The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MS. HUNTER-GAULT: And I'm Charlayne Hunter-Gault in New York. After the News Summary, we have a report from Moscow on today's ceremonies marking the 50th anniversary of V-E Day. Then the Senate budget battle, first with Sen. Pete Domenici, chairman of the Senate Budget Committee, and Alice Rivlin, head of the Office of Management & Budget. Then the views of three budget experts, Peter Peterson, James Miller, and Robert Greenstein, and we end with a documentary report on a move to make parents criminally liable for their children's crimes. NEWS SUMMARY

MR. LEHRER: V-E celebrations continued in Russia today. President Clinton joined more than 50 heads of state to commemorate the 50th anniversary of the end of World War II in Europe. He spoke about the sacrifice of nearly 27 million Soviets who died during the war. He also attended a parade of about 4,000 war veterans in Red Square, but Mr. Clinton and other western leaders boycotted another military parade to protest the Russian offensive in Chechnya. At a state banquet after the ceremonies, Presidents Clinton and Yeltsin toasted each other. Tomorrow they will hold a summit meeting. The offensive in Chechnya and Russia's plan to sell nuclear technology to Iran are on the agenda. We'll have more on the V-E Day celebrations later in the program. Charlayne.

MS. HUNTER-GAULT: The U.S. returned 13 boat people to Cuba today. They are the first refugees to be repatriated under an agreement with Havana announced last week. It reverses a 35-year-old policy of routinely granting political asylum to Cuban refugees. Also under the deal, 21,000 refugees held at the Naval base in Guantanamo Bay, Cuba, will be allowed to come to the United States.

MR. LEHRER: The Senate Republican budget was placed on the table today. It aims to eliminate the deficit by the year 2002. Savings would come from a variety of means: reducing the growth of Medicare, eliminating the Department of Commerce and other programs, and transferring Medicaid from the federal government to the states. The principal sponsor is Budget Committee chairman Pete Domenici of New Mexico. He told his committee the plan differed from the House Contract With America in at least one key area.

SEN. PETE DOMENICI, Chairman, Budget Committee: This Republican budget that I'm proud to present, which I had something to do with putting together, does not make the task of getting to balance more difficult by cutting taxes. This budget will be in balance, there will be no taxes cut. At that point in time, we have before you and before the public a balanced budget predicated only upon restraining spending, reforming spending, and yet in many instances cutting some of the appropriated spending. This is a cut first budget.

MR. LEHRER: We'll have more on the Domenici budget plan later in the program. The Senate voted today to cut off debate on a bill to limit product liability. That bill had been stalled when provisions were added to cap punitive damages in all civil cases. Those provisions were removed before today's vote.

MS. HUNTER-GAULT: The Senate today unanimously confirmed John Deutch as director of the Central Intelligence Agency. He replaces James Woolsey, who resigned last year in the wake of the Aldrich Ames spy scandal. Deutch will leave his post as deputy secretary of defense. He told reporters at the Pentagon this afternoon he will make changes at the CIA but there would be no bloodletting.

MR. LEHRER: Floodwaters filled the streets of New Orleans today. Five people were killed. About 18 inches of rain was reported during a seven-hour period last night. Hundreds of homes were flooded, highways closed, and schools shut down. Louisiana Governor Edwin Edwards declared a state of emergency in New Orleans and surrounding areas. He sent in the National Guard to help. And that's it for the News Summary tonight. Now it's on to remembering World War II in Moscow, the budget debate, and holding parents responsible. FOCUS - WAR AND REMEMBRANCE

MS. HUNTER-GAULT: The final round of celebrations to mark the 50th anniversary of V-E Day is where we start tonight. President Clinton and other leaders converged on Moscow today and paid tribute to the sacrifices of the Soviet Union in World War II. Julian Manyon of Independent Television News reports on the anniversary observances that took place in the shadow of a current war.

JULIAN MANYON, ITN: Red Square echoed to the sounds of bands and marching men as Russia remembered her costly triumph half a century ago. First, whole battalions, dressed in the uniforms of World War II, carrying the Tommy guns that the Germans feared. Then, as Boris Yeltsin waved from atop the Lenin Mausoleum, rank after rank of World War II veterans, their chests covered with medals, their steps still steady after 50 years. They survived a war in which more than 26 million Soviet citizens died. Today President Clinton and John Major were there to honor their deeds. These are the men who fought in the great battles on the Eastern front, and this parade is designed to remind the world of the enormous sacrifices that Russia made in that conflict. As the parade of veterans ended, John Major saw for himself the grief which many in Russia still feel about the war. Beside him, Boris Yeltsin's wife, Naina, burst into tears of emotion. When he saw what had happened, the prime minister appeared to offer a word of comfort. Later, John Major and President Clinton joined Boris Yeltsin at a ceremony to dedicate a new war memorial, surmounted by an obelisk almost 150 meters high. In his speech, the U.S. President called for full recognition of the enormous price in human lives which Russia had paid to defeat Nazi Germany.

PRESIDENT CLINTON: The Cold War obscured our ability to fully appreciate what your people have suffered and how your extraordinary courage helped to hasten the victory we all celebrate today.

JULIAN MANYON: Earlier, both Bill Clinton and John Major had stayed away from a full-scale military parade on the outskirts of Moscow. It seems that they did not wish to review units which have just taken part in the fighting in Chechnya.

MS. HUNTER-GAULT: After the parade, President Yeltsin played host to a dinner for other leaders. A toast by President Clinton addressed the past and the present.

PRESIDENT CLINTON: World War II left us lessons not for an evening but for a lifetime. One-time opponents are now valued and trusting friends. And with Russia's turn to democracy, the alliance for freedom stands on the verge of great new possibilities. Together, we can face vistas of promise which separately we could never even imagine. And together we can face the challenges to our humanity in this age -- terrorism, the proliferation of weapons of mass destruction, and the continued lust for killing based on ethnic, religious, or tribal differences. As we look to new horizons in the new century, let us remember also another lesson of the great war, the resilience of hope. Our nations prevailed because they never lost hope. It is the touchstone of our humanity. Let us renew that hope tonight. [applause]

MS. HUNTER-GAULT: Tomorrow, President Clinton holds two meetings with Mr. Yeltsin and also will talk to students at Moscow State University. FOCUS - BUDGET BALANCING

MR. LEHRER: Now, the quest for a balanced federal budget. It began in earnest today in the U.S. Senate with the release of a plan by the Republican Chairman of the Senate Budget Committee. Kwame Holman begins our coverage.

KWAME HOLMAN: New Mexico Sen. Pete Domenici is leading his fellow Republicans toward passage of what he says will be an historic budget.

SEN. PETE DOMENICI, Chairman, Budget Committee: It is an essential debate. America's future for young and old alike will be shaped by its outcome because the numbers don't lie. Our deficit is out of control, and our current deficit and debt path is unacceptable.

MR. HOLMAN: Domenici's plan aims at balancing the federal budget in seven years, a mammoth undertaking that requires a $961 billion reduction in spending. The biggest target, entitlement programs, would take the biggest hit. Medicare spending would be reduced by $256 billion, farm subsidies by $14 billion, and Medicaid by $175 billion. Social Security, however, the largest of the entitlement programs, is off the chopping block, as promised earlier by Senate Republicans. Spending for so-called discretionary programs, those not mandated by law, which include funds for all federal agencies, except the Defense Department, would take an overall cut of $190 billion over the seven years. Among specific cuts in the Republican proposal, foreign aid cut by $26 billion, spending on education programs cut by $67 billion, and eliminating the Commerce Department entirely would cut about $8 billion. Spending on defense programs would be essentially frozen over the seven-year period, resulting in a saving of $48 billion. The Republican plan also projects a reduction in interest payments on the national debt, resulting in an additional $155 billion savings over the seven-year period.

MR. LEHRER: Now, to Sen. Domenici, Republican of New Mexico, chairman of the Senate Budget Committee, and to President Clinton's budget director, Alice Rivlin. Senator, what words would you use to characterize your own budget plan?

SEN. PETE DOMENICI, Budget Committee Chairman: [Capitol Hill] Well, first of all, I think it is a very historic event. I think it's visionary. I think it's necessary. It's visionary because it proposes a very simple but profound proposition that the United States of America should reach a point in time, sooner rather than later, when we pay our bills without borrowing money every year. So from my standpoint, it's been an exhilarating four months, getting ready for it. It's probably one of the most pride-filled days of my service to New Mexicans and the nation because I am absolutely positive, no doubt about it, that I'm doing something right for the future of our country and for our children.

MR. LEHRER: Alice Rivlin, would you use words like historic and visionary to describe what Sen. Domenici put on the table today?

ALICE RIVLIN, Budget Director: Not exactly. It's a tough budget, and I think it's an honest budget. Sen. Domenici has not done what his colleagues in the House did and pretended that it's possible to have both a balanced budget and a huge tax cut. He left the tax cut out. But even to get to balance, he shows enormous cuts. The other thing he's been honest about is putting on the table that if he is going to do what he and his colleagues want to do to, to balance by 2002, it's going to take very large cuts in Medicare and Medicaid. These are painful cuts. More than half of the programmatic cuts in Sen. Domenici's budget come from Medicare and Medicaid.

MR. LEHRER: And is that your major complaint about it, that it is too much, too soon?

MS. RIVLIN: I think it is very tough. It may be short-sighted. When you look at the things that will have to be cut, if this budget were to go forward, it would be huge cuts in discretionary spending, maybe a third of the programs, and to cut things like education, investments in children in the name of the future of the economy is, I think, very short-sighted. We're for deficit reduction but not at the price of reducing the investments in our future.

MR. LEHRER: Sen. Domenici, just generally to pick up on what Ms. Rivlin just said, and then we'll go to some of the specifics --

SEN. DOMENICI: Sure.

MR. LEHRER: -- when you sat down to do this plan, were you guided by the numbers, or were you guided by a philosophy? What was it that you wanted to do in addition to balancing the budget, if anything?

SEN. DOMENICI: Well, first, let me say to Dr. Rivlin I thank you for the complimentary remarks, and if I've done some things right, including the entitlement reforms, including the Medicare reforms, which people insist on calling cuts, the Medicaid reform, which people insist on calling cuts, many of them were found in the very exciting and realistic suggestions in the Congressional Budget Office list of options when Dr. Alice Rivlin was the head of that department, and I thank her for all those suggestions. That doesn't mean that she agrees with the way I'm doing it. Perhaps she thinks I'm doing it too quick, but those suggestions have all been part of that pattern because as I sat down to look at this, first I said at some point in time we ought to get to balance, we can drag it on and drag it on, but pretty soon, it loses all effectiveness for our children, for jobs, for increased standards of living, and so I chose seven years because it looked like we could do it. Secondly, I said since we must leave Social Security off the table, everything else is really on the table, and which programs are growing so fast that we are not going to be able to afford them anyway. That's something we haven't said enough of. The Medicaid program growing at 10 percent after two years of growing at 26 and 27 percent only three years ago, it is obvious we cannot pay for that kind of program, and so I said, since we can't, why don't we see if it can be reformed? We suggest reform. Medicare, very fortunate. I started looking at the CBO options, many of which were produced by Dr. Rivlin, and lo and behold, on April 3rd, the trustees gave us their approach, their approach to saving a program that we can't afford, saving it for these citizens and others. And that was to change it so that it doesn't cost so much. I don't believe that means taking anything away. It is too rigid, it's old-fashioned. The seniors deserve better. So it was a combination of numbers to get there and which programs we would never be able to afford anyway and then saying, let's put everything else on the table.

MR. LEHRER: Was that the wrong way to go about it, Ms. Rivlin? Did he take the wrong approach?

MS. RIVLIN: I think it is a very drastic set of cuts and probably not justified. We don't need to get to balance that quickly, and more particularly, though Sen. Domenici didn't put a tax cut in his package, a tax cut will be there, and the idea that we can cut back on Medicaid, which funds health care for low-income people, and mostly for people in nursing homes, that's everybody's grandmother who's going to be cut back to fund a tax cut for the wealthy is a fanciful idea.

MR. LEHRER: So you think --

SEN. DOMENICI: I believe you can balance the budget without doing that, and we did not put them in, and let me respond. As far as Medicaid is concerned, it is currently 24 United States government programs thrust on the states, managed under voluminous sets of regulations, as inefficient a program as you can have. Is it not sensible to say, let's get rid of that and deliver it more efficiently? I believe it is.

MR. LEHRER: Can it be done?

MS. RIVLIN: I don't believe that efficiency will give you cuts of that magnitude. I think one of two things will happen. You will ever have a lot of older people and low-income people not getting service, or you'll have the states burdened with this huge amount of expenditure. Efficiency will not do the trick.

MR. LEHRER: So what -- let me just ask her one question here before going back to you, Senator.

SEN. DOMENICI: Sure, sure.

MR. LEHRER: Do you agree with his basic premise that Medicaid and Medicare have to be reformed? Now, the cuts -- the amount of the cuts and the growth is another issue, but do you believe something had to be changed?

MS. RIVLIN: Everybody agrees that Medicare and Medicaid need reform, that the rate of growth needs to be slowed. The question is: Do you do it in such drastic ways that cuts people off the rolls, reduces services, shifts costs to the states and to the private sector, or do you do it in a more rational way?

MR. LEHRER: Now, the -- do you also not agree with this, Senator Domenici and others who say that if you're ever going to get closed to a balanced budget, whether it's in seven years or twenty- seven years, you have to talk about those particular kinds of programs, the entitlement programs?

MS. RIVLIN: Yes. And the President has made very clear that he agrees with that, that we must have health care reform, but slashing Medicare and Medicaid by themselves in the name of deficit reduction or worse -- and Sen. Domenici is not guilty of this -- worse, in the name of tax cuts for the wealthy, is not the way to do it. We need to look at the whole health care system together.

MR. LEHRER: Senator.

SEN. DOMENICI: Let me say I'm sure that -- I'm sure that Alice Rivlin was not for the President's budget. The President's budget has an income tax cut in it and it doesn't even reduce the deficit. I mean, talking about, talking -- anybody from the White House talking about the budget I put forward -- and I don't say that because I want a continuing battle -- I would like them to join us.

MR. LEHRER: Well, let's talk about the tax cut thing. You heard what Ms. Rivlin said, and she's not the only one who said it --

SEN. DOMENICI: Sure.

MR. LEHRER: -- that Domenici can have all these great ideas about no budget cut, but both Sen. Dole, who is the Senate Majority Leader, and Senator Gramm, who is a key figure running for president, say there will be tax cuts coming from the Senate.

SEN. DOMENICI: Well, Jim, let me say that I don't read it that way.

MR. LEHRER: Okay.

SEN. DOMENICI: I believe, I believe the economic dividend that is found in this budget which the CBO gives us, once you got into balance, I believe that's the only thing that's going to be debatable with reference to ultimately, the only thing debatable and the only thing to be provided to the Finance Committee for possible tax cuts. I want to mention something about Medicaid, because you know, across the United States, almost everybody is buying insurance policies, they're getting into group insurance coverage. Do you know that most of Medicaid in the United States, Medicaid is not even done that way? The law isn't written to permit it. You have to get a special waiver to get it. So we're still doing the same old fee-for-service, the most expensive and costly program around, with all kind of strings attached. I believe the states can manage this program at 8 percent growth and deliver a better quality of care and prevention to the poor people of this country and 24 American programs tied in knots by regulations and costing more than anybody really assumes it should.

MR. LEHRER: You just disagree with that?

MS. RIVLIN: Not entirely. We certainly agree that there needs to be more state flexibility. We have given a lot of those waivers that Sen. Domenici talks about. We believe in more flexibility for the states, and in managed care for Medicaid, but we don't believe that savings of this magnitude are possible. The reimbursement rates on Medicaid are very, very low, and doctors are often not willing to serve Medicaid patients.

MR. LEHRER: Yeah. Sen. Domenici, I want to come back to the tax cut thing.

SEN. DOMENICI: Please.

MR. LEHRER: Have you had a, a conversation with Sen. Dole and said, look, I know what you've said publicly and I know what the House has passed and I know what the Contract With America says, that I, Pete Domenici, am not going to go along with it, and I'm going to fight this tax cut thing, I mean, what's the political reality that you face in your own -- within your own party and your own Senate?

SEN. DOMENICI: When Sen. Bob Dole made the comment some three or four weeks ago that there would be room for a tax cut, I had told him, Sen. Dole, there will be room. The room that I'm talking about is the exact same room I'm talking about here tonight. The room will come only after you have a balanced budget and enforce it, and that will be a dividend, economic dividend, prescribed not at our request but by the Congressional Budget Office. He knows that. Perhaps he's going to try to make it a bigger economic dividend, but frankly, I believe it will leave the Senate will much the same premise that I take it there. There will be a balanced budget unequivocally and enforceable first.

MR. LEHRER: How do you read the situation there, Ms. Rivlin?

MS. RIVLIN: Well, I don't read the Senate probably as well as the Senator does. I don't work up there, but on the House side, they have already passed a very large tax cut which goes very heavily to wealthy people, and there is a lot of pressure in the Senate to do the same. I admire Sen. Domenici standing up against this, but I wonder if he's going to win.

MR. LEHRER: From the White House point of view, you're taking the position that the Domenici plan is not going to prevail, is that right? In other words, you're fighting something else besides the Domenici plan?

MS. RIVLIN: Yes.

MR. LEHRER: If fighting is the proper term.

MS. RIVLIN: We believe the cuts in the Domenici plan are just too drastic. We don't think that Medicare and Medicaid should be slashed in this way without looking at the whole health care system at once and seeing what we can do about that. We think the cuts in discretionary spending will wipe out investments in the future that we think are very, very important, especially in education, science, and technology, things that we need to grow the economy.

MR. LEHRER: What is your and the President's reaction to the Domenici approach on defense spending?

MS. RIVLIN: Excellent. The Senator is to be commended --

SEN. DOMENICI: It's the only thing in here we accepted that they did.

MS. RIVLIN: Yes. They said they would go with our defense numbers, and we naturally think that's quite a good thing.

MR. LEHRER: Why did you do that? Why did you do that?

SEN. DOMENICI: That'll never fly up here unless we have a real balanced budget, I'll tell you. That's the reason I'm getting it.

MR. LEHRER: Why is that?

SEN. DOMENICI: Because I've got a real balanced budget, and they're saying, okay, if you got a real balance and defense is going to be frozen, that's fine, but if you're not to get a balanced budget and you're going to let other programs grow -- we've already cut defense too much -- we've cut it over the past seven years some 43 percent. So I'm getting that done, but only on one premise, that it's part of a balanced budget.

MR. LEHRER: May I come back to a general point that Ms. Rivlin has made about your plan, is that it goes -- it cuts too much, too fast, it's an arbitrary thing, seven years. Why did you choose seven years? How do you combat that basic argument against your approach?

SEN. DOMENICI: Well, let me tell you I started off thinking we should do less. I started off saying when we were talking about five years, let's put a big down payment. I saw the vote on the constitutional balanced budget, it passed in the United States House overwhelmingly. In the United States Senate, it was one vote short, and I heard Democrat after Democrat, good ones that I'd really believe in, who said we don't need that, let's balance it ourselves. I took a hard look and said, can it be done? I concluded it could be done. As a matter of fact, I concluded it could be done as easily and as fairly as cutting 450 or 500 billion dollars out over the first five years. And I decided we ought to do something that is really right for the country. You know, seven years is a long time. For somebody to say we ought to take it over a longer period of time it's just to fail to understand that the American dollar is falling, interest -- long-term interest rates are way too high, our standard of living is dropping, even though our wages are going up, somehow we can't gain, and most of that is attributable to our incessant appetite and refusal as adults to pay the bill. I would feel better if the White House, once again, said, we know how to get there and we'll raise taxes, we'll have to do that. The more I hear, you can't, you can't, the issue is: can you keep on borrowing this way? At what point do you hurt everybody, you know? And I think now is the time to have this fight, and I don't like the words "slashing Medicare and Medicaid," because I don't think that's happening, Jim. I think when the final bolt -- stitches are put into Medicare reform, it's going to come down dramatically, and you're not going to be hurting senior citizens.

MR. LEHRER: Alice Rivlin, what -- to his general point, that -- why not do it in seven years, why not do it now?

MS. RIVLIN: I think we have to think about what is the point of getting to a balanced budget. It's presumably to have a higher standard of living in the future because we won't be borrowing so much, and our savings will go into more productive investments. But if you do that at the price of cutting education spending and science and technology and the other things that we need to grow the economy, then you haven't accomplished anything. I'd rather do it slower.

MR. LEHRER: Do you think also that the cutting -- the cutting is going to be indiscriminate, I mean, it's numbers and not weighted about the national needs and priorities?

MS. RIVLIN: Certainly there will be an argument about that, but the cuts in Sen. Domenici's budget are so large that they are going to have to wipe out a great deal of very valuable spending -- approximately a third, across-the-board, if you take out things from the discretionary spending that clearly nobody wants to cut, like air traffic control, for example. We can't afford to do that. If you take out those things, probably the rest of the budget would have to be cut by about a third. That's very drastic, and it will fall on things like education and Head Start, things that we need.

MR. LEHRER: All right. Well, we have -- yes.

SEN. DOMENICI: Let me tell you, Jim, if the United States economy adds 2.5 million jobs, which is a modest estimate of what you get from a balanced budget, it makes up for a lot of things we aren't doing at the public sector. Frankly, I'm not a believer that everything we're doing in the public sector is the only way to do it, nor am I believer that you have to do every bit of it because, if you don't, you're hurting people. I think there's another way to hurt people.

MR. LEHRER: So that's a philosophical argument. That's not a money argument, is it, Senator?

SEN. DOMENICI: No, it isn't.

MR. LEHRER: Do you agree, Ms. Rivlin

MS. RIVLIN: Oh, it's a philosophical argument, but neither of us I think are taking the extreme position -- I certainly don't believe everything the government does is right, and we've cuta lot of it and more can be cut, but we need to preserve the essential things that will grow the economy in the future.

MR. LEHRER: Alice Rivlin, Sen. Domenici, thank you both very much.

MS. HUNTER-GAULT: Now to the balanced budget effort as seen by three veteran budget watchers. Peter Peterson is an investment banker and the president of the Concord Coalition, a bipartisan budget policy organization. Robert Greenstein is executive director of the Center on Budget & Policy Priorities, a budget research organization in Washington. And Jim Miller was budget director in the Reagan administration and is now with Citizens for a Sound Economy, a Washington policy group. And starting with you, Jim Miller, we've heard Sen. Domenici say this is a visionary, historic, and necessary budget, and Alice Rivlin says it's tough, too drastic, and short-sighted. What is it? JAMES C. MILLER, III, Former Reagan Adviser: Well, you know, I'm sitting here thinking, and I wonder if the viewers out there are realizing that they've been the victim of a huge deception, because all the cuts that we're talking about here are reductions in the rate of increase in federal spending. I imagine that people will be astounded to learn that even taking President Clinton's own budget figures, you could accommodate this tax cut that came out of the House under the Contract With America, you could accommodate the increases in Social Security, and you could almost accommodate the increases in medical -- in Medicare, and still balance the budget in the year 2002, provided you just don't spend any more on the rest.

MS. HUNTER-GAULT: So I think I hear you coming down on the visionary, historic, and necessary side.

MR. MILLER: Well, I think it is necessary for us to balance the budget, but I think what we ought to do is to establish the principle that will do like a family does, that is, finds itself extremist, and not keep spending. We should control our appetite, as Pete Domenici said, but we could do that, and we can bring the budget into balance, and we can also have the tax cuts that are included in the Contract With America.

MS. HUNTER-GAULT: Mr. Peterson, what's your take on this new budget? I'm sorry, not Mr. Peterson, Mr. Greenstein while I'm still in Washington. ROBERT GREENSTEIN, Budget Analyst: Well, the problem with the budget is that it isn't balanced in the way it approaches deficit reduction. It takes half of the budget off the table, defense, Social Security, among others, and it says all the rest of the cuts have to come from the remaining half of the budget. When you get into what it actually does, it asks for virtually no sacrifice from people at high income levels or the big corporations, who could most afford it. It puts a very heavy hit on low income working families. It's imbalanced in that fashion. Now, Jim Miller's point that there are no cuts, there are only restraints in the rate of growth, you know, Sen. Domenici just said that defense had been cut 43 percent in the last seven years. The amount of dollars spent on defense last year was the same as the amount spent seven years ago, but defense had to be cut because it didn't keep pace with inflation. When you have seven straight years, you have to pay salaries to people delivering services and you have no adjustment for inflation, you have to reduce the services. That's what this budget does. In the Medicaid area, you know, if you put everybody in health maintenance organizations or managed care, and you cut even further the rates you pay doctors and hospitals, which are already lower in Medicaid than in the regular health care system, you still can't get even half of the Medicaid savings you need under the Domenici budget. The only way to get that level of Medicaid savings is to cut the services, the medical services people can get, or to take low-income children and elderly people and no longer provide health care for them. That's why it's not balanced. It's too tough in that area. It doesn't spread the pain fairly.

MS. HUNTER-GAULT: All right. Pete Peterson, you've heard two sides come down on each side of the previous conversation. Where do you come down, too drastic and short-sighted, or visionary and wonderful?

PETER PETERSON, Concord Coalition: When I heard the word "historic," it reminds me of the hyperbole of the Nixon administration in which I served. Everything we did was historic first. So let's say compared to what? I think this budget compared to the Clinton budget is a vast improvement because that sees $200 billion deficits as far as the eye can see. I personally much prefer it to the House, because I think the approach of spending cuts first is the absolutely right approach, and $350 billion tax cuts in the House bill makes it far more difficult to ever balance the budget. I think in particular when the House, you know, repeals the tax increase on Social Security, it is sending absolutely the wrong message, telling the American people that the Social Security system is sustainable when anybody that looks at it when the baby boomers retire know that's not true. Every country in the world taxes retirement income, so I think a bunch of wrong-handed signals are being sent. There's something else about the tax system that I hope our young people catch onto. I had my research people, Charlayne, tell me what a typical elderly person making a median income in the United States pays in taxes versus a young taxpaying worker family. The young worker family paid $7200 a year in federal taxes. The elderly person making exactly the same amount of money paid only $900. You know why? Because so many of these entitlement benefits are tax free, not just Social Security, but Medicare, where people are getting ten to twenty times what they put in that's tax free. So I come down on the side of saying compared to what? I prefer the Domenici budget to anything I've heard to date, though it can be improved in certain respects.

MS. HUNTER-GAULT: Let me come back to you, Mr. Miller, on a point that Mr. Greenstein made. I mean, he says that this budget is not balanced, and that the words that you're using are, are wrong, and that it really comes down heavily on -- heaviest on the low-income people without requiring any sacrifices on the part of upper-income people, corporations, and so on.

MR. MILLER: Well, I don't think that is true. I haven't seen the particulars of Pete Domenici's budget. There are a lot of things that are cut out that I think middle class subsidies ought to be cut out, a lot of subsidies for business ought to be cut out. That's what Congress should be doing in terms of the freezing of the total spending on these other items. They have to make hard decisions but that's why we elect public officials to go to Washington and make those hard choices. If, if you can do the -- the cutting out of these -- these middle class subsidies, I think that's a good place to start. But I don't characterize the House budget or what they have proposed -- Tom -- the Kasich budget is anything like in the same terms that Pete Peterson was -- or certainly Bob was suggesting here. It is not punish the poor and help the rich. I mean, it's across-the-board cuts in a lot of things that need to be cut out.

MS. HUNTER-GAULT: Mr. Greenstein, how do you respond to that?

MR. GREENSTEIN: Well, you look at the Kasich budget. It ultimately has $100 billion a year in new tax cuts, half of them go to the top ten or twelve percent of people in the country. It has a children's tax credit. The 1/3 of the children with lowest income don't get anything from that children's tax cut at all, and you come back also to the Domenici budget. Pete Peterson and the Concord Coalition, to their credit, have said if you're going to balance the budget, put everything on the table, including even revenue. Every deficit reduction effort of the 80's and early 90's, including every one Ronald Reagan signed, was a mix of spending cuts and some revenues. Alan Greenspan said last summer, talking before the Entitlement Commission that both Pete and I served on, that we should look at tax entitlements, as well as spending entitlements, those that deliver subsidies through the tax code. Those tax entitlements are the entitlements that primarily benefit people at higher income levels and the biggest corporations. Those are off the table in the current debate; they shouldn't be.

MS. HUNTER-GAULT: What do you think about that, Pete Peterson? Do you accept the charge that Alice Rivlin made and that Mr. Greenstein just supported that this budget is being balanced on the backs of the poor and that it hurts the poor the most?

MR. PETERSON: It isn't being balanced on the backs of where we should start. The Concord Coalition focuses on where I think the big problem is, Charlayne. When I did a book recently, I asked somebody to tell me where the benefits went and the tax expenditures that Bob Greenstein's talking about. And I was shocked to see that $400 billion a year of entitlement benefits and tax expenditures go to people above the average income. Now, if everybody's on the wagon, who's going to pull it? And that's why the Concord Coalition takes the following position: First, everything should be on the table. We're celebrating World War II this week, and you remember, in World War II, we were all in it together, we all shared. The Concord Coalition believes that farm subsidies, that veterans' benefits non-disabled, that the lavish pensions for federal workers, as well as Social Security and Medicare, should be on the table. The second thing we believe is in an affluence test, not a means test but an affluence test. And we take the position that above the median income, we should very steeply cut the benefits as the incomes go up. So Pete Peterson's benefits are cut 85 percent, someone just above the median income is cut 10 percent. And if we did that, we would find that we would not have to cut these other programs that Bob's talking about as much as they're now being cut.

MS. HUNTER-GAULT: Mr. Miller, let me ask you about the Social Security, in particular. Why isn't that on the table now? Why not deal with it now?

MR. MILLER: I think it's got to be dealt with eventually. I mean, Pete is right. I mean, the year 2020 or 18 or whatever, when you open up the strong box marked Social Security Trust Fund, you find out there's nothing in there but IOU's on current generations. The system is going broke then, and we've got to do something about it, and I think it's incumbent upon politicians and others to engage in a dialogue about what ought to be done. Let me say on the tax side as well, I'm in favor of substantial reform. Citizens for a Sound Economy stood very four square on the flat tax. I think we ought to move in the direction of a flat tax and eliminate a lot of the favoritism that's shown in the tax code, make sure that people know that their neighbor is paying just as much tax as they are in similar circumstances.

MS. HUNTER-GAULT: Do you think that a tax cut is going to -- I mean, you heard what Sen. Domenici said about this -- I mean, do you think that a tax cut inevitably is going to get into this package and is going to happen?

MR. MILLER: Oh, yes, I think there will be a tax cut that would pass the Senate as well as there has been one to pass the House. It will not be of the sort that will be a flat tax. It will not be a revolutionary kind of tax. The tax package that passed the House goes not only to the question of economic growth but more importantly to the question of families. I mean, we have a system where under certain circumstances, two people pay lower taxes if they just live together rather than stay married. That doesn't make any sense. Our tax system has undermined families, and the, and the -- and the amount for children, the tax credit, is going to help, help secure families and bring 'em together. So the tax package out of the House is not just for economic growth, it's for social reasons as well, and I applaud it.

MS. HUNTER-GAULT: Mr. Greenstein, what impact, if that is how it turns out, what impact is that going to have on the average American?

MR. GREENSTEIN: The budget as a whole or the House tax package?

MS. HUNTER-GAULT: The tax package, if that's included.

MR. GREENSTEIN: Well, with the House tax package, the impact on the average middle income American is probably a negative one because it loses ultimately $100 billion a year -- those are the Treasury figures -- and that has to be paid for. You want to balance the budget, you have to cut $100 billion more in order to pay for that tax cut.

MS. HUNTER-GAULT: He's right about that, isn't he, Pete Peterson?

MR. PETERSON: Yes.

MR. MILLER: No, he's not.

MR. PETERSON: I think one of the great tax cuts of all times would be what would happen if we had a balanced budget. I had a bunch of bond experts down one day and I said, if we balanced the budget, what would happen to long-term interest rates that affect mortgages for the middle class and so forth? They estimated they would fall 1 1/2 to 2 percent if the bond markets really believed you have it. And I think that would be a wonderful tax cut.

MR. GREENSTEIN: Charlayne, if I could just finish here. Where does that $100 billion to pay for the tax cuts come from? We're cutting low-income programs so deeply in the House and Senate budgets there isn't enough left there. It's going to mean that things like Medicare, student loans, things that benefit the middle class, are cut more deeply to pay for tax cuts that disproportionately go to the upper end. The final thing that's of interest --

MS. HUNTER-GAULT: Let me just get Jim Miller to respond to that, because Alice Rivlin also said that this budget hurts because what it does is, it is done at the price of reducing investments in our future, cutting programs that affect children, education, and so on.

MR. MILLER: Well, that assumes, of course, that Congress is going to invest in the right things, spend the money on the right things. Congress wastes a lot of money, and the administration wastes a lot of money, and that's one reason to make hard decisions. Let me go back to this question of the tax. I mean, the figures that Bob is citing is Treasury figures. But the congressional figures on this tax cut are so that the revenue lost to the federal government is much, much lower than the $100 billion a year.

MR. GREENSTEIN: That's not right. The figures are virtually the same between the --

MR. MILLER: One eighty-nine for the whole five-year period.

MR. GREENSTEIN: We're talking about the second five years. That's the key on these tax cuts. They're back-loaded. They're designed so they don't lost that much money in the first five years -- that's the gimmick -- and then they explode on you in the second. There's no disagreement on that.

MR. MILLER: We're going to have a big tax reform in the next couple of years.

MR. GREENSTEIN: The Republican-headed impact committee and the Treasury agree that these tax cuts ultimately lose nearly $100 billion a year.

MS. HUNTER-GAULT: All right. Let me ask Pete Peterson this. The other thing Alice Rivlin said is that these efficiencies that Sen. Domenici outlined are simply not going to do the trick, that the savings of the magnitude that he's describing are just simply not possible. What's your reaction to that?

MR. PETERSON: Well, the Concord Coalition is a non-partisan, bipartisan group, so I would say both sides are perhaps engaging in a little bit of hyperbole. It seems to me what's not being said, Charlayne, is if we're really going to cut health care costs, we're going to have to, for example, make people far more cost conscious than they now are. This means much larger cost deductibles, cost sharing. I think it's crazy that all of these Medicare costs are not taxed at all, for example. The Clinton health care plan, for example, said they were going to cut health care costs, but they added five new entitlements to it. So I think cutting health care costs involves importantly making people far more cost conscious than we are now. And nobody is really talking about that because it involves some pain.

MS. HUNTER-GAULT: Pain, that's what I want to --

MR. PETERSON: Yeah.

MS. HUNTER-GAULT: Can the budget be balanced realistically without real pain, the kind of pain that Alice Rivlin talked about, and is it important to do, to have that pain?

MR. PETERSON: I -- pain is a word that conveys certain meanings. I would say there has to be shared sacrifice across the board starting first of all with those of us that can afford it. If we do that, I think we can get this job done.

MS. HUNTER-GAULT: Mr. Greenstein.

MR. GREENSTEIN: Well, I completely agree with the sentiment Pete's just expressed. The problem with the current budgets on the Hill is that they don't share the pain equitably. They even have - - the new Domenici budget even has a tax increase for low-income working families with children through a scaling back of the earned income tax credit. What we really should do is put everything on the table and share the pain equitably. And I agree with Pete's sentiment, those who can most afford the sacrifice should be part of it rather than shielded from it.

MS. HUNTER-GAULT: Mr. Miller, in a word, you get the last word.

MR. MILLER: Well, I think we're using entirely the wrong language. This is not a shared pain thing. It's a movement in the direction that's going to make everybody better off --

MS. HUNTER-GAULT: Well, thank you all.

MR. MILLER: -- if we get the deficit down.

MS. HUNTER-GAULT: Thank you all for joining us. FOCUS - FAMILY TIES

MR. LEHRER: Finally tonight, holding parents liable for crimes their children commit. Lee Hochberg of Oregon Public Broadcasting reports.

OTTO STADELI: And they come up over the hill here and made --

LEE HOCHBERG, KOPB: Never in 66 years in rural Silverton, Oregon, has Otto Stadeli seen has much juvenile crime.

OTTO STADELI, Scrap-yard Owner: Right here is where the kids was breakin' in, they had a trail right through the briars, and they cut the fence down over the edge of the hill and crept in. They just keep coming in, and I'd fix the fence and they'd cut it again and just an ongoing affair.

MR. HOCHBERG: Stadeli owns a small scrap-yard. Ten times in recent months it's been burglarized.

OTTO STADELI: And they stole four sets of torches, my three quarter and one-inch drive socket sets, $3,000 worth of tools. If I could have got ahold of 'em, I'd like to wring their necks, you know, but you can't do that.

MR. HOCHBERG: What Stadeli did instead has focused national attention on this town of 7,000, an hour away from Portland. As a member of the Silverton City Council, he pushed through a parental responsibility law. It fines parents up to $1,000 if their under-age child commits a crime like the vandalism Stadeli found in his tool shed.

OTTO STADELI: There it is.

MR. HOCHBERG: A judge can even order a parent to spend time in jail.

OTTO STADELI: We feel that the parents are responsible for their offspring until they're 18 years old, regardless, whether they like it or not.

MR. HOCHBERG: It's a homespun philosophy from a homespun town, a place where a penny still gets you 12 minutes on a parking meter. The law was enacted in January, and already, 15 parents have been fined. Though the juvenile crime rate so far is unchanged from last year, the police chief believes it will drop.

RANDY LUNSFORD, Silverton Police Chief: We have heard some responses from juveniles who say, hey, I don't want to get my parents in trouble, so that's what we're hoping for.

MR. HOCHBERG: And it seems to have struck a popular chord elsewhere. Mayors from 100 other towns have called Stadeli and said they might pass parental responsibility laws of their own.

OTTO STADELI: They say, we're so glad to hear that there's somebody coming back to a realization that this is what it should be, the parents should be in charge of their children.

MR. HOCHBERG: In at least 33 states, parents can be ordered to pay restitution for property damage caused by their children, but laws like Silverton's are the first to criminally charge parents for the crimes of their kids. The law already has prompted a constitutional challenge.

JOSSI DAVIDSON, Anita Beck's Lawyer: [in court] What the law seems to suggest is that a parent has done something wrong if a child does something wrong, and that is the really big jump that makes this ordinance unconstitutional.

MR. HOCHBERG: Silverton resident Anita Beck was one of the first parents fined after her son was charged with shoplifting. Her attorney argued in court that short of shackling herself to her son, she had no sure way to prevent her son's crime and, in turn, no sure way to prevent being charged herself.

JOSSI DAVIDSON: And, in fact, the parent could be guilty under the ordinance at the precise moment she's doing everything she can and reasonably believes she can to supervise her child, to be in compliance with the law, and a law that you can be violating at the very moment you're striving your mightiest not to violate is fundamentally unfair.

OTTO STADELI: I believe, and a lot of the people in the city believe it's the responsibility of that parent to see that that child is brought up as a good citizen until they're old enough to be on their own, which would be 18 or so.

MR. HOCHBERG: You're saying bad parenting is a crime.

OTTO STADELI: I would say it is, yeah. Now, what we did in our family in raising 11 children, when they're about a year or a year and a half old is when the children know, startin' to know yes and no, and you say, look, you can go this far, and if you step over the line, you got a consequence that's comin', maybe a paddling or whatever. And I don't mean to child abuse anybody but the Lord put that padding in the back end of your seat for a reason. A swat now and then will send 'em in the right direction.

GILBERT GEIS, Criminologist: Very strange laws. The reasoning behind them, it seems to me, is seriously flawed.

MR. HOCHBERG: Critics like University of California criminologist Gilbert Geis say parental responsibility laws are the worst kind of law, knee-jerk reactions born of frustration, unlikely to reduce the juvenile crime problem and likely to aggravate it.

GILBERT GEIS, Criminologist: You put the parent in prison, then you've broken up the family further. If you fine the parent, you define the child of resources; you've given the child a weapon to use against the parent -- if you don't give me this, I'm going to go out and do this and they'll put you in prison.

MR. HOCHBERG: And Geis says the laws overlook something even the best parents know.

GILBERT GEIS: Here you cannot control a child who does not choose to be controlled if they're fifteen, sixteen, seventeen -- they have a will of their own.

RAMONA OLSON, Silverton Mother of Nine: I was sitting outside in my car in the front of the school waiting for him to come out the door and get into the car.

MR. HOCHBERG: Right out here?

RAMONA OLSON: Right out here at the school.

MR. HOCHBERG: Ramona Olson, a Silverton mother of nine, says her case illustrates the overly broad reach of Silverton's law. Olson was cited when her 11-year-old son shoplifted a wallet from a drugstore. She had been waiting for him outside school, but he slipped out a side door, headed into town, and snatched the wallet. She was charged with failing to supervise a minor.

RAMONA OLSON: I was not failing to supervise. I was supervising almost to the ultimate, and I shouldn't have been cited. Olson, a single mother, asks why, if the child's crime was the fault of poor parenting, her ex-husband wasn't also cited. Of the 15 parents who've been charged in Silverton, half are single mothers.

GILBERT GEIS: The laws are sexist; they're classist. The parents that are being punished tend highly disproportionately to be working class, single mothers.

CHRIS LOVE, Single Mother: I mean, we try to do the best that we can, and, you know, we're dealing with making enough money to support the family, coming home, you know, and we don't know -- we can't keep track of the child when they leave school till we get home after work.

OTTO STADELI: If they can't watch 'em, they should have somebody that's watchin' 'em for 'em. And if they can't afford that, they should have never had children. I mean, you just can't turn your kids loose like you do goats or sheep.

MR. HOCHBERG: Parental responsibility laws are also being used in larger cities. In the suburban Los Angeles town of Norwalk, parents are held liable for the actual costs of removing graffiti. Parents also pay for any costs incurred to arrest their minor.

KEVIN GANO, Public Safety Chief: Do you understand that you are going to be held responsible for his behavior, all the costs?

NORMA PICADO: Yeah. I talked to him today.

MR. HOCHBERG: Under Norwalk's law, Norma Picado was forced to pay the more than $200 in police time it cost to arrest her son, 14-year-old Raphael, on robbery charges. Public safety chief Kevin Gano says better the parents should pay that cost than the taxpayers.

KEVIN GANO: How do you reach out and shake a parent and say, you have got to take control of your kids? The only way to do that is to send 'em a bill.

NORMA PICADO: And I told him, you know, what are you thinking? I'm working hard. I give you everything that you want. What do you want me to do?

KEVIN GANO: You've done everything possible.

NORMA PICADO: I have a lot of bills to pay, and I say, I want you to give it everything what you need, but you know -- [crying] - - I can't support everything what you do outside.

MR. HOCHBERG: Gano uses the law not only to shake up the parent but to shame the child.

KEVIN GANO: Do you understand that your mother is responsible for all the costs associated with your behavior? If you go out there and get arrested, she's going to be charged every time. You got your mom here, who loves you and cares about you, or she wouldn't be here. There's a lot of people that don't have that. Now, you need to tell her right now that it's over.

RAPHAEL: I'll start goin' to school and everything, getting better grades.

NORMA PICADO: I hope so.

SPOKESMAN: I need a couple of guys with shovels over here.

MR. HOCHBERG: As an added punishment, parents in Norwalk who are unable to pay the cost of their child's arrest are forced into community service time, alongside their children, pulling weeds and cleaning allies.

KEVIN GANO: I hope that they're thinking they really don't want to be out there doing that again next week or the week after, so they're going to take a little bit more responsibility and a little more control.

MR. HOCHBERG: There are hints that the plan works. Yolanda Rodriguez says, though her son had to stay home sick, he was so moved by her efforts to clean up this alley that he told her he'll clean up his act.

YOLANDA RODRIGUEZ: I'm working so hard for him, and he says, okay, Mother, I'll change for you. I think so.

MR. HOCHBERG: He said he'll change for you?

YOLANDA RODRIGUEZ: Yeah, uh-huh.

MR. HOCHBERG: And this 13-year-old says he too felt badly for his mother.

DAVID CANCHOLA: It made feel guilty because she had to come for what I did.

MR. HOCHBERG: Is that going to change you, your behavior in the future?

DAVID CANCHOLA: Yeah. Why should she be doing stuff for that I got in trouble for? It's my fault.

MR. HOCHBERG: In the four plus years since Norwalk's program began, almost 4,000 parents have been cited. Gano says the program, together with an unrelated gang truce, has slashed weapons possession charges by one half, vandalism and graffiti by almost three quarters.

KEVIN GANO: We don't have the drive-by shootings. We don't have the gang shootings. It's just really decreased significantly.

MR. HOCHBERG: And in Silverton, there are signs that the parental responsibility law there may be working too.

MICHAEL HAMMOND, Counselor: [role playing session] Why can't you be more responsible?

WOMAN: Well, I usually do it. I practically always do it.

MICHAEL HAMMOND: You never do it!

WOMAN: You're just picking on me, just one time.

MICHAEL HAMMOND: You never do it!

WOMAN: One time I forget.

MICHAEL HAMMOND: You never clean your room. You're always irresponsible.

MR. HOCHBERG: Silverton parents whose kids have broken the law are being assigned role playing exercises to improve their parenting skills and more parents than ever are attending without being ordered to.

CHRIS LOVE: I didn't want to become one of the victimsof the city, you know. I didn't want to be put before the public and, and said, your child is this now, you have to take care of it.

MICHAEL HAMMOND: I've definitely seen a big difference, a big jump in attendance since the ordinance did go into effect.

MR. HOCHBERG: The laws are certainly focusing more attention on parenting. Municipal leaders will be watching to see if they actually close the door on the growing problem of juvenile crime. RECAP

MS. HUNTER-GAULT: Again, the major story of this Tuesday was President Clinton's trip to Russia. He attended V-E celebrations in Moscow but boycotted a military parade to protest the Russian offensive in the breakaway republic of Chechnya. Chechnya and Russia's plan to sell nuclear technology to Iran will be discussed when Presidents Clinton and Yeltsin begin a summit tomorrow. Good night, Jim.

MR. LEHRER: Good night, Charlayne. We'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.