The MacNeil/Lehrer NewsHour

[TEXT OMITTED FROM SOURCE] booster has definitely been found under water; the administration announced proposed changes in antitrust laws; and the destructive floods in the West got even worse. We will have the details in our news summary in a moment. Robin?

ROBERT MacNEIL:

After the news summary we focus on the Philippines and the tough choices it presents for U.S. policy. We'll have excerpts from today's congressional hearings and the views of newspaper editors around the country. Then Fed watcher David Jones will tell us why Paul Volcker's remarks to Congress got Wall Street so nervous. Next, has air safety been lowered by deregulation? We have a documentary report and a discussion with FAA administrator Donald Engen and a leading congressional critic. Finally, columnist Mark Shields has an essay on the political tribulations of Vice President George Bush. News Summary

LEHRER: The U.S. Senate went on record today against fraud in the Philippine Presidential election. In an overwhelming 85-9 vote the senators passed a non-binding resolution which said the results were marked by such widespread fraud they cannot be considered a fair reflection of the will of the Philippine people.

Sen. EDWARD KENNEDY, (D) Massachusetts: The vote in the United States Senate today by 85 to nine was a clear indication, Republicans and Democrats alike, that the American people know that the election that has been held recently in the Philippines is a fraud, that Marcos should step down, and that Cory Aquino should be inaugurated as the next president of the Philippines. The Senate of the United States has spoken. The House of Representatives will speak on this issue, and it's time that the President of the United States speak on this issue. Cory Aquino has been elected president of the Philippines, and it's time to call a spade a spade.

LEHRER: Meanwhile, Secretary of State Shultz said aid to the Marcos government would continue for now, but he hinted in testimony before the Senate Budget Committee it could be stopped as further evidence of fraud comes in.

GEORGE SHULTZ, Secretary of State: We have a stake in freedom. We have a stake in democracy. Let's put that first over and above the bases. The bases are important. They're important to the Philippines and to other countries out there in addition to ourselves. So we feel that we have on our hands a very difficult and delicate situation, and we don't want to jump at it with some precipitous action here. We want to stay connected with the Philippines. We don't want to walk away from them. And how to do that under present circumstances is a difficult task, and I would counsel care and at least a little patience.

LEHRER: Defense Secretary Weinberger told a House committee a cutoff of military aid would help no one in the Philippines except the communist rebels called the New People's Army. In the Philippines itself, President Marcos told his supporters today he was prepared to use his powers to the limit to thwart the civil disobedience now underway in the country, as urged by his election opponent, Corazon Aquino. He did not state specifics nor say if it included a return to martial law. And one final Philippines item: the Los Angeles bureau chief of the American-published Philippine News, an anti-Marcos newspaper, was shot to deathat his Los Angeles home today. There was no immediate word on the circumstances. California Senator Alan Cranston asked the FBI to investigate. Robin?

MacNEIL: NASA said today that searchers in a small submarine had found and positively identified parts of the right booster rocket suspected of causing the Challenger disaster. At a news conference Colonel Edward O'Conner, the Air Force officer running the search and recovery operation, showed videotape taken underwater of part of the SRB, or solid rocket booster.

Col. EDWARD O'CONNER, USAF, director shuttle recovery

I'd like to say right now that we now have positive identification from the engineers at Marshall that this is indeed a portion of the right SRB. Again, I'd like to emphasize, just a portion. What we have located is a portion of the aft skirt assembly and part of the aft segment. We are going to continue to document this area to identify more components of the right SRB. As I'm sure you're all aware, this is a very important step to be able to identify it to this extent.

REPORTER: Do you know at this point whether you have any debris that reaches up as far as either the factory joint or the field joint, the seams in question in the SRB?

Col. O'CONNER: No, at this time we don't have any identified debris up to that level.

REPORTER: Have your pictures of video indicated any sign of leaks or burns, problems that we suspect may have caused the accident?

Col. O'CONNER: To date NASA has not been able to use any of the photos that we have taken to document any failure mode. What we have is major portions of the aft skirt that show a lot of damage from impact with the ocean.

REPORTER: Do you suspect that you might find debris beyond that seal level?

Col. O'CONNER: Using the NR-1 and other assets I'm confident we're going to find all of the right-hand SRB.

MacNEIL: The NR-1 that Colonel O'Conner referred to is a nuclear research submarine which will begin salvage operations in the area this weekend. Meanwhile, the presidential commission said today that at least three NASA officials involved in the decision to launch the Challenger were not told that booster rocket engineers had strongly urged against the launch. A commission statement was released as an engineer at rocket manufacturer Morton-Thiokol said he and others argued against the launch because of the cold temperatures. Allen McDonald says his objections were overruled by his boss, but he kept making them at Cape Canaveral. He feared the temperature could make the seals in the rocket ineffective.

LEHRER: The Reagan administration wants the nation's antitrust laws changed to allow more corporate mergers. The proposals were unveiled today at a joint news conference by Commerce Secretary Malcolm Baldrige and Attorney General Edwin Meese. Meese said the changes would help U.S. companies compete abroad.

EDWIN MEESE, Attorney General: The administration's proposed reforms will greatly benefit American industries, American workers and American consumers. The antitrust laws are critical aspects of our free market economy, and some of their key provisions, enacted in 1890 and 1914, need prompt revision. Many American industries that now compete in global markets cannot afford to be shackled by outmoded, unduly restrictive antitrust rules. The time has come to improve and modernize the antitrust laws.

LEHRER: Federal Reserve Board chairman Paul Volcker said today the falling price of the dollar is a two-edged sword. It may be great for the sale of U.S. products abroad, but there is a danger of its also fueling inflation. He said it in testimony before the House Banking Committee. Prices on the New York stock market fell more than 20 points after Volcker's testimony, and most analysts said he was the cause. Also on the economy today, new government figures show housing starts up 15.7% in January. That is the biggest increase in almost two years.

MacNEIL: In business news, Greyhound Lines announced today that it will close 35 of its 125 bus terminals by October 1st, and instead sell tickets through independent agents. The company had previously announced it would probably eliminate up to 2,000 jobs this year, reducing its workforce to 10,000. It will also discontinue some routes.

And, after 135 years, the firm whose name means sewing machines, the Singer Company, is getting out of that business. Pointing to the declining interest of American women in home sewing, Singer said it will spin off the sewing machine operation and concentrate on more profitable aerospace technology.

LEHRER: Thirteen persons are now reported dead in the floods and landslides that are devastating parts of the West, particularly northern California. We have a report from Lloyd Patterson of KRON-San Francisco.

LLOYD PATTERSON, KRON [voice-over]: Much of northern California still looks like this tonight. There are problems up and down the coast. Mudslides are the big worry in the Santa Cruz Mountains 50 miles south of San Francisco. One woman died when a wall of mud buried her mountainside home. Two others have been injured here under similar circumstances. But most of the casualties and damage have been in the area 50 miles north of San Francisco, in the wine country of Napa County and the resort area of Sonoma County. A solid week of rain, 20 inches in some spots, combined with high tides to push normally tranquil streams into raging rivers. Thousands of residents have been evacuated from the two counties. For some, the only way to safety was by huge military helicopters.

REFUGEE: We had to leave our house because we ran out of food and water and everything. It was in our back yard.

PATTERSON [voice-over]: Hundreds of homes and businesses have sustained damage. Many lack flood insurance. Residents never expected these conditions. The governor has declared several counties disaster areas. The rain let up today, the rivers are slowly receding, and tonight forecasters are saying northern California's worst storm in decades is finally coming to an end.

MacNEIL: Overseas, Jordan's King Hussein today called off his year-long efforts to find a joint approach to peace with Yasir Arafat and the Palestine Liberation Organization. In an extraordinary televised speech lasting nearly 3 hours, Hussein said, "We are unable to coordinate politically with the PLO leadership until their words become bonds characterized by commitment, credibility and consistency."

In Lebanon, an anonymous telephone caller claimed that Moslem extremists had carried out their threat to execute one of two Israeli soldiers captured on Monday. Some 1,000 Israeli troops continued a house-to-house search in southern Lebanon for the two captives, despite a warning that one of them would be killed.

LEHRER: Finally in the news of this day, the U.S. Senate approved a 37-year-old treaty making genocide an international crime. It made the United States the 97th nation to approve the treaty, which began as a reaction to the Nazis' murder of millions of Jews in World War II.

And that's it for the news summary. Now it's on to how the Philippine election story is playing out in the country, a look at which way the Federal Reserve is leaning, an update of the ongoing story about air safety, and some final words from Mark Shields about the problems of Vice President Bush. Philippines: What To Do?

LEHRER: It was Congress' day to get involved in the fray over what next for the United States in the Philippines. The Senate made its wishes known by voting 85-9 for a non-binding resolution condemning the presidential election results as fraudulent. In the House, the key Asian and Pacific Affairs Subcommittee opened hearings on how the U.S. should alter its relationship with the Marcos regime. Here is a sampling of what was said.

Sen. RICHARD LUGAR, (R) Indiana: The judgment the Senate came to this morning by a vote of 85-9 that the election was fraudulent, after our debate today I think came in large part because of the wholesale fraud. A feeling that from the beginning the election lists were managed.

Rep. STEPHEN SOLARZ, (D) New York, Chairman, Asian and Pacific Affairs Subcommittee: I realize you were there only a limited period of time, but based on what you saw, what you heard, who do you think was responsible for the bulk of the fraud?

Rep. JOHN MURTHA, (D) Pennsylvania: We saw no evidence of the opposition being involved in any kind of fraud. I mean, we saw none. There may very well have been some, but we saw none of the opposition involved in it.

Rep. SOLARZ: So your feeling is that it was in fact the government that was responsible for the great majority of it, if not all of it?

Rep. MURTHA: There is no question in our mind that that's -- that it would have been to the advantage of the government -- what happened would have been to the advantage of the government.

Rep. SOLARZ: NAMFREL has estimated that 3.3 million Filipinos were disenfranchised and were not permitted to vote because their names were left off the registration rolls. Do you find that a credible judgment?

Rep. MURTHA: Mr. Chairman, I would put great confidence in NAMFREL as an organization. They are volunteers and I saw them all over the country and they obviously lean towards the opposition. No question in my mind about that. But as a whole they wanted to run a

Rep. JIM LEACH, (R) Iowa: It appears that the government of Ferdinand Marcos has stolen the wealth of the Philippine people. It shouldn't be allowed to steal their soul through the ballot box. There's a tendency in this country and I think in the Philippines to exaggerate the base issue. It's important, but I don't think it's the bottom line of our foreign policy. These bases, as important as they are, can be moved elsewhere, and the communist insurgency, as important as it is, can be fought by other governments than the one in power. The real issue is the deteriorating political and economic situation in the Philippines, and in that regard I just think that we have to understand that a government that loots its people is not a government that's likely to deal with that situation very well.

STANSFIELD TURNER, former CIA Director: The probability of things going communist if Marcos stays in power is higher than the probability that army is going to collapse if we pull the rug out from under Marcos. But secondly, I would like to go back to a remark I made earlier, that this is an important event in the history of our country because we didn't do too well the last couple of times this came up, in Vietnam and Iran and Nicaragua. We're doing better right now, and if we manage this thing well it's going to tell the next person whom we counsel over a period of years, "You're in trouble, and we wantto see you reform as you think you should. We're not going to tell you how to reform because we don't understand your culture that well, but if you don't do something, we may not be able to continue supporting you." And if we do that here successfully and the country transitions to a better position, we're going to be in a much better position as a nation to handle these things when they come up in other environments. Philippines: Editors' Views

LEHRER: The Philippine election has been a big deal in Washington and the national news the last several days and weeks, but how is it playing elsewhere in the country? We explore that question now with three regional newspaper editors, Tom Dearmore, editorial page director of the San Francisco Examiner, who is in the studios of public station KQED-San Francisco; Mary Lawrence, editorial writer for the Indianapolis News, from public station WFYI-Indianapolis; and Arnold Rosenfeld, editor of the Austin, Texas, American Statesman, who is with us from public station KLRU in Austin. You all heard what Admiral Turner just said, that this was an important issue for the United States. Do the people in Austin, Texas, see it as an important issue, Mr. Rosenfeld?

ARNOLD ROSENFELD: They haven't written the paper too much, but I do think they sense it's an issue. There's a lot of discussion. This is a fairly new issue for them. Suddenly in their agenda of international issues they're asked to think suddenly about the Philippines. And I think they care, and I think that that question crosses political lines. We're dealing here with issues of basic democracy, and I think people, whatever side of the political spectrum they may be on, care about that very deeply.

LEHRER: What's the care quotient in San Francisco about this story, Tom Dearmore?

TOM DEARMORE: There's great interest in San Francisco on this question, of course. We have many Filipino-Americans in San Francisco, and I think most of them supported Cory Aquino. We have a sizable string of letters in the Examiner today in her support, the top letter commending our Sunday editorial in which we urged President Reagan to tell Mr. Marcos to vacate the office of the president.

LEHRER: You told him in the editorial that the President of the United States should tell the president of the Philippines to step aside?

Mr. DEARMORE: That's right.

LEHRER: And do what? And turn the government over to whom?

Mr. DEARMORE: We're telling him to step aside and let the democratic process work in the Philippines; that we're saying that the President of the United States should tell the president of the Philippines in all solemnity that the election was a fraud, that it was stained with the blood of freedom-minded Filipinos.

LEHRER: Mary Lawrence in Indianapolis, what has your newspaper suggested thus far as a course of action for the United States?

MARY LAWRENCE: Well, we've suggested that Washington should consider withholding aid to the Philippines and explaining it very clear to Mr. Marcos that we realize and recognize the fraud that was committed in elections that were his responsibility to run cleanly. And then allow the Filipinos to settle the problem themselves. I think it's up to Mrs. Aquino to continue with the demonstrations and to negotiate with Mr. Marcos or force him out. And as he becomes more intractable, Washington should look seriously at reducing aid, if not giving it to him, perhaps giving it to non-governmental agencies in the Philippines.

LEHRER: Your senator, Senator Richard Lugar, has played a key role in all of this as chairman of the Senate Foreign Relations Committee and as leader of the observer group. He was on our program the other night and I asked him -- he had just gotten back from Indiana, and I asked him if the interest in the Philippines was as strong in Indiana as it seemed to be here in Washington, and he said, yes, sir, it certainly was. Is that because Senator Lugar is so involved, or is there another reason? Or is he right or wrong? What's your reading of that?

Ms. LAWRENCE: Well, we're getting very few letters to the editor about the Philippines. I think people do care, but the two letters we got, one fellow supported Marcos and the other woman was angry at Senator Lugar for not saying -- for not withholding his report until he saw the President. People do care, but if the President of the United States wants more response, he's going to have to sell the importance of the Philippines a lot more to our people.

LEHRER: What kind of prominence have you given it in the Indianapolis News on the news side?

Ms. LAWRENCE: It's been play story nearly every day.

LEHRER: How about in Austin? How have you played the story?

Mr. ROSENFELD: It's been page one all the way; it was our lead editorial this morning. We said that we thought that the President should move to cut off aid to the Philippines, though not necessarily interfere in their election process.

LEHRER: In other words, you're not suggesting what Tom Dearmore is suggesting in San Francisco, that the President of the United States tell Marcos to go?

Mr. ROSENFELD: Well, I hate to posture myself as a moderate in this discussion, but we haven't quite gotten that far, but we've gone a little further than simply suggesting that the President ought to think about it. We've taken a strong stand. I think we're probably working our way towards a hysterical fit over it. We'll get there. That will probably bring down the Marcos regime.

LEHRER: A hysterical fit. What do you mean?

Mr. ROSENFELD: Oh, just speak awfully strongly about it.

LEHRER: You mean you think that's where this whole thing is headed?

Mr. ROSENFELD: Well, I don't get any indication right now. I heard just a few moments ago what the Secretary of State said, counseling patience. Is that the same kind of patience we've shown in South Africa? The same kind of patience we've shown toward the Duvalier government? I think this goes to very basic American values, and we should hear much more strongly from the administration on this issue. I'm not someone, as else earlier, too concerned about the base issue. We seem to be able, as we said this morning, to find it comfortable to support every dictator that claims he's anticommunist. That should not be the test. The test should be how strongly do they support democracy? And I don't think it's there, in a country, by the way, that has a democratic tradition. That's what hurts so much. We thought we'd left them with more.

LEHRER: Tom Dearmore, the politics of this in San Francisco, it's been commented, people here in Washington at least have noticed in the last several days how the -- well, we saw it in the Senate today, 85-9, Republicans, Democrats, conservatives, liberals all voting the same way. And there seems to be less of a political division over this issue. How's it going in San Francisco?

Mr. DEARMORE: There's very little division in San Francisco that I can see on the question. The --

LEHRER: In other words, everybody thinks it was a fraudulent election and Marcos should go?

Mr. DEARMORE: I hear from very few supporters of Ferdinand Marcos.

LEHRER: Are there any supporters in Indianapolis for Ferdinand Marcos, Mary Lawrence?

Ms. LAWRENCE: Yes, there is. There is great concern about -- that he's the force against communism. We don't agree. We think that the communists have a much better chance of taking power if he remains in office. But the letter that we got supporting him said -- accused Mrs. Aquino of working with the communists.

LEHRER: Well, Mary, do you think -- it's also been said -- in fact, we've gotten letters here on our own program directed at us saying that we have devoted too much time to the Philippines, that, you know, the ice wagon driver in Indianapolis and so on couldn't care less about this. Do you think that the national media has overcovered this thing?

Ms. LAWRENCE: Well, we've got to be careful about how we play it. I think the public could very easily tire of this issue, and expect us to hit them over the head with South Africa. It's up to the media to keep it in perspective and now and then remind them of what this means. How important is it to the ice truck driver in Indianapolis what happens in the Philippines? And there is a danger of overplaying a story, yes.

LEHRER: Arnold Rosenfeld, are we overdoing it?

Mr. ROSENFELD: I don't think so. I don't think, however, that the impressions that our leaders are getting are always issue-oriented. I think television has played a large role in those various interviews they've had with President Marcos and Mrs. Aquino. I think that the impression there is almost McLuhanesque. You can sort of look clearly at Marcos and say, "Oh, my God! What's going on in the Philippines?" as against the impression she gives. And I think those television impressions, although not always something you ought to follow, have given Americans a very clear view of what's happened over there.

LEHRER: Okay, well, Arnold Rosenfeld in Austin, Tom Dearmore in San Francisco and Mary Lawrence in Indianapolis, thank you all very much. Robin?

MacNEIL: Still to come tonight, a look at what Paul Volcker has in store for the economy and why it's giving Wall Street the jitters. A Kwame Holman report on air safety with followup comments from FAA head Donald Engen and Congressman Dan Glickman. And, finally, a Mark Shields essay about Vice President George Bush. Which Way for the Fed?

MacNEIL: Now a look at the economy and the man whose words move markets, Federal Reserve Board chairman Paul Volcker. He told Congress today that the decline in the value of the U.S. dollar could renew the threat of inflation. But he added that major changes in U.S. monetary policy were unwarranted at this time. Wall Street, which had been counting on the Fed to lower interest rates, took Volcker's remarks as bad news, and the Dow Jones industrial average dropped 20 points. Here to tell us more about Paul Volcker and the economy is our frequent Wall Street commentator David Jones, senior vice president and chief economist of the firm of Aubrey G. Lanston.

First of all, Mr. Jones, has Paul Volcker halted this incredible advance that Wall Street's been making for the last four or five weeks, or just slowed it for a day, or what?

DAVID JONES: He's certainly stopped it for now. The interest rate picture was very important, Robin. The stock market had become addicted to lower interest rates. It's been the story of the stock market moving up to record levels virtually every day, and the Fed chairman today -- some would call him the second most powerful man in the country -- declared that he thought things had gone about far enough in terms of interest rates declining, maybe it's time to stabilize a bit, and his power was seen in the stock market. My own view is the stock market's not going to fall out of bed, but it may be more difficult to achieve even higher levels, given the fact that no one can count, at the moment, at least, on lower interest rates.

MacNEIL: And why were so many people gambling on low interest rates?

Mr. JONES: It was almost a --

MacNEIL: In simple ABCs.

Mr. JONES: It was almost a perfect situation. Here we are in the fourth year of economic expansion. Usually people think the economy should be dying of old age by this point, yet we show solid growth, as the chairman suggested today. On top of this, almost out of the blue came a very sharp decline in oil prices, meaning that we can have solid growth with low inflation, something we're not used to at this stage of expansion and, finally, interest rates were low. You can't ask for a better set of circumstances than that, and once you get on the bandwagon of a surging stock market you become addicted to that process. So everything looked perfect. Suddenly the Fed chairman says today, wait a minute, maybe we've gone far enough for now, and you can see how psychological the market had become. As soon as he said something realistic, the market stopped in its tracks.

MacNEIL: And you don't think they're all going to come running back in and buying tomorrow? They're going to hold off for awhile? This is the end of this boom for the moment, do you think?

Mr. JONES: I think the first half of this year is still going to be a reasonably good environment for the stock market. Rates will stay low, and the fact the oil prices have come down will keep inflation much lower than we're used to. Those are two good conditions. So, if you selectively pick stocks in companies that have good earnings in this kind of an environment, you're okay. But the chairman also caused us to look to the second half of this year, and he suggested that maybe the economy will grow a bit more strongly and maybe because of a declining dollar inflation will pick up a bit, and that's where the market began to look again. Maybe rates could be going up by the end of the year instead of down.

MacNEIL: Okay, let's go to what he said about the dollar. He said the falling dollar was a two-edged sword. It was good for American exports and other things, but it could be dangerous because it could revive inflation. Now, he also seemed to be saying the dollar has fallen far enough. It's lost about 30% of its value in the last year. But the Reagan administration, the Treasury, doesn't think it's fallen far enough. How big is that disagreement?

Mr. JONES: I think there is a disagreement developing between Treasury Secretary Baker and Fed Chairman Volcker. Treasury Secretary Baker would like to see rates come down some more, probably would like to see the dollar come down some more, because what he's trying to do is to turn around that trade balance as fast as possible. As the dollar comes down, our exports become cheaper to foreign buyers, and so our export industries, which have been hit hard by that strong dollar, pick up a bit. And by the same token, imports go up in price, and we buy less from foreign suppliers. And so the secretary would like very much to see that trade deficit begin to be reduced, reduce the powers of protectionism in Congress, and turn the politics around more favorably to the administration. The Fed chairman said, "Wait a minute. We may have gone far enough. Thirty percent is a big drop in the value of the currency. It almost guarantees somewhat more inflation, at least in the imported goods we buy in the second half of this year, so let's wait awhile, look at the situation."

MacNEIL: Now, where does the financial community that you represent, where does that decide -- is it as worried as Volcker about the dollar falling too fast, or as complacent as the administration is about it?

Mr. JONES: Well, the financial markets have become emotionally addicted to two things -- lower interest rates and declining oil prices. I would say the dominant force in perhaps both the stock and the bond market over the last several months has been the prospect for much lower oil prices and therefore much lower overall inflation. After all, if people at the gasoline pump can pay lower prices for gasoline they'll have more money in their pocketbooks which they'll go out and spend. That was a perfect situation -- low inflation on one side, a stronger economy on the other. So what we've got here is a situation which both the stock and the bond markets said it couldn't be better. But once in again, even for healthy markets to continue, you always need someone to step in. Chairman Volcker likes to tell the story that one of his friends said to him, "You're a typical central banker. You're always afraid that somewhere in this world there's somebody who's happy."

MacNEIL: Finally, there's another disagreement between the administration and Volcker, isn't there? In the economic message, in the budget message, the administration was urging a slightly tighter hold on the money supply because they were worried about inflation. Volcker said today no change is warranted in what's been a fairly generous money supply up 'til now. Now, where is that argument, and is the administration no longer concerned because the falling price of oil has taken away that scare of inflation?

Mr. JONES: Well, the plot thickens a bit here because we have now a triangle, Chairman Volcker on one side -- and he's really in control; Secretary of the Treasury Baker and our new head of the Council of Economic Advisers, Mr. Sprinkel, who is one of the old doctrinaire monetarists. And his view is if you set the money dial at one setting, keep money growth on a steady basis, everything will be okay, and right now it's running too fast. Fed Chairman Volcker said today, "So what? It was running too fast last year and we still had a relatively slow economy, and we had inflation coming down. We didn't have all those bad things like high inflation and excessive growth like the monetarists would say." Chairman Volcker said, "Look, we need a lot of judgment on this matter. Let me decide when I should turn the monetary dial and when I shouldn't. And, Mr. Sprinkel, you take care of your Council of Economic Advisers; I'll take care of the Fed." I have a feeling in that one particularly Mr. Sprinkel will lose the debate.

MacNEIL: David Jones, thank you very much.

Mr. JONES: Thank you. Safety in the Skies

MacNEIL: We turn now to the continuing debate over air safety. Transportation Secretary Elizabeth Dole told a Senate subcommittee that her agency plans to strengthen its air safety programs. Judy Woodruff has more on the story. Judy?

JUDY WOODRUFF: With all the concern lately over the space shuttle disaster, there's been less attention focused on airline safety. But as the questions aimed at Transportation Secretary Dole today at a congressional hearing showed, there are still a great many doubts about the ability of the airlines and federal regulators to keep the skies safe. Just two days ago, the Federal Aviation Administration ordered all domestic airlines to make closer inspections of aging Boeing 747 jumbo jets. That was after cracks were discovered in several of the planes' frames. In a moment we'll look at the debate over air safety with the head of the FAA and a leading congressional critic. First, we have a background report from Kwame Holman.

KWAME HOLMAN [voice-over]: Last year the statistics caught up with America's commercial aviation system. The deadliest year ever for world aviation was the second-worst on record for U.S. carriers. Five hundred twenty-eight lives were lost in seven separate accidents involving domestic airlines. Accidents involved commercial airliners, like this Delta jumbo jet that crashed in a Dallas thunderstorm; small commuter planes, like the one carrying famous schoolgirl Samantha Smith; and charter services, like the Arrow Air flight that crashed in Newfoundland, killing hundreds of U.S. service personnel.

Despite these statistics, the Federal Aviaton Administration claims that the skies are as safe as ever. Former commercial pilot John Nance disagrees.

JOHN NANCE, former pilot: The point was valid in January of last year; it's valid now. What we have had is a systemic decline, and some of the accidents are indicative of the decline.

HOLMAN [voice-over]: Nance and other critics complain that the FAA has not been able to keep pace with the growing number of planes in the sky. Since deregulation in 1978, when the government stopped setting fares and schedules for the airlines, the number of airlines operating big commercial jets has almost doubled, and the number of big jets in U.S. skies has risen 20%. There are now 2,800 airliners in regular service. but the number of FAA employees regulating the airlines has not increased.

Mr. NANCE: Deregulation has exacerbated the problems and the capability of the system and the FAA to deal with them. That's the point. They have less than one-third the number of inspectors needed; they probably have overall less than one-half the budget they need. There are desperately -- there are things that are desperately needed in terms of changes within the FAA that require money.

HOLMAN [voice-over]: The FAA's responsibilities include everything from running airports to regulating private and commercial aviation. But it is the FAA's role in controlling air traffic that has gotten the most attention. Today there are 14,000 air traffic controllers on the job. That's a decrease of 3,300 controllers since 1981. Frank Johns, who supervises controllers at the busy Denver airport, insists that the reduction in number has not made the skies any less safe.

[interviewing] How should the public perceive a situation in which fewer air traffic controllers are handling more planes today?

FRANK JOHNS, controller superviser: I think a prudent person might look back and say that we probably had too many controllers back then. We also have more adequate traffic management, which we did not do very well before.

HOLMAN [voice-over]: Johns does admit that today only 37% of his controllers are fully qualified, compared with 57 in 1981, but he insists that nobody is overworked.

Mr. JOHNS: In Denver we work our controllers on position, at control position an average of five hours a day. I think people can be very confident that our controllers are rested, and what they do, they do very well.

HOLMAN [voice-over]: But just last week, because of an air traffic controller error, two planes almost collided in the skies above Georgia. Only last-minute evasive action prevented a crash. After that incident, which critics say is only one in a long list of near-misses, Atlanta's WSB-TV obtained this interview with an anonymous air traffic controller.

CONTROLLER [voice disguised]: I've seen so many airplanes on a controller's frequency that he just couldn't talk to all of them at one time, much less control them. As we say, it's just a matter of time, that something's got to happen, that we've been lucky.

HOLMAN [voice-over]: The FAA also has been criticized for the way it handles planes while they're still on the ground. For the most part the airlines regulate their own maintenance. Some 300 FAA ground inspectors only spotcheck to make sure the airlines are doing an adequate job. Critics say that some airlines, under pressure to cut costs, are cutting back on maintenance.

Mr. NANCE: After deregulation what we have created is a system that has a negative incentive for the carriers to spend any more money for safety than their competitor, and then when you enable competitors to come in and operate pretty much on the minimums, just exactly what they have to do and not a bit more to be able to keep their costs way down, the established carriers no longer have the luxury of being able to spend what they want to. Now they have to cut costs. Not illegally, but closer to the minimums.

HOLMAN [voice-over]: Thirty-three airlines have been discliplined or grounded in the last two years, and last fall the FAA imposed a record $1.5 million fine against American Airlines for violations of maintenance regulations. Tim Forte, who directs inspections for the FAA's western region, insists that the FAA's record shows that the agency does a good job.

TIM FORTE, FAA: Self-regulation is always going to be a part, I believe, of the aviation industry. The industry has increased in size, and through human resource management we're meeting the demands on us and our obligations.

HOLMAN [voice-over]: Forte says he's seen no indication that economic pressures are compromising airline safety. He says the FAA tries to anticipate such problems.

Mr. FORTE: Anytime an air carrier is undergoing any type of economic hardship or any type of labor-management dispute, we immediately increase our surveillance. If they're a national carrier, we increase it nationally. If they're a local carrier we deal with it locally. And we maintain that increased level of surveillance and inspection until they're through their crisis period.

HOLMAN [voice-over]: The FAA says it will hire 200 new inspectors this year, but critics like John Nance say the FAA's problems won't be solved just by hiring new inspectors, that its problems run deeper than that.

Mr. NANCE: The FAA internally has lost control of the system to such a point that they're playing a game of trying to tell the public everything's all right. It's kind of a cover-your-tail situation. And you can understand this. You don't expect to have someone from the FAA come out and say, "Hey, folks, it's out of control." That would scare the public.

WOODRUFF: Joining us now are FAA administrator Donald Engen and Congressman Dan Glickman, Democrat of Kansas, former chairman of the Transportation Subcommittee of the House Science and technology Committee, a founder of the House Aviation Forum.

Mr. Engen, let me begin with you. We just heard the former pilot, John Nance, say that things are out of control at the FAA.

DONALD ENGEN: I don't know where Mr. Nance gets his figures because that just is not true, Judy.

WOODRUFF: Well, I mean, how do you respond specifically, I mean, just for example to what he said about there not being enough inspectors? He said you have less than a third of the number of ground inspectors you need.

Mr. ENGEN: That's not true. First of all, we are increasing the number of ground inspectors that we have. You must remember that the way our system works and the way it's worked for 50 years, is that people operate in the system much as they do on our highways, obeying the federal air regulations. We do not have enough people in the FAA to fly the airplanes and to maintain all the airplanes. We do this based upon the federal air regulations. My inspectors do a very good job, a very thorough job, and they are out there day and night inspecting the airlines.

WOODRUFF: I'm sorry, you said you don't have enough people to do what?

Mr. ENGEN: To fly all the airplanes or to maintain all the airplanes.

WOODRUFF: To be on every single airplane when it goes.

Mr. ENGEN: Yes. And so we do inspect the airlines. We do resolutely go after anybody who is not adhering to the federal air regulations. And I would take issue with Mr. Nance in one respect, that we are indeed regulating the airline industry out there. This past year -- your lead-in said there were some 30-odd airlines that have been grounded, but actually that number is in excess of 60.

WOODRUFF: Which have been grounded?

Mr. ENGEN: Which have been grounded or severely constrained. And also we adjudged over four times the amount of monetary fines last year that we have in any other previous year.

WOODRUFF: Congressman Glickman, let me just take this one point at a time. What about this question of whether there is adequate ground inspection? The administrator says there is; we've just heard a prominent critic say that there are far fewer than there need to be.

Rep. DAN GLICKMAN: Well, I don't think there are enough. I think Don Engen's trying to correct that problem, and he faces problems with the Office of Management and Budget and the administration that doesn't go along with a lot of FAA requests to provide additional money to have these inspectors or as many of them as they need. But the fact of the matter is is that we are operating an entirely different method of air transportation today than we did 25 years ago. We have carriers springing up overnight --

WOODRUFF: Because of deregulation.

Rep. GLICKMAN: Because of deregulation, both in commuter and in the commercial area. We have a lot of carriers that don't have the operating experience anymore that some of the old line carriers did. The system is basically a self-regulatory system; they inspect themselves. But if you're not making a lot of money, you're never quite sure how good the inspection is. And that's why it's all the more important to have an effective, independent and adequately funded FAA inspection force out there.

WOODRUFF: All right, well, let's talk about the funding question in just a moment, but your point is that they're not that far off on the inspections, on the number of inspectors. Is that correct?

Rep. GLICKMAN: Well, my point is that they need more inspectors. They're adding some this year. They need a heck of a lot more than they're adding this year, and this gentleman on my right, Admiral Engen, has to go to the Office of Management and Budget and just squeeze the turnip to get as many as he can get, and he's gotten about as many --

WOODRUFF: Well, I was going to delay the money question, but let's talk about it now. How much trouble are you having getting what you need out of the rest of the budget?

Mr. ENGEN: We have what we need in our FY1986 budget, and we have a larger budget in FY1987. Secreatry Dole authorized the hiring of additional inspectors in 1986, '87 and '88 to the amount of some 500 inspection personnel. We are hiring those people right now, and we will hire additional inspectors in 1987. And --

WOODRUFF: So you're satisfied is what you're saying?

Mr. ENGEN: Well, you're never satisfied. You're always trying to do better. You're always trying to do better. And Secretary Dole and I are trying our very best to get the most from our people. I'm satisfied that the budget that the administration has placed before Congress this year is sufficient to man the FAA in the year 1986, and if we can get it approved, it will be sufficient for 1987.

WOODRUFF: Do you buy that, Congressman?

Rep. GLICKMAN: Well, I think we actually need way more money in the FAA budget than we have, but we're operating within some budget constraints. When I go home, however, when people tell me, cut the budget, they never tell me to cut the FAA's budget, because everybody flies and they want to make sure these planes are safe. Now, the fact of the matter is that it's been Congress putting the pressure on OMB and the Department of Transportation to get as many inspectors as we currently have. And Congress just needs to keep that pressure up and --

WOODRUFF: But is the current budget proposal for '86 and beyond, as Mr. Engen just said, is that satisfactory as far as you're concerned?

Rep. GLICKMAN: In my judgment it is not satisfactory in terms of the numbers of inspectors. We need more. But we are dealing with some fiscal realities here, and unless we shift some monies around internally we probably won't get any more.

WOODRUFF: All right, let's talk about the number of air controllers. We heard the controllers who were interviewed, I guess, in Atlanta saying that it's a matter of time before something goes wrong. We heard one controller saying there were more planes in the air than they can handle.

Mr. ENGEN: I would point out also in the Atlanta case, the reason that the two airplanes were vectored apart was because the air traffic controller did indeed change the altitude. And I think that you will find that the air traffic controller who spoke from Denver put some balance in there. We have a sufficient number of air traffic controllers now. Are they well enough trained? They are, but I don't have enough of them fully trained, and therein lies my overtime problem, which is a good one. Air traffic control is a stressful occupation. I would like to stand up and say before everybody that the air traffic controllers of America are truly professional people. They're doing a good job.

WOODRUFF: But you're saying that you don't have as many of them fully trained as you'd like?

Mr. ENGEN: That's right, but if I could say, at a few centers such as New York, Chicago, Cleveland, perhaps a little bit in Atlanta, Washington and Los Angeles, we don't have as many as we want. Does that make the system unsafe? No, it doesn't. But does that mean we work overtime? It does indeed.

WOODRUFF: Does that concern you?

Rep. GLICKMAN: Sure, because if there are folks working overtime and in a very stressful job, I think that it is going to push the system to the limit and that is one of the reasons why, you know, the pressure needs to be on the FAA all the time to complete its hiring process to get fully trained controllers in the system. One other point. We have a lot of money in the Airport Trust Fund. That's money paid out of ticket taxes when people fly and fuel paid by pilots. That money is supposed to go to make hardware improvements in the system so that by the year 2000 we're going to be able to move a lot more people a lot more efficiently. One of the problems we face now is this administration has -- and not Admiral Engen, but the OMB and others, have seen fit to want to take some of that money out of the hardware improvements for the next generation of airplane flying and move it into today, the operating aspect of the FAA's budget, and that makes some of the long-term problems more severe.

WOODRUFF: Let me get back to this question of deregulation. You and I guess others have been criticized for leaning too heavily on the airlines themselves to monitor themselves in this period of deregulation, when actually it's because of the economic, the competitive pressure, it's much more difficult --

Mr. ENGEN: That's what our system set forth. For 50 years this is the way our system has been built. People adhere to the federal air regulations. The FAA doesn't fly those airplanes, the FAA doesn't maintain those airplanes, but the FAA ensures that the federal air regulation are adhered to.

WOODRUFF: Are you completely satisfied that they are?

Mr. ENGEN: I'm never satisfied. I want to say right here and now we're always trying to do better. I'm satisfied that we are adequately measuring the system out there. I'm satisfied that we are having people adhere to the federal air regulations. And I'm satisfied that they're operating safely.

WOODRUFF: But then again you have the comments that we heard from this pilot, Mr. Nance.

Mr. ENGEN: Well, you know, he views it from a different aspect than I do, and I want to pat Congressman Glickman on the back because he's a very strong supporter of the FAA. He truly is. We all are working the system. I don't want to say that that system is not functioning well, because it is. The system is indeed functioning as it was designed to do. It's a challenge, and we're there every day, 24 hours a day, to ensure the --

WOODRUFF: And what's the but?

Rep. GLICKMAN: Well, the system has some rough edges. To a large extent it's caused by the fact that we need more FAA people watching the airlines and the air traffic system. And I think that Congress and this administrator are trying to move in that direction. And the other thing is the way we fly airplanes today is just totally different in terms of fares and routes, and it is somewhat incompatible, deregulation, with self-regulation because with deregulation the profit margins change very rapidly; self-regulation, requires a continuing effort to maintain those airplanes. You have a lot of airplanes that are flying that are a lot older than they used to be, and it just requires a strong federal government to keep on top of it.

WOODRUFF: That report ended, I think, with a rather scary prognosis that things are not as they should be.

Mr. ENGEN: Which report?

WOODRUFF: Can you assure -- the one we just saw. Can you assure the viewers tonight that they can look forward next year and the years beyond, fewer accidents, fewer near-misses?

Mr. ENGEN: Indeed, that's what we're dedicated to. Let me say that there are 750,000 pilots who are licensed to fly in these here United States. There are 250,000, roughly, airplanes that fly. We fly 200,000 airplanes a day in these United States. Any single person can cause an accident if he or she fails to do something. To the extent that we have good air traffic control, I can assure you that the system is indeed safe.

WOODRUFF: Mr. Engen, Donald Engen, thank you for being with us; Congressman Dan Glickman, thank you.

Rep. GLICKMAN: Thank you, Judy. Beating Around Bush

LEHRER: Now an essay about the perils and problems of being Vice President Bush. The essayist is Washington Post columnist Mark Shields, and it grows out of Mr. Bush's recent bout of bad press over his courting of the conservatives in the Republican Party, among other things.

MARK SHIELDS, Washington Post: Most of the knocks put on Mr. Bush for his alleged caressing of the erogenous zones of the body politic's right side fall into one of three categories -- professional, ethnic, or Cuomo. Let's take the professional problem first. Being vice president at any time is no month in the country. Think about it. Does anybody make public fun of the secretary of commerce, of the surgeon general? No, of course not. But getting laughs at the expense of whoever happens to be vice president, well, that's child's play.

All vice presidents are disparaged as nameless, faceless non-entities. For example, as one local wiseguy put it, "Everyone in Washington seems to have a nickname. Ronald Reagan has "Dutch;" Walter Mondale has "Fritz;" Thomas O'Neill has "Tip;" and George Bush an "Who?"

Then there's the line about the allegedly obsequious VP. Critics of the vice president say he's nothing but a nifty cheerleader and yes-man.

GEORGE BUSH, Vice President: I am proud to serve with a President who does not apologize for the United States of America.

SHIELDS: But that's unfair. Just the other day Mr. Reagan was asked again about a possible tax increase. "Absolutely no," thundered the President, and it didn't take thirty seconds for Vice President Bush to declare forcefully on that proposed tax increase, "Absolutely no." Now, that's no yes-man.

Next, the ethnic factor. In contemporary American politics there's only one ethnic religious group that can be safely joked about. That group? Upper-class white Anglo-Saxon Protestants, or WASPs. And that's what George Herbert Walker Bush, a graduate of Andover and Yale, most emphatically is. So what happens? Vice President Bush is lampooned as the ultimate Ivy League preppie whose favorite drink is probably Perrier Lite and whose idea of soul food is quiche. On both occupational and pedigree counts Mr. Bush takes a truckload of abuse.

Which brings us to the widespread charge that the Vice President deliberately misrepresented the words of New York's Democratic Governor Mario Cuomo. But before any more attacks are launched on the only Vice President we have, let us consider for a moment the plight of an important domestic industry, the direct mail firms that collect money for conservative candidates and causes. That industry has been hard hit by layoffs, lawsuits and dramatically reduced profits. George Bush understands what direct mail campaigns need, an identifiable villain, a fearsome demon. For 20 years that demon for the right wing direct mail industry has been Edward Kennedy. The industry has grown and prospered, warning its occasionally paranoid pen pals about the outrages being planned that very moment by the evil agents of an Edward Kennedy presidential administration. The detested Kennedy restoration was imminently inevitable unless your check was received and deposited by tomorrow night.

But now Senator Kennedy is an officially announced non-candidate, and nobody's getting rich warning a mailing list about a President Bruce Babbit or President Richard Gephardt, so that's where Mario Cuomo comes in. With no Kennedy to scare contributors, the formidable Mr. Cuomo looked to be the best bet for prospective villainy. All the Vice President was doing was test-marketing Mario Cuomo as the new liberal demon. The returns should be in within a month or two. So the next time you hear George Bush being savaged by some pundit or sage, ask that pundit or sage if he would be quite as harsh if George Bush were secretary of energy instead of vice president, or hispanic Quaker instead of a WASP. I doubt it.

LEHRER: Again, the major stories of this Wednesday. The U.S. Senate overwhelmingly passed a resolution saying fraud in the Philippine presidential election distorted the will of the Philippine people. The Reagan administration proposed sweeping changes in the nation's antitrust laws as a way to make U.S. industry more competitive abroad. The death toll in the West Coast floods rose to 13 with more rain possibly on the way. And in the search for clues in the causes of the space shuttle Challenger tragedy, a part of the right rocket booster has definitely been found in the Atlantic Ocean. Today, NASA released a videotape with underwater pictures of the booster rocket. We end now with a look at the entire tape as narrated by Air Force Colonel Edward O'Conner.

Col. O'CONNER: This gives you a good indication of the sea conditions we're working in. You can see those small white objects floating across the screen. that's indicative of the Gulf Stream current located at the ocean bottom. It's probably on the order of about a half a knot. The object in the center of the screen there is a hydraulic reservoir for the right-hand SRB. This is part of the thrust vector control system. That is the particular item that we recovered and identified through part numbers that that was indeed installed on the right-hand SRB aft skirt.

In a moment you're going to see a fuel supply module. This is one of two stainless steel spheres that are installed in each aft skirt. They contain hydrazine, which is a fuel that powers the auxiliary power unit that gives us the power necessary to run the thrust vector control system. Here you see another part of the aft skirt with some insulation on it. Again you can see that we've got a lot of small pieces on the ocean floor, meaning it's going to be a very lengthy process to recover all the components. We are doing very limited recovery now so that we can go out there with other assets and do a full photo documentation of the items as they lie on the ocean floor. We're also putting together analytic teams that are going to work with the photography that we have, to come up with the best recovery technique and the best chemical and metallurgical techniques for isolating the problem that caused the failure of 51-L.

We also have in this particular segment of video some of the expansion nozzle from the right-hand SRB. It's a phenolic structure, and you can see some of the filaments that are coming out, frayed from the inside. We are preparing at this time to send other submersible vessels out to this area to give us better documentation.

LEHRER: Good night, Robin

MacNEIL: Good night, Jim. That's the NewsHour tonight. We will be back tomorrow night. I'm Robert MacNeil. Good night.