, still in favor of Bush but not as strongly in favor of him, or what?

MR. GOEAS: More of a -- depending on the group, but to a great extent, moving from for George Bush to being undecided.

MS. HUNTER-GAULT: Ms. Lake, who are the -- is there any group now that are key voters in terms of this upcoming election?

MS. LAKE: Yes, I think there are a number of key voters and I think what's very revealing about this data is the opportunity the Democrats have with them. First of all, Democratic voters, including Reagan Democrats, the blue collar voters, have pretty much come home and blue collar men, in particular, really love the Persian Gulf War, but they're very angry over the economy and have serious questions about George Bush.

MS. HUNTER-GAULT: Because their jobs are threatened?

MS. LAKE: That's right. Their jobs and their kids' jobs and the long-term future of this country. AndI think that those blue collar voters, frankly, know that you don't fix America's economy at Tokyo's Toys R Us. The two groups of voters that I see as really key swing voters are suburban independent voters and younger voters. Younger voters are particularly interesting in this survey. They still lean Republican and lean toward the President. But, frankly, Democrats are having a very hard time talking to younger voters. And this survey shows that there is an opening there and some disenchantment with Republicans on the economy and some openness for Democrats to talk to them about the economy.

MS. HUNTER-GAULT: Mr. Goeas, was there any particularly good news for the President in your poll?

MR. GOEAS: Well, I think there's quite a bit. Again, I'll come back to my point there is much that you can do out at the White House. There are other things that you need a campaign to be going to be able to do those things. And I think what we saw in the President's speech yesterday is that there are several things that it takes a campaign to be able to say, and there's a lot George Bush can say about the economy, about controlling inflation, about bringing down or keeping down interest rates, about taking some of the mandates off of small business. There are a variety of programs which would help the economy that he sent to Congress that they have not passed.

MS. HUNTER-GAULT: Well, what about the message that he was taking to New Hampshire, what the Washington Post calls his "mea culpa tour," I hear you and understand, I care, I feel your pain, you know, what do your polls show about the effectiveness of this kind of approach?

MR. GOEAS: Well, it's going to be too early to tell on that, that is to some extent a common message to the Democrats being out there for five/six months now saying that he only cares about foreign affairs, that he doesn't care about the economy, that he doesn't care about the middle class voters. Again, it takes the campaign to come back and say, yes, in fact, I do, and this is what I have done and what I will do.

MS. HUNTER-GAULT: Ms. Lake, do you think there are key battleground issues that George Bush can emphasize to win, a la Willie Horton in 1988, and what do you think those issues are?

MS. LAKE: I think a lot depends on what happens to the economy. I think George Bush would be foolish to talk about anything but the economy right now, and I mean, people would, indeed, wonder what country he thought he was in if he weren't talking about jobs and prices and the middle class being squeezed by rising prices. I think two things worry the American public enormously. They think that this President is too concerned about foreign affairs, would make a better President of the United Nations than President of the United States. The second thing they worry about is that he doesn't really understand problems facing average people, that he has not shown his leadership capacity in the economy. And I think if he were distracted by any other issues other than the economy, he'd be wasting his time. If the economy improves, then I think you're going to see a broader battleground for the middle class, their pocket books and values. And both parties have strengths and weaknesses in that debate.

MS. HUNTER-GAULT: Do you think the Democrats have a better grasp on it at this point than the --

MS. LAKE: Well, right now our numbers shown an enormous advantage. We have a 25 point advantage on who would be better for the middle class over George Bush. Even Democrats in Congress have that advantage.

MS. HUNTER-GAULT: Mr. Goeas,if this election were held tomorrow, who do you think would win?

MR. GOEAS: Oh, I think Bush is still the odds on favorite to win.

MS. HUNTER-GAULT: What do you think, Ms. Lake?

MS. LAKE: I think we're going to take back the White House, but I haven't bought a house yet.

MS. HUNTER-GAULT: But what about tomorrow?

MS. LAKE: Tomorrow? I think that -- I actually think it might be easier to beat George Bush tomorrow, honestly, than it will be in November 1992.

MS. HUNTER-GAULT: All right. We'll be coming back to this no doubt. FOCUS - GERGEN & SHIELDS

MS. HUNTER-GAULT: Now for some end of the week analysis on polls and other things political, we have our regular team of Gergen & Shields. They're with Judy Woodruff in Washington. Judy.

MS. WOODRUFF: And they are David Gergen, editor at large at U.S. News & World Report, and syndicated columnist Mark Shields. All right, gentlemen, you've heard these poll number from Ms. lake and Mr. Goeas. George Bush, 35 percent of the people say he deserves reelection, a real drop for him from what it was a few months ago. David, what is going on? Is this real? Is this permanent, or is this a temporary blip on the screen?

MR. GERGEN: I think it's more than a temporary blip. He's been in free fall now for a number of weeks. His approval rating's down, are down to about 46 percent. If he drops much farther, he's going to be below Dan Quayle in approval ratings. Dan Quayle's at 41. I think the President went to New Hampshire this week. I think he may have helped himself modestly by at least allowing the voters of new Hampshire to beat up on him a little bit, to take out some of the hardships on him and let him make sure he heard about them, and I think that was about the only thing he could do under the circumstances and it may begin to staunch some of the flood of blood into that particular state.

MS. WOODRUFF: Why was that a good thing, to go up there and say, hey, I'm sorry I didn't acknowledge I think we're -- I think Steven said we were in an economic free fall.

MR. GERGEN: Well, he had to do a mea culpa, in effect. I think, after all, it was in New Hampshire that he took the pledge in 1988 not to raise taxes. Now, Pat Buchanan has pointed out very effectively that he broke that pledge. And Pat Buchanan is driving some real holes into the Bush campaign. It's one of the reasons that it's such a difficult thing. You know, Mark said on this show sometime ago, and nobody believed him, that Pat Buchanan could win in New Hampshire. Well, the truth is now Pat's closed that lead from 36 points -- Bush had a 36 point lead over him -- it's now down to 16 points. And there are people in the White House who now say what Mark said a few weeks ago, and that is that Buchanan could win.

MS. WOODRUFF: Do you still think so, Mark?

MR. SHIELDS: Yeah. I think that people in the White House are saying it for a very partisan reason, which is to set a level of expectations.

MS. WOODRUFF: To lower expectations?

MR. SHIELDS: That's right. I mean, if, in fact, Pat Buchanan, Ronald Reagan in 1976 against a President not nearly as popular as George Bush, against Jerry Ford, Reagan two term governor of California and the leader of the conservative movement could only get 49 percent in New Hampshire as a challenger. There was a hierarchial tradition among Republican primaries. But I think David, his own credentials as a profit are pretty solid. He predicted that Pat Buchanan would do what he has done, which is to raise the "no taxes" pledge as a political issue. But the importance of this, Judy is not simply "no taxes," because as a matter of fact, the "no taxes" pledge has receded in saliency in New Hampshire. It's always been traditionally a very important issue. It isn't as important to vote as it has been historically, polling shows. What it shows more than anything else is a character issue, and that's how Pat's using it. Pat, George Bush is seen as philosophically flexible.

MS. WOODRUFF: Because he made a promise and then he broke it.

MR. SHIELDS: On everything. I mean, whether it's taxes or whether it's jobs and trade, or just what he's going to do, everything seems to be an open question. What Pat Buchanan presents is something constant. He's firm. He's fixed. It isn't really as much what Pat believes I think that is appealing to people, but that he believes something and believes it solidly. And I think, if anything, his positions may be a liability, but the fact that he holds them so steadfastly and straightforwardly is a virtue.

MS. WOODRUFF: You're saying that's more important than the economy?

MR. SHIELDS: I think in a match-up -- no, not in the economy. I'm talking about as a match-up against George Bush. Obviously, the economy is the dominant, transcendent, total issue. All other issues up there are secondary and tertiary.

MR. GERGEN: Let me add something to that. I think there is this issue of whether George Bush has a chameleon-like quality, does he really believe in something? After all, in 1980, he campaigned against Reagan tax cuts, called it "voodoo economics." In 1988, he campaigned for tax cuts, then he raised taxes. Now he's back to tax cuts. Now, what I think I'm hearing more and more -- it's not just the chameleon-like quality, it is a number of people are worried that when he says things, it seems to be a pose, it seems to be said, something -- you know, it's as if I'm doing this now strictly for political reasons and I will say almost anything - - and as he said in that very unfortunate remark to David Frost, I'll do anything it takes to get elected -- and I think that character does count. So if you've got a President who's seen as an opportunist and you've got a bad economy. That makes a very vulnerable situation. I think he still has the opportunity to rescue this. I don't want to -- we should not write this man off. He's still very likely to win re-election. But I think that he's got some problems now that are growing in nature. It's more than simply the economy.

MS. WOODRUFF: Is this an appealing George Bush who went to New Hampshire this week and talked about -- what was it -- don't cry for me, Argentina, and I'm sick and tired of -- we heard him earlier on the show -- of being punched around by these lightweights in a sort of down-home, country dialect?

MR. GERGEN: You were there, weren't you?

MR. SHIELDS: Yes, I was. I spent three days in New Hampshire this week, and I'd say that part of the President which was the part that made the film clips was the least appealing. I mean, David's right. He did come in with a limited mea culpa. I mean, George Bush has run a "no fault" Presidency. He's always been quick to shift blame and he -- at one point he took blame and then quickly said, I'll take responsibility but not blame. And he is -- then he kind of trailed off into this language of these lightweights hitting me, they're all climbing all over my you know what, and I'm from right down -- he ran at the good neighbor -- I'm right down the road in Kennebunkport, when the storm hits you, it hits me -- but I was sitting with one of probably the most respected Republicans in the state the night before the President's visit and he said there's one thing I hope George Bush doesn't do tomorrow -- it's a fellow who's supporting George Bush, who's very active in the campaign - - and that's I hope he doesn't attack George Mitchell, and I said, well, why?

MS. WOODRUFF: Senate Majority Leader --

MR. SHIELDS: Senate Majority Leader from Maine, who is a neighbor, and he said because George Mitchell is not Tip O'Neill, he's not Ted Kennedy, he's not somebody who's sort of the embodiment or the personification of liberalism or -- they see him as a neighbor and what did George Bush do, but come in and say, if I'd listened to George Mitchell on Iraq, Saddam Hussein would be in Saudi Arabia and oil would be $20 a gallon.

MS. WOODRUFF: Is that, is the Gulf War something that he can get some mileage off of?

MR. GERGEN: It's remarkable to me that a year after the Gulf War began, this past week was the week, after all, of the anniversary, that it is doing so little for him politically -- I think that this country, the people in this country are far more supportive of the war than the press is. You know, in the press there's been a lot of discussion about letting Saddam off the hook and there have been a lot of criticisms and so forth and so on. In the heart of America, people are very enthusiastic about the military still. They're very enthusiastic about the war. I believe this could play to the President. I think he needs -- for instance, if he went out and did more for the troops who were coming out of the military or looking for jobs and tried to create jobs for them and looked after them, I think people would rally to him for that.

MS. WOODRUFF: What about the voters of New Hampshire? Again, Mark, you were up there. Do they have a history of being willing, casting that primary vote just to send a message, or do they view that vote as a vote for President no matter what, because that, of course, is what Buchanan's chances hinge on?

MR. SHIELDS: It's always tough to figure out the total psychology of any electorate. There's a tradition in New Hampshire of not wanting to end the process there, of continuing, to send it on further. I mean, it was certainly the case in 1984 with Gary Hart's great upset over Walter Mondale there. It was certainly the case in sending a message in 1968 with Gene McCarthy winning 42 percent of the vote against President Johnson as a total underdog. And in 1952, in the first primary, when they sent Harry Truman word that his time in the White House was up, Estes Keyfauber got 55 percent --

MS. WOODRUFF: And you covered that election?

MR. SHIELDS: I headed up Youth for Keyfauber, Judy. But I think the New Hampshire voters take it enormously seriously. The turnout is the envy of the nation. We're talking about 75 percent of the people. We're talking about people at the grassroots being involved. It is really a wonderful, wonderful place, and a wonderful event at the best sense. We can argue that it's unrepresentative. It is. It doesn't have big cities and all the rest, but it's a marvelous thing to behold.

MR. GERGEN: And they do like to send a message. What's happened in the past week is once again George Bush has ratcheted up the stakes for the state of the union address. This thing -- there is so much riding on this speech for him, it's the last big event now before the New Hampshire Primary and an awful lot of people are going to be tuned into that. He has to hit that out of the park.

MS. WOODRUFF: Is he raising expectations too high?

MR. GERGEN: I think he's in very serious danger of that. The program that's been leaking out in the press this week is one which is going to be very complicated to understand and may sound very, very modest in terms of the needs.

MS. WOODRUFF: Go ahead.

MR. SHIELDS: Well, there was criticism up there that he didn't come up with specifics in New Hampshire. And one of the New Hampshire Republicans, as one of them said to me, he said, thirsty men want cold beer, not explanations. And that really, I think, there's a sense of he is -- each time he says I'm going to have something big, he makes it bigger.

MS. WOODRUFF: What is it -- I mean, we're going to talk about this again, obviously, but what is it that he has to do that's going to persuade them that he can make a difference in everything that they're worried about in the state of the union?

MR. GERGEN: I think far more than cutting taxes for the middle class. What one hears from the country is give us something that gives us assurance for the long-term; we don't want hand-outs; we don't want $300. People think that's a joke. And, you know, the Democrats are talking about that too. That's not what the country wants. They really want to see investments in education and roads and highways and long-term jobs.

MS. WOODRUFF: But you're saying that's not what's --

MR. GERGEN: That's not what you're hearing right now and it's a lot of, there's some gimmicky things in this thing. I mean, they want to change the IRA program in a way that's just going to be rejected up on Capitol Hill. They want to pay for some of the tax cuts out of Medicare. That's not going to fly on Capitol Hill.

MR. SHIELDS: And George Stefanopolis, who's Bill Clinton's deputy campaign manager nationally, has said, and I think he's absolutely right, this year all voters want to know is what are you going to do and how are you going to do it. I mean, what are you going to do for America, and how you're going to do it, and in a specific sense that Jim Blair has termed "specificity" is a character issue. And I think George Bush, quite frankly, that's the test. It's a character test that he comes out with something that's believable, that's credible, and that is -- David's absolutely right -- long- term that makes America competitive, that makes it guaranteed that the next generation there is going to be horizons and opportunity and fulfillment of the American dream. Absent that, if it just looks like something that gets you through New Hampshire and by that angry electorate, I think there's going to be a revulsion.

MR. GERGEN: I agree with that.

MS. WOODRUFF: All right. David Gergen, Mark Shields, thank you both. RECAP

MR. LEHRER: Again, the major stories of this Friday, the U.S. trade deficit fell in November to its lowest level in almost nine years. It was down more than 43 percent from October. Industrial production fell 1.9 percent last year. It was the first yearly drop since 1982. And Russian President Boris Yeltsin agreed to split control of the former Soviet Navy with the republics of Ukraine and Azerbaijan. Good night, Charlayne.

MS. HUNTER-GAULT: Good night, Jim. That's our NewsHour for tonight. We'll be back on Monday. I'm Charlayne Hunter-Gault. Have a good weekend.