The MacNeil/Lehrer NewsHour

INTRO

ROBERT MacNEIL: Good evening.A disaster in Mexico City leads the news tonight. More than 200 people were killed when a natural gas plant blew up. U.S. and Nicaraguan negotiators began new talks on differences between the two countries. Doctors say they are close to implanting a second artificial heart. Americans' personal income rose more than half a percent in October. Jim?

JIM LEHRER: In our table of contents tonight, first a summary of the news of the day, then a politics and economics focus section as a Democratic House leader and a thinker from President Reagan's favorite think tank go as it over the budget and related matters. Focus segment number two is on conflict in a Pennsylvania church over unemployment. Number three is on what is going on in Chile, where the government continues its state of siege. And we also take a look at the latest ups and downs in the life of a dictator, Khadafy of Libya.

MacNEIL: The Mexico state coroner is reporting tonight that at least 212 people were killed and more than 500 injured today when a series of gas explosions shook Mexico City. Officials said scores of people were missing; one city official said hundreds of people are lost. Early estimates put the death toll at 90 or more when the following report was filed by Jane Hodgkin of Visnews.

JANE HODGKIN, Visnews [voice-over]: A huge plume of flame burst over this northern working-class district of Mexico City when the gas tanks exploded. Damage was widespread and casualties high. At least 90 people were killed and hundreds were injured. Emergency services were called in from surrounding areas, and television and radio stations broadcast urgent appeals for blood donors. Near the site of the fire a football stadium was hastily converted into a treatment center. Hundreds of families had to be evacuated from their homes as the flames and intense heat threatened to spread the fire to other gas plants. There are six of them within 10 kilometers, and the authorities said they might have to destroy one of the nearest to control the fire.

MacNEIL: At the Mexican seaside resort of Manzanilla, U.S. and Nicaraguan officials began another round of talks on settling differences between the two countries. President Reagan's special envoy, Henry Shlaudeman, and Nicaraguan Deputy Foreign Minister Victor Ugo Tinoco, have already had seven meetings at the same spot. All have been kept under tight secrecy, and no signs of progress have been reported. The latest meeting is expected to last two days.

Jim?

LEHRER: The second implanting of an artificial heart is about to happen. Dr. William DeVries, the surgeon who did the first one on the late Barney Clark two years ago, will do the next one, too. It will take place at Humana Hospital in Louisville, Kentucky, where today reporters were told all was ready except for the final selection of the patient. Dr. Robert Jarvik, the artificial heart's inventor, said operation number two will differ from the first one in some ways. They both spoke at today's news conference.

Dr. ROBERT JARVIK, artificial heart inventor: I think we're better prepared, substantially better prepared, than we were at the University of Utah. From what we've learned, from the effort that's gone into it, I think we've identified things to watch out for, such as the question of emphysema that Dr. Clark had that wasn't appreciated, and I think that there will likely -- though not necessarily -- likely there may be a patient in somewhat better condition than Dr. Clark was.

Dr. WILLIAM DeVRIES, artificial heart surgeon: My realistic hope is that we'll get the patient out of the hospital and put a golf club in his hand and let him swing or let him take a few shots at the basket or something like that. I think that it's important that the patient get -- have some expectation of a normal life. I think that's what I would like, and that's what I think most of the people I'm hearing are saying the same thing. Now, whether that's realistic or not, we'll have to see. But I don't feel -- if I thought that a patient was going to spend the rest of his days in the hospital, I would think twice about it.

LEHRER: Doctors Jarvik and DeVries did their work with Barney Clark in Utah. Dr. DeVries moved to Louisville last August, accepting an offer from the privately-owned Humana Hospital that included less restrictions and unlimited resources. Clark lived for 112 days after receiving his artificial heart. Robin?

MacNEIL: Abdel Hamid El-Bakoush, the former Libyan prime minister whom the Libyan government plotted to assassinate, called today for international action to force Libyan leader Muammar Khadafy out of power. Last week Khadafy's government claimed that a hit squad had murdered Bakoush, who is now an exile living in Cairo. But the Egyptians said they had faked the assassination and Bakoush turned up alive and well on Egyptian television. Egypt said it arrested four would-be assassins hired by Libya. Today the United States denounced Khadafy's government for boasting about political assassinations. The comment came from State Department spokesman John Hughes. And we'll focus on Colonel Khadafy and Libya's troubles with its neighbors later in the program.

A real political assassination took place in Vienna today when a Turkish diplomat was shot down at a traffic light. An Amenian extremist group said they did it.At a street corner near the heart of downtown Vienna a gunman rushed up to the diplomat's car and fired six rounds with a nine-millimeter pistol, shattering the windows on the red Mercedes. The dead man was Evner Ergun, the deputy director of a United Nations agency in Vienna, the Center for Social Development and Humanitarian Affairs. He was the second Turkish diplomat killed by Armenians in Vienna this year.

In Lebanon, Israeli and Lebanese army officers met again today to talk about the withdrawal of Israeli troops from southern Lebanon. Both sides sounded optimistic, but the Israelis flatly refused to pay $10 billion in war reparations.

And in London, British Prime Minister Margaret Thatcher met Prime Minister Garret Fitzgerald of Ireland to discuss ways of curbing violence and promoting reconciliation in Northern Ireland. It was their first such meeting devoted exclusively to the troubles in Ireland. For security reasons it was secretly switched from Dublin to Mrs. Thatcher's heavily guarded country residence outside London.

Jim?

LEHRER: There were two new economic numbers out today. Personal income was up last month 0.6%, said the Commerce Department, and that's great. But personal consumer spending was down 0.1%, and that's not so great, because it's seen by some economists as further evidence that economic slowdown may be coming that could be worse than anticipated. Robin?

MacNEIL: Former Republican Senator George Aiken of Vermont died today in Montpelier at the age of 92. Ten years ago he retired to his hill farm in Vermont after 34 years in the Senate. He was known as the champion of rural interests. He helped set up the Farmers Home Administration and the Bureau of Outdoor Recreation. He helped father the food stamp and Food for Peace programs. He also played a key role in the passage of the Civil Rights Act of 1964. In 1970, Senator Aiken said, "For a long time I've had two callings, agricultural and political.In either category you get a lot of dirt on your hands, but the dirt acquired through working with soil is more easily washed off." Budget Cutting: Which Way to Go?

LEHRER: At week's end, say those in the know, President Reagan will sign off on how and where to trim $50-or-so billion from the federal budget. There was stories in some newspapers over the weekend that a large hunk of those cuts may come from various health programs, because of a document on budget cutting that was handed out at last week's cabinet meeting. But "no official standing" were the words used today by a White House spokesman to describe that document, even though presidential counselor Edwin Meese was the distributor. The document is a soon-to-be-published report from the Washington-based Heritage Foundation, and it is the subject of the first half of our first focus segment tonight. The report recommends, among other things, 3% cuts in Medicaid grants to states with high health care costs, vouchers to Medicaid recipients to buy private health services, tying income more closely to Medicaid benefits, and making participation in Social Security and Medicare more voluntary by allowing participants to invest their Social Security taxes, plus consolidating health, education and welfare programs to cut administrative and other costs. One of the principal authors of the Heritage study was Peter Ferrara, a Social Security specialist who was senior staff member in the White House Office of Policy and Development until last year. He is now a Washington lawyer. Mr. Ferrara, the White House says your study has no official standing. Does that upset you, sir?

PETER FERRARA: Well, no, that's just basic protocol. The study will be reviewed within the administration. There was a mandate-for-leadership report that came out by the Heritage Foundation at the beginning of the first Reagan term, and that was widely read throughout the administration, and this report will be also.

LEHRER: You must be delighted, though, at the publicity and attention it's getting. Ed Meese gives it to the cabinet members, on the front page of The New York Times, The Washington Post. You're off to a great start, and it hasn't even been published.

Mr. FERRARA: Well, all the Heritage Foundation studies get wide coverage and are widely read within the administration.

LEHRER: Why is that?

Mr. FERRARA: Well, because of the close affiliation between the philosophy of the Heritage Foundation and I think the philosophy of the President and because of the thoroughness of the studies produced by the foundation.

LEHRER: Do you feel that your report will have some influence, some really major impact on what the President will finally recommend?

Mr. FERRARA: Well, I think so. I was in the administration during -- for much of the first term, and I know that all the cabinet members read their portions of the first report and they distributed it throughout their departments, and I believe they'll do the same with this one.

LEHRER: The other thing the White House said today was they're trying to wash their collective hands of -- let me start all over again. The other thing the White House said today was they didn't like your recommendations about Medicare and Social Security, the part of making them voluntary in some respects. Is that to be expected, or do you think they'll come around?

Mr. FERRARA: Well, I think that they really haven't had time to read the recommendations on Social Security and Medicare. The President promised during the campaign that he would not cut Social Security benefits and not raise Social Security taxes, and I think he should keep those promises, and that's what this report recommends and the recommendations regarding Social Security in particular are perfectly consistent with that. In particular, the recommendations regarding Social Security would give workers an option to begin to substitute expanded super-IRAs for some of their present Social Security coverage as a feasible proposal and as great benefits for the elderly as well as today's young workers.

LEHRER: Why is that a good deal?

Mr. FERRARA: Well, one of the basic problems with Social Security is that while today's retirees are still getting a good deal from the program, young workers entering the work force today will not get a good deal from the program. The maximum Social Security tax was $189 as late as 1958. It was $350 as late as 1965. In January of this year the maximum Social Security tax will be almost $5,600. By the end of the decade it will be over $8,000 a year.Now, you take a worker who is entering the workforce today, having to pay that five, six, seven, $10 thousand, $15 thousand each year throughout his entire career, even if he gets all the benefits that Social Security promises him, it will still be a bad deal in return for the enormous taxes that have been paid into the program throughout his career. Now, this super-IRA is meant to address that problem by giving young workers an option to get higher market returns by investing a portion of funds into that super-IRA, yet it's structured in a way so that it actually strengthens Social Security financing and reduces any long-term financing problem within Social Security, and thereby benefits the elderly at the same time by making the program more secure.

Mr. FERRARA: Now, your proposed Medicaid cuts, or changes, I should say, that I just outlined in introducing you. What would be the effect of those?

Mr. FERRARA: Well, the effect is to create incentives for greater cost-consciousness among the providers of medical care and for the consumers. The idea is to bring in more private-sector competition, more private-sector incentives, more consumer choice and more consumer control, creating on the part of both medical providers and consumers an opportunity to take into account the costs of the medical care and to take actions accordingly.

LEHRER: Of course we've just talked about the Medicare, Social Security and the Medicaid -- the medical-world type cuts. You have 1,300 recommendations in your study, as I understand it. If they were all accepted by the administration and Congress, what kind of dent would that make in this $50-billion goal?

Mr. FERRARA: Well, I don't think the foundation has added it up that way. I'm sure that over the long run it would create great reductions in government spending, and I think primarily the idea here, in many respects, is not to make those cuts at the expense of people who are actually in need or at the expense of people who have come to rely on them, but by creating new opportunities, by bringing in more reliance on the private sector, bringing in more of the efficiencies of the private sector, to achieve the goals that people desire, but at better means.

LEHRER: Thank you. Robin?

MacNEIL: Whatever the President does propose, its fate will depend on how it's handled by the Democratic majority in the House of Representatives. House Democratic leaders met today behind closed doors to consider procedures that will govern the budget debate. To tell us what happened today and to react to the Heritage Foundation's budget proposals, we have Missouri Democrat Richard Gephardt. He's a member of both the House Budget and Ways and Means committees and the new chairman of the House Democratic Caucus come January.

Congressman, first of all, did you decide any procedural changes today that will affect the budget process?

Rep. RICHARD GEPHARDT: We decided at a very tentative stage -- it certainly isn't the final decision, but we decided to try to change the budget process so that it's a more real process. Actually, if this proposal lasts it would have the appropriations bills decided along with the budget, and it would make the budget process a lot more real. As it stands now, we have a budget proposal, and then later on in the year we do the appropriations. Under this proposal it would all be put together. You'd have your appropriations, your tax bill and your authorization bills all in one big bill, probably in July before we leave in August, and I think we would bring a lot more discipline in the budget process.

MacNEIL: What has to happen to that to make it take effect?

Rep. GEPHARDT: Well, it's got a long road. It's got to go first through the whole Democratic Caucus in December, and then it would have to be adopted by the entire House as part of its rules, and that would take a bipartisan effort some time in January. So it by no means has made it all the way, but it's at least gone the first step and that's very encouraging.

MacNEIL: I understand you also considered a proposal which would change your own rules to allow Congressman Jones, Jim Jones, to serve an unprecedented fourth term as the chairman of the Budget Committee, but that that was turned down. Is that correct?

Rep. GEPHARDT: That's correct. The proposal there was to allow existing members of the Budget Committee to compete for budget chairman, which would have allowed Jim Jones and others on the committee to compete for that job in January. That rules change was turned down, which means that if that's sustained in the caucus, that a new crop of people who either serve on the committee or not will compete for the chairmanship in January.

MacNEIL: Does that mean, in current political terms, that Mr. Reagan would be likely to get a Democrat any more amenable to his philosophy as chairman of the Budget Committee than he had in Mr. Jones?

Rep. GEPHARDT: I think that's really yet to be determined.

MacNEIL: It's possible, is it?

Rep. GEPHARDT: It's possible, but it would be a hot competition, I would take it, between a number of people, and it's yet to be determined who that personality would be.

MacNEIL: I see. Now, turning to what we've just been listening to from Mr. Ferrara, how do you think House Democrats will react if the President is to pass on these Heritage Foundation proposals?

Rep. GEPHARDT: Well, it's hard to evaluate the proposals because, as has been said, they've not been published yet. So you'd obviously need to see them. From a surface reading, it would seem to me that we wouldn't reject all of them. The idea of bringing more competition into Medicaid and trying to get those costs down a bit are ideas that have been around for some time and certainly merit looking and looking at them hard. I think the troublesome proposal has to do with making Medicare and Social Security really private programs or getting people toopt out on a voluntary basis of the pension plan and Social Security and Medicare. I think that would meet with stiff resistance, and I think it's unusual that we're having this debate and discussion after the campaign's over. We just went through a national campaign, and it seems to me if the President was interested in proposals like this -- and I'm not sure he is -- that he indeed would have had a discussion about this with the electorate before the election.

MacNEIL: Given all the rhetoric in the campaign, Mr. Mondale saying the President would have to raise taxes, Mr. Reagan saying he wouldn't, are the Democrats going to make proposals of their own, initiate proposals of their own, to deal with the deficit, or are they going to sit back and wait until the President frames the debate?

Rep. GEPHARDT: I think the latter. I think Democrats and a lot of Republicans in Congress are going to react to what the President proposes. There's really only one national legislator in this country, and that's the President of the United States. He has an obligation and a responsibility under our Constitution to present budgets. Congress has the responsibility to dispose of those budgets, and I don't think you're going to see any great desire on the part of Republicans or Democrats to come forward with calls for national sacrifice to solve the budget problem when we just went through a campaign where the President said we didn't need to raise taxes, we didn't need to cut entitlement or Social Security programs, and we didn't need to cut back on defense spending. Given that scenario, he said we could grow our way out of the problem. I think members of Congress are willing to see if we can do that unless the President's changed his mind. If he has, we'll listen to those proposals.

MacNEIL: Thank you. Jim?

LEHRER: Mr. Ferrara, does the Heritage Foundation believe that this can all be done without a national sacrifice, to use the congressman's term?

Mr. FERRARA: Well, I think that the general feeling among the people at the Heritage Foundation is that if we adopt policies aimed at stimulating high economic growth, then that means getting the Federal Reserve Board in line with that policy and perhaps adopting a tax simplification measure similar to one that Mr. Gephardt has promoted and aim for a high economic growth rate of four or five percent, or even more, and then have some spending restraint at the same time, that a balanced budget is achievable within a reasonable frame of time.

LEHRER: Without hurting anybody?

Mr. FERRARA: I didn't say without hurting anybody, and I am not going to say with hurting anybody. I've said economic growth and spending restraint and spending reductions. Those are the two elements that I think within a reasonable amount of time can lead to a balanced budget.

LEHRER: Without raising taxes?

Mr. FERRARA: Without raising taxes.

LEHRER: Do you agree, Congressman?

Rep. GEPHARDT: I don't agree, and I think the President and a minority of economists espouse the view that was just espoused here, and I think it's a wrong-headed view. I don't think it works. I don't think you can grow your way out of this problem, and I think if we try to do it we're going to wind up with an economic disaster. But if that's what the President wants to do, that's what Congress is going to do, and we're going to see if this experiment works. Howard Baker called it a riverboat gamble, George Bush called it voodoo economics. We could think up other names, but indeed it's betting the company store. But if that's what the President wants to do, the people obviously endorsed that in the election and that's what we'll try.

LEHRER: Leaders of your party, Congressman, had a big meeting over the weekend down in the Caribbean, and there's been an awful lot of talk about the search for the new soul of the Democratic Party as a result of the election, and many people suggested the Democratic Party is out of touch with the American people. Do you think that the Heritage Foundation approach is more in touch than your party has been?

Rep. GEPHARDT: Well, I don't reject everything that has been discussed here. I haven't seen their proposal. There may be some merit in some of their proposals. But I think Democrats are in touch with where the American people are. We certainly didn't articulate a program nationally in the presidential campaign that accomplished that, but I think in the House among Democrats, in the Senate among Democrats, we've published documents in the last two years that have really rethought Democratic ideas and programs. We have attached those ideas to the ideas of growth and opportunity. We've said set out very specifically how we'd like to get there. And if you look at the races around the country for governorships and the Senate, and in the House races, I think you see the Democratic candidates have done pretty well. And they've done well articulating the ideas of growth and opportunity. If we can do that in a presidential and national level, we'll succeed there.

LEHRER: What's your view of that?

Mr. FERRARA: Well, I'd just like to say that I would love to sit down with a bright, articulate congressman like Congressman Gephardt, who is precisely the kind of person who I think would be most responsive to the super-IRA proposal, for example, which is structured to benefit the elderly as well as today's young workers.

LEHRER: He says it isn't going anywhere. He says it's nonsense.

Mr. FERRARA: Well, he hasn't -- that's why I said I'd like to sit down with him and talk to him about it because many people have said, "You know, Congressman Gephardt, he's exactly the kind of bright, articulate and innovative congressman who would be interested in something like this." And I think it's a proposal that's carefully --

LEHRER: Well, we have a couple more minutes. Tell him where he's wrong.

Mr. FERRARA: Well, the proposal, the super-IRA proposal, would give today's workers an option to contribute an additional amount to their IRAs on top of the amounts that they're allowed to contribute under current law, up to 20% of their Social Security retirement taxes. They would have a right to direct their employers to contribute an equal amount, and both the employee and employer would get a full income tax credit for those contributions -- a dollar off their income taxes for every dollar of that contribution. But to the extent workers exercise this option, their future Social Security benefits would be reduced. So, if you take a worker entering the workforce today, he takes full advantage of this 20% each year his entire career, then his Social Security benefits when he retired would be reduced 20%, but he would have his super-IRA benefits which would more than make up for these reduced Social Security benefits. So he in fact should have higher benefits overall.

LEHRER: What's wrong with that, Congressman?

Rep. GEPHARDT: Well, off the top of my head, two things. One, you're asking for a further tax credit, which costs revenue, which is a tax decrease, which gets our deficit problem to be worse. That's something you've got to take into account off the bat. Secondly, to the extent you begin weaning people out of the Social Security program and trying to direct them only into private pensions, you really weaken the future of that program, and I have serious reservations about that. If you want to talk about scaling back Social Security, making changes in the program to make it successful in the future, that's one topic, and something that we ought to be interested in. But to begin getting people out of the program and weakening the program, which I think is the goal of many people, is something I'm not interested in.

Mr. FERRARA: This would just allow diversification. People would still be relying on Social Security, but they would have an option to get the higher returns available to young workers through super-IRAs.

LEHRER: But the congressman's right.The basic premise of your whole idea is that it's better to be out of Social Security than in it, correct?

Mr. FERRARA: Well, this would actually strengthen Social Security because, again, it's based on an income tax credit. That means the payroll taxes flowing into Social Security would continue to flow in. In the future, while workers are relying more on IRAs and less on Social Security, Social Security expenditures would be reduced, so you're strengthening the long-term financing prospects of Social Security, and --

LEHRER: You follow that?

Mr. FERRARA: -- You're having benefits across the board.

LEHRER: Do you buy that?

Rep. GEPHARDT: I follow it, but I'm not sure I buy it, and my real problem is that you're really beginning to cost more money to the government, and you're going to have people saying, "Gee, we can't finance Social Security the way it is, we've got a deficit that's going out of style."

LEHRER: Mr. Ferrara, you had two minutes with this bright young congressman named Gephardt, and you didn't get anything there.

Mr. FERRARA: I think he's already beginning to get excited about it.

LEHRER: Okay, thank you. Robin? Battle for Jobs

MacNEIL: Our next focus section is also about the economy, but it's a view from the bottom, so to speak, not the top. Yesterday in a Lutheran church in Clairton, Pennsylvania, the Sunday sermon was read by the minister's wife. Her husband, the Reverend Douglas Roth, couldn't preach himself because he was in jail. We learn how he got there in this report by our correspondent Kwame Holman.

KWAME HOLMAN [voice-over]: While the rest of the country is fighting back from the deep recession of 1982, the greater Pittsburgh area is still experiencing double-digit unemployment. Hardest hit are the steelmill towns along the Monongahela River, towns with a history, towns like Homestead, where, in 1892, 35 people died trying to start a steelworkers union; towns like Clairton, where the film "The Deerhunter" was set. Unemployed people in these towns say they feel cut off from working America. Strongly supportive of Walter Mondale, they feel isolated in a country that re-elected Ronald Reagan. Kevin and Joanne Reilly have been out of work for 2 1/2 years.

JOANNE REILLY: We are a minority. We are -- and they want us kept a hidden minority.

KEVIN REILLY: Obviously the rest of the country is having a good time. We're not.

HOLMAN [voice-over]: To support their family, the Reillys depend on food stamps and the GI Bill. But for moral support they depend on religion in general and on the Trinity Lutheran church in particular. It was the pastor of this Church, Douglas Roth, who was arrested last week, and it was through him that the Reillys met a group of ministers actively involved in helping the unemployed.

Ms. REILLY: They got involved. They weren't just standing up there on Sunday and saying, you know, "We shall stick together," because, you know, I've heard that since I was little. You know, everybody -- you know, the ministers say nice things on Sunday and then you don't see them again until next Sunday, you know. But now they've started to really do things.

HOLMAN [voice-over]: What Pastor Roth and other Lutheran and Episcopalian ministers have done in the past year is to support acts of civil disobedience. Together with some union members, they've targeted corporations they blame for the unemployment. They've confronted Mellon Bank several times, using everything from loose pennies to skunk oil to call attention to their charge that the bank is not investing in the region. Father James Von Dreele is another of the fighting ministers.

Father JAMES VON DREELE, St. Matthew's Catholic Church: The work that we're doing is in line with the civil disobedience that took place during the civil rights movement, and what we're doing is confronting the institutions, whether it be the legal institutions or the churches or the corporations, with what is happening and why they are making the decisions that they are, and holding then accountable.

HOLMAN [voice-over]: Recently the ministers and their supporters met to find ways to force the corporations to negotiate with them about new jobs for the unemployed. They also planned confrontations that they think are psychologically beneficial to the community.

Father VON DREELE: What we're trying to do is to take those people who are depressed and give them some hope, and the only way you can do that is to get at the deep anger that's inside of them and help transform that anger into some real positive action.

POLICEWOMAN: Would you please come with us?

HOLMAN [voice-over]: Their aggressive actions have led to arrests. Last week Pastor Roth was arrested for refusing to leave his church after his bishop ordered him off the pulpit. The bishop said Roth's actions were too divisive, but for Roth's followers the arrest was a rallying point.

Ms. REILLY: I believe that they thought silencing a minister and putting him in jail would be the ultimate thing, that they would finally be able to shut us all up, you know. But I don't think it's going to work.

HOLMAN [voice-over]: In fact, Pastor Roth stimulated his followers even further by refusing to accept the court's authority.

Paster DOUGLAS ROTH, Trinity Lutheran Church: I must obey God rather than men.

JUDGE: Sir, you're telling this court that you're not prepared to curb yourself and you're not prepared to cease and desist.

Pastor ROTH: I must obey God.

JUDGE: All right. I understand. The defendant is committed for 90 days and fined $1,200.

HOLMAN [voice-over]: Pastor Roth went to prison, and yesterday his wife preached in his place. Like the ministers' other acts of civil disobedience, Pastor Roth's arrest did bring a lot of press attention to their fight, but they have met with little success in actually getting jobs for those they represent. Although U.S. Steel and Mellon Bank refuse to comment on the ministers' actions, many others have been critical of their methods and their zeal. But for the Reillys, the ministers are a lifeline.

Mr. REILLY: The actions through the church and the union makes me feel like something's going to be done and something's going to get accomplished.

Ms. REILLY: They give you a purpose for living, and that's really important. Everyone has to have that.

HOLMAN [voice-over]: There are other voices in the mill towns tapping the anger and frustration of the unemployed, voices with overtones that are more political and less religious. One of those voices belongs to Mike Stout. A union officer, he tries to arouse the unemployed with songs he writes for union rallies. But Mike Stout doesn't want to be a lone voice in the wilderness.

MIKE STOUT, union officer: I think we need the same kind of grassroots movement, the same kind of mass movement that got black people civil rights, that ended the war in Vietnam, that got us unions in the first place back in the 1930s.

HOLMAN [voice-over]: To build that grassroots support, Stout is working with the Tri-State Conference on Steel, a group that wants a government-supported, community-controlled steel industry.

Mr. STOUT: The only way we feel that it can be saved is if the government, the federal government steps in. Just like they stepped in with Chrysler, just like they stepped in with Conrail, just like they stepped in with Continental in Illinois, they have to step in to the basic steel industry.

HOLMAN [voice-over]: Stout wants the government to use the power of eminent domain to force corporations like U.S. Steel to sell their closed mill buildings and facilities. The mills would then be reactivated by the workers themselves. Critics argue that steel can never make a comeback, but for unemployed rank and filer Jay Weinberg, their demand for the mills is a matter of down-home justice.

JAY WEINBERG: It's almost like a marriage. This company in a particular area says that we're walking away and they want to take everything with them, not only the profits, the cars, the bank accounts and everything, and just walk away. And we're saying, well, fine, you can have it all, but we want the house, in effect.

HOLMAN [voice-over]: But such a settlement is far from reality. Last week the Tri-State group had to get busy to make sure that the house would be left standing. They thought U.S. Steel was going to tear down the area's largest blast furnace, known as the hot end of the mill. If that furnace goes, it might be impossible to revitalize the other mills.So they redoubled their efforts, meeting with local mayors, mapping out a strategy to get political support for a feasibility study.

Tri-State PARTICIPANT: Folks are coming out of the rabbit holes saying that we can't put an absolute end, close to the valley and to our mills without some attempt to find out what their potential is before we shut them down.

Mr. STOUT: There ain't going to be nothing else without the hot end except a minimill.

Ms. REILLY: Whether or not Mike Stout's plans bear fruit, whether or not the ministers' actions bring changes, these organizers have at the very least given their followers hope.

Ms. REILLY: When you're laid off for so long you feel like nobody cares, and then there's somebody that's standing there saying, "Just call me. I'll be there for you. You know, it makes you feel good. At least you don't feel like you're in it all by yourself, and it does help."

HOLMAN: While the unemployed were protesting and planning, much of the rest of Pittsburgh was rejoicing in some good economic news. A local university received a large Defense Department contract, the mayor has announced a new regional economic plan, and a revitalization study was released. But no one can say with certainty how or whether these new long-range plans will help unemployed steelworkers.

LEHRER: Still to come tonight on the NewsHour, a look at what Khadafy of Libya may be up to now and why, and a look at what's happening under the state of siege in Chile. What To Do About Khadafy

MacNEIL: Next we focus on Libya and the bizarre drama which came to light this weekend in Cairo. After Libya boasted that its hit squad had assassinated former Prime Minister Abdel Hamid Bakoush, the Egyptians produced him alive on Cairo television and showed faked photographs that had fooled the Libyans into saying he was dead. Here's how Jack Thompson of the BBC told the story on Saturday.

JACK THOMPSON, BBC [voice-over]: Enter Mr. Abdel Hamid Bakoush, alive and well, an undoubtedly dramatic moment during a Saturday evening press conference in Cairo, and all designed to show how Egypts security forces had tricked Colonel Khadafy into believing he'd eliminated yet another opponent living in exile. And it was these photographs of the murder attempt faked by Egyptian agents posing as hit men which apparently fooled the Libyans and led them to broadcast the success of the operation over Tripoli radio on Friday afternoon.

MacNEIL: In Washington, as we reported, the State Department said it was appalled that the Libyan government would claim it was responsible for terrorist attacks on its critics. But Washington has other reasons to be upset by Libyan leader Colonel Muammar Khadafy. Both Libya and France agreed to withdraw their troops from the African nation of Chad. The French did, the Libyans didn't, and are still helping one side in Chad's civil war. And, late today, the Libyan government called for the overthrow of Egyptian President Mubarak. To explore Colonel Khadafy's "I'll do what I like" foreign policy, we have Lisa Anderson, professor of government at Harvard University and an expert on Libya.

Ms. Anderson, is this an isolated incident, trying to assassinate a prominent Libyan exile abroad?

LISA ANDERSON: On the contrary, it's part of a pattern that Khadafy has followed for at least the last five years of trying to eliminate the opposition abroad. This happens to be one of the most prominent figures in the Libyan opposition, and has drawn attention for that reason. But it's certainly not isolated.

MacNEIL: Why is he so concerned about the exiles?

Ms. ANDERSON: Well, he's been concerned for, as I say, a couple of years because that's where most of the opposition activity has been, in the exile community. Recently he's become more unhappy about this because the exiles appear to be developing ties with internal opposition in Libya. So he is following both increasingly repressive policies at home and a more serious effort to get the exiles abroad.

MacNEIL: It's even been reported in the last couple of days that he might be involved in a plot to overthrow President Zia of Pakistan and might have been involved in the assassination of Indira Gandhi. I mean, are those reports plausible to you?

Ms. ANDERSON: The involvement in Pakistan is plausible because he was an admirer of Bhutto's --

MacNEIL: The former prime minister who was hanged, found guilty and hanged by Zia.

Ms. ANDERSON: By Zia, exactly. He was an admirer of Bhutto's and was, at certain points, attempting to encourage the Pakistani nuclear weapons program to, presumably, his benefit. The reports that he was involved in the assassination of Prime Minister Gandhi in India are much less plausible. That's the kind of thing that people will attribute to Khadafy which he will never deny creditfor.

MacNEIL: He gets a lot of arms from the Soviet Union. Is he doing the Soviets' bidding, by any stretch of the imagination, or is there some community of interest whereby what he does is convenient for them? Can you put the two together?

Ms. ANDERSON: Well, one thing that's important to keep in mind about the Soviet-Libyan arms relationship is that the Libyans have been paying in dollars for those arms, which in itself is convenient for the Soviets because that's a source of hard currency, and that's billions of dollars.

MacNEIL: And he gets the dollars by selling his oil?

Ms. ANDERSON: Exactly. The Libyans [sic], however, have been unable to convince him to sign a treaty of friendship and cooperation, the kind of thing that is conventional in the Soviet camp in the Third World, and it's clear that they don't trust him. They call him a fanatic, some of the same terminology we use about him. He is, however, convenient to them. His opposition to the West and to Western interests is clearly something that is consistent with their interests. I think it's a marriage of convenience and I think it's a marriage of convenience from both perspectives.

MacNEIL: Now, when people like President Mubarak and the former prime minister who was the object of that assassination attempt call for Khadafy's overthrow -- Mubarak called him an international terrorist, and urged other nations to take steps against him -- can anybody do anything about Khadafy?

Ms. ANDERSON: I think not. There have been discussions for nearly a decade on the part of the Egyptians that they would attack Libya and precipitate the downfall of that regime and so forth. Any efforts to threaten Khadafy tend to backfire because people in Libya rally around the regime. It's clear that his standing in international circles is declining and will continue to do so, and that deploring his activities is a valuable thing to do. But to threaten him, to go so far as to threaten him, I think is counterproductive.

MacNEIL: Does the United States have any leverage?

Ms. ANDERSON: Well, in the long run or absolutely, of course they do, because it is American multinational corporations who are still bringing up the Libyan oil and who are involved in all sorts of construction projects and so forth and so on.So that there is a sort of absolute leverage. But the Reagan administration has shied away from taking policy initiatives like that, in part because that constituency, the American multinationals, is not one that they want to make uncomfortable.

MacNEIL: Now, looking to Chad, the African country immediately to the south of Libya, as I said, the French and the Libyans agreed to pull their troops out mutually. They were each supporting the other side in that civil war, the French supporting the government, Libya supporting the rebels. Libya's left them in there. What's the significance of that?

Ms. ANDERSON: Well, I think it was predictable that the Libyans in fact would not pull out. The principal interest that Khadafy has in Chad at this point is to get the French out, and so he's willing to promise to withdraw his own troops in order to have the French withdraw theirs. In fact, I think it was unlikely from the very beginning that he would withdraw all his troops, and certainly he was always left with the option of leaving his Chaddian allies in Chad and that they could invite him back once the French were gone. So from his point of view he has no particular interest in leaving Chad. What he wants is the French to leave.

MacNEIL: Well, he's achieved that. Now, what likely sequel will that have? The French are embarrassed and what else will happen?

Ms. ANDERSON: Well, I think it's turned into an American-French problem, not a Libyan problem at this point, because the French wanted the fig leaf to leave, and the Americans have clearly decided that a fig leaf is not adequate.They really want the Libyans out. And so it has become an issue between the United States and France, and the Libyans can simply leave their troops in until at least that's resolved.

MacNEIL: How important is it in terms of priorities in American foreign policy, would you say? How important is that?

Ms. ANDERSON: Well, I think opposition to Libya has been important under the Reagan administration since the very beginning for symbolic purposes as much as an assessment that he is genuinely dangerous. And in that sense the notion that the French are willing to let him get away with something is something that the Reagan administration, in any event, is unlikely to want to live with.

MacNEIL: Well, Ms. Anderson, thank you very much for joining us.

Ms. ANDERSON: Thank you.

MacNEIL: Jim? Chile: State of Siege

LEHRER: For the last few weeks the news from the south American nation of Chile has been growing steadily more grim, culminating with the declaration of a state of siege, followed by mass arrests of political dissidents and clampdowns on the press. It is the subject of our final focus segment tonight, to be conducted by Judy Woodruff. Judy?

JUDY WOODRUFF: Jim, the crackdown by the military dictator, General Augusto Pinochet, has stirred up opposition throughout Chile, and nowhere has it been more vocal than from the Roman Catholic Church. Yesterday, in Catholic masses conducted all across the South American nation, a pastoral letter issued by the archbishop of Santiago was read to the congregations. The letter condemned Pinochet's state of siege and called the suspension of civil liberties for 90 days a grave reversal for understanding and peace. Of the news media in Chile, only the church-owned radio was able to report on the archbishop's letter because of the censorship that's been imposed.

The heightened tensions between church and state are one indication of just how serious the situation in Chile has become.

[voice-over] Over the past 18 months, street scenes like these have become commonplace in Chile, especially in cities like Santiago, the capital. Students, trade unionists, slum dwellers, church activists, all vigorously raising their demands for more democratic government, for a return to elections, for an end to military rule. This resurgence of street violence led the government to declare a state of siege two weeks ago, suspending basic civil rights, imposing censorship and curfews. In another drastic step last week, the politically active slum of La Victoria, outside Santiago, was raided. Homes were searched and ransacked. Five thousand men were rounded up and herded into a soccer stadium. A similar roundup of 3,000 men had occurred a few days earlier in another slum.

Some of those suspected of anti-government activities have been sent into internal exile. Others were questioned and released. Still others have reportedly been taken to installations like this for torture and inquisition.

GABRIEL VALDES, opposition leader: People disappear, people killed, and the poor people especially, they suffer very much. We need solidarity from all the democrats in the world because we are fighting for very simple reasons. We are fighting for liberty, for freedom, for human rights. We want to have a democracy in Chile as we used to have for 150 years.

WOODRUFF [voice-over]: Democracy ended in Chile in 1973, in a bloody coup that toppled the leftist regime of an avowed Marxist, Salvador Allende. Allende had been popularly elected, but his uneven rule pitched the country into economic chaos. At first Chileans welcomed the orderly government of the army general who overthrew Allende. Under Pinochet Chile enjoyed a five-year economic boom from 1977 to 1982. In a cleverly orchestrated vote of confidence, Pinochet was empowered to remain in office until 1989, and all the while he vowed to restore democracy.

But the economy collapsed and Pinochet's repression became the target of demonstrations by Chileans from all walks of life. Much of the opposition comes from the slums, which house 40% of Chile's population, and where unemployment runs around 50%. The middle class, which first welcomed Pinochet's rule and reveled in its economic upturn, now faces 35% unemployment. Once-comfortable jobholders now hawk tooth-brushes or shine shoes or take menial government jobs sweeping streets.

Chile's powerful copper industry has also been plagued by the current recession. Strikes and protests last year by copper workers were crushed by arrests and firings, leaving the movement a weakened but determined part of the opposition.

In May, 1983, Monsignor Juan Francisco Fresno was installed as the Catholic archbishop of Santiago, replacing a fesity cardinal who had confronted Pinochet. It was seen as a move by the Vatican to temper the role of the church in a country that is 90% Catholic. Monsignor Fresno even opened talks to improve relations between protestors and government. But the talks broke down. A prominent Catholic clergyman was expelled, and now the archbishop of Santiago has joined the government's critics.

Yet, despite the opposition from so many quarters, Pinochet holds the unyielding loyalty of the military and the police, from which he draws the force to continue his rule, and he uses that force shrewdly to divide his opposition, giving some hope to those who want to edge him peacefully toward democracy, at the same time resisting those who want to lure him into an even more brutal crackdown that could lead to widespread revolt and overthrow.

[on camera]: We talk now to two guests about events in Chile. Mark Falcoff is a resident fellow at the American Enterprise Institute here in Washington, where he specializes in Argentina and Chile. He is the author of the recently published book, Small Countries, Large Issues, which includes a section on relations between the United States and Chile. He is joined by Aryeh Neier, vice chairman of Americas Watch, an organization which monitors human rights abuses in the Western Hemisphere.Mr. Neier returned last week from a trip to Chile.

Mr. Neier, let me begin with you. You have just returned, and we've seen some of these scenes of violence. Just how bad was it when you were there?

ARYEH NEIER: Well, you don't see the violence in the center of Santiago most of the time. The violence is primarily confined to the poor neighborhoods, the poblaciones, and I went out to one of those neighborhoods which had been raided by the air force, the army, the police, and looked at the destruction that had been left behind -- the clinic destroyed, the kindergarten destroyed, the houses ransacked, all the males in the slum arrested. That's pretty terrifying, but at the same time Pinochet is trying very hard to convey an atmosphere of normality and tranquility in the middle-class center of Santiago.

WOODRUFF: Well, are most Chileans aware of what is going on now that there has been the censorship?

Mr. NEIER: I think the censorship plays a crucial role in his policy. He is trying to tell most of the Chileans everything is okay, it's only those terrorists, it's only those slum people who are discontent. And censorship means that the raids on the slums are not covered in the newspapers. It means that the demonstrations, the protests are not covered in the newspapers. Last week in Santiago the newspapers were primarily concerned with beauty contests and sporting events. It had an eerie quality of tranquility in the center of the city.

WOODRUFF: Well, is it your sense then that he's successful in keeping what's going on from the rest of the population?

Mr. NEIER: Well, the principal problem he has is the church, because the church is able to operate throughout the country, throughout the city of Santiago, and even when the media of communication are censored, the church still disseminates information from the pulpit and through the variety of church activities that continue. So I don't think he's entirely successful, but he is partially successful at least in holding on, and that's his only aim at this moment, to hold onto power.

WOODRUFF: Mr. Falcoff, why Pinochet, why to make the move now?

MARK FALCOFF: Well, he really had to, from his perspective, because he has to show strength in order to hold onto his control of the armed forces. There is always a great deal of speculation on whether or not Pinochet and the armed forces completely agree on how to approach political problems.

WOODRUFF: Do you think they agree?

Mr. FALCOFF: They seem to so far. But periodically during demonstrations such as the ones we've just seen, in the past there have been little blips on the horizon which indicated a slight breaking of the front, and one example of that was last year when the commander of the Chilean air force spoke out against some of the conduct of the security forces. And very shortly after that Sergio Jarpe was named interior minister with the specific goal of trying to initiate a dialogue with the opposition. It is generally thought -- and, again, we're in an area of considerable speculation here, but I think informed speculation -- it's generally thought that the decision to hire Jarpa was made by other service chiefs, not by President Pinochet himself, and that Jarpa's long tenure under very difficult circumstances likewise reflects a desire on the part of some of the other generals and service chiefs to have an orderly transition back democracy, but always to maintain control over the situation.

WOODRUFF: So you're saying that there may be some -- there may be a silver lining in all this? Is that what --

Mr. FALCOFF: Well, we won't know, of course, until we've lived through this whole period. At least right now we don't know. Many conservatives and moderates, people who want to go back to democracy in Chile but want to do so in an orderly fashion, have hoped that Jarpa's role would be one of initiating a phased return to democracy, somewhat like occurred in Spain after Franco. But there is a big difference. In this case, Franco, in the person of General Pinochet, is still alive.

WOODRUFF: Then what are you saying immediately precipitated what's happening?

Mr. FALCOFF: Well, obviously, outside of these conversations that go on between the opposition politicians and Jarpa, and the generals and President Pinochet you have a reality outside the palace, which is the unemployment we've just seen and the tremendous economic setbacks and the growing dissatisfaction with the government, which is certainly very broad, although there is some support for the government, too, even now. But the point is perhaps all of the political actors are riding a tiger none of them can control, and when that tiger rears its head Pinochet instinctively reacts by cracking down so that he shows he's still in control, which is utterly essential to him, I think.

WOODRUFF: Mr. Neier, what is the state of the opposition there right now?

Mr. NEIER: Well, the opposition is divided. For one thing, politics was frozen in Chile after 1973, after the coup. Politics was illegal. And so the political leaders are all the people who were the leaders before the coup. To some extent I think they are out of touch with a next generation. Pinochet is very cleverly and very effectively trying to exploit a fear of a left-wing takeover should his government fall. There is a certain amount of terrorist activity in Chile and widespread suspicion that the government is in some way involved in the terrorist activity as a way of discrediting the opposition.

WOODRUFF: Well, what about the reference that Mr. Falcoff just made to this move toward -- an apparent move toward democracy before all this latest crackdown took place?

Mr. NEIER: Well, as Mr. Falcoff said, we're in the area of speculation. He speculates that other service chiefs imposed Jarpa on Pinochet in order to move towards democracy. At least from the way in which Sergio Jarpa has performed as interior minister, I think that he has in some respects helped to slow any move towards democracy. He has been part of the strategy in practice for dividing the opposition and keeping Pinochet in power.

WOODRUFF: Mr. Falcoff?

Mr. FALCOFF: Well, I wouldn't disagee with that, but I would say something, that just simply opening the dialogue with the opposition politicians served very nicely to divide the opposition, to reveal all kinds of differences. I remember last year El Mercurio published a list of 62 --

WOODRUFF: This is a newspaper.

Mr. FALCOFF: Excuse me. This is the conservative daily which has generally been progovernment, but now even it is apparently subject to censorship. It published a list of 62 known political groups by that time that had come out into the light of day in this kind of -- I don't want to speak too strongly of this -- but in this obvious loosening of political control by the government. I think the thing that Jarpa wants is to move at his own pace, but -- that's very obvious, but he does expect to play a political role as a civilian leader in democratic Chile in the future.

WOODRUFF: Is it possible the opposition could be wiped out by this latest move? Mr Neier?

Mr. NEIER: Well, I don't think the opposition can be wiped out because in part the --

WOODRUFF: Or, conversely, strengthened? I mean, what is your reading?

Mr. NEIER: Well, my reading is that the political opposition is one part of the opposition, but in many ways it is not the most formidable opposition. The most formidable opposition is the labor unions, and they have been victimized by repression but they continue to function, and they are capable of bringing an already cripplerd economy to a complete standstill. And I think the church is the most significant opposition. The church is entirely anti-Pinochet today, and a lot of Chileans, most Chileans, put their loyalties to the church above anything else.

WOODRUFF: Mr. Falcoff, any role for the United States to play in all this, the Reagan administration --

Mr. FALCOFF: Well, the Reagan administration and the Carter administration before it both attempted to influence the course of events in Chile, and in my judgment neither of them has been entirely successful. The loosening up of repression that we talked about, that was talked about on the film we just saw, occurred as the result of a period of economic boom and good feeling, not because of the Carter administration's policies, however meritorious they may have been in the case of individual victims of torture or what have you. Likewise, the Reagan administration has pursued a policy of quiet diplomacy. It seems to have been equally irrelevant to the movement of the Chilean economy --

WOODRUFF: And nothing the United States could do right now, you're suggesting?

Mr. FALCOFF: I think the United States has made its point of view very well known over the past 18 months.

WOODRUFF: Mr. Neier, would you --

Mr. NEIER: No, I don't agree with that at all. I think that the United States has spoken mildly, but essentially has sustained the Pinochet regime by continuing to make sure that it gets the loans that it needs to stay afloat. Without those international loans, the Pinochet government could not survive. In addition, the United States has refrained from criticizing openly the very severe abuses of human rights. It's only spoken in general terms.

WOODRUFF: Thank you, gentlemen, for being with us, Mr. Neier, Mr. Falcoff. Robin?

MacNEIL: Once again the main stories of the day. More than 200 people were killed and more than 500 injured when a natural gas plant exploded in Mexico City.

The United States and Nicaragua began new talks on their disputes.

Doctors said they're close to implanting an artificial heart for the second time. And personal incomes went up 0.6% in October.

Good night, Jim.

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