The MacNeil/Lehrer NewsHour

MR. MAC NEIL: Good evening. I'm Robert MacNeil in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Wednesday, we analyze the Clinton-Yeltsin summit, Senators Dodd and Gregg debate Medicare as a tool to balance the budget, and Ron Ostrow of the Los Angeles Time updates the Oklahoma City bombing investigation. NEWS SUMMARY

MR. MAC NEIL: President Clinton won a concession in his Moscow summit with Russian President Yeltsin today. Yeltsin agreed to scrap a plan to sell technology to Iran which Washington claims can be used to make nuclear weapons. He also agreed temporarily to delay the sale of two reactors to Tehran. But after four hours of talks, differences remained over the ultimate scope of NATO and Russia's offensive in Chechnya. Yeltsin dismissed criticism of the Chechen operation and said there are no military actions going on in the region. But shortly after he spoke, Russian helicopter gunships fired rockets into farmhouses near the Chechen village of Serzhen-Yurt. We'll have more on this summit after the News Summary. Jim.

MR. LEHRER: The United States will take trade action to open up the Japanese market to U.S. autos. U.S. Trade Rep. Mickey Kantor said today several Japanese products will become subject to U.S. tariffs and a complaint will be filed with the World Trade Organization. The list of targeted Japanese products will be published in the next few days. Kantor spoke about the decision in Washington.

MICKEY KANTOR, U.S. Trade Representative: In the most critical sector for our economy, the automotive sector, despite thousands of hours of hard work during efforts spanning 20 months, the United States and Japan have been unable to reach an agreement. Japan remains unwilling to take the steps necessary to bring genuine market access and concrete results in a sector in which Japan has a $37 billion trade surplus with the United States, accounting for nearly 60 percent of the overall bilateral trade imbalance and nearly 25 percent of our entire global trade deficit.

MR. LEHRER: Japanese officials said they would appeal the complaint to the World Trade Organization.

MR. MAC NEIL: A second person was charged in the Oklahoma City bombing today. TerryNichols appeared at a federal hearing in Wichita, Kansas. He agreed to be transferred to Oklahoma City to be charged in the blast which occurred exactly three weeks ago. Nichols and his brothers were already being held as material witnesses. Nichols' former army buddy, Timothy McVeigh, has already been charged. The car bomb killed 167 people and injured about 400. We'll have more on this story later in the program.

MR. LEHRER: Former President George Bush quit the National Rifle Association today. He resigned his lifetime membership in protest of a recent NRA fund-raising letter. That letter said federal law enforcement agents wear Nazi bucket helmets and black storm trooper uniforms and want to attack law-abiding citizens. Mr. Bush called it a vicious slander on good people. He said in a letter to the NRA he was still a gun owner and a hunter and supported most NRA objectives, but he said, "Your broadside against federal agents deeply offends my own sense of decency and honor and offends my concept of service to country."

MR. MAC NEIL: A storm system which began last weekend is continuing to cause damage. Residents in the New Orleans area endured a second day of flooding. More than 16 inches of rain have fallen since yesterday morning. At least a thousand homes were flooded, and hundreds of people were evacuated. Floodwaters were more than five feet deep in some areas. At least six people have died in flood-related incidents. In Illinois, severe weather spawned several tornadoes that touched down in the central part of that state. Many homes were damaged, and power was knocked out in some areas. No one was seriously hurt.

MR. LEHRER: House Republicans introduced their budget plan today. It has the same target as the Senate version announced yesterday, a balanced budget by the year 2002. It also reduces the growth of Medicare and transfers Medicaid from the federal government to the states. Its major difference with the Senate's is a tax cut, already passed by the House earlier this year. Administration officials criticized it soon after it was introduced by the chairman of the House Budget Committee.

REP. JOHN KASICH, [R] Ohio: We're excited today to unveil what can only be described as a bold, innovative, revolutionary document that keeps our promises. In terms of this program, we eliminate 284 separate programs of the federal government, 13 agents are eliminated, 69 commissions, and three departments; the Department of Commerce, the Department of Education, and the Department of Energy. Also included in this program are the full tax cuts from the Contract With America.

LEON PANETTA, White House Chief of Staff: In trying to fulfill their contract, Republicans have broken our nation's contract to working families and to their parents. The most glaring evidence of this broken contract are the massive cuts that are proposed in both Medicare and Medicaid.

MR. LEHRER: The Senate passed a new product liability law today that would limit some lawsuit awards. The vote was 61 to 37. The bill had been stalled by efforts to enlarge its scope by including a cap on damages in all civil cases. That attempt was abandoned yesterday. The bill now goes to a conference committee to work out differences with the House-passed version. The Military Base Closing Commission has added 35 bases to its list. They include eight facilities in California, four in Texas, and three each in Oklahoma and Pennsylvania. The nuclear missile base in Grand Forks, North Dakota, was also added. The commission will make its final recommendations on whether toclose or restructure the bases in late June.

MR. MAC NEIL: Doctors from the Centers for Disease Control in Atlanta and other health organizations are heading to Zaire to investigate a mysterious and deadly virus. At least 90 people have already died in the town of Kikwit, which has a population of more than half a million. A quarantine has been declared, and the U.S. government today warned citizens to avoid the area. Scientists believe the disease may be the Ebola virus, which has a 90 percent mortality rate and can kill in less than two weeks. The Ebola virus causes severe hemorrhaging and has no cure. That's it for the News Summary. Now it's on to the U.S. and Russia, trimming Medicare, and an Oklahoma City update. FOCUS - SUMMIT SESSION

MR. MAC NEIL: We begin tonight with today's meeting between Presidents Clinton and Yeltsin in Moscow. We'll discuss the issues on their agenda after this report from Correspondent Simon Marks in Moscow.

SIMON MARKS, Moscow: President Yeltsin welcomed President Clinton to the Kremlin this morning for a meeting the Russians weren't calling a summit. With so many unresolved disputes between the two sides, Russian officials described President Clinton's time here as a working visit. The work was dominated by three contentious issues: Russia's opposition to NATO expansion, Moscow's proposed sale of nuclear technology to Iran, and the war in Chechnya. On the inclusion of East European states in NATO, President Yeltsin said he and President Clinton now understand each other better but are still sticking to their respective positions. There was some movement on Iran. The Russians won't now sell a gas centrifuge to Tehran, which could be used to make nuclear weapons, and though the bulk of the billion dollar deal is still in place, President Clinton says progress was made.

PRESIDENT CLINTON: We actually got more done today than I thought we would do, and we are ahead of where I thought we would be. As I said, President Yeltsin made it clear to me that even though it would be some financial sacrifice to Russia, he did not believe they should proceed with the centrifuge and the related portions of the sale that could have a much more direct and immediate impact on weapons production. I gave him some of our intelligence and made the best arguments I could about why I thought the whole sale should not go forward. And we agreed that since some of this involves an evaluation of technical matters, it would be appropriate to refer it to the Gore-Chernomyrdin Commission, where we have gotten a lot of useful work done between our two countries.

SIMON MARKS: There was no progress reported on the Russian army's intervention in Chechnya. President Yeltsin described the Chechen rebels as criminal terrorists and compared their actions to those of the Oklahoma City bombers, and even though the Russian defense ministry says four Russian soldiers died in fresh fighting on Monday, the Russian leader maintains the region is peaceful.

PRESIDENT YELTSIN: [speaking through interpreter] Well, first there are no hostilities underway in Chechnya right now. Furthermore, the armed forces are not involved there. Today the ministry of the interior simply seizes the weapons which are still in possession of some small armed criminal gangs. Creative work is being done and I believe that soon we will have a normal situation there and the situation of a democratic republic with all the ensuing rights for the citizens living in Chechnya.

SIMON MARKS: The news conference ended on a prickly noted. President Yeltsin was asked how he responded to threats from U.S. congressional leaders to cut foreign aid if he continues to maintain his current assertive position on the nuclear deal with Iran.

PRESIDENT YELTSIN: [speaking through interpreter] We are not afraid of threats. We never react to threats. We need to set out what relates to peaceful and to military purposes, and this has been entrusted to the Gore-Chernomyrdin Commission.

PRESIDENT CLINTON: I think it is important that the people of the United States and the people of Russia understand that from time to time, as with any sort of relationship, there will be differences of opinion. But I think we should be quite careful in using the language of threats in a relationship that in the last two years has made the world a much safer place.

SIMON MARKS: After the news conference, President Clinton left the Kremlin and headed to the more relaxed setting of Moscow State University. There, before an audience of students, he delivered the keynote address of his visit and in contrast to his reluctance at the news conference to criticize President Yeltsin's actions, he launched an unequivocal attack on the war in Chechnya.

PRESIDENT CLINTON: As I told President Yeltsin earlier today, this terrible tragedy must be brought to a rapid and peaceful conclusion. Continued fighting in that region can only spill more blood and further erode support for Russia among her neighbors around the world: Holding free elections, ensuring a free and independent press, promoting tolerance of diversity -- these are some of the difficult tasks of building a democracy.

SIMON MARKS: Tomorrow, President Clinton will return to that theme when he meets alternative Russian political leaders at a morning reception, but after his talks with today's Russian President, he maintained their summit has proved Russia and the U.S. can still engage with one another, even when they disagree.

MR. MAC NEIL: to analyze the state of U.S.-Russian relations now, we're joined by Adrian Karatnycky, president of Freedom House, a non-profit organization that monitors human rights and democracy around the world; Lilia Shevtsova is the director of political studies at the Russian Academy of Sciences, she's now a fellow at the Woodrow Wilson Center; Michael Mandelbaum is a professor at the Johns Hopkins School of Advanced International Studies, he also directs the project on East-West relations at the Council on Foreign Relations, he was an adviser to President Clinton during the 1992 campaign; and Jack Matlock, former ambassador to the Soviet Union during the Reagan and Bush administrations is now a professor at Columbia University, he joins us from Knoxville, Tennessee. Michael Mandelbaum, President Clinton called this today a "win-win meeting." Would you describe it that way?

MICHAEL MANDELBAUM, Council on Foreign Relations: I think that's fair enough. I want to highlight something that was attributed in the preceding piece to the Russian government, which was quoted as saying this is not a summit. I think that's right. This is not a summit meeting, and if we call it a summit, we generate unrealistic expectations. After all, the term "summit" stems from two historical eras that are now long past. One is World War II, where summits at Tehran and Yalta and Potsdam brought together the leaders of the anti-fascist coalition to dispose of the world, to send armies hurtling across borders to draw lines all around the world. Nothing like that is happening in Moscow, and then in the Cold War, a summit was a meeting of two leaders. We're poised withnuclear weapons to strike one another at the slightest provocation. The threat of war was ever present, and we believe that the quality of the meeting was an indicator of the quality of relations and the chances for war and peace. If the summit was successful, that meant the world was safer. If it was unsuccessful, that meant the world was more dangerous. That isn't true anymore either. This is not a summit. It's a meeting. It's a meeting between two important countries that have some interests in common and some divergences. And the reports suggest that they made modest progress on some of those divergences.

MR. MAC NEIL: Well, Mr. Karatnycky, a win-win meeting would you say?

ADRIAN KARATNYCKY, Freedom House: Well, I don't think that there was even a match being played, so to describe a victor or someone who loses I think is off the mark. But I do think that what Michael Mandelbaum said is essential, that is to say the issue is -- the most important issue here was not diplomacy. While President Clinton was engaged in diplomacy, the most important message was whether he was speaking to the new emerging community of democratic Russians. We are on the eve of an electoral season. President Yeltsin has shifted his allegiances to the old nomenclature, which is adopting ultranationalist, anti-Western slogans, but there is a strong core group of people who want to be integrated into the West, and really that speak that he gave at Moscow State University in that sense is much more important than the summitry because the summit occurs on the tip of an iceberg, but beneath that iceberg is a great deal of growth in civil society, and it is there, where there is a lot of U.S. government and other government-supported assistance through USAID and other institutions, and there, rather than in the diplomacy, is where the American difference can and should be felt.

MR. MAC NEIL: Ms. Shevtsova, what did you see as important in this?

LILIA SHEVTSOVA, Russian Academy of Sciences: Well, I think that low expectation of this summit were absolutely fully justified, but maybe I'll be a little bit optimistic, because I see at least two positive results of this meeting. The first result is that everything during this summit might have been much worse. Thank God, we haven't reached, you know, the point of crisis.

MR. MAC NEIL: You're not embarrassed to call it a summit, as the others are?

MS. SHEVTSOVA: Yes. And there's one more aspect that I find very positive. The summit demonstrated that probably the period of ambiguity in the relationship between United States and Russia is over. The honeymoon is over, and both leaders, thank God, understand it, and now they're learning hard to deal in a new paradigm, in a paradigm of much more cooler, a chilly relationship, and maybe they will be much more reasonable and much more pragmatic now.

MR. MAC NEIL: Jack Matlock, do you see the leaders having learned that they're now dealing in a much cooler relationship?

JACK MATLOCK, Former U.S. Ambassador, Soviet Union: [Knoxville] I think that's true. At the same time, I think we mustn't forget that our interests do not conflict in any important matter. You take the matter of Iran. It's certainly as much in the Russian interest as it is in ours that Iran not go nuclear, maybe even more so, so that our basic interests really are much more in accord than sometimes these disputes would indicate.

MR. MAC NEIL: What did you think about the significance of Yeltsin saying, okay, we won't sell the gas centrifuge reactor which America believes could be used to develop nuclear weapons?

MR. MATLOCK: I think that was very important. That is much more sensitive in terms of developing nuclear weapons than the reactors. After all, the reactors are a similar type that we are arranging to be sold to North Korea. So our position on those, I think, is much weaker than the gas centrifuge. That was important, and it's important than they not sell it.

MR. MAC NEIL: Ms. Shevtsova, did you think that was an important concession by Mr. Yeltsin?

MS. SHEVTSOVA: Well, I think that this was very small concessions, because according to some reports from Russian press just now, the minister for nuclear energy in Russia continues to negotiate with Tehran about the selling of three nuclear power plants to Iran. This is a deal that is worth about $2 billion, and probably there will be much more, you know, weapons sale and dealings with Iran and also with Iraq, with Sudan, as you know.

MR. MAC NEIL: And Michael Mandelbaum, how do you see Mr. Yeltsin's climb down, very little or significant?

MR. MANDELBAUM: Well, I think we ought to understand the type of issue that this represents. First of all, nuclear proliferation is a large, frustrating, ongoing global issue that's going to be with us forever, for as long as it's possible to make nuclear weapons, which is effectively forever. So there isn't going to be a decisive event at this meeting. Second, the United States and Russia are on the same side. There is a certain amount of cooperation on nuclear proliferation, just as there was between the United States and the Soviet Union. Third, from the Russian point of view, the motives for selling what we regard as dangerous technology to Iran are strictly commercial. This has nothing to do with any geopolitical goal. Russia certainly does not want Iran to have nuclear weapons. But fourth, what we have here is a very powerful and quasi- independent bureaucracy, the ministry of atomic energy, which needs to make this sale from its own point of view in order to get foreign currency, in order to keep itself in business. So the real conflict here is between the central Russian government, Mr. Yeltsin, and this powerful baron in charge of atomic energy who simply wants to go his own way.

MR. MAC NEIL: Mr. Mandelbaum, describe the Gore-Chernomyrdin Commission to which these issues have been referred. What is it and what's it -- what's it for?

MR. MANDELBAUM: Well, the Gore-Chernomyrdin Commission was set up early in the Clinton administration to deal with economic matters, and it is gradually --

MR. MAC NEIL: Mr. Chernomyrdin is the prime minister.

MR. MANDELBAUM: Chernomyrdin, Mr. Chernomyrdin is the prime minister. He's the head of the Russian government. He was appointed by Mr. Yeltsin. He's an old-style Soviet bureaucrat, who has close ties to the energy ministry, but he also has proven to be somewhat more skillful, somewhat more westernized, somewhat more willing to take proper economic steps than was thought initially. And this commission has turned into something more than I think was envisioned in the first place. It hasn't been simply ceremonial. Now, referring the matter of the sale of atomic reactors to this commission is one way of deferring it, of kicking the can down the road, so to speak, but at least it demonstrates that Mr. Yeltsin recognizes the need not to proceed immediately, and it is possible that either through the work of this commission or in some other way ultimately the sale will not go through.

MR. MAC NEIL: You don't see it that way, Ms. Shevtsova?

MS. SHEVTSOVA: Well, quite probable. You know, it's not the only contentious area in our relationship. There are a lot more areas, a lot more questions. Just look at the NATO expansion, look at the Chechnya problem, and human rights relations.

MR. MAC NEIL: Well, I was going --

MS. SHEVTSOVA: Look at the problem of CFE at last.

MR. MAC NEIL: I was going to come to the Chechnya thing. Mr. Karatnycky, what do you make of Yeltsin saying at the news conference there isn't any fighting going on there now, and a few minutes later, the world television can show helicopter gunships attacking that village?

MR. KARATNYCKY: Well, you know, it's three years, four years after the August coup, and we're back to the age of the big lie. It is really a sign that is symptomatic of the deep changes that are occurring within Russian political life. The government and the administration that President Yeltsin currently heads is fundamentally different from the government and administration that he headed a year or two ago. It has been increasingly taken over, especially in the -- I would say -- the political and the security ministries and security structures by people who have adopted extreme nationalist positions, more aggressive positions. In the area of economic reform, that is where you will still find democrats and reformers. In the areas of security, of external policy, et cetera, et cetera, power is shifting in a different direction, and the habit of lying shamelessly about such activities is something that we really associate with the very distant past. And I think it is a very worrisome sign of what is approaching as the electoral season nears.

MR. MAC NEIL: A very worrisome sign, Ms. Shevtsova?

MS. SHEVTSOVA: Well, there are a lot of worrisome signs, and it seems to me the question is not that the power has been shifted to force -- so called force structure. The problem is that Yeltsin, with all his allies, the whole regime is turning to the right and is using status orientation in order to consolidate its power, in the situation when liberal democratic reforms failed.

MR. MAC NEIL: Jack Matlock, do you see this as necessary pre- election maneuvering? I mean, after all, it's not unknown in this country for parties to move to the right or to the left when they need to orient themselves before an election. Do you see this as a dangerous move, or just necessary pragmatic political maneuvering before an election period?

MR. MATLOCK: There's a large element of pre-election maneuvering, of course, but it is dangerous, though I think one can exaggerate how far it has gone at present. Obviously, if some of these trends continue, I think that they will begin to impinge upon many of the gains of democracy. On the other hand, I think President Clinton handled it pretty well. I think his speech was forthright, and I think it was the message he should have been giving while he was there.

MR. MAC NEIL: Do you think Mr. Clinton handled the Chechnya episode well in this visit, that he was strong enough in condemning it for his own needs elsewhere?

MR. KARATNYCKY: I would have felt happier if he had made President Yeltsin a little more uncomfortable in public. After all, you recall Mr. Yeltsin had a habit of making Mr. Gorbachev uncomfortable in public and should be able to take it. But clearly, the fact that he made this very important address and raised these issues in a very forthright way I think gives a substantial boost to the democratic forces and is to be applauded?

MR. MAC NEIL: Do you agree with that, Michael Mandelbaum?

MR. MANDELBAUM: Yes. I think it was appropriate. Mr. Yeltsin was asked at the press conference how he responded to threats, and he said he wasn't going to give into them. If you can find me a leader anywhere who will confess that he is subject to pressure by threats, then I'd be willing to sell you the Brooklyn Bridge. I think that the people of Russia are not in any doubt as to what the international community thinks about Chechnya. It is a disaster and a tragedy for Russia, but I think it was right for President Clinton to make that point once again. We aren't going to be able to stop the war directly. We don't have that kind of leverage over the Russian government. But I think in this new Russia, where public opinion does count for something and where there are many people who want Russia to be a normal member of the international community, making it clear that policies like the one in Chechnya make it more difficult for Russia to join the civilized world can over the long-term and not only over the long-term have some modest impact on Russian policy. So I think it was right for the President to say what he did.

MR. MAC NEIL: Ms. Shevtsova, you mentioned the NATO, the desire of some western countries to expand NATO to up to the Russian borders. They disagree on that clearly. Is that a dangerous friction between the United States and Russia?

MS. SHEVTSOVA: Well, you know, I think that the problem of NATO enlargement is a little bit ambiguous problem, because well, on the one side, NATO, anti-NATO rhetoric is a rhetoric of Moscow political elite. I don't think that within the Russian society, you know, the ordinary people think much, you know about NATO. But on the other side, there are a lot of contradictions. I don't find the arguments about NATO enlargement convincing enough. So if NATO is just this school of democracy, why, for instance, Russia or other independent states cannot join it, for instance? It would be nice for Yeltsin and other political leaders to learn a little bit about democracy, but if NATO is just an answer to a Russian threat, then NATO must move, you know, until Russian borders. And this case, you know, NATO would become a very interesting and very nice instrument for Yeltsin and his team to mobilize real extremists in Russia.

MR. MAC NEIL: You mean, use the, what they see as the encroachment of NATO closer to Russia --

MS. SHEVTSOVA: Oh, yes.

MR. MAC NEIL: -- as a way of, of exciting nationalist feelings in Russia?

MS. SHEVTSOVA: Oh, yes, definitely, because for the time being, Russian society is much more moderate than Russian political elite.

MR. MAC NEIL: Mr. Matlock, you've been making that argument I know with us for some time, that there's no need to expand this.

MR. MATLOCK: Yes. I think we have not handled this situation very well, this particular question. I think there is no need for expansion now. And under certain conditions, NATO should expand, but these conditions haven't been met. And I think Dr. Shevtsova is absolutely right. If we expand without doing it right, we are going to create conditions that could bring on a threat which does not now exist.

MR. MAC NEIL: What do you think of the NATO expansion issue?

MR. KARATNYCKY: Well, I believe that NATO should expand. I believe that it is not --

MR. MAC NEIL: Why? Why, in a few words?

MR. KARATNYCKY: Because there is a security vacuum in Central and Eastern Europe, and it is important to fill that vacuum. Russia is setting about, trying to recombine itself in a military-political alliance which it has and which includes most of the countries of the post Soviet Bloc. The key is, I believe, to bring some stability to the Central European countries so that they can feel comfortable and can actually relieve themselves of a burden of militarism and of the threat of some outside intervention. And secondly, it means that the next stop on President Clinton's agenda, Kiev and the Ukraine, become a central part of this puzzle. It seems to me that NATO should expand not to Russia's borders but to Ukraine's borders and then sufficient resources should be devoted to making Ukraine an economically stable buffer.

MR. MAC NEIL: And finally, Mr. Mandelbaum, briefly on the NATO expansion issue.

MR. MANDELBAUM: Well, I agree with Dr. Shevtsova and Amb. Matlock. I think NATO expansion, as being proposed now, is at best premature and at worst counterproductive for the reasons that they have cited. And since I've recently committed myself to print to that effect, I will stand by what I've written. But I also want to add that the security of Central Europe that Mr. Karatnycky cites is important to us, but I believe that there are four layers of protection for the countries of Central Europe that are the prime NATO member candidates already in place. There is Russian weakness. Russia really is no military threat. There is Ukraine, which acts as a buffer state. There is the remarkable series of arms control and disarmament measures that were signed between 1989 and 1983, which if they observe, which if they are observed ensure that NATO -- that Russia will be no threat to Central Europe. And finally, there is the partnership for peace, which Russia has agreed to join, which provides an extra layer of protection. So --

MR. MAC NEIL: I'm afraid -- I'm sorry to interrupt you, but I'm afraid we're tight tonight, and we have to move on. Thank you all four very much. Jim.

MR. LEHRER: Still to come on the NewsHour tonight, a Senate Medicare debate and an Oklahoma bombing update. FOCUS - CURING MEDICARE?

MR. LEHRER: Now, day two of the thrust in the Senate for a balanced budget. It was launched yesterday with the release of the Republican plan that would balance the budget by the year 2002. One of its centerpieces is to cut $250 billion in the future growth of Medicare, the health insurance program for the elderly. We'll have our own Senate debate about that right after this backgrounder from our medical correspondent Fred De Sam Lazaro of public station KTCA-St. Paul-Minneapolis.

PEOPLE DEMONSTRATING: [chanting] Save our security! Save our health! Save our security! Save our health!

FRED DE SAM LAZARO: It seemed sheer coincidence last week just as the debate over Medicare reform began heating up in the nation's capital, 2,000 advocates for the elderly came to Washington for the White House Conference on Aging. Their host was President Clinton.

PRESIDENT CLINTON: Reducing the deficit is terribly important, but it is also important that Congress protect programs for seniors like Medicare. We must have a sense of what our obligations are.

MR. LAZARO: The Conference on Aging is held once every decade to call attention to the needs and wants of seniors. It was at an earlier such gathering that Medicare was first proposed and signed into law by President Johnson in 1965. Over the years, Medicare has proven extremely popular and valued by its beneficiaries. Conference delegates Mary Louise Schweikert and Edith Brady reflected a commonly heard sentiment.

EDITH BRADY, Conference Delegate: Our incomes don't go up but the prices, as you know, do, our health care goes up, so we really need this help. Most of our people are lucky to be able to afford medicine, housing, and food.

MARY LOUISE SCHWEIKERT, Conference Delegate: I think if Medicare takes a huge hit, there are going to be people who will die. There are going to be people who will suffer because they can't get the services that they need.

HEALTH CARE WORKER: [talking to patient] Do you mind sitting up on the exam table here?

MALE PATIENT: No.

MR. LAZARO: About 32 million seniors and 4 million disabled Americans receive Medicare coverage for all reasonable and necessary medical services. The benefits do not include prescription drugs and long-term care and are there for less comprehensive than typical private plans. However, Medicare comes at much lower cost to beneficiaries, a group private insurers would likely shun as high risks.

JOHN PRIBYL, Conference Delegate: My 92-year-old great aunt spends a good chunk of her income on a Medicare supplement, because Medicare doesn't cover everything. And still, it doesn't cover the drugs.

MR. LAZARO: Beneficiaries on average pay $2800 a year out of pocket in deductibles, co-payments, and supplemental insurance, a figure that is twice what it was just seven years ago. For its share, the federal government shells out $440 million, almost $1/2 billion a day. The program will cost $176 billion this year, about 15 times what the Johnson administration had predicted back in the 60's. Princeton University economist Uwe Reinhardt says Medicare's growth has largely reflected that of the health care industry which, in turn, has been driven by an explosion in technology.

UWE REINHARDT, Economist, Princeton University: In the mid 60's, people had no idea what physicians could do, what technology would make possible. Coronary bypasses weren't done in those days. That's now an operation costing as much as a Mercedes Benz. It in those days was not thought of, so for one technology really in a way helped us live longer and did us in cost-wise. That was, of course, one unpredictable trend, that longevity would increase as much as it did. I don't think the actuaries thought of that, and of course, there is a not long-term care but long-term maintenance; if people die at 80, they can't go to the doctor. If they live to 90, they'll go all these many more years to the doctor.

MR. LAZARO: About 90 percent of Medicare beneficiaries are in traditional fee-for-service medicine. Medicare has moved slowly toward cheaper managed care programs, which have allowed the private sector to cut its health care bills. Also, the cost of home health delivery and skilled nursing facility has been skyrocketing by nearly 40 percent between 1992 and '93.

UWE REINHARDT: Medicare gave the hospitals an incentive to reduce the length of stay, but it did not put similar controls on skilled nursing facilities, and particularly on home health care, which is still relatively uncontrolled, and, therefore, it's just like sticking your finger in the balloon. You put it in one end, and then it bulges somewhere else.

MR. LAZARO: At current rates of growth, the Health Care Financing Administration predicts Medicare spending will double, from $176 billion this year to $340 billion by year 2002. By then, Medicare's large hospitalization fund, financed by payroll taxes on all Americans, is expected to run out of money.

MR. LEHRER: Now, to our debate with two members of the Senate Budget Committee: Christopher Dodd, Democrat of Connecticut, and Judd Gregg, Republican of New Hampshire, who headed the committee's working group on entitlement reform earlier this year. They both join us from Capitol Hill. Sen. Dodd, what do you think of the Domenici Republican approach to Medicare?

SEN. CHRISTOPHER DODD, [D] Connecticut: [Capitol Hill] Well, I think it goes far beyond what needs to be done. Obviously, you've got to look at the reform measures we tried last year. You may recall the health care effort that failed, but there, there was some $55 billion in cuts in Medicare the President proposed, in fact, succeeded in getting. We had $124 billion as part of the health care package which did not make it. That has extended the solvency of the fund an additional three years, and clearly, more needs to be done. No one questions whether or not we need to reform it, but it needs to be reformed, in our view, in the context of health care overall. It isn't just a Medicare problem. It's a Medicare -- it's a Medicaid problem -- it's access; it's rising costs. The inflation factor is double digit. It's higher than the Consumer Price Index, and it seems to us that before you just decide you're going to take some significant cuts in the growth of Medicare, which will be tantamount to a $900 increase to retirees, that is out of pocket expenses, that they can hardly afford, we ought to be looking at the totality. That's what the President has asked for. And, of course, last year, every effort we made in this area, we were told there was no crisis, nothing needed to be done, and now we're being told a few weeks later that something has to be done. I would add that I think there is a legitimate suspicion that these cuts in Medicare appear to be, at least from a House perspective, less so in the Senate bill offered by Senator Domenici, that these are going to be used to pay for a significant tax cut, the benefits of which by and large will go to upper income taxpayers in the country, not to working families. And that seems to be a very legitimate concern as well. So reform is on the table, ought to be, we need to look at it in terms of how we can solve it, but this goes very, very deep, and a lot of people, hard-working people who've spent all of their lives building this country are going to be asked to pay a very dear price, indeed, without looking at the totality of the problem.

MR. LEHRER: Do you agree with that, Sen. Gregg, that people are going to have to pay a very deep price for this?

SEN. JUDD GREGG, [R] New Hampshire: [Capitol Hill] No. And, in fact, I think the Senator's made a number of statements which are inaccurate. To begin with, it's the trustees of the trust fund, four of whom happen to be administration officials, including Donna Shalala, who have told us if we don't do something about this, the trust fund goes insolvent in the year 2002. And that means there is no insurance program for senior citizens, so the matter has to be addressed. In addition, the trustees have set the number. They've said that the trust fund is out of whack by the amount of $262 billion over a five-year period. Now, we haven't attempted to get to that large a number, quite honestly, because we thought it was too big a number to adjust. Our adjustment is in the range of $160 billion over five years. And we've suggested that the way you get to that isn't by hitting the beneficiaries at all. What we've suggested is that we give the beneficiaries some choices that they don't presently have. We've suggested that the beneficiaries have a program much like members of Congress have where they can go out in the market and choose other programs than fee-for-service. As your introductory comments noted, 90 percent of the senior citizens are using fee-for-service. That's because they grew up with it in the 50's and the 60's. But that's the most expensive form of health care. What we've suggested is to create an economic incentive to allow seniors to go out and choose other forms of services, such as HMO's or PPO's, fixed cost delivery services, and we've said if they want to stay with fee-for-service, they can. Voluntarily, they can choose whichever program they want, but if they choose a fixed cost program, and it's less than what fee-for-service costs, then we're going to allow them to keep a significant amount of what they save. Say the program they have today costs them $5,000, and be able to go out and go into an HMO that costs $4500, with the same benefit structure, maybe even a better benefit structure because many HMO's stress wellness and preventive care, then they'll be able to keep 75 percent of the $500 difference. And that'll create, one, an economic incentive for seniors to look for other and better types of health care; two, it will create in the marketplace a variety of different health care programs coming out to seek seniors' business; and three, for the federal government, what it gives us is a fixed rate of increase. And we're not talking about cutting Medicare at all. And I think that's very important to note here. We're talking about taking a rate of growth in Medicare which is now 10 percent, three times the rate of inflation in the private sector, 10 times the rate of health care inflation in the private sector, and reducing that rate of growth down to 7 percent. So we're talking about a dramatic increase in the amount that's spent on Medicare here.

MR. LEHRER: And that can be done in -- according to your calculations and those of Sen. Domenici and others -- without hurting any of the people who are the beneficiaries?

SEN. GREGG: Well, there will be some adjustment for beneficiaries, but more importantly, the adjustments will be, we think, in a positive way and the beneficiaries will be given more choices. They'll be given the opportunity like members of Congress are to go out and take an HMO program and if the HMO program costs less, then they'll save money. Now, as we get into -- as we transition into that, there's going to be a transition period. And what we suggested is that the savings up front that are needed in order to get on a glide path to making this Medicare system solvent here -- and what you got to remember here is if we don't make it solvent, beneficiaries are really going to be hurt because they won't have a system at all -- to get on that glide path, we suggested some adjustments which impact provider groups, they impact doctors, they impact hospitals, and they impact some segments of the beneficiaries but the affluent ones primarily, because we do put in an affluence test on the Part B premium which we think is very reasonable, so that John and Mary Jones who are working 60 hours a week at the local restaurant to make ends meet don't end up subsidizing the 500 top retirees from IBM.

MR. LEHRER: Well, Sen. Dodd, what's wrong with that? What's wrong with giving the folks more choices and all the things that Sen. Gregg just outlined?

SEN. DODD: Well, it sounded wonderful, didn't it? But the fact of the matter is you have an awful lot of people that don't have those choices because in the fee-for-service plan, they don't want to take on someone. As you know, people are living longer today, and a lot of these people have not -- don't work out financially in the fee-for-service area, so they don't have those choices at all, and so that makes it much more difficult. Secondly, you have organizations like the National Association of Manufacturers, the American Hospital Association has said rather bluntly here that if you have these kind of very deep cuts -- and they are -- it may not be much if you're on the wage or salary of a congressman or senator -- but if you're on a fixed income like the elderly are, this is a huge whack -- and that's one of the problems of getting some sense of reality of what this means to them. Those costs get shifted. Hospitals are not going to just absorb these costs. They're going to pass them on in higher health care costs to others. So working families out there pay more, or the premiums go up, and business is very worried about it, so it isn't just the elderly here who can pay the price but also other segments of the economy.

MR. LEHRER: Sen. Gregg, let's come back to a point that Sen. Dodd raised earlier, that he has -- he thinks that people have a legitimate suspicion -- that was his word -- legitimate suspicion that what's really at work here is that Medicare will be reduced or that growth -- the rate of growth of Medicare will be reduced in order to finance a tax cut that you Republicans, particularly in the House, are committed to.

SEN. GREGG: Well, No. 1, the Senate bill has no tax cut in it until you get to a balanced budget and until you've restored the actuarial soundness of the trust fund. And the No. 1 goal here, remember, is to restore the actuarial trust -- the soundness of the trust fund, which is linked to deficit reduction. I mean, the fact is -- and it's only logical and this point was made by the trustees of the trust fund when they testified before us -- that if you're able to bring a trust fund into balance, which is way out of balance right now, that in the process, you obviously positively impact the deficit issue, but there is no tax cut in our bill. There is no transfer in our bill because the tax to the extent there is a tax cut in our bill it doesn't incur until after we've gotten to a balanced budget and until after it's been scored as a balanced budget.

MR. LEHRER: Can that be made to stick politically in the Senate, Sen. Gregg? Sen. Dole, the Majority Leader, said he favors a tax cut. Sen. Gramm, who is a key member of the Senate, and also running for President, says he favors a tax cut. So realistically, can you and Domenici and others hold the Senate to this?

SEN. GREGG: Well, there are differing views on that in our caucus but it's going to be -- that mechanism, that approach, which basically says first you have to get to a balanced budget by reducing spending, which is what I think the American people asked us to do, second, you have to put the trust fund into balance, and then third, after you've done those two things, then if you get an economic benefit, which we think we will in reduced interest rates, you can take that money and cut taxes with it.

MR. LEHRER: Sen. Dodd --

SEN. GREGG: That'll pass the committee 12-0 on the Republican side.

MR. LEHRER: Okay. Sen. Dodd, you don't buy that?

SEN. DODD: No, of course not. In fact, Sen. Domenici said very categorically today that $170 billion in there that is the so-called dividend can only be used for a tax cut. That was the sop to those elements frankly that want a tax cut. Clearly, that's what it's there for. Why not take that money --

MR. LEHRER: I'm sorry. Bring me up to date on that. What's that - -

SEN. DODD: Well, he was asked -- the chairman was asked --

MR. LEHRER: Okay.

SEN. DODD: -- very specifically, the $170 billion that becomes, that is hanging out there as a dividend can only be used, according to the chairman's words today when asked by Sen. Sarbanes and Sen. Hollings and the chairman, Sen. Exon, can only be used for a tax cut. Why not take that $170 billion and mitigate some of these cost to Medicare people who are claiming in this bill we're not touching Social Security, tell that to the Social Security recipient who is going to have a $900 whack come out of that Social Security check they get in order to pick up the difference between what they'd otherwise get under Medicare.

SEN. GREGG: Well, I think we're getting into the minutia of how this is working. And I expect some of your listeners may be confused as to where the $170 billion figure that Sen. Dodd just cited.

MR. LEHRER: This listener in particular is. Okay.

SEN. GREGG: Let me explain to you the way this works. What has happened is that the Republicans for the first time in twenty-five years have put on the table a budget that gets to balance. Now, we've been told that if we put that into law, and we don't get into law by passing it, we actually have to pass legislation afterwards, and then CBO scores the action that we take of putting that balanced budget into law, then, then we will be on a balanced budget glide path. At that point, CBO says, after those two things have happened, at that point, CBO says that interest rates in this country will drop by 2 percent. And as a result, the cost to the government of borrowing will drop by 2 percent, and as a result, you generate $170 billion dividend. That dividend at that point we are saying should be returned to the taxpayers of this country. What Sen. Dodd and his side have essentially said is they've come up with about 17,000 ways to already spend this money. They had an agricultural proposal; they have had a Medicare proposal, and they're going to have other proposals.

MR. LEHRER: All right.

SEN. GREGG: Our point is these folks aren't even willing to vote for a budget to get to balance to get us this dividend. We happen to think that we're doing a pretty good job of getting this to a balanced budget.

SEN. DODD: Well, I disagree.

SEN. GREGG: And we would like to use the dividend --

SEN. DODD: Let me respond, if I can.

SEN. GREGG: -- to return --

MR. LEHRER: Has he characterized your position correctly, Sen. Dodd?

SEN. DODD: No, not at all. In terms of how this is supposed to work, but if there is a dividend there, our point in this debate on Medicare, what we offered today, what Sen. Exon offered, was why not take that money and then try and mitigate some of the cost, as reform the Medicare program, No. 1? No. 2, this is not a budget in balance at all. They're using the Social Security trust fund, which is a --

SEN. GREGG: That is not accurate. That is not accurate at all.

SEN. DODD: The Social Security trust fund is not allowed to be used. It is the law of the land.

SEN. GREGG: That is totally specious.

SEN. DODD: That money is incorporated in this. It's part of the deal. So this budget is about $600 billion out of deficit.

SEN. GREGG: Oh, come on, Senator.

SEN. DODD: And that's based on the law of the land.

SEN. GREGG: The last 25 years the budget has been accounted for in this way.

SEN. DODD: No, it has not. No, it has not.

SEN. GREGG: We've used a unified budget. And the idea that the trust fund is being used in any way than it was used last year --

SEN. DODD: It's a unified budget. The chairman has said so, the chairman has said this is a unified budget.

SEN. GREGG: Didn't the President set the --

MR. LEHRER: Gentlemen, you all go ahead and keep talking, but we've go to go. Thank you both very much.

SEN. GREGG: But we're having a good discussion.

MR. LEHRER: Okay, great. Go ahead. UPDATE - NEW CHARGES

MR. MAC NEIL: Now we update the Oklahoma City bombing story. As we reported, charges were filed today against a second suspect in the bombing that took place three weeks ago. Margaret Warner has the story.

MS. WARNER: Today federal prosecutors charged Terry Lynn Nichols with playing a direct part in the bombing of the federal building that killed 167 people. Nichols is a friend of the first suspect arrested in the case, Timothy McVeigh. For more details on the story, we turn now to Ron Ostrow, a reporter for the Los Angeles Times, who has been covering the investigation. Welcome. What role do the authorities think Terry Nichols played in the bombing? RON OSTROW, Los Angeles Times: Well, at this stage, he's simply charged with the same crime that McVeigh was charged with, namely maliciously destroying a federal building, but what I think you're seeing here is the ingredients of an indictment that will follow. This is just a federal -- criminal complaint against him. Down the road will come, I believe, a grand jury indictment naming those two and possibly others in a conspiracy to do this. They think that they were both friends from their army days. They enlisted, in fact, on the same day in 1988. He served, the gentlemen today, served --

MS. WARNER: Nichols.

MR. OSTROW: -- only a year. Nichols -- whereas McVeigh served in the Persian Gulf and such. But, nevertheless, they formed a friendship there and a friendship that continued over the years and they seem to share a rather deep hatred of the federal government and a flashpoint for that hatred was -- so the theory goes -- was the Waco incident in 1993.

MS. WARNER: Now, of course, Terry Nichols has been held for the last couple of weeks, I gather, as a material witness. What evidence did the authorities develop in the course of those two weeks that enabled them to sort of increase the, the charges against him?

MR. OSTROW: That's an interesting evolution. I mean, first, as you say, he is held -- he comes in, he turns himself in a few days after the bombing, then he's held as a material witness along with his older brother, James. Then they're charged -- remember -- with a separate federal charge of -- seemingly unrelated at this stage to the bombing -- of possessing and blowing up destructive devices.

MS. WARNER: And this was at the farm of this other brother, older brother.

MR. OSTROW: That's right. And named as taking part in that was McVeigh, was Timothy McVeigh. He wasn't charged in that. I think what this is again leading to is you can see the outlines of an indictment here, that is that they were allegedly planning and working with explosives, bettering their skills, if, indeed, that's what the charges end up being.

MS. WARNER: Do they have any evidence that links Terry Nichols to the bombing or potentially does, any physical evidence, anything that --

MR. OSTROW: Well, they have his own statements when he was a cooperating witness that I knew of. I'm a little restrained from giving a direct answer in that the affidavit that we all thought was going to be an affidavit by an FBI agent laying out the cause for filing this complaint against Terry Nichols was sealed and remains sealed at this hour. I think -- I think it may be released tomorrow, but that, I'm told, displays some really fine detective work on Nichols' role and will spell out directly what he did in the blowing up of the building.

MS. WARNER: But now in your story today in the Los Angeles Times, you talked about a receipt for, what ammonium nitrate.

MR. OSTROW: A ton of ammonium nitrate. Now, that's one of the things --

MS. WARNER: Explain where they found the receipt.

MR. OSTROW: They found the receipt at -- at Terry Nichols' home. The receipt bore the fingerprint of McVeigh. I believe there's more than just that one receipt. I think they have other receipts. The material was purchased in aliases that the two men have used allegedly over the years. And I think those receipts will be, will be key evidence.

MS. WARNER: You mentioned that the affidavit with sort of the background on this is still sealed. Why is it sealed?

MR. OSTROW: Well, last night when we were doing the original story, we were told that it was -- in order to give the court where the complaint would be filed time to find an attorney to represent him, you'll remember that McVeigh lost his original two attorneys because they had known victims in the blast and so on.

MS. WARNER: And this is because he won't really indict it formally until the affidavit's opened, is that what you mean, the judge?

MR. OSTROW: The indictment could still be some weeks away, or it could be late this week. Whenever it does come. Now, today we're told that it wasn't particularly the lawyer aspect, it was that you want to hold those things under seal while you're still questioning people whose activities are covered in there, so they don't tailor their testimony or alter their statements.

MS. WARNER: Meanwhile, separately, what has happened to the search for -- or in the search for John Doe No. 2, the drawing we've all seen so many times?

MR. OSTROW: Well, I think there's an effort underway to de- escalate the importance of John Doe 2. The two theories -- or the leading theory seems to be at this stage that it could even be Nichols' 12-year-old son, Joshua, who was living with him for some days immediately before the bombing, and the thought being that when they went over -- allegedly when they went over to the Ryder truck agency in Junction City, when they went to get the vehicle, that he just came in with McVeigh, who signed the documents and stuff, and the gentleman writing it, who was the best witness, doing the writing, was the best witness as to the drawing and so on, just saw him from across the room, saw him with a baseball cap. That's the theory at least. So he'll be, at best, an innocuous, but nevertheless possibly important witness.

MS. WARNER: But that means they spent an awful lot of time running down a false lead.

MR. OSTROW: Yes, apparently there may well have been some false leads. No one yet, I don't believe, has ruled out that John Doe may be someone more important, but I believe that's the lead theory right now.

MS. WARNER: And I gather that the mother of this boy, the ex-wife of Terry Nichols, has been called before a grand jury.

MR. OSTROW: Yes.

MS. WARNER: Why?

MR. OSTROW: Well, she gave an interview to a syndicated television program in which she talked about her husband and -- sorry, her former husband and his hatred of the government and the fact that he's supposed to have left her last November some instructions. He asked her not to open up this instructions in this package for 60 days. She opened it the next day, she says on the television, and found -- there were bonds and other material left to her -- it was like a last will kind of thing -- and then a separate note for McVeigh, which she says she never delivered, but it's telling him, you're on the own, go for it, that kind of thing, and also keys to a storage locker in Las Vegas, which, according to her, she found contained gold bullion, silver bullion, masks, and other things that might have been somewhat useful to conspirators. The problem is the owner of that facility says when he cleared it out on January 16th, there was nothing like that.

MS. WARNER: And finally before we go, I gather also that authorities are looking at the possibility that McVeigh and Nichols might have been involved in some bank robberies.

MR. OSTROW: They're puzzled over particularly how McVeigh -- but Nichols too -- supported themselves in this long period from the army forward, and they really haven't traced sources of income that I know of that would be enough for him to carry on some of these activities, so there are some 13 unsolved bank robberies throughout the Midwest in the relevant time that they're trying to see whether they're linked to.

MS. WARNER: I see. Well, thanks, Mr. Ostrow. That's all the time we have. But thanks for being with us.

MR. OSTROW: A pleasure. RECAP

MR. LEHRER: Again, the other major stories of this Wednesday, at the Moscow summit, President Clinton won concessions on Russia's selling of nuclear technology to Iran, and the United States announced trade actions against Japan in an effort to open up the Japanese market to U.S. automobiles. Good night, Robin.

MR. MAC NEIL: Good night, Jim. That's the NewsHour for tonight, and we'll see you again tomorrow night. I'm Robert MacNeil. Good night.