The NewsHour with Jim Lehrer

MARGARET WARNER: Good evening. I'm Margaret Warner. Jim Lehrer is away. On the NewsHour tonight, terry Smith looks at what today's unemployment rate increase tells us about the state of the economy, Kwame Holman reports on the conclusion of this week's Senate battle over the President's budget and tax plan, Mark Shields and Paul gigot analyze that and other things political, Gwen Ifill talks with playwright August Wilson, and a California educator reads her favorite poem. It all follows our summary of the news this Friday.

NEWS SUMMARY

MARGARET WARNER: President Bush reported progress today in resolving the standoff with China. He spoke hours after an American general made a second visit to the 24 crew members of a U.S. surveillance aircraft being held by China. Chinese authorities released an undated photograph of 11 of them. They've been held on Hainan Island since Sunday, when their plane collided with a Chinese fighter jet. Mr. Bush said the American crew was in fine shape.

PRESIDENT GEORGE W. BUSH: They are Housed in officer's quarters, and they are being treated well. We're proud of these young men and women, who are upholding the high standards of our armed forces. We know this is a difficult time for their families. And I thank them for their patriotism and their patience. We're working hard to bring them home through intensive discussions with the Chinese government. And we think we're making progress.

MARGARET WARNER: Secretary of State Powell said the U.S. and China have exchanged "rather precise ideas" for ending the standoff. In the meantime, he said, U.S. officials expect to be able to meet regularly with the crew. Virginia Senator John Warner, Chairman of the Armed Services Committee, said later the two countries are working on a joint statement to resolve the matter. He spoke after being briefed by administration and intelligence officials.

SEN. JOHN WARNER: We're moving towards a letter that will contain exchanges of views, first at the level of the ambassador and the foreign minister. But that letter is being reviewed both by our President and the President of China. So it will reflect a common understanding. I would say that the question of the apology is not in any way to be incorporated in the letter.

MARGARET WARNER: Warner also said the two sides are trying to establish a framework for experts from the two countries to meet to determine how the accident occurred. A State Department spokesman declined to comment on the Senator's remarks. On Chinese state television today, the pilot of the second Chinese fighter jet in the sky at the time of the accident said the U.S. plane was at fault. He said the large U.S. propeller plane made a big move toward the other Chinese fighter. That jet crashed into the sea, leaving the pilot missing and presumed dead. U.S. unemployment rose in March to its highest level since the summer of 1999. Last month's jobless rate, as reported by the Labor Department, was 4.3%, up 0.1% since February. Businesses cut 86,000 jobs from their payrolls, the largest one- month reduction since the end of 1991. The markets fell today as the unemployment news and new profit warnings raised recession fears. The Dow Jones Industrial Average fell 126 points to close at 9791. The NASDAQ Index closed down 64 points, or about 3.5%, at 1720. We'll have more on the economic outlook right after the News Summary. The Senate passed a budget outline today with a substantially smaller tax cut than President Bush had wanted. The Senate's tax cut would total $1.2 trillion over ten years. The President wanted a $1.6 trillion cut. The vote was 65-35, as 15 Democrats joined all 50 Republicans to pass it. The House approved a budget last week with the higher Bush tax cut. The two versions now have to be reconciled. We'll have more on this story later in the program. California's largest public utility filed for Chapter 11 bankruptcy protection today. Pacific Gas and Electric said it was caught between rising wholesale energy costs, and a deregulation law that barred it from raising rates to customers. The bankruptcy filing allows the utility to continue serving its 13 million customers while it deals with its creditors. Just last night, Governor Gray Davis said he now supports rate hikes, at least for large power users. He spoke in a televised address.

GOV. GRAY DAVIS: I remain committed to protecting average Californians from massive rate hikes. So I'm urging the Public Utilities Commission to adopt a plan that will protect average consumers, award those who conserve, and motivate the biggest users to cut back. Under my proposal, more than half of you won't pay a penny more. For the rest, the average increase will be 26 1/2 percent.

MARGARET WARNER: The State Utilities Commission has already approved rate increases of up to 46%. In the Mid East today, Israeli helicopters rocketed two Palestinian police stations in Gaza and knocked out power to thousands. The attack came after Palestinian mortar fire hit several Israeli communities. A top aide to Israeli Prime Minister Sharon said the army now intends to strike back "relentlessly." A Palestinian cabinet minister said Israel was "very near to killing any peace opportunity." That's it for the News Summary tonight. Now it's on to jobs and the economy, the budget battle, Shields and Gigot, playwright August Wilson, and a favorite poem.

FOCUS - BEHIND THE NUMBERS

MARGARET WARNER: Terence Smith explores the latest economic numbers and what they mean.

TERENCE SMITH: Today's unemployment number was the worst showing in 20 months, it climbed from 4.2% in February to 4.3% in March. Manufacturing shed 81,000 jobs last month, making a total of 450,000 such jobs lost since June. Service sector jobs were down, as were retail and temporary jobs. Unemployment was up, for African-Americans. Their jobless rate jumped from 7.5% in February to 8.6% in March, although those numbers are drawn from a smaller sample. One bright spot -- construction firms added 12,000 jobs in March.

Joining me to walk through the numbers are Ed McKelvey, senior economist at Goldman Sachs and company, a Wall Street investment firm; Lisa Lynch, professor of international economics at Tufts University's Fletcher School of law and diplomacy-- she was chief economist at the Labor Department under President Clinton-- and Ross DeVol, director of regional and demographic studies at the Milken Institute, an economic think tank. Welcome to all three of you.

Lisa Lynch, let me begin by asking you to read these latest numbers for us. Are they, do you take them as yet another sign of a slowdown?

LISA LYNCH: Well, certainly looking at the numbers today, we are seeing the continuation of the slowdown in the manufacturing sector. And if manufacturing is not in recession, it certainly is very close to being in recession. I think the real worry in today's numbers was that up to now the service side of the economy has been able to pick up the slack from the decrease in employment in manufacturing. And that did not happen in the most recent numbers. And, in particular, we saw a sharp decrease in the use of temporary help employees, and temporary help agency employment. And manufacturing has used a lot of those workers, but they're also using other parts of the economy. So that's sort of the sobering news. The second part of today's report that's going to give pause and kind of a Pepto-Bismol moment for Wall Street has to do with the wage numbers. Now wages -- hourly wages were up out of 4.3% number in March, and that's a much higher number than we had been seeing over the last two years where wage increases, hourly wage increases were on the order of 3.5 and 3.8%. So that gets people a little nervous about what might be happening both for profits for companies and inflation concerns more generally in the economy.

TERENCE SMITH: Ed McKelvey, were there some nerves on Wall Street today?

ED McKELVEY: Well, certainly you saw the market respond in a negative way. Some of that was probably due to other factors. But yes, I think the numbers put you a little closer to nationwide recession. They don't put you in it. And I think the Street's nervous about that. I would agree with most everything Lisa said except I would say manufacturing is very clearly in recession.

TERENCE SMITH: As an incentive or nonincentive for the Federal Reserve to cut interest rates, how do you read that?

ED McKELVEY: Well, this report probably doesn't quite do it in terms of getting the Fed to move before its next meeting on May 15th. It may still do that, but there have been a number of mixed signals in recent data. And had this report been a lot worse, you might have seen the Fed move more quickly, but not quite yet.

TERENCE SMITH: Ross DeVol, when you look at the technology sector, what's the message there?

ROSS DeVOL: Well, the message there is this might be the first investment led recession that we've had in the post-war period.

TERENCE SMITH: Meaning?

ROSS DeVOL: Meaning that the technology sector is playing a large role in the job losses at a very early stage. We look at some of the numbers, industrial equipment lost 16,000 jobs. Computers is in that category. Electronic components lost employment. And we've seen the communications equipment sector begin to lay people off. And these latest numbers don't even reflect the job cut announcements that have already been made. Those numberless be showing up very soon. So that's what's really troubling, is that this could very well be an IT equipment investment led recession, and the Fed doesn't really have the weapons to correct that.

TERENCE SMITH: So it's reaching beyond, for example, the dot com sector, more broadly into technology?

ROSS DeVOL: That's correct. We all know the dot com stories, the venture capitalists push firms into the public market that didn't have any profits. And we've seen the retrenchment from that, but now it's affecting the real side of the technology sector, firms like HP, Intel, Cisco -- those types of firms. We've seen Gateway announce they're going to layoff additional people, and Dell in Austin, Texas is going to layoff 10,000 employees.

TERENCE SMITH: Lisa Lynch, how important and how long lasting are these numbers in the manufacturing sector?

LISA LYNCH: Well, we've seen manufacturing softness in the employment numbers in manufacturing going back to June of last year. I think what is troubling when you look at the manufacturing numbers is that, as Ross said, that we're seeing for the first time decreases in employment in sectors of manufacturing that had been increasing in employment during the year 2000. But I want to say, manufacturing is only one part of the economy. We did have some good news today in the jobs report. We had healthy continued growth in the construction sector. We have strong growth in health services, and sort of the other side of the investment-led IT new economy is that we had a lot of job growth in computer and data processing. So those companies that invested in new technology are putting people to work with that new IT technology.

TERENCE SMITH: Lisa Lynch, explain that construction number that went up when others went down.

LISA LYNCH: Well, we've seen more generally in the housing data for the economy continuation of growth in new housing and obviously the appointment that is associated with that. So, I mean, in terms of what people are doing in buying homes, people are still going out there and buying homes, and that's consistent with the good numbers that we've got in consumer confidence. And that also suggests that if there is a continued decrease in interest rates, that that should continue, that investment in the housing sector of the economy.

TERENCE SMITH: Ed McKelvey, stepping back for a moment, isn't this number still very low as than unemployment figure?

ED McKELVEY: Certainly is. We have seen a very low unemployment rate throughout 2000 and into 2001. The problem of course is that the economy really responds, the change in the unemployment rate is what reflects the growth rate. We've started most every downturn in the economy with what seemed like a very low unemployment rate. You really have to look at the net change, I think. And you're not in a troublesome territory just yet. But it certainly is a bit worrisome that you've had an increasing pattern.

TERENCE SMITH: Ross DeVol, where is that troublesome territory?

ED McKELVEY: You mean where are we likely to go in terms of growth?

TERENCE SMITH: Or either or both of you -- yes. Go ahead.

ED McKELVEY: I'm sorry, Ross.

ROSS DeVOL: Let me jump in. We've talked a little about manufacturing. We've lost 450,000 jobs in that sector. And let me agree with Ed, there's no question the manufacturing is in a recession. It's just a question of whether the rest of the economy is or not -- the only thing that might save us. I think an important thing to look at is typically construction is declining at this stage in a economic downturn. What's unique about this one is the fed has been lowering interest rates and that has stimulated construction, which has acted as a stabilizing force. But what I'm really concerned about at this stage is with all the announcements that earnings are going to be much more expectations, especially in the tech sector -- and I think we'll see more of those announcements come out, that it can become a self fulfilling prophecy in terms of the stock market reacts negatively to the poor earnings numbers, driving the stocks down further, forcing firms to announce additional layoffs. So I really view the technology sector as playing a key role here in determining just how will we go. It will be interesting to see whether or not the April employment numbers show decline. If they do, I would be ready to declare that we are officially in a recession.

LISA LYNCH: Lisa Lynch, what about the psychological factor of all of this, when these numbers come out on both consumer confidence and the attitude towards the larger question of the economy?

LISA LYNCH: Well, look, in terms of the psychology, certainly the Goldilocks economy is over in the U.S.. But let's not all become Chicken Littles and say that the sky is falling. There are bears lurking around. But we still have an unemployment number of 4.3%, which is extraordinarily low from a historical point of view. We have workers earning more money. We have consumer confidence high, we have strengths in the economy in the housing sector, in financial services and health care. And so we have a mixed picture, and I think that's what drives everybody a little bit batty, because there's not a clear message here. But there are obvious areas of concern, and that's why you're seeing the volatility that you're seeing in the stock market.

TERENCE SMITH: Ed McKelvey, do you share that confidence in the underlying strength of the economy?

ED McKELVEY: Well, I think in the long-term sense it does have some underlying strength. I would take less comfort from the housing numbers for the reason that this is a sector that behaves a lot differently with the changes we've had in the mortgage market over the years. It currently is performing quite well, there's no denying that. The concern I have is pretty much what Lisa suggested, that the behavior of the market could spark additional retrenchment by consumers. We have not seen that yet -- at least to a great degree And if that happens, then you could have a snowballing effect. We're not there yet, we hope we don't get there, we're forecasting one percent growth, so we sort of narrowly escape here. But there certainly is an ongoing risk.

TERENCE SMITH: Ed McKelvey, in your first answer you talked about other factors that fight have been involved in the market today, a downturn versus yesterday's rush up, what did you have in mind?

ED McKELVEY: Principally was that rush up and that people were probably booking some gains, a rare thing on Wall Street these days. And so it wasn't surprising to see the market open down even if there had been no news.

TERENCE SMITH: Ross DeVol, what should we be looking for, not only in technology, but more broadly as we go ahead?

ROSS DeVOL: I think what we want to be looking at is the consumer. So far consumer spending -- growth has slowed down, but it's still positive. And unless the consumer really cuts back, it's very difficult to see a recession. So the jobs numbers and the consumer numbers and the consumer confidence are all interrelated. If consumer spending stays positive, I don't think we'll have a recession, one officially. So that is what you're going to want to look at.

TERENCE SMITH: Lisa Lynch, do you agree, we can escape the "r" word?

LISA LYNCH: Well, I don't think we're going to see the "r" word in the short term. But we are going to see a lot of softness. We've had a very rapid heady period of growth in the United States, and you can sort of imagine that people are, we need to take pause, a little rest, get our digestion system going again, and then hopefully take off.

TERENCE SMITH: Ed McKelvey for the market what should we be looking for?

ED McKELVEY: Well, I think in the near term the market still is digesting some of that earnings news, and may have some difficulty. Our view on the longer term is quite optimistic. Markets often turn up quite ahead of when the economy turns up. So six to twelve months out I think you may be looking at better numbers in the market.

TERENCE SMITH: Okay. And quickly, Ross DeVol, can we look to technology to help us here?

ROSS DeVOL: Over the next two to three months, I don't think we're going to see technology helps us much. Orders announcements have been very weak. It will depend to a large extent how much corporate investment budgets are cut back. That's what will happen to I T, and I think we keep our eye closer on the information technology numbers, and if they don't go too bad we'll probably escape the "r" word. But we'll be so close to it that it will feel very similar to an "r" word.

TERENCE SMITH: All right. Thank you, all three, very much.

MARGARET WARNER: Still to come on the NewsHour tonight, the Senate's budget fight, Shields and Gigot, playwright August Wilson, and a favorite poem.

UPDATE - BUDGET BATTLE

MARGARET WARNER: The finale of this week's Senate budget fight-Kwame Holman reports.

KWAME HOLMAN: The Senate spent most of today disposing of some 40 amendments in order to bring the budget outline for the next fiscal year to a vote this afternoon.

SEN. PETE DOMENICI: First I want to say to the Senate, we're getting very close. We only have about four amendments on each side, and I think we can work them out.

KWAME HOLMAN: But the real focus was on the floor where final negotiations toward a ten-year tax cut and spending plan were underway. Leaders were trying to fashion a deal that would satisfy main- line Republicans and Democrats, as well as a small number of centrists from both parties. That was necessary because on Wednesday it became apparent President Bush's $1.6 trillion, ten-year tax plan could not survive in the evenly divided Senate. Democrats, with the help of three Republicans, voted to divert nearly $500 billion of the tax cut to education programs and federal debt reduction. Today, as the appointed time for the final vote arrived, it became clear some compromise had been reached, only because Budget Committee Chairman Pete Domenici called for the yeas and nays.

SPOKESMAN: The clerk will call the roll in final passage.

KWAME HOLMAN: And as the vote proceeded, it also was clear that compromise was one more than a few Democrats could support.

SPOKESMAN: Mrs. Carnahan, aye. Mr. Johnson; Mr. Johnson, aye.

KWAME HOLMAN: Though he wasn't needed to break a tie vote, Vice President Dick Cheney announced the final tally.

DICK CHENEY: The ayes are 65. The nays are 35.

KWAME HOLMAN: The action then shifted to the media gallery, and reporters learned the compromise was just under $1.3 trillion in tax cuts over ten years, about $300 billion below the President's mark. The Vice President said the administration was satisfied with that outcome for now, but more negotiations lie ahead when Senate and House members meet in a Conference Committee.

DICK CHENEY: I think in the final analysis we made a decision that the best way to proceed was to take the number that was there as of this morning with respect to the overall tax level, I think Pete said, what, 1.3, 1.28, and go with that, rather than try to have another vote this afternoon and take that to conference. And we're confident that coming out of conference we will get a good number, fairly close to what the President originally recommended.

KWAME HOLMAN: A majority of Democrats voted against the package, but Democratic leaders too declared satisfaction. The package directs tax writing committees to decide how to send $85 billion in tax rebates to Americans during this calendar year.

SEN. KENT CONRAD: It was a Democratic amendment on the floor that put the fiscal stimulus for this year at $85 billion of tax cut to put money in people's pockets as quickly as possible. And we have said we think it should be a combination of rate cut and direct payments to taxpayers to give a lift to this economy.

KWAME HOLMAN: Democratic Leader Tom Daschle said there was even more.

SEN. TOM DASCHLE: More importantly than just the tax cut, what we feel good about, of course, is the commitment now to education and the commitment to debt reduction that we felt were so important. Not only that, we have the full commitment to prescription drug benefits. So I think we've made good progress this week, and I'm very encouraged by it. I understand some of our Republican friends have called this a victory. If this is a victory, there ought to be more like them.

KWAME HOLMAN: But the spotlight may have been brightest on the handful of Senate centrists, whose commitment to a smaller tax cut than the President's help force the compromise . The tax cut figure in the resolution is almost exactly what centrist leader John Breaux of Louisiana proposed early in the debate.

SEN. JOHN BREAUX: I that think what we have shown today that it is, in fact, possible to change the political culture of Washington. A vote of 65-35 for a budget is a significant change from the way business was done in the past, and I think it does represent a new day of cooperation between both parties to reach a common goal and a common good.

KWAME HOLMAN: For his, the President says this latest step toward final action on taxes and spending bodes well.

PRESIDENT GEORGE W. BUSH: When the House and Senate complete their work, they will have paved the way so the American people can receive an across-the-board income tax reduction, a doubling of the child credit, relief from the marriage penalty, and the elimination of the death tax. This budget also wisely increases spending on education, funds priorities like Medicare and Social Security, and pays down a record amount of debt.

KWAME HOLMAN: The process begins when Congress returns from its two-week recess.

FOCUS - POLITICAL WRAP

MARGARET WARNER: Now, Shields and Gigot with their political analysis of the budget battle and other news of the week; that's syndicated columnist Mark Shields and "Wall Street Journal" columnist Paul Gigot.

So, Mark, we had the President, the Vice President, the Republican leadership all expressing delight at this vote. Can this be considered a victory for the President?

MARK SHIELDS: Well, the Associated Press, that arbiter of objectivity, called it a stinging setback. Chuck Grassley, the Chairman of the Senate Finance Committee acknowledged it was a setback as well. That's the spin. Now, Margaret, I have to say but for the tone deaf White House, up to this vote they could have claimed a great victory. If you think about it, last fall Al Gore was talking about a $250 billion tax cut. The Democrats incrementally have gone to 900 billion -- the congressional Democrats. All he had to say was - it reminds me of one quick story, and I'll be quick with it Paul. That's the elderly man on the train who encounters the very attractive young woman, over cocktails he says to her, would you sleep with a man for a million dollars, hypothetically, and she muses and said yes I would. He says will you sleep with me for 50 dollars; and she said, I certainly wouldn't - indignantly -- what kind of person do you think I am? He said I thought we both knew what you were; I thought we were haggling over price. George W. Bush could have claimed victory on the 1.2. But because of -- in my judgment -- the bad politics they've played trying to do in the Senate what they've done in the House, that is line up your entire army behind you and not let a single troop leave, they end up with the first black eye.

MARGARET WARNER: Why couldn't they push through the 1.6 trillion cut? I mean, the President said this was the crown jewel of this program, it's the thing he most wanted, he went to 22 states to campaign for it. Why couldn't he get it through?

PAUL GIGOT: Because two Republicans, Northeast Republicans, wouldn't give even a new Republican President their vote on his top priority. I think that they felt that they'd get the benefit of the doubt on this first issue of a new presidency.

MARGARET WARNER: The White House thought that.

PAUL GIGOT: The White House thought that, I think the Republican leadership thought it. They knew there was some negotiating to be done, they knew they'd have to make concessions on spending. But I think in the end they thought, first priority, top priority, new presidency, got to accomplish something, you at least give them the benefit of the doubt on the budget resolution, which remember is only an outline, it is not the final tough votes on particular spending proposals or particular tax cuts.

MARGARET WARNER: But do you agree with Mark that he should have compromised with and negotiated with the Democrats, at least the moderate Democrats, from the outset and then he would have been able to say this is really my package?

PAUL GIGOT: In retrospect looks like he should have, but I don't think that -- he would have run the risk of losing some votes on the right, and with all due respect to these moderates in the middle, they are very hard to pin down, Margaret. The only Senator I've ever seen John Breaux deliver is John Breaux. It is very hard to know where these people at any particular moment. They thought they had Ben Nelson, for example of Nebraska, a state that George W. Bush carried by 25 points. He had suggested to them yeah, you give me a little agricultural spending, I'll be there, but then he shifted back and forth. So some of these Senators, in a 50-50 Senate every one of these Senators thinks he's President for a vote or a day or a week. And it's hard to work and pin it down.

MARGARET WARNER: What about the Democrats, Mark? I mean it seemed that Daschle was holding them together, they had great cohesion, but in the end you had 15 Democrats going for a much larger tax cut, that -- as you pointed out -- than they had ever endorsed.

MARK SHIELDS: Than they had ever endorsed, but there's obviously, you had economic news today. That I think made the case for a tax cut, not this specific tax cut, but a tax cut, stronger. We had the biggest job loss, to put a partisan edge on it, since the first George Bush was President -- the first -- the biggest in ten years in the last month. So there is a case to be made by traditional Democratic reasoning for economic stimulus. And I don't think there was any question. Margaret, it's a lot easier to vote for a tax cut than it is to vote against a tax cut, I mean, just politically. I mean, just on one point that Paul made about Ben Nelson, Ben Nelson was elected to the United States Senate while George W. Bush was carrying Nebraska by 25 points, he's a little bit insulated. He's been around a long time, and the really inept political pressure they tried to apply to the hometown state press, I think, boomeranged on them. The second thing is, Margaret -- you talk about northeast Republicans. This is a week where the administration said how about a little salmonella in the school lunch - about a little more arsenic in the water -- You know, you've got that, and at the same time we want to start drilling in that arctic natural wildlife. When you've got Bob Smith, the most arch conservative probably ever elected from New England, the chairman of this Senate Public Works Committee coming out against arctic drilling this week, they're making it tougher to be with the White House rather than easier.

MARGARET WARNER: All right. So what's going to happen in the House Senate Conference Committee when they go to resolve these two?

PAUL GIGOT: I think they'll probably get something that is at least 1.45, 1.5 trillion. And there are some I talked to Senator Phil Gramm today who said that the thing about this vote when it comes back from a Conference Committee is itself not amendable, so it's going to be an up or down vote. They have some weeks to work on some of these Senators, he's going to try to make it close to 1.6. Whether they can carry that in the Senate I don't know, but I think it will end up being fairly close to what the President proposed.

MARGARET WARNER: Do you want to hazard a prediction?

MARK SHIELDS: The internals will change. This is going to be a different tax cut. I mean, what we're talking about, Margaret, is the bulk of it being the 6th or 7th year. (a), there's going to be more stimulus now when the economic clouds are gathering, and second, there will be a pulling down of the top rate. There will be a diminution.

PAUL GIGOT: If there's a mistake the White House made in this, I think it is not adapting to the economic circumstances, Margaret. They kept, they wrote a tax cut in 1999 for a surplus era. They have a situation now where one of the best selling point for the tax cut is the economy, particularly with Democrats. They didn't change. They were too, they are too inflexible and I think that al you allowed Daschle to come in and say we'll do something this year, and the Democrats take some credit for this - when if they'd adapted a little bit more - and I think they're going to have to when they write the specifics of the tax bill, but I disagree with Mark, there's going to be real fighting over that top rate.

MARGARET WARNER: All right. Let's turn to the other big story this week, China; first major policy test for this new President, Mark. How has he handled it?

MARK SHIELDS: The jury is still out, Margaret, but I don't think there's any question that the longer it goes on, the initial response of the American people is always to rally behind the commander in chief, they've done this. Washington Post/ABC poll showed by better than two thirds Americans say yes the President is doing the right thing. But at the same time what you can see gathering is an antipathy and an enmity toward China. Three out of four Americans backed the President saying yes economic sanctions if they don't return our troops and our plane. So I think time is not George W. Bush's ally in this. It's the first unscheduled moment of his presidency. And that's always a great test of any, it's the first look we really get, when it isn't in the Rose Garden or isn't ceremonial. I think this is the test, and people haven't made the final grade yet.

MARGARET WARNER: How do you think he's done? I mean, of course, we don't know what they've done behind the scenes, but in handling it publicly.

PAUL GIGOT: I think it's been a cautious performance, prudent, to use a word. And it's a complicated delicate situation; we have American men and women over there. You want to get them back. And I think that's his first priority, because they don't want to get into a situation where they know. This is the kind of issue with Americans being held hostage, if that becomes, if that sinks in with the American public, --

MARGARET WARNER: Takes hold -

PAUL GIGOT: -- that that could really be dry tinder, a match for dry tinder on this issue and they could lose control over China policy in the long run. And they're not just thinking about this episode, they're thinking about how can we deal with China in the long run. I think what they'd like to do, Bush would like to do is toughen U.S. Policy to China from what it was with Clinton on the security side of it, but still maintain open trade. Because they think in the long run that can undermine the Chinese regime. The danger here is that the Chinese misjudge American public opinion, keep this dragging on, and you'll see the danger next week if this is still going on next week you're going to see the decibel level rise in both parties on Capitol Hill, and I think that's where you can begin to see the administration lose control of this.

MARK SHIELDS: Do you remember how justified conservative critics of Bill Clinton felt when the revelations came out about Marc Rich, soft money -- pardon to this traitor? Okay. They said everything we've been saying about this guy was true, and they felt just absolutely vindicated by events. That's how critics of China feel a little bit right now. These are the people who say, look, let's go in -- economic is really going to change things - these are people -- let's be very blunt about -- they brutalize their own people, terrorize their neighbors, sell nuclear technology to the worst people on the face of the earth, and somehow because we buy their slave labor products and sell some stuff in there, at about a seven to one ratio against us, that's going to be turning around. They still, that is a Stalinist state.

MARGARET WARNER: All right. But, Mark, how long do you think the President has, how long can this drag on before the President has to adopt a tougher line, as you would say?

MARK SHIELDS: I would say, Margaret, by the middle of next week, if our detainees are not home, detainees, they are hostages.

MARGARET WARNER: And how do you think this is going to affect the climate on the Hill in terms of China policy?

PAUL GIGOT: I'll just give you an example. I talked to Craig Thomas, a Senator from Wyoming, a sub committee chairman on the Foreign Relations Committee and an ardent free trader and somebody who has given the benefit of the doubt to China in the past, and he said this week, China is shooting itself in the foot with this. And I was reluctant to support giving Aegis destroyers with missile defense capability to Taiwan.

MARGARET WARNER: To Taiwan.

PAUL GIGOT: I think I'm going to consider that if this drags on. He said, I was in favor of letting them into the World Trade Organization, we're going to have to do some reconsideration if that goes on. And I think if it stops now, I think Bush can get away, President Bush can get away with building a new consensus on a tougher line on security, but still maintain open trade. If it gets too far, then I think we're going to see the Craig Thomas's of the Senate say enough, and it's going to be very hard to withstand public opinion.

MARGARET WARNER: Do you detect the same thing?

MARK SHIELDS: I do, and first goes the Olympics probably, 2008 Olympics, which they want. I think that strengthens the case for arms sales to Taiwan. And I think most favored nation or whatever we call it now is coming up again for a vote in the Congress, I'm not saying if it turns it around, but I think it puts the President in a position where he's going to be second-guessed because there wasn't an initial top of the line, either Secretary Powell or the President himself calling the Chinese counter part early on and saying look, let's avoid any kind of a real problem here, let's get this anything we have to do to resolve it, and I think that the delay probably will be viewed in ultimately in retrospect as a mistake.

PAUL GIGOT: I don't know that that would have made all that much of a difference. I mean, he's a new President, you don't have that personal relationship with the Chinese premiere. If you've met him, sat down with him, taken his measure they know each other, that's likely to have a better effect. I think caution in this case probably was wise.

MARK SHIELDS: I just say this, Margaret. Everywhere I went last year talking to people who had doubts about George W. Bush, they said, you know, in a crisis he'll turn to his father because his father was there. This is the time he probably should have turned to his father and listened to him.

MARGARET WARNER: All right. Thank you both.

CONVERSATION - AMERICAN SHAKESPEARE

MARGARET WARNER: Now, a conversation with an all-American playwright, and to Gwen Ifill.

GWEN IFILL: When Tony-winner Brian Stokes Mitchell demands the opening act spotlight in August Wilson's latest play, the character he portrays-- King Hedley II-- is angry. He is tortured.

BRIAN STOKES MITCHELL: They make up the rules, and then they break them themselves. It don't do nothing but put me two weeks behind. I ain't nobody. I don't count. I don't need to eat, I don't need to pay my bills.

GWEN IFILL: Hedley has killed a man for scarring his face. He has served his time. He cannot get a job, instead scratching out a living on petty scams. Born to promise, he watches, frustrated, as his life slips and slides away. Such frustration-- especially given voice through the words of an African-American man-- is a recurring theme for Wilson, who, at 55 years old, has established himself as one of the nation's preeminent playwrights.

BRIAN STOKES MITCHELL: He's our Shakespeare. He takes these gigantic, grand themes about humanity and the human experience, and puts themin a small setting with characters and people that we all know and we all live with and we all can relate to, that are very simple... at first glance.

BRIAN STOKES MITCHELL: I'm living for you. That's what I told you when we first got married.

GWEN IFILL: King Hedley is the eighth of ten plays Wilson is writing chronicling each of ten 20th century decades in black America. This one, set in the 1980s. The awards have come regularly: A Tony award, for "Fences," here with James Earl Jones.

JAMES EARL JONES: I got out of here every morning and bust my butt, putting up with them crackers all day long...

GWEN IFILL: A shelf full of honors from the New York drama critics circle, and two Pulitzer prizes, including one for "The Piano Lesson."

ACTOR: You never find you another piano like that.

GWEN IFILL: Later adapted for television, "Piano Lesson" tells of a brother and sister's fight over whether to sell an elegantly carved piano. The instrument is both heirloom, and a reminder of their family's legacy of slavery. The sister, played by Alfre Woodard, believes the piano's history makes it too valuable to sell. But Willie Boy, played by Charles Dutton, has other plans.

WILLIE BOY: If my daddy had seen where he could've traded in that piano in for some land of his own, it wouldn't be sitting up here now. He spent his whole life farming on somebody else's land. Doaker, I ain't gonna do that!

GWEN IFILL: All but one of Wilson's plays are set in the Pittsburgh neighborhood where he grew up. The characters he has created in the years since, explore the American dream, but a dream as seen through the eyes of the Americans most playwrights overlook. His last production, "Jitney," was set in a Pittsburgh gypsy cab station in the 1970s.

ACTOR: 'Cause we're gonna be running jitneys out of here, until the day before the bulldozer comes!

GWEN IFILL: Marion McClinton directed "Jitney," and is also taking "King Hedley" to Broadway this spring.

MARION McCLINTON: Well, August is always constantly in pursuit of the truth. He writes about the truth of a people, the truth of a decade, with great poetry.

GWEN IFILL: It is an unconventional poetry. One that relies on Wilson's ear for the dialect and language of an often dispossessed people. Director Lloyd Richards first heard it in 1984, when he gave Wilson his big break by staging "Ma Rainey's Black Bottom," here in the Chicago production.

LLOYD RICHARD: When I read it, I felt very much that I was hearing those people really articulate. And I said, "who could've written that kind of a play?" Certainly, the person knows and understands the life of black people.

GWEN IFILL: As "King Hedley" has traveled from Pittsburgh to Chicago to Seattle to Washington's Kennedy Center, Wilson has tagged along-- tinkering, rewriting and recasting.

I sat down to talk with Wilson about "Hedley," and about his work, in Washington.

GWEN IFILL: At some point you decided you were going to actively embrace the African-American oral tradition as a way of telling your stories. Was that a conscious decision or were you just writing what you knew?

AUGUST WILSON, Playwright: Well, it... Conscious and I was writing what I knew at the same time. You know, I think I can trace that back to when I first heard Bessie Smith as a 20-year-old living in a rooming House in Pittsburgh in 1965. And I would go across the street to the St. Vincent de Paul Store and, indiscriminately, buy these 78 records for a nickel apiece. And I had... Patti Page, you know, all the popular music of the '30s and '40s. Hoagy Carmichael tunes, et cetera. And one day I had a typewritten yellow label, a record by someone named Bessie Smith, you know. And I put that on the turntable, and it actually changed my life.

BESSIE SMITH: (singing) ...Sweet jelly roll so fine...

AUGUST WILSON: I was stunned by this record. I had never heard anything like it. And as a consequence of that, I began to look at the people who were living in the rooming house. I began to look at them differently; I began to connect them to a history. And then I realized that I was part of that. And so I claimed that record there as mine. And from that moment on, you know, I began to, in my writing, you know, to embrace and explore this African presence in America.

GWEN IFILL: And explore and embrace the musicality of it as well.

AUGUST WILSON: Absolutely, yeah. See, I learned this earlier on, also, in that when I was writing poetry and we had a place in Pittsburgh, the Halfway Art Gallery, and the musicians and the poets would go down there on Saturdays and Sundays. And the musician would tell us, you could play... you could read while we set up. And the people came in and they didn't want to hear the poetry. They came to hear the music. So we were an addendum. So I thought, well, if you're going to do language, if you have the musicality of language, since you're dealing with words, you have to have that. Otherwise, the people are not going to listen, you know.

ACTORS: Well you begged me all come down there...

GWEN IFILL: I was struck in this play by how much rage there seemed to be -- not only on the part of Hedley, who's searching for his identity, but also all the characters, including the women characters, to a degree that I haven't noticed in your work before.

AUGUST WILSON: Well, okay, this is 1985, after all. There was a lot of stuff going on.

GWEN IFILL: What stuff?

AUGUST WILSON: Well, you know... Ronald Reagan, I think, is...You know, this is the Reagan era, you know. Black folks did not go through this time of prosperity for some in America. Folks that went through the depression were not noticing it, they did not go through the Reagan era, because... It had a huge impact on the community -- just in terms of economics. I think the larger, I mean, if you look at the play, all king wants is a job.

ACTOR: I go for a job. They say, "what can you do?" I say I can do anything. You get me a tanks and the airplanes, I can win any war that's out there.

ACTOR: If you had the tanks, the airplanes and the boats, you could probably work.

ACTOR: I could dance all night if the music's right. Ain't nothing I can't do. I could build a railroad you give me the steel and a gang of men. The greatest fight. I ain't linking this to nothing. I can go down there, do metal shop. I know how to count money, I don't loan money to everybody who asks for it. I know how to do business. I'm talking mayor, governor, I can do it all. I ain't got no limits. I know right from wrong. I know which way the wind blows too. It don't blow my way!

AUGUST WILSON: His rage or whatever, is due to the fact he can't find a job, you know -- because America's not playing by the rules. The rules say that if you have the lowest bid on the contract, you're supposed to get the contract if you bid the lowest bid. So you're black and you bid the lowest bid, but you don't get the contract. You see, so it's things like that. So King says now I'm playing by the rules, and so his whole thing that he talks about is a job.

GWEN IFILL: And he wants a child.

AUGUST WILSON: Well, he wants a child, too, yeah. I mean, his wife's pregnant and doesn't want to have the baby. You know, he wants this sense of continuum. You know, he wants to contribute to the world, you know. And that's probably the only contribution he can make.

GWEN IFILL: And one of the reasons why she doesn't want to have the baby contributes to one of the kind of seminal speeches in the play.

AUGUST WILSON: Absolutely, yeah.

GWEN IFILL: Which is what happens black children after they're born.

AUGUST WILSON: Well, I think she says, "I don't want to have a baby when you've got to fight to keep them alive."

ACTRESS: I don't want to raise no more babies when you've got to fight to keep them alive. You take little buddy will's mother up on Bryn Mawr Road. What's she got? A heartache that don't never go away. She up there now, sitting down there in her living room. She's got to sit down because she can't stand up. She's sitting down trying to figure it out, trying to figure out what happened. One minute her house is full of life, the next minute it's full of death. She waiting for him to come home and they bring her a corpse, saying, "come down, make the identification, this your son? Got a tag on his toe, say John Doe." They've got to put a number on it, John Doe number four.

GWEN IFILL: You demand a lot of your audiences. Three and a half hours, maybe, on this play. Why is that? Why the emotional attention that you demand?

AUGUST WILSON: Well, you know, first of all, you know, I'm trying to write the best play that I can write. And I think audiences should bring something with them. You know, if you want to stay home and watch television... this is not television, and that's what I'm saying. It's theatre, of course, that's why you're here, you know. So if it's three hours long, you get your money's worth.

GWEN IFILL: But it's three intense hours.

AUGUST WILSON: Well, but, see, that's good. When I go to the theatre, that's what I would want. I would want to be challenged, I would want something intense. I would want something going on, you know, going on the stage. So that when I walk out of the theatre, I take it with me.

GWEN IFILL: You've been described as a man on a mission, and we can go in a million different directions with that. But one is that your play "Fences"-- one of your best- known plays-- has been in search of a film outlet for, what, 15 years now?

AUGUST WILSON: Mm-hmm.

GWEN IFILL: Because you want a black director.

AUGUST WILSON: Yes.

GWEN IFILL: Explain why that's important and where it stands now.

AUGUST WILSON: Well, you know, I think, I think it's important that you have a black director because "Schindler's List" had a Jewish director, because "The Godfather" had an Italian director, you know. I think when you have a work of art that deals with a culture that's so seminal through black American culture, that you just simply have black sensibility behind the artistic development of that project.

GWEN IFILL: You are compared often to other black writers, but less occasionally you are compared to Tony Kushner or Arthur Miller or others. Which do you prefer, I guess, to be known as the great African American playwright or the great American playwright?

AUGUST WILSON: I don't view my plays as belonging to black history. They belong to theatrical literature, you see -- because I don't think of Anton Chekhov as writing about the Russians. I mean, I don't view his work that way. You see, I don't view Shakespeare as, you know, an English dramatist, you know?

GWEN IFILL: But surely you're aware that people view you that way.

AUGUST WILSON: Yes,of course, and I mean, I am. I mean, I am. I'm a black American playwright. You know, I couldn't deny it. I couldn't be anything else. I make my art out of black American culture, all cut out of the same cloth, if you will, you know. That's who I am, that's who I write about. You know, in the same manner that Chekhov wrote about the Russians, I write about blacks. So there's no reason why you can't say "August Wilson, playwright" -- even though all of my work, every single play, is about black Americans, about black American culture, about the black experience in America, you know? "August Wilson, playwright." I write about the black experience of men, or I write about black folks. That's who I am. I couldn't do anything else. I wouldn't do anything else.

GWEN IFILL: Thank you, August Wilson.

AUGUST WILSON: You're welcome.

MARGARET WARNER: "King Hedley II" moves to New York next week. Previews begin Tuesday.

FINALLY - FAVORITE POEM PROJECT

MARGARET WARNER: Finally tonight, another look at the power of words and cultural heritage. This one is taken from former poet laureate Robert Pinsky's project of asking Americans to read their favorite poem. Tonight's reader is Dena Spanos- Hawkey, who runs a literacy program in Claremont, California.

DENA SPANOS-HAWKEY: This one's growing in.

DENA SPANOS-HAWKEY: I was a change-of-life baby. My father was 61 and my mother was 41, and I was kind of the surprise. My brother and sister were both teenagers, and it was an interesting upbringing. My father was old from the time I was a little child, and he always was afraid he would die before I'd become an adult. But he lived and actually danced at my wedding, and then was able to also enjoy having three grandchildren. My parents are from Vittoli, which is a little village in the province of Rumeli in Greece. And they eventually ended up in Cleveland, Ohio. My father came over when he was 13, and my mother came over when she was 20, when he went back to the village to marry her. I discovered Yannis Ritsos about ten years ago, because I was interested in reading more Greek poetry and looking at my heritage, and the poem I found was "Our Land." And it touched me tremendously, because my parents are both immigrants, and I actually found the book in a bookstore and thought, "I should read this. This is about me. This is my history." You know, I've read Shakespeare, I would read e.e. Cummings, I would look at all kinds of books, but I never read anything that directly related and touched my own life. "Our Land," by Yannis Ritsos, translated from the Greek by Edmund Keeley. "We climbed the hill to look over our land: Fields poor and few, stones, olive trees. Vineyards head toward the sea. Beside the plow a small fire smolders. We shaped the old man's clothes into a scarecrow against the ravens. Our days are making their way toward a little bread and great sunshine. Under the poplars a straw hat beams. The rooster on the fence. The cow in yellow. How did we manage to put our house and our life in order with the hand made of stone? Up on the lintel there's soot from the Easter candles, year by year: Tiny black crosses marked there by the dead returning from the resurrection service. This land is much loved with patience and dignity. Every night, out of the drywell, the statues emerge cautiously and climb the trees." This poem brought back so many memories of the strength and the passion, and the spiritualism that my parents both had. They had a very strong faith, and I remember my mother on the bus, as we would return after midnight from the resurrection service, carrying the resurrection candle, lit, to our door on Alameda Avenue, and then would place the cross from the soot from the candle above our doorway, not only for the dead and a remembrance, but also to protect our home. And when I read the part about the stone, the hands made of stone, I couldn't help but think of my mother's hands. They're not a model's hands. They're the hands of a peasant woman who worked very hard in the fields, and also hard in her life here in the United States, raising us against all odds.

RECAP

MARGARET WARNER: Again, the major stories of this Friday. President Bush reported progress in resolving the standoff with China. He spoke after an American general held a second meeting with the 24 crew members of the U.S. Surveillance aircraft being held there. U.S. unemployment rose to 4.3% in March, its highest rate since the summer of 1999. And the Senate approved a budget plan with a tax cut that's $400 billion less than President Bush wanted. We'll see you online, and again here Monday evening. I'm Margaret Warner. Thanks for being with us. Good night.