The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MS. HUNTER-GAULT: And I'm Charlayne Hunter-Gault in New York. After the News Summary, we debate an idea whose time may be on the horizon, a national energy tax, and on to the big troubles at Sears. Next, Sen. Bob Packwood's political problems, and finally we hear some parting words from Supreme Court Justice Thurgood Marshall. NEWS SUMMARY

MR. LEHRER: President Clinton talked today to the Joint Chiefs of Staff about ending the ban on homosexuals in the military. The chiefs oppose such a change. The President said today he intends to fulfill his campaign promise but wanted the military leaders' input on how best to do it. Over the weekend, Defense Secretary Les Aspin said opposition within Congress could be strong enough to prevent it from happening. White House Communications Director George Stephanopoulos talked about the prospects at a White House briefing.

GEORGE STEPHANOPOULOS, White House Communications Director: Whenever you try to make progress in civil rights, in any discrimination, there is opposition at the front, and it's always difficult. I think here there are some special difficulties with the military in making sure that we do maintain good order and discipline. And they have some very legitimate questions over how this should be done. And this is something we really want to work with them on over the next, one, in meeting today with the Joint Chiefs, and then over the next several months, so we can figure out the best way to do this and maintain the military's goals of discipline and order.

MR. LEHRER: The President today named his wife, Hillary, to head a task force on national health care reform. Mr. Clinton told task force members he wanted a legislative package ready for Congress within 100 days of his inauguration. He said he appointed his wife to chair the effort because of her ability to organize and lead people, "from a complex beginning to a certain end." He also had this to say.

PRESIDENT CLINTON: I think that in the coming months the American people will learn as the people of our state did that we have a First Lady of many talents that who, most of all, can bring people together around complex and difficult issues to hammer out consensus and get things done. I hope the American people will see just how passionately I personally am committed to doing something about health care reform. We've talked about it long enough. The time has come to act, and I have chosen the course that I think is most likely to lead to action that will improve the lives of millions of Americans.

MS. HUNTER-GAULT: A bipartisan group of Senators today urged President Clinton to consider a drastic overall of the nation's tax system. They said consumption taxes would be better for the nation's economy than the current income tax. Yesterday Treasury Sec. Lloyd Bentsen said the administration probably would impose a tax on energy use. The Senators said that proposal was too narrow.

SEN. DAVID BOREN, [D] Oklahoma: I would not think that that would be wise, and it only touches about 7 or 8 percent of consumption in this country, and I think, again, if we're going to succeed, we have to have a plan that will put everyone in the same boat. If we start dividing the country by region, putting heavier tax burdens on some regions ofthe country than others, I don't think we'll succeed.

SEN. JOHN DANFORTH, [R] Missouri: Instead of focusing on one sector of the economy, namely energy, it would be better policy to think in terms of a broad consumption tax, and I think politically it would be infinitely easier to pass it for the reasons given. Once you start singling out a sector, then you have all kinds of political problems relating to fairness.

MS. HUNTER-GAULT: We'll have more on the tax story right after the News Summary. President Clinton signed an order today establishing his National Economic Council. The council will coordinate various government departments and the development of economic policy. He said the council would make the process more specific, clear and effective.

MR. LEHRER: Sears Roebuck & Company announced today it will eliminate 50,000 jobs, close 113 stores, and eliminate its longtime big book catalogue. The Chicago announcement said all of the actions will be completed by early next year. The catalogue has been a Sears staple for nearly a century but has lost money in recent years. This afternoon, Arthur Martinez, chairman of the Sears Merchandise Group, told Correspondent Elizabeth Brackett the reorganization would create a stronger company.

ARTHUR MARTINEZ, Chairman, Sears Merchandise: I believe we have a very viable, very successful future ahead of us as a general merchandise retailer in the mall. Most of the other department stores have vacated many of the product categories that made them true department stores. I believe that Sears has a very vibrant future as a true department store in its generally excellent mall locations.

MS. BRACKETT: But Sears just laid over the last couple of years 40,000 workers. Is there reason to believe that this may not be the last time another major cut is made?

ARTHUR MARTINEZ: I also believe in never saying never, but I firmly believe that this is the ultimate restructuring for the Sears Merchandise Group.

MR. LEHRER: We'll have more on the Sears story after the News Summary.

MS. HUNTER-GAULT: Battles raged for a fourth day today in the former Yugoslav republic of Croatia. Two French United Nations peacekeepers were killed in the clashes between the republic's Croats and Serbs. The fighting took place in a Serb-controlled enclave. Croatian troops recaptured the remains of a key bridge that linked the Croatian capital, Zagreb, with the Adriatic Coast. The fighting shattered a year-old truce in Croatia.

MR. LEHRER: U.S. and Belgian troops battled Somali fighters today. About 40 Somalis were wounded. They were part of a local militia advancing on the southern port of Kismayu. A U.S. military spokesman said the Somalis were twice warned to pull back but refused to do so. He said their commander had ordered several recent attacks on a rival faction, breaking a cease-fire agreement agreed to earlier this month. No U.S. or Belgian troops were wounded in the clash.

MS. HUNTER-GAULT: United Nations inspectors in Baghdad today said Iraq had turned over a partial list of its nuclear weapons supplies. Until now, Iraq has maintained that producing the list would violate its sovereignty. U.N. officials said Iraq must now identify the rest of its suppliers to comply with the Gulf War cease-fire agreement. Meanwhile, Iraq's Deputy Prime Minister, Teraq Aziz, today called for a new chapter in relations with the U.S. In Washington, White House Spokesman George Stephanopoulos refused the overture, saying, "We need full compliance with all U.N. resolutions.

MR. LEHRER: The U.S. Supreme Court today restricted federal appeals by Death Row inmates. In a six to three vote, the court said federal judges cannot stop states from carrying out executions once an inmate had exhausted other appeals. He said executive clemency should be used to protect the truly innocent from being put to death.

MS. HUNTER-GAULT: A gunman opened fire today near the entrance to the Central Intelligence Agency just outside Washington. Two people were killed. Two others are in critical condition. The gunman fired a long-barreled rifle at stopped cars in rush hour traffic. The suspect remains at large. That's it for the News Summary tonight. Now it's on to the idea of an energy tax, what happened to Sears, the problems facing Sen. Bob Packwood, and some words from Thurgood Marshall. FOCUS - ENERGIZING THE ECONOMY?

MR. LEHRER: The words "broad based energy tax" fell from the lips of Treasury Sec. Lloyd Bentsen yesterday, and reaction to them has been falling in Washington and elsewhere ever since. Bentsen said the Clinton administration was considering proposing such a tax as a way to raise money and to conserve energy. We'll have a debate about the wisdom of that idea after Alan Murray, Deputy Washington Bureau Chief at the Wall Street Journal, helps us define some terms. Alan, what kinds of broad based energy taxes are on the table now for the administration? What do we mean by all of that?

MR. MURRAY: What they're looking at is instead of a gasoline tax, which only affects gasoline, which is very visible, you can see it driving down the road, they change the signs at the gasoline station, is to spread it out to affect all kinds of energy, so some of it would show up in your natural gas bill, some of it would show up in your electric bill, some of it in your gasoline, makes it a little less visible, spreads it out over more sources.

MR. LEHRER: But it would be at the consumer level. I mean, it would be at the gasoline -- one of the proposals is at the consumer level in each one of those energy sources.

MR. MURRAY: You see it at the gasoline pump, but the proposals they're looking at would also affect businesses that buy electricity to make aluminum or airlines that use gasoline to fly their airplanes, so it would affect businesses and consumers.

MR. LEHRER: So if -- but the broader the base, the less you notice it, is that --

MR. MURRAY: That's the point.

MR. LEHRER: One hunk at a time?

MR. MURRAY: That's the point. Look, I mean, they need to raise a big chunk of money, anywhere from 10 billion to 50 billion dollars a year. That means that they're going to have to take something like 100 to 500 dollars out of the pocket of the average American. Now if you do it all with gasoline, you've got to do a 10 to 50 cent a gallon increase. That's a big increase. If you do it with a broad based energy tax, it's a much smaller increase in the gasoline price, small increase in your electric bill, but it will still add up to potentially several hundred dollars a year for the average family.

MR. LEHRER: And is there any question in your mind, Alan, that this is an economic issue, rather than an energy issue even though they say it's an energy issue as well?

MR. MURRAY: The main goal here is to raise money to bring down the deficit. Now you can -- one of the advantages of an energy tax is you can argue it has some environmental benefits, if we can get people to consume less energy, it would help us clean up our environment, it has some benefits in terms of, of reducing our dependence on overseas oil, but the main goal of this proposal is not the environment, it's not energy dependence, it's to raise money to bring down the deficit.

MR. LEHRER: Now some of the proposals I noticed, reading about this today, would do, would move it a little further back. In other words, you would tax oil coming from foreign sources, you would tax all petroleum at various, various steps along the way. Where does that stand? What kind of proposals are those?

MR. MURRAY: There are various different proposals. There's the gasoline tax which we talked about. There's an oil important fee.

MR. LEHRER: Which, for the record, when he was a candidate, President Clinton -- now President Clinton said he was opposed to it in principle.

MR. MURRAY: He did say he was opposed to it.

MR. LEHRER: Right. Okay.

MR. MURRAY: And it also -- we should point out -- it creates a lot of problems in Congress because it hits people who live in states like North Dakota, have to drive long distances to get anywhere, much harder than it hits people in the East. Another proposal they're looking at is an oil import fee, only tax imported oil. That creates a lot of trade problems. We supposedly have a free trade agreement with Mexico or even to tax oil from Mexico, very complicated. Then another proposal is to tax all carbon-based energy sources, coal, oil. This is something that the Vice President, Al Gore, advocates in his book, because carbon energy is thought to contribute to global warming. The problem with that proposal is it really hits the coal companies hard, very hard.

MR. LEHRER: Why? Why does it hit them harder?

MR. MURRAY: Because they have the most carbon content, and therefore, they have to pay the highest tax, and you have some very powerful members of Congress, Sen. Byrd of West Virginia most notably, who are from coal producing regions, so that's why they've walked back this political map and ended up with the broad based energy tax as the most likely option.

MR. LEHRER: Now the carbon tax, that's paid also at a different stage, is it not? Isn't that paid at the production end rather than at the consumer end?

MR. MURRAY: That's right.

MR. LEHRER: But the consumer would end up paying for it eventually --

MR. MURRAY: Sure.

MR. LEHRER: -- because it would be -- but it would be passed on. But was is your understanding at this point as to what is the most serious proposal on the table?

MR. MURRAY: My understanding at this point is because of the political problems with a gas tax, an oil import fee and a carbon tax that I just discussed the most serious option on the table is a broad based tax that affects all kinds of energy, whether it's, whether it's oil, gasoline, hydroelectric power, nuclear power, even solar power, even clean types of energy. It would affect them all.

MR. LEHRER: What is your reading about what Sen. -- now Secretary Bentsen was doing yesterday? Was that a trial balloon, or was that as serious move?

MR. MURRAY: It was a trial balloon. They want to see what the response is, but from my discussions with people in the administration, this is a very serious proposal. And frankly, given the box that they're in, they've got to figure out some way to bring the budget deficit down by $145 billion a year by 1997, that this is one of the only options that they have to turn to.

MR. LEHRER: All right, Alan, don't go away. Now for our debate about all of this Jessica Tuckman Mathews is vice president of World Resources Institute, a policy research center in Washington, Charles Dibona is president of the American Petroleum Institute, a trade association for the major oil companies. Mr. Dibona, do you like this idea of a broad based energy tax?

MR. DIBONA: Well, no, I don't think it's a good idea, but I think you've missed the most important point in your discussion.

MR. LEHRER: It's happened before.

MR. DIBONA: And that is that you focused on the effect on the individual consumer, but the biggest effect I think would be on workers in industries which are energy intensive, and that means seven out of the top ten industries in the United States. We are a very energy intensive country which tends to focus on energy intensive industries for historical reasons. And so the effect of this will be principally in putting people out of work. Several years ago this idea surfaced.

MR. LEHRER: How would it put them out of work, Mr. Dibona?

MR. DIBONA: It raises the cost of a very important factor of production, energy. That does not happen in foreign countries; it happens here if we have this tax, therefore, it makes U.S. energy intensive industries less competitive on world markets both with regard to competition from imports here and in exporting abroad. So --

MR. LEHRER: give me an example.

MR. DIBONA: The petro chemical industry is one from my own area, but it would also affect wood products, aluminum, most agricultural products, particularly those that do a lot of irrigation and fertilizing, so it does have that problem. The second problem that was not mentioned is that it's a highly regressive tax. It is like a gasoline tax. It falls more heavily on low and medium income people than it does on people at higher income level. You cannot take that regressivity out of this tax. You can do other things with other taxes, but not within this tax.

MR. LEHRER: Why can't you take it out?

MR. DIBONA: Because low income people tend to spend a larger fraction of their income on gasoline, heating oil and other things. The third thing that I think ought to be noted is that despite the claims, it will not significantly slow the rising dependence on oil imports, and the reason for this is that the price elasticity, a demand for oil is fairly low. You have to make very, very large increases in price in order to reduce consumption very much so. A $20 billion a year tax, for example, would slowly rise in imports of oil from 7 percent per annum, which we expect, to something above 6 1/2 percent, so less than 1/2 percent. It would be something like the order of sixty or seventy thousand barrels per day less oil imports, but we would also export less and import more goods that are energy intensive for the reasons I've just described so that on balance --

MR. LEHRER: It's a bad idea.

MR. DIBONA: Yeah. I mean, if you wanted to deal with that problem, the best way of dealing with it is to open Alaska or the outer continental shelf.

MR. LEHRER: We get --

MR. DIBONA: Where you get a million dollars a day for thirty years, not eighty thousand.

MR. LEHRER: One issue at a time. Ms. Tuckman, what do you think of the, of the broad based energy tax idea?

MS. MATHEWS: Well, I, I think that if one agrees that we have to reduce the budget deficit, and I think we have finally approached the national consensus on that, and that we need more revenues to do this, then the next question you have to ask is: Are there some taxes that are better than others? And I think it's clear that what we have right now is a federal tax base that is entirely focused on taxing income and profits, which are the two things that we most want to encourage rather than discourage. So there's an option which is, are there things we can tax that we want to discourage? And the answer is yes. We want to discourage pollution, and we'd like to discourage wasteful resource use. And the biggest pool of wasteful resource use that we have and the biggest pool of pollution that we have is energy use. And that's why people are looking at this, at this tax. Now the question that you were looking at before, how broad based is this, is difficult because the broader the base, the lower the rate, as you've suggested, and, therefore, the less environmental benefit you get, as Mr. Dibona said, because, because you're making a much smaller change in price.

MR. LEHRER: Wherever you do it, the impact is smaller?

MS. MATHEWS: Right. So the more defined the focus, the bigger the environmental benefit, but you're trading off again making it more politically difficult and making the economic effect greater. On the other hand also, the disadvantage of a very broad based tax is it becomes complex and you start to spawn a whole new industry of tax avoidance lawyers and attorneys and accountants who are figuring out ways to get around it. The more narrowly based the tax is, the more simple it is, the more transparent it is, the more difficult that becomes. So there are lots and lots of trade-offs here.

MR. LEHRER: What about Mr. Dibona's basic point, the basic negative of a broad based energy tax, which is that it hurts all American industries?

MS. MATHEWS: Well, I disagree with that. Firstly, this economy is becoming steadily less energy intensive, not more. It's much more into services. Secondly, you're only throwing people out of work if you make the argument that there is no inefficiency to weed out. And there is virtually universal agreement that this country in every sector, in transportation, in industry, and in homes and stores is exceedingly energy inefficient still.

MR. DIBONA: Yeah. I don't agree with that. We can come back to that.

MS. MATHEWS: We can come back to that. There is a lot -- I believe and most energy analysts believe -- a huge pool of efficiency -- inefficiency to wring out of the system that you get by raising price and you get most efficiently. And then finally - -

MR. LEHRER: Because just the economics force it.

MS. MATHEWS: Absolutely.

MR. LEHRER: That's the whole point.

MS. MATHEWS: Our biggest economic competitors, Germany and Japan, price all energy much more highly than we do, not just gasoline, where the tax is eight to ten times what it is here.

MR. DIBONA: That is not a factually correct statement either.

MS. MATHEWS: Well --

MR. DIBONA: That is not true. It is true for gasoline. It is not true for industrial --

MS. MATHEWS: It's true, it's true for electricity.

MR. DIBONA: -- it is not true for industrial fuels.

MS. MATHEWS: Well, it's certainly true for electricity.

MR. DIBONA: No, industrial fuel is the principle industrial fuel.

MS. MATHEWS: Well --

MR. LEHRER: In other words, your point is that even if we were to have a new broad based tax, it would still not compete in any way with what the -- our competitors are paying for energy?

MS. MATHEWS: Absolutely.

MR. LEHRER: Our energy would still be cheaper?

MS. MATHEWS: Absolutely and they are, I mean, they have proved that you can get good productivity growth and economic success, but you see what, what they are doing is they're getting about twice as much GNP per dollar of energy use. In other words, their productivity of every bit of energy they use is much higher, and that's because they price it higher and they're using it more efficiently. There are other differences. Weare bigger and have bigger distances. We have more square feet per person than do the Japanese so that we have some built-in differences, but there are, there are much bigger efficiencies of energy to be gained which are just economic pluses.

MR. LEHRER: Mr. Dibona, you don't dispute -- I mean, everything I've ever seen written down on a piece of paper at least is that you take Japan and Germany, our two major industrial competitors, their cost of energy is much higher than ours.

MR. DIBONA: It is true for gasoline. It is not true for the energy sources. I mean, we pay the same amount for a barrel of oil, it's priced in dollars. They do not tax industrial uses of fuel. We don't tax industrial uses for fuel. So it's simply not true. They subsidize coal much more heavily than we do in Europe and in fact, they could solve their carbon problem by taking off some of those subsidies of coal. But let me just talk about two points, one about the question of whether or not we are less energy efficient. The kinds of examples that are given here just miss the point. There are differences on the personal consumption size that have to do with the fact that -- of life style. And we do have three times the space of a Japanese family. We tend to use three times as much heating energy. We drive more. The cars individually have about the same mileage, a lot of them Japanese cars. The difference is they have the equivalent of taking the population of the United States and putting it in two smaller to medium size Western states. That makes it a little less likely that you're going to drive very long distances. With regard to the industrial use of energy it's a complete misunderstanding or mis- comparison. For example, the claim is often made that the wood products industry in Japan is three times as energy efficient when you measure it in terms of GNP per BTU produced. The reason for that is in the United States the lumber products industry consists of cutting a tree down, hauling it, cutting it up, drying it, and producing cut lumber. Almost all of the energy is used there from the stage of taking cut lumber and using it to produce furniture and houses which have exactly the same energy efficiency. With regard to transportation of goods, we're 30 percent more efficient than the Japanese. It's not because we're inherently more efficient. It's because we travel longer distances and when you measure it in terms of BTUs per ton moved, we do it more efficiently.

MR. LEHRER: Ms. Tuckman.

MS. MATHEWS: Well, you know, we're talking about a great big hunk of the economy here and getting this -- a lot of people feeling different parts of the elephant. But there -- there are big differences in efficiency with which the U.S., Japan and Germany use energy and how much GNP we get out of it. And even when you take out differences that we've both mentioned here -- for example, in the size of our living quarters -- you still see a remaining difference which most of the energy industry, particularly the electricity industry, agrees you could squeeze out with a net economic gain. That is to say with existing technologies at existing prices you can, you can cut the need for existing energy services. We don't need to use any given amount of energy to be economically successful. What we need to do is deliver certain energy services, air conditioning, heat, lighting, et cetera, and there are more efficient and less efficient ways to do that. We have saved the chief energy in this country longer than any other industrialized country, and it has cost us.

MR. DIBONA: We have the same energy prices for industrial goods, and, furthermore --

MS. MATHEWS: We don't because -- wait a minute --

MR. DIBONA: -- there is no -- the academics do not show any difference.

MS. MATHEWS: The electricity -- electricity is a major industrial source and electricity here is cheaper. In fact, it's about half what it is in Japan. It's about 15 cents per kilowatt hour.

MR. DIBONA: If you take the upper Northwest and the kinds of foreign subsidized TBA, you get that but you don't get it throughout the United States.

MS. MATHEWS: No, no, no. I'm talking the national.

MR. DIBONA: The point is that it is hard to believe that people in this country, businessmen who have very carefully looked at every possible way to save money, have cut overhead, have gone to just in time inventory control, have missed this marvelous opportunity to save additional money and just out of spite have chosen not to do --

MR. LEHRER: You think that a tax would do that though. You think it would squeeze some more out, it would wring some more out.

MS. MATHEWS: Sure. In between 1973 and 1986, when oil prices went way, way up, energy prices went up, the economy grew by about 30 percent and energy use stayed absolutely constant. That was, that was efficiency induced change largely because of price. And it was --

MR. DIBONA: It was price.

MS. MATHEWS: And it was the moral equivalent of, in technological terms, of fixing broken window panes. It was just the very first step. We've hardly -- we've hardly begun.

MR. DIBONA: You had to quadruple -- it's very -- that's a very interesting case because you had to quadruple the price --

MS. MATHEWS: No.

MR. DIBONA: -- to do that.

MR. LEHRER: Well, I can't quadruple our time. Very quickly, Alan, this, our kind of argument, it's going to be millions of these -- not millions -- thousands of these going on between now and the time there is or is not an energy, an energy bill proposed and passed. What are the -- is Sen. Danforth in the clip right, the broader the, the broader the tax proposal, the more likely it is to be passed?

MR. MURRAY: Sen. Danforth is advocating a broad tax that goes beyond energy, basically a national sales tax. I don't think President Clinton can do that. I mean, this is a man who campaigned saying that he was going to cut middle class taxes and instead he's going to go out and offer what everyone will recognize as a huge increase in middle class taxes. Now, energy taxes, I agree, also increase the middle class taxes, but it's not as evident, it's not as immediately apparent. You can argue it has some spillover effect, and I think they'll stick to energy --

MR. LEHRER: Now is that -- in other words, Mr. Dibona and his folks have got a hard sell ahead of them.

MR. MURRAY: He's got a tough time.

MR. LEHRER: All right. We'll leave it there.

MS. MATHEWS: Can we just before we leave --

MR. LEHRER: Two seconds.

MS. MATHEWS: All right. I mean, we haven't talked at all about a key part of this, which is the environmental benefits.

MR. LEHRER: Exactly.

MS. MATHEWS: Which are important.

MR. LEHRER: Exactly. Exactly. And we'll do that next time.

MS. MATHEWS: All right.

MR. LEHRER: Thank you very much.

MS. HUNTER-GAULT: Still ahead, sad days at Sears, the Packwood storm in Oregon, and some vintage Thurgood Marshall. FOCUS - SEARS - MINDING THE STORE

MS. HUNTER-GAULT: Next, Sears Roebuck closes the book on its big book in a new round of major layoffs and cutbacks. The Chicago company announced today that it will eliminate some 50,000 full and part-time workers, shut more than 100 stores, and drop the big book, the general merchandise catalogue which gave Sears its start almost 100 years ago. In the past three years, Sears has cut nearly 50,000 other jobs, while slipping from first place to third behind general merchandisers Wal-mart and Kmart. Why such trouble and will things get better? We'll get two views after this brief historical excerpt from a program about Sears produced by Chicago public television station WTTW and reported by Joan Steel.

JOAN STEEL: It was out of a railroad station in North Redwood, Minnesota, that the young Richard Warren Sears began selling gold watches in 1886. Within a year, Sears moved his fledgling business to the thriving streets of Chicago. In his day, Sears was thought of as a shrewd promoter, more a snake oil salesman than the image of quality and dependability his name has come to represent in this century. With sales growing, Sears needed someone who something about watches. An 80 cent classified ad in the Chicago Daily News caught the eye of one Elva C. Roebuck. Sears, the promoter, found Roebuck, the craftsman. The 19th century was the era of the American farmer. As late as 1880, 72 percent of the population lived in rural America. Farmers relied on the local general store where prices were high and selection was limited. It was in the farmer that Sears and Roebuck saw their opportunity.

LENORE SWOISKIN, Sears Archivist: They would offer prices to them that were much better than what they could get locally.

MS. STEEL: Lenore Swoiskin is Sears' corporate archivist.

LENORE SWOISKIN: As an example, there was a cream separator. Mr. Sears was traveling with some Sears people out on a farm, saw a cream separator on a farm, asked the farmer how much it cost, and when he found out how expensive it was, he decided that he could obtain it and make -- sell it more readily to more farmers at a much lower price.

MS. STEEL: The link Sears used to unite the manufacturer and the farmer was the catalogue.

LENORE SWOISKIN: As you can see, the items we offered were very general, similar to the merchandise we offer today. Here's a sewing machine that was named Minnesota where Mr. Sears started the business and it was his, a native of that state. Here's a very attractive baby carriage, $13.75.

MS. STEEL: In the mid 1890s, Elva Roebuck had sold his interest in Sears for a paltry $25,000, and a Chicago clothing manufacturer, Julius Rosenwald, bought himself a partnership with Richard Sears. It was Rosenwald that introduced organization and management to a company plagued by chaos and unruly growth. Rosenwald introduced a time schedule system at the mail order plant, expanding the facility's output by 10 times. In 1925, the aging Rosenwald hired Gen. Robert Wood as a vice president. It was Wood who recognized that the auto would affect the way America shops. The key to survival turned out to be the retail operation where store sales surpassed mail order and continue to dominate today. After the war, Sears followed an America on wheels to the suburbs under the direction of Gen. Wood. Wood retired in 1954, leaving Sears the world's largest retailer.

MS. HUNTER-GAULT: Now to some views from Chicago. Howard Haas is the author of "The Leader Within," a book on business leadership, a topic which he also teaches at the University of Chicago Business School. For 20 years, he was the chief executive at Sealy Mattress and did business with Sears. David Snyder covers Sears as the managing editor of Crain's Chicago Business, a weekly business magazine. David Snyder, was this a big surprise today, the developments?

MR. SNYDER: Not at all. The surprise was not that Sears catalogue was closed today, but quite frankly that it took so long. This is a business, $4 billion in sales, which has been bleeding money for several years. Since the mid 1980s, it's been losing about $150 million a year. Sears, however, has been reluctant to part with its past, or as its chairman says, tear the fabric of the culture. But finally today, the fabric was torn.

MS. HUNTER-GAULT: Mr. Haas, tell us a little bit about that, tearing the fabric of its past. What were the Sears problems and when exactly did they begin?

MR. HAAS: Well, they really began when they acquired -- in 1985, when they came into sharp focus when they acquired Dean Witter and Coldwell Banker. Sears really brought five conflicting cultures together, the retailing culture, the mail order culture, the All State culture, the investment banking culture, which is an industry in which you can do a $10 million deal on a handshake and you can't buy three spools of thread at Sears in the merchandising end of the business without getting a purchase order and then finally they went into the real estate business, and I didn't even mention the fact that at one time they had an international division where they were bartering goods in foreign countries. So you had one company called Sears that was in five to six different industries and cultures that were clashing with each other, and Ed Brennan came in and started the -- tried to implement the store of the future, but the Sears culture was set in concrete by that time, and it was very difficult to change.

MS. HUNTER-GAULT: Do you have anything to add to that, Mr. Snyder?

MR. SNYDER: There's been long, deep-seated problems at Sears in what many people believe was a failure to realize them. Sears is very much an in-bred culture where they very rarely bring in executives from outside the company to run their retail business. So these problems just continued to fester. There was a lot of news today because the company took a $1.5 billion write-off in order to right their retail problems, when, in fact, the company has already taken over $1/2 billion in write-offs already dating back to 1985 and another one in 1990 in which Sears said, well, this is what we need in order to solve our problems. The questions Sears must face today is whether this is the, the final solution to fixing their problems or whether this is just one in a series of bandaids it hopes will right the problems.

MS. HUNTER-GAULT: Okay. We're going to get to that question ultimately but let me just ask you this. I mean, why did they -- the big book -- people are writing -- reporters are writing about it today like it was the closing down of the bible, calling it the end of an era, why did they close down the big book, and how does it relate to the overall problems of Sears?

MR. SNYDER: It's a very good question. Certainly the Sears catalogue is an American icon in many ways. We all grew up with the Sears catalogue, but the bottom line is that the world changed and Sears didn't.

MS. HUNTER-GAULT: What do you mean?

MR. SNYDER: Well, the Sears catalogue continued to be this humongous book that was expensive to produce and carried a broad assortment of merchandise that many people didn't have an interest in buying.

MS. HUNTER-GAULT: Like what?

MR. SNYDER: Oh, everything from jeep parts to out of date slippers, even prosthetics in some of their catalogues, very, very obscure items which does not have the mass market appeal to carry a catalogue operation. At the same time, specialty catalogues like Land's End came on the scene with a vengeance, and they sold a very edited, specialized assortment of merchandise, and they were able to target their customer very well, where the Sears catalogue didn't.

MS. HUNTER-GAULT: Mr. Haas, why couldn't Sears make some changes in its catalogue? I mean, J.C. Penney had problems with its catalogue, a story of -- a store of comparable merchandise, et cetera -- and it turned its catalogue around. What was the problem with Sears?

MR. HAAS: Well, you can't compare Sears to J.C. Penney. J.C. Penney is a late comer in the catalogue business. Sears' initial business was the catalogue. The big book was the retail store that was mailed out for rural America and where they shopped under the banner of satisfaction guaranteed.

MS. HUNTER-GAULT: But now this is the era of the catalogue. There's an explosion of catalogues. Why couldn't they compete?

MR. HAAS: But Sears did not go out of the catalogue business today, Charlayne. They only went out of the general catalogue. It seems to me that Martinez left open the door to continue to use their substantial catalogue expertise to put out specialty books. Take a look at Spiegel's for example. Spiegel's was just as antiquated as Sears was in its general catalogue until Hank Johnson came by and realized that the American woman had been emancipated by the Equal Employment Act. The nuclear family had changed, that with two breadwinners there wasn't the time to drive to a store, to a shopping mall and go from store to store. And what he did was made the Spiegal catalogue into a highly focused, specialty catalogue, and those are the winners, the LL Bean catalogues and many others, the Horschild catalogue even the GAP catalogue or the Crew catalogues have all been winners because they've been sharply focused and they've given in-depth selection and good value.

MS. HUNTER-GAULT: Well, Sears made some management changes. It made some merchandising changes. It's gone through some other layoffs. Why didn't any of that work for it?

MR. HAAS: It wasn't -- it was too little and too late. What they did is they, they were taking bites around the perimeter of the cookie, but they didn't bite into the cultural problem that was killing them, and the cultural problem was they lost their focus and that the culture that was sustaining them which was almost a, a -- although they spoke English -- no one could understand if you weren't an insider at Sears what that English meant, it was so inbred. But now they've taken two of four steps they need to take. The first thing they've done is they're going to spin off Coldwell Banker and Dean Witter. They're going to sell off part of All State. That's a financial move but that's a focusing move also because they're going to raise money and at the same time they're going to take the fig leaf away from the people in the retailing end, they're going to be able to run, but you're not going to be able to hide anywhere. The second thing they've done is get out of the big book. The third thing they need to do -- and today they also closed down over 100 stores which are going to be marginal stores that aren't producing anyway.

MS. HUNTER-GAULT: Let me ask Mr. Snyder, what about the -- how important was it that Sears only would use its private brands and the quality of its merchandise wasn't as it had been -- how much of a factor was that in the problems of this, I guess, culture that you're talking about?

MR. SNYDER: A very serious one, and I think that you need to look at the problems with Sears catalogue hand in glove with the problems of the Sears store, that being the Sears catalogue tried to be all things to all people. It sold power saws and dresses in the same medium. The Sears store continues to face the same problem in that they are selling a very unusual assortment of merchandise unprecedented in the retail business. And quite frankly, the different sectors of the Sears stores have very different customer bases. On the issue of brand names, Sears has made some efforts to get into brand name business, especially in the appliance and electronics area. But quite frankly, many of the high names in the apparel business just won't sell to Sears because it just has a dowdy reputation that Liz Claiborne, for instance, one of the hottest names in women's apparel, does not necessarily want to be associated with Sears.

MS. HUNTER-GAULT: Well, briefly, let me just ask you -- you maybe heard Mr. Martinez say in our little news clip summary that he sees the reorganization leading to a stronger company. Do you feel -- how much is this reorganization going to help, and what do you see as the prognosis for the company?

MR. SNYDER: It's a difficult question. What Sears is doing, as Howard says, is peeling away the layers of the onion and getting down to the core operations of what Sears is going to be, and that's, and that's a retail store as we know it. But they still face an enormous and formidable task getting people to shop for their power saws, for instance, in a regional shopping mall environment.

MS. HUNTER-GAULT: Very briefly, Mr. Haas, do you see more layoffs in the future?

MR. HAAS: Well, I do, but I also see coming out on the other side a successful Sears. I'm not quite as -- I'm not quite as pessimistic as my colleague, David, is, because I see things happening now. For example --

MS. HUNTER-GAULT: I'm sorry. We don't have to time to take the example. We'll leave on that note of pessimism and come back to you in a few weeks perhaps and see what's happened. Thank you both for being with us.

MR. SNYDER: Thank you. FOCUS - FRIEND OR FOE?

MR. LEHRER: Next, the political storm surrounding Sen. Bob Packwood. The five-term Republican was back in Oregon today for the first time since sexual harassment allegations were made against him last November by more than a dozen women. We have a report by Correspondent Lee Hochberg of Oregon Public Broadcasting.

DEMONSTRATOR: Bob Packwood has to go, hey, hey. Ho, ho. Bob Packwood has to go, hey, hey.

MR. HOCHBERG: The angriest of Oregon's voters are the ones who thought Sen. Bob Packwood stood for enlightened attitudes toward women. Now, they believe they've been hoodwinked.

DEMONSTRATOR: Hey, hey.

KIM ROTH, Packwood Opponent: It was a very political strategy to be on women's issues, and now we find out that he's, he's doing things behind our back. I feel very betrayed by that and very used.

JOHN BIDDLE, Packwood Supporter: It seems to me that with all the problems we have in the world, we certainly have better things to do than worry about a man kissing somebody in 1969.

MR. HOCHBERG: But some Oregonians say the power that Packwood wielded and possibly abused around the nation's capital is reason to keep him. His power is Oregon's power.

SEN. PACKWOOD: [talking to woman] Bob Packwood.

WOMAN: Yes, I recognized you.

SEN. PACKWOOD: Who are you?

MR. HOCHBERG: For Packwood, a political crisis that began in the final days of his re-election campaign has gotten even sticker. Other women have stepped forward since the Washington Post disclosed charges that he had left a 20-year trail of unwanted kisses, groping and in one case a forceful attempt to rip off a woman's under garment.

JULIE WILLIAMSON: He grabbed me, and I was trying to get away and kick him, and I remember trying to kick him in the shin, and he stood on my feet. And he pulled my hair like that, my head back like that, and he was mashing his face on mine, and then reaching up under my skirt and trying to pull my girdle off, and I kept struggling, and I got away.

MR. HOCHBERG: Portland political consultant Julie Williamson, a 53-year-old grandmother, has become a symbol of Packwood's power gone awry. Her story echoes those of the other women. She says Packwood accosted her in 1969 when she was on his Senate staff.

JULIE WILLIAMSON: And I thought and thought about what I was going to say, and so when he got in the car, I just said, what was supposed to happen, were we just going to get down on the floor and go for it? I mean, I was real mad.

MR. HOCHBERG: What did he say?

JULIE WILLIAMSON: He said, "I suppose you're one of the ones who wants a motel."

SEN. BOB PACKWOOD, [R] Oregon: What I did was not just stupid or boorish. My actions were just plain wrong, and there is no other better word for it.

MR. HOCHBERG: A stiff-jawed Packwood has refused to admit or deny Williamson's allegations or any of the others. He apologizes for his behavior but won't describe what that behavior actually was.

SEN. PACKWOOD: I'm not going to get into the specifics of each and every charge. I'm simply going to say my conduct was wrong. I just didn't get it. I do now.

MR. HOCHBERG: But Packwood's mea culpa generally has fallen flat. The state's largest newspaper, the Oregonian, lampoons Packwood mercilessly for his abuse of power. It endorsed Packwood in every election since the 1960s, including last November, but now it calls for his resignation.

BOB LANDAUER, Portland Oregonian: He's allowed an acute problem to decay into a chronic condition, and I'm ready just to kiss him goodbye.

MR. HOCHBERG: Oregonian editor Bob Landauer says the Packwood campaign lied to the newspaper to get its editorial endorsement, which is critical in Oregon. In the last days before the election, Packwood's chief of staff told reporters that the Senator was not under investigation for sexual harassment. The Oregonian accepted the denial and proceeded to endorse Packwood. Landauer says that may have swung the close election Packwood's way.

BOB LANDAUER: He stole the election. I believe he cheated, and I think he, in that sense, he really short-circuited our process, and that offends me right to the core. He is hiding in Washington, D.C., and we think in the process he is becoming a laughing stock.

MR. HOCHBERG: Packwood bashing has become sport in Oregon, spawning T-shirt sales and blue humor. In an Oregonian poll, 78 percent of Oregon voters said they believed the women's allegations, and 1/3 of those who voted for Packwood say they'd vote for his opponent today, sweeping Packwood out of office.

STUART GATES, Packwood Opponent: We've always supported Bob.

MR. HOCHBERG: Until now.

STUART GATES, Packwood Opponent: Until now, yes.

MR. HOCHBERG: Lifelong Republicans Stuart and Sylvia Gates helped get Packwood started in politics 30 years ago. Now they've drafted one of five petitions send to the Senate demanding Packwood relinquish his Senate seat, a charge he violated Oregon's strict election law by deceiving the voting public.

STUART GATES: We were prevented by him or his staff from having facts that might have made a difference. We're very disappointed that this otherwise good man has been, been perverted by power.

MR. HOCHBERG: Still, in Oregon's rural Willamette Valley, farmers and other groups have gotten used to having a senior Senator fight for them. They say the allegations are much ado about nothing. Sue Hopper and Vicki Iverson are with the Oregon Farm Bureau.

VICKI IVERSON, Oregon Farm Bureau: It really doesn't affect how we feel about him as far as farmers.

SUE HOPPER, Oregon Farm Bureau: -- the kind of job he'll do for us. We need him back in the Senate. We have too many critical things going on and will be affecting us. That's the big picture. That's what's important.

MR. HOCHBERG: Hopper and Iverson and 57 other female members of the Farm Bureau drafted this letter to Senate Majority Leader George Mitchell. "Is Senator Packwood's uninvited kissing of women," the letter asks, "really worse than Senator Kennedy's conduct in the incident involving Mary Jo Kopechne?"

SUE HOPPER: How much of that stuff goes on all the time? It doesn't make it right or wrong.

VICKI IVERSON: I've got non-wanted kisses before. Just somebody's overenthusiastic and you're going, oh, my gosh.

SUE HOPPER: Yeah, me too. And I think a lot of times nothing is meant by it.

JEANETTE SLEPIAN, Packwood Supporter: I don't think any of would want to work in a work place where an individual would be afraid to hug, to kiss, to pat on the back a fellow employee, be that a peer or a supervisor.

MR. HOCHBERG: A hastily formed Political Action Committee is trying to prevent Packwood from being hanged by public opinion before he has his day with the Ethics Committee. Jeanette Slepian, former Packwood staff member, emphasizes that what Packwood is alleged to have done doesn't fit the legal definition of sexual harassment.

JEANETTE SLEPIAN: None of them said that in any way was their employment threatened, when they said no, assuming it was true, it was no. That does not constitute sexual harassment.

JEANETTE SLEPIAN: [addressing group] The facts are that Julie Williamson had and has strong motives to see Bob Packwood lose his Senate seat.

MR. HOCHBERG: Packwood's supporters have taken to attacking the credibility of the women making the allegations.

JEANETTE SLEPIAN: During Bob Packwood's run for re-election, Julie Williamson served as a campaign consultant to the Democratic candidate for Congress. It was in the heat of this most important campaign that she felt the need to whisper that she had been sexually harassed 23 years ago.

MR. HOCHBERG: Williamson denies that going public was politically driven. She notes she's spoken openly about the alleged incident for years. A strategy of blaming the victim, she says, won't distract voters from Packwood's abuses.

JULIE WILLIAMSON: Even if I'm a Democrat and even if I have been a consultant and made money or whatever they allege, he did not have a right to attack me in the way that he did 23 years ago when I worked for him.

MR. HOCHBERG: The aggressive efforts to save Packwood's power may be eroding some of what built it in the first place, the support of women's rights groups. The head of Oregon's National Abortion Rights Action League, Diane Linn, marched side by side with Packwood only nine months ago in the march for women's lives in Washington. So-called women's PACs have given generously to Packwood. Now though they say even his years of pro-choice advocacy aren't enough to keep them on his ship.

DIANE LINN, Abortion Rights Activist: And to know that the Senator had, had depended on our support all these years, but behind the scenes was treating women like this, is, you know, it really is a painful proposition. Our trust has been betrayed and we do not want him to serve as our U.S. Senator any longer.

SPOKESMAN: We feel that his credibility is zero and that his chances of regaining it are zero, and we think in term -- our view is that he is going to have remarkably, remarkably little influence in the Senate in either party.

DEMONSTRATORS: What do we want? Packwood out. When do we want it? Now!

MR. HOCHBERG: Oregonians are watching closely to see how much power Packwood retains as the Ethics Committee convenes. Many say how the Senate deals with the allegations is significant not only for what it teaches Packwood but for what it shows the Senate, itself, has learned about controlling members who abuse their power. FINALLY - 1908-1993

MS. HUNTER-GAULT: We close with a remembrance of retired Supreme Court Justice Thurgood Marshall, who died yesterday at the age of 84. Appointed by President Lyndon Johnson to the court in 1967, Marshall was the only black justice on the court for his 24-year tenure. Before joining the court, he argued before it, championing civil rights in some 32 cases, winning 29. His most celebrated victory was the landmark Brown versus Board of Education case in 1954, which ended official segregation in so-called "separately equal schools." He retired in 1991, and said that when people remembered him, he hoped they would say that he did what he could with what he had. In a series of 1987 interviews with journalist Carl Rowan he talked about the Supreme Court and Martin Luther King's assertion of freedom.

JUSTICE THURGOOD MARSHALL: [1987] You know, everybody quotes Martin Luther King saying, "Thank God, we're free again." We're not free. We're nowhere near free. Years ago, a pullman porter told me that he'd been in every state, in every city in the country, and had never been any place in this country where he had to put his hand up in front of his face to know that he was a negro. I agree with it. Segregation in general, we still have it. I still know when I'm in certain places, I know that, I know that the clubs here in this town invite everybody else but me. I don't have an honorary membership in any club, any place, under any circumstance. How come?

CARL ROWAN, Syndicated Columnist: But all the other justices do?

JUSTICE THURGOOD MARSHALL: I assume they do.

MR. ROWAN: You've been averaging 15 dissents per term. Shouldn't we call you the great dissenter or the great unhappy justice?

JUSTICE THURGOOD MARSHALL: Oh, I'm not unhappy at all. I enjoy fighting. I agree with that old saying that "I love peace but I adore a riot." I, I think it would be horrible to have a court that was all one side or the other. I wouldn't want it.

MR. ROWAN: Well, when you sit down to write some of those dissents, I'm sure you've got to be a little disappointed, maybe even angry every now and then.

JUSTICE THURGOOD MARSHALL: Oh, gee, you got to be angry to write a dissent.

MR. ROWAN: Do you ever wish you were pulling teeth and filling teeth instead?

JUSTICE THURGOOD MARSHALL: Doing anything else. But when you once get into a dissent you begin to enjoy it, and the deeper you get in it, the more you enjoy it, the more you wonder what would happen if you'd been in the majority.

MR. ROWAN: You believe in the Court. What does that mean? Does that mean that you believe that anybody who sits on that Court is going to be influenced by the other eight members in a lot of ways or what?

JUSTICE THURGOOD MARSHALL: I don't think anybody is unreasonably influenced by anybody else. They might say so, but I don't believe it. But I believe they listen to me, and we listen to each other. And we do it repeatedly, and regularly. And I think we have absolute and complete mutual respect for each other and I see nothing to the contrary or in the future either.

MR. ROWAN: Do you think it's right for various groups of Americans to try to deny the confirmation of someone appointed to this court on the basis of their being too liberal or too conservative?

JUSTICE THURGOOD MARSHALL: I think the protest is a part of the American way of life, and the right to petition Congress is in the Constitution. So I think any individual, any group has a specific duty, not only right but a duty, to present to Congress their views on any matter that's before Congress. The Senate Committee held hearings for 11 months before they got around to confirming me, but I still think they had that duty. RECAP

MR. LEHRER: Again, the major stories of this Monday, President Clinton consulted the Joint Chiefs of Staff about ending the ban on homosexuals in the military, the President named his wife to head a task force on national health care reform, and Sears Roebuck announced it will cut 50,000 jobs, close 113 stores, and eliminate its longtime catalogue by early next year. Good night, Charlayne.

MS. HUNTER-GAULT: Good night, Jim. That's our NewsHour for tonight. We'll be back tomorrow. I'm Charlayne Hunter- Gault. Good night.