The MacNeil/Lehrer NewsHour

MS. WARNER: Good evening. I'm Margaret Warner in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Thursday, three Senators debate the health alliance's piece of the Clinton health reform plan. Elizabeth Farnsworth reports on how the South Koreans see the threat from the North. The analysts explained why BCI and Bell Atlantic walked away from the altar, and essayist Richard Rodriguez talks about his Indian heritage. NEWS SUMMARY

MR. LEHRER: CIA Director James Woolsey talked to the House Intelligence Committee today about the Aldrich Ames spy case. Ames, a 31-year CIA veteran, and his wife were arrested Monday on charges of spying for the Soviet Union and Russia since 1985. Woolsey described the security problems involved in this kind of case.

JAMES WOOLSEY, Director, CIA: The Intelligence world has a very, very difficult job. It is a bit like playing goalie on a hockey team in which you can never let a single shot get past you. But having said that, it's quite clear that in this case one very important shot did get past the goalie, and it is an issue which raises, I think to the forefront of all of our minds the way in which security is managed I would say not only for the CIA and not only for the Intelligence Community, but for the government as a whole.

MR. LEHRER: Sen. Bill Cohen, Republican of Maine, said today he will introduce legislation to place new requirements on people with access to sensitive information. They would include disclosure of personal finances and foreign travel and random polygraph tests among other things. He spoke about it at a Capitol Hill news conference.

SEN. BILL COHEN, [R] Maine: We don't want to Stalinize our Intelligence Community to the point where we are so paranoid that we are lacing, or linking everybody up to a lie detector test day by day and truth serum at night. That's not what we are as a country. But what we can do is take measures which are prudent, they are reasonable, they are not too intrusive, and it seems to me they would give you an added, give us an added measure of protection against the kinds of activities that Mr. Ames was involved with. There's no guarantee. There is no guarantee you can ever make, pass any piece of legislation that can prevent people from selling out their honor. It cannot do that. But we can take measures to reduce potential for it.

MR. LEHRER: CIA Director Woolsey said a commission was now reviewing personnel procedures at the CIA and the Defense Department. He said the review had been underway for some time and he expected their report to be delivered soon. Margaret.

MS. WARNER: Russian President Boris Yeltsin addressed the new Russian parliament today, but he did not mention the spy case. Instead, he spoke about the internal problems facing his country and the continuing need for reform. The speech came a day after the parliament voted to pardon the leaders of last October's armed rebellion against Yeltsin. Among those pardons were Yeltsin's former Vice President Alexander Rutskoi and the speaker of the former parliament, Ruslan Khasbulatov. We have more from Moscow in this report by Julian Manyon of Independent Television News.

JULIAN MANYON, ITN: Outside La Fortiva Prison in Moscow there is mounting anticipation among the small group of opposition supporters at the gate. The authorities must now decide whether to release the White House rebels Rutskoi and Khasbulatov following the new parliament's vote for amnesty. Tonight Rutskoi's lawyer was tight-lipped. Earlier today, in his state of the nation address to parliament, President Yeltsin called for national reconciliation and then made an apparent reference to the amnesty, saying that reconciliation does not mean pardoning everything and everybody. But Yeltsin did not make it clear whether or not only four months after their capture his opponents will now be freed. In his speech, the president did make some important concessions to the rhetoric of the conservatives in the new parliament. While pledging that economic reform will continue, he said that both central control and a primitive free market are wrong for Russia, and echoing the views of Vladimir Zhirinovsky, he called for a campaign against the criminals and racketeers who are prospering in the present situation. But it's the accused rebels in the La Fortiva who are now the president's main headache, and some of his close warn allies warning that freeing them could mean civil war.

MS. WARNER: It was continued fighting in Bosnia today one day before a Muslim cease-fire is supposed to begin. At least 10 people were reported killed when a shell hit a clinic in the Muslim enclave of Maglaj. Croat and Serb forces have surrounded the town for nearly a year. UN officials couldn't confirm this report by Muslim-controlled radio in Sarajevo. In the Bosnian capital, two Muslim soldiers were killed by sniper fire. Four people have been killed by snipers since the UN cease-fire began two weeks ago.

MR. LEHRER: Surgeon General Dr. Joycelyn Elders today accused tobacco companies of aiming advertising at young people. She made her charge as she released the 23rd Annual Surgeon General's Report on Smoking and Health. This year's focused entirely on smoking among adolescents. Dr. Elders spoke at a Washington news conference.

DR. JOYCELYN ELDERS, Surgeon General: By adopting cigarette smoking, young people are led to believe that they are adopting an image of being members of the Five "S" Club, that they're slim, they're sexy, they're sociable, they're sophisticated, and successful. It's ironic and tragic. The teenager gets an image. The tobacco company gets an addict.

MR. LEHRER: A spokesman for the Tobacco Institute said the industryworks hard to prevent tobacco use by young people. He said the Surgeon General's Report did not back up its allegations that tobacco companies were trying to hook kids. President Clinton talked about the high cost of prescription drugs today. He did so with a group of senior citizens at a drugstore in Norwich, Connecticut, and later to a larger group at the Norwich Auditorium. The administration health plan proposes to hold down costs by purchasing drugs for seniors in large quantities. Mr. Clinton explained his position.

PRESIDENT CLINTON: Hillary often recounts to me her conversations with the hospital pharmacists she met during her father's illness. He told her of the many patients he sees leaving the hospital with prescriptions he knows they will never fill because they can't afford it. Now, medicine can't work miracles unless it is used. There's overwhelming evidence that without the regular treatment of adequate medicine many people actually get sicker or hospitalized or require nursing home care and, therefore, impose far, far greater costs on the health care system, on the taxpayers than would be the case if there were a prescription medicine benefit.

MR. LEHRER: We will look at the health alliance's part of the Clinton plan right after this News Summary.

MS. WARNER: A strong demand for aircraft helped spark a sharp rise in factory orders last month. The Commerce Department said today orders for durable goods jumped for the sixth consecutive month by 3.7 percent. It's the first time since 1987 that orders have risen for six months in a row. The biggest corporate engagement in American history is now the biggest corporate break- up. Late yesterday, Bell Atlantic Corporations and Telecommunications, Incorporated parted ways for failing to reach final terms on their $33 billion proposed merger. The deal would have combined the country's largest cable TV operator with its third largest regional phone company. We'll have more on the story later in the program.

MR. LEHRER: The Senate Banking Committee held an oversight hearing today on the Resolution Trust Corporation, the agency charged with bailing out failed savings & loans, but it turned into a partisan debate over the Madison Savings & Loan, an Arkansas thrift whose owner was president and Mrs. Clinton's partner in the so-called "Whitewater" venture. The Republican side of today's debate was led by Sen. Alphonse D'Amato of New York.

SEN. ALPHONSE D'AMATO, [R] New York: It seems to me that this committee has an obligation to find out and to get out all of the facts, not to impede the special prosecutor and/or his, his undertaking. That I would hope, Mr. Chairman, that you would in a bipartisan fashion, as you have moved, moved forward in seeing to it that the documentation and the practice that relates to this case are made available to the committee.

SEN. JOHN KERRY, [D] Massachusetts: This has nothing to do with federal policy on savings & loans. It has to do only with the question of whether or not the President might have done something wrong.

SEN. ALPHONSE D'AMATO: No, I didn't say that. Maybe you said that. I did not say that he did anything wrong. Let's understand that. So don't put words in my mouth.

SEN. JOHN KERRY: Then if you didn't do anything wrong and it has to do with the question of policy, you have to ask the question: Why are those other institutions, why are the Texas institutions not of a significant concern?

MR. LEHRER: An Independent Counsel has been appointed to look into the Whitewater matter. The Clintons have maintained their financial dealings were entirely legal.

MS. WARNER: Entertainer Dinah Shore died today in California after a brief battle with cancer. The singer won Emmy Awards during a broadcast career that spanned more than 50 years. Shore hosted a widely popular variety show during the golden age of television. She was 76. That's it for the News Summary. Now it's on to the right medicine, two uneasy neighbors, calling the whole thing off, and some reflections in a mirror. FOCUS - HEALING POWERS?

MR. LEHRER: They argued in the Senate Finance Committee today about health alliances, one of the centerpieces of the Clinton health care proposal, and we're going to do the same thing here ourselves right after this backgrounder by Kwame Holman.

SEN. DANIEL PATRICK MOYNIHAN: A very good morning. We're going to spend the morning on the subject of health alliances.

MR. HOLMAN: The Senate Finance Committee is one of the principal battlegrounds where any health care reform packages will be forged. This morning, as the committee focused on the reform device known as a health alliance, members heard from the governor of Puerto Rico, where a health alliance of Medicaid recipients took effect just three weeks ago.

GOV. PEDRO ROSSELLO, Puerto Rico: Implementation has been both rapid and comprehensive. We are likewise encouraged by some other surprising data concerning Puerto Rico's first experience with a health care alliance. The price being paid by the Health Insurance Administration over its beneficiaries is more than 31 percent lower than the cost of traditional fee-for-service plans. Also, the price is 29 percent lower than the cost of comparable coverage supplied by similar health maintenance organizations on the island.

MR. HOLMAN: The major reform plans being considered in the Senate all would involve health alliances. The most prominent mention of alliances came in the Clinton health reform package. Under the Clinton plan health alliances would function as buying clubs or purchasing agents that would negotiate with insurers, doctors, and hospitals to provide health care for all members of the alliance. Almost every business, family, or individual would have to join an alliance which would collect the premiums and pay the insurance companies that offer the health plans. The alliances would offer consumers the choice of a variety of health plans, whichever fits their needs, whether it's a Health Maintenance Organization or the more traditional Fee For Service plans. All insurance plans would be community rated, which means they would charge everyone the same premium and they could not exclude patients because of preexisting conditions such as cancer or AIDS. The Finance Committee is far from an agreement on the specifics of health alliances, and West Virginia Democrat Jay Rockefeller says the idea has gotten a bad name.

SEN. JAY ROCKEFELLER, [D] West Virginia: I don't know whether I'm amused or amazed. But alliances I think probably because of the design of some people have taken on a bad name to some. It's perfectly clear to me that you cannot have a health care plan that works in this country without an alliance and that anybody who thinks that you can have a health care reform plan without an alliance is living in thin air.

MR. HOLMAN: Richard Curtis, a nonpartisan health policy analyst, told the committee real health care reform must include something like health alliances.

RICHARD CURTIS, Institute for Health Policy Solutions: It seems to me, I don't care what the name of the organization is or whether you divvy these functions upa little bit, but that something that plays this role that very efficiently gives people their choice of these plans, especially in the small employer and individual market and provides even-handed information and is easy to use is, is needed.

MR. HOLMAN: Since alliances are one of the cornerstones of the Clinton plan, the White House has to hope that view eventually is shared by most members of Congress.

MR. LEHRER: But it is not shared by all members of Congress, and now we will prove that with our own Senate debate. Sen. Tom Daschle, Democrat of South Dakota, is the President's point man on health care in the Senate. Sen. David Durenberger, Republican of Minnesota, supports a limited role for health alliances, and Sen. Phil Gramm, Republican of Texas, opposes the health alliances altogether. Sen. Daschle, first, the reports today that no matter what the debate is the health alliances are dead on arrival, is that correct?

SEN. DASCHLE: That isn't correct at all. In fact, the hearing brought that point out very well. The witnesses, virtually every one of them said if you really want an alternative to bureaucracy, if you want an alternative to the overregulation, we've got to have something like an alliance. Call it what you will. We have about two and a half million people administering our health care system today. That equals all of the federal government outside of defense. We spend $48 billion regulating that. What we're trying to do is to come up with an alternative that reduces regulation that consolidates the purchasing power and, and pools the risk. So we do those two things, Jim. We consolidate the purchasing power. It's really why insurance companies fear alliances. They know we're finally putting the power in the hands of the purchaser, rather than the hands of the insurance company, and we're doing so by spreading the risk and minimizing the detrimental effect that risk holds now for insurance companies simultaneously.

MR. LEHRER: Now, Sen. Gramm, you oppose health alliances in every form. Tell us why.

SEN. GRAMM: Well, Jim, first of all, I support the ability of a free people to come together on a voluntary basis and to form alliances, cooperatives, whatever they want to do in terms of voluntary joint purchase. But you need to realize under the present plan if you don't work for the government and you don't work for a company that hires over 5,000 people, your private health insurance is cancelled. You're forced to buy health care through a government-run cooperative. That government-run cooperative offers some choices but only choices that are dictated by the government and the seven-member board. You can, if you are forced into this alliance, you can, if you don't like the service write a letter to your Congressman, file a grievance that you can never stop giving them your money, and finally the President's plan imposes a $10,000 fine on anybody who tries to sell you private health insurance in competition with the government. So I don't think it ought to be a surprise that Elvis may be alive out there somewhere but as people have gotten to know what these alliances are, they're dead.

MR. LEHRER: Your, your opposition is based on the mandatory part of it, is that right?

SEN. GRAMM: That's right. I don't have any objection. In fact, my own bill allows people to voluntarily come together to formalize this, but I am opposed to saying to people that if you work for a company with 5,000 or fewer employees, we're going to cancel your health insurance and force you to buy health care and health insurance through the government. And I might say, Jim, also through the Cooper plan, they're cut-off is at a hundred employees instead of five thousand, and they don't give you the ability to write off for tax purposes what you have under current law unless you buy through the government. My point is this. I don't believe that the question is whether you should lose your freedom at five thousand employees or a hundred. I think the whole issue is should we deny one single American the right as a free person to buy their own health care and their own private health insurance. I say no.

MR. LEHRER: Sen. Durenberger, you're kind of the middle there physically between Sen. Daschle and Sen. Gramm but also philosophically on this particular issue. You believe there should be some health alliances but tell us what, what -- where you come down between these two men.

SEN. DURENBERGER: I believe that they're both partly right. I mean, Tom Daschle is correct in saying that people who are in small businesses and individual buyers don't get the advantages in the current marketplace that people who work for big companies do. There's a variety of price advantages, administrative cost advantages, choice of health plans, things like that that aren't available to, to people in small groups and individuals. And for that reason the idea of a coop or purchasing group or whatever you call it is really critical to changing the system. Phil is right in that he says what Bill Clinton has done has taken a good idea, the cooperative purchasing, and he's bureaucratized it and used it for a variety of, of purposes that are going to defeat both the voluntary nature of it and I think a lot of the efficiencies that will come from large group buying for through these coops.

MR. LEHRER: How do they --

SEN. DASCHLE: Can I say something about this?

MR. LEHRER: Hold on one second. Let me ask Sen. Durenberger, how would this defeat the purpose? In other words, the basic purpose of the health alliance is efficiency, and it also gives everybody an equal chance. That's the basic argument for it. How would the health alliance defeat its own purpose?

SEN. DURENBERGER: You have. It all comes in the governance. I mean, the notion of a purchasing group today is the federal employee health benefit plan, the XYZ company, whatever, it might be a coalition of implement dealers, whatever. That's currently a purchasing group, but it's owned by the members, and they can decide what kind of health plans and how accountable they ought to be. What the President has done is taken that notion and, in effect, given, in effect, given the states the authority to set up the governance system, given the states the powers and duties and responsibilities, control of prices, control of services, and so forth, where the state ought to do that to a lot of these purchasing groups.

MR. LEHRER: All right. Now, Sen. Daschle, why, why does it have to be mandatory? Why is it -- why does the President want -- and you want it done the mandatory way, everybody has to get into a health alliance?

SEN. DASCHLE: Well, let me answer that. And I want to go to a couple of other points that have been raised. It has to be mandatory simply because if you don't do it, what everybody told us this morning is that insurance companies and everybody else will gain the system. You know what insurance is today. It's a search for healthy people. As soon as they're not healthy, they want to get rid of you. It's amazing to me that Phil would argue that somehow he is advocating more freedom when today that's the problem. We have 37million people who have no freedom at all. They're told they can't get insurance. Where is the freedom in that? And we're told that this is supposed to be more bureaucratic when we all belong to an alliance. If it's good enough for Congress, the federal employee health benefits plan is an alliance. And if it's good enough for Congress with nine million people, we've got a hundred seventy-five people running this alliance. We've got .2 of a percent of the premium, so we've got reduced bureaucracy. You've got a much less costly administration plan covering 9 million employees that we all belong to. So I think that on the basis of, of choice which they told us again this morning is critical, if you want to enhance choice, you've got to make sure that you pool the resources. Basically, Jim, what we're doing is saying this: We're telling the insurance companies they can no longer drop somebody if they get sick or if they lose their job. And what we don't want the insurance companies to do in cases like that is to go out and find healthy people. To ensure that everybody's in the system, we've go to ensure that they can pool the resources to pick the private plan they want. Another misnomer, another -- one of the misconceptions is that somehow this is not private insurance. We are all buying private insurance. There is no government here. The federal employee health benefits plan isn't government. We're buying private insurance. The three of us have private insurance right now.

MR. LEHRER: Sen. Gramm.

SEN. GRAMM: Could I respond to that?

MR. LEHRER: Yes, sir.

SEN. GRAMM: Well, first of all, let me respond by making note of the fact that Congress and the government and all of the companies that have over 5,000 employees are going to be exempt from participating in these so-called "alliances." Secondly, they are going to cancel the private health insurance you have now. You're not going to be allowed to keep it.

SEN. DASCHLE: That's not true?

SEN. GRAMM: That is true.

SEN. DASCHLE: No, that isn't true. I can't -- I don't --

SEN. GRAMM: Well, I tell my children not to argue about facts, but the law could not be clearer. If you work for a company with 200 employees and you have a Blue Cross/Blue Shield policy --

SEN. DASCHLE: You can keep it after this plan.

SEN. GRAMM: -- your policy is going to be cancelled, and --

SEN. DASCHLE: No.

SEN. GRAMM: -- you're going to have to choose from the plans that are provided through this health care collective. Who is going to dictate the plans? A seven member board in Washington, and the real key is this: They're so confident that we won't like it that they impose a $10,000 fine on anybody who tries to sell you private health insurance and --

SEN. DASCHLE: That's for fraud.

SEN. GRAMM: I have that right here in front of me.

SEN. DASCHLE: Fraud is illegal. Nobody should get away with fraud.

MR. LEHRER: Sen. Durenberger.

SEN. GRAMM: There's the provision right there. I just ask you to read it.

SEN. DASCHLE: That's right, and this talks about fraud. That's right there.

SEN. GRAMM: No, that's not at all. That's somebody selling you - -

MR. LEHRER: Wait a minute.

SEN. DASCHLE: If somebody is fraudulently involved in insurance, they should be charged, they should be.

MR. LEHRER: Sen. Durenberger.

SEN. DURENBERGER: Yeah, Jim.

MR. LEHRER: Wait a minute. Sen. Gramm, Sen. Daschle, I'm going to call on Sen. Durenberger to resolve this. No, no. Sen. Gramm says, Sen. Gramm says that the Clinton plan -- you heard what he said -- this is what the Clinton plan says, and Sen.Daschle is saying, no, no, that's not true. In terms of cancelling people, forcing people out of their private plans, which one is right, sir?

SEN. DURENBERGER: I don't think we ought to be debating what's in this bill. The idea that we should be debating tonight is whether or not people in small groups and individuals ought to be able to buy with the same power that people in large groups do. We -- we can work out between us should it be mandatory, should there be a variety of things. The important thing here is the concept that is missing from the market today which is everyone ought to have the power in the system that is presently possessed only by large groups of buyers.

SEN. GRAMM: Jim, could I make one comment on this?

MR. LEHRER: You can if you answer Sen. Durenberger's point. Do you disagree with the concept that the individual by himself should have the same access to price and everything that the big people do who are members of groups of 5,000 or more, or that you all do in the Congress of the United States?

SEN. GRAMM: I believe that they should, but I think people ought to have a right to choose. I'm opposed to saying to people that it -- because you don't work for the government or because you don't work for a big company that we're going to force you into these health care purchasing collectives. If they're such a good deal, if they're going to provide us with so much savings, why do we have to make people do it? Secondly, if they're really voluntary, why do they force out of the insurance they have and isn't it true that a seven-member board in Washington is going to dictate these plans, set a global budget for them, and it has the power, for example, to force people out of the high cost plans, the fee-for-service plans, if you have a cost overrun. I mean, those are the facts?

MR. LEHRER: Sen. Daschle, are those the facts? What's your position on the seven-member board in Washington that Sen. Gramm has mentioned several times that's going to decide this for everybody?

SEN. DASCHLE: That is just flat wrong, and he knows it's wrong. Read the bill. I mean, obviously, we have some minimum standards. We want to be sure that we have portability. We want to be sure that if I go to his state of Texas, that I'm going to be covered. We want to be sure that the states in Texas, the insurance plans in Texas will accept my insurance in South Dakota. There's got to be some kind of a national understanding of portability. He supports portability, i.e., your ability to go to another state, just like I do. But it's ironic that he would bring up choice, because every single witness that I know of who has come before every committee of Congress has said it's alliances that bring you more choice, more private choice, choice that allows you guaranteed access to a personal, private health plan. So I don't know where this, this concern for choice really is. Basically what opponents of alliances are concerned about is that it takes away the power of the insurance companies to pick their customers. And that's really what I think we've got to address.

MR. LEHRER: Is that true, Sen. Gramm?

SEN. GRAMM: Well, look, I mean, it's one thing to debate an issue. It is another thing, No. 1, to impugn the motives of people who disagree with you.

SEN. DASCHLE: I'm not impugning any motive.

SEN. GRAMM: Secondly, I'm not representing insurance companies. If this is such a good deal, why do you have to make people do it? Secondly, I think one of the reasons that the administration is losing this debate is that consistently they deny thethings that are in their own plan. They cannot defend their own plan. Nobody can defend the provision of a bill that imposes a $10,000 fine on anybody that tries to sell you private health insurance in competition with these government monopolies.

MR. LEHRER: I'm going to give -- I'm going to give Sen. Durenberger the last shot on this. and I'm going to ask you, Sen. Durenberger, to play reporter here. Is the Clinton plan on health alliances, the question I asked Sen. Daschle at the very beginning, and I think you answered it yourself just a moment ago, is it over? I mean, is there going to be something between Sen. Gramm and Sen. Daschle and I are arguing about?

SEN. DURENBERGER: Yeah, there will be something in-between, and there's already a bipartisan solution to this. We just need to get the bi-partites together to agree on it. And I think you could take the best in the Chaffee Bill and the best in the Breaux- Durenberger, Cooper-Grandy approach --

MR. LEHRER: Sen. Durenberger --

SEN. DURENBERGER: -- and you're going to end up with it.

MR. LEHRER: Sen. Durenberger, just based on what I heard tonight, if you can get Sen. Gramm and Sen. Daschle together, you're in great shape.

SEN. DURENBERGER: I do it all the time.

SEN. GRAMM: You give people a choice, and you get me and you take away the choice and you lose me.

SEN. DASCHLE: That's right. I'm for choice too.

MR. LEHRER: Senators, thank you all three very much.

MS. WARNER: Still ahead, South Korea looks North, a broken engagement, and a Richard Rodriguez essay. FOCUS - SOUTHERN EXPOSURE

MR. LEHRER: Now the Korean story. North Korea is in a standoff with the United States and the United Nations over inspections of its nuclear sites. But many officials and citizens of South Korea hope a crisis can be averted. That hope was voiced today by South Korea's president. We have a report by Elizabeth Farnsworth from South Korea.

MS. FARNSWORTH: This is Sun Yoo Li, a town just a few minutes south of the demilitarized zone that divides North and South Korea. The town is within easy striking distance of North Korea, where about one million troops are deployed near the DMZ. Six hundred and fifty thousand South Korean troops are based just south of the DMZ. Lim Won Ja can remember when his town was overrun by North Koreans in 1950 at the beginning of the Korean War. He said hundreds of townspeople were killed during that terrible time but now he seldom thinks about danger from the North. He had read in the newspaper that North Korea might have the plutonium to build a nuclear bomb, but he said it didn't worry him in the least. He was confident the crisis would be resolved. A housewife shopping in the late afternoon said the same. "We are so used to living near the DMZ," she said, "we don't even think about it anymore." In Seoul, just 25 miles to the South, people didn't seem very worried either. This city of 12 million people, the vital heart of South Korea, is within range of North Korean artillery. But even late last month as the Clinton administration was revealing its plan to send Patriot missiles to South Korea, a seasoned diplomat could joke about North Koreans getting stuck in Seoul's infamous traffic. Kim Kyung-Won is a former South Korean ambassador to Washington.

KIM KYUNG-WON, Former Ambassador, South Korea: I try to imagine what it would be like if the North Koreans launched an attack and tried to get into Seoul. Would they have any better chance than I have at the rush hour with all this traffic?

MS. FARNSWORTH: In the midst of the tensions last month, the stock exchange had its best week in four years. Shoppers poured into January sales at the Lotte Department Store, and just across the river, ice skaters worked on their technique. There seems to be a reluctance in South Korea to believe that the North would ever use a nuclear weapon against the South.

KIM KYUNG-WON: Who in the world would use nuclear bomb to attack their own fellow countrymen? We may be two different regimes, but in terms of national identity, we refuse to regard them as, well, as belonging to a different world. I, myself, personally was born in North Korea. I grew up there. I went to school there, and I am sure there are kids that I went to school with still living there. If you can understand that, then you can sense something of what the South Korean people feel about the North Korean attitude on the nuclear weapons.

MS. FARNSWORTH: But former Amb. Kim also said he hasn't forgotten the Korean War when the North did attack fellow countrymen, and when 2 million soldiers and 2 million civilians perished.

KIM KYUNG-WON: And if they don't actually go so far as to drop bombs on us, we would become vulnerable to their blackmail.

MS. FARNSWORTH: So at the same time as people in Seoul do not appear anxious about the North, they are very realistic. Foreign Minister Han Sung Joo.

HAN SUNG JOO, Foreign Minister, South Korea: You have to understand that Koreans have been living in this kind of situation, sort of threatening situation, ever since 1953 when the Korean War ended. And so even though there is a constant looming threat, people tend to get used to it, but we take this issue very seriously, and we, we know that this issue has to be dealt with, resolved, and we are trying to do it in a peaceful way.

MS. FARNSWORTH: The question of how to deal with North Korea has always been extremely controversial in the South, where the desire for reunification has never abated. A strong proponent of reunification, the Rev. Moon Ik Hwan died last month, and thousands turned out for a memorial. Moon Ik Hwan was a key leader of the democracy movement of the 1970s and '80s. In 1989, he traveled briefly to North Korea, violating South Korean law, and spent the next four years in prison. Rather than berate North Korea for its nuclear policies, these mourners sang about their yearning to live once again in a united country. [people singing] "Our dream is to achieve unification," they sang. "It is the only way to preserve what we are." Some of these people struggled for decades to bring democracy to South Korea. They viewed Washington as an ally of the dictators, and they are still skeptical of U.S. intentions.

KANG SOON JUNG: [speaking through interpreter] We know that the US has twenty to thirty thousand nuclear bombs. Maybe the US should destroy theirs first. North Korea may not even have a bomb. The US should not pressure them so much.

MS. FARNSWORTH: President Kim Young Sam, who took office last year as the first popularly elected civilian president, must mediate between the doves and the hard-liners who still have significant power in South Korea, especially in the military.

LEE CHUNG MIN, Sejong Institute: With democratization, the entire unification and the national security debate has opened up so that the government no longer sort of controls the agenda as previous governments did.

MS. FARNSWORTH: Lee Chung Min is an analyst at the Sejong Institute, a Seoul think tank.

LEE CHUNG MIN: The key point is that if the government appears to be "soft-line" vis-a-vis the nuclear issue, then you have conservative forces who would basically object to that particular stance. On the other hand, if the government pursues a hard-line stance on the nuclear issue, then you have people who would basically argue that's not the way to go, don't pressure the North, take this on a step-by-step basis, and let's negotiate the issue through rather than taking it to the brink.

MS. FARNSWORTH: At a press conference late last month, Lee Ki Taek, leader of the opposition Democratic Party, opposed economic sanctions against the North and criticized the timing of the Patriot Missile announcement, calling it premature and provocative. Lee Chung Min disagrees.

LEE CHUNG MIN: If the U.S. government chooses to deploy Patriot Missiles in South Korea either in U.S. bases or elsewhere, I think that's a very positive move, because it gives a very strong signal to the North Koreans.

MS. FARNSWORTH: Among political circles in Seoul, there is general agreement on what the North Koreans are after with their nuclear program.

KIM KYUNG-WON: They're diplomatically isolated, and their economy is in shambles, and it's getting worse. But what is most distressing from their point of view, that their allies and friends of the past either have all disappeared, collapsed, or deserted. And the faith which they thought they shared with these countries has collapsed.

MS. FARNSWORTH: The faith?

KIM KYUNG-WON: The faith, the ideology. And in these circumstances, I think they are trying to desperately cling to one gimmick which they think that can provide them protection and security which is the nuclear weapons in their mind.

MS. FARNSWORTH: In talking to South Korean analysts like Kim Yung-Won, a much more complex picture of the North Korean government emerges than in the U.S. press. Analysts say North Korea Leader Kim Il Sung's nearly 50-year rein shows that he is canny and capable, not a demented renegade as he is sometimes portrayed in the United States. Less is known about his son and successor, Kim Jong Il, but at the moment, the father appears to be in charge of the nuclear issue. Cho Soon Sung, chair of the National Assembly Foreign Affairs Committee, met Kim Il Sung three years.

CHO SOON SUNG, National Assembly, South Korea: I do not see him as a demon or lunatic, but he is a very clever politician and calculating each of his moves. I think he's a real fox. [laughing]

MS. FARNSWORTH: For the past 40 years, along the DMZ, South Korea and its U.S. allies have been on hair-trigger alert. But so far, all out fighting has been avoided. A war would likely destroy all this country has achieved since 1953. For now, few people here believe that will happen. FOCUS - BROKEN ENGAGEMENT

MS. WARNER: Next tonight, a very big deal falls apart. The deal would have married Bell Atlantic, one of the nation's largest phone companies, and cable TV giant Telecommunications, Incorporated, or TCI. Their merger announcement last October was heralded as an historic step in creating a new era of electronic media. The parameters of what's come to be known as the information superhighway were not and still are not clear. But it was clear to a wide range of media and information companies that a race was on and that one road to victory might lie in combining their different strengths through mergers. For Bell Atlantic and TCI, a merger brought together the interactive capabilities of the phone company with the cable company's ability to carry hundreds of channels of TV programming. On the NewsHour last October, Bell Atlantic Chairman Raymond Smith described his company's thinking.

RAYMOND SMITH, Bell Atlantic: [October 13, 1993] Well it became very clear to us a few years ago that in the second half of the 1990s there was going to be an explosion in terms of growth in our industry. And this could mean communications and information. And that explosion was going to be brought about by a convergence of a number of events, changing regulation, technology that was changing so fast in terms of fiberoptics and digital machines and high speed computers, and that there would be something that now is being called interactive multimedia or interacting with your television set in ways that never would have been dreamed of before, and that all of the parts of this new industry were going to come together.

MS. WARNER: But last night, after months of negotiations, Bell Atlantic and TCI said they couldn't close the $33 billion deal. Now come the questions: Why did their deal collapse, and what might this mean for the future of the information superhighway they envisioned? Here to help us answer those questions are Ken Auletta, who writes about communications for the New Yorker Magazine, and Richard MacDonald, a media analysts with the investment firm First Boston. Mr. MacDonald's company served as TCI's investment banker in the Bell Atlantic merger, but Mr. MacDonald, himself, did not work on the deal. Welcome, gentlemen. Ken Auletta, why did this deal collapse?

MR. AULETTA: Oh, I think probably multiple reasons, but price being foremost among them. Bell Atlantic wanted to renegotiate the price down as they had once before, and TCI at some point said, enough, we can't do it. They felt they had to renegotiate it down, because TCI was going to have less cash flow. They wanted to reduce the profit margin because of new federal regulations.

MS. WARNER: Explain that a little bit.

MR. AULETTA: Well, the FCC decreed that all cable companies should reduce their rates by 7 percent, and then that necessarily means that TCI will have less cash, and since the deal was predicated on the amount of cash flow that TCI had, Bell Atlantic said we want to reduce the price, and at some point, TCI said you can't reduce it. But the other thing that happened, and a senior official at TCI said this to me this afternoon, he said, you know, when fish is out of the water for a long time, it begins to stink. And this fish was out of the water since the deal was announced in October without consummation. And disagreements, egos, differences over price and other matters come to the fore.

MS. WARNER: Is that how you see it, Rich MacDonald?

MR. MacDONALD: Well, I see it, I mean, there's a lot in that, of course, but what I also see is that there were institutional reasons why the deal -- why there were conflicts. I think Ken's really correct when he talks about the conflict between -- in the regulatory world. The FCC has a mandate, had a mandate from Congress, in effect, to take money back and give it to the people from cable, from people who felt their cable rates were too high. I think also that there was and is institutional conflicts between the types of industries that when they tried to marry these two enormous companies, one in the phone industry, the other in the cable industry, there were different cultures, and it was very difficult for them to work together the whole time, though they did their very best to get there, and I think there are still many complexities that hadn't been worked out. I think those are the two major conflicts.

MS. WARNER: But aren't these both things that these two men, didn't they spend months negotiating secretly with one another? They would have thought of that, wouldn't they, I mean, the different corporate cultures, the fact that the FCC was about to act to reduce the cable rate?

MR. AULETTA: Well, they didn't know in October when they signed this deal that the FCC would this week announce a further 7 percent reduction to go along with the 10 percent than they had announced last year. But, you know, things, they were, they were haggling over price for the several months. They knew walking in that their cultures were different. You just have to go out to TCI, which is based outside of Denver. It's a cowboy culture. People don't wear ties. Outside their office they look of the Rocky Mountains. Then you go to Arlington, Virginia, where Bell Atlantic is located. Everyone is in a shirt and tie. It's a nice antique-filled office, and you look out on shopping malls. It's a very different button down versus cowboy culture.

MS. WARNER: Well, do you agree? Do you think that -- was this one of the main reasons, and do you think the FCC thing was more of an excuse? I mean, there have been some reports --

MR. MacDONALD: No, I don't think so.

MS. WARNER: No.

MR. MacDONALD: I think that these entities are, the personalities are very important, and types of people and how they work are very important, but these entities are very big. The social environment is extremely important, and there may have been some miscalculation, but certainly some misunderstanding of the vigor of the grassroots movement against cable rates, so I think that's something that everybody has to come to grips with going forward, especially if they think about all the, you know, billions of dollars of investment that one's going to need for this so-called "information highway."

MR. AULETTA: Rich is really suggesting something that's very provocative and important here, and that is if you ignore, as many people in the cable industry have, the anger that the public feels, which is reflected in the actions that the FCC and Congress have taken against cable in the last two years, it really raises another profound issue. The presumption that the Clinton-Gore administration is making is that private industry is going to pay for the information superhighway, the government can't afford to. And the bills that are before the Congress and that are supported by the Clinton administration are designed to encourage competition between cable and telephone and broadcasters and all these others, and they will put the money and resources into it. At the same time, as they do that with one hand, the other hand of government, the FCC, is saying, hey, let's lower your prices, and cable is coming back, and Bell Atlantic is coming back in the form of this deal and saying, you're doing that, and you're killing us. You can't invest the money.

MS. WARNER: You think this is what Ray Smith meant when he talked about the unsettled regulatory environment?

MR. MacDONALD: I think that's part of it, and I think the key thing to understand is that there is a real conflict, policy conflict right now between what the administration is telling us on the one hand, with all their new regulatory initiatives, and what the actual fact of regulation is doing to this industry. And I think that's -- you know, one can't ignore that there is very serious movement within the country that these two countries sort of got in the middle of, a rock and a hard place almost.

MS. WARNER: So what is this going to mean for this information superhighway?

MR. MacDONALD: It's a big, big pothole in the information highway at the moment. It'll take a lot -- there are a lot of decision makers who are now very confused who also are looking for direction themselves, they're trying to understand the policy environment. They're trying to understand everything that means the business environment, because there's no question the stock market was down almost 42 points today, and there's no question that this collapse probably had something to do with that. So there's a great many things that have been added to the mix that we haven't been able to focus on.

MR. AULETTA: Uncertainty is the enemy of investment, and you have out there now great uncertainty.

MR. MacDONALD: Yeah. And I think it's really to some extent what the -- and there is an anger on both sides. Everybody involved in this transaction certainly has come out and made, you know, I think very direct statements about who's responsible, and, you know, all that. But I think there's a serious policy issue where people are going to have to sort it out. How much, what's a fair cable rate, you know? How much money can we give the cable industry or the phone industry to create the investment needed to build the information highway? How do we do it best?

MS. WARNER: And who should figure this out? I mean, is it's government's job and the Congress's job?

MR. MacDONALD: Well, right now because they've set it up, right, so we have this conflict, it's absolutely in their court, there's no question about it. But the cable industry and the phone industry both are going to have to recognize the strong feelings among consumers about both industries and what's the best solution.

MS. WARNER: What about consumers? Should they be happy about this? I mean, some consumer groups opposed the merger, didn't they?

MR. AULETTA: Yeah. It's basically, it's probably good news/bad news for the consumer. The good news is that abstractly at least they're getting another rate reduction, cable rate. The bad news would be if, in fact, it impedes the building of the superhighway that affords them the possibility of control over their television sets.

MS. WARNER: Can either of these companies build the superhighway by itself?

MR. AULETTA: No. One of the reasons for the convergence of these industries is the presumption that the resources that no one company, with the exception of companies like AT&T, has the resources necessary, so you need to --- nor the skills necessary.

MR. MacDONALD: Yes. I think that's a really important point.

MR. AULETTA: And so the idea of a marriage was to combine those two.

MR. MacDONALD: Right.

MS. WARNER: And are there other marriages in the work? I mean, Mike Malone takes TCI to someone else?

MR. MacDONALD: Well, everybody's going to do a lot of re- thinking. There's going to be a lot of figuring out where the pieces all fit. And after all, remember, marriages have been done. Time-Warner has US West as a partner and Cox has Southwestern Bell and NYNEX is involved with Viacom in some way. I mean, those things they've already been done and are presumably under the wire.

MR. AULETTA: But today the most depressed people are not the people who work for TCI or Bell Atlantic, but they're the people who work for Wall Street investment firms.

MS. WARNER: Any comment, Rich McDonald, on that?

MR. MacDONALD: I'm going to stay away from that one. That's -- [laughing]

MS. WARNER: And you wrote a very interesting profile of John Malone in the New Yorker. What does this say about him?

MR. AULETTA: Well, you know, one of the things you learn about tough businessmen -- I remember Larry Tisch once saying this -- the key -- the man who runs and owns CBS -- he said the key to any deal making and merger making is to set a price and be prepared to walk away and never look back, and, and get a good night's sleep over it. And I think that's John Malone. I think John Malone knew what he wanted to do in making this deal, but he also knows what he won't do. And he wasn't going to get into what he felt was a situation that wasn't tenable. So he walks away. He's basically a cowboy.

MR. MacDONALD: Yeah. But it's a very important point that this - - there was, you know -- despite the obvious numbers involved, there was a noticeable lack of ego, and rather there was an institutional marriage, because two guys thought this really made sense. And when they couldn't finally work it out at the end of the day, they called it off.

MS. WARNER: And Malone was even willing to be No. 2, right, in this new company?

MR. MacDONALD: Right.

MR. AULETTA: Yeah. Malone is a guy who basically wants to spend more time with his family in Maine where he has a house and, and in the suburbs of Colorado where he has a house. And he doesn't want to be an operational guy. He has a Ph.D., he's a guy who enjoys invention, and though he's a very powerful strategic chess player, he basically is someone who wanted to walk away from day- to-day responsibility. So he'll find -- some other deal will come along where John Malone's involved.

MR. MacDONALD: Right. I think the other thing to do is look past the personalities in that sense, because as John said -- and to look past regulation at some point that we're going to have to straighten this out -- John always said -- I think he said in the last -- I guess, I guess before he announced this deal -- that the only thing that matters is technology, everything else is irrelevant, because technology is going to move forward one way or the other.

MS. WARNER: Well, I'm sure --

MR. AULETTA: He's learned that more than technology matters. You need the program.

MS. WARNER: That's all the time we have, gentlemen. We'll come back and talk about that. Thanks, both of you. ESSAY - SOY INDIO

MR. LEHRER: Finally tonight, essayist Richard Rodriguez of the Pacific News Service shares some thoughts about his Indian heritage.

RICHARD RODRIGUEZ, Pacific News Service: What is one to make of the Indian rebellion in the Mexican state of Chiapas -- young rebels on the evening news defiant behind masks, or dead on the street? Several hundred miles from Mexico here in this Latino neighborhood of San Francisco, it is easy to find the ubiquitous Indian mural. Wherever there are Mexicans, you will find street murals like this one with it's pre-Columbian allusions, defiant against history. We learn from news reports that Indians in Chiapas have been mistreated for generations, mistreated by landowners, as by politicians. Indians have labored in medieval servitude. Mexico City promised the Indian land and then broke its promise. For those of us who are Mexican or who are related by blood to Mexico, there is something else embarrassing to admit. Mexicans loathe the Indian, loathe our own Indian face in the mirror. Landowners in Chiapas could get away with murder, and politicians could mistreat the Indian, because there has long been a racist conspiracy of sweet grandmothers and jolly shopkeepers and doting uncles, the conspiracy of Mexicans against the Indian in the mirror. Yet, you will say: Aren't most Mexicans Indian? Most Mexicans are Mestizo, a mix of European and Indian. At the top of the ladder in Mexican are the light-skinned, hinta de reason, people of reason they were called in colonial days, I mean, Mexicans of European blood. To this day, the famous Mexicans, the movie stars, the poets, the filmmakers, the television faces, the rock stars of Mexico, or intellectuals, or politicians, tend to look more like President Carlos Salinas De Gortari than like a Chiapas Indian. Mexicans are nationalists. They chased Spain away in the 19th century. Mexicans would never call themselves Spaniards. On the other hand, Mexicans do not call themselves Indians. In Mexico, you will see the Aztec warrior romanticized in murals and cheap restaurant art. Fierce before defeat. Otherwise, the idealized Indian is the Virgin Mary as she appeared in 1531, La Virgen De Guadalupe, with brown skin, dressed as an Aztec princess. If the male is fierce, she is gentle. If he represents defiance against Europe, she represents some feminine endurance. The other day in Mexico City a rich Mexican said to me, because I'm a writer from California, "I don't know," he said, "I don't know what Mexico is going to make of you or your books. We're not used to having writers who look like you." Here in the US, the Indian for most Americans is a ghost. Indians died in the cowboy movie, or else the Indian is on a reservation in Oklahoma. In Mexico, the Indian is everywhere, in the crowd, in the mirror. But Mexicans fear the reflection in the mirror, and Mexican grandmothers hope for light-skinned grandchildren. In Mexico, the Indian is the loser in history. Or is she? Los Angeles has become the largest Indian city in the U.S., though we are years away from recognizing it as such. And Indians are very much on the move. Here in California, people use water images to describe the northern migration of brown people from Mexico and Central America. Californians speak of the flood of immigrants, the tide, the waves of illegals crossing the desert. On the other side of guilt, one hears regarding the dead Indian. Americans fear that the Indian is too much alive. Too many Indians are coming this way. For their part, Mexicans assume the Indian's colonial defeat. The male warrior was killed. The Indian maiden was raped by the conquistador. In the Mexican scheme of things, my mixed blood is proof of the Spanish will over the Indian. It has not occurred to many Mexicans that maybe the story of Columbus and Cortez might still be going on, that my Indian face could be proof of some endurance that will outlast medieval Spanish designs. In the Mexican lexicon, Indio is a slur. Call someone an Indio and you insult him. Indio means stupid. Indio means backward. Indio means unmodern. The hardest thing for a Mexican to say is, "I am an Indian." But perhaps now after Chiapas, both Americans and Mexicans need to learn it. "Soy Indio." I'm Richard Rodriguez. RECAP

MS. WARNER: Again, the major stories of this Thursday, CIA Director James Woolsey said the agency was reviewing its personnel procedures. He said the Aldrich Ames spy case had shown a weakness in internal security, and this evening the U.S. announced that Bosnian peace talks will move to Washington this weekend. The focus would be creating a two republic state, one Serb and the other a mixture of Croats and Muslims. Good night, Jim.

MR. LEHRER: Good night, Margaret. We'll see you tomorrow night with Mark Shields and Paul Gigot, among other persons and things. I'm Jim Lehrer. Thank you, and good night.