The MacNeil/Lehrer NewsHour

Intro

ROBERT MacNEIL: Good evening. These are today's news headlines. Cuban President Fidel Castro says Washington's charge that he exports revolution is absurd. President Reagan challenged Saudi Arabia to help start Arab-Israeli peace talks. Israeli planes bombed targets in Lebanon for the second day. Senator John Glenn said he will vote against Edwin Meese for attorney general. Jim?

JIM LEHRER: There is a special event on the NewsHour tonight. It's part one of Robert McNeil's extensive interview with Fidel Castro, conducted over the weekend in Havana. Also tonight, a focus segment on the decision to sell Conrail to another railroad. News Summary

MacNEIL: Cuban President Fidel Castro says he's not going to change his behavior in Central America or his relations with Moscow to secure better relations with the U.S. Castro was speaking in an exclusive interview with this program. In recent weeks, U.S. spokesmen have responded to signs from Castro that he would like to improve relations by saying they want deeds, not words. On NBC's "Today" show this morning Secretary of State Shultz said, "Words have come and gone with Cuba over the years, but it's their behavior that counts, and the minute they're ready to change their behavior, then we're ready to talk to them." One item of Cuban behavior the Reagan administration wants changed is what they call Castro's exporting revolution in Central America. Castro told us that charge was absurd.

FIDEL CASTRO, Cuban Premier [through interpreter]: We will continue being Marxist and we'll continue being socialist. And we will always say that our social system is more just. But we have said also, because we are convinced about it, we have said the following, which is my answer to that. Neither can Cuba export revolution because revolutions cannot be exported, and the economic-social factors, the cultural-historical factors that determine the movement of revolution, cannot be exported. It is absurd, it is ridiculous to say that revolutions can be exported, but the United States cannot, in the event, avoid them either. The United States accuses us maybe of wanting to promote change. Well, then, we would like to see changes occur. But changes will come whether the United States likes it or not.

MacNEIL: That interview was recorded in Havana over the weekend. After this news summary there will be an extended segment in which Castro talks in detail about relations with the U.S., the Soviet Union, Nicaragua and Angola. Jim?

LEHRER: President Reagan talked peace in the Middle East with royalty today. King Sahd of Saudi Arabia started his five-day visit to the United States at the White House. Before going off to talk in private, the two leaders exchanged public welcoming statements that showed their differing perspectives. President Reagan challenged the king to use his influence to get the Arab world to negotiate with Israel. King Sahd asked President Reagan to work on behalf of the Palestinians.

Pres. RONALD REAGAN: Together our considerable influence and our moral suasion can, at the very least, decrease the threat of war. If the Saudi and American governments focus their energies, progress can be made, especially in the lingering dispute between Israel and her neighbors. I continue to believe that a just and lasting settlement based on United Nations Security Council Resolution 242 is within reach. The security of Israel and other nations of the region and the legitimate rights of the Palestinian people can and should be addressed in direct negotiations. It is time to put this tragedy to rest and turn the page to a new and happier chapter.

King SAHD of Saudi Arabia [through interpreter]: Mr. President, the majority of the Arab countries gained their freedom and independence with the exception of one people, the Palestinian people, who committed no wrong that could justify what has befallen them. The Palestinians, who were never aggressors or invaders, found themselves, through no fault of their own, the victims of unjust aggression. The Palestinian question is the single problem that is of paramount concern to the whole Arab nation and affects the relations of its peoples and countries with the outside world. It is the one problem that is the root cause of instability and turmoil in the region. I hope, Mr. President, that your administration will support the just cause of the Palestinian people.

LEHRER: King Sahd will be in Washington until Friday. His schedule includes sessions with Secretaries Weinberger and Shultz and several very large social functions.

MacNEIL: In Jordan King Hussein and Yasir Arafat, the leader of one faction of the Palestine Liberation Organization, were reported to have met today for a talk about a new approach to peace in the Middle East. And in Lebanon Israeli jets bombed a Palestine guerrilla base, the second one to be hit in two days. People who saw today's raid said four guerrillas and nine girls in a nearby school were wounded.

LEHRER: The State Department today lodged a formal protest with South Korea over the violent airport welcome for dissident leader Kim Dae Jung. The State Department said the South Koreans did not allow a U.S. Embassy representative to greet the plane Friday, which the U.S. says might have prevented the incident. Korean security police scuffled with Kim and a group of Americans traveling with him at the airport.

And, in Thailand, the Associated Press said Vietnam will give the United States the bodies of five people it says are Americans missing in action, killed during the Vietnam War. And the search for MIAs continued today in Laos. A team of U.S. and Laotian experts examined the wreckage of an American cargo plane that was shot down in 1972; 13 U.S. servicemen were reported missing after the crash.

MacNEIL: Senator John Glenn called a news conference today to say he would vote against Edwin Meese, President Reagan's nominee for attorney general. Last week the Senate Judiciary Committee voted 12 to six to approve the nomination, and a vote by the full Senate is due next week. Glenn said he thought Meese would be confirmed, but he gave these reasons for voting no.

Sen. JOHN GLENN, (D) Ohio: In my view, what we need in the office of attorney general is not a superman, a Solomon or a saint. What we need is merely a human being who is keenly aware of the power and the scope and responsibilities of the office, an individual who clearly understands and fulfills the ethical demands of high public office and a person who is willing to extend to others the same compassion and tolerance of human imperfection that he asks for himself. In my judgment, Mr. Meese is not that person. Indeed, after examining the evidence, I believe that Mr. Meese's behavior while serving as a public official reveals extremely poor judgment at best and an ethical blind spot at worst. In either case, Mr. Meese does not measure up to the standards that I believe are necessary for the office he is seeking.

LEHRER: The new secretary of education today mounted a vigorous defense of cutting aid to college students. William Bennett said, at his first news conference, the administration is right to deny student loans to those from families with annual incomes of more than $32,500. He conceded it and other proposed student aid trims might cause a problem for some families, but he said that would not be the case for all. For some students, he said, it will mean only giving up their stereos, cars and beach vacations.

WILLIAM BENNETT, Secretary of Education: No one can deny that setting this limit will have tough consequences for some people. But when you're setting out a budget, when you're setting out an administrative proposal, you have to look to the larger picture. You have to look to where you think the target must be, and I think the administration's absolutely right to think about the neediest students first. There is one other possible benefit, beneficial consequence of this. Tightening the belt can have the function of concentrating the mind, and it might make for more cautious and deliberate consumers. That is, when people start thinking about a $20,000 investment, which is what a college education costs in this country -- about 70% of the people pay less, about 30% pay a lot more -- we might start thinking about that, more of us might start thinking about that with the same sort of care we think about when we buy a car -- kick the tires and drive it around the block. And I think that kind of caveat emptor, that kind of greater scrutiny and deliberateness on the part of the consumer here -- "What am I getting for my money here, Mr. Chancellor?" -- wouldn't be a bad thing, either.

LEHRER: There was another college education story in Washington today. A panel of scholars from the Association of American Colleges said the nation's universities have become supermarkets for professors to peddle learning to students who earn bachelor degrees that don't mean very much. The group said college curriculums have been taken over by fads and fashions and that they no longer insist students be intellectually and philosophically challenged. Conversation With Castro

MacNEIL: Our major focus section tonight is a newsmaker interview with Cuban President Fidel Castro. Last month the U.S. and Cuba successfully negotiated an agreement under which Cuba will take back 2,500 "undesirables" who came in the Mariel boat lift of 1980, and the United States will reopen normal immigration procedures in Havana. Since then Castro has said he'd be willing to talk further about improving relations. Washington has reacted coldly, saying Castro is saying nothing new, and it wants to see Cuban deeds, not words. How far Castro wishes to push his new effort has not been clear, but in Havana part of his motivation is obvious.

[voice-over] Havana today expresses the weaknesses of the Cuban revolution. Its successes are in the countryside, where better nutrition, health care and education have changed more lives. Havana, the symbol of the decadent past, was neglected, with little new building. But with an economy still unable to meet all Fidel's goals and an acute need for hard currency, old Havana is getting a facelift to attract tourists. Buildings and streets from the Spanish colonial period are being refurbished as is the square of the old cathedral. The bulk of the tourists are still people from the Eastern bloc, their presence symbolizing Castro's dependence on the Communist world for economic survival in the face of the American trade blocade. That's been in force for a quarter of a century and has been tightened by the Reagan administration. Cuba's lifeline is a procession of Soviet merchant ships bringing virtually everything, from oil and lumber to light bulbs. They return taking Cuban sugar, citrus and nickel, but recently not enough to meet the planned quotas. So Cuban consumers have been asked to tighten their belts again, to wait for more attractive consumer goods while a big drive is made to boost exports to the Soviet bloc and to the West, both to meet Cuba's commitments to her Communist partners and to earn hard currency to pay her Western debts.

This is the context for the growing suggestions that Castro, 26 years after his revolution, would like to patch things up with the U.S. There is no slackening of revolutionary zeal. The spirit that defeated the Bay of Pigs invasion of 1961 is constantly nourished, and the symbols of Castro's rise to power are a national shrine. The revolution is still young enough to enjoy tweaking Uncle Sam's beard. This poster says, "Mr. Imperialist, we are absolutely not afraid of you." It is located close to the U.S. mission, now called the U.S. Interest Section -- because there are no full-scale diplomatic relations -- where U.S. officials try to read the signals that Castro is sending.

On Friday night President Castro sat down with me for the first major American television interview in six years. With a Cuban government interpreter we talked for more than four hours, first about relations with the United States.

[interviewing] Mr. President, every time that you begin to talk about improving relations with the United States, Washington says, "Show us deeds, not words." What actions or deeds are you prepared to make to improve relations with the United States?

FIDEL CASTRO [through interpreter]: You said every time I speak of improving relations; actually there are not many times. Now then, I have read a few statements in which it is said that they want deeds and not words. I believe that that is a style of speaking. I would say a style of a great power. I understand that it is not easy for the United States to change its style. We are a small country. We cannot speak in those terms, but we are also a country with a lot of dignity and no one can suppose that we would beg the United States for an improvement of relations. We have never done so, and we shall never do it. My intention is not that they believe what we say but rather simply to analyze our ideas and to go deeper in them and to make objective analyses of events. It is not a matter of faith, of confidence. It is a matter of objectivity.

MacNEIL: Let's go through an objective analysis. The State Department and the White House always say that there are three obstacles to improving relations between Cuba and the United States. And they are your allegiance to the Soviet Union, what they call subversion in this hemisphere and the large number of your troops in Africa. Sometimes they also mention human rights in Cuba. The White House mentioned human rights in Cuba this week again. Can we discuss in detail each of these, starting with relations with the Soviet Union? Is there a formula by which you could keep your ties to the Soviet Union and improve relations with the United States?

Pres. CASTRO [through interpreter]: If the United States believed that there are three obstacles, actually there are quite few, quite little. I thought there were much more. Now, then, if we analyze these three types of obstacles, the first, that is the relations that we have with the Soviet Union, with the socialist countries and with any other country are matters of our sovereignty and that cannot be questioned, or at least we are not ready to discuss that. And this is always -- this is something that I always say in a very frank way. If, in order to improve our relations with the United States, we must give up our convictions and our principles, then relations will not improve on those lines. If we are going to question our sovereignty, then they will not improve either. Relations between Cuba and the Soviet Union are based in the most strict respect for independence and sovereignty of our country. We have friendly relations, very close relations, and these relations cannot be affected in order to improve relation thing. The countries that do those things simply are not respected, and actually we are not going to change neither our flag nor our ideas. In our relations with the Soviet Union, in our friendship will be maintained intangible. I say this being fully frank and fully sincere. And it is necessary that this be understood.

MacNEIL: The director of Cuban affairs in the State Department, Kenneth Skout, he said in a speech in December what Cuba could not do and still retain Moscow's favor is to alter its fundamental commitment to unswerving support for Soviet policy. And so my question is, isn't that unswerving support for Soviet policy the price of the Soviet aid that keeps the Cuban economy going?

Pres. CASTRO [through interpreter]: Well, we coincide in many things with the Soviet Union because we have a community of political principles. It is a socialist country; we are a socialist country. We do have many things in common with the Soviet Union and in many international problems we have a common stance that is based on political ideas and principles. It is a friendly country of whose friendship we will not reject and of which we do not feel ashamed of because, actually, we are not going to fight with our friends to become friends of our adversaries. That we shall never do. And the Soviets have never imposed any conditions on us, on their assistance, and they have never attempted to tell us what we should do, what we must do, with which countries we are to trade and with which countries should we have relations. So I simply can't understand where these theories come from. But if that our relations with the Soviets are an obstacle and if someone thinks that we are going to sell out or that we are going to give up our banners or our flags or that we are going to change our ideas, that is an error. Cuba is a country that cannot be bought. And countries that are bought are simply not respected.

MacNEIL: I think what the United States government is saying is that your economic dependence on Moscow makes you automatically a part of the Soviet camp in having to agree to policies like the Soviet intervention in Afghanistan. Would you, Fidel Castro, who values the independence and integrity of a small country, would you alone have approved the Soviet intervention in Afghanistan if you had been free to make your own choice? Did you privately and personally approve of the Soviet intervention in Afghanistan?

Pres. CASTRO [through interpreter]: When it was put forth at the U.N., that is, the question, the issue, we said clearly that in that conflict, in that attack, that tremendous attack against the Soviet Union led by the United States, we were not going to be on the side of the United States. Simply that. And we were then on the side of the Soviet Union. That is, we did not deal or delve on the topic; that is what we said. This is opposition because of this.

MacNEIL: But isn't that the point? That your friendship and dependence on the Soviet Union makes you part of the camp and therefore take positions which Washington regards as anti-American positions?

Pres. CASTRO [through interpreter]: You establish this dependency as something that is actual in fact and action. But in today's world, in the economic arena, no one is absolutely independent, not even the United States nor Japan nor Western Europe. They depend on oil, raw materials, and for many other countries they need markets, they need trade. That is, no country is totally independent economically.

MacNEIL: Is it not true that your role in return for all the aid you get from the Soviet Union is to be a thorn in America's side?

Pres. CASTRO [through interpreter]: If that were true, we would not be talking about improving relations with the United States. If our role is to be a thorn, then it would not be convenient for us. Actually it does not bring us great benefits, either. That is, we are based on a conviction and it is the necessity to struggle in our area, in Central America, throughout the world. It is a duty, actually a duty that we have in order to lower tensions and to achieve relations of peace in the world. And I say this sincerely, although I am a revolutionary. I was a revolutionary, I am a revolutionary, and I shall always be a revolutionary. And I will not change a single of my principles for a thousand relations with a thousand countries like the United States.

MacNEIL: Will the Soviet Union continue to provide you with the aid and support it does, do you believe, if you have good relations with the United States?

Pres. CASTRO [through interpreter]: Look, our relations with the Soviet Union, with the socialist countries are solid things based on principles and have absolutely nothing to do with our economic and political relations with the United States. I will say one thing, though. The Soviet Union and the Soviet people feel great appreciation and great respect toward Cuba. But it is they respect Cuba because they admire, as other peoples do, the courage of Cuba, Cuba's staunchness and Cuba's capability to resist for over 26 years the aggressions, the economic blockade and the brutality of the United States.

MacNEIL: Would the Soviet Union like it if you had better relations with the United States, the blockade perhaps were lifted and the economic burden on the Soviet Union were shared or lessened?

Pres. CASTRO [through interpreter]: The United States will pay us for our sugar at the price of the Soviets, or will they be buying the nickel and they will be maintaining the type of relations and trade that we have with the socialist countries. But I believe that the idea that we have any needs to trade with the United States should be totally eradicated. Everything we have done during these 26 years, we have done it without trade with the United States. And our future has been conceived without trade with the United States. Actually, we have not asked for the Soviet Union -- generally we don't ask their opinion on our economic or political relations in an international arena. But I know the Soviet Union very well and I know the policy of the Soviet Union, and the Soviet Union would never be against Cuba's developing its economic relations with the other capitalist countries, including the United States.

MacNEIL: So, to move on to the second point that Washington says is an obstacle to better relations -- what the White House spokesman Larry Speakes called this week your subversion in the hemisphere. Let me quote you again Mr. Skout of the State Department. "It is Cuba's striving, with Soviet support, to introduce Marxist-Leninist regimes throughout the hemisphere which still lies at the heart of our differences." Would you comment on that?

Pres. CASTRO [through interpreter]: Well, I could also accuse thePope of practicing subversion in Latin America and preaching Christianity and Catholicism. He visited many countries even recently. He has met with natives and said that the land had to be given to the natives and the land properties. And he declared that schools were necessary for the children, jobs for the workers and for the families, medicine and doctors for the ill and also foodstuffs or housing. What we preach is more or less that. And besides, it is what we have done in our country. So then, we will continue being Marxist and we'll continue being socialist, and we will always say that our social system is more just. But we have said also, because we are convinced about it, we have said the following, and which is my answer to that. Neither can Cuba export revolution because revolutions cannot be exported, and the economic-social factors, the cultural-historical factors that determine the movement of revolution cannot be exported. The external, the huge external debt of Latin America cannot be exported. The formula applied by the International Monetary Fund cannot be exported by Cuba. The unequal trade cannot be exported by Cuba. Underdevelopment and poverty cannot be exported by Cuba, and that is why Cuba cannot export revolution. It is absurd. It is ridiculous to say that revolutions can be exported. But the United States cannot, in the event, avoid them either. The United States accuses us maybe of wanting to promote change. Well then, we would like to see changes occur, but changes will come whether the United States likes it or not, whether or not Cuba likes it. I could answer by saying that the United States wants to maintain an unjust social order that has meant for the peoples of this hemisphere poverty, hunger, underdevelopment, diseases, ignorance -- and the United States wants to maintain that. And we could also say that the United States wants to avoid change. If we are accused of wanting to promote change, we can also accuse the United States of wanting to avoid change and of wanting to maintain an unjust social regime. But actually neither can we export it, nor can the revolution avoid it -- nor can the United States avoid it.

MacNEIL: In supporting militarily the Sandinista regime in Nicaragua, is Cuba not helping to sustain and introduce a Marxist-Leninist regime?

Pres. CASTRO [through interpreter]: In Nicaragua, by offering military cooperation? Well, we are helping an independent country, we are helping a just revolution to defend itself. That's simply what we are doing. In the same way that, for example, the United States has also sent weapons to this -- in this hemisphere to other people. It sent weapons to Somoza. It sent weapons to Trujillo when Trujillo was there. It sent weapons to Pinochet. It sent weapons to all of the repressive governments of Latin America, governments that murdered, tortured dozens of thousands of people, governments which disappeared tens of thousands of people. They had no moral obstacle in giving any economic, financial and military assistance to these governments. So, with what moral grounds can it be questioned; that is, can our right be questioned to help Nicaragua and Nicaragua's right to receive that aid? I ask the following. Can the United States help the counter-revolutionary bands, supply weapons to them -- explosives -- to fight inside Nicaragua, something that has meant the lives of thousands and thousands of people, and on the other hand question Cuba's right and Nicaragua's right for us to give them aid -- economic, technical aid, and even some cooperation in the military field?

MacNEIL: So you would not stop giving such aid as a condition of improved relations with the United States?

Pres. CASTRO [through interpreter]: We shall not make any unilateral decision in our relations and cooperation with Nicaragua. What we have said is that in Central America a politically negotiated solution is possible. What we say is that we support the effort of Contadora to seek solutions of peace in Central America, that we support it staunchly, sincerely, and that we beleive that political solutions exist and peace solutions exist that are convenient for the Nicaraguans, for Central America and for the United States itself, and that we are ready to struggle for that. And also that the agreements that are reached shall be complied by us in a determined way. That is, any agreement reached between Nicaragua and the Contadora framework shall be complied by us to the very letter.

MacNEIL: How hopeful are you that now that some political settlement can be reached in Central America?

Pres. CASTRO [through interpreter]: I am absolutely convinced. I have a lot of information about the work of Contadora. I have heard all the discussions, all the burning issues there, the positions of the United States, Nicaragua's positions. And I am convinced, fully convinced, that it is possible to find formulas that would be acceptable by all parties, or to all parties. I have that conviction. I am convinced about that. Now, then. For it, it is necessary for the United States to want to really cooperate in finding a political solution. I believe that as long as the United States is convinced that it can destroy the Sandinista revolution from within by combining the effect of the economic measures against Nicaragua with the economic difficulty inside Nicaragua and the actions of the counterrevolutionary bands, as long as they're convinced that they can destroy the revolution from within, it will not be seriously ready to seek a political solution to the problems of Central America. Because if it believes that it will destroy the revolution, why negotiate, then? Why reach agreementss? Now, then, Now, when the United States becomes persuaded that it shall not achieve that goal, that the Nicaraguan revolution cannot be destroyed from within, because of the questions I mentioned, the problems I mentioned, I believe that they can face the economic problems with what they produce and with the aid they are receiving, the economic aid they are receiving. If they handle it correctly, efficiently, they can face the economic problems. I'm convinced of that. I am also convinced that they can defeat the bands and that the bands will never be able to defeat --

MacNEIL: Excuse me. By the "bands" you mean what are called in the United States the contras?

Pres. CASTRO [through interpreter]: Yes, the counterrevolutionary bands that will be defeated. They will be defeated. So then a situation will come up before the United States: that is, the United States will have no other alternative but to negotiate seriously to seek a solution or invade Nicaragua. And since, in my view, in my criteria, a U.S. invasion in Nicaragua is inconceivable, since it would mean such a serious mistake, a terrible mistake, that I do not simply think that the United States would really get to the point of making that mistake. I cannot assure you that it might not do it, but I say that it is inconceivable that under the present circumstances in Latin America, under the present circumstances of crisis with the present feeling on the part of Latin American peoples, at the times we're living in, the aggression and invasion against a Latin American country would be as catastrophic in political terms, it would mean such a political cost, and not only a political cost but also in terms of U.S. lives --

MacNEIL: Let me turn to Africa. The third of those obstacles that Washington sees to improving relations with you, your troops in Angola. You talked recently about circumstances arising which would cause you to bring them home. What would happen -- what would have to happen to start bringing the Cuban troops out of Angola?

Pres. CASTRO [through interpreter]: What is needed there? Well, discussions have taken place with the participation of the United States. The United States has had dialogues, talks with Angola's leadership. We are informed through the Angolans about these negotiations or talks that have been held with our support and with our full cooperation. That is, they have carried out these negotiations in close contact with Cuba.

MacNEIL: Could you withdraw any of your troops before there is agreement?

Pres. CASTRO [through interpreter]: No. No. The Angolans would not agree with that, and from our point of view it would be a mistake. And the Angolan proposal, that is, if those circumstances come up, then Angola commits itself, and Cuba of course would support it, to withdrawal in a period of three years what is called the grouping of troops in the south, which is made up by approximately 20,000 men. And even the figure was given. This is the bulk of our troops, actually, but there are still troops in the center and to the north of Angola, including Cabinda. The Angolans have not included these troops in the negotiations, these present negotiations, and their position is that to withdraw those troops, it will be something that would have to be discussed between Angola and Cuba whenever it is considered that they can dispense of these troops.

MacNEIL: Do you think that this projected settlement of the Angola situation, does that erase Cuban troops in Angola as an issue between you and the United States?

Pres. CASTRO [through interpreter]: Before there were no troops in Angola and relations were very bad with the United States. The day where there are not troops in Angola or in some other place or there are no advisers in Central America, maybe the United States might invent something else.

MacNEIL: Just to sum up our conversation about improving relations with the United States, why is this the right time to raise this, and realistically speaking, how hopeful are you that it can happen?

Pres. CASTRO [through interpreter]: Whether this is the right -- best moment? I believe that if the United States is objective, if it is realistic, I would say that it is the best moment for the United States, not for us. Actually, we can go on for five, 10, 15, 20 more years. The only obligation on our part, really, is toward peace. If there's peace here and in other areas, we will feel more pleased. If relations are normalized, even more pleased, because it would be then a progressive progress. Peace is convenient for all, but from the political point of view I am convinced -- and I'm saying this fully frankly -- I think that the United States benefits most than us. We can sit here and wait, calmly, and see what happens in the coming years.

MacNEIL: Tomorrow night Fidel Castro talks candidly about human rights in Cuba, political prisoners, dissent, the controlled press and the mistakes of his revolution. He also discusses what he sees as an explosive economic situation in Latin America. Conrail: Bad Deal?

LEHRER: Finally tonight we focus on the Conrail decision, the one made Friday by Transportation Secretary Elizabeth Dole to sell the freight railroad to another one, the Norfolk Southern. There were other bidders, other options, and the decision has been attacked and challenged, with some members of Congress saying they will try to kill the deal when it comes before them for ratification. Under the sale arrangement, Norfolk Southern would pay $1.2 billion for the government's 85 interest in Conrail. The railroad's 19 labor unions own the other 15 . Norfolk Southern already has 18,000 miles of track serving the South and Midwest, while Conrail has about 14,000 miles in the Northeast and Midwest. Combined, they would form the largest railroad in the nation. It could be the end result of a most unpredicted success story. [voice-over] Conrail was created by Congress in 1976 out of the ruins of the Penn Central and six other bankrupt or failing Northeastern railroads. The point was to maintain freight service in that part of the country. The government spent over $3 billion to buy the Reagan and then $4 billion more to repair the system and keep it running. When the railroad administration took office in 1981, it saw Conrail as a losing proposition and decided to sell it. In April, 1981, then-Secretary of Transportation Drew Lewis explained the administration's decision on the MacNeil-Lehrer Report.

DREW LEWIS, Secretary of Transportation [April 6, 1981]: It will never be a profitable railroad of any significance. We would be much better off to get two or three strong railroads from the South and one from the West to come in there and make it a truly competitive railroad. Why should the federal government be in the railroad business?

LEHRER [voice-over]: Lewis' plan aroused opposition in the Northeast, where thousands of jobs were at stake. Fifteen thousand railworkers marched on Washington to protest the decision. As a result, Congress blocked the sale but agreed to a package of cuts designed to make Conrail more efficient. Conrail got rid of its money-losing commuter lines. Its workers agreed to wage concessions which left them earning 12 less than the industry standard. All of it helped put Conrail in the black for the first time in 1981. Today Conrail is one of the nation's healthiest railroads with $800 million in the bank and an estimated 1984 profit of $500 million.

But the return to profitability did not turn off the administration's desire to sell. A lengthy selection process culminated in Secretary Dole's press conference late Friday afternoon.

ELIZABETH DOLE, Secretary of Transportation: My aim in selling the railroad has been to select the buyer which will leave Conrail in the strongest financial position after the sale, best preserve service to Conrail's shippers and, consistent with these two criteria, give the taxpayers the best rate of return possible. There can be no doubt that the Norfolk Southern fully meets these criteria.

LEHRER [voice-over]: It is now up to Congress to ratify or overturn her choice.

[on camera] Here to speak for Secretary Dole and the Norfolk Southern choice is Deputy Transportation Secretary Jim Burnley. Here to speak against it is Congressman Bob Edgar, Democrat of Pennsylvania. He's with us from the studios of public station WITF in Harrisburg. Mr. Secretary, to you first. Why, in brief, was Norfolk Southern the way to go?

JIM BURNLEY: Let me answer that, Jim, by giving you a very capsule summary of how wegot to the point where the secretary made her decision on Friday. This process began, as your piece indicated, back in 1981, more than three years ago, when the Congress passed the statute that gave Conrail the various and sundry opportunities that were described in your introductory piece. But it also instructed the secretary of transportation to prepare a plan to sell the railroad. Now, at the end of that three-year process which has involved discussions by our Goldman-Sachs investment adviser, the company that was hired also pursuant to Congress' instructions, with hundreds of possible buyers around the country in a competitive bidding process that began in the spring of 1984. The secretary, as again she said in the piece you ran a moment ago, judged the three remaining bids, one of the Allegheny Corporation, one of a group led by Bill Marriott and Norfolk Southern, the third bidder, against the criteria she'd outlined. And, just to repeat those criteria --

LEHRER: All right, now let's just understand Allegheny and Marriott are not existing railroad companies.

Sec. BURNLEY: That's correct.

LEHRER: Norfolk Southern was the only railroad company.

Sec. BURNLEY: That's correct.

LEHRER: They were investment groups and they were just going to buy it and run it, right?

Sec. BURNLEY: Exactly.

LEHRER: Okay.

Sec. BURNLEY: And her judgment had been that any of the three bidders were perfectly capable of running the railroad and we had no doubt about the ability of any of the three. However, when judged against her three criteria, first, leaving the railroad in the strongest possible financial position, the Norfolk Southern bid is $1.2 billion in cash at a minimum, plus a surrender of tax write-offs on the books of Conrail -- $2.1 billion in operating losses, another $275 million in investment tax credits, no preferred stock, no loan against Conrail's assets, a very clean, strong financial package. So they clearly met the first requirement. The second requirement, the bid that best preserves service to Conrail's shippers, again, we believe that this approach will more than satisfy that criteria. As you know, the Justice Department did an extensive study over six months and set some very stiff requirements that Norfolk Southern will have to meet before we can actually turn the railroad over to them. And as the secretary said Friday, under those Justice Department requirements, where there were once three railroads competing there will be three railroads after the closing. Where there were two, there will be two. So there will be no significant loss of competition. And then, consistent with those two criteria -- and it's important to make that point -- consistent with those two criteria, the bid that best maximizes a return to the American taxpayer. Again, there have been a lot of proposals that have speculated that, through a public offering or some other device, loans against Conrail, which Conrail would have to carry on its books and pay the debt service on, regardless of economic conditions, you might raise more money. But in this instance, we've got a minimum of $1.2 billion in cash on the day of closing, and to the extent there is any increase in the cash on hand in Conrail, Norfolk Southern would have to pay an equal amount to us. So we would expect that the final purchase price would be in excess of that.

LEHRER: All right. Congressman Edgar in Harrisburg, sounds like a great deal. What's the problem?

Rep. BOB EDGAR: Well, I think there are three big problems. The first is the cost is too low. When you're talking about $1.2 billion, Conrail already has about $800 million in the bank; they made about $500 million last year, and I personally believe that if we would move to a public offering we could recover more of the $7 billion that we have invested in Conrail over the last 10 years.

LEHRER: Why? Why would you be able to raise that through a public offering?

Rep. EDGAR: Well, I think you have to recognize that Conrail is a very profitable railroad right now. We're making money each year, and it's important to keep the present management in place. And I'm afraid if we allow it to go to Norfolk Southern we have no guarantee in the out-years that service will continue to our region of the country, particularly Pennsylvania, or that the jobs will stay here. And if we move to a public offering in this profitable setting, I think we could raise $1.4, $1.6 billion and still keep some umbilical cord that the federal government will have within the system.

LEHRER: Explain to me, Congressman, I'm not up on all of this, exactly what is a public offering? How would that work, in simple terms?

Rep. EDGAR: Well, I introduced legislation two weeks ago that would incorporate the proposal that was first set forward by L. Stanley Crane, who is the present operator of Conrail.

LEHRER: He's the president.

Rep. EDGAR: That's right. And what that particular thing would do would set aside a certain part of the stock for the labor unions; in this case it would be about 30 . The rest of the 70 would be open for the public to buy. Norfolk Southern, Marriott, Allegheny Corporation and other corporations could buy into Conrail, but the essential corporation would be public.

LEHRER: And it would remain under the control of L. Stanley Crane and his folks as it is now?

Rep. EDGAR: That's correct.

LEHRER: Well, let's ask the secretary. What was wrong with that?

Sec. BURNLEY: Well, there are several very real practical problems with the congressman's proposal and the Conrail management proposal. First, the proposal of two weeks ago takes $300 million out of the Conrail treasury on its face. It proposes to raise not $1.2-, not $1.4-, as the Congressman said a moment ago, even $1.6 billion through a public offering. It proposes to raise $500 million in common stock and $600 million in preferred. That's $1.1 billion. You get up to 1.4 by raiding the treasury of the company. Secondly, Conrail's profits have to be judged against other private companies and other railroads in particular, and you have to take into account the many special breaks they got under the Northeast Rail Service Act of 1981. For example, they're exempt from any state taxes. They have their employees on contract at 12 below any other railroad in the country today, and obviously if it continues to be profitable, that's going to change. So you've got a lot of real practical problems with that approach. And we're not opposed to it on principle; it's just that, as a practical matter, the Norfolk Southern bid is much stronger.

LEHRER: Okay. What were some of your other objections, Congressman?

Rep. EDGAR: Well, the Justice Department came out and said that parts of Norfolk Southern would have to be abandoned because of the conflict. It's not clear who would buy those sections in Western Pennsylvania and Ohio that are presently servicing those communities. And if you just simply spin that part off, there's no guarantee that the economy of that region will be maintained and the service will be maintained. And, secondly, I think you have to recognize that Conrail as an entity helps primarily the Northeastern andMidwestern states. Norfolk Southern helps the South and the Western states, and I think that their tendency, when an economic crisis would occur, like a recession or like an economic downturn in the future, to shift their resources to the South and West and away from our region of the country, which, while the rest of the nation was in recession, parts of our region were in a deep depression. And we're fearful that simply giving it away to Conrail -- or, excuse me, to Norfolk Southern, at a bargain-basement price without keeping some guarantee that the public interest can be maintained would not be in the best interest of our region.

LEHRER: Mr. Secretary?

Sec. BURNLEY: Well, again, with all due respect to the congressman, I am flabbergasted at the notion that his bill of two weeks ago, which raises a maximum of $1.1 billion and leaves a risk on the government -- if he's overly optimistic, we may -- if we get $800 or $900 million, then either that's going to come out of Conrail's treasury or out of the government's hide. So it's somehow a bargain-basement sale. His public offering only gets above that by doing that which we won't do, and that's go into the Conrail treasury.

LEHRER: All right, let's move away from the money for a minute to his other point.

Sec. BURNLEY: The other point about abandoning lines, again with all due respect, simply is wrong. The Justice Department instructed Norfolk Southern to go negotiate with other competing railroads -- and in particular the railroads with whom they'll be negotiating are Gilford Transportation in New England, the Grand Trunk across the northern part of the Midwest, the P&LE, the Pittsburgh and Lake Erie, which serves western Pennsylvania-southern Ohio region -- and to work out sales of those tracks. In fact, there are not going to be any significant abandonments.

LEHRER: There are not going to be any abandonments?

Sec. BRUNLEY: No, it's not going to happen.

LEHRER: We've got just a minute left. Congressman, what is the process now? You're going to try to stop this. How are you going to go about trying to stop it?

Rep. EDGAR: Well, Elizabeth Dole's decision has to come to Congress, and the House and Senate will hold extensive hearings, and I believe that the enabling legislation that's necessary will have to get a bipartisan support in the House and Senate. Elizabeth Dole has suggested Norfolk. The labor unions have accepted and suggested Allegheny Corporation. I think the compromise will be some form of a public offering, and I think that the economists and Wall Street have indicated that we can in fact, with a public offering, get more than what in fact Norfolk Southern is getting.

LEHRER: All right. And you're going to hang in there on Norfolk Southern?

Sec. BURNLEY: Yes. We expect to close before the end of the year.

LEHRER: All right, gentlemen, thank you both very much. Robin?

MacNEIL: Once again, the main stories of the day. Cuban President Fidel Castro says the charge that he exports revolution is absurd. President Reagan called on Saudi Arabia to help get Arab-Israeli peace talks going. Jim?

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