The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. Leading the news this Monday, Soviet Pres. Gorbachev won the Nobel Peace Prize, and South Africa scrapped a key segregation law. We'll have the details in our News Summary in a moment. Judy Woodruff is in New York tonight. Judy.

MS. WOODRUFF: On the Newshour tonight, we lead off with a question troubling many Americans these days, [FOCUS - STORM CLOUDS] whether the U.S. is in or headed for a recession. We hear from four economists. Next, the San Francisco Bay area still recovering [FOCUS - AFTERSHOCK] one year after the big earthquake, and [SERIES - FOR THE PEOPLE?] another in our series of conversations on how good a job our federal government is doing of governing. Tonight political scientist Francis Fox Piven. And finally we'll have a musical remembrance of America's maestro, [FINALLY - AMERICA'S MAESTRO] Leonard Bernstein. NEWS SUMMARY

MR. LEHRER: Mikhail Gorbachev won the 1990 Nobel Peace Prize. The Soviet President was cited today for his leading role in the peace process and the openness he has brought to Soviet society. He met with a group of reporters in Moscow and had this reaction.

MIKHAIL GORBACHEV: [Speaking through Interpreter] I would say the prize is a boost to our efforts. I'm sure it helps my position and my mood. And it's an inspiration. I'm sure it helps my position and my mood and my physical, emotional and intellectual conditions. It shows we're on the right path, and the changes we are making are right.

MR. LEHRER: Pres. Bush was among those offering congratulations. He said Gorbachev has been a courageous force for peaceful change in the world. Reaction to the news was less enthusiastic on the streets of Moscow. Wire service reports said many Soviets reacted with complaints about the economy. Foreign Ministry Spokesman Gennadi Gerasimov said, "We must remember this certainly was not the Nobel Prize for economics." Gorbachev had been scheduled to present his economic reform plan to the Soviet parliament today, but it was put off until later in the week. The plan would transform the Soviet economy from a state run to a market system. Judy.

MS. WOODRUFF: Soviet Foreign Minister Eduard Shevardnadze today said his country has no plans to join the multi-national force in the Persian Gulf. He said if the Soviet Union were to send troops, it would only do so with parliament's approval. Defense Sec. Dick Cheney was in London today for talks with Prime Minister Thatcher on the Gulf. He said U.S. troops will stay in Saudi Arabia as long as the Saudis want them and as long as it takes to get the job done. Meanwhile, President Bush had some words for Iraq's Saddam Hussein today. Mr. Bush spoke in Dallas at a fund-raiser for the Republican candidate for governor. He talked about Iraqi atrocities against the Kuwaiti people.

PRES. BUSH: Newborn babies thrown out of incubators, and the incubators then shipped off to Baghdad; dialysis patients ripped from their machines and those machines then sent off too to Baghdad, the story of two young kids passing out leaflets, Iraqi troops rounded up their parents and made them watch while those two kids were shot to death, executed, before their eyes; Hitler revisited. But remember, when Hitler's war ended, there were the Nuremberg trials. America will not stand aside. The world will not allow the strong to swallow up the weak.

MR. LEHRER: Israeli Prime Minister Yitzhak Shamir today warned Iraq about moving into Jordan. He said such action would likely raise the dangers to levels we cannot accept. Shamir spoke at the opening of the fall session of parliament. He also accused the United Nations of hypocrisy for its vote to condemn the killings of Palestinians in Jerusalem last week. Israel said it would not cooperate with a Security Council investigation of that incident. A group of leftist Israeli parties said they will challenge that decision in parliament. Pres. Bush said today he wants the UN resolution fully implemented. In Beirut today, Lebanese army troops began dismantling the green line that separates the Moslem from the Christian part of the city. The government gave the orders after Syrian troops crushed a rebellion by a Christian general, Michel Aoun. Aoun is now in the French embassy, which is surrounded by Syrian and Lebanese troops. The Lebanese government wants to put him on trial. But in Paris today, Pres. Mitterrand said France will not hand him over.

MS. WOODRUFF: Another pillar of apartheid fell in South Africa today. The government officially revoked The Separate Amenities Act used to segregate public facilities since the 1950's. We have a report from South Africa by Kevin Dunn of Independent Television News.

MR. DUNN: At Johannesburg Central Park, a visitor could be forgiven for thinking apartheid has long been dead. Facilities are already open to all races and the demise of the Separate Amenities Act is warmly welcomed.

BLACK GIRL: Everyone will be free and be happy and equal, all rights in place.

BLACK GIRL: I feel great because I've been waiting for this moment for such a long time and I think we all have to be equal.

MR. DUNN: But elsewhere, whites are taking extraordinary measures to keep blacks out, here turning a public resort into a private club.

WHITE WOMAN: No, I don't want them. I prefer to use it with the white people.

WHITE MAN: Blacks are dirty. Whites are clean.

MR. DUNN: Most councils, however, will comply and many whites will accept it.

WHITE MAN: it's fine. We're actually glad it's happening.

MR. DUNN: But for others, it's a step too far.

WHITE WOMAN: Coming here and seeing any blacks, I'll go out. I won't stay.

MS. WOODRUFF: In one town near Johannesburg, white residents voted to close all public facilities rather than open them to blacks. Other areas plan to charge high fees for the use of such facilities to help keep blacks out.

MR. LEHRER: There was an election this weekend in what used to be East Germany. Chancellor Helmut Kohl's party was the big winner, taking four of five states. The opposition Social Democrats acknowledge the results hurt their chances to unseat Kohl on December 2nd. That is when the new Germany holds its first nationwide election.

MS. WOODRUFF: President Bush blamed Congress again today for the deadlock over the budget. He said it's up to the House and Senate to pass a deficit reduction agreement before the midnight deadline on Friday. At his Texas speech, he hinted that he would not sign another resolution to keep the government from shutting down if no agreement was reached.

PRES. BUSH: Four days from now on October 19th, the clock on all these procedural things runs out, and the American people have every right to expect more from their elected representative. Congress has a responsibility, and this, if this is the best that the system can do, then it's time to build a better budget system. In the next five days, Congress has the chance, and in my view, Congress has an obligation to act once and for all. Twice now this year, I've signed emergency legislation to add more time to the clock. Well, this Friday, time's up.

MS. WOODRUFF: House Speaker Tom Foley was critical of the President's remarks. He spoke to reporters outside the capital this afternoon.

REP. THOMAS FOLEY, Speaker of the House: There is no purpose in making any American suffer a lack of government services, be inconvenienced with a closure of federal facilities and certainly no reason for a single federal worker to be furloughed simply because the President wants to make a point that doesn't need to be made and has no practical consequence or value. It's an obstruction to the budget process, not an aid, not a help. It's not a positive thing, it's a negative thing, and it's only possible consequence is to bring the entire federal government into some disrepute with the public, including the President and both parties.

MS. WOODRUFF: That's it for the News Summary. Just ahead, economic storm signals, California's aftershock, does government work, and the passing of an American original. FOCUS - STORM CLOUDS

MR. LEHRER: First tonight the new gloom about the U.S. economy. There is recession fear abroad in the land, aA fear built on higher oil prices and interest rates and on uncertainties about Washington, taxes, and the budget, a fear that is already more than fear for the housing and building industries and may soon be so for some parts of the transportation and retail industries. We are going to go through the specifics of the gloom report with four economists who do this sort of thing for a living. Audrey Freedman does it for the Conference Board, New York based research group. Robert Mincy does it for the Urban Institute in Washington. Adrian Dillon for the Eaton Corporation a manufacturing company in Cleveland, Ohio he is also a consultant to the Business Council a group of top U.S. Business Executives. He joins is from Public Station WVIZ in Cleveland and Alan Sinai does his for the Boston Company a financial consulting firm. He joins us from San Diego. Mr. Sinai beginning with you and I want an over view from all of you. How bad a shape is the economy in right now and what do you see happening in the immediate future, in the next six months or so?

ALLEN SINAI, Economist: The economy has slipped in to a recession. It probably did this summer. The tell tale sign was a half percentage point in the unemployment rate and that was before Iraq. With the inflation coming off the higher oil prices the way that works through the economy. We will probably have two or three quarters of declining GNP and a recession that will last ten months. I would call it moderate but the worst is going to come in the fourth and first quarters.

MR. LEHRER: When you economists us the world recession you have a technical definition of that. Why don't you give that to us now.

MR. SINAI: Actually I think it is one that is popularly thought which is two quarters of declining GNP. Really the definition of a recession and when it is dated by the National Bureau of Economic Research a fairly large number of indicators are used to define it. In popular terms it has been refereed to with two quarters of declining GNP.

MR. LEHRER: Now what do you mean when you say it.

MR. SINAI: My judgment is based really on employment date across a wide spectrum of industries both in the goods and services sectors of the economy. Look at the regions of the economy the States and how they are doing and also the various components of GNP and how they are doing. Over the next six months really the cause of inflation is based on certain fundamentals having to do with real income growth and continual rising unemployment, poor profits performance, still high interest rates and the production of jobs and income in what we traditional call a downturn.

MR. LEHRER: Alright. Ms. Freedman do you see a downturn. Do you see the same over view that Mr. Sinai does?

AUDREY FREEDMAN, Economist: I do also see a downturn and I see a longer one than Allen Sinai does because debt conditions in the United States are very serious. We really don't have the power to shorten the recession that we had in the past. The Federal Reserve can not independently lower interest rates and start our economy going again and the Federal Government certainly can't deepen our debt situation and go in to deeper deficit spending. SO the usual ways of making a recession short one and counteracting a recession somewhere in the middle aren't available to us now. So it is going to be a longer one than usual perhaps 18 months.

MR. LEHRER: Now when you say debt situation you are adding in a lot of things right?

MS. FREEDMAN: Right.

MR. LEHRER: You mean the trade deficit, the federal deficit. What else do you mean?

MS. FREEDMAN: Well most of all I mean the federal deficit and mean our dependence on foreign lenders. Of course the foreign lenders are not buying Treasury Bonds which makes our debt burden even greater because interest rates are rising but also corporate debt and personal debt and most of the debt has been incurred because of real estate purchases, commercial real estate purchases and housing purchases and they have been financed by debt and now their value is falling.

MR. LEHRER: Mr. Dillon how does it look from Cleveland?

ADRIAN T. DILLON, Economist: Well I some times think that I have been brought in here for comic relief but we don't think that the kind of severe decline that has been portrayed in the headlines and on Wall Street is inevitable.

MR. LEHRER: Why, why not. What do you see that these folks do not see?

MR. DILLON: First of all let me be clear. I don't think that the next six months are going to be fun. We are talking about a flat economy. No growth but no severe decline either. But the fact is that the economy is extraordinarily resilient and inventories for example are under superb control.

MR. LEHRER: Inventories are whether you are a manufacturer or retailer it means that you have things already made and ready to sell. Is that what you mean?

MR. DILLON: Or in process, or materials waiting to be produced.

MR. LEHRER: You see that as up beat?

MR. DILLON: I see them under control.

MR. LEHRER: By whom, who is controlling that?

MR. DILLON: Manufacturers, wholesalers, retailers. Really a cross the board the business sector has shown extraordinarily discipline adjusting production simultaneously to the order boards.

MR. LEHRER: I see. So if you use the term recession either technically or in a general way. Using Allen Sinai's description of it you see a flattening out but you do not see that over the next several months?

MR. DILLON: I see continued stagnation but not a precipitous decline unless we get a war or a shortage because of the Middle East.

MR. LEHRER: Alright Mr. Mincy where do you come down?

RONALD MINCY, Economist: I think that economy has entered a recession. In my mind there is no question about that. I think the issues are how deep the recession will be, how long it will take and there are reasons to think on both ends of the spectrum whether we will have a longer or shorter recession.

MR. LEHRER: What do you mean ends of the spectrum?

MR. MINCY: That is to say in one hand the public sector is less able to gear in to and counter this recession as they have done in the past.

MR. LEHRER: Then you agree with Ms. Freedman on that?

MR. MINCY: I do but on the other hand as was mentioned inventories are in a much better position than in the case of the previous recessions. So if we get in to one it may not be of long duration and we are in a much better import position. That is to say that the demand for U.S. goods from other nations is consistently high so that even when our domestic consumption declines we still have a healthy foreign sector there buying our goods. I think, Jim, the real issue and a very important issue to be concerned about this recession is what is it going to do with workers and income at the lower end of the income distribution. I think that we have gone through a period of substantial income growth over the last ten years but lower income workers have suffered a real decline in their wages and in this recession if it occurs is going to deal a real blow to the segment of the population that hasn't benefited from what we have.

MR. LEHRER: Give me a fell for the nature of that blow. How severe could it be?

MR. MINCY: Workers or individuals not much above the poverty level will experience declines in their income level two to four times as high as other segments of the population. And this is going to impact most lower income workers who will experience more unemployment. longer unemployment and the traditional tax and transfer systems that we have to rescue people out of declining incomes are not going to be effective this time.

MR. LEHRER: So your feeling that this recession unlike some others which have been felt at the top and middle as well as the bottom this one is going to be felt the strongest at the bottom?

MR. MINCY: No I wouldn't characterize the history that way. The history is this. Over the last ten years the economy has preformed very well but what has happened to workers at the low end has not been a tremendously positive story. Now that the good times are over the story for the low income population and particularly for blacks in this country is going to be a very negative one.

MR. LEHRER: Alright let's take that specific and go back through everyone. Mr. Dillon do you agree that the people at the bottom are going to be hurt the worst?

MR. DILLON: I think that if we do go in to a recession the pain will be far more uniform than it has been in the past because more sectors are likely to feel the downturn rather than the traditional recession where housing, auto's and capital spending suffers 95 percent of the decline. Now the cyclical sectors won't fall as much but more sectors will feel the pain.

MR. LEHRER: Alright Ms. Freedman how do you feel about this?

MS. FREEDMAN: Well during this ten year period that we refer to as the good times they were not all that good for the lower part of our income distribution. They haven't been good for poor people or nearly poor people all along even though parts of the economy produce great wealth.

MR. LEHRER: Good times are never good for the poor. I mean there are no times that are good for the poor?

MS. FREEDMAN: No but income distribution has become more extreme during the decade of the '80s and I wouldn't even call it good times. It was good times bought with a credit card.

MR. LEHRER: Do you agree with Mr. Mincy that this recession that you already think is here is going to get worse and is going to hurt those folks the most?

MS. FREEDMAN: The lower income folks. yes.

MR. LEHRER: Mr. Sinai?

MR. SINAI: Recessions always hurt the lower income on the distribution more than others and I think that it won't be any disproportionate effect. When you have a full fledged recession all segments are hurt but the low income relatively speaking will do worse but I don't think any worse than in any episodes.

MR. LEHRER: Another specific Mr. Sinai what are interest rates going to do over the next several months?

MR. SINAI: Long term rates may go up. Part of the problem in the dept of our downturn will be how far inflation goes. We are entering now a period of a wave of inflation. Largely energy price driven but also to some derivative inflationary effects. We are going to see double digit annual rates of inflation for a while and in that situation it is hard for long term interest rates to come down. It is also very hard for the Federal Reserve because some of this inflation will creep in to the non energy areas. It is very hard for the Federal Reserve to ease monetary policy and lower short term rates. So I think that long term rates are going to go higher and short term rates the Fed will probably ease some. They will not go down a lot at all.

MR. LEHRER: Mr. Mincy are interest rates going up?

MR. MINCY: I think that additional terming of what has happened to interest rates is what has happened to the foreign sector. Our debt problems in this country are very important and the Fed is under constraint. Interest rates in Europe are rising. Interest rates in Japan are rising. So if we lower our interest rates a lot of foreign investors who are now buying and investing in the United States will take that capital flow out and if that occurs our recession will deepen. So I think that the story for interest rates is that they can not decline very rapidly and that is another dimension to this. Again the public sector has its hands tied in helping out in this recession and for that reason I think that it may be a serious one.

MR. LEHRER: Mr. Dillon the causes aside as to why interest rates may go up. Would you agree where ever you were in the financial scale. A business executive deciding to take over another billion dollar company or some one trying to decide to buy a modest house. Should you expect interest rates in the country all over the scale to go up in the next few months?

MR. DILLON: No I don't expect interest rates all over the spectrum to go up in the next few months. It seems to be an important assumption here that oil prices are going to stay at $40 or go up from there but the fundamentalists suggest $20 to $25 a barrel. I also think that inflation is not going to double digit levels for any length of time. In the manufacturing sector for example there is no inflation. We have had absolutely flat prices. So once that we get a budget agreement, hopefully we get a reduction by the Fed, inflation will not be as bad as people expect and certainly not for as long and I expect both short and long term rates to come back down especially if we get a recession.

MR. LEHRER: Ms. Freedman there it is again. Mr. Dillon is looking at the same things that you are and is seeing it different. Now what is he seeing that you don't see?

MS. FREEDMAN: Well if you look at the elements in the Producer Price Index take out the effective energy. In fact there was no inflation that was recorded in September. But starting soon the oil slick will spread across all prices. And will spread in to transportation prices first and in to farm prices and all kinds of raw material prices rather soon and then eventually will spread through the Consumer Price Index as well. It moves and it spreads. On the other hand we are predicting some sort of recession. Recession does break back on inflation so we can't be predicting very high inflation and continuing recession and inflation at the same time.

MR. LEHRER: Yes Mr. Mincy?

MR. MINCY: I worry about that. We may be able to predict that because if oil prices stay high then we have other forces that can take the economy down. They tend to raise unemployment and the like?

MR. LEHRER: Which will bring prices down?

MR. MINCY: However if fuel prices remain high and they spread themselves to other sectors of the economy through for example increases in trucking costs that may well keep inflationary pressure on the economy at the same time that we are experiencing other things.

MR. LEHRER: Mr. Dillon.

MR. DILLON: Question?

MR. LEHRER: I assume that you disagree with everything that Ms. Freedman and Mr. Mincy just said?

MR. DILLON: I don't disagree with everything they just said. I just think that the effects will be far more muted. The level of productivity growth in this economy is excellent and in a soft economy you just don't pass those costs through.

MR. LEHRER: How do you measure productivity growth?

MR. DILLON: Well the sector that I am familiar with most is manufacturing and in this expansion which is now 8 years old we have had productivity growth that has been going at record breaking levels. Four percent per year, year after year and this year. So we can have four percent increases in our costs but zero in our margins and our prices are unchanged. So I think that the fundamentals are much better than expected.

MR. LEHRER: Mr. Sinai what are you advising your clients to do. Are you trying to scare them in to in action, scare to them in to action. So which way and what?

MR. SINAI: No I am just trying to present some facts to them and one fact that we ought to look at on the inflation, recession combination has to do with oil prices. If they do stay up around $35 a barrel. almost double what they were it is wise to recall what happened in 1973 and 1974 and 1979 and 1980. During that period we did run double digit inflation and we also ran some recession and unemployment. So we got inflation and recession at the same time. Oil prices are a key. So with that in mind we advise our clients to be very cautious on their investments because the combination of the recession and inflation. But a possibility of it rising unemployment and perhaps higher long term interest rates and a declining dollar is deadly for U.S. equities so for a time they should be very cautious in U.S. equities. For a time they should be cautious on long term interest rates. It is far safer to keep your money and have some principle to invest again rather than invest it and loose it one some spike in interest rates and inflation.

MR. LEHRER: Mr. Dillon people like to talk about the psychology of what you economists rock sometimes and you heard Mr. Sinai say that he is advising his folks to play it safe. The cover of Newsweek Magazine last week had a thing about the housing bust and all of that. How do you economists figure in the psychological aspect of this?

MR. DILLON: In fact I think the psychological aspect of this is going to worse than the oil price impact per say. It is the fact that the level of uncertainty has increase dramatically that makes us all collectively pause or hesitate and that collective hesitation is what slows the economy.

MR. LEHRER: You don't mean all economist, you mean all of us?

MR. DILLON: All individuals and collectively. And that collective hesitation is what slows the economy.

MR. LEHRER: Mr. Mincy do you agree with that?

MR. MINCY: I think so. One thing that we can look at is.

MR. LEHRER: Just on the psychological thing. We want to finish on that? You agree that it is a psychological factor?

MR. MINCY: Absolutely. If we move the consumer sector of the society that has weather us through such storms that will tend to bring on a more series recession quicker and make it weaker.

MR. LEHRER: Ms. Freedman what do you think about that?

MS. FREEDMAN: I prefer and have for some time that the consumers spend a little bit less and save a good deal more as a way to strengthen our economy for the future.

MR. LEHRER: In other words it wouldn't hurt people to get a little scared right now?

MS. FREEDMAN: That is right because that is the best thing for future growth.

MR. LEHRER: Mr. Dillon correct me if I am wrong but do we have a tiny element of agreement here between the four of you before we go?

MR. DILLON: That is the level of uncertainty.

MR. LEHRER: Ms. Freedman, gentlemen thank you. Judy.

MS. WOODRUFF: Still ahead on the Newshour, the California Earthquake one year later, is our government failing us, and remembering Leonard Bernstein. FOCUS - AFTERSHOCK

MS. WOODRUFF: It's been almost a year since a major earthquake rocked the San Francisco Bay area, leaving behind crumbled buildings and collapsed highways. Since then, area residents have been struggling to repair the damage. And as Spencer Michels of public station KQED reports, some are trying to fix more than just the highways.

MR. MICHELS: Much of the damage to highways and bridges was dramatic and immediate. The worst disaster occurred on the Cypress Viaduct of the Nimitz Freeway in Oakland, where 41 people died when the top portion of this double decker roadway pancaked into the lower level at rush hour. One person was killed when bolts on the San Francisco-Oakland Bay Bridge failed, causing a section of the roadway to collapse. Repairs were made quickly and the bridge put back in service, but experts warn the bridge is vulnerable and needs upgrading. In San Francisco, the Embarcadero Freeway along the waterfront was damaged and closed. It may never function again, even though no one died here. And North of the city along Coastal Highway 1, the 7.1 earthquake caused landslides that destroyed the road, virtually isolating beachfront communities. This summer, residents protested long delays in fixing the highway. Solving these problems is the job of Bob Best, director of California's transportation agency, CalTrans.

BOB BEST, Director, CalTrans: The major structures that were closed around here, and of course, several of them are still closed in the process of being replaced or retrofitted, are just the obvious symbol of it. It's going to cost us somewhere around $1.8 billion to put all of the transportation facility whole again.

MR. MICHELS: While traffic in many areas today is a mess as drivers crowd alternate routes that were not designed for heavy usage, the damage the earthquake caused has provided opportunities for community activists and politicians to right old wrongs and for engineers to learn some new lessons. Since it was built in the 1950's, Oakland's Cypress structure, a key link in the major highway between San Jose and Sacramento, has been a thorn in the side of many residents of predominantly black West Oakland. Residents didn't want the Cypress rebuilt. They say that it physically split the community and spewed out fumes and noise. Nor do they want a temporary road along the same route. For years, this community had little power, but this time, activist Bill Love says it will be different.

BILL LOVE: When they first built the Cypress, we were a minority black community that was totally controlled by a white power structure. Today the mayor's black, our supervisor's black, our city council person is black, the majority of the city council is black, 40 percent of the Board of Supervisors is black, the Speaker of the Assembly is black. We now have people who will, in fact, listen to us.

MR. MICHELS: Love and others organized CERT, Citizens Emergency Relief Team, and made their presence known at CalTrans meetings on how to replace the wrecked freeway. The project engineer for CalTrans wasn't happy. [CALTRANS MEETING WITH PUBLIC]

MR. MICHELS: From that rocky start, relations improved. Engineer Irene Itamura today attends all CERT's meetings.

IRENE ITAMURA, Project Engineer, CalTrans: I think the times are different now. I think CalTrans listened in the '50s, but we are listening to the city, or the community works normally through the city. Now we are getting input directly from the community as well as from the city.

BILL LOVE: CalTrans listened, huh? No. CalTrans took a couple of beatings and they listened. We had a couple of public hearings and I felt sorry for them. And they finally realized that there was a real unified, both an emotional and rational response to this freeway.

MR. MICHELS: The Cypress Freeway was demolished quickly. CalTrans abandoned plans to install a temporary high speed roadway in the same place. Instead, the agency bowed to community pressure, planting trees and renaming the street the Nelson Mandela Parkway. Meanwhile, state engineers at Intamura's office are designing several alternate routes for a permanent freeway. Across the bay in San Francisco, officials and environmentalists also see an opportunity for change. The Embarcadero Freeway has long been regarded as an eyesore, blocking waterfront views. While it didn't collapse last October, this double decker roadway, similar in design and age to the Cypress, suffered serious structural damage and is closed to all traffic. In fact, motorists are using part of it as a parking lot, while politicians are predicting it could fall down in another quake.

BILL MAHER: It's going to kill people.

MR. MICHELS: Bill Maher is a San Francisco supervisor who wants to take down the freeway.

BILL MAHER, San Francisco Supervisor: It's clear to me that the Embarcadero is beyond redemption and we should proceed to replace it.

MR. MICHELS: Maher and the city administration are campaigning hard to demolish the Embarcadero, but in 1986, San Franciscans voted overwhelmingly to retain the Embarcadero Freeway. Despite its appearance, it had become a convenience, especially to the city's famed China Town. Activist Rose Pak fought to save it.

ROSE PAK: Forty years ago the major controversy in China Town was China Town was going to be phased out, it was going to die, until the freeway opened up and it revitalized and it grew. The perception is that the freeway revived China Town.

MR. MICHELS: After the earthquake, Pak organized a mass shutdown of China Town and a demonstration at City Hall to get the freeway fixed and not removed. But the city defied her andis asking the state to allow the demolition of the Embarcadero.

ROSE PAK: And to our horror, CalTrans did not fight it and what they told us was good riddance, that freeway has been a pain in the butt since the day they built it and, you know, we've been harangued and all of that, if the city wants it, they can have it.

BOB BEST, Director, CalTrans: We would not only let 'em tear it down, we'd do it for 'em. Just from an investment standpoint, you don't take a structure that old that's going to cost that much to retrofit. You're better off building and replacing it with a new facility.

MR. MICHELS: The city wants to bring back an underground routing that was used in the 1920s, an aesthetically pleasing tunnel for the roadway as it passes the ferry building. This plan would cost up to $135 million. China Town leaders didn't like it because it would take too long to build and carry too few cars. But such opposition in areas of town adversely affected by the freeway's closure faded as community leaders like Rose Pak reluctantly bowed to political pressure and threw in the towel. So it's a good bet, the Embarcadero Freeway will come down. While CalTrans seems to be handling the political disputes, it is still wrestling with sticky seismic engineering problems. In July, Director Best ordered retrofitting work stopped on several San Francisco freeways. A panel of experts had said that the ongoing work to support pillars were probably inadequate; the retrofits needed redesign.

MR. BEST: What we are doing on these structures has never been done anyplace in the world before.

MR. MICHELS: Designing freeways for earthquakes was a very inexact science in the '50s when the Cypress was built. Fixing damaged freeways is more uncertain than building new ones according to seismic architect Richard Eisner, who heads an earthquake preparedness agency.

MR. EISNER: Existing structures, we don't how they were built, we don't know the quality of the construction. In many cases we don't know enough about the actual design that went into the structure, and plus it's extremely costly.

MR. MICHELS: Is it worthwhile to retrofit all these structures?

RICHARD EISNER, Seismic Architect: Absolutely, absolutely. In another earthquake, one that's more centered in an urbanized area, rather than one that was a hundred kilometers from the core of the Bay area, we're going to have not one freeway structure collapse, we could have hundreds, and not forty-two people die, but hundreds die.

MR. MICHELS: Eisner and engineers in the Bay area are alarmed at how little money and effort have been spent on research into repairing existing structures.

MR. EISNER: The interest in retrofit design and repair wanes after a period of months after a major disaster such as this. Everyone is interested in building new buildings.

MR. MICHELS: On the front lines, the broken freeways, construction engineers must cope with some uncertainty about the repairs they are making. As the stoppage of work indicates, engineers disagree on how best to proceed.

JOE CAMILLERI, Civil Engineer: I think there's a lot of new variables that still have to be tested so when you have that, there's not going to be a consensus of what to do.

MR. MICHELS: It will be next spring or later before many of San Francisco's moderately damaged freeways can reopen, and it will take at least five years before the badly damaged Cypress and the Embarcadero Freeways will be replaced. Engineers are trying to plan today for an eight magnitude earthquake, as large as the one that destroyed much of San Francisco in 1906. They say they can do it but that it will be very expensive. SERIES - FOR THE PEOPLE?

MS. WOODRUFF: Next we consider our series of special conversations on the Washington budget crisis and what it says about how the federal government of the United States works. Tonight we talk with Frances Fox Piven, a professor of political science at the Graduate Center of the City University of New York. Ms. Fox Piven has co-authored a number of books, including poor people's movements and why Americans don't vote. Dr. Piven, thank you for being with us.

FRANCES FOX PIVEN, Political Scientist: Wonderful to be here.

MS. WOODRUFF: What does this argument in Washington over the budget say about how well our government is working do you think?

DR. PIVEN: Well, I think overall it says that we have come to be in a very sorry mess, the result of at least a decade of policies, budget policies, which will, when you take them together, are kind of feeding frenzy, the budget politics are about some people getting benefits from government and other people trying not to pay taxes to government, and over the past decade, well organized interests, especially business interests, and affluent interests, did very well in getting their taxes slashed by monumental levels at the same time as we built up military spending and then tried to make it all come together by cutting programs that go to ordinary citizens, a whole range of programs that go to ordinary citizens, and also keep our country running by paying for infrastructure. It doesn't work. You can't cut taxes, spend a great deal on the military, and cut programs that are relatively small by comparison with these tax cuts on the military build-up.

MS. WOODRUFF: And why were these special interest groups so successful over this period that you're referring to?

DR. PIVEN: Well, special interest groups are always very successful at budget politics. They have beety eyes, they pay attention, they have professional lobbyists, they're the liquor interests, the fur interests, and they're always very important and very influential, but it's also true that two other conditions made the American people especially weak and prone to be deceived about the politics of the last decade. One was Ronald Reagan, the great communicator, I think pulled the wool over people's eyes. He promised he was cutting taxes. People thought it was their taxes. In fact, the taxes of a lot of poor working people actually rose during this period, while the taxes of the rich were cut. But another reason was that the opposition, the Democratic opposition, was so weak voiced, was so itself, so on this side, on one side, on the other side, didn't really have a clear position and didn't tell the American people what was happening.

MS. WOODRUFF: But let me ask you about those two pieces, on Ronald Reagan being able to pull the wool, why was he able to do that? Were people just particularly prone to having the wool pulled over their eyes? I mean, what was it about what was going on among the electorate during that period?

DR. PIVEN: Well, a couple of things. One was that the people who are the electorate are not the entire country, and this also has to do with why the Democrats were as weak and ineffective as they were in raising alternatives, in contradicting the government, which was what their job was, and that is in the United States only half the population votes. Now it's true that just voting is not, is a weak reed compared to having all the bully lobbyists out there, but lots of people vote and they vote for the Congress every two years, and the Senate every six years, and the President every four years. And if issues are enunciated and people have the impact of those issues on their own lives explained, then those voters can matter, but in the United States -- and this is in a way our great shame -- half of the electorate and half that's doing worse does not go to the polls. This is an astonishing thing that we never pay attention to. We're always proud of ourselves as the first democracy.

MS. WOODRUFF: But we do hear about that at voting time, right after there's been an election, and we say tsk, tsk, only 49 or 53 percent voted, and we lament it and we talk about it and we wait another four years or another two years to talk about it again.

DR. PIVEN: We think there's something wrong with those people, they're just not conscientious enough.

MS. WOODRUFF: And the percentage keeps going down, but why does it keep going down?

DR. PIVEN: Well, I think that's that a pattern that's deeply rooted in American political institutions. We have had low voting for most of the 20th century and it began in the 19th century when in the states and in the counties, systems were introduced which required people to go through a series of procedures to get themselves on the list of accredited voters. We call that personal voter registration. Now most Americans take that for granted. What we are not aware of is that this is the only country in the world that makes citizens figure out how to get themselves on the list and what most of us are not aware of is that this is the only country in the world that makes citizens figure out how to get themselves on the list. And what most of us are not aware of most of the time either is that we don't make it easy to get on the list. You -- for example, we are in Manhattan, the most sophisticated, perhaps, borough in the country, and I dare say that most people don't know where you have to go to get a registration form. You have to go down to Verrick Street. And they don't know what it's like to try to get the people at Verrick Street to answer the phone, and they don't, aren't sure how to answer the questions when you get the form. So all over the country, registration is mysterious to a lot of people, especially poorer people, less educated people. They don't know where to go, how to do it. They're intimidated by officials. This is the only country that we do it that way. If we watched another country in Central America with a system like this, we would be very critical. In this country, we allow it to go on, we're used to it, and what happens is that once lots of poorer people, less educated people, don't vote, politicians begin to ignore them. They don't speak their language; they don't raise their issues. So that it also becomes the case that the poorer people become apathetic.

MS. WOODRUFF: And you're saying that's what's happened. But as it relates to what's happening right now, how much difference would it make? Would we be having a different debate over the budget right now, a different kind of impasse? Would we still be having an impasse if we had 75 percent of Americans registered and voting or 100?

DR. PIVEN: That's -- you know, it used to be said, especially by conservative political analysts, that there's a danger in too much democracy, because if you expand democracy, people make demands, and those demands escalate, and government can only give so much, and so as a result of escalating demands from too much democracy, you have a kind of crisis of democracy. But it turns out to be in a way just the other way. Our democracy is contracting and as it contracts, it isn't the people who make demands. It's the special interests who make demands. And it's their feeding frenzy in the 1980s that brought us to this point.

MS. WOODRUFF: So what difference would it make?

DR. PIVEN: If we had had broader democracy, then we have to hope that there would be politicians who would want to appeal to those low income voters and who would, therefore, have first defended, defended the programs that were cut that educated people, fed people, maybe gave them medical care. That would put us in a better economic position today to compete in an international economy. And it's also true that if more people had voted, especially the least well off, maybe we wouldn't have had a set of policies which actually taxed the poor more and the rich less.

MS. WOODRUFF: So would we still be having this debate over whether the wealthy should pay more taxes, whether --

DR. PIVEN: They would be paying more.

MS. WOODRUFF: They would already be paying --

DR. PIVEN: They would already be paying more taxes. We wouldn't have given away, as we did, $750 billion in tax revenues in the first Reagan administration. We did that. We gave it away to business and to the well off.

MS. WOODRUFF: What would the debate over? Would it -- I mean, would we still be arguing over the size of the defense budget --

DR. PIVEN: We would still be arguing over the size of the defense, but maybe the pressure from Democratic publics would be so great that we would have to chuck Star Wars. It wouldn't hurt. It would be all right to chuck Star Wars. It really would. Nobody has an idea what good it's going to do for anybody, excepting a few specialized firms, in any case. And maybe if we had that kind of pressure from the bottom, people who won't pay higher taxes than the rich, people refuse to, and register that refusal with their votes, people who demand decent education, who want to have a health care system in the United States as good as Canada or England or Australia or France, which we don't have, then maybe we would have more, actually more rational policies, because politics for the rich has not been good for our economy.

MS. WOODRUFF: What do you say to those people sitting out there who say, well, that sounds good, it's all well and good for the political scientists to sit around and discuss the theory and the philosophy of why we should have a more truly democratic government, but the reality is that we have a system of government where only half the people vote, and they happen to be the people who have a higher income, and you do have special interests in there mixing it up and having a big influence.

DR. PIVEN: Well, we may not be able to do anything, at least in the short run, about special interests. They're there and they're going to be fighting for what they want, but what we can do something about is low voting. You know, there was a bill brought before the Congress just this year. The House passed it, the Senate just missed considering it because it lost on a cloture vote.

MS. WOODRUFF: And what it would have done?

DR. PIVEN: That was a National Voter Registration Act, it was called. It would have made very simple proposals to make it possible for people to register to vote whenever they apply for a driver's license or unemployment insurance or welfare or other government services. Why not? You can register for the draft at the post office. Why shouldn't you be able to register to vote at a whole range of government services? I'm very hopeful that it will come up again. It won't be a miracle cure, but it would be a step.

MS. WOODRUFF: It passed the House. Why didn't it pass the Senate?

DR. PIVEN: Well, the Democratic leadership didn't want to bring it up without a ruling that would prevent a Republican filibuster. In order to get such a ruling, a cloture vote, you need 60 votes. They only got 55. It was a strictly partisan vote, by the way. The Republicans voted against it all the way, excepting for Senators Packwood and Hatfield. I'm hopeful that it will come up again at the next session in one small step toward bringing us into the Democratic world in a fuller way than we are at this point.

MS. WOODRUFF: Well, Frances Fox Piven, we thank you for being with us.

DR. PIVEN: Thank you. RECAP

MR. LEHRER: Again, the major stories of this Monday, Soviet Pres. Gorbachev was awarded the 1990 Nobel Peace Prize, and the last major segregation law went out of effect in South Africa. FINALLY - AMERICA'S MAESTRO

MR. LEHRER: We close tonight with a few minutes with Leonard Bernstein. The computer/conductor died yesterday at the age of 72. Here's an excerpt of him conducting the Boston Symphony and the last movement of Tchaikovsky's 5th Symphony. It happened at the Tanglewood Music Festival in Massachusetts in honor of Bernstein's 70th birthday. [BERNSTEIN'S CONDUCTING OF THE BOSTON SYMPHONY]

MR. LEHRER: Leonard Bernstein at Tanglewood two years ago. Good night, Judy.

MS. WOODRUFF: Good night, Jim. That's our Newshour for tonight. We'll be back tonight with another conversation about the budget crisis and government. This one features economist Gary Becker of the University of Chicago. I'm Judy Woodruff. Thank you and good night.