The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening. It was a day for big economic news. The nation's unemployment rate shot up a stunning 0.4% last month, and on Wall Street stock market sales and prices soared dramatically for the second day in a row.Also, President Reagan lifted some of the economic sanctions against Poland. A new report predicts a crisis is coming for elderly veterans, and the short, sour reign of Bert Lance as the Mondale-Ferraro campaign chief ended. Robert MacNeil is away tonight; Charlayne Hunter-Gault is in New York. Charlayne?

CHARLAYNE HUNTER-GAULT: On several of today's big news stories we have explanations. On the economy we'll explain why bad news for the unemployed is good news for Wall Street. On Bert Lance's resignation, political analyst David Gergen takes a crack at explaining his departure and what it means. We'll also explain why aging veterans are posing a threat to Veterans Administration hospitals. Then there's the Olympics, where track and field events debut today, and from where we have a special report on the new phenomenon of amateur athletes earning big money legally. And, finally, on the on-going postal negotiations, in separate interviews with both sides, we find out just how far apart they really are.Economic Bad News, Good News

HUNTER-GAULT: The government today reported its first bad unemployment news in almost two years. According to the Commerce Department, the civilian jobless rate rose 0.4%, to 7.5% in July. Over 400,000 Americans lost their jobs last month, with the biggest losses suffered by blacks and women. In Santa Barbara, where President Reagan is still vacationing, White House spokesman Larry Speakes said the administration does not believe the figures represent any weakening of the labor market. But House Speaker Thomas "Tip" O'Neill said the jobless figures prove that the smoking gun of Reagan unfairness has two barrels -- poverty and unemployment. Despite the negative economic news, the stock market soared again today, as a record 237 million shares changed hands. The Dow Jones Average of 30 industrial stocks shot up 36 points to close the day at 1202.08, its first 1200-plus close since February. Jim?

LEHRER: There must be an explanation for what the stock market and the unemployment rate did today, and we get one now from Lawrence Kudlow, a private economist, formerly the chief economist at the Office of Management and Budget. You're on, Kudlow. First, on the stock market, why is the stock market doing what it's doing?

LAWRENCE KUDLOW: Well, there are a lot of reasons for the stock market rally, and I wouldn't attribute it to any single factor. One of the biggest events that has occurred this summer is the decision by the Federal Reserve Board not to tighten interest rates any further. Prior to that decision, which was made a few weeks ago and reported in Congress by Paul Volcker, there had been some speculation in the marketplace that interest rates were going to be pushed higher by the Fed's policies. And there was a lot of selling of both stocks and bonds in advance of that. And so in the end, Volcker reported a few weeks ago that the Fed decided, at least in the short run not to tighten, and money supply targets were kept the same. And this, I think, lifted a lot of interest rate anxieties, which I'm sure was one of the key factors in triggering the stock market increase.

LEHRER: Yeah, but why yesterday and why today and why in such large numbers? Volcker's news, as you just went through, is 10 days, two weeks old.

Mr. KUDLOW: Well, yeah, he was -- I believe he was in the Senate Banking Committee last Wednesday, but these things take -- you know, events, of course, tend to build and attitudes change. There is a lot of other things going on. For example, as recently as only a month or two ago people were worried about the price of oil going up because of hostilities in the Persian Gulf between Iran and Iraq. Now, in recent days, they're really, just this week, the market has been swept by a tide of rumors that the oil prices may go down because Saudi Arabia may be overproducing on its schedule. And this, I think, is helping to fuel the stock market optimism that low oil prices might contribute to a lower inflation. Now, in addition to that, I would add with respect to the economy and these unemployment data, we had the release late last week, I believe, of the leading indicators from the Commerce Department, and they did register a decline. Now, these month-to-month numbers should be taken with great caution because they're subject to enormous revisions later on. But the lower growth rate in the economy that is implied by the leading indicators is viewed as a positive omen for stock market people because they are hoping that the economy will not overheat, inflation will not flare up and hence drive interest rates up, which is, of course, the bane for stocks. Today, early this morning, the employment rate --

LEHRER: Excuse me, let me stop you right there. In this simplest language possible, explain why it is such a bane for stocks.

Mr. KUDLOW: Well, higher interest rates complete with stock market investments. If you can purchase, for example, a three-month Treasury bill, whose rate goes from 10 1/2% to 11%, that's a government-guaranteed piece of paper. It has terrific liquidity; there is no danger of any credit problems, and you're getting a pretty fair risk, going from 10 1/2 to 11 percent. Now, that is going to be stiff competition for any stock, at least in the short run, if rates go up. And you get money moving around, lots of big institutional money trying to figure out which is the hot place to be. Okay. Today you get the employment data comes out and, as Charlayne discussed, it was up 0.4%. But I don't think it's a stunning reversal, frankly. You have to understand that during the summer months --

LEHRER: Do you want me to edit out "stunning" at the top?

Mr. KUDLOW: Well, I wouldn't mind. But of course I wasn't here when you did all that.

LEHRER: All right. All right.

Mr. KUDLOW: But you have to recognize that in the summer months you have a lot of labor flows -- people [in] part-time jobs and so forth and so on -- and the seasonal adjustments are very dicey. And I think year-in and year-out during the summer we always have this problem, and typically it is not unusual that the unemployment rate jigs up a little bit only to jag down again. One thing I will point out, though. The payroll employment, the business survey in these data showed another gain of 300,000 jobs, which is about 3%-plus for the month. And we've seen very steady increases in this number, really, all year long. And I would not overestimate the economic weakness significance of this number.

LEHRER: But, Mr. Kudlow, would you not concede that it is a little weird that unemployment goes up in the country; that means there are more people unemployed this month, or last month, than there were the month before, and the people on Wall Street see that as good news?

Mr. KUDLOW: Well, I'll tell you, Wall Street's become a pretty weird place in the last couple of years, and so these contradictions aren't so unusual. But if you try to make some sense out of it, I would suggest the following line of reasoning. There has been a fear -- and my judgment is it's partially justified -- that the economy is growing too fast, and that if it continues to grow too fast it'll overheat and it'll create excessive demands, which will generate higher inflation, higher borrowing, and ultimately higher interest rates. And we get down to the notion that interest rates are the bane of the stock market. When they see weaker data coming in, the hope is we won't have the overheating, we won't have the inflation and we won't have the interest rates. So, with a lot of cash on the sidelines, people rush to buy stocks.

LEHRER: All right, now, a couple of questions, and I'm going to write down the answers and come back at you --

Mr. KUDLOW: And hold me to them?

LEHRER: And hold you to them. All right, first of all, do you expect the stock market to continue to do these crazy things it's done the last two days, or is this a two-shot thing that is over as of Monday?

Mr. KUDLOW: Well, I think -- let me make two quick responses. Number one, I do not think we are looking at a sustainable rally for more than perhaps a week or two or there-abouts. I don't know about day to day, but I think this is a temporary rally. And, number two, and really much more important, we have seen in the last year or so unprecedented volatility in interest rates and stock prices, and I think this kind of roller-coaster performance is an omen that the markets are troubled and that there's an anxiety out there about the economic outlook for the U.S.

LEHRER: So it could go boom, you're saying, the other way?

Mr. KUDLOW: That's right. That's right. And we've seen this, tremendous fluctuations in the last year. And this is very disturbing to many people.

LEHRER: All right, finally, on the unemployment rate, charlayne also reported what Speaker O'Neill said, that this is a -- well, I won't repeat what he said. What would you think unemployment's going to be, come November, when people go to the polls?

Mr. KUDLOW: My guess is in the next couple of months we'll see it gradually move lower. And I think -- because I feel the economy is basically quite strong, and my own judgment is that the next problem on the horizon is not going to be recession, but it's going to be inflation. So I suspect, however, with that in mind, that the unemployment rate'd probably get back to about 7% by election time.

LEHRER: All right, ladies and gentlemen, remember the name. It's Kudlow. And you heard it here and we'll be back. Thank you very much.

Mr. KUDLOW: Thank you.

LEHRER: Charlayne? Postal Strike?

HUNTER-GAULT: All was not quiet on the labor front this week. In the stalled postal union negotiations a series of threats were exchanged between the head of the U.S. Postal Service and union leaders representing the postal employees. The fireworks began on Wednesday when the head of the two major postal unions said they would not rule out a strike if a settlement over a new contract isn't reached. Postmaster General William Bolger countered, saying he would fire all 600,000 postal employees if they went on strike. Strikes by government workers are illegal. The postal workers' contract expired July 20th. The unions want higher wages and benefits, but the Postal Service is asking that current employees take a three-year wage freeze. And tomorrow it will begin hiring new workers at lower wages than those page veteran employees performing the same job. To get more insight into labor's position, we talk now with Vincent Sombrotto, president of the National Association of Letter Carriers, which represents 256,000 postal workers. Mr. Sombrotto, what is your reaction to Postmaster General Bolger's threat to fire you if you and your people go on strike?

VINCENT SOMBROTTO: Well, it's totally consistent with his attitude through the years.He's a bully, a tyrant, someone that's trying to intimidate, of course, honest and decent, hard-working men and women.

HUNTER-GAULT: One of the people, and it may have been you, who was quoted as calling the postmaster general a tyrant said that they thought that he was trying to provoke a strike. Do you go along with that?

Mr. SOMBROTTO: Well, he's certainly a provocateur, and he's also one of the most lawless of public officials in America today.

HUNTER-GAULT: What do you mean?

Mr. SOMBROTTO: He's got a record of flaunting [sic] the law over the last five or six years. He, in spite of the fact that the courts have ruled that employees should have been paid under the Fair Labor Standards Act, he resisted for five years, and ultimately had to make a settlement and pay employees in excess of $500 million. In 1981, consistent with his action now, he tried to undermine, or if not destroy, the collective bargaining process by going into the National Labor Relations Board to put all of the unions into one union. And even as early as last year, when he fired -- unconscionably fired 14 honest, decent workers in Houston, Texas, and said that they were striking against the law. And in the end he was reversed. Those workers, happily, are back to work, and they were put back to work with all back pay. He has no problem trying to victimize people. So anything he says, incidentally, is irrelevant. He is someone that, from the point of view of the National Association of Letter Carriers, is a non-person. He will be out of office at the end of this year. So we don't consider anything he says.

HUNTER-GAULT: All right, but let me ask you on the point of a strike. You haven't said whether you will or you won't. Will you?

Mr. SOMBROTTO: Myself, I have an obligation, a responsibility, and a duty to meet with my membership at convention in Las Vegas in the week on August 20th, and we'll make a determination of what future action we'll take, and we'll do it at that time.

HUNTER-GAULT: Is a strike possible, though? I mean, strikes are illegal by government workers.

Mr. SOMBROTTO: Yes.

HUNTER-GAULT: Is there a real consideration of going out, either wildcat or nationwide?

Mr. SOMBROTTO: No, I would strongly be against any wildcat actions. If we would take any action, we would take it together as an organization.

HUNTER-GAULT: So you're saying that there really is the possibility that a nationwide strike would --

Mr. SOMBROTTO: That's correct. If there were a strike and the National Association of Letter Carriers were to call that strike, it would be a national strike. Now, I don't want to give the impression that we are going to go out on strike. I want to make it clear that's one of the two options that we have.

HUNTER-GAULT: And the other is?

Mr. SOMBROTTO: The other is to continue to go through this process outlined in the Postal Reorganization Act, and that is to go to final and binding arbitration.

HUNTER-GAULT: All right, now, the negotiations are at a standstill right now.What's the big sticking point?

Mr. SOMBROTTO: Well, the sticking point is that the -- well, let me point out that the postmaster general, in a letter to all employees, said earlier this year that he don't want to poor-mouth the Postal Service's position. In fact, he said, the situation is terrific. The last two years we've made a surplus in excess of a billion dollars. He said even this year we're going to make a surplus. But he's reversed that just recently. And so, from the point of view of the employees, we have made a great contribution to that outstanding record. If it the finest postal service in the world. And we think that we should share in the benefits, based on our contribution and our work.

HUNTER-GAULT: All right, so where is it that you are now that Mr. Bolger and his people are not? I mean, what's the big problem?

Mr. SOMBROTTO: Well, in the first instance, he says that we're not entitled to any increases in wages for three years, besides which, notwithstanding his sharp practices and shadings of the truth, by saying that present employees' basic salary will not be altered. The fact of the matter is every current postal employee would lose 79" an hour for straight time, and $1.19 an hour for overtime, based on his proposal. Their COLA increases would be sharply reduced --

HUNTER-GAULT: The cost-of-living adjustments.

Mr. SOMBROTTO: That's exactly. Their benefits would be sharply reduced. So he has asked for a series of givebacks, and then says to the workers that he's not asking for them to give back anything.

HUNTER-GAULT: Right. Now, why have you decided to sue the Postal Service for instituting a wage cut for newly hired workers?

Mr. SOMBROTTO: Because we have established an integrity of our -- to our job. Each worker has the ability to earn a certain amount of wages based on collective bargaining. We've done that through five contracts, and we don't want to undermine those five contracts. There is an integrity to our job. We do it. We're proud of the job we do. We're the finest postal service in the world, the cheapest postal service in the world. And we don't think that the postmaster general, coming as a shill and a dupe and as a front-man for the board of governors, should be trying to undermine the wage structure of the Postal Service.

HUNTER-GAULT: All right, now if you have this two-tiered system in which the newer workers coming in will make lower wages, I mean, that doesn't affect the current membership. I mean, so what would be the problem there?

Mr. SOMBROTTO: Sure it does. We have, in my craft alone, over 35,000 part-time workers who are guaranteed no more than four hours every two weeks. Now, let me hasten to add that most of them make a living wage. They would be in competition with folks that would come in working for 23% less. I don't have to draw you the scenario wherein managers would find it confortable to put them to work and then to the detriment of those present part-time workers.

HUNTER-GAULT: Finally, let me askyou. The postmaster general said today that if your demands were met that the price of stamps would go up a lot faster than they would under management's plan. What's your reaction to that?

Mr. SOMBROTTO: I have to laugh about that because under management's plans -- I don't know where stamps would go up, but in 1981 he said that based on our negotiations stamps would go to 50". He's cut that down to 28" and 27".The fact of the matter is if he came to the bargaining table prepared to bargain in good faith, we could have reached an agreement. This nonsense and this totalitarian attitude of saying, "I'm going to fire people if they strike," that's not a courageous act. That's not an act of a strong person.

HUNTER-GAULT: Well, are you saying that the price of stamps won't go up under your -- if your demands are met?

Mr. SOMBROTTO: I'm saying if he would have bargained with us in good faith that there would have been no need for stamps to go -- the price of stamps to go up other than what has already been proposed by him. And that is to raise the first class postal to 23" next year.

HUNTER-GAULT: All right, Mr. Sombrotto, thank you for before with us.

Mr. SOMBROTTO: Thank you very much.

HUNTER-GAULT: Jim?

LEHRER: The other side of it now from the postmaster general, William Bolger. First, Mr. Bolger, and obviously, your response to the various attacks that we just heard, the charge that you are a bully and a tryant.

WILLIAM BOLGER: I haven't heard that tyrant charge since my teenage daughters, when I wouldn't let them go out at night.

LEHRER: You don't feel, obviously, that your actions justify that kind of a label?

Post. Gen. BOLGER: Absolutely not, and I'm not going to get involved in name-calling. It serves no useful purpose.

LEHRER: What about his suggestion that you are irrelevant in this, that you're going to go out of office fairly soon anyway?

Post. Gen. BOLGER: Well, basically, I'm the postmaster general. I'm in that office now, and I remain in that office through -- we go though the lawful pursuits of going through arbitration, which should end sometime in December. I'm still going to be there.

LEHRER: What exactly is your position on firming employees who go on strike?

Post. Gen. BOLGER: I don't have a position other than obeying the law. The law clearly says that federal employees that strike against the government, and we are a part of the government, have to be discharged and they have to remain discharged. It isn't a personal position. It's just an absolutely obligation, responsibility under the law.

LEHRER: He says that you're trying to provoke a strike by statements like that.

Post. Gen. BOLGER: Nobody ever raised the strike issue until he and Mr. Biller of the APWU raised it. I don't personally think that our postal employees across the nation are going to want to strike or even want to go on strike and withhold their services.I think our postal employees are disappointed, obviously, as I am, that collective bargaining doesn't work at this point in time. But they're willing, as they should be, they obey the law and let the arbitration process finally make the decision, if that's the way it has to go.

LEHRER: So your own view is there is not going to be any strike?

Post. Gen. BOLGER: There shouldn't be one, and my view is there won't be one.

LEHRER: But if there is one, just to make sure we understand each other and everybody understands, if there is in fact a strike, whether it's a small wildcat strike in any area or is it a big nationwide strike, those people who go on strike will be discharged?

Post Gen. BOLGER: There is no other way to go under the law. The law says they will be discharged, and, frankly, the postmaster general, whether it's myself or not, has to carry out that law.

LEHRER: All right, let's go to some of the specifics. Why is a three-year wage freeze necessary?

Post. Gen. BOLGER: Basically we've been paying our employees a premium of about, on the average of about 23% -- some are lower; some are higher.

LEHRER: What do you mean by that?

Post. Gen. BOLGER: Well, our compensation is about 23% higher than like ours in the private sector. We've had some economic studies to show that. And we have no intention of trying to cut the basic pay of our current employees. Never did. None of the proposals we put on the table cuts the basic wages of our current employees. The hourly rate, the salaries stay the same. We have some proposals on the table to help curb health costs, and that type of thing, but certainly not the basic wages. We said, okay, we're going to be hiring a lot of people over the next several years, and the way to do this, to correct this course, is to take the new employees and bring them in at a lower compensation. Now, what we're talking about is not a horrendous salary. We're talking about bringing in a starting salary of a letter carrier of $17,352 a year, plus $4,000 more that we'd have to pay in fringe benefits. Now, that's over $8 an hour. The person with an average high school education can pass our exam and do very well and come into the labor market and start at that salary.

LEHRER: Well, how does that compare with what the starting salary would be before?

Post. Gen. BOLGER: $21,000 is our current starting salary for a letter carrier -- about, roughly, around, oh, four to -- somewhere in the neighborhood of $4,000 less.

LEHRER: How do you respond to the opposition that the letter carriers' union has to this idea?

Post. Gen. BOLGER: Well, I can understand their position, but they ought to understand the responsibilities to the American public that they and I have too.We're supposed to give universal delivery service at uniform prices, keep our prices reasonable so our service can grow and prosper and be fair to the American public. I think that they ought really consider this, and they haven't. They talk about me being intransigent with -- in my position, in labor negotiations. They put one package on the table and never moved an inch. We moved quite a bit. Not as much as they wanted us to move, but we tried to move a little bit in the last hours of negotiations to see what their response was. Their response was, "It's garbage."

LEHRER: But you want to freeze current employees' pay as well?

Post. Gen. BOLGER: Well, it's not exactly a freeze when there's a cost-of-living adjustment built into that that would take the inflationary pressures if we had the inflationary pressures.

LEHRER: What about -- what is your position on what -- if the unions got what they want, what is on the table now, at least, or what was on the table during negotiations, what would have been the effect of that on the cost of stamps and mailings generally?

Post. Gen. BOLGER: Including the price increase that we've already proposed, it'd be about a 28" stamp. We haven't increased our prices in about four years. We don't intend to increase our prices again until 1985. Four years in between. We last increased them in 1981. We would suggest that, looking at their proposal, which would increase our costs in the third year out about $6.6 billion for each year from then on in, we would suggest that that 23" stamp has to go to 28" stamp -- to a 28" stamp. It probably could go in two phases. Probably we'd put the 23" stamp in effect in 1985, be immediately filing for one to go into effect at about 26" in 1986, and then be looking at the completion of the contract, 1987 and looking at the 28" rate.

LEHRER: Under your plan, what would happen?

Post. Gen. BOLGER: Stay 23" for about five years.

LEHRER: Is the Postal Service prepared to go into binding arbitration?

Post. Gen. BOLGER: Yes, sir. I mean, we don't have any choice. Again, that's what the law calls for. If we come to an impasse, which we have reached at each of our three tables, we -- there's an opportunity to go through fact-finding, and that process is going on now. And all parties have an obligation to let this thing finally be decided by binding interest arbitration.

LEHRER: And your best-informed guess at this point is that that's what's going to happen?

Post. Gen. BOLGER: That's what -- well, that's what's planned to happen under the current law. You know, we keep saying -- we've broken down on negotiations. We've reached an impasse. We have, and we have to follow the law, go through fact-finding, arbitration. There is nothing to prevent the parties, while fact-finding is going on, while the arbitration is going on, from getting together again if there's an opportunity to reach agreement.

LEHRER: I think any fair objective observer would, just by listening to the two of you tonight, would say, however, that things are at a very bitter impasse. Why has it come to that?

Post. Gen. BOLGER: Well, it's not bitter, as far as I'm concerned. I think unfortunately Vince used some words I wish he hadn't used, but he did. I'm not bitter about it. He has a responsibility to his members. Also I have a responsibility to his members who are our employees. And I recognize that. I'm not bitter about it. It just happens to be that parties didn't reach agreement, and now they resort, from my standpoint, to the law and not to anything illegal. If there's any bitterness, sure, I've reacted to the suggestion of a strike and told people what I would do to carry out my responsibilities under the law, and I shall do that. I'm not looking forward to it. I would much prefer to see the good postal employees -- and the vast majority of our employees do good jobs. We're not quarrelling about that. We do have the best postal service in the world. We do have a cost-effective postal service. But it's got to be kept that way.

LEHRER: Mr. Bolger, thank you very much.

Post. Gen. BOLGER: Thank you.

LEHRER: Charlayne?

HUNTER-GAULT: On a different front, as expected, the administration announced that the government was lifting some sanctions imposed on Poland in 1981 in response to that country's crackdown on the Solidarity union movement. White House spokesman Larry Speakes said Poland's recent move granting amnesty to its more than 650 political prisoners was a potentially positive development. But in Poland the Polish government demanded that the United States unconditionally lift all sanctions. The U.S. decision leaves two of the strictest sanctions in effect -- refusal of new trade credits to the Polish government and cancellation of Poland's most-favored-nation trading status.

Meanwhile, U.S. officials reacted strongly to what they called an inexcusable attack by Soviet security men on an off-duty Marine guard in Leningrad yesterday. In Leningrad a U.S. Embassy spokesman said the Marine, whom he did not identify, was beaten and then detained for two hours at a police station. He was not badly injured. A Soviet official described this latest incident as "hooligan activities," and charged that the Marine was completely drunk and threw stones at passersby. In Washington, State Department spokesman Alan Romberg gave a different account.

ALAN ROMBERG, State Department spokesman: There have been several serious incidents in the Soviet Union over the past few months involving American tourists and officials that show a disturbing pattern of official involvement in a campaign to harass and isolate Americans in the Soviet Union. And we have brought this matter up with the Soviets on numerous occasions. We have not received a satisfactory response. The incident was a clear set-up and was without any provocation whatsoever. We have protested this incident strongly both in Moscow and Washington.

HUNTER-GAULT: As Romberg said, the incident was a set-up and protests have been lodged in the two capitals. Jim? Lance Withdrawal

LEHRER: There had been a feeling among the pros and the pundits that Bert Lance's days were numbered, ever since Walter Mondale chose him to be his general compaign manager to a firestorm of negative reaction. The number turned out to be 19. Nineteen days after his appointment, Lance is out. He took himself out of it last night. Judy Woodruff has more. Judy?

JUDY WOODRUFF: Jim, from the minute the word was out that Mr. Mondale had chosen Bert Lance, there was controversy, and the controversy never went away. Party leaders from every section of the country, including the South, which was supposed to be placated by the appointment, called it a terrible decision. They pointed to the financial problems that caused Lance to leave his job as budget director and to his ties with Jimmy Carter, a reminder many Democrats didn't want Mondale saddled with. The negative publicity persisted. The questions kept coming. And, finally, after meeting with Mondale campaign manager Robert Beckel, Lance agreed to submit his resignation.In a letter, Lance said he had become a source of diversion. After days of avoiding the issue, Mr. Mondale said in a statement that he regretted Lance's decision but understood it. With us to discuss the Lance episode further and to look at what it says about the Mondale campaign, is David Gergen, former director of communications in the Reagan White House, now a fellow with the American Enterprise Institute. He joins us from the studios of public station KCET in Los Angeles. First of all, Mr. Gergen, just how much does all of this hurt Walter Mondale?

DAVID GERGEN: Well, I think, Judy, that most of the damage was sustained during the time that Mr. Mondale was in San Francisco. But it seems to me that, as you recall from our days there, it was expected while we were there that the days were numbered. In fact -- and it came more quickly, I think, than a lot of us expected. It seems to me that every one of these kinds of appointments goes through three stages. First, there's the appointment, and when the public is aghast, "My God, how did someone do that?" Then there's the stage of the attack which comes, and finally there's the stage when the person generally resigns. In this case, it seems to me the first two stages were not well-handled from Mondale's point of view. First of all, the judgment that went into the appointment raised a lot of questions about how well be understood the political situation and how well his staff understood the South. Then, when the attackcame, they seemed to backpedal very quickly. Rather than defending Lance, they moved -- tried to move away from him very quickly and really weren't very stand-up about it. And I think that that raised the whole question about how tough a guy Mondale was.

WOODRUFF: Well, do you think they --

Mr. GERGEN: Now, the third --

WOODRUFF: Go ahead. I'll let you finish.

Mr. GERGEN: I'm sorry. Let, me just make this final point. The third stage, it seems to me, has been well-handled, and that is that Bert Lance has gracefully withdrawn. He has done what was in the best interest of the candidate and probably in his own best interest. And I think that he comes out of this with the respect of a lot of people that he did the right thing at the right time.

WOODRUFF: I hear you saying that you think Mondale would have been smarter to have made some decision one way or another on this much sooner. If he had done, it, say, in San Francisco, rather than letting it drag out for almost three weeks?

Mr. GERGEN: No, not that. I think that it was wise to let the matter go beyond San Francisco and to let it go beyond the first trip that Mr. Mondale and Ms. Ferraro took to the South. So that they had some separation. If the resignation had come during the midst of the convention it would have overshadowed the convention, the acceptance speeches and so forth, and I think that would have been a bad mistake on their part. I think that what was a mistake in San Francisco was the fact that the candidate, Mr. Mondale, was not willing to stand up for the choice he had just made. If I might, it seems to me that the contrast here with the Burford appointment, that --

WOODRUFF: You mean Ann Burford, the former EPA director?

Mr. GERGEN: Yes. I think the White House recognized very quickly that it too made a mistake in appointing her to the position they did. And then when the matter came up and Reagan was questioned about it in a news conference here recently, of course stood up for her. And then she withdrew. She did not withdraw as gracefully as Mr. Lance did, to be honest about it, but I think that the middle phase, the time when you're asked to defend your judgment and to stand up for the people who are close to you, I think that Mondale failed on that.

WOODRUFF: Well, what does that say about Mr. Mondale, do you think?

Mr. GERGEN: Well, a lot depends on how -- on the course of the campaign. It has called into question his judgment initially. It's called into question whether he is willing to be tough when the times call for toughness. I think that hurt him. I think that these kind of incidents pass over time. The real question becomes, is there an accumulation of incidents like them, and does that suggest a pattern of behavior? Mr. Mondale's problem, as you well know, before San Francisco, was whether he was going to be bowing too rapidly to special interest groups and whether he could ever say no in the tough situations. And when it came up to Lance, he just wasn't willing to step up to the plate and say, "This is my man. He's been cleared by the American judicial system, and I believe in him." Instead, he he sort of backtracked and took away the position he first offered to him, and then he had a diminished role in the campaign. And I think that that, to a lot of Southemers and others, the question was, "Well, if you're going to appoint him, at least you ought to defend him." And that wasn't done. But passing that, the fact is, I think, that now they've gotten the issue pretty well behind them, and I don't think it's going to play a major role in the campaign.

WOODRUFF: Well, that was my next question. What effect do you think it will have with the voters a few months down the road, and especially in the South, where they may be particularly sensitive?

Mr. GERGEN: I think it's going to have an impact now, and it's likely to slow the momentum that Mondale was trying to develop in the South. He had just taken his campaign there, and he clearly sees that as a critical battleground in November, and that's going to -- it's going to shadow them there for a few weeks. But I don't think in the long run it's going to make a significant difference. There are many more important problems on the agenda. It would have been a mistake to have -- I think to have let this drag out into October, say, and then have the resignation come them. If it comes in August, a lot of people are away, they're on vacation, they're not paying as much attention. The real campaign's going to start now, with the Republican convention and in particular around Labor Day.

WOODRUFF: Is this something that President Reagan and the Republicans can turn into an issue? Can they rejoice over this problem that the Mondale campaign is having?

Mr. GERGEN: Judy, I doubt it. I think that the Reagan camp would probably prefer to lie low here a bit now. Let the media make the comments and they can focus on other issues. It may be brought up in Dallas. But the Republicans, after all, are now preparing to make their -- bring their message to the country about what they've accomplished, and that's going to be the purpose of the Dallas convention, and I wouldn't expect them to make a great deal of this in Dallas.

WOODRUFF: And you don't see them bringing it up later, I gather you're saying?

Mr. GERGEN: I think it may come up. Sure, it's going to come up in places like Georgia. But I doubt that it'll be a major issue down there. It just doesn't seem to have that sort of get up and go and the juice in it that it would have were Lance still in place. You know, there's an oddity about this. You have to wonder now, with Mr. Lance, what he's thinking. As you well know, the television and the print press were just getting ready to give a lot of attention to Richard Nixon. Next week marks the 10th anniversary of his departure from office, and there's sort of this resurgence about Nixon. And here he is sort of returning with an acceptability in the public, and here Mr. Lance is now, just the week before, is leaving under these circumstances. He must feel like he's getting a raw deal, frankly.

WOODRUFF: Thank you, David Gergen, for joining us.

Mr. GERGEN: Thank you.

WOODRUFF: Jim?

LEHRER: The Simpson-Massoli immigration bill, after that Democratic convention in San Francisco, it seemed it would die in conference committee. House Democrats said they would not support the Senate version, and President Reagan said he would veto the House version. But today the chief Senate sponsor, Wyoming Republican Alan Simpson, said the battle may not be over yet. Simpson said President Reagan personally told him he would sign a compromise if it did not include some of the expensive provisions of the House version. Simpsom is pushing now for the House and Senate to start working on a compromise.

And, in Congress, Carl Perkins, one of the five most senior members of the House of Representatives, died today of an apparent heart attack. The 71-year-old Kentucky Democrat joined Congress in 1948. he was one of the architects of many of the social programs passed in the 1960s, including Head Start and adult training laws.

[Video postcard -- Florence Junction, Arizona] Old Soldiers Don't Fade Away

HUNTER-GAULT: The Veterans Administration warned today that its medical system may soon be in danger of bursting at the seams. In a major new report, the VA said that its hospitals and clinics are expecting a flood of new patients over the next few years, as veterans from World War II and the Korean War begin to reach retirement age. To meet the increasing medical needs of these aging vets, the VA says it's going to need to make some changes in a system that now costs the nation some $8 billion a year.

[voice-over] There are over 28 million American veterans who made it safely home after their often perilous tours of duty. As a reward for their service, those honorably discharged are entitled to free medical care for life at the hundreds of clinics, hospitals and nursing homes run by the Veterans Administration. But getting that free care now depends on more than just service to the country. The problem is available space. Some VA facilities are already filled to capacity. At the Miami VA medical center, even those injured in war can face months of waiting.

DESK WORKER, Miami VA hospital: Well, Mr. Kaplan, I could give you an appointment October the 15 at 9:40. Okay?

VETERAN: If I'm alive and well, I'll be here.

HUNTER-GAULT [voice-over]: The hospital's medical director is Dr. Charles Rosenberg.

Dr. CHARLES ROSENBERG, Miami VA hospital medical director: We are now seeing 1,000 patients -- about 1,000 patients a day in an area that was originally designed for 150.

Dr. WILLIAM REEFE, Miami VA hospital: The demand is great. We can't meet the demand for all the patients that seek these beds.

HUNTER-GAULT [voice-over]: The VA accepts patients on a strict priority system set by Congress, which gives a high preference to veterans over 65.

DOCTOR: How are you?

VETERAN: I'd rather be here than anyplace, because Jackie and Kathy --

DOCTOR: How long have you been in the nursing home now?

VETERAN: About two years.I love it.

HUNTER-GAULT [voice-over]: Today there are four million elderly veterans, but by the year 2000 the number is expected to triple, and VA officials fear that this potential flood of new patients will strain the agency's limited resources and turn its hospitals into geriatric centers. That's already happening in Miami.

MAURA MILLER, geriatric nurse: You really don't see a cure in a large percentage of these people because they do have long-term, chronic medical problems. And they are very impactful upon the system in the VA because there are so many of them and they all have chronic, long-term problems.

ANTHONY MAURER, veteran: I had a stroke four years ago, and been the same ever since. Doesn't get any better.

DAVID ENGLE, veteran: Just been sick off and on. I mean, I got sick lately, you know. And it's very difficult, you know. Very difficult. Very difficult.

HUNTER-GAULT [voice-over]: At the Miami hospital the population boom in aging veterans means that many younger veterans, who aren't at the top of the VA priority list, are being squeezed out of the system, even though by law they too are entitled to care.

Dr. ROSENBERG: Some of them go to other public resources if they're indigent, or they go to their own physicians if they can afford it, and some get no care at all.

HUNTER-GAULT: Because it's in the nation's retirement capital, the Miami VA's situation is worse than most. But experts say it's the wave of the future.

Dr. REEFE: It's just a mirror of what's going on in the population as a whole in the United States, and here in south Florida the mirror is closer to what's going to happen to the rest of the country in five or 10 years.

HUNTER-GAULT: Here to tell us what the VA plans to do about the problem we have Dr. John Gronvall, acting chief medical director for the Veterans Administration. Dr. Gronvall, first let me just clarify a point. Is it the case that any veteran over 65 is entitled to free medical care in VA facilities?

Dr. JOHN GRONVALL: That's not an entirely accurate statement as you made it, but beyond the age of 65, under the laws that define eligibility, all veterans are presumed financially unable to get care elsewhere so that if they come to the VA and we have space available we're obligated to provide care to them.

HUNTER-GAULT: And that regardless of whether what's wrong with them had to do with anything related to the wars they served in. It's just general medical problems, right?

Dr. GRONVALL: That's correct.

HUNTER-GAULT: You agree with what the doctor just said, that the situation in Miami is really the wave of the future?

Dr. GRONVALL: Yes, it certainly is. And one of the major reasons that led us to prepare the report that we released today was that we wanted to make an organized assessment of the growing need throughout the entire country. We're seeing it particularly in the Southeast, but it will face the entire country, of course.

HUNTER-GAULT: Right.And he said, what, they were seeing something like 1,000 new patients in a very short period of time, like --

Dr. GRONVALL: We've tried to project out through the year 2020 regarding the total number of veteran patients that we'll be called upon to treat, and we've used a number of ways to try to estimate what that total demand in the future might be?

HUNTER-GAULT: And what did you come up with?

Dr. GRONVALL: Well, we've tried in the report to use several different means of making that projection. Every means that has been used shows that the demand for care is going to increase. To a considerable extent that's because, as anyone ages, their medical needs become more serious, there are some specific medical problems that affect older individuals, and the older person may not react as well to illness, and that requires more medical care. So we're projecting a significant increase in the medical problems of older veterans.

HUNTER-GAULT: How, in terms of priority, does the plan that you've just come up with specifically address this problem?

Dr. GRONVALL: What we've done with the plan, as I say, is try to project special problems of older veterans. We've described the need for a number of new kinds of programs or expansion of programs, first of all, to try to help keep veterans at home -- keep them well so that they don't need to be in a hospital or in a nursing home, but then to provide new programs of assistance to help them stay well, or to place them in a nursing home or in a hospital, when that's necessary, and look for better ways to provide care to these aging individuals.

HUNTER-GAULT: Does your plan call for building more hospitals or expanding the ground facilities that you have?

Dr. GRONVALL: The plan makes projections for a need for additional hospital beds to meet the need. The biggest increase that we projected is in the need for nursing homes, and we plan that the Veterans Administration would build additional nursing homes and also contract with community agencies, state agencies, to significantly expand the number of nursing home beds that would be available.

HUNTER-GAULT: How much over the current $8 billion that you're spending on these aging veterans do you project this new plan of yours will cost?

Dr. GRONVALL: Well, I should say that our plan is not primarily a budget document and it's not really an attempt to predict a specific or precise price. What we've tried to do is project the need, describe some programs that could meet that need. We expect that the serious discussion that will go on during the next year will then lead to some agreements on programs that could then be translated to costs. But I can give a figure that -- an estimate would be that by about the year 2000 we would expect that something like a 70% increase in support would be necessary to meet the need.

HUNTER-GAULT: Do you have any concern at all that as costs and prices and everything else increase, there may come a time when you'll just actually have to cut back on some of these benefits?

Dr. GRONVALL: I think that that is certainly a possibility if the Congress establishes eligibility and authorizes the programs that we run and the facilities that we provide. So that would be a matter for the Congress to determine as it discussed and debated the ways in which to meet the need.

HUNTER-GAULT: And programs like Medicare and so on, you can't perhaps ease the burden by integrating them into those kinds of programs as well?

Dr. GRONVALL: Well, we've made our projection on the assumption that the Veterans Administration programs and Medicare and Medicaid policy would not change. It will surely be important that both the Veterans Administration programs and the Medicare program be discussed at the same time because changes in either would affect the other program, and we would hope that that discussion would occur.

HUNTER-GAULT: All right, Dr. Gronvall, thank you very much for being with us.

Dr. GRONVALL: Thank you.

HUNTER-GAULT: Jim?

LEHRER: Oil from a tanker that ran aground in the Gulf of Mexico Monday has begun washing onto the Texas coast. Officials say the molasses-like sludge could hit some 200 miles of coastline. At risk are fishing grounds, tourist beaches and marshes. Authorities are watching the wind. Unless it shifts, heavy concentrations of oil may land tomorrow near Galveston Island.

Charlayne?

HUNTER-GAULT: In India at least 29 people were killed and 20 were injured when two suitcase bombs exploded in the customs shed in the southern city of Madras. Officials said the intention was to blow up two airliners from Sri Lanka as part of a terror campaign to win a separate state for the Tamil minority in that country.

And, in France, a group of anarchists said it was responsible for bombing the headquarters of the European Space Agency in Paris. Here is a report from Don Lang of Visnews.

DON LANG, Visnews [voice-over]: The bomb went off inside the building, shattering windows and damaging a number of cars parked outside. Seven people were slightly injured in the blast. A message in red paint had been scrawled on the outside of the building. It read, "War Against War," and it bore the acronym of the banned organization Accion Directe. In the last month the organization has claimed responsibility for three other bombings in France. One hit the building of an institute dealing in international affairs; the others damaged offices of the departments of defense and industry. No one has been seriously injured in any of the blasts. This latest attack came less than two days before the European Space Agency was due to launch a rocket carrying two communications satellites from its base in South America.

HUNTER-GAULT: Meanwhile, the hostages freed from that hijacked Air France jetliner in Iran were being flown back to Paris today as West German investigators tried to determine how explosives got past security at the Frankfurt airport. None of the hostages were harmed, although one of the four Americans on board, 17-year-old Wilhelm Ostern of Sewickley, Pennsylvania, said he wouldn't feel completely recovered, "Until I'm in Europe and on my way back to the United States."

In El Salvador, four leftist guerrillas are in custody today, following a 19-hour aborted bank robbery and seizure that left one bank guard dead. Some 63 hostages were released unharmed. Diplomatic sources were quoted as saying the guerrillas gave up after appeals by the International Red Cross.

Jim? Amateur Athletes Pan for Gold

LEHRER: Back in this country the Olympic centerpiece, the track and field competition, got underway today, with qualifying heats leading to finals in some events over the weekend, the rest over the next eight days.

Our special correspondent at the Olympics, Larry Merchant, reported last night that much of the controversy surrounding the use of drugs hovers around these track stars. The same is true of the argument over amateurism -- the problem of devoting full time to being a world-class athlete, remaining non-professional, pure, doing it all for the love of the sport, while at the same time keeping bread and maybe even a bit more on the table.Larry Merchant on amateurism.

LARRY MERCHANT [voice-over]: In Sacramento, California, recently, 200 athletes from 17 countries competed in a final tune-up for the Olympics.

ANNOUNCER: Jumping third will be a young man who had his first 28-foot jump here in this pit three years ago. He is the world champion, Carl Lewis.

MERCHANT [voice-over]: Carl Lewis, recognized as the greatest track and field athlete in the world, is given an excellent chance to duplicate Jesse Owens' feat of winning four gold medals. He runs under the banner of the Santa Monica Track Club. Last week he added to his honors a rare double, appearing on the covers of both Time and Newsweek magazines.

DIRECTOR: We would like to do a thing with, you know, Carl, Carol and Mom and Dad in the studio.

MERCHANT [voice-over]: Joe Douglas, coach of the Santa Monica Track Club and Carl Lewis' personal manager, receives as many 40 calls a day requesting interviews, personal appearances and endorsements from Lewis. And that was before the Olympics.

JOE DOUGLAS, coach of Santa Monica Track Club: I feel that Carl Lewis reaches the broad spectrum of our society. I think a lot of the older people, the younger people, the various minority groups can all identify with Carl. They enjoy feeling the vicarious identification of being a success in track and field.

MERCHANT [voice-over]: In the old days, superstars like Carl Lewis had limited opportunities to enrich themselves. Amateurs were not allowed to accept money for competing, yet the best of them did -- from promoters who needed them to draw crowds and, later, as the running boom erupted into a billion-dollar business, from sporting goods companies for wearing their equipment. These under-the-table payments led to charges of hypocrisy known as "shamateurism."

Coach DOUGLAS: I've been at track meets and after the track meets you'll be in a hotel, and there'll be a long line. It takes hours and hours to pay off all the athletes. At the time you see no officials around because the meet promoter doesn't want it around. If the governing bodies or the IAAF happen to be around at this particular time, everybody would be disqualified.

MERCHANT: The sham in amateurism was eliminated in 1982 when the rules of eligibility were redefined. To deal with modern reality, such as the tremendous pressure from sporting goods companies. The Athletic Congress, TAC, the governing body of track and field, instituted trust funds. This enables amateurs to make money from endorsements and appearances as long as it's funneled through TAC.

[voice-over] Amateurs who can command fees draw specific amounts from their trust for travel and training or living expenses. Carl Lewis reportedly earns up to $15,000 for some appearances in America, higher than that in Europe, where track and field is more popular. Mary Decker, the middle-distance champion, is said to get up to $6,000. But the big money today comes from advertising and promotion. Santa Monica Track Club attorney David Greifinger was instrumental in opening up those markets to amateurs.

DAVID GREIFINGER, attorney, Santa Monica Track Club: The former structure was that for an athlete to do advertising there's a flat fee of $25,000 to be paid by the advertiser, and TAC kept most of it. The athletes saw very little. Therefore, athletes did virtually no ads.

CARL LEWIS [Nike shoes commercial]: My first jump was a joke. Nine feet even. But I said to myself, don't give up.

MERCHANT [voice-over]: Today there is no limit on advertising fees, but TAC's share is limited to a token $500. Carl Lewis, according to a prominent sports agent, gets about a half-million dollars alone from one shoe company. Overall he earns considerably more than the $600,000 that Edwin Moses, the great hurdler, admits he'll earn from all sources this year. Mary Decker, who is thought to be close to that bracket, may exceed it because she can also run in lucrative long-distance road races. These professional scale earnings stagger the old guard of track and field, but they have learned to accept the changes with resignation.

AL BAETA, co-director, Sacramento Invitational Summer Games: My position on the philosophy of amateurism doesn't mean that I don't believe that the Carl Lewises, the Edwin Moseses, the Mary Deckers, don't deserve to be compensated, provided assistance, rewarded financially for all of their efforts in preparing themselves for international competition. I just wish it didn't exist in this modern-day world.

MERCHANT [voice-over]: While the old guard looks back, Joe Douglas is looking ahead to bigger and bigger bucks. Douglas has already set in motion plans to leap Lewis' earnings into the rock-star class.

Coach DOUGLAS: We thought if we could get him out of the track magazines into the sports magazines, this was our first goal, such as Sports Illustrated. Hopefully he would have the opportunity to be in business magazines, fashion magazines, airline magazines and so on. This way the general public would get to know Carl Lewis.

MERCHANT [voice-over]: But for the overwhelming majority of athletes, including Lewis' teammates at the Santa Monica Track Club, the rich new world of amateurism pays no dividends. Track is a minor sport in America. Those who stay with it beyond college do so because they love it, with no illusions of financial grandeur.

1st AMATEUR: I never got into the sport expecting to make money. An example I can think of, a while back I was 10th-rated in the United States. If Iwas the 10th-best quarterback, cornerback or place-kicker, I guarantee I'd be making money.Track and field, there's nothing. No money.

2nd AMATEUR: In my case, it was something that I enjoyed doing. you know, I did it all through school, you know, high school, college. It was something that I was fairly good at, and I enjoyed doing it. So when I graduated from college I wasn't finished wanting to do it.

MERCHANT: So you have scholarships now from your wives, who support you?

2nd AMATEUR: Yeah, basically that's it, yeah, you know.

3rd AMATEUR: To show you how far we are from the big money, when I won $100 in a road race I thought that was big money.

MERCHANT [voice-over]: Money and big-time track and field have been inseparable for more than a half century. Basically the only thing that has changed is that payments are above-board and bigger than ever. For the elite athlete of today the word amateur suggests a purity and innocence that never was and never will be. To them sport isn't a pastime. It's a full-time job.

Coach DOUGLAS: Amateur athletics in the world-class level, the national-class level, hasn't existed for many years.And I wish we could eliminate the word amateur and just call these athletes athletes.

MERCHANT [voice-over]: Whatever he is called, Carl Lewis, in seeking four gold medals, is giving new financial meaning to the Olympian cry, "Go for the gold."

LEHRER: That report by Larry Merchant from the Olympics in Los Angeles. To no one's surprise, by the way, Carl Lewis had an easy time of it today, winning his heat in the 100-meter dash. The finals are tomorrow.Charlayne?

HUNTER-GAULT: Once again, the main stories of the day. For the first time in almost two years, unemployment went up in July, by 0.4%, but the stock market shot up 36 points on the biggest volume in history.

The United States confirmed that it is removing some of the economic sanctions that were imposed upon Poland.

And the Veterans Administration warned that its hospitals and clinics may soon be over-whelmed by aging veterans of World War II and Korea.

Good night, Jim.

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