The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening. Here are the lead stories this Friday. The U.S. and Nicaragua exchanged charges over the downing of a helicopter. Britain joined the U.S. effort to develop the Star Wars missile defense system. And the unemployment rate went down to 7 . We'll have the details in a moment. Charlayne Hunter-Gault is in New York tonight. Charlayne?

CHARLAYNE HUNTER-GAULT: Here's what we'll be doing in the NewsHour tonight. The latest U.S.-Nicaragua friction will be debated by a top State Department official and a congressional opponent. And two big-city mayors and Senator Phil Gramm argue over the fairness of his budget-balancing plan. News Summary

LEHRER: Relations between the United States and Nicaragua took another turn for the worse today. Secretary of State Shultz said a Cuban pilot and co-pilot were flying a helicopter shot down earlier in the week by U.S.-backed guerrillas, and he said the U.S. may take further steps to assist the rebels because of increased Cuban and Soviet involvement.

GEORGE SHULTZ, Secretary of State: I certainly am concerned about the Cuban presence and military presence in Nicaragua and on the mainland of this hemisphere. It's not news to us that this is taking place, but the bringing down of a helicopter with a Cuban pilot and co-pilot on it is sort of incontrovertible evidence. The fact that the Cubans are active militarily is clear, and the fact that this is happening through Soviet-supplied military equipment is clear.

LEHRER: Shultz denied the missile used in downing the helicopter had been supplied by the United States. The Sandinista government made that charge yesterday and recalled its ambassador to the U.S. for consultations in Managua. Charlayne?

HUNTER-GAULT: Britain today became the first nation to join President Reagan's Strategic Defense Initiative research program, Star Wars. Few details of the agreement were available, but Secretary of Defense Caspar Weinberger said British participation in the $26 billion project would provide that country with real business and real jobs. Secretary Weinberger also said he expected at least three more countries to join the project soon. We have a report from Chris Wain of the BBC.

CHRIS WAIN, BBC [voice-over]: The one demand which Mr. Heseltine had insisted on was eventually dropped. Britain had said there must be a cast-iron guarantee of 1 billion pounds' worth of work over the next five years. That was a promise Mr. Weinberger and President Reagan simply couldn't give. The areas which Britain will be interested in are the first and last stages of missile flight. British infrared technology, in particular, is ahead of the Americans'. Infrared detectors can spot missiles being fired before they come into radar view, and they can sort out real warheads from decoys. British radar engineers think they can develop a cheap new way of building very long-range precision radars. The Americans are known to be interested in British know-how on optical computers, which are much faster than electronic computers. And two British firms, Short and British Aerospace, are working on very fast missiles which can destroy warheads before they hit their targets. For the Americans today's agreement is politically important, because President Reagan at long last has a European ally involved in the Star Wars project.

HUNTER-GAULT: There was a series of bomb explosions in Europe today, the worst in Belgium, where two bombs exploded in the courthouse in the city of Liege, killing one person and slightly injuring two others. Police speculated that the intended victim was the Belgian justice minister, who was late for a ceremonial appearance at the building. So far no group has claimed responsibility for the bombing. The other blasts occurred about 10 hours earlier in Belgium and France, damaging a NATO pipeline and the civilian agency that manages it. A left-wing guerrilla group claimed responsibility for these bombings. Police said damage at both locations was relatively small.

LEHRER: The U.S. unemployment rate fell a tenth of a percentage point last month, down to 7%. That is the lowest it's been during the five years of the Reagan administration. The Labor Department said 8.1 million Americans were out of work in November, a decrease of 151,000 from October. On other economic fronts today, the U.S. trade representative issued a stiff warning to Western Europe and Japan. Clayton Yeutter said they were inviting a political explosion in the United States if they continued to maintain unfair trade policies. Yeutter said it in a speech to an international economic forum in Geneva.

And Senate and House negotiators reached an agreement late this afternoon on a way to balance the federal budget. The plan would force across-the-board cuts equally for military and domestic spending programs.

HUNTER-GAULT: In Seattle, a Vietnam veteran who had fasted 51 days in an eight-foot-square bamboo hut to call attention to Americans still missing in Southeast Asia ended it today after the intervention of President Reagan. Thirty-four-year-old Gino Casanova spoke yesterday by phone with Mr. Reagan, who promised to meet with Casanova within two months to discuss the MIA issue. Casanova told reporters he felt good except for some dizziness. He had planned to fast for 61 days, with each day representing an MIA from Washington state. Casanova lost about 45 pounds during his 51-day fast.

LEHRER: Finally, two closing items. Retired U.S. Supreme Court Justice Potter Stewart is in a Hanover, New Hampshire, hospital in critical condition. There were unconfirmed reports he had suffered a stroke while visiting relatives. Stewart retired in 1981 after serving 23 years on the highest court of the land. And in Minnesota, the state supreme court ruled that an eight-and-a-half-month-old fetus is not a human being. The ruling came in a decision involving the death of a fetus in a traffic accident. The court sustained a lower court's dismissal of criminal charges against the driver of the car held responsible for the accident.

HUNTER-GAULT: Stay with us for more on the NewsHour as a top State Department official and a congressional critic debate the new flap between the U.S. and Nicaragua. And two big-city mayors take on Senator Phil Gramm over the fairness of his budget-balancing proposal. U.S.-Nicaragua: War of Words

LEHRER: The United States versus Nicaragua and vice versa is where we go first tonight. The Sandinista government of Nicaragua claims the U.S. supplied the missile rebels used to shoot down a helicopter earlier this week. The U.S. government says that is not so, and countercharges that the pilot and co-pilot of the helicopter were both Cuban, an additional sign of an increased and direct military involvement by Cuba in the military affairs of Nicaragua. Secretary of State Shultz said at a news conference today, this development could lead to further U.S. help for the anti-governmewn3t contra guerrillas. Here's what Shultz said.

Sec. GEORGE SHULTZ: There's no truth to the charge that these weapons are being supplied by the United States. Our legislation prohibits that, and we are faithful to the legislation. Obviously these kinds of surface-to-air missiles are available on the international market. We know that the Nicaraguan communists have plenty of them themselves, and so it may be that they got them out of -- captured them from there, but somehow or other they got a hold of them. And the point is that the Soviet and Cuban presence and materiel is there and being used against the Nicaraguan people, and thank goodness that they did get a hold of some weapons that can knock these choppers down and were able to use them. It is incumbent on us as a moral matter as well as a strategic matter to support those in Nicaragua who are fighting for freedom in that country. and we will continue to do so. We will support our friends and try to help them develop and flourish, and democracy take root and flourish, and will continue to oppose what the Cubans, the Nicaraguans, with Soviet support, are trying to do in the region. It's not only bad for Nicaragua; it's a cancer in the region.

LEHRER: We've got a Nicaraguan response from the deputy chief of the embassy here in Washington, Manuel Cordero. He spoke with reporter David Shapiro.

MANUEL CORDERO, Nicaraguan Embassy: They don't have any proof, and the facts are not there. I mean, their charges are made up totally.

DAVID SHAPIRO: There are Cubans in Nicaragua, are there not?

Mr. CORDERO: Yes, there are Cubans in Nicaragua, as well as from more nationalities. But the Cubans that are in Nicaragua have remained in more or less the same numbers that have been for quite a while, and we don't expect them to change in the future. So this is -- the timing of their declaration is more tuned into some sort of campaign that they are starting to get funding for the contras. The administration thinks that by using this argument, by using this spectre of some sort of Soviet-Cuban involvement in Nicaragua, they can scare Congress into giving more money to the contras. And we think that it is obviously a very cheap trick, but they think that they can be successful with it.

LEHRER: It was Elliott Abrams, the assistant secretary of state for inter-American affairs, who first raised the issue of increased Cuban involvement in the Nicaraguan fighting. He did so in congressional testimony yesterday and he is with us now.

Mr. Secretary, you heard what the Nicaraguan official said, that this is just a cheap trick on the U.S.'s part to get Congress to allocate more money for the contras.

Sec. ELLIOTT ABRAMS: In a brief statement he had an awful lot of lies. For one thing, it is the case that the pilot and co-pilot were Cuban. It is also the case, as we demonstrated in some papers we gave out today, that there is a long record of Cuban combat roles in Nicaragua. Today we declassified some materials that dozens of defectors had given us on the Cuban role. These are all accounts collected in 1985 of the Cuban combat role in Nicaragua.

LEHRER: Now, what is that role? Characterize it for us.

Sec. ABRAMS: Well, it began as an advisory role, in the Ministry of Defense, in the Ministry of the Interior, which does a lot of combat work too, and it has moved over time into a direct combat role. In infantry units they are there, they are shooting.

LEHRER: These are Cuban soldiers.

Sec. ABRAMS: There are Cuban soldiers, leading these brigades, fighting in these brigades. Some of them are mixed brigades of Cubans and Nicaraguans. They also have an air role. We noted that these new Soviet helicopters are being piloted with enormous amounts of skill, and we wondered sometimes, how is it that the Nicaraguans have learned so fast? The answer is, they're not Nicaraguans, they are Cuban pilots from the Cuban air force, sent to Nicaragua to do the fighting for them against the freedom fighters there.

LEHRER: He says you had no proof. What is the proof of what you just said?

Sec. ABRAMS: There are reams and reams of intelligence material, all of it available to the House and Senate intelligence committees -- all of it. Some of it has been declassified here. It's all available to the relevant committees of Congress. It is crystal clear what is going there. You know, they change their tune every once in a while, and sooner or later they'll admit that this is going on too and probably claim that they have some justification for it. But it is absolutely clear evidence.

LEHRER: Secretary of State Shultz said that further action may be necessary by the United States to help the contra guerrillas who are fighting the Sandinista government. What further steps are under consideration?

Sec. ABRAMS: Well, the question really is one that should be directed to Congress. The administration has always said that we felt we should be doing more. We should be giving them greater levels of aid, we should be giving them increasing kinds of aid, and ultimately the question will arise in Congress, I think, as to whether we should be giving them some way to defend themselves against these Soviet helicopters with their Cuban pilots. Right now we give them bandages, which is nice, but shouldn't they have a better way to defend themselves?

LEHRER: The humanitarian aid.

Sec. ABRAMS: That's right. The question is whether that really is sufficient for people who are the only real chance of putting pressure on the Sandinistas and creating a democracy in Nicaragua.

LEHRER: Is it your position -- you mentioned lies -- that the Nicaraguan government charged that that missile was supplied by the United States? Is that a lie?

Sec. ABRAMS: That is an absolute lie. And again, the members of the House and Senate intelligence committee know precisely what the United States used to give the contras when we were permitted to give them military assistance, and it's just ludicrous.

LEHRER: Is this just an incident over a downed helicopter and a Cuban co-pilot and pilot, or is this a strong ratchet turn in the bad blood between the United States and Nicaragua?

Sec. ABRAMS: Well, what did the administration do? All we did yesterday was tell the truth, a truth that because we like to protect intelligence sources we hadn't said much about publicly, although we had said it to the intelligence committees -- that there are Cubans in a major combat role in Nicaragua. Now, if it's ratcheting up just to tell the truth about what's going on in Nicaragua, I just think that's wrong. What we did was to say what's happening, and their reaction is theirs.

LEHRER: Well, I meant that as a question, not as a statement, and you're saying no, this does not mean that things have gotten suddenly worse the last few days between the U. S. and Nicaragua? That's what I'm trying to get at.

Sec. ABRAMS: Well, the --

LEHRER: Is this a big deal or not?

Sec. ABRAMS: What is a big deal is the Cuban combat role, which the administration has now decided to go public on -- that is, declassifying this intelligence information and informing the Congress -- not just the intelligence committees, whole Congress -- and the people as to what's going on. And the question as to whether it's a turning point in the U.S. role down there is really one that's going to have to be put to Congress.

LEHRER: Do you think it should be?

Sec. ABRAMS: Of course it should be. We have to respond to that Cuban role.

LEHRER: Thank you. Charlayne?

HUNTER-GAULT: A different view now of the Cuban factor and how the U.S. should react; it's from Sam Gejdenson, Democrat from Connecticut and member of the House Foreign Affairs Subcommittee on Western Hemisphere Affairs.

Congressman, what's your reaction to the U.S. revelations today about the Cuban role?

Rep. SAM GEJDENSON: Well, I think it indicates a couple of things. It firstly indicates that the Reagan policy continues to fail in Central America. Back in 1981 when the administration began this policy, the argument was that there were Cubans and Soviets there and we had to stop it. Today Secretary Shultz and my friend Elliott tells us that that role has increased, that all the things that the administration has gotten done in Nicaragua in support for the contras has actually increased the role of the Soviets -- arguments we made four years ago.

HUNTER-GAULT: So you accept -- in the first instance you accept the evidence and the statements that Mr. Abrams and Mr. Shultz made earlier?

Rep. GEJDENSON: Well, we're in a difficult position to argue the exact numbers. I think that the administration does have a credibility problem. As you recall, the President began this assault on Nicaragua arguing that it was interdict arms to El Salvador. That veil was soon pulled aside, and he finally admitted, yes, it was an assault on the Nicaraguans. So the administration doesn't have a lot of credibility on Capitol Hill. It is pursuing a policy that it doesn't have broad-based support for in the Congress or in the general public; and the lesson that this administration ought to have learned from history is that the United States, when it engages in a policy that has very peripheral support in the public and Congress, is doomed to fail. What Elliott has told us here today and what Secretary Shultz has told us today is that four years of the Reagan policy in Central America -- and he can say that the Congress didn't give him enough, but he knew what he could get from the Congress -- four years of that policy has worsened our position.

HUNTER-GAULT: What about his point that it is crystal clear what is going on there? Is it as clear to you as it is to him, and is it the same vision that you both are seeing?

Rep. GEJDENSON: Well, I think the differences are these, that what we've done is taken the largest country, the most powerful country on the face of this earth; taken a government that we have grave displeasure with, and provided economic, military -- and now they're attempting to get humanitarian assistance there, although the Hondurans won't cooperate, so a lot of that has been sent back -- in a policy that's doomed to failure. And that's part of -- the crux of our difference. If every government we disagree with, we took these actions, we would find ourselves supporting military insurgencies in Libya, in Iran, Iraq -- all across the globe. What we find is an administration that is caught up in its rhetoric. It is against communist regimes. My parents and my family fled the Soviet Union in '46. Most members of Congress oppose nondemocratic governments. But the problem here is that most members of Congress recognize this is a policy doomed to fail.

HUNTER-GAULT: Well, how concerned are you about the Cuban presence there?

Rep. GEJDENSON: Well, I think that our concern is that the continued American pressure leads to growing Soviet and Cuban influences, that the policy that the administration has undertaken leaves us very few options. They have a policy of supporting the contras that will not succeed militarily -- there is no light at the tunnel. The Nicaraguan response will be to continuously go to the Cubans, Soviets and others for additional military assistance, and that will lead to greater failure for United States policy in Central America.

HUNTER-GAULT: And you just don't buy Secretary Abrams' argument that greater levels of aid would help the contras defend themselves more rather than just the Band-Aid approaches, that the answer lies in the Congress?

Rep. GEJDENSON: Well, I believe two things. One, that greater levels of military assistance will only raise the battle and end up with more human carnage and very little different results, in the final analysis. And additionally, once again, the administration has entered an area where there isn't public or congressional support to give the kind of military assistance that could lead to a victory. If you want to win in Nicaragua, this isn't a small island in the Caribbean; you're going to have to commit American troops in large numbers. The Sandinistas are dug in, they are well prepared. It will be a bloody and costly battle. If it is as dangerous as the administration thinks, let them come to Congress and ask for a military carte blanche, because that's what it's going to take to get the kind of victory that they're looking for.

HUNTER-GAULT: Well, thank you. Jim?

LEHRER: Mr. Secretary, is that where this is headed?

Sec. ABRAMS: Nourrender -- Cuban combat role in Nicaragua, kill the freedom fighters, fine. What if they try El Salvador next? Cubans in El Salvador -- let me finish. Cubans in El Salvador? Okay. You're going to take that too? You're going to say fine, Cubans in Guatemala? Where are we going to stop the notion that Cubans can come into a combat role in Central America? We are not in favor of using American tGng support for this administration's policy. And as I just said --

Rep. GEJDENSON: Not in Central America.

Sec. ABRAMS: -- 21 negative votes in the House of Representatives -- 435 members, 21 negative votes. That's support.

Rep. GEJDENSON: What kind of timetable are you giving us for when this is all going to work? We've had four years of increased --

Sec. ABRAMS: That depends on the level of support that Congress gives.

Rep. GEJDENSON: How much do you want? What do you want?

Sec. ABRAMS: If we have anything to bring up to Congress, as the secretary said this morning, we will do it when we have put together a plan that we think we should present. I just want to say again that your view that there is no support in Congress is increasingly passed by time. At one point there wasn't support; then Congress came around for humanitarian aid; now they've come around for transportation -- planes and vehicles. It's clear what direction Congress is moving in. And you may be left behind, but it's clear where Congress is moving. And it's for more support because of the Cubans and because of the support for terrorism that comes from Nicaragua.

Rep. GEJDENSON: What's happenedhere is that the administration once again has locked itself in a policy that it can't seem to turn around direction and take a look at alternative options. There is --

Sec. ABRAMS: Like surrendering to the Cubans and the Soviets. That's an alternative option. Walk away from it.

Rep. GEJDENSON: That's a great sleight of hand, that the only alternative is either supporting your policy in Central America that has failed or total surrender. To the contrary, there are alternatives that you're not willing or haven't been willing to date to undertake.

Sec. ABRAMS: The alternative is reconciliation, and the Sandinistas have rejected it for five years.

Rep. GEJDENSON: For five years. In the process of having an agreement in the Contadora process, the Reagan administration pulled the rug --

Sec. ABRAMS: Who walked away from Contadora?

Rep. GEJDENSON: The Reagan administration.

Sec. ABRAMS: Excuse me, there was a Contadora meeting at the meeting of the OAS general assembly, which the U.S. attended, and the Nicaraguans refused to send somebody to attend it. In Rio last year there was a meeting, and I think you know this -- they were almost at an agreement on internal reconciliation, and the Nicaraguans, the Sandinistas, walked out. And again, I have to tell you that that is very well understood in South America.

Rep. GEJDENSON: Well, to the contrary, a number of people both on the Hill and in Central America that I've spoken with have the feeling that the administration from the very beginning had no commitment to the Contadora process. And I think if you take a look at the actions that this administration has taken and if you honestly review your own actions, you'll find that that's the case. Now --

Sec. ABRAMS: Once again, blame America, blame America. Never blame the communists --

Rep. GEJDENSON: That's great rhetoric.

Sec. ABRAMS: Never blame the Cubans, never --

Rep. GEJDENSON: That's great.

Sec. ABRAMS: You haven't said one thing about the Sandinistas or the Cubans. Blame America, that's the policy.

Rep. GEJDENSON: Because what we find is that we only can affect our own policies. What you -- [crosstalk] brought America into a policy of disgrace in Central America again.

Sec. ABRAMS: Let them take Central America, that's the policy.

LEHRER: Gentlemen, thank you for gracing us with one of the best arguments I've ever heard on the Nicaraguan question. Thank you. Charlayne?

HUNTER-GAULT: Still ahead on the NewsHour, two big-city mayors debate Senator Phil Gramm over the fairness of his budget-balancing plan.

This is pledge week on PBS, and we're taking a short break now so that your public television station can ask for your support. That support helps to keep programs like this one on the air. We'll be back shortly.

[Pledge Week Intermission] Gramm-Rudman: Unfair Burden?

LEHRER: Whatever happened to that snowball called Gramm-Rudman-Hollings, is the question we ask next. What two big-city mayors think should happen to it comes right after that. Gramm-Rudman-Hollings is the legislation that would mandate a balanced budget by 1991. The Senate passed a version and the House passed a version, but the twain have yet to meet. Conferees have been trying to forge a compromise, but so far with sparse success. It is attached to a needed and otherwise routine increase in the debt ceiling limit, so the pressure has been on to get it done. Several key negotiators met again today, among them being the Gramm of Gramm-Rudman-Hollings, Senator Phil Gramm, Republican of Texas.

And I understand, Senator, that you all reached some kind of deal, is that right?

Sen. PHIL GRAMM: We did, Jim. What happened to Gramm-Rudman-Hollings is that it started out as a sprint, it turned into a marathon, but the net result is tonight we reached agreement. On Monday we'll mark up the compromise, and on Wednesday we'll adopt it in both houses of Congress.

LEHRER: Generally, who gave what and what's the end result?

Sen. GRAMM: Well, the end result is we have a six-year program to bring the deficit under control; to set out in law the target of balancing the budget; to force the President to submit budgets within that target, make it not in order for Congress to even consider a budget that doesn't meet the target; make amendments on the budget zero sum so that if somebody wants to raise money for mother's milk, they got to kill off a hog somewhere in the budget to pay for it, since they can't raise the deficit with an amendment; to do something unheard of in Washington, which is make the budget binding so that you can't bring a bill to the floor that violates it; and then at the end of the budget cycle, at the beginning of the fiscal year, the President is mandated, in a strictly ministerial function, if we don't do our job, to reduce all automatic increases and all controllable expenditures across the board proportionately to eliminate the overage; then we can come back and do it in another way if we choose.

Now, the Democrats starting out wanting 28 exceptions. We gave them eight. We set up a special program for health care programs, ranging from Medicare to veterans' health, and we treat it with a separate type of sequestering.

LEHRER: And they are exempt? That's what the Democrats wanted.

Sen. GRAMM: They wanted 28 exempt; we ended up granting eight exemptions -- about $60 billion out of a trillion-dollar budget. We set up a special medical program listing everything from Medicare to veterans' health, and we set up a special process to make it part of the sequestering mechanism. So it's a compromise, but I think it clearly preserves everything we set out to do in establishing a binding budget and a process to balance the budget.

LEHRER: What about defense? How is defense treated in the compromise?

Sen. GRAMM: We set out a 50-50 division. The last Gramm-Rudman proposal that passed the Senate achieved a 50-50 division between defense and nondefense. If there is an across-the-board cut, if Congress and the President don't do their job, our compromise would simply let 50% of the across-the-board reductions fall on defense, 50 fall on nondefense.

LEHRER: So in other words, that's a great incentive for those who are in favor of a larger defense spending, to get the job done. Is that what that means?

Sen. GRAMM: Well, what this does is, it puts pressure on both the President and the Congress to do their jobs. People talk about does it give the President power and take it away from the Congress? The truth is it takes power away from the President, power away from the Congress, and the power it takes away is the power not to act, the power through their indecision to pass the cost of spiraling deficits on their children and grandchildren, and the cost in interest rates onto the American worker.

LEHRER: All right, Senator, don't go away. Charlayne?

HUNTER-GAULT: One of the many constituencies upset about the Gramm et al proposal are officials of cities around the country. Many of them have already experienced a reduction in federal dollars since the Reagan administration came to power, and many have had to raise local taxes to compensate. Faced with the balanced budget plan and greater reductions, they've placed the issue at the top of their agenda this weekend at the annual meeting of the National League of Cities in Seattle. To give us some specifics on their concerns, we go now to two big-city mayors, George Voinovich, a Republican from Cleveland and the outgoing president of the league, and his successor, Democrat Henry Cisneros of San Antonio. They both join us from public station KCTS in Seattle.

Gentlemen, starting with you, Mayor Cisneros. What's so upsetting to you about what you've just heard?

Mayor HENRY CISNEROS: The problem is that when you begin to implement Gramm-Rudman in the years ahead, what effectively will happen will be a fundamental reordering of the relationship between the federal government and the cities. We expect, for example, that revenue sharing, which came in under President Nixon and has been an important part of federal policy for the last 15 years, will not only be eliminated next year but probably curtailed this year. UDAG --

HUNTER-GAULT: Excuse me. Revenue sharing being a general pot of money that goes to the cities to spend any way they choose.

Mayor CISNEROS: That's correct, that's correct. And other key programs that have been very important in keeping cities surviving and prosperous, like the community development block grant programs and Economic Development Administration and others -- our best estimate is that those will be completely eliminated. Job training programs, mass transit programs will likely be completely eliminated. Now, the difficulty of that is simply that many of our cities function as engines of the national economy and that we will find cities, not just another lobbying group -- this is not the realtors, this is not the oil interests or anything else -- these are 80% of the people of the country that live in cities in America will find themselves with higher local taxes or reduced services because of the impact of these cuts.

HUNTER-GAULT: Mayor Voinovich, what specifically is going to happen in Cleveland if Gramm et al passes?

Mayor GEORGE VOINOVICH: Well, Gramm-Rudman actually is the last nail in the coffin of destroying the relationship between the federal government and our cities. It's an indication that there are people in Washington today who don't understand that domestic spending is just as important as defense spending, and it fails to take into consideration that during the last several years cities and programs dealing with problems that we have in our cities have been cut over 50%. It fails to realize that most of us have increased our taxes 50%, that we're running our cities -- for example, in Cleveland we're running our city with 650 less employees; that the capacity to respond to the problems of those programs that they're going to destroy as part of Gramm-Rudman are going to do irreparable damage to the quality of life of Americans who live in our cities.

HUNTER-GAULT: All right. You said 600 less employees. In specific terms, what other kinds of concrete things do you think will happen in Cleveland as a result of this bill?

Mayor VOINOVICH: Well, let's face it. If Gramm-Rudman goes in, revenue sharing's gone, as Mayor Cisneros said. Revenue sharing --

HUNTER-GAULT: But what does that mean in practical terms for Cleveland?

Mayor VOINOVICH: Well, what it means is that 576 people, 6% of our workforce, is going to be laid off, and most of them policemen and firemen. What it says is that the streets of Cleveland are not going to be safe, and that's the point we've been trying to get across to them in Washington for the last several years. And what Mr. Gramm has to understand is we've had a policy of tax and spend before, and now we have deficit and spend. We lowered taxes when we shouldn't, and what we need to do is to increase taxes to provide for the domestic and for the national defense, and to get at the tax expenditures, those indirect loopholes that are hemorrhaging the federal budget to the tune of about $400 billion, to do something realistic about the deficit instead of picking on just 16% of the problem, which they've been doing for the last several years.

HUNTER-GAULT: Mayor Cisneros, what's wrong with increasing local taxes to make up for lost revenues from the federal government?

Mayor CISNEROS: Well, the institution in the whole federal system -- now, I don't mean the federal government, I mean the system that includes federal, state and local -- that has the toughest time raising revenues is the local level, because we're saddled with taxes that are the hardest to raise, like the property tax. The property tax is relatively inefficient as a taxing system; it's hard to assess, hard to appraise, hard to administer -- it's the toughest tax in the entire federal system, and that's what cities are left with. Also cities, central cities, for example, in the north are left with those who are the poorest, those who are the oldest, those who are left behind in the flight to the suburbs in the central cities, and you cannot raise taxes fast enough to provide the kinds of services that are essential. I'm not talking about frills; I'm talking about basic services. If people believe that the cities are important to the workings of America -- and I happen to believe that the cities are -- we've got to recognize this is not just another lobby group. This is an essential institution that has to do with the functioning of our country, our system of democracy as we know it, and the American economy.

HUNTER-GAULT: Well, very briefly, if the cuts don't come from the cities, where should they come from?

Mayor CISNEROS: Well, I think we as an organization have advocated across-the-board freezes. Gramm-Rudman as we understand it addresses about 13% of the total budget. It's not across the board; it addresses about 13% of the budget -- 50% from defense, which is $10 billion out of a $300 billion budget, and about $10 billion from about $100 billion from the cities. So the cities get hit a lot worse than anywhere else. The practical effect is going to be that it will terminate a system of federalism, a relationship that has been built up over the years. And some believe that this is a radical philosophical difference from the way we've built this country over the last 50 years. And not everything about the country for the last 50 years has been bad. We built a prosperous country, we built a nation with a good system of government, and now we're going to begin dismantling that by focusing on the cities as somehow deserving less support than we've had over the years.

HUNTER-GAULT: All right. We'll continue.

Mayor VOINOVICH: You know, if --

HUNTER-GAULT: Excuse me, we're going to continue now going back to Washington with Jim and some more questions.

LEHRER: Senator, is that what's involved here, is eliminating the federal relationship with the cities?

Sen. GRAMM: Well, you know, all of that because we have committed over a six-year period to balance the budget. Revenues are growing at $75 billion a year. We've got to apply roughly one half of that to reducing the deficit; Congress can spend the other half. And you listen to them and it sounds as if it's the end of the world. What they're really saying is this, that the federal government if forced to make a choice that the American taxpayer, through his or her representative in Washington, will not continue to fund the programs that we want in the cities, and their message, and it's an interesting message, is don't worry about the future of America, don't worry about a $2 trillion debt, don't worry about raising taxes, which is what the league, as a special interest group, has proposed -- to hell with all those things, just don't make us make a hard decision. Well, I reject that.

Mayor VOINOVICH: We've made -- we've made the hard decisions. We're the ones that have raised our taxes. I've been to the voters six times in six years for tax increases. Our taxes have gone up 50%. It's while you were there during the last five years that the deficit went from $27 billion in '80 to over $200 billion, and the interest cost today, because you doubled the deficit in five years that took 206 years to get, the interest on that right now is more than all the cuts you made in '80 in the human services program. Don't say -- we're not the ones that are responsible. You are the ones that have been fiscally irresponsible in [technical difficulties]

LEHRER: We just lost Seattle. He was doing a number on you.

Sen. GRAMM: Well, let me respond to him while we --

LEHRER: Yes. Yes. Trying to get communications back.

Sen. GRAMM: Trying to get the communications back.

LEHRER: He's right, though, isn't he? I mean, it wasn't the mayor of Cleveland that raised the federal deficit.

Sen. GRAMM: Well, the point is that the federal deficit has gone up, and what I'm trying to do is to do something about it. And what I have done is put now into law, as of next Wednesday, a six-year program to bring the deficit under control and to force the choice. Now, we're not saying what the choice may be. They may get their wish; they may get to raise taxes. We may control spending, but all I'm trying to do is to force a choice. They're afraid of the choice.

LEHRER: Now, what's wrong with that, Mayor Cisneros?

Mayor CISNEROS: Well, I don't know whether we've got communications back.

LEHRER: We do. We do.

Mayor CISNEROS: If you can see us or not.

LEHRER: We can see you and hear you.

Mayor CISNEROS: But the key -- one of the key reasons why we have the deficit that we do is the 1981 tax cut. The 1981 tax cut, which Senator Gramm of course was associated with and which resulted in the increase in the size of the deficit. Now there's an imperative to push back spending inside the size of that tax cut, which was a tax cut for business and which was a tax cut that was built on supply-side philosophy. And if we had a real supply-side philosophy in this country we'd worry about how we train people for a changing economy, how we invest in education, how we invest in those who are unemployed, how we invest in the infrastructure that's needed for the productive sector of our economy to function, and a lot of that is going on in the cities. The senator referred to us as just another special-interest group; I don't think we are. City officials don't make one more penny because they do the right thing by the people who live in their cities. But the people of the cities and those who are unemployed, and those who need to be trained, and those who are near illiterate, and those who are going to be on the wrong side of a chasm of unemployment as the Japanese and other countries continue to invest in education and training as we sit back and watch our industrial machinery decline, those are real supply-side questions, and I don't think you can address those by simply chopping away at the -- at governmental programs because you have a philosophy that is anti-interventionist of government when so much of what we've built up in this country is because we believe in priming the pump, in investment by government.

Sen. GRAMM: Well, let me respond by saying that when the Democrats controlled Washington and both houses of Congress and the White House, they primed the pump to the extent that they almost drowned the system. What we have done is to set about providing incentives for people to work, save and invest. We've created eight million new jobs in the last three years. That's more permanent, productive tax-paying jobs than all the makework jobs of the previous 30 years of government put together. What I'm trying to do is strengthen and sustain the recovery by bringing down interest rates where people can build and buy their own homes, invest in their own businesses. And I think that's what the American people want.

Mayor VOINOVICH: Senator, let me just say this, that the deficit that we have had during the last several years has done irreparable damage to the manufacturing sector of the United States, because the trade deficit has increased and we are no longer competitive in the world marketplace because of the deficit. We're losing our farm economy -- we're in trouble there. We have millions of Americans that are out of work. You're being pressured right now for protectionism because our American workers are in dire straits -- they don't know where to turn -- and you mortgaged the future of our children, and now you're saying to solve the problem, you're going to take and cut at another little portion of the budget, about 16%. And I think that's not being realistic.

Sen. GRAMM: George, that's good politics, but it's not true. What we have done is committed to reduce the deficit over six years. We haven't committed how we're going to do it. What you're afraid of is that when we have to make the hard decisions, that the programs that benefit you are not going to make the cut. Now, I don't know whether they're going to make the cut or not, but you can't sit there and complain about the deficit and what it's done to the competitiveness of American business abroad, and then at the same time raise hell because I want to bring the deficit under control. You ought to be supporting Gramm-Rudman, given all the stuff you just said. But what you're really saying is the deficit is a terrible problem, just like the league said, but don't deal with it be affecting us; raise taxes on the working people of America, cut somewhere else, but don't look at our programs. Exactly what you're saying.

Mayor VOINOVICH: Senator, you know, if you look at tax expenditures, you can tell me all you want to about, for example, food stamps, and at the same time you haven't been able to do anything about the martini lunches; or transportation -- you want to cut out transportation, but you still have all of the benefits, depreciation for airplanes and for automobiles and the rest of that stuff. The tax expenditure side -- that's the indirect part of your spending -- you haven't even looked at it. No appropriations, no budget committee. We're losing about $400 billion a year indirectly through the Treasury, through hemorrhaging, for all kinds of loopholes. And you guys in Washington have refused to look at that during the last five years.

LEHRER: We have to go. I'm sorry. I'm sorry. Senator, Mayors in Seattle, thankyou all very much.

HUNTER-GAULT: Tonight's Lurie cartoon feature is next, inspired by the latest U.S.-British pact.

Sen GRAMM: Thank you.

Ranon Lurie cartoon -- Margaret Thatcher thumbing a ride in outer space, picked up by U.S. Star Wars vehicle]

HUNTER-GAULT: Once again, today's top stories. The United States says it may take additional steps to aid the rebels fighting the Sandinista government of Nicaragua. Britain became the first nation to join the United States in its Star Wars research program. And unemployment dipped slightly to 7 .

Good night, Jim.

LEHRER: Good night, Charlayne. Have a nice weekend. We'll see you on Monday night. I'm Jim Lehrer. Thank you and good night.