The MacNeil/Lehrer NewsHour

INTRO

JIM LEHRER: Good evening. In the headlines this Wednesday, President Reagan said the U.S. has proposed Geneva as the place and early March as the time for the new arms talks with the Soviet Union. The Senate Finance Committee voted unanimously to confirm James Baker as Treasury secretary, and the 1984 consumer price figures show the inflation rate was a moderate 4%. Robin?

ROBERT MacNEIL: These are the NewsHour contents tonight. After the news summary our first focus section is an update on arms control, with Senator Gary Hart just back from Moscow and Assistant Secretary of State Richard Burt. We have a part of James Baker's first appearance before Congress as Treasury secretary-designate. Economist Joseph Pechman discusses his new study that finds the poor paying more and the rich paying less taxes. And finally a documentary report on why there are so few contraceptive ads on TV.News Summary

LEHRER: President Reagan said today the U.S. wants the new arms talks to begin in early March in Geneva and is just waiting to see if that's all right with the Soviets. Mr. Reagan said the formal time-place proposal is on the table but we just have not heard back. He said, in an interview with the Associated Press, that the delay did not mean there was a problem, only that both countries have bureaucracies. And the new chairman of the Senate Foreign Relations Committee, Senator Richard Lugar of Indiana, said today in Washington the arms talks are not a substitute for the Reagan administration's strategic defense initiative known as Star Wars.

Sen. RICHARD LUGAR, (R) Indiana, Foreign Relations Committee: Arms control arrangements can affect the pace and the character of some military programs, but they cannot contribute substantially to the balance we require for our security. I firmly believe that without the introduction of the new strategic defense initiative we would have little reason to hope for any substantial or positive developments in arms control negotiations. SDI has already made its first contribution to arms control. The Soviet Union is back to the negotiating table. We should not expect the SDI to do too much too quickly, but we should be prepared for the fact that this research effort is here to stay and that its consequences will be great.

LEHRER: Soviet President Konstantin Chernenko said in a published message today that the Soviets will conduct the arms talks in a business-like and constructive manner and said he hoped the United States would do the same. Chernenko has not been seen in public for four weeks. A report from Moscow today quoted foreign diplomats saying he was ill, but his condition was not grave. We will be talking about arms control in our lead focus segment tonight, first with Senator Gary Hart and then with State Department official Richard Burt. Robin?

MacNEIL: One of the changes in the Reagan cabinet, James Baker to the Treasury, got swift early approval in the Senate today. After hearing Baker for only 2 1/2 hours, the Senate Finance Committee voted unanimously to recommend his confirmation to the full Senate. The majority Leader, Robert Dole, said that that vote could come as early as Friday. Baker was named to the Treasury job after President Reagan approved a job switch with Donald Regan, who will take over as White House chief of staff when Baker's confirmation is complete. In his testimony today Baker said President Reagan would give equal priority to tax simplification and cutting the federal deficit.

JAMES A. BAKER III, Treasury Secretary-Designate: My views are those of the President, and his views are that these are equal priorities for him on the domestic agenda.That is, tax fairness, tax simplification on the one hand and deficit reduction on the other. He alluded to tax simplification in his inaugural address, and he will speak more to that in the State of the Union, as will he speak to deficit reduction. It's his view that he'd like to consider those as equal priorities. He would like to see them proceed through the legislative process on separate tracks so that we don't get hung up in a negotiation on, "We'll do this much spending if you'll accept this much by way of tax increases." But in his mind they are equal priorities.

MacNEIL: In a focus section later in this program we'll have a longer excerpt from James Baker's testimony and the case for tax reform from Brookings economist Joseph Pechman.

The government confirmed today that consumer inflation remained modest through 1984. The December consumer price index showed prices rising 0.2%, making the increase for the whole year an even 4%.

LEHRER: The secret space shuttle did not fly off on its secret mission today, but it is now set to go tomorrow. It was cold weather at the launch site at Cape Canaveral, Florida, that caused the one-day delay. All five of the astronauts on the mission are military officers and their exact task in space is classified, but most reports say it involves placing a spy satellite over the Soviet Union.

The bitter cold that set records throughout the eastern third of the country abated some today. One hundred and forty-five people died in various cold-related incidents since Monday.

On the sports beat, legislation to block professional sports franchises from fleeing from one city to another was introduced in the Congress today. One bill would forbid such moves unless the team is losing money or playing in an inadequate sports arena. Another version orders the National Football League to expand by two teams, one of which would go to Baltimore, the other to Oakland. It was the loss of teams in those two cities and the threat of other moves that prompted the legislation. Similar bills in prior congresses haven't gone anywhere, but Democratic Congresswoman Barbara Milkulski, who represents Colt-less Baltimore and is a co-sponosr of one of the bills submitted today, says the need is greater now.

Rep. BARBARA MILKULSKI, (D) Baltimore: We now hear the rumors that the Eagles had tried to fly, the Cardinals want to leave the nest and the Saints want to sin by leaving New Orleans. We hope to be able to protect those communities in an orderly way, because when a professional sports team leaves a community, it leaves behind not only the broken hearts of fans, but often enormous debts for playing arenas that they helped create. One of the things that we've seen recently is that teams are leaving for financial greed rather than financial need. The Community Sports Team Protection Act will deal with that particular issue.

MacNEIL: The government announced today that aspirin makers have agreed to start a campaign next week to warn of a possible link between aspirin and the often-fatal children's disease called Reye's syndrome. The Department of Health and Human Services said the campaign will include posters and stickers in stores as well as radio and television commercials. The manufacturers also agreed to put new warning lables on aspirin products, but they won't appear until summer. All this follows release of a pilot study by the federal Centers for Disease Control suggesting that children who take aspirin for flu or chicken pox may run 25 times greater risk of getting Reye's than children who are not given aspirin for those illnesses.

In other medical news today, a consumer activist group founded by Ralph Nader said the federal government is withholding the names of more than a quarter of a million workers who face increased cancer risk from exposure to chemicals in the workplace.According to Public Citizen, the list of names was compiled by the National Institute of Occupational Safety and the Centers for Disease Control. They recommended that $4 million be spent to notify several thousand workers. But, the Nader group said, the administration never followed up because it wanted to protect industry from lawsuits. The administration denied that and told us tonight that it does intend to notify the workers, but it said it's moving cautiously to avoid unnecessarily alarming workers who may or may not be at risk.

LEHRER: Overseas today, in the Philippines shock waves from the 1983 murder of dissident Benigno Aquino continued. A government prosecutor charged the country's top general, armed forces chief Fabian Ver, and 25 others with involvement in the Aquino murder. Officials said there would be a free and open trial to prove there is no cover-up in the politically sensitive case.

In drought-stricken Ethiopia there is fear thousands of refugees may face a new killer, the disease cholera. Relief officials say 50 people a day are dying of cholera in one refugee camp alone. Along with starvation and malnutrition, famine refugees face typhus, relapsing fever, bronchial pneumonia and dysentery. And, in a related story, a U.S. Air Force cargo plane carrying 30 metric tons of food aid left today for the Sudan. The shipment, valued at $124,000 is for the more than 100,000 Ethiopian refugees who have sought help in the Sudan.

MacNEIL: Searches are underway for two U.S. military aircraft that were reported missing late yesterday. In the Caribbean, sonar contact was made with what's believed to be the wreckage of a C-130A cargo plane which went down in stormy weather off the Honduran coast. Twenty-one were on board. In the Pacific there's been no sign of a training plane which went down near Guam with nine men aboard. Dealing with the Kremlin

LEHRER: We focus first tonight on arms control, the Soviet Union and related subjects of import, and item one is a newsmaker interview with Senator Gary Hart, Democrat of Colorado and a 1984 candidate for the Democratic presidential nomination. He returned yesterday from a trip to Europe and the Soviet Union. He talked to several Soviet leaders, including two hours with Soviet Foreign Minister Gromyko. Senator Hart was thus the first American official to meet with Gromyko since the Gromyko-Shultz talks in Geneva.

Senator, welcome home.

Sen. GARY HART: My pleasure.

LEHRER: How would you characterize Gromyko's attitude toward these coming negotiations?

Sen. HART: I think he's serious to the degree hespeaks for the Soviet government. He was very, very explicit and very specific about the interrelationship of the space, the strategic and the medium-range systems. He said there'll be no separate negotiations on those three things in the sense of progress on one without progress on all. So they very strongly feel that the space initiatives, both space and defense, have to be on the table in the full sense of the word.

LEHRER: You used the word serious. Did you get the feeling when you left there after two hours that this man does want an agreement when it's all said and done?

Sen. HART: Well, I can't speak for him or their government, but I think they do approach these negotiations extremely seriously. He also said, by the way, that the didn't think we ought to go to the table and debate generalities. He said we ought to get to the table as quickly as we can -- he mentioned six to eight weeks. But he said we ought to bring -- both sides ought to bring concrete, specific proposals when they come.

LEHRER: What did he say about Star Wars, the satellite defense system?

Sen. HART: Well, he went on at great length, frankly. There was no -- basically no news there in the sense that he didn't say anything he hadn't publicly said before, including a rather extraordinary interview on Soviet television for about two hours. The two principal points were that this is an expansion of the already unacceptable arms race to a new dimension and, second, that it was going to be very difficult to disassociate research from actual production and deployment of those systems.

LEHRER: Do you agree with him?

Sen. HART: Well, no, I don't, I do to some degree, but not on the fundamental premise. I think we can have elemental research, laboratory research on defense of our satellites and continued research on laser and other technologies. But I do disagree with this administration's massive approach to this initiative.

LEHRER: In what way do you disagree with it?

Sen. HART: Well, I've mentioned the massive nature of it. This country can't afford $26 billion right now. We're running $200-billion annual deficits, and we have people that are out of work and hungry and other human needs. Second, I think it is -- I don't know very many serious scientists who believe that we can in fact develop this system, even for the estimated trillion dollars.

LEHRER: Do you think the fact that it's on the table jeopardizes the possibility of reaching an agreement with the Soviet Union?

Sen. HART: No, to the contrary. I think the administration is to be complimented for reversing its original position, saying it wouldn't negotiate over the systems. But when it says it will negotiate, it better be serious because I think the Soviets are expecting it to negotiate.

LEHRER: Do you agree with Senator Lugar that the Soviets wouldn't have even come back to the table if it had not been for this defense plan?

Sen. HART: Well, in 10 years of this work, that is to say, defense and arms control work, I've come to realize you can't really understand the motives of anyone else. I wouldn't begin to estimate why they did what they did. They make concessions, we make concessions. They said they weren't going to come back to the table until we had quit deploying new systems in Europe, but they came back anyway. So there's been, at least to that initial degree, a give on both sides.

LEHRER: You spoke with Mr. Gromyko for two hours. I assume that you did some talking as well as Mr. Gromyko. What did you tell him about your attitude and U.S. attitudes toward all of this?

Sen. HART: I said two things, really. I said that there was serious concern in this country, bipartisan, non-partisan concern over two major things: one, the human rights issues having to do with the rights of emigration and family reunification and just human treatment of dissidents and refuseniks in the Soviet Union and, two, that there were one or two serious questions about Soviet compliance with other agreements that bothered many of us who were pro-arms control.

LEHRER: What did he say?

Sen. HART: He turned pretty typically Russian at that point and denied everything.

LEHRER: You mean he denied he had human rights violations?

Sen. HART: Oh, yes, and of course denied that they were violating any treaties as well or even coming close to it. But his attitude turned very gruff and very angry at that point.

LEHRER: What did you say?

Sen. HART: I said, "Well, I didn't particularly care if it angered him, it was the truth and they had to face up to it."

LEHRER: I read somewhere, Senator, that you also suggested to him that the Soviet Union unilaterally stop research and deployment of nuclear weapons. Is that correct?

Sen. HART: No, what I said was that I thought we had to get the political and diplomatic initiative ahead of the scientific and technical. And the only way I could figure out how to do that was for both sides to declare a moratorium on one or more of their initiatives, either experimentation in space or deployment of all new systems or a comprehensive test moratorium patterned after the '63 Kennedy initiative. And I really asked what would be the Soviet response if the United States were to declare such a moratorium for six or 12 months. He did not flatly reject the notion, but he didn't adopt it either. In subsequent meetings that I had with some fairly key officials they came closer to showing interest in that effort, that they pointed out they had proposed moratoria in the past the United States had rejected; they saw no particular reason for them to take the initiative again. But I noticed that there was a degree of seriousness on those officials' part when I asked, would they seriously undertake to match such an initiative if the United States were to take it?

LEHRER: Let me ask you your personal judgment here. You obviously went to Moscow with your own views plus a feeling for what the administration is up to in all of this, and you then met with the leaders of the Soviet Union. Are you personally hopeful now that something is going to come of all of this?

Sen. HART: Yes, in a very general, I must say basic, sense. And I think we have to be hopeful. If we don't figure out some negotiated settlement, there is no military resolution of this except the use of these nuclear weapons. We're way beyond the boundaries of what's necessary for national security, and now it's just a mindless arms race as far as I'm concerned, so they're -- we can't unilaterally disarm. It's going to have to be a negotiated reduction. On the other hand, there is a certain degree of inflexibility on both sides that concerns me deeply.

LEHRER: Finally, a Chernenko question. Did you see him or did the subject of his health come up at all?

Sen. HART: It came up unofficially. I had asked to see him if he were available. I was told that he was not, and there was some intimation that the reasons were physical.

LEHRER: Anything you can add to this report today that he's ill but not grave?

Sen. HART: No.

LEHRER: You don't know anything?

Sen. HART: No.

LEHRER: Thank you. Robin?

MacNEIL: For a reaction to Senator Hart's observations and for an update on the official U.S. view of arms control developments, we turn to Richard Burt, assistant secretary of state for European affairs. Mr. Burt was a member of the U.S. delegation to the Shultz-Gromyko talks in Geneva and one of the architects of administration arms control policy. Mr. Secretary, first of all, does the Senator's report on his talk with Gromyko give any new slant on things?

RICHARD BURT: No, I don't think it does, which is not to devalue the Senator's conversation. I mean, we support communications with the Soviet Union, discussions on arms control and other subjects.But Gromyko, as the Senator himself pointed out, has been getting a lot of public exposure and he has been emphasizing the linkage or interrelationship between these various negotiations. They clearly would like to hold progress in the offensive nuclear negotiations hostage to the administration's strategic defense initiative, and we think this will be their strategy in the negotiations.

MacNEIL: And the U.S. position on that is?

Sec. BURT: Well, we recognize there are some important relationships here. In fact, when Secretary Shultz met with Mr. Gromyko he talked about the relationship between offensive and defensive forces, and reminded Mr. Gromyko that back when we signed the 1972 ABM treaty we said that our ability to continue to constrain our strategic defenses was dependent on achieving reductions in offensive forces. But at the same time we think it's a mistake to impose a mechanical linkage in these negotiations. We think if we can make progress in any one of the three negotiating groups that we should examine what those agreements are and if we think it's in our mutual interest we should go forward with those agreements.

MacNEIL: I wonder. You obviously talk a lot among yourselves; you've now had several weeks to think all this over and Mr. Gromyko has gone on saying, and again to Senator Hart, very explicitly, as the Senator just said, that in the Soviet view progress means progress on all three, and that progress on one of the three legs of these negotiations won't be enough. Is this an impasse before the talks actually begin?

Sec. BURT: No, I don't think so. The fact is, is both sides before or during the negotiations are free to establish any relationships or linkages they would like. You'll recall when the Soviet Union left the negotiations at the end of 1983 because the West had begun deployment of intermediate-range weapons in Europe, they didn't just stop the negotiations on intermediate-range systems. They walked out of the strategic arms negotiations; they even slowed down the conventional negotiations in Vienna. So it's interesting and it's important that we talk about these relationships, but it remains to be seen exactly what kind of a linkage will actually take plce in the negotiations. And, as I said, we think it's important to try to make progress in any one of the three, but we don't think that this pace of the slowest negotiation should be the governor of the overall negotiations.

MacNEIL: But he does think so?

Sec. BURT: That's what he's saying, but I think there's a political -- a very political, self-serving reason for that and that is they are trying to spotlight the President's strategic defense initiative as opposed -- and trying to take the pressure off themselves and trying to take attention away from their own very massive, in-place strategic defense capability.

MacNEIL: Senator Hart also said that Gromyko told him the talks should begin sooner than later but not sooner if it just leads to generalities. Is the reason that they haven't replied yet to the proposal for talks in Geneva early March that they're bargaining for more specific definition of the talks?

Sec. BURT: No, I don't think so, and while the President today stated that we are talking to the Soviets in diplomatic channels about convening the negotiations, we are not engaging in any kind of pre-negotiation. We are just --

MacNEIL: Are they trying to?

Sec. BURT: No, they are not. We're simply talking about really very logistical questions about time and place. We can speculate as to why they haven't agreed already, but we expect them, as the President stated, to agree in the near term.

MacNEIL: And what is the department speculation about why they haven't agreed yet?

Sec. BURT: It just very well may mean that they have to get the senior members of the Politburo to all agree on a time and place, and they haven't done that as of yet.

MacNEIL: Thank you. Jim?

LEHRER: Senator Hart, can you add anything to that as to why the Soviets have not replied to the proposal on time and place?

Sen. HART: No, I would think Secretary Burt's analysis is accurate. It's probably internal politics and I think it's probably a minor delay, not to be taken seriously.I would just make one amendment, if I could, so that my own reporting of the position is clear. Foreign Minister Gromyko did not say, according to my recollection, there will be no progress in any of these areas. What he said was there will be no final agreement. There will be no success, no ultimate success until we have solved -- we have serious negotiations in each of these areas.

LEHRER: That's a significant difference, is it not, Mr. Secretary?

Sec. BURT: Well, I think it's a difference, but, you know, what we want to do it --

LEHRER: No, what I mean, that's a significant difference between the progress and reaching an agreement --

Sec. BURT: No, no, but I think -- well, not necessarily because if you can make progress in a certain area, but then you can't codify it, you can't achieve an agreement --

LEHRER: I see.

Sen. HART: That was his point.

Sec. BURT: Then we've got a stalemate, and that's what we want to avoid.

LEHRER: Do you see this as a serious problem, Senator?

Sen. HART: The linkage?

LEHRER: Yes.

Sen. HART: Well, you and no. I think it's tremendously -- the whole idea of, frankly, exporting the arms race into space, wherever it starts, our side or theirs, is complicating for several reasons.One, it's enormously expensive. We can't afford it. The second is it's technologically questionable, to say the least, and, third, it enormously compounds the whole problem of arms control negotiations, and I think we're beginning to see this already.

LEHRER: Is he wrong?

Sec. BURT: Well, I think he is. And I would say, first of all, I don't think a phrase like "exporting the arms race into space" is very helpful to clear and rational thinking about the topic. There has been an arms race in space, as we pointed out, for some time. Soviet ballistic missiles, which they began deploying and testing back in the 1950s, fly through space. They have tested and deployed an anti-satellite system. Their ground-based anti-ballistic missile system, which is deployed right now around Moscow, intercepts -- could intercept U.S. missiles in space. So clearly -- and just to simply go on for a moment, both sides use space now for a variety of different military functions, including early-warning reconnaissance. The point is that the President would like to see, with a research effort, whether or not it's possible to move from a situation of mutual assured destruction, where we had a system based on deterrence to a system where both sides would be more secure than they are now.

LEHRER: You don't see it that way, Senator?

Sen. HART: Well, it's not really what I see; I think it's what a lot of people see. To say that ballistic missiles fly through space, therefore space is already militarized, frankly, not just the Russians' ballistic missiles fly through space; so do ours. And therefore what the President's proposing here is just a little more of the same, or maybe a lot more of the same, is nonsense, and I think Mr. Burt knows that.

LEHRER: In what way is it nonsense?

Sen. HART: Well, it's massive. We're talking about putting laser mirrors in space and particle beam weapons. I don't even think the administration has fully defined what this system is all about. They're going to spend $26 billion figuring out what the system is and then they're going to say, not knowing even what it is, that it's not militarizing space. I've seen all kinds of sketches -- they've been in the Air Force publications and so on -- that to say that this is just a continuation of what both sides have been doing is just not the case.

LEHRER: When you were talking to Gromyko about this, does he see it as a minor research effort, as --

Sen. HART: No, no, no. Clearly not. Obviously their official view is that it's major departure. I don't accept their official view. I do accept the view of an awful lot of thoughtful people in this country from the scientific and diplomatic community that it's a horrendously bad decision.

LEHRER: Where have you and your colleagues in the administration, from the President on down, gone wrong in not being able to explain that this is a research -- if it is in fact just a research effort?

Sec. BURT: Well, I don't think we've gone wrong. I think clearly, first of all, the Soviet Union wants to expound this view that somehow this American program is --

LEHRER: Well, let's forget the Soviet Union. Let's talk about the Senator Harts of this world who say --

Sec. BURT: Well, I think it's a little bit ridiculous on the one hand to say that the administration isn't sure what its own program is, but then on the other hand to argue that we all know it won't work. I mean, I can give you a long list of projects that reputable scientists, beginning in the 19th century and this century, have all said wouldn't work, including the guy in 1903 who said man could never fly. I think we're at much too early stage for anyone to conclude it won't work. There are a variety of basic technologies and applied techniques that this program is gong to explore. Perhaps Gary Hart in 1995, when he's on the MacNeil-Lehrer program can say, "See, I told you so, it wouldn't work," but I think that in the interests of trying to achieve a more stable nuclear balance and achieve nuclear reductions that a research and development program along these lines is worth a good shot.

LEHRER: Now, what's wrong with that, Senator?

Sen. HART: I said earlier that I thought we could afford limited continued research of the sort that we've been doing. This isn't an initiative in the sense we haven't been doing anything. We've spent literally billions of dollars on laser and particle-beam research over the past five or 10 years, frankly, predating the Reagan administration. Many of the people who say even the broad outlines of what the President is talking about -- really accomplishing massive defense of civilian populations is what he's really talking about. They say it won't work, and they're people who have been doing that research. So it's not as if the President invented something that hasn't been going on and that it's just a handful of elected officials who disagree with it on political or economic grounds. Now, there is a whole scientific community of all political persuasions who are saying the same thing.

Sec. BURT: Jim, I've just got to --

Sen. HART: I think we ought to go forward with, continue that research at the same level or slightly --

Sec. BURT: I've just got to come back to that editorial cartoon with the television commentator sayig that the strategic defense initiative, won't work, and then the woman asking her husband, "Then why are the Soviets so concerned about it?" I think they have a great deal of respect for our technological potential. I think that there are of course scientists in this country who think that it can work. There is of course an argument for at least investing the adequate and appropriate amount of resources into this program, remembering that the Soviet Union probably, until recently, has spent 10 times as much on strategic defense as the United States --

LEHRER: Gentlemen, we are fresh out of resources. Senator, Mr. Secretary, thank you both.

Sen. HART: Thank you.

Sec. BURT: Thank you.

LEHRER: Robin?

MacNEIL: Still to come on the NewsHour tonight, Treasury Secretary-Designate Baker testifies to Congress, economist Joseph Pechman discusses his new finding that the poor are paying more tax and the rich less, and we have a documentary report on why there are so few contraceptive ads on TV. New Man for the Treasury

LEHRER: Our next focus segment is on everyone's favorite subject, taxes. And item one in that is what James Baker told the Senate Finance Committee today.Baker, the White House chief of staff during the Reagan first term, is swapping jobs with Treasury Secretary Donald Regan for the second four years. The Finance Committee voted unanimously to confirm Baker after hearing him for 2 1/2 hours this morning. They heard him say, among other things, that tax reform was as important to the administration as deficit reduction. But he did not endorse the tax simplification plan offered by the Treasury Department in November. He said Mr. Reagan would offer his own in the State of the Union address next month. Here, in excerpts from the confirmation hearing, is more of what Baker and the senators said today.

Sec.-Designate BAKER: We must on a bipartisan basis bring greater fairness to the American tax system and make it simpler. We must increase incentives for savings and investment and we must thereby encourage the increased productivity that is the key to a better life for all. We must, on a bipartisan basis, reduce the projected deficits by cutting wasteful and unjustifiable government spending. As a start, we must work together to enact a total freeze on federal program outlays for fiscal 1986 relative to 1985. We must pursue monetary policies that keep inflation down and, over the longer term, reduce it still further while at the same time we assure strong and sustainable economic growth.

Sen. ROBERT DOLE, (R) Kansas, Majority Leader: There has been a lot of discussion about tax simplification. Some of us are concerned, or, not concerned but just wondering what we should do first. It seems to many of us that deficit reduction has to be a priority, and I'm wondering if you have any views on these two very important areas.

Sec.-Designate BAKER: Mr. Leader, my views are those of the President and his views are that these are equal priorities for him on the domestic agenda. That is, tax fairness, tax simplification on the one hand, and deficit reduction on the other. He would like to see them proceed on through the legislative process on separate tracks so that we don't get hung up in a negotiation on, "We'll do this much spending if you'll accept this much by way of tax increases." But in his mind they are equal priorities.

Sen. JOHN DANFORTH, (R) Missouri: Can you assure us that the administration's program for tax simplification will not somehow muscle out deficit reduction?

Sec.-Designate BAKER: Yes, sir. I can assure you that efforts to make the tax system more fair and more simple will not muscle aside, in terms of priority, our efforts to deal with the deficits. But they are equal priorities as far as the President is concerned. We wouldn't want the reverse to be true either, and that is that we would have to put tax simplification on the back burner until we had dealt with the deficit.

Sen. JOHN HEINZ, (R) Pennsylvania: As you know, there has been talk among Republicans, among Democrats, in the Senate, in the House about a budget freeze that includes a freeze on the Social Security COLA. Where is the President on the issue of Social Security?

Sec.-Designate BAKER: The President made a campaign commitment, Senator, with respect to Social Security that he would not do anything to reduce the benefits of Social Security.

Sen. HEINZ: Is he in favor of freezing the Social Security COLA under any circumstances?

Sec.-Designate BAKER: No. He is not therefore, as a result of his campaign statements, in favor of freezing it. Now, he did say at his press conference the other night if there was an overwhelming consensus up here on a bipartisan basis and it was sent down to him, he'd obviously have to take a look at it.

Sen. WILLIAM ROTH, (R) Delaware: There's a long editorial, I don't know whether you've seen it this morning or not, in the Wall Street Journal but that deficit reduction is really a code word for tax increase.

Sec.-Designate BAKER: We're not talking about tax increases. There is no sentiment within this administration that I'm aware of for a tax increase. We think that if there's one issue that was at the forefront of the last national election we had it was the issue or raising taxes, and we think that the American people spoke very loudly with respect to that issue and we think that their view is that, yes, we should do something about the deficit, but we should do it on the spending side. Who Pays Taxes?

MacNEIL: While James Baker was testifying about taxes and the economy, a leading advocate of tax reform, Joseph Pechman of the Brookings Institution, was releasing a new study called Who Paid the Taxes, 1966 to 1985?" Focusing on trends over the past two decades, the study concludes that the poor are paying a higher proportion of their income in taxes now and the rich a lower proportion than 20 years ago. The study says that the poorest Americans paid 16.8% of their income in federal, state and local taxes in 1966, but pay 21.9% today. The richest Americans paid just over 30% of their earnings in taxes 20 years ago, compared to only 25.3% today. Joseph Pechman is with us tonight. In simple terms, Mr. Pechman, why are the poor paying relatively more and the rich relatively less? What are the reasons?

JOSEPH PECHMAN: Well, the major reasons are that we have been increasing payroll taxes to finance Social Security and unemployment compensation during these two decades, and at the same time we have been de-emphasizing the corporate tax and the states and local governments have been collecting somewhat less in proportion to income from the property taxes. Since the payroll tax is a tax on workers, who are concentrated in the lower-income classes, and the corporate income and property taxes are taxes on capital, obviously the lowest-income classes are paying more today and the highest are paying less.

MacNEIL: What part did the Reagan tax cut of 1981 play in all this?

Mr. PECHMAN: These trends go beyond the Reagan tax cuts. They started in the early 1960s, as a matter of fact, when the Kennedy administration introduced liberal depreciation allowances and the investment credit, which were later increased. And this reduced the yield of the corporate tax. The increase in payroll taxes, of course, were set in motion many years ago when it was understood that as the system matured we would need more taxes to finance the Social Security system. So I would say that the Reagan tax cuts in 1981 continued the trend but didn't start it.

MacNEIL: So this has been a long-term trend?

Mr. PECHMAN: Yes.

MacNEIL: What about government programs for the poor?When you factor them in, everything from food stamps, aid to dependent children and everything else, when you factor those in, how does it come out?

Mr. PECHMAN: Well, it turns out that those programs actually improve the lot of the poor quite a bit because they're in effect negative taxes. And on the average, for the lowest 10% of the population the transfer payments, the Social Security, unemployment compensation and food stamps, actually almost double their incomes. So that the transfer payments are really a very equalizing factor in this whole situation. In fact, the contribution of taxes to equalizing the distribution of income is very small because the tax system, on balance, is only very modestly progressive, whereas the transfer payment system is highly progressive, and therefore that accounts for most of the equalization that is done by the tax transfer system.

MacNEIL: Does that then wipe out or neutralize your observation that the poor are paying a relatively higher proportion of their income in taxes than the rich are?

Mr. PECHMAN: No, what it says is that the transfer payments have been keeping a floor under the incomes of the lower-income classes. At the same time, another finding of the study is that the distribution of market incomes, that is, the incomes that people get by working and investing, has become more unequal. And it turns out, I suppose by accident, that the equalizing effect of the transfer payments has just about offset the unequalizing effect of market incomes. So that the distribution of income, that is, the shares of income received by the various income classes, is roughly the same today as it was 20 years ago.

MacNEIL: Can we put that in simpler terms, that the government is roughly helping the rich proportionately as much as it's helping the poor, or what?

Mr. PECHMAN: I would say that the government is helping the poor roughly enough to offset the reduction in their share resulting from the change in the distribution of market incomes.

MacNEIL: Now, what about the people in the middle? We've been talking about the poor and rich Americans. What about the great mass of Americans who are average Americans? What about their share of taxes?

Mr. PECHMAN: Their share of income has remained roughly the same over this period, and their tax burdens have remained roughly the same. Perhaps they've increase slightly. But I would say that there's been really no change in the status of middle America. It is certainly not the case that the middle-income classes have been losing ground.

MacNEIL: So to use the word you just used, progressive, you're saying that under both Democratic and Republican administrations, the American tax system over 20 years has become gradually less progressive?

Mr. PECHMAN: That is correct. That is exactly the --

MacNEIL: And what does that mean to you?

Mr. PECHMAN: Well, it depends on how you feel about progressivity. If you think that progressivity is wrong, unfair, then you would welcome this development. If you think that the tax system should be progressive, should be based on ability to pay and that income is a good measure of ability to pay, you would regard these trends as unfortunate. My own view is that a modest degress of progressivity in the tax system is desirable, and I didn't think that the 1966 degree of progressivity was excessive, so I am rather concerned that that has been eroded to a certain degree.

MacNEIL: What effect -- you've strongly supported this Treasury-proposed tax simplification or tax reform proposal. What effect would it have on the relative progressivity?

Mr. PECHMAN: Of course, the major thrust of the tax reform proposal is not to change the distribution of tax burdens by income classes very must or to change the total tax curden. However, the Treasury Department did recommend an increase in personal exemption, in fact a doubling of personal exemptions, which helps the lower-income classes, and also recommended a shift of about $25 billion from personal taxes to corporate taxes.Both these changes would increase the progressitivity of the tax system somewhat so they would at least halt and possibly reverse the trends we've seen for a little while.

MacNEIL: You're an old Washington observer of these matters. What odds would you give on that tax simplification package or one like it being passed this year?

Mr. PECHMAN: Well, needless to say I hope it goes through. I don't know what odds I would give, but I think that Secretary Baker has a tough row to hoe from here on out.

MacNEIL: Well, Joseph Pechman, thank you. Pitching Birth Control

LEHRER: Our final focus segment tonight is on a subject that, until recently, has been mostly a no-no for television, the commercial end of it, at least. It's birth birth control devices. For years the makers of contraceptives have been trying to urn commercials for their products on television, but most stations said no on grounds they would offend their viewers. It is a subject that stirs great argument, as correspondent Kwame Holman tells us in this report.

KWAME HOLMAN [voice-over]: In the mid-1970s this commercial for a condom was broadcast several times on two California TV stations. It was quickly canceled when viewers complained. If the sexual revolution begain with the introduction of birth control pills in 1960, 15 years later there was no place for the advertising of contraceptives on television. Three years later, in 1978, a major pharmaceutical house, Whitehall Laboratories, prepared this commercial for Semicid, their new, over-the-counter spermicide.

NARRATOR [Semicid commercial]: Semicid is effective, yet has no hormonal side effects.

HOLMAN [voice-over]: It was accepted by a few independent stations, attracted little attention and few complaints, but because no other stations and no major networks would use the commercial, Whitehall decided to concentrate on magazine advertising instead. Then, in 1983, another contraceptive maker, Thompson Medical Group, started advertising Encare on college radio stations.

ACTRESS [Encare commercial]: For me it's scary just thinking about getting pregnant. I mean, I'm still in college.

NARRATOR: Encare gives you effective, two-way protection without a prescription.

HOLMAN [voice-over]: Later they tried a television commercial.

NARRATOR: Encare contraceptive inserts.

ACTRESS: Encare is effective.

ACTRESS: It doesn't have hormones.

ACTRESS: I like the two-way protection.

HOLMAN [voice-over]: A handful of local TV stations and cable broadcasters used the commercial and waited for public reaction. Thompson Medical Group's marketing vice president is Don Lepone.

DON LEPONE, Thompson Medical Group: We have, through our experience in independent television, on cable television, developed a dossier of positive responses to our advertising from the different stations. We feel that's real market experience.

HOLMAN [voice-over]: With that apparent success with the public, the commercial was submitted to the major networks. They refused it. Alice Henderson is vice president of program practices at CBS.

ALICE HENDERSON, CBS: The reason for that, generally speaking, is that we feel that particular kind of advertising has a tendency, because we are a network function, to perhaps go against some of the moral and religious beliefs of people throughout the country, and we may be bringing that kind of material into their home unwanted.

HOLMAN [voice-over]: The story was similar at ABC. Alfred Schneider is vice president of standards and practices.

ALFRED SCHNEIDER, ABC: I think there are two issues that deal with contra -- one is the moral issue, is the appropriateness of advocating the sale of contraceptive products to the public when there is still a very obviously a controversial issue with respect to contraception. The second part of that is whether or not the subject of contraception is offensive to the American viewing audience in questions of taste and questions of appropriateness in terms of the audience to which it is directed.

HOLMAN [voice-over]: Last December Whitehall tried again, offering the networks new evidence of public acceptance of their commercial when it was aired in Denver and Las Vegas. Art Lawrence developed the ad.

ART LAWRENCE, Whitehall Laboratories: The walls didn't come tumbling down in either of the markets. We've been on the air in Pittsburgh, we've been on the air in southern California. We've been on the air in prime time, we've been on the air in daytime.

HOLMAN [voice-over]: Encare and Semicid have now been joined by a new product. The spermicidal sponge for women called "Today" has been on the market for 18 months. Its first TV commercial was completed in September. The approach is more soft-sell than the other commercials.

NARRATOR ["Today" commercial]: When you think about all the changes in the last 24 years, it's hard to believe your choices in birth control haven't changed at all. Until "Today." the 24-hour contraceptive sponge.

HOLMAN [voice-over]: Dr. Bruce Vorhauer invented the sponge.

Dr. BRUCE VORHAUER, "Today" inventor: There is a credibility associated with television that I think is necessary for our product. We're new. We've been on the market now a little over a year, a year and three or four months. And to establish that credibility by way of print media or newspaper and radio is possible; it just takes longer.

HOLMAN [voice-over]: Despite the gentle treatment, the networks are still concerned about negative reactions from religious groups, principally Catholics. Reverend Joseph Battaglia speaks for the Catholic archdiocese in Los Angeles.

Rev. JOSEPH BATTAGLIA, Los Angeles archdiocese: There is no stated opposition yet to the advertising of contraceptive devices. However, the principles involved in contraception would be the same, and the church would be opposed, I believe, to such advertising, basically because it continues to foster this idea of sex without responsibility, sex without any kind of repercussions. With that kind of a mentality, I think we continue people to stay in an immature attitude toward their sexuality.

HOLMAN [voice-over]: Leonard Pearlstein heads the ad agency for the "Today" sponge.

LEONARD PEARLSTEIN, "Today" ad agency: Nobody wants to offend a religious group. Nobody wants to be amoral or unmoral, certainly not us. No more -- no less so than anyone else. But I think the issue is, what about the group that wants to know?

HOLMAN [voice-over]: The manufacturers argue that advertising contraceptives on network TV could help reduce the number of unwanted pregnancies in America and serve to counter the concentration on sex of the networks' entertainment programs. Dr. Louella Klein, president of the American College of Obstetrics and Gynecology, agrees.

Dr. LOUELLA KLEIN, American College of Obstetrics and Gynecology: Television really pervades our lives in a sense and we see so many suggestive and sexy kinds of things on television without any counter of sexual responsibility, responsibility to prevent pregnancy, how to prevent pregnancy, and it seems to me that especially for teenagers that it is important for birth control and sexual responsibility to be credible, for it to be an accepted and usual part of life that people see, something that it is necessary to know about, to understand.

HOLMAN [voice-over]: A public interest group, the Center for Population Options, is working on the side of the manufacturers to get the networks to accept contraceptive ads. The center's deputy director is Jody Levin-Epstein.

JODY LEVIN-EPSTEIN, Center for Population Options: Television gives us sex day in and day out, all the time. On prime-time television, in all kinds of shows. Yet it fails to give us a message about responsibility.

Mr. PEARLSTEIN: It's kind of a Catch-22 because on the one hand you get this kind of programming, but on the other hand the same people who put that programming on the air say, "Well, I don't know if people can really deal with this product." Of course they can deal with the product.

HOLMAN [voice-over]: ABC's Schneider

Mr. SCHNEIDER: I think they should argue their case with respect to the appropriateness or inappropriateness for contraceptive ads without making comment on the quality of the program in their own opinions.

Ms. HENDERSON: Whether you have decided to kick back, relax and watch some fluffy love story or some gritty kind of a movie, I don't think you necessarily still expect to be sold that kind of a product. You may expect a beer commercial or a perfume commercial or something else, but not something that is perhaps against your own moral beliefs or religious beliefs.

HOLMAN [voice-over]: While the networks hold fast to their policies, all three contraceptive makers made a breakthrough elsewhere this summer. Ted Turner's superstation, WTBS in Atlanta, accepted all three commercials and aired them on cable TV systems that reach 40% of American households. The station runs six to 10 commercials daily, during daytime and prime time. WTBS ran its first Encare commercial in June. The station received a few dozen complaints, but after that public reaction virtually ceased.

NARRATOR [Encare commercial]: Discover birth control you can trust. Encare.

HOLMAN [voice-over]: Of the three manufacturers, the makers of the "Today" sponge are pushing hardest for maximum exposure. In September their ad agency went before TV sales representatives with a battery of facts and figures to help convince local station managers to accept the commercials.

Encare REPRESENTATIVE: And 58% of all the abortions that happened occurred among people who are under 20 years old. Obviously something isn't -- the word is not getting out there about birth control or people are just taking too many risks.

HOLMAN [voice-over]: The agency also surveyed the opinions of women aged 18 to 34. About a third objected to the contraceptive commercials, but just as many objected to the ads for tampons and douches now common on television. Despite all the arguments, local stations worry about the controversy.

LOCAL STATION MANAGER: How is the Moral Majority going to respond to this?

Encare REPRESENTATIVE: Is an unwanted child a moral issue? Do unwanted children grow up to be healthy, happy adults? You know, do you want to talk about morality? There's more than one side to that question.

HOLMAN [voice-over]: The "Today" sponge is making some headway. The commercial was accepted by more than 40 stations, including all the network-affiliated stations in several cities.

Dr. KLEIN: The truth of the matter is I think that if you see advertisements that there'll be questions in the home about birth control and people will really have to come to grips with how do you tell your teenagers about birth control. I think it may stimulate in fact what ought to be going on inside the home on sex education that's not presently going on.

Ms. HENDERSON: There probably is a lack of information and a lack of understanding with young teenage boys and girls, but I think that information should not come from a television commercial; it should come from their parents, their minister, a free clinic, their family physician, the pharmacist at the market, if they are making a conscious decision to participate, not from the 30-second commercial.

LEHRER: That report by correspondent Kwame Holman. Robin?

MacNEIL: Once again the main stories of the day. The United States has proposed that the new round of arms talks with the Soviet Union begin early in March in Geneva. On the NewsHour tonight, Senator Gary Hart said Soviet Foreign Minister Andrei Gromyko told him there could be no final agreement in the talks without progress in all three areas to be discussed.

The Senate Finance Committee voted unanimously to confirm James Baker as secretary of the Treasury.

And the consumer price index shows the inflation rate for all of 1984 to have been a moderate 4%.

Finally, the British saw some of their lawmakers on publicly broadcast television for the first time today, but it was not the popularly elected House of Commons. It was the hereditary and appointed members of the House of Lords. Here are two reports.

CHRISTOPHER JONES, BBC Parliamentary Correspondent [voice-over]: The Lords in the limelight. And the Lords have always been ahead of the Commons when it comes to the modern ideas. They had electicity 50 years before the Commons did. They had microphones with loudspeakers 30 years before, and while the Commons have never let the cameras into their ordinary debates, the Lords had them in 17 years ago. In 1968 they had a closed-circuit experiment.

HOUSE OF LORDS MEMBER, 1968: When young people leave school at 15 or 16, the early school-leavers, there is little or no effort to cater for their needs in sport, nor, indeed, in most other things, from my experience.

JONES [voice-over]: This wasn't actually broadcast, but they could see themselves at work, and it whetted their appetites for the public attention that TV cameras would give to their often ignored efforts. The Lords have placed very few restrictions on the cameras now, although they presume they wouldn't be too pleased if they concentrated on their, well, rather more relaxed moments. The British Parliament has lagged years behind most other nations in letting in the cameras. Some countries like Canada very strictly limit what they can show, but other countries have absolutely no inhibitions, even about their most excitable politicians.

U.S. CONGRESSMAN: You gave your reasons why, because the leadership whipped you to death, and you bled and you cried and you said, "Mr. Leader, Mr. Leader, I'm with you!"

[excerpts from Brazil, West Germany, European Economic Community disruptive meetings]

JONES: The House of Lords here, of course, is always very well behaved. There's absolutely none of that [unintelligible we're so used to these days from the lower house, the other place, the House of Commons, that is, just along the corridor from here. The Lord Chancellor presides on the Woolsack, he's also the Lords' speaker, but effectively he has no powers to control the behavior of the House of Lords itself. And it's a collection of bishops and bankers and men of the arts, of letters, of science and learning, and, as you'll see when the place is televised for six months, they are always impeccable, often very wise, very witty, well-informed, occasionally even boring. But impeccable.

GRAEME SHENTON, BBC [voice-over]: Today's live coverage began with the traditional daily procession into the chamber by the Lord Chancellor, Lord Hailsham. And the glare of the television lights seem to have brought about an unusually large turnout as several hundred hereditary and appointed peers and bishops of the Church of England crammed the red leather benches of the long, gilded, gothic chamber. Three former prime ministers were there, and the oldest peer present was Lord Shinwell, born in 1884. He entered politics in 1903, the same year the Wright Brothers first took to the air. A large proportion of the Lords are beyond normal retirement age, so it was with some passion that they tackled question time.

SPEAKER: Can the noble Lord please tell us that, should any noble Lord making an inordinately long speech, apparently succumb to the heat of the television lights, would that be classed as euthanasia?

SHENTON [voice-over]: The Thatcher government's economic policy was the subject of the Lords' first televised debate, and while the ruling Conservative Party enjoys a huge majority in the Commons, government ministers in the House of Lords don't always enjoy safety in num bers, and even the Conservative Lords are apt to speak their mind, such as Lord Stockton, former Prime Minister Harold MacMillan, who told the assembled nobles that Britain should look to the United States for an economic lesson.

HAROLDMacMILLAN, former Prime Minister: Four or five years ago when the rather depressing reign of President Carter came to him, they were very much in the position that we were in. And then President Reagan did a very wise thing. He dismissed all the academic economists in Washington.

MacNEIL: As you heard, it's an experiment for six months, but it's not likely to continue unless the House of Commons agrees to try it too, and that house has been resisting. Some observers say that's because some members of the Commons do not always behave like British ladies and gentlemen.

Good night, Jim.

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