The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight four views of the Federal Reserve decision to cut interest rates, a Kwame Holman report on the congressional politics of a new military airplane, a Susan Dentzer profile of the new head of the World Health Organization, and the debut of a conversation series on issues raised by the conduct and investigation of President Clinton - tonight: law professor, Stephen Carter. It all follows our summary of the news this Tuesday.% ? NEWS SUMMARY

JIM LEHRER: The Federal Reserve lowered short-term interest rates 1/4 point today. They cut the key rate on overnight loans between banks to 5.25 percent from 5.5. percent, where it has been since March 1997. In a statement the Fed said the action was taken to "cushion the effects of overseas financial turmoil on U.S. economic growth." Wall Street had expected the rate cut, but apparently wanted a deeper one. The Dow Jones Industrial Average closed down 28 points, at 8080.52. We'll have more on the Fed decision right after this News Summary. In other economic news today, consumer confidence was down in September for the third month in a row. It was the worst decline since January. It's measured by the Conference Board, a private business research group in New York City. A spokeswoman blamed concern over the Clinton-Lewinsky investigation and global market turmoil. The last of Hurricane Georges dumped rain on the Gulf states today. Forecasters expected up to 15 more inches on top of the two feet that fell yesterday. Two more deaths were reported, bringing the toll to four. In Gulfport, Mississippi, residents tried to clean up. Winds were clocked at 35 miles an hour, down from 175 yesterday. The National Guard directed traffic where stoplights no longer worked. At the White House Federal Emergency Management Director James Lee Witt had this to say.

JAMES LEE WITT: It's still just a little early for - to give an estimate of the damages, though someone gave me a figure this morning of the economic loss just in Puerto Rico as over $200 million. One of the figures I saw was over $2 billion just in Puerto Rico, but that was just an estimate. The insurance losses in just the Panhandle is over $200 million, just insurance losses. And the infrastructure losses, we're still doing damage assessments, and we'll continue to do that through this week to make sure we get a good estimate.

JIM LEHRER: Witt also said President Clinton would soon visit the region. Palestinian Leader Arafat was back at the White House today for a one-on-one meeting with President Clinton. Afterwards, Arafat said he accepted a proposal for Israel to return 13 percent of West Bank land to Palestinian control. 3 percent of that land will be dedicated to a nature reserve to be jointly monitored by Israelis and Palestinians. White House Spokesman Mike McCurry said this about the meeting.

MICHAEL MC CURRY: They talked about all of the elements of the interim agreement discussions that the parties will have in the region and that presumably will underpin the discussions they have directly here in Washington in the future. The security that the citizens of Israel need to feel as they move forward in the peace process is a very real concern. And I think Chairman Arafat understands that, but so are the concerns that he raises, and he would like to see the Israeli side address, and those are serious concerns as well.

JIM LEHRER: On the Palestinian-governed West Bank today a Palestinian man was killed and two others injured when their car exploded. Police said all three were known activists in the militant Hamas movement. It was not known if they were victims of an accident or an attack. Congress was told today that the U.S. military was showing signs of serious wear. The Joint Chiefs of Staff told the Senate Armed Services Committee that readiness is fraying and the long-term health of the military is in jeopardy. They called for increased spending on weapons procurement and on pay and retirement benefits to improve enlistment and retention rates. Army General Henry Shelton is chairman of the Joint Chiefs.

GEN. HENRY SHELTON: The most critical factor for both current and future readiness are our men and women who - that we are privileged to have serving in uniform today. Our people are more important than hardware. We must do whatever is necessary to sustain the quality of those in their ranks, because quality is more important than quantity. We are already seeing troubling signs that we are not on the path to success in that effort. Our retention rates are falling, particularly in some of our most critical skills like aviation and electronics, the very skills that are in demand in a vibrant economy.

JIM LEHRER: As the joint chiefs were testifying, the Senate passed a $250 billion defense spending bill for the next fiscal year. It includes a 3.6 percent pay raise for military employees and money for anti-missile defense research. The House passed the same bill yesterday. The president is expected to sign it. We'll have more on defense spending later in the program. Former Los Angeles Mayor Tom Bradley died today of a heart attack. He'd been a police officer before becoming a lawyer and entering politics. He was a Democrat, was re-elected four times, and served 20 years before retiring. He suffered a stroke two years ago. Tom Bradley was 80 years old. And that's it for the News Summary tonight. Now it's on to the Fed's interest rate decision, a new military airplane, the new head of the World Health Organization, and a conversation with Stephen Carter.% ? FOCUS - CUTTING RATES

JIM LEHRER: Reaction to today's interest rate cut from Laura Tyson, former economic adviser to President Clinton, now dean of the Hass School of Business at UC-Berkeley; Joel Prakken, chairman of Macroeconomic Advisers, an economic forecasting firm in St. Louis; Lyle Gramley, a former Federal Reserve governor, now consulting economist at the Mortgage Bankers Association of America; and Michelle Laughlin, economist and vice president for the Wall Street investment firm, Prudential Securities.Beginning with you, Laura Tyson, first, a quick go-around. Did the Fed do the right thing today?

LAURA D'ANDREA TYSON: I think absolutely. It was a courageous move. It was the right move, and a very important signal to try to help and restore confidence in the global economy.

JIM LEHRER: Mr. Prakken.

JOEL PRAKKEN: It's hard to fault them for it. There's little probability that this will be a mistake, particularly since if events dictate, they can always take it back.

JIM LEHRER: Mr. Gramley.

LYLE GRAMLEY: I think they did, yes. I think it's hard to make a case that we really needed lower interest rates for the U.S. economy. But if the Fed hadn't moved today, we probably would have seen such a big drop in bond and stock market prices that we would have had adverse repercussions all over the globe. So I think they did the right thing.

JIM LEHRER: Ms. Laughlin, Wall Street wanted more, though, right?

MICHELLE LAUGHLIN: We wanted more. The Fed did the right thing by lowering rates. I think there's some debate about the magnitude of the move, but I certainly think going forward we'll see additional rate cuts. So we'll stick with what we got today and be happy with that for now.

JIM LEHRER: What exactly was - Wall Street wanted actually double that. They wanted a .50 cut, right, rather than just a .25?

MICHELLE LAUGHLIN: Exactly. And on top of that, we would have liked to have seen a cut in the discount rate. That would have been more of a symbolic move, but it really would have underscored the Fed's intentions and I think signaled to the markets that easier monetary policy was on the way. And I think that would have been very well received in the market.

JIM LEHRER: Laura Tyson, is it mostly a symbolic thing, or does it - will this actually have practical effects, both here and in the global markets?

LAURA D'ANDREA TYSON: Well, I think it is a very important symbolic gesture. But it also has real effects. The symbolism is basically to say we recognize there's distress in the global market; we recognize it's beginning to show signs of erosion in the United States. We want to take a move now. It will bring down rates, particularly for consumers, and for investors, what the Fed is doing, it's sending a signal that they're concerned about the signs of a credit crunch, and that they are willing to send into the system the back-up needed really to keep credit flowing. That's the key signal today. It's a confidence signal.

JIM LEHRER: It's a confidence signal, Mr. Prakken, and you think that's really the basic move today, and that was the basic impact of it, a confidence move?

JOEL PRAKKEN: I do. A rate cut this small will have impacts on the other economy, but they will be quite modest. A larger point to be made, I think, though, is that Fed officials were trying to communicate to people out there that they're not asleep at the switch, and that if economic conditions dictated, they're willing to switch the emphasis of policy away from fight inflation to promoting economic growth.

JIM LEHRER: Do you agree with Mr. Gramley that by the time today came, the Fed really had very little choice?

JOEL PRAKKEN: I do. Financial markets had priced into them an expectation of a rate cut even somewhat larger than today and had the cut not be forthcoming, I expect that there would have been a backup in rates and a decline in the equity market; that would have been disturbing.

JIM LEHRER: Mr. Gramley, let's talk about some of the practical things. You work for the Mortgage Bankers Association. Is what happened today going to affect mortgage rates, credit card rates, consumer rates at all?

LYLE GRAMLEY: It won't affect mortgage rates very much because this move had been anticipated and bond rates have gone down, and mortgage rates right along with them. The benefits will come for consumers who have a home equity loan that's tied to the prime, because the prime, because the primary will probably go down. Auto loans that are tied to the prime --

JIM LEHRER: Would it go down about the same rate as --

LYLE GRAMLEY: Probably. A quarter of a percentage point on the prime. And that will bring down --

JIM LEHRER: And that's important. Tell us about what the prime is and why that's important.

LYLE GRAMLEY: The prime rate of interest is the rate of interest that banks charge their favorite commercial customers. But a lot of loans to consumers for buying autos or home equity loans are tied to the prime. So when the prime goes down, their loan payments will go down also.

JIM LEHRER: So there will be a ripple effect, right?

LYLE GRAMLEY: There will. There will, indeed. It's not large 25 basis points doesn't change the course of Western Civilization, but it does help.

JIM LEHRER: Does it cause people to - does it cause consumers to buy and do things they wouldn't otherwise do?

LYLE GRAMLEY: We might see somebody buy an automobile that they otherwise wouldn't have bought. Somebody whose home -- his equity payment loan has gone down-will have a little money - more money - spent over to spend for something else. But I think it's more the effect on confidence than it is on interest rates per se.

JIM LEHRER: Okay. Ms. Laughlin, what does this spur investors to do, both the Wall Street professionals and those who work with Wall Street professionals, in other words, their customers.

MICHELLE LAUGHLIN: Well, I think one of the things it's going to help to do, echoing what everybody else has said, is it shores up confidence. There's been so much volatility in the financial markets of late and the fact that the Federal Reserve had taken action really - you know -- confirming there's a doctor in the house I think will go a long way in reducing a lot of the volatility we've seen. It may encourage individuals, therefore, to stick with their stock holdings, not to liquidate. I think it will encourage investors to look at Treasury securities, which will benefit, particularly shorter-term Treasury securities, which will benefit as rates come down. And I think, in general, it will keep financial assets, you know, relatively well bid.

JIM LEHRER: Now, Laura Tyson, let's go beyond the United States now, because one of the underlying reasons given today by the Fed for doing this was the problems in the global markets. Give us a cause and effect now - 2.5 today helps people in Brazil, or helps people in Thailand or Russia or elsewhere in the world.

LAURA D'ANDREA TYSON: Well, the cause and effect is, No. 1, to -- the U.S. has been one of the few sources of powerful economic growth in the world economy. And we are a very important market for countries that are trying to crawl out of very deep recessions, some of them even bordering on depression. So with stronger U.S. economy, stronger consumer demand in the United States, stronger investor demand in the United States means better market conditions for the rest of the world. That's number one. Number two is that investors around the world have gotten so spooked by problems, such as a default in Russia, and problems such as the issues in Indonesia and Malaysia, but they've been very unwilling to lend, even to very well-rated corporate borrowers and very good credit prospects around the world. What this does is - again, if it restores confidence and sends a powerful signal that credit conditions will ease, then I would hope that there would be some moneys that would become available for the good borrowers in the world who are not at this point able to compete for funds at all because investors have simply stampeded out of the rest of the world into safe U.S. Treasury bills.

JIM LEHRER: What do you say to those, Ms. Tyson, who would suggest that this now means that the Federal Reserve of the United States has become kind of the world banker, it changes interest rates and it affects everybody in the world?

LAURA D'ANDREA TYSON: Well, I think that we are in a very unprecedented situation where we do have a very large global financial crisis going on around us. We do need institutions to play the lender of last resort role. The Federal Reserve, along with the other central banks of the G-7 nations, Europe, and Japan, can play that role. Japan really can't reduce interest rates much more. They've reduced them essentially to zero as it is. Japan could reform its banking system. The European Central Banks,I hope, will follow the Fed's lead and act as a group, collectively and cooperatively to provide some additional resources and some additional signs of concern to the global financial markets. Somebody has to play that role. And I applaud the Fed for taking the step today.

JIM LEHRER: Mr. Prakken, how do you see this thing beyond the United States and the effect it'll have on the global markets, and what - practical effects?

JOEL PRAKKEN: I think the newest concern for the Fed is a fear that the contagion that swamped Asia moved to Russia, could now overtake Latin America in our backyard, surrounding the United States and cut short the expansion. My view is that by itself the Fed cannot do all the heavy lifting. It can help around the edges, by making a little bit more liquidity available, by calming investors' concerns. But --

JIM LEHRER: By making liquidity available, that means by lowering the interest rates a little bit-that means that money is cheaper to borrow and there's more available, right?

JOEL PRAKKEN: Money is cheaper. The terms are easier. But I suspect, however, that bringing stability to South America probably will also entail help from the IMF, maybe in coordination with the United States Treasury, I wouldn't be surprised after the upcoming elections in Brazil later this week, that you see such an announcement. The Fed's move today I think should be thought of as part of a larger effort to stabilize that region of the world. And this is the little bit that the Fed can do to help.

JIM LEHRER: Now, Ms. Laughlin, of course, Wall Street is part of an international market, more so now than ever before, is it not?

MICHELLE LAUGHLIN: Absolutely. You know, one of the other assets - when you talk about some of the international consequences are benefits from the Fed action today -- there are a number of indirect effects probably worth mentioning, particularly when you look at the dollar, so many commodities are traded in dollars, and as the dollar has risen over the last year and commodity prices have dropped to 21 year lows, many economies have struggled, economies which are tied to oil, Canada, with 40 percent of their economy is tied to raw materials prices, and because their currency had weakened so much was forced to raise interest rates. They now will get some relief, and, in fact, the Bank of Canada was able to cut interest rates finally today. So I think there are a number of other indirect effects away from the confidence issue, which will provide some global relief.

JIM LEHRER: Mr. Gramley, how do you see the Fed now on this kind of new - this is new, is it not, to have this kind of power globally?

LYLE GRAMLEY: Well, the Federal Reserve has always had to take international considerations into account in formulating its policies. And I remember back in 1982 the Federal Reserve made a major change in the course of policy in part because of these - the serious state of the world economy. We were going through the Latin American debt crisis at that time. But I would stress that the Fed can't be the world's central banker. They couldn't have taken this step today if they thought that by doing so it would have adverse effects on the U.S. economy. They could go ahead and take this step because the risks of low inflation are quite minimal.

JIM LEHRER: But how should it be read, as a step to help the U.S. economy, or more to help the global economy?

LYLE GRAMLEY: I think it should be read as a step to tell the world that the Fed intends to keep the U.S. economy growing at a satisfactory pace, both for our own sake and to do whatever that can to facilitate a solution to this crisis internationally.

JIM LEHRER: But you had suggested earlier that you were really sure that the Fed really had to do this, they did it - I mean, they had to do it because of the advanced word and all of that, but as a practical sense and in a practical way you didn't think they had to do it. Why not?

LYLE GRAMLEY: The current numbers coming in are still quite strong. Consumer spending is doing very well this summer. Most of our forecast numbers for the third quarter are being revised up. The housing market is doing very well. Initial claims for unemployment insurance are down below 300,000 a week. This economy still has a lot of momentum. We can see possibilities of a slowing pace of economic growth as time goes on, but we've been forecasting a slowdown since the middle of 1996. It hasn't happened yet. But this is a safe step to take. The Fed really hasn't taken any undue risk today.

JIM LEHRER: Laura Tyson, for the lay people listening, which is most of us, what will you professionals be looking at over the next few days and weeks to see if, in fact, the Fed action today had some kind of really good lasting, important effect here and elsewhere?

LAURA D'ANDREA TYSON: Well, I think that we will be looking at what happens in global financial markets. One of the signs that we are in a very sort of fragile situation is the fact that even very well rated borrowers have had trouble floating new bond issues, is the fact that the risk premium, the additional amounts that countries or that companies have to pay above the Treasury bill rate to get money to finance worthwhile projects, that those premiums have gone up dramatically, and that discourages investment. So there will be a number of indicators that come from the financial markets, themselves, in terms of new bond issuance, initial public offerings, can companies actually issue new stock, what's happening to the premiums charged to borrowers around the world in different countries. Then, as we go on, we'll also see signs of what's happening to consumer behavior as consumer rates come down. I would disagree with the view that it was certain today that what the Fed should have done is reduce rates by .5. I think the truth is that everyone should recognize we're in a highly uncertain situation right now. We've had a number of major surprises. Everything is very volatile. It seems to me very important for the Fed to send a signal, but at the same time to be extremely cautious. And, of course, to move .25 today - 25 basis points today - doesn't preclude moving further as more evidence comes in. I think the Fed is to be applauded for moving but also for being cautious.

JIM LEHRER: Mr. Prakken, what's your reading on whether or not - let's say this doesn't work. I mean, let's say things continue to get bad, not necessarily here but around the world, are there - is this -- this should not bee seen as an act of last resort by the Fed, there are other things to do ? Do you agree with Ms. Tyson, if this doesn't work, they can come back with another 2.5, or do others - and it's still "a" solution to the overall problem?

JOEL PRAKKEN: The Fed cut rates today because the chances of slower growth or even a recession in the U.S. have gone up in his estimation. If, in fact, a recession does develop in the United States or becomes even more threatening, it will take a considerably larger decline in short-term interest rates to stem that than we've seen to date. But I think it's worth noting - and I do - I agree with Lyle in this regard - that one of the reasons the move today was so cautious is there are still signs out there that economic growth is faster than can be sustained indefinitely in the United States, and there are some indications that inflation fundamentals are gradually deteriorating. That means that the Fed has to be cautious in moving too quickly in a direction that could ultimately over-stimulate the U.S. economy.

JIM LEHRER: Okay. Thank you very much. I want to correct myself. I said 2.5 - what I meant was .25 - as all of you all knew - and I know the world knew as I said it a while ago. But thank you all four very much for being with us.% ? FOCUS - WORTH THE MONEY

JIM LEHRER: Still to come on the NewsHour tonight, a new military airplane, the new voice for World Health, and the debut of a new conversation series. Kwame Holman has the airplane story.

KWAME HOLMAN: The C-130 Hercules has been called the premier military cargo plane in the world. From Vietnam to the Gulf War, to Bosnia, the C-130 has been credited with toughness and versatility in carrying out its mission, whether delivering troops into combat, heavy military equipment, or food and medical supplies to countries devastated by war and famine. And the C-130 has been a work horse in this country, transporting National Guard units and equipment in all 50 states. Air Force plant six, located in Marietta, Georgia, is where Lockheed-Martin designs and builds the C-130. Lockheed has been based here for more than 40 years and is the U.S. military's number one supplier. The company takes special pride that the C-130 has been in continuous production since 1954, longer than any other plane built in the U.S.. Inside the factory Lockheed workers now are assembling the latest and controversial version of the C-130, the J model. The C-130J doesn't look much different from previous designs, but Lockheed says the new aircraft is safer, faster, cheaper to operate, and technologically superior to its predecessors. General Ronald Fogleman, former Air Force chief of staff, agrees, but is concerned about the cost.

GEN. RONALD FOGLEMAN (Ret.), Former Air Force Chief of Staff: Clearly, the C-130J is a much more capable airplane than what we have today. But it's really a cost-effectiveness kind of analysis that you're involved in here.

KWAME HOLMAN: Production of the C-130J is two years behind schedule, and each plane now costs $60 million, $20 million more than its predecessor, the C-130H. Fogleman is among those critics who ask does the United States military need the J model and can the military afford it?

GEN. RONALD FOGLEMAN (Ret.): In an era in which you don't have any money to buy such things this is a very difficult decision.

KWAME HOLMAN: But former Marine pilot Arlen Rens insists that the new C-130J is a sound investment. Rens now works for Lockheed and says the advanced technology in the new C-130J will make military pilots more productive.

ARLEN RENS, Lockheed Martin Pilot: Today's average pilot is going to fly to levels of proficiency and expertise that used to be the realm of a very few, the folks we sent the top gun. This system is going to take average and make them great. And it's going to take the above average and they're just going to do magic.

KWAME HOLMAN: We went aboard one of the new C-130J's for a demonstration of the new aviation technology in the cockpit. Modern turbo prop engines enabled the C-130J to take off and land in shorter distances, a critical factor for operating in dangerous or remote areas.

SPOKESMAN: Thank you much. Tower's coming up, flaps on staid place -

KWAME HOLMAN: Instead of a crew of four in the cockpit, as in previous models, only two pilots are needed to fly this plane.

SPOKESMAN: As I look on my map, right here's the ridge line, so all three things tell me I'm right where it says I am.

KWAME HOLMAN: And there's a sophisticated digital navigation system that enables the C-130J to locate a target in total darkness and fly in extreme weather. Air Force officials acknowledge the C-130J is an impressive aircraft, but they don't consider it a priority, and they didn't ask for any new C-130's in their budget request to the Pentagon.

SPOKESMAN: The tower coming back -

KWAME HOLMAN: Nonetheless - when the House of Representatives approved the military's budget in June, eight C-130J's had been added at a cost of nearly $1/2 billion. Wisconsin's David Obey, the top Democrat on the House Appropriations Committee says that money would be better spent on more pressing priorities, for example, replacing the aging F-14 jet fighter fleet.

REP. DAVID OBEY, (D) Wisconsin: And yet what the Congress chose to do was to cut back that program in order to put over $400 million into the purchase of C-130's to go to National Guard units around the country, and that was done primarily at the request of Speaker Gingrich, who happens to represent Georgia, where the planes are being built.

KWAME HOLMAN: The C-130's are built right next door to House Speaker Gingrich's home district. Many of Lockheed-Martin's 9,000 employees are his constituents. According to "Inside the Pentagon," a defense newsletter, the Pentagon asked Congress for one new C-130J last winter, after the speaker called Deputy Secretary of Defense John Hammery shortly before the Pentagon's budget request was sent to Capitol Hill. Gingrich followed up with a letter to the Air Force this summer, recommending an even larger purchase. He wrote, "I believe that it would be financially prudent and responsible to plan for acquiring a sufficient number of C-130 aircraft every year, beginning with eight aircraft in the fiscal year 2000 budget and increasing to a level of 12 per year." Meanwhile, Gingrich convinced members of the Appropriations Committee to go beyond the Pentagon's recommendation and approve money for eight new C-130J's, seven more than the Pentagon asked for. Both Gingrich and Pentagon officials turned down requests for interviews. But fellow Georgia Republican Saxby Chambliss, a member of the House National Security Committee, said the decision to buy eight C-130J's was based on the merits and not politics.

REP. SAXBY CHAMBLISS, (R) Georgia: Lockheed is a great citizen in the state of Georgia. But the fact that it's made next door to the speaker's district is of no consequence to me one way or the other.

KWAME HOLMAN: The C-130 historically has benefited from the support of some influential members of Congress. Retired Democratic Senator Sam Nunn, former chairman of the Armed Services Committee, was a big proponent of the C-130 program. And G.V. "Sonny" Montgomery, the powerful former Democratic Congressman from Mississippi, was a member of the House Armed Services Committee and now is employed by Lockheed. In fact, over the last two decades members of Congress have ordered the purchase of two hundred fifty-one C-130's; the Air Force requested only five. But Congressman Chambliss says that's because the Air Force, like members of Congress, understands very well how the budget process works on Capitol Hill.

REP. SAXBY CHAMBLISS: The individual members of Congress are lobbied by individual guard and reserve units to modernize their local units with the addition of 130's, and we continually modernize this program so there are always numerous requests coming from members of Congress and the Air Force knows that's going to happen. So they don't request those. They let members of Congress request those, or add them to the process.

KWAME HOLMAN: But Congressman Obey says that process has gotten out of hand.

REP. DAVID OBEY, (D) Wisconsin: It is a plane which the Congress is insisting that we move forward on much faster than the Pentagon wants to move forward on it. And, as I say, the Pentagon estimates that if you wanted to supply upgraded aircraft to those guard and reserve units, you could do so at about 1/7 the cost by simply refurbishing some of those old planes.

KWAME HOLMAN: C-130's have a long life span. Some remain in service for 40 years. Many older models of the C-130's still are used by the Air National Guard and reserve. But according to a recent report by the General Accounting Office, many of those C-130's have been "retired with substantial life remaining." And the report says those retirements have been driven by congressional direction to buy more C-130's than the Air Force requested in its annual request. But Lockheed's chief operating officer, Terry Graham, defends Congress's plan to buy eight new C-130J's.

TERRY GRAHAM, Lockheed Martin: You have to make the comparison as to long-term investment versus short-term investment. You can crutch the airplanes for a number of years and still have some capability there. But the wiser decision, in my opinion, would be to invest in the C-130J and have an airplane that has modern-day capability and will carry you for another 30 years.

KWAME HOLMAN: In fact, the Air Force says it would like to purchase up to 150 C-130J's over the next 20 years. It had decided not to buy any this year until Speaker Gingrich stepped in.

GEN. RONALD FOGLEMAN (Ret.): The dilemma you face is knowing that some of these aircraft really are going to need replacement out there in four to five years. But in the near term you have a tremendous budget crunch, and to have aircraft forced upon you that displays higher priorities really, if you think about it, puts the Lockheed Company and what you would think would be its primary customer, at odds.

KWAME HOLMAN: Lockheed also relies on sales to its primary customer, the United States Government, as an indirect way to promote sales worldwide. Earlier this year, Lockheed introduced international buyers to the C-130J during a five-month promotional blitz flying the plane to 32 countries.

TERRY GRAHAM: One of the keys to achieving that success in the worldwide market, though, is also support of the United States Government. It's important that the government - if the airplane was conceived by the government, built here in the United States - that they support the purchase of the airplane for their own use. And that generates confidence around the world that the premiere Air Force in the world, the United States Air Force, is buying this airplane, and they can too.

KWAME HOLMAN: Lockheed expects the C-130 J to sell extremely well worldwide. So far, the company has received orders for 83 planes from the air forces of Great Britain, Australia, and Italy. But Graham added, international sales could be jeopardized if the U.S. Air Force didn't buy any new C-130J's, because it could lead to the shutdown of the Marietta production line and layoffs of hundreds of workers.

TERRY GRAHAM: Starting it back up would be terribly expensive, so our - we make the - everyone understand that the continuation of the program, it's a very critical element.

KWAME HOLMAN: Speaker Gingrich also addressed that concern when he wrote to the Air Force this summer. "If no aircraft are budgeted and the production line must be temporarily suspended, it will cost the Air Force substantially more money in the long run to restart the line and renew production of the aircraft than follow a stable and rational production plan." But General Fogleman views support for the C-130J differently.

GEN. RONALD FOGLEMAN: What we have is a situation where Lockheed, by applying a tremendous amount of pressure through the Congress, is basically showing a sort of arrogance, and that they are putting themselves in a position of saying we know what is best, we know better than the professionals who have to live, develop, and produce these programs. And basically it's a situation where I think they're putting a corporate consideration ahead of the consideration of the nation.

KWAME HOLMAN: Nonetheless, today the Senate joined the House in approving overwhelmingly a final compromise Pentagon spending bill for next year. It includes $465 million for seven new C-130J cargo planes. % ? FOCUS - VOICE FOR HEALTH

JIM LEHRER: Now, a new voice for world health as reported by Susan Dentzer of our Health Policy Unit, a partnership with the Henry J. Kaiser Family Foundation.

SUSAN DENTZER: Dr. Gro Harlem Brundtland is the new director-general of the World Health Organization. That's the United Nations agency that aims to control and eradicate disease and improve the quality of life worldwide. Brundtland is the former prime minister of Norway and a Harvard-trained physician. She took over at WHO earlier this year on the eve of the agency's 50th anniversary. Founded in 1948, and headquartered in Geneva, Switzerland, WHO has 4,500 employees around the world and an annual budget of roughly one billion dollars. It does not provide health services directly, but rather offers advice, research, training, and funding to help mostly developing countries fight disease. The agency has played a major role in such achievements as the virtual eradication of smallpox around the globe. Despite the dedication of the many public health professionals who work for it, the WHO has had a reputation of being one of the United Nation's most bloated and worst-run institutions. And so, after a decade of what was widely deemed uninspired leadership under her predecessor, Brundtland has begun an overhaul. She has brought in an almost entirely new senior staff and refocused WHO's mission. In particular, she wants to strengthen WHO's partnerships with member countries, non-profit groups and even private-sector businesses to increase the agency's effectiveness.I asked Brundtland why she took on the challenge after stepping down as prime minister.

DR. GRO H. BRUNDTLAD, Director General, World Health Organization: My former health minister came to me and said, Gro, you have to take this challenge, and I said, you know that I was planning to have some free time. But as my conscience then started working, my background as a doctor and public health worker, you know, I had to take it seriously.

SUSAN DENTZER: The first World Health Assembly in June 1948 listed its top priorities as fighting malaria, improving maternal and child health, fighting tuberculosis, sexually transmitted diseases, and nutrition, and environmental sanitation. What's changed in the past 50 years?

DR. GRO H. BRUNDTLAND: Those basic ideas and challenges are still with us. We could nearly list them today the same. At the same time a lot has been achieved. We have eradicated smallpox, which no one would have envisaged in 1948. We are trying now and about to eradicate polio, although we have emerging infection, and new threats, they are still with us, and we can never be thinking that we have solved those problems.

SUSAN DENTZER: In an address you gave this week to the Americas region of the world you had particularly strong words about the need to stamp out use of tobacco.

DR. GRO H. BRUNDTLAND: Because tobacco is a killer. And tobacco leads to non-communicable diseases. The other major area of concern, which creates a double burden of disease, in poor countries, in developing countries, the tobacco habit is spreading, consumption is increasing, we know that the 3 million deaths a day globally, which are related to tobacco, in 2010 will be 10 million deaths. So this is really an epidemic going on around the world. A child of ten or twelve influenced by society and by their peers will make choices in life that can be with them long, you know, into adult years and premature death from cancers, heart disease, which is related to their tobacco habit. So this, I feel, we as society and we as parents cannot look upon it as a kind of free choice problem.

SUSAN DENTZER: How will you be working more effectively with other organizations, outside the WHO?

DR. GRO H. BRUNDTLAND: We are, first of all, reaching our two other partners, making an alliance for roll-back malaria, 3,000 children dying every day from malaria. I am going to take direct contact with the leaders of African countries with the World Bank, with UNICEF, with UNDP, there is a large challenge there, especially in Africa, where you have to break the circle of the way that that disease spreads in communities, in the homes, impregnated bed nets for children. You have around the bed a net, which is set with insecticides, but in a way that doesn't put damage on the child or the home, which will avoid biting while you are sleeping, which is one of the main channels of spreading the disease. That's one example. But it's a broad effort. You must go into the homes and communities around in African countries and have a sustained long-term effort. It's not something, a quick fix you can do overnight or in a few months.

SUSAN DENTZER: An international Congress on Obesity recently noted an epidemic of obesity throughout the world. What will WHO do to reduce weight?

DR. GRO H. BRUNDTLAND: This is also part of the lifestyle changes. Maybe the most important thing is that we have stopped moving. People sit; they don't walk; they don't work the way we did. But we continue eating with the eating habits of our childhood. And so that's exercise, lifestyle pattern changes is one of the important aspects to it. It does lead to non-communicable diseases. Heart disease, even cancer - so it is a challenge, and it's part of the effort in non-communicable diseases that we need to improve and increase.

SUSAN DENTZER: There's a growing gap between the rich and the poor around the world, and this is particularly evident in health care. What can the WHO do about this?

DR. GRO H. BRUNDTLAND: WHO has a special role because we know the links between health, disease, and poverty. Not only does poverty create ill health and disease, but if you invest in health, if you make improvement, in health care and in spreading the message of how to improve health, then you will increase productivity and increase economic output.

SUSAN DENTZER: Eleven people a minute around the world die of AIDS and AIDS-related disease. And as the late Jonathan Mann noted, he died, of course, in the Swissair crash recently, but he was formerly the head of the global program on AIDS for WHO, he noted that community and political commitment to AIDS is plateauing or even declining, even as the numbers of those affected grow, and the disparity between rich and poor within and between nations grows ever larger.

DR. GRO H. BRUNDTLAND: We will be looking at how we can narrow the gap that Jonathan Mann was talking about. Also, with regard to trying to bring drugs to poor countries, the treatment should be made gradually available to all countries. That's a major problem and a major, I think, solidarity concern.

SUSAN DENTZER: Tens of billions of dollars is what it would cost to bring those drugs to those countries in an effort to eliminate this disparity where AIDS patients in wealthy countries now can live a great deal longer, those in poor countries are given an immediate death sentence.

DR. GRO H. BRUNDTLAND: What is happening now is that in certain countries and for mothers, pregnant mothers, the drugs are made available, so that we try in cooperation with other partners and AIDS of course is in the lead in this, working at least to make product to start using the drugs, and then we will hope that we can stimulate research, so that even less expensive drugs will come, and so that we can make gradually a major effort. I think there is an obligation morally to work towards narrowing this gap.

SUSAN DENTZER: What have you learned in your experience as a politician and as a physician that you will bring to this job?

DR. GRO H. BRUNDTLAND: You can use your knowledge to make a difference by having an influence on political decision-making, and world health is not an issue for any nation, because disease is spread and we are in the same boat, and that's all the background and experience that I bring to the job. This is not a question only for health ministers. Presidents, prime ministers, and finance ministers are, indeed, health ministers, themselves, and they should know, and we will help them know.

SUSAN DENTZER: Dr. Brundtland, thank you very much.

DR. GRO H. BRUNDTLAND: Thank you.% ? CONVERSATION - PERSPECTIVES

JIM LEHRER: Finally tonight we begin a series of conversations about issues raised by the conduct and the investigation of President Clinton in the Monica Lewinsky matter. Over the next several days we will talk one at a time to Orlando Patterson, William F. Buckley, Jr., and Deborah Tannen, among others. Elizabeth Farnsworth, in San Francisco, has the first conversation.

ELIZABETH FARNSWORTH: And joining me now for that is Stephen Carter, a professor at Yale Law School and author of, among other books, "Civility: Manners, Morals, and the Etiquette of Democracy." Thanks for being with us.

STEPHEN CARTER, Yale University Law School: It's my pleasure. Thank you for having me.

ELIZABETH FARNSWORTH: In a recent op-ed piece in the New York Times you wrote: "In the current uneasy moment there is a chance for genuine moral rejuvenation which the nation desperately needs." What did you mean by that?

STEPHEN CARTER: One of the great weaknesses in America today is our reluctance to engage in genuine moral conversation, to talk openly with each other about what's right and wrong. With the current scandal in Washington what parents everywhere are asking is, what do I tell my children, what do I tell my children? And the answer, it seems to me, begins with saying that we tell our children there is such a thing as right and such a thing as wrong. That beginning already is one that Americans are often reluctant to join, but one that we need to start talking about.

ELIZABETH FARNSWORTH: Why? Why is it so important?

STEPHEN CARTER: You know, let me give you a couple of examples of why it's so important. There have been surveys in recent years that tell us that somewhere between 40 percent and 60 percent of college students admit to cheating on exams, and those are just the ones who admit to having done it. And quite apart from the current scandal in Washington, hardly a week goes by when we don't read of someone else convicted of insider trading or another politician caught with his hand in the till. But somehow what's going on in America is we have more and more adults signaling to children that there is no real right and wrong; there's only the pursuit of personal advantage, the pursuit of individual achievement. Somehow we have to find a way from the current mess to build a conversation with our children and with other adults about how to build a better society.

ELIZABETH FARNSWORTH: And you think this conversation, this sense of right and wrong, is important not only for us as individuals but as a nation. You think it's important to Americans, to America.

STEPHEN CARTER: The United States of America is a great and wonderful nation with its flaws but a wonderful place. And one of the things that has made it wonderful in the past, I think, has been the belief that most Americans share in a set of values, set of virtues, if you will, that we think are important for adults to hold. One of the things that's happening in the current scandal is a lot of people are saying, oh, well, it's important for the president to be a role model. That's what his critics are saying. It seems to me that that's only a tiny piece of the answer. Of course, the president has a responsibility to young people but so do other adults. That is to say, the question is not what should the president do, how should the president behave; the question is, how should all of us adults behave, what are the responsibilities that all of us have to model virtuous behavior in a time when many Americans - most Americans in the surveys think the nation has lost its moral bearings.

ELIZABETH FARNSWORTH: It's a sort of national moral conversation you want, is that right?

STEPHEN CARTER: I think it's important, and I know that people are a little scared to talk about morality. Whenever someone says morality, somebody else says, oh, well, you're trying to take away my fundamental rights. That's why you say morality. One of the things that I think both sides are missing in the current Washington dilemma is that virtues - the elements of good character - they're not cudgels with which to win partisan arguments - they're not tools to be used to beat other people over the heads. They're rules to live by, rules to live by that adults voluntarily take on because we think they're good. Take just one example. Telling the truth is better than lying. Almost everybody believes that. None of us perhaps tell the truth as often as we should, but most of us try to do it pretty much all the time. That's not something that the law always controls. It's not something the law always should try to control. But it is something that we, as adults, should try to take on as a responsibility. And when our children hear us saying, oh, tell her I'm not home, I don't want to talk to her, when somebody calls on the phone we'd rather not hear from, we're teaching our children already that lies are actually convenient tools to be used to get out of tough situations.

ELIZABETH FARNSWORTH: I was interested in your op-ed piece. You don't really let anybody off the hook here. As you said, it's not just about the president, but you criticized Mr. Starr. You criticized the American people. About the American people you say the polls show "an alarming display of cynicism."

STEPHEN CARTER: One of the things that I worry about in America is our tendency as a people to become so caught up in our own gaining of advantage that we don't think enough about others or about the national interest. There have been a lot of commentators who've suggested that a lot of the support for President Clinton, support that continues very strong, remains high because people say, well, the economy is going well, my wallet is full, and that's why I support him. I hope that isn't the reason, because that would be a remarkably cynical view that people can do whatever they like as long as they keep us relatively affluent. I would like to believe that a lot of the support that we see for President Clinton is actually a kind of almost a one-on-one contest. They look at President Clinton's conduct, look at Kenneth Starr's conduct, look at the hearings that they are fearful may begin on Capitol Hill, and they're thinking, you know, as bad as what the president did may have been, that these other things, the Starr investigation and the coming hearings, those frighten people a little bit. That may seem to be even a little worse.

ELIZABETH FARNSWORTH: And what about the argument that - let's just talk about the main issue here - that adultery is essentially private, that we shouldn't be encouraging some kind of public conversation about this; this is a private matter; it should be dealt with between - within the family, or between a person and their minister.

STEPHEN CARTER: I think the adultery is private in the sense that it is wrong, deeply wrong, to spend the government resources to try to ferret it out. But we have to recognize that adultery also represents the kind of breaking of trust, the kind of shattering of commitment that harms the family, the family being for most of us the central institution on which the nation is built. That doesn't mean that adultery is unforgivable and doesn't mean we have to constantly talk about it. But when it occurs, whether it occurs with a president or with family and friends, it's important to recognize its wrongfulness and to be able to articulate that to our children and in conversations with each other.

ELIZABETH FARNSWORTH: And another term that I was struck by - you said the national conscience is not defeated; it's exhausted. Explain that.

STEPHEN CARTER: You know, one of the things that's happened over the last couple of decades in the wake of Watergate, perhaps in the wake of Vietnam has been what one journalist referred to as the scandal a week problem, that is, that somehow that the media have tried to play up so many stories as though everything is equally scandalous that by the time you come upon something that really is important, it's often very hard to grab people's attention. Moreover, we live in a morally confused time. There are a lot of battles going on. Some people call them the culture wars. Whatever one may call them, there are a lot of battles that go on in America today about just what are the lines of right and wrong. Those battles tend to wear people out, I think sometimes, and yet, they're battles that it's important to fight, because children need to be raised in a world in which they understand clearly from adult behavior that there's such a thing as right and such a thing as wrong, and consequences when one does the wrong, rather than the right. When we don't raise children that way, we end up with the 40 to 60 percent of college students cheating, and we may be mad at them for it, but we should scarcely be surprised.

ELIZABETH FARNSWORTH: So in a strange way you really see this - it's not strange but in a very interesting way you see this as an opportunity for America.

STEPHEN CARTER: I think it's important to look at it that way. A lot of the commentators have been saying people are exhausted by this, people are worn out, people can't take anymore. And I share some of those sentiments. But I think, you know, they say, when they give you lemons, make lemonade. The point is that when we have this kind of scandal, when we have this depth of national difficulty, the important thing to do is to look at it and say what lessons can we take from it, what can we tell the children, how can we turn this to our advantage as we try to grow into a more morally virtuous nation?

ELIZABETH FARNSWORTH: And finally, Mr. Carter, on a slightly different note, I'm curious about your views on why the support for President Clinton is so much higher among African-Americans than among whites, and I'll give you one figure here. A recent New York Times/CBS poll shows that about 69 percent of African-Americans have a favorable opinion of the president compared to 34 percent of white Americans. Why the strong support, in your view?

STEPHEN CARTER: Well, I think one of the reasons certainly is that black Americans have a perception of having suffered a great deal under Republican administrations over the 12 years before President Clinton. It doesn't matter whether someone thinks the perception is right or wrong. The fact is the perception is there. And I think there's a lot of fear among African-Americans about what happened with Republicans to get back into the White House. I think it's very important work for the Republicans to do, to try to reassure the black community that they are not, in fact, the community's enemies, which is a widely shared perception, I think, among African-Americans today, especially in the cities.

ELIZABETH FARNSWORTH: Well, Stephen Carter, thank you very much for being with us.

STEPHEN CARTER: It's been my pleasure. Thank you.

JIM LEHRER: We'll talk to sociologist Orlando Patterson tomorrow night. Others we will hear from over the next few weeks include William F. Buckley, Jr. and Deborah Tannen.% ? RECAP

JIM LEHRER: Again, the major stories of this Tuesday, the Federal Reserve lowered interest rates 1/4 point to cushion the effects of overseas financial turmoil in the U.S. economic growth. The last of Hurricane Georges dumped more rain on Gulf states, two more deaths were reported, bringing the total to four. And Yasser Arafat said he accepted a proposal for Israel to return 13 percent of West Bank land to Palestinian control. We'll see you on-line and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.