The MacNeil/Lehrer NewsHour

Intro

ROBERT MacNEIL: Good evening. In the headlines this Labor Day, Hurricane Elena hit the Mississippi coast, causing heavy property damage. In the first major speech since his cancer operation, President Reagan reopened his campaign for tax reform. South Africa's freeze on foreign debts rallied its currency while anti-apartheid riots continued. We'll have details of these and other top stories in a moment. Jim Lehrer is away tonight; Judy Woodruff is in Washington. Judy?

JUDY WOODRUFF: We have four focus sections on the NewsHour tonight. First, an update on what was Hurricane Elena; then two leading economists talk tax reform, trade and the economy. Next, one of the American reporters who met with Soviet leader Gorbachev last week shares his impressions. And finally, the other Red Sox, a look at the little team that's making it big. News Summary

MacNEIL: After days of flirting with the Gulf Coast, Hurricane Elena roared ashore in Mississippi today, causing huge property damage but no serious injuries. Winds of more than 100 miles an hour tore roofs off buildings, uprooted trees, flooded highways and knocked out power lines, but then weakened as it moved inland. More than a million people had evacuated coastal areas as the hurricane left forecasters guessing just where it would hit. Correspondent Tom Beardon followed the hurricane along the coast, and here is his report.

TOM BEARDON [voice-over]: The huge storm teased the coastal communities of four states for three days, cutting a meandering path through the Gulf. Half a million people were evacuated from the beachfront resorts of Clearwater and Tampa while the wind-whipped surf pounded the sea walls and caused minor flooding. The small town of Crystal River, Florida, was directly in the path of Elena for most of the weekend. Thousands fled inland to shelters like this one in a high school gymnasium. People were packed inside with portable radios and televisions their only link with the outside world. The most serious problem was frustration: people had been evacuated as the storm approached on Saturday, and had to sweat it out as the hurricane stalled for a full day. Authorities were afraid people would return to their homes before the danger was past.

STEVE REKEWALT, school official: People have been leaving on their own. We've advised them not to. We've asked them not to. But they have still taken it on their own to leave.

BEARDON [voice-over]: Thousands of volunteers like Diane Henderson spent countless hours helping their neighbors in the shelters. She says most of them took the long and sleepless nights in stride.

DIANE HENDERSON, volunteer: Really it's pretty nice. The lights make it hard for the elderly to sleep, and it's hard on the floor, but really everybody's been great. Everybody's cooperated real good.

BEARDON: Elena finally came ashore here at Gulfport, Mississippi. Officials are a long way from any definitive survey of the damage, but according to one estimate it will be at least a billion dollars.

[voice-over] Late this morning people began leaving the shelters to see what the storm had left behind. Tom McKay returned to his tire store to find all the windows blown out.

TOM McKAY, tire dealer: It's not as bad as I expected. I gured the windows would go, but everything else is secured.

BEARDON [voice-over]: Thousands of trees have been toppled, causing extensive damage to many homes, and particularly to utility systems. Power may not be restored for several days. Hundreds of buildings have suffered major and minor damage. This apartment building caught fire during the storm last night. They couldn't do much more than let it burn. But as bad as it is, it is only a mere shadow of the devastation Hurricane Camille brought to this community 16 years ago, and people are profoundly greatful for that.

MacNEIL: By this afternoon the winds had dropped to about 60 miles an hour, which is less than hurricane strength, so Elena was downgraded to a tropical storm. Judy?

WOODRUFF: News media in the Soviet Union gave prominent coverage today to Soviet Communist Party Chief Mikhail Gorbachev's statements about deteriorating relations between the superpowers and his accusation that the Reagan administration "is trying to drive us into a corner." The remarks came in an interview with Time magazine published yesterday. Gorbachev asserted that the arms race is intensifying and that the war threat is not subsiding. He described the U.S. approach to the upcoming November summit as "a scenario of pressure, of attempts to ascribe to us every mortal sin." It was the first interview Gorbachev has granted to a Western news organization since he came to power in March.

MacNEIL: South Africa's currency, the rand, recovered sharply today in response to a four-month freeze on foreign debt repayments announced last night. But Western bankers said the freeze and currency controls would buy the Pretoria government only a breathing space, not an end to its economic crisis. The head of South Africa's national bank, Gerhard de Kock, suddenly cut off a visit to Washington and flew home without explanation. He had been planning to meet Federal Reserve Board Chairman Paul Volcker and other U.S. officials tomorrow. Here is a report from James Robbins of the BBC.

JAMES ROBBINS, BBC [voice-over]: As soon as the currency markets reopened this morning the rand strengthened and closed tonight 10 U.S. cents above the all-time low set last Tuesday. The government's emergency measures seemed to have restored some confidence. But many in the business community insist the government has only been given breathing space to announce radical change in the next few months or face total economic collapse. The currency may have been helped by evidence of patchy support for the strike called in a minority of the country's coal and gold mines. Flying over some of the mines, union leader Cyril Rammaposa admitted to us that about half the men called out were not striking. Most mine compounds are closed to news teams and there have been reports of intimidation on both sides with management security men using rubber bullets and tear gas against miners. But at East Prefontaine a full shift went underground while at Dylkrowl migrant workers from Mozambique were on their way home with all their possessions, saying they'd been driven out by other miners for refusing to strike. In Cape Town today, further violence, not as serious as last week, but with reports of sporadic stoning and of police opening fire in several parts of the city.

MacNEIL: In other foreign news, Iraq said it had attacked Iran's Kharg Island oil terminal for the fourth time in 18 days. Iraq called the raid destructive and powerful and designed to hinder Iranian efforts to repair the damage from previous raids.

West Germany's counterespionage chief who defected to East Germany has written to Bonn saying he fled because he was in a hopeless situation. West German reports said Hans Joachim Tiedge was heavily in debt and drinking. They said they had no evidence that he had been a long-term mole working for the East Germans. Despite the spy scandal, Bonn announced a major advance in its relations with East Germany, saying the Communist leader Eric Honneker had promised to remove all minefields from their common border this month.

WOODRUFF: President Reagan emerged from a three-week vacation today to plug his tax reform plan. He traveled to Harry Truman's hometown, Independence, Missouri, for his first major public speech since his cancer operation. The President pounded away at the current tax code and declared that he has recovered from surgery and ready to fight for his tax overhaul package. Correspondent Kwame Holman has our report.

KWAME HOLMAN [voice-over]: Independence, Missouri, launching pad for the American pioneers' drive west, became Ronald Reagan's first stop for what's expected to be a series of speeches pushing his tax reform plan and other economic programs. The President began by attacking so-called special interests who he says reject tax reform.

Pres. RONALD REAGAN: Tax reform has its enemies, especially among the people who have vested interests in the status quo. Status quo -- that's a Latin name for the mess that we're in with our present tax structure. Those vested interests just hate it when we talk about reform and they loved it when they thought I was laid up and out of action. Well, I'm back and rarin' to go up for the battle that's only just begun.

HOLMAN [voice-over]: The President told the Labor Day crowd at this annual celebration that his tax plan cuts taxes most for low-income families and least for families with high incomes, some of whom, he says, have taken advantage of the current system.

Pres. REAGAN: Now undoubtedly some of these high-income people have legitimate losses from bad investments, but for a great many it was simply the opportunities provided in the present tax law with all its complexities, its shelters to hide in, loopholes to get lost in, the legal scams that are worked by people who don't want to pay their fair share. And the middle class gets stuck paying most of the bills.

HOLMAN: Warming to his task on this first stop on his fall offensive to sell his tax reform package, the President invoked the Democrats themselves in emphasizing what he called the pro-family nature of his tax reform plan.

Pres. REAGAN: We have just received a report from Congress, from the House of Representatives, which is controlled, as you know, by the Democratic Party. The House Select Committee on Children, Youth and Families has called our tax plan the most pro-family of all the tax proposals before Congress.

HOLMAN [voice-over]: From here it was back to the White House for the President and an uncertain future for his tax reform plan.

MacNEIL: The wreck of the liner Titanic has been located in 13,000 feet of water 560 miles off Newfoundland, it was announced today. The French Institute for Research and Exploitation of the Seas said its joint project with the Woods Hole Oceanographic Institute in Massachusetts had located the liner with submarine sonar and underwater cameras. The Titanic struck an iceberg and sank on her maiden voyage in April, 1912, with the loss of 1,513 lives. The wreck is believed to contain millions of dollars in diamonds.

WOODRUFF: Coming up on the NewsHour, four focus sections, beginning with an update on former Hurricane Elena; talk of tax reform, trade and the economy with two leading economists; a correspondent's report on his meeting with Soviet leader Gorbachev; and a look at a financially dazzling minor league baseball team. Elena Hits

MacNEIL: First tonight, a closer look at Hurricane Elena, the storm that has bedeviled weather experts and millions of Americans on the Gulf Coast for four days. On Thursday it was heading northwest towards Mississippi. By Friday night it had veered to the northeast and the state of Florida ordered mandatory evacuation. But late Sunday afternoon it doubled back, speeded up and hit Mississippi after all, near Gulfport. The man who had the job of trying to predict Elena's movements and where it would hit the coast is Neil Frank, head of the National Hurricane Center in Miami.

Mr. Frank?

NEIL FRANK: Yes, sir.

MacNEIL: When we talked on Friday evening you were pretty sure Elena would hit the Florida coast on Saturday morning and that if it did change course it would veer further east. Do you now understand the dynamics of what happened?

Mr. FRANK: Yeah, I think we understand very well what happened. We thought the storm was going to cross the Florida peninsula and then maybe become stationary off the southeastern Florida coast and then start coming back towards the northwest, and we thought at that time we would be making landfall somewhere around Georgia or maybe South Carolina. Well, the storm stalled, of course, on the Florida west coast and waited there until we got a river of air come down and pick it up and move it back towards the northwest and on into the Mississippi coast this morning.

MacNEIL: You've made in recent years great advances in predicting where hurricanes are going to go, but with all that sophisticated advance in meteorology, are there things you still don't know, the clues of what steers a hurricane?

Mr. FRANK: Okay, now listen, I want to make a correction here. I'm not sure we've made quite the improvement in forecasting that you're suggesting. We do a great job of observing, and because we do I think there is an impression that we must forecast a lot better than we really are capable of doing. Over the last 25 years we've seen about a 10 to 15 percent improvement in our skills in forecasting, but our skills in observing have increased tremendously. The weather satellite, the reconnaissance airplane and the coastal radars allow us to monitor minute by minute the progress of a hurricane. But if you're going to forecast where a hurricane is going to go, you've got to know what the air currents look like in the wide environment around the hurricane, and that's where we haven't made very good progress.

MacNEIL: As a scientist, is there a line of research that meteorologists are pursuing that you think will give additional clues about those things?

Mr. FRANK: Well, I think it would be a very difficult problem, and the first thing you would have to do is to get a lot of data over the vast ocean regions where we don't have those kind of skills at the present time. Now, it would be very costly to put our standard weather observing pieces of equipment out over the ocean. You know, we could put some ships out there and leave them there all year, but economically that's just not feasible. Now, we're hoping that some time in the future that maybe indirectly through the eyes of the satellite that we can find out what's going on over the ocean and that that might help us improve our forecasting. But in the meantime, we're not forecasting very well and we don't anticipate that we're going to have a great improvement in the near future, certainly not fast enough to solve the dilemma that we've got along that coastline today where we've got so many people that have to be evacuated to high ground.

MacNEIL: Considering what that represents, the dislocation of lives and the potential danger to property and everything else, how does the equation of the investment necessary to really make all those minute observations you're talking about weigh against the cost of people's lives in other ways? What do you think?

Mr. FRANK: Well, okay, but when you're talking about putting standard observing tools out over the vast regions of the ocean, you're talking about putting an ocean-going vessel at a given location and leaving it out there all year. That's extremely expensive. And economically it's just not feasible to do that kind of thing. So the only chance in the future is maybe indirectly through the eyes of something like the weather satellite that will be able to do that. Now, I understand the tremendous loss of life along the coastline today. As a matter of fact --

MacNEIL: Loss of property, I think, right?

Mr. FRANK: Loss of life and loss of property, although I would tell you that we're more vulnerable to the hurricane today than we've ever been in our history because of the tremendous number of people that are on the coastline today and are in exposed locations. And if we had one of thes bad storms like the one that just made landfall today move into a coastal area where we have vast numbers of people and we don't get them back to high ground, the potential loss of life is certainly in the hundreds and might be in the thousands.

MacNEIL: So what is your own personal recommendation of where the effort should go, looking towards future hurricanes?

Mr. FRANK: Well, there's a lot of things that we need to be doing. Just one, certainly, we need to improve our meteorology. There's no question about that. But how about going down on the coastline and developing some realistic growth patterns? It's not an objection to living on the coast or developing the island, but maybe that we should restrict growth until we make the number of people who live out there -- make some way for them to get back to high ground.

MacNEIL: But in view of the level of known knowledge of these things, are you happy this evening about -- was this a successful exercise in hurricane plotting and forecasting?

Mr. FRANK: Well, in terms of our abilities, I think we did very well. In terms of what the demands are upon our service, no, we did not provide the kinds of services that are needed in all cases. And that's a real serious problem for us. We know in some communities that it may take 20 to 30 hours to evacuate everybody. We're trying to get our warnings up with that kind of a lead time. When you have a storm like this that comes right to the coastline and then stalls and wobbles around on the coast, then we had to keep shifting warnings, and there was no way that we would have given some of those communities enough lead time to get everybody back to high ground. So this storm really pointed out one of the frail links in our warning system, and that is our ability to give the kind of lead time that is required in some communities.

MacNEIL: Well, Mr. Frank, we appreciate you very much joining us this evening. Thank you. Debating the Economy

WOODRUFF: Our next focus tonight is tax reform and the economy. Both were on President Reagan's mind today as he ended his California vacation and headed back to Washington. In a speech in Independence, Missouri, Mr. Reagan tried to drum up support for his own tax reform plan for the first time since he had to undergo cancer surgery almost two months ago. He began by explaining why the current tax system is in such desperate need of change.

Pres. RONALD REAGAN: Well, let me tell you why we ought to take our current tax system out and string it up. It's been tried and found unfair, unworkable and unproductive. It is a system that yields great amounts of revenues, but even greater amounts of discontent, disorder and disobedience. It's a system that yields a lot of things that we have to have -- of course, that money -- but a lot of things wedon't need at all. Our current tax system is anti-family; it gives a measly little deduction of just over $1,000 for each dependent. Our current system is an assault on personal improvement and effort; it taxes you at such rapidly increasing rates when you work overtime that the harder you work, the smaller the share of your income that you take home. Our current tax law is anti-growth. It discourages enterprise and it discourages productive investment.

WOODRUFF: Overall, the concept of tax reform has been widely supported, despite criticism of some specifics of the Reagan plan. Joining us now to look at what the President had to say today are two leading economists, Lester Thurow, a professor of economics at the Massachusetts Institute of Technology and the author of several best-selling books on the economy. He's at the studios of public station WGBH in Boston; and Richard Rahn, chief economist with the U.S. Chamber of Commerce, based here in Washington.

Mr. Rahn, let me begin with you. Do you agree with the President? Among other things, he said today we're getting a daily mugging from our tax system. Do you agree with that?

RICHARD RAHN: Well, the President is absolutely right. I thought it was a great speech, and his criticisms of the present tax code were right on the mark.

WOODRUFF: Does anybody disagree with that?

Mr. RAHN: Well, not too many people.

WOODRUFF: Dr. Thurow, what about you?

LESTER THUROW: No, I don't disagree with that. I think we've got a tax code that's kind of like a cheap Swiss cheese. It's more loopholes than it is cheese.

WOODRUFF: All right, what about the President's plan to overhaul it? The plan that's now beginning to work its way through the Congress.

Dr. THUROW: Well, basically the President's plan, I think, is better than the current tax law but not as good as the first proposal that came out of the Treasury. The basic problem is that the President put several big loopholes back in his proposal, and once you start putting loopholes back in the proposal there isn't any way to stop. Like the President put the capital gains provisions back in the proposal. That's a provision that helps high-income families. And so what you've got now is a situation where low-income families will pay less taxes, high-income families will pay less taxes, and the family around $35,000, $40,000 a year may even end up paying more taxes under the Reagan proposal than it does under the current law.

WOODRUFF: Is that a feature that bothers you as well?

Mr. RAHN: Well, I think the President's proposal is much better than Treasury I. The --

WOODRUFF: The first administration proposal.

Mr. RAHN: Yes. The capital gains tax rate change that Lester Thurow referred to I think is exactly what is needed. We have learned from the historical experience, beginning with the capital gains tax rate cuts beginning in 1978 that as we reduced that tax rate we actually increased the tax revenue from the capital gains tax. I'm sure that will happen again. It fostered innovative technology. We revitalized our venture capital markets as a result of that capital gains tax cut. And it's just good economic sense, good sense.

WOODRUFF: Do you think that'll happen, Dr. Thurow?

Dr. THUROW: Well, I think some of that will happen, but the basic problem is that you have an issue of an incentive, let's say, for capital formation versus fairness. Most capital gains breaks go to very high-income individuals. And so it ends up basically providing this system where high-income people get a bigger tax break than the $40,000 family gets. The other problem you have is if you really start putting those kind of provisions back in, where do you stop? Solar energy is also a good thing. Why not put the provision for solar energy back in? You know, it's a little bit like being a half-time prostitute. If you're a half-time prostitute you're still a prostitute.

WOODRUFF: The plan, Mr. Rahn, has been criticized for helping the poor and especially the rich, or giving them a bigger break than it gives the people in the middle-income levels, right?

Mr. RAHN: Well, right now you have 10% of the taxpayers pay more than 50% of the federal income tax, the top 10%. In fact, we've seen a shift in recent years to the wealthy individuals actually paying a higher percentage of the total tax. That actually happened after the 1981 tax cuts that the President proposed, which we fully endorsed and agreed with him on. But we did get that shift to the welfare taxpayers. Now, I expect this will happen again. We know that marginal tax rates above 35 are counterproductive, and my goal is not to go ahead and penalize people. I want to raise the maximum amount of revenue we can from any given tax, and if you can reduce a rate and raise more revenue, as we do with the capital gains tax, to me that's desirable.

WOODRUFF: So it's okay with you if the wealthier, if the people who make more money get a bigger tax break?

Mr. RAHN: Well, actually they end up increasing their tax liabilities. They move out of tax shelters, they keep more of their investment at home, they put it in more productive enterprises rather than spending it on consumption or non-taxable bonds and so forth.

WOODRUFF: That's not the way you see it, right, Dr. Thurow?

Dr. THUROW: Well, the basic problem is if you take that $35,000, $40,000 family where both the husband and wife work, they get all of their money from earnings and they don't have this capability of moving it out of unproductive shelters and moving it into something else. It's basically all earnings that you're talking about here. And so you're giving a freedom to a high-income person to shove their income around and take advantage of the law that middle-income person simply doesn't have because they don't have a lot of capital income. It's basically all earnings, and there's not much you can do about it. You can't shove your job around as easily as you can shove your financial portfolio around.

Mr. RAHN: Well, may I respond to that? In the President's tax proposal it will do just the opposite. Many of those so-called loopholes that certain people have enjoyed will be eliminated, and you will have a much flatter tax. You had some people, indeed, who were able to avoid taxes through the present tax code. Those loopholes are going to be shut off and you're not going to have that anymore.

Dr. THUROW: In terms of loopholes --

Mr. RAHN: The individual, all individuals, will have a tax rate reduction under the President's tax proposal. The big shift will be from individuals to business; I think a little bit too much.

WOODRUFF: Dr. Thurow, you get the last word.

Dr. THUROW: In terms of loopholes, the biggest loophole is the capital gains provision, and the President put that back in. And so we've got the biggest loophole that's in the system back into the system under the present proposal.

Mr. RAHN: If you reduce the rate and gain revenue, it's not a loophole.

WOODRUFF: Gentlemen, stay with us. We expand our focus on the economy now with a look at the increasingly volatile issue of foreign trade. Over the weekend the President promised to veto any legislation limiting foreignimports in the face of growing sentiments in the Congress to impose protectionist barriers. Many business people are arguing that action is needed now to protect U.S. industries from overseas competition. But for others that isn't the way to go, as we see in this report from Barry Mitzman of public station KCTS in Seattle.

BARRY MITZMAN, KCTS [voice-over]: The timber industry is just one example of the region's extensive involvement in Japanese trade. Each year Oregon and Washington sell the Japanese about $1.5 billion worth of logs, lumber, pulp and paper. Japan is a major customer for Northwest farmers; Oregon and Washington annually export to Japan nearly a billion dollars in wheat, corn and barley. And the Boeing Company in Seattle sells more airplanes to Japan than to any other foreign nation. Overall, Japan is Washington State's largest trading partner by far. Thousands of Northwest jobs depend on this trade.

RICHARD A. BUSH, State Commerce Department: The market for Washington State is the Far East. It's the Pacific Rim.

MITZMAN [voice-over]: Richard Bush is Washington State's trade and investment representative in Tokyo.

Mr. BUSH: Japan has seriously been trying to increase its imports of goods. They really have.

MITZMAN [voice-over]: Bush recently joined dozens of Northwest businessmen at this Japanese trade fair, the first ever for U.S. manufacturers. The event was sponsored by the Japan Export Trading Organization, struggling to change Japan's protectionist image.

JAPANESE TRADE OFFICIAL [through interpreter]: America is the biggest partner for Japan, and American companies wanted to export American products, but they don't know much about the Japanese market. So we are trying to make arrangements so they can make contacts with Japanese buyers so that they can make it easier to export American products.

NELSON GOODSELL, AG Industries: Basically what AG is is a kind of a specialized trading company, and we are out of Seattle, and what we do, we try to find new and unique items in the United States that we can market through our channels in Japan. The main one that we're introducing now is Hoodsport wine from Hoodsport, Washington. It's a fruit wine, and they have four different fruits that we're introducing. We also have some Montana bee pollen, which is a new natural food item out of Montana. The biggest, that happened 10 years ago, was Gayla Kite. We've sold about 13 or 14 million kites already in a 10-year period, and we hold about 85 of the kite market in Japan.

MITZMAN [voice-over]: Success stories such as these have helped reinforce a special bond between Japan and the Northwest, a bond that is based in part on simple proximity.

Mr. BUSH: Because there is no question. When you talk about even shipping costs to ship from Seattle to this part of the world is far cheaper than it is to ship to Chicago.

MITZMAN [voice-over]: Proximity to Asia also makes the Northwest a natural point of entry for Japanese goods. Now that auto import quotas are gone, thousands of Toyotas, Nissans and Hondas are wheeling through the port of Seattle, which is two days closer to Tokyo than other West Coast ports.

JOHN ANDERSON, State Commerce Department: And this state happens to benefit as much from imports as it does from exports. In trade it doesn't make any difference which way the cargo is moving, it creates the same number of jobs on the docks and in the support services and so forth. So we benefit substantially.

MITZMAN [voice-over]: Northwest leaders like John Anderson and WashingtonGovernor Booth Gardner see a grand opportunity in their region's close ties to Asia.

Gov. BOOTH GARDNER, (D) Washington: We consider ourselves, instead of being in the West, we kind of talk about we're in the Northeast corner of a new kind of world economy as it pertains to the U.S.

MITZMAN [voice-over]: The Japanese have consciously cultivated such positive attitudes with major new investments in the Northwest. This high-tech factory in southwest Washington is owned by Japan's SEH Corporation. It will eventually employ nearly 2,000 local workers making silicon wafers for computers and electronics. The site was chosen even though most of the plant's customers are in California's Silicon Valley.

SPEAKER: We looked at land availability and costs. We looked at power costs and availability and also people availability in Silicon Valley, and none of those ended up being as favorable to us as was Vancouver, Washington.

CORPORATE OFFICIAL, Keosera Inc.: It is a great pleasure to be here at this groundbreaking for the facility of Keosera Northwest Incorporated.

MITZMAN [voice-over]: The Keosera Corporation and six other Japanese firms have recently committed to building major high-tech manufacturing operations around Portland, Oregon, and nearby Vancouver, Washington. This clustered investment may be an effort by the Japanese to build a regional bulwark against rising U.S. protectionism.

TERUO KUZUMAKI, Bank of Tokyo: There has been a wave of Japanese investment abroad. Japanese investor would like to avoid any protectionist measures that might possibly be taken by the U.S. government against imports.

Mr. BUSH: Certainly the fact that we're threatening protectionism is making jobs -- or making my job in trying to attract industry a lot easier. That threat of closing the market is driving a lot of investment into the United States so that they can protect their market.

MITZMAN [voice-over]: There are areas of friction between the Northwest and Japan. Apple growers aren't happy that the Japanese refuse to import any of Washington State's enormous crop. The Japanese say U.S. apples may be infested with coddly moths that could damage Japanese orchards, but some Washington growers suspect that protecting domestic agriculture and industry is Japan's true concern.

GUS KUEHNE, Independent Forest Manufacturers Association: The heart of the problem is that the Japanese want to protect jobs in Japan, and they want to --

MITZMAN [voice-over]: Gus Kuehne represents the operators of small independent Northwest lumber mills. They're unhappy with the Japanese for importing raw logs from the Northwest but little finished lumber or plywood, on which many more jobs depend.

Mr. KUEHNE: They have imported raw logs from the Northwest, and that's our major export to them, is raw logs. Even though we're able to produce lumber at lower prices, they have various trade barriers to the access of their market for this finished lumber. They simply want to maintain the employment base in their country, and right now I would say we have a trade policy of appeasement, one of regardless of what any other country does we're going to leave the situation as open as possible, and we've got to change that stance.

Sen. SLADE GORTON, (R) Washington: This concern about this imbalance has invaded even the Pacific Northwest, perhaps traditionally as free trade-oriented an area as the United States has.

MITZMAN [voice-over]: Responding to complaints from lumbermen and other manufacturers, Washington Senator Slade Gorton has joined other members of Congress in proposing retaliation, a 20 tax on all Japanese imports. But Gorton claims his bill is not protectionist, because it would lower the tax if the Japanese buy more U.S. goods.

Sen. GORTON: But I emphasize the difference between this proposal and any of the others is that it would be totally within the power of the Japanese to lower that tariff simply by purchasing more American goods.

MITZMAN [voice-over]: Yet, in the Northwest Japanese trade and investment have already built up large reservoirs of good will. In contrast with other regions of the nation, many people here believe their economic future is directly dependent on close and friendly ties to Asia.

Rep. DON BONKER, (D) Washington: I think Senator Gorton's suggestion of a surtax on Japan is hasty, it's potentially damaging, and it certainly will invite retaliation, which will not be in the best interests of the Northwest.

MITZMAN [voice-over]: Congressman Don Bonker chairs a Democrats' task force on international trade, and he is one of the many Northwest leaders who have roundly condemned Senator Gorton's relatively moderate proposal.

Rep. BONKER: If his amendment were to pass, I think it would be economic devastation, in particular for the Northwest.

Gov. BOOTH: Devastating for us. And I don't think it's particularly in the good health of this country. I think we need, as a population, people who will learn to compete in a world market.

Mr. BUSH: My feeling since I've been involved with the state of Washington is that we are absolutely anti any form of protectionism. I'd certainly hope that continues, because protectionism is the beginning of the road downhill. I don't think anybody gains anything from it.

WOODRUFF: Still with us to look at that report and the economy overall, economist Richard Rahn with the U.S. Chamber of Commerce, and Dr. Lester Thurow with the Massachusetts Institute of Technology. Dr. Thurow, the picture from Washington State is that free trade is good, any kind of protectionism is bad. To what extent does that reflect the situation across this country?

Dr. THUROW: Well, that's a statement which is generally true. What it doesn't capture is the fact that we're currently going to be running a trade deficit of something around $150 or $160 billion. And so there is a real issue in terms of avoiding protection on this or that product, but there's still an issue as to how you get that trade deficit down, because if you're running a $150-billion trade deficit, basically you're going in debt $150 billion every year, and no country can afford to do that for very long.

WOODRUFF: Well, what do you say to those people in Washington State who are dependent on the business they're doing with corporations in Japan?

Dr. THUROW: Well, of course that's just part of the picture. You could have had another segment where you looked at the businesses being put out of business; let's say, those chip factories in Silicon Valley, many of which are now being put out of business by the Japanese. Of course, there are some jobs when you have a lot of imports, but basically a country needs to have a balance between its exports and its imports. And if you look at the current situation for the country as a whole, you just can't describe a trade deficit of $150 or $160 billion as a healthy situation.

WOODRUFF: Richard Rahn, what about that?

Mr. RAHN: Well, if you take a look at the all over situation, we create many more jobs by having free trade than we've been losing, and it makes it difficult, of course, for those industries which have suffered because of unfair foreign competition -- and there's a lot of unfair foreign competition. So the trick is try to find solutions -- and I don't believe tariffs or quotas are the solutions -- to open up other markets and get other countries to stop subsidizing their industries unfairly.

WOODRUFF: So what should we be doing? The administration, as we know, just turned down any kind of protectionist measures for the shoe industry. What should the administration do?

Mr. RAHN: Well, they've got to be more aggressive in negotiating with other countries to get them to open up the markets, and of course that is a difficult proposition. We need to lean on other countries in every way we can that is not self-destructive to ourselves. And, again, tariffs and quotas historically have proven self-destructive. We had the Smoot-Hawley tariff during the 1930s, which helped bring on the Great Depression and surely aggravated it. We don't want to repeat those kind of mistakes.

WOODRUFF: Is that your view, Dr. Thurow?

Dr. THUROW: Well, we don't want a lot of tariffs and quotas on specific commodities, but I think the government ought to be out doing things like intervening in foreign exchange markets to drive down the value of the dollar. There is also an issue with two or three countries which basically are geared up to export and not import. If you take the Japanese, it's not just that the Americans are running a large trade deficit with them. The Europeans are running a large trade deficit; the Chinese are running a large trade deficit. They're running a huge surplus overall, and the world economy can't simply work with the Japanese sitting there with a $50, $60-billion trade surplus with everybody. And so there is an issue here as to how you get coordination in the world economy to get rid of both those deficits and those surpluses and simply saying negotiate hard isn't the answer. People have been saying that for 20 years and nothing happens. We negotiate hard and the deficit gets bigger.

WOODRUFF: So what is the answer?

Dr. THUROW: Well, I think it's really two things. The first thing is that we should be intervening basically to get the dollar down to a reasonable level. Secondly, I think you can make a case for some kind of punitive tariffs on countries that persistently run very large surpluses, and that isn't just Japan. For example, on a per capita basis, both Taiwan and Canada have larger surpluses than the Japanese do, and somehow those countries that are running enormous surpluses, some pressure has to be put on them to do something about their surpluses. Because if you put pressure in that direction, what they're going to do is raise imports. And that's good for world trade. If the United States has to solve its deficit problem by itself, the only thing the United States can do is restrict imports, and that'll happen one way or another. And so if you don't want to do that you have to use some of these other techniques.

WOODRUFF: What's wrong with that he's suggesting?

Mr. RAHN: Well, first of all, trying to bring down the value of the dollar, that has a lot of negative side effects. For instance, we would greatly aggravate inflationary pressures in this country if we brought down the value of the dollar. History shows us that high-valued currencies often are very good for a country. It makes it difficult for certain firms who are very price competitive to enter the foreign market, but it has many advantages to the American consumers. All of us are buying many goods and services at a much cheaper rate than we could otherwise because of the high-priced U.S. dollar. And also the question is, how do you bring it down? The history of foreign exchange intervention by central banks in this country and other countries around the world is not one written in success. In fact, during the 1970s the only thing that can be said for foreign exchange intervention by the European governments and by our government is that we cost our taxpayers about $12 billion, but we didn't alter the fundamental values of the currencies.

WOODRUFF: I noticed that the dollar was stronger on international currency markets today because there was some optimism based on the economic reports that came out of Washington last week. What is your overall forecast, outlook for the economy for the rest of the year and into next year, Dr. Thurow?

Dr. THUROW: Well, if you look at the economy it's been running a kind of a one- or two-percent real rate of growth and that's basically what you would see in the future for the next six to nine months. We're essentially in a race between the trade deficit, which is getting bigger and bigger and kind of threatenng to sink the economy and push it into a recession and the Federal Reserve Board, which is aggressively raising the money supply and, lowering interest rates. And those low interest rates help stimulate industries like housing and cars. But it's very hard to have a kind of a vigorous, robust economy with that kind of a trade deficit, and eventually if the dollar doesn't come down the Federal Reserve Board will run out of room to try and stimulate the economy, and the trade deficit will push the whole economy into a recession. But that's not on the horizon for nine to 12 months. And so I think kind of one- or two-percent growth rates is what you would look for over the next six to nine months.

WOODRUFF: So you think we're okay?

Dr. THUROW: Well, that's not okay because that may mean rising unemployment rates. With a one- or two-percent growth rate, that isn't quite healthy enough to keep unemployment constant, and a year from now we may end up with unemployment rates which are higher than we have at the moment. Not hugely higher, but you need something like about a 3 growth rate just to hold unemployment constant in the American economy.

WOODRUFF: Is that your scenario?

Mr. RAHN: No, my scenario is much more optimistic. The reason we've had --

WOODRUFF: Much more optimistic?

Mr. RAHN: Much more optimistic. The reason we've had that slow economic growth is because last year the Federal Reserve produced very little money, from June to December. Now since the beginning of this year they have been increasing the rate of growth of the money supply. We know there's a lag between changes in the rate of growth of the money supply and changes in the rate of growth of GNP. Now we're starting to see the pickup now. I expect this quarter we'll grow about 3 , and the fourth quarter and the beginning of next year in the four- to five-percent range. That means unemployment will come down and real per capita incomes will be rising.

WOODRUFF: So unemployment will come down, as you see it?

Mr. RAHN: Yes, we're going to have a much rosier future than I think --

WOODRUFF: And Dr. Thurow, you don't agree?

Dr. THUROW: Well, basically the thing to remember about that forecast is he is out on a limb by himself. The standard forecast is much more like my 2 than it is any four or five-percent growth rate.

WOODRUFF: All right, well, we'll have you all back in six to nine months to see who was right. Lester Thurow, Richard Rahn, thank you both for being with us.

Mr.RAHN: Thank you.

MacNEIL: Still to come on the NewsHour, impressions of President Gorbachev from one of the U.S. journalists who just interviewed him, and a profile of two men who breathed new life into minor league baseball. Talking with Gorbachev

MacNEIL: Soviet President Mikhail Gorbachev is in the news today. Time magazine has scooped the Western press by getting the first interview with the new Soviet leader. Last week when he talked to three editors from the magazine about the November summit with President Reagan, the occasion was notable not only for what he said but how he said it. The Soviet leader, in the words of one diplomat in Moscow, came across as the best public relations man they have. In the two-hour, 12-minute interview he showed a number of different moods as well as a mastery of a variety of different substantive issues. One of the three interviewers was Richard Duncan, chief of correspondents of Time magazine.

Mr. Duncan, what's your conclusion about the timing of the interview? Why did he want to give it now, do you think?

RICHARD DUNCAN: Well, it seemed fairly clear to me that it is a bit of pre-summit positioning. The main thrust of the interview revolved around the summitry, and he said at the outset that he was concerned about a deterioration of relations between the United States and the Soviet Union coming into the summit and that he was concerned that there was a lowering of expectations on the American side while the Soviet Union, he said, maintained high expectations. So I think it's a salvo, if you will, fired before the big battle or the big meeting at the summit.

MacNEIL: The magazine in its report says he was tough, witty and showed a disciplined intellect. Give an example of how he was tough.

Mr. DUNCAN: Well, he was tough in that in many ways he -- in all the important ways, I believe, he didn't differ significantly from the tough Soviet line on arms control, on a number of issues which divide the two countries, and while stylistically he appears to be a great deal more flexible, not to say soft, but a great deal more flexible than his predecessors and perhaps than many of the people who ordinarily represent the Soviet Union.

MacNEIL: Excuse me interrupting. I read in your report that he's verbally flexible. I mean, he doesn't just recite the old phrases --

Mr. DUNCAN: That's right.

MacNEIL: -- but finds new fresh ways of phrasing them.

Mr. DUNCAN: That's exactly right, but I think he's tough and he says -- the word struck my mind because of course it had overtones of Khrushchev. The negotiations will be "buried;" we will "bury" -- he used the term "bury." Or occasionally said, "If you do this, of course we'll have no choice. We will do the same thing." He was quite tough that way.

MacNEIL: What about witty?

Mr. DUNCAN: Oh, he told a funny story about an old finance minister of the Soviet Union who used to go to sleep during meetings and would wake up at the wrong times and would simply say, "No, no. There's no money. There's no money." Reflexive answers. He was trying to make the point that the United States was giving reflexive, sort of unthinking answers to Soviet proposals. And he said at one point he was asked -- was told that his wife, that the Western press was in love with his wife and hoped he was going to bring her to Geneva, and he said, "Well, if that's the case, I won't bring her." He smiles easily. Intellectually --

MacNEIL: What about the disciplined intellect?

Mr. DUNCAN: He seems to have done all of his homework to an extent I think unprecedented with Soviets who seem to normally talk from a script. When you ask him about issues he can deal with definitions of research and development in the Strategic Defense Initiative, in Star Wars, at what stage he thinks it would be verifiable. You can see the mind proceeding along a very rigorous and disciplined course.

MacNEIL: Reuters news agency, which has done a big reaction piece on your interview today rounding up diplomatic opinion in Europe, says they're saying that he demonstrated such a mastery of style and substance that he puts the Reagan administration on the defensive. What's your feeling about that?

Mr. DUNCAN: Well, that's in perceptions, other people's perceptions. I think that's a little strong, but clearly he is no longer just the kind of wooden spokesman for the Soviet Union that in many ways we had come to expect. Here is a person who is a conversationalist, who takes initiative, brings up ideas, and who will probably do that right onto the summit and through it.

MacNEIL: How did you come away thinking about the probable chemistry between him and Ronald Reagan?

Mr. DUNCAN: Well, he's a very intense man. I think he is -- I think of Ronald Reagan's chemistry of being of one of amiability, discussing -- touching on one point, perhaps, then the other, trying in general terms to make a point. This man is very precise. As I say, he's intense. He comes up with a lot of information and a lot of data. He builds his arguments in a very disciplined manner and I think he'll come hard at our president.

MacNEIL: In a word, is there a lesson in this interview for the administration as they prepare for the summit?

Mr. DUNCAN: Well, I'm not saying that they were about to do this, but they certainly shouldn't underestimate Mr. Gorbachev. He's a formidable statesman, I think, and seems very much in charge. And talks very easily and freely and I think they'd better listen to him because he seems to represent that country.

MacNEIL: Mr. Duncan, thank you for joining us.

Mr. DUNCAN: Thank you. The Best in Baseball

WOODRUFF: For major league baseball players Labor Day is the beginning of the end, the start of the home stretch towards a pennant, and, if all goes well, a World Series. But for minor leaguers, those who play in the shadows of the major leagues, such as players on the Pawtucket, Rhode Island, Red Sox, Labor Day marks the end of their season. More than miles separate the major league Boston Red Sox from their AAA farm team in Pawtucket. R.D. Rosen of public station WGBH reports.

R.D. ROSEN, WGBH [voice-over]: This is baseball where the only strikes are the ones across the plate. This is a summer game without astronomical contracts, salary arbitration or disappointed fans. This is the minor leagues; to be precise, the Pawtucket, Rhode Island, Red Sox of the AAA International League, as high as you can go without being in the majors. Down here in Pawtucket things are bit different from the big leagues. For one thing, no one seems to have a bad word to say about the man who owns this team.

FAN: Ben Mondor is the owner of the park, and for years he would just walk up and down the aisles shaking the hands of people, thanking them for coming, saying, "How do you like the game?"

MIKE TAMBURRO, general manager: This is Mr. Mondor.

BEN MONDOR, owner: How are you?

Mr. TAMBURRO: He's the real boss of the Sox.

ROSEN [voice-over]: Welcome to the warm little world of Ben Mondor. Eight years ago, after a successful business career rescuing bankrupt New England textile companies, Mondor reluctantly embarked on a different sort of salvage mission. A banker friend urged him to buy the Boston Red Sox top farm club, the bankrupt Pawtucket Red Sox.

Mr. MONDOR: And he said, "Ben, why don't you buy a ball club?" And I said, "Hey, Champ, go play in traffic, huh?" I mean, what the hell I want a ball club for? I'm happy. I'm home. Hey, good luck. And he eventually, about four months later, I'm sitting with Mike in this ballpark, 1,142 creditors, and I'm saying, "What the hell am I doing here?"

ROSEN [voice-over]: Mike is is Mike Tamburro, the team's general manager.

Mr. MONDOR: But I did say to Mike one thing I remember. I said, "You know, Mike, every businessman in the world will admit, if he's successful, will admit to one thing. He lives with one haunting fear, that someday he's going to pull a real bummer. I said, "This is my bummer.' "

ROSEN [voice-over]: In the beginning Mondor's fears semed justified.

Mr. MONDOR: First year I think we set some sort of international league record. We won the pennant the first year because Boston had a lot of talent on the way up, and we only drew 70,350 -- -236 fans all year. We won, probably set the all-time record internationally for winning our championship pennant in solitude.

ROSEN [voice-over]: Since then the Pawsox' performance on the field has wavered, but attendance has improved significantly. In 1982, five years into Mondor's regime, the Pawsox drew more than 200,000 fans to set a team attendance record. And they did it even though they spent a good part of the season in last place. So, question: how did Ben Mondor take a bankrupt baseball club that was a loser even when it was winning ball games and turn it into a winner even when it was losing ball games? Answer number one, cash.

Mr. MONDOR: To bring back this thing from the mess it was in we had to spend a lot of money, and eventually it came back because we never had to pay for money. If you don't have the bucks, get the hell out, in any business.

ROSEN [voice-over]: Answer number two, Mondor hired organization-minded Mike Tamburro, who last year was voted minor-league executive of the year by both the Sporting News and the Baseball Writers of America.

Mr. TAMBURRO: We're basically the research and development arm of a major corporation.

ROSEN [voice-over]: Answer number three, they marketed the club tirelessly.

2nd FAN: I started coming because they called my office and said, "Well, do you want to buy season tickets for the Pawsox?" "What? What are you talking about? I never went to the Pawsox game." I said, "Sure." And they were cheap. You couldn't beat it. You know, it's the best entertainment in town.

ROSEN [voice-over]: Answer number four, Mondor and Tamburro agreed on a novel strategy for promoting the team.

[on camera] The gentlemen who operate the AAA Pawtucket, Rhode Island, Red Sox don't believe in pre-game cow-milking contests or jalopy nights or disco nights or free souvenir batting helmets. They believe in baseball played the old-fashioned way. They've seen the future of the game, and it's not dancing chickens.

Mr. TAMBURRO: Too much is made of the promotional end of baseball in our game today, at all levels. And the major leagues are fast becoming part of that. You know, they see these big attendance numbers that some of the minor league clubs have created by promotions, and now they're beginning to think there's some type of magic in all these giveaways and all this chicken stuff.

Mr. MONDOR: Let me put it this way. It's like, let's say you get a promotional product. You open a gas station and give a promotional product to start off and keep giving it -- stamps or glasses or what have you. The guy across the street opens one up and gives, too. Everybody you have is going to leave you and go there. Then the other guy comes out and gives a bigger product, they're going to come back to you. Well, we said to them you have no promotional products, but you have our service, the ball game. This is the best you can find anywhere.

ROSEN [voice-over]: For the fans it's not whether the Pawsox win or lose, or even how they play the game, although how they played it on one occasion in 1981 made professional baseball history -- the longest game ever, 33 innings. No, in Pawtucket it's enough that the game is played.

CHIP YOUNG, The Providence Eagle: It's sort of like your simple sister, where everybody does care about them, and if you tried to take them away they'd fight like hell. But it's just sort of a comfortable feeling with the Pawsox and all the venom is taken out on the Red Sox depending upon how well or how poorly they're doing.

ROSEN [voice-over]: The simple sister plays in this appropriately modest hom,e, McCoy Stadium. McCoy was built as a WPA project 40 years ago on a swamp, a cement-eating swamp.

Mr. TAMBURRO: They just kept pouring and pouring and pouring. In fact, one of the first things they told Ben when he first came to Pawtucket in 1977 was, "Do whatever you want, but don't dig.

Mr. MONDOR: They tell me that there's another stadium right under here. It just sank.

ROSEN [voice-over]: One of the park's more intriguing features is the Wall of Fame, which commemorates, with a certain primitive charm, those Pawsox players who have gone on to bigger and richer things. McCoy Stadium may not be the Taj Mahal, but for the fans there's not a bad seat among the 5,800 in the house. A family of four can park free and see an evening of professional baseball for $10. Here at Finley Park in Boston, where the other Red Sox play, the price tag is four and five times as much. In Pawtucket the baseball is strictly no frills. Nothing artificial added, nothing genuine taken away. The baseplayers are still, most of them, attached to childhood. They do not yet have celebrity or battered bodies or clause-cluttered contracts. For now this clubhouse is their home. Actually it's a halfway house. When they leave here it's either to join the majors for a day or a month or a decade, or else to withdraw slowly, to join the rest of us in the world of those who can't hit the curve or the outside corner. For the twinight doubleheader against the Maine Guides this evening, the kind of evening which suggests that God might be a baseball fan, the gate is not what Mondor and Tamburro hope for, but it will do.

Mr. MONDOR: We end up with a consistent strong attendance and always the best bottom line of anybody. And that's good management.

ROSEN [voice-over]: There's no question that these two men are having a good time. Listening to them toot each other's horn is like, well, it's a far cry from George Steinbrenner and Billy Martin.

Mr. TAMBURRO: When it comes to community and people, he never rests.

Mr. MONDOR: He is the main reason that we are where we are.

Mr. TAMBURRO: God knows how many boards he's on in this community.

Mr. MONDOR: He runs a hell of a good ship.

Mr. TAMBURRO: When you're working for the best owner in the game of baseball and the most community-minded man in this game, it becomes a pleasure every day to come to work. And that's why it becomes the best.

ROSEN [voice-over]: It's justthe kind of talk you'd expect with a winning ball club. In Pawtucket, however, it's the kind of talk you get even when you've been deep in last place for the entire summer.

Mr. MONDOR: There's nothing like a cheering crowd to get the pulses going and to smell the hot dogs and the popcorn. I mean, this is just -- that's the way it is.

MacNEIL: Once again, the main stories of the day. Hurricane Elena hit the Mississippi Coast, caused heavy property damage and then abated to a tropical storm. In the first major speech since his cancer operation, President Reagan reopened his campaign for tax reform. South Africa's freeze on payment of foreign debt rallied its currency while anti-apartheid riots continued. Good night, Judy.

WOODRUFF: Good night, Robin. That's our NewsHour for tonight. We'll be back tomorrow night. I'm Judy Woodruff. Thank you and good night.