The MacNeil/Lehrer NewsHour

MS. WOODRUFF: Good evening. I'm Judy Woodruff in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After tonight's News Summary, we look at James Baker's switch from foreign policy to campaign politics with analysts David Gergen, Mark Shields, and John Newhouse of the New Yorker. And we examine his foreign policy record with Clinton adviser Michael Mandelbaum and Republican consultant Condoleezza Rice, and we have a NewsMaker interview with Israeli Prime Minister Yitzhak Rabin. NEWS SUMMARY

MS. WOODRUFF: President Bush ended weeks of speculation and rumors today. He announced that James Baker will resign his post as Secretary of State to become White House Chief of Staff and oversee the President's re-election bid. The move will be effective in 10 days. Mr. Bush said he wanted Baker's help shaping his second term agenda. He spoke in the White House briefing room.

PRESIDENT BUSH: From Tokyo to Toronto, Jim Baker is known for accomplishment. And he knows about change, how to distinguish wise moves from foolish ones, and he knows about America's government, having helped to develop and implement domestic, economic and foreign policies. And perhaps most important, he knows our people are the source of our country's strength.

MS. WOODRUFF: Baker returned the President's compliment in a farewell speech to State Department employees.

JAMES BAKER, Secretary of State: President Bush and I, as practically all of you, I'm sure, know, have been close friends for 35 years. And I know what he can accomplish when he directs his resolve toward a purpose. I think we saw it in the Gulf. He's a trusted leader. And, my friends, I think we will see it again as President Bush targets America.

MS. WOODRUFF: Deputy Secretary of State Lawrence Eagleburger will serve as acting secretary when Baker moves to the White House. Gov. Bill Clinton praised Jim Baker's political skills today, but said he still expected a negative campaign. Clinton said, "He's a very able politician. He's one of the best politicians, deal makers, and political handlers they've got. I think it'll still be very negative, but it will be more cleverly negative. His running mate, Senator Al Gore, had this to say at a campaign stop in Chicago. "I think that James Baker is the best they have. I think that he -- I think he's very talented. I think his talent would be better -- put to better use in continuing the Mideast peace talks at this critical stage. I just think that Bush and Quayle are in a state of political panic and they're throwing everything, including the kitchen sink, into their political quest to try to convince the American people that the country needs four more years of the same old approach that we have had. And the people aren't buying it.

MS. WOODRUFF: We'll have much more on the story just after the News Summary. Also on the campaign trail today, Gov. Clinton made what he described as a major foreign policy address to the Los Angeles World Affairs Council. He spoke about his priorities.

BILL CLINTON: My first foreign policy priority will be to restore America's economic vitality. I have laid out a strategy to raise our people's skill levels, boost productivity, spur innovation, and investment, reduce the national debt, and make us the world's strongest trading power. I will elevate economics in foreign policy, create an Economic Security Council similar to the National Security Council, and change the culture and the State Department so that economics is no longer a poor cousin to old school diplomacy.

MS. WOODRUFF: We will assess Gov. Clinton's remarks at length on the NewsHour tomorrow night. Robin.

MR. MacNeil: The United Nations Security Council today overwhelmingly approved the use of force in Bosnia. The Council authorized military intervention only as a last resort to ensure the delivery of relief aid and open detention camps to inspection. There are no plans for the immediate deployment of troops. In Geneva, Red Cross officials accused all of Bosnia's warring parties of human rights violations. They did so at the first ever emergency meeting of the U.N.'s Human Rights Commission. A U.S. official laid the blame for atrocities at detention camps squarely on Serbia and Montenegro, the two remaining republics in the Yugoslav state.

JOHN BOLTON, Assistant Secretary of State: We now know that camp prisoners are being moved from Omarska, Banyaluka, and perhaps elsewhere in an effort to hide the horrors inflicted upon them. We ask the people of Serbia and Montenegro this simple question. Do they wish to go down in history as the last fascist state in Europe?

MR. MacNeil: The Yugoslav representative forcefully denied reports that Serbs were running concentration camps. The U.S. has requested a special investigator to report on all rights violations for possible war crimes trials. In Sarajevo today, sniper fire hit the convoy of the Yugoslav prime minister. A producer for ABC News was killed. Louise Bates of Worldwide Television News narrates this report.

LOUISE BATES: The murder of David Kaplan turned Panic's peace mission into tragedy. The ABC team was supposed to accompany the prime minister in an armored personnel vehicle, but due to lack of space, Kaplan hitched a ride in another TV crew's van. He tried, but discarded a bulletproof vest. There was a single shot through the back of the van. It hit Kaplan in the back. Surgeons struggled for two hours to save his life, but failed. Panic was deeply distressed and angry at the killing.

MILAN PANIC, Prime Minister, Yugoslavia: I think criminals killed them. I think terrorists killed them. No Serbs, no Muslims good, no Croats good. These are crippled people mentally, ill, killing people like this.

LOUISE BATES: Hours later, the shocked ABC crew boarded a plane back to the safety of Belgrade. Guarded by U.N. troops, the prime minister, the man who'd come in search of peace, stepped aboard the same jet.

MR. MacNeil: Kaplan was the 30th journalist killed in Yugoslavia's 14-month-old civil war. Rebels in Afghanistan launched a rocket attack on the capital today, killing at least a hundred people. Hundreds more were wounded. Kabul has been shelled repeatedly over the past week, as rival Muslim factions struggle for power. Twelve hundred people have died in the shelling, which is the worst since the country's Communist government fell in April after 14 years of civil war.

MS. WOODRUFF: In economic news, inflation remained low in July. The government said consumer prices inched up just .1 of 1 percent last month. Retail sales gained 1/2 percent, after falling the previous month. And first-time claims for unemployment benefits fell 66,000 in the week ending August 1st. New claims had surged the week before due to a spate of temporary layoffs in the auto industry.

MR. MacNeil: Federal investigators said today that sabotage was the likely cause of last night's Amtrak train derailment just outside Newport News, Virginia. Seventy people were injured in the accident. A National Transportation & Safety Board member said a switch had been manually opened to divert the passenger train onto a side track that has a maximum speed of 15 miles an hour. The lock on the switch had been removed and a pair of bolt cutters was found nearby. That's our News Summary. Now, it's on to James Baker's job switch and Israeli Prime Minister Yitzhak Rabin. FOCUS - RESCUE ME

MS. WOODRUFF: The much anticipated move of James Baker from the State Department to the White House and the Bush re-election effort is our lead segment tonight. The decision has implications both for presidential politics and for U.S. foreign policy. And we will explore both. First, the politics. After the President's announcement of the job switch this morning, Baker talked with State Department employees and foreign service officers. Among other things, he laid out the political stakes involved in his decision and here are extended excerpts.

JAMES BAKER, Secretary of State: I have decided to resign as Secretary of State effective August 23rd to work with the President to help develop a second-term agenda that builds on what has been achieved and that fully integrates our domestic, economic, and foreign policies. The President will be asking for the support of the American people to give him a mandate for this agenda. I'm fully committed to this decision because I believe this year the people of the United States will be making fundamental choices and they'll be making fundamental choices at a pivotal time in America's journey. When you peel away the rhetoric, there are very, very different ideas in conflict out there. We should build on the fundamentals of lower tax rates, limits on government spending, greater competition, less economic regulation, and more open trade that can unleash tremendous private initiative and growth. But I think that in the nineties government can add to this growth program by building opportunity and hope for individuals, families and communities. I think that there is a conservative agenda for helping people and for responding to their needs. We want to empower them to make their own choices, to break away from dependency. We want to give them economic security, a stake in society. Initiatives should be unleashed, success should be rewarded. Excellence, obviously, should be our goal. Contrasting philosophies matter when it comes down to what each party really wants to do. We might discuss similar topics, but there are sharp differences and approaches. The President wants to offer the voters an integrated program to strengthen America and to give our people economic security, building from the ground up and not from the top down. I know there will be skeptics. Some will ask why President Bush spent so much time on foreign policy during his first term. And here's my reply. Over the past four years, more of our fellow human beings have gained their freedom than any other time in human history, and we have permanently turned back the hands of the nuclear dooms day clock. So the President saw a chance to take on the two central problems of our age, the struggle for freedom, and the threat of nuclear war, and he seized it. No apologies for that. It's time now to turn to new challenges, to the future, at home, and abroad. And that's exactly what President Bush intends to do.

MS. WOODRUFF: Now, the political causes and effects of the Baker announcement. We are joined by our own analysis team of Gergen & Shields plus one. That is David Gergen, editor at large at U.S. News & World Report, and syndicated columnist Mark Shields. Joining them is John Newhouse, a staff writer with the New Yorker, and a guest scholar at the Brookings Institution here in Washington. He's a former assistant director of the U.S. Arms Control & Disarmament Agency during the Carter administration. Well, David Gergen, is this the move that's going to bail out the Bush campaign from 25 points behind?

MR. GERGEN: Well, Judy, I think it's the first move when we step back into the race. I mean, it is a step that will I think help to rejuvenate the White House staff and the campaign. There are many at the White House that feel the place has been mismanaged badly for the past eight months, so mismanaged that they've lost confidence with themselves. With Baker coming back, there were people actually today in the staff crying they were so happy that there's been a feeling they can't do anything right. They've been off track every time they try something, they mismanage it, they mishandle it, and Baker's going to give them confidence in themselves again that maybe they can step out. Now, that's only the first step. I don't think Jim Baker win's the election, but I think he may rejuvenate the campaign. I think it will give George Bush more self-confidence, and that's very important too.

MS. WOODRUFF: So it's giving confidence, is that how you boil it down?

MR. GERGEN: Well, I think that he -- you have to first understand that -- let's go to the Baker-Bush relationship. I think it's probably unique in this century to have someone who's this close to a president and the relationship and dependency on both sides. You know, we've had Harry Hopkins with FDR. We had Col. House with President Wilson, but I think that Baker's actually closer to Bush and in some ways this plays a larger role in Bush's life, and I think that the President -- the President's son told me last week, you know, Jim Baker's been around my dad's campaign every time for the last 20 years. He's just going to feel more comfortable with him. I think that'll help. I think that Baker will put a lot more snap into the campaign too. There are a lot of big decisions to make, starting with the acceptance address next week, and they need Baker around for those decisions.

MS. WOODRUFF: Mark, how do you read this politically?

MR. SHIELDS: I'm glad, Judy, the spirits of the White House are better, and if any time in the last eight months, I mean, were yearning, getting nostalgic about the old Sununu days, which was eight months ago, and he was -- poor John was driven out of town in a railroad car and --

MS. WOODRUFF: Sam Skinner was brought in.

MR. SHIELDS: Sam Skinner was brought in and Jim Baker's back. I think that Jim Baker is unique. I would include Robert Kennedy as far as closeness to a president and that kind of relationship.

MR. GERGEN: That's a good point.

MR. SHIELDS: But Jim Baker is a unique political figure in this country's political history. Five presidential campaigns he's had a leadership role, starting with Jerry Ford's, which I think perhaps may have been the best for all of the campaigns. He came from 32 points back, came within an eyelash a switch of 23,000 votes -- he would have come the greatest comeback in history against Jimmy Carter in '76 -- made the switch to Ronald Reagan in '80 after George Bush won the vice presidency, presided, more or less, over the Reagan '84, even though Ed Rollins was the manager, pulled George Bush out in '88. Here he is three decades, five campaigns, in 1992, he's back. It is truly remarkable, I mean, because it really is exceptional for anybody and the leadership of a national campaign, Presidential campaign, requires winning the confidence and trust of an individual. Usually somebody only runs one of those. They're very, very lucky if they can run one -- but this guy has done that in three different Presidents, and it's a remarkable achievement.

MS. WOODRUFF: John Newhouse, help us put a finger on what it is. I mean, you heard what David and Mark had to say. What is it about Jim Baker that would cause him to be pulled out of the State Department at a moment of some crisis around the world and pulled into a campaign?

MR. NEWHOUSE: Well, as David pointed out, the campaign's in very tough shape. And I think there are a lot of pluses there for Bush in this move for which there's no precedent, and there may be just a little down side. First of all, Baker will bring strength and coherence. He will bring what Bush calls the vision thing. He doesn't have it, himself. He's no more of a conceptualizer than George Bush is, but Baker knows you need it, and he will find someone to supply it. I mean, he's bringing with him two people from the State Department, two of the four, who he's been using to supply the vision thing. He also really knows how to manage the press. I mean, we haven't seen anyone this good at managing the press in modern times. And he's --

MS. WOODRUFF: What do you mean managing the press? He generally gets good press, is that --

MR. NEWHOUSE: Yeah, but it's no accident that he gets a good press. I mean, he controls a lot of very vital and sensitive information. He controls the access to that, and he controls the other people who have contact with the press. And it's a very small circle he operates in so there are no leaks of which he doesn't approve. So he gets the kind of -- he generates the kind of press he wants to see. And you can't really minimize the importance of that.

MS. WOODRUFF: David --

MR. NEWHOUSE: But I think there's a real down side for him in this. I mean, the down side for Bush, if there is any, is that, as David pointed out, this is a very close relationship. They're like brothers, but like brothers, they're also very competitive and they've been rivals at various stages. And I think there's got to be maybe a whiff of humiliation here for George Bush in having to bring back --

MS. WOODRUFF: In having to reach out.

MR. NEWHOUSE: -- Jimmy Baker again to pull his chestnuts out of the fire.

MS. WOODRUFF: Do you think that's the case?

MR. GERGEN: Neither man wanted to do this.

MS. WOODRUFF: Well, Baker was choking up today when he made his remarks.

MR. GERGEN: He was. Jim Baker has worked for some years to get out of the White House. He was anxious to leave back when he left Reagan in 1984, and they went over to the Treasury and got pulled back in from Treasury to run the '88 campaign. And at that time, of course, he was once again called a handler and a pall. Now, Jim Baker then had the opportunity to go to the State Department and he became a statesman. And there's been a great reluctance on his part to go back again to being a pall. I mean, he's made a sacrifice here. He's done it for a good friend. He's done it for a good cause. I mean, he's -- I think he accepted the inevitability of it, but I don't think either George Bush -- and for the very reason that John just said, I think George Bush was not anxious to do this, but both of them felt it was imperative under the circumstances.

MS. WOODRUFF: But his own political future, of course, to some great degree hinges on George Bush's political --

MR. SHIELDS: Sure. He -- For George Bush it had to be an act of humiliation, I mean, really at a personal level, because George - - in 1988, the campaign is regarded almost uniformly as a lousy campaign. Many people trace the failure of the Bush presidency in its first term to that campaign which laid out no agenda, laid out no sense of the future, and was totally devoid of the vision thing, but who took the blame? The late Lee Atwater was castigated. Roger Ailes, the TV maven, was censured. George Bush was regarded as somewhat of an ethical midget. But Jim Baker, John said, went right over to the State Department -- my goodness, isn't that wonderful, Jim Baker presiding over that campaign, so at this level, Bush had to turn to him -- here he is -- having had his first term -- he's 68-years-old, he's 25 points down in the polls or 20 or wherever he is, and has to say, Jimmy, will you do it again? That's got to be the --

MS. WOODRUFF: But wait a minute, do I hear a contradiction -- because on the one hand, you're giving -- you and others are giving Baker credit for these great campaigns, but on the other hand, you're saying he had a major hand in the fact that there wasn't a mandate?

MR. SHIELDS: I used the phrase -- described Jim Baker as the Teflon manager in 1988, and I think it sticks.

MR. NEWHOUSE: That's a good phrase, but I also disagree, I think, if I understood you correctly, that Baker's political fortunes are tied with Bush's. I really think there's a divergence, and I think there may have been even four years ago. He didn't want to become a campaign manager four years ago. Jim Baker wants to be President. He wants to go back to the White House on his own and he wants to run on his record as a statesman. He doesn't want to be regarded as a sometime the cabinet member and a sometime campaign manager, particularly if this campaign turns ugly, as the last one did, because, you know, the mud is sure to spatter him this time. He won't get off free this time.

MS. WOODRUFF: But are you suggesting that he would have been better off himself politically if he hadn't gotten involved in it?

MR. NEWHOUSE: Much better.

MR. GERGEN: He would have been better off politically.

MS. WOODRUFF: Well, why didn't he say no?

MR. GERGEN: He would have been better off politically if he hadn't gone and the President won. But unless he went, it wasn't clear the President could win. You know, so I think that was the inevitability of it. Now, let me say I think that Mark is pointing out something which is very interesting -- and John about this. Jim Baker -- if I have any quarrel with his campaign management of the past -- he did not go for a mandate in 1988 with George Bush. And I think that hurt George Bush the first term. He did not go for a mandate in the 1984 campaign with Ronald Reagan. What was striking today about the Baker speech is he said, let's go for a mandate. It was very clear he's now changing. And I think, Judy, to go to another point John made, what Baker said in that speech today is the best single speech given by anybody in this administration.

MS. WOODRUFF: Well, that's what I want to ask you about, because he laid out the vision thing that John spoke about.

MR. GERGEN: That's correct.

MS. WOODRUFF: Who wrote that? Did Jim Baker write that? You said he's not the one with the vision.

MR. GERGEN: Well, there's -- one of the people who's coming with Jim Baker is a fellow named Bob Zelleck. He's one of the bright, rising stars in the Republican establishment and very, very thoughtful. He and Dick Darman are very close. In fact, he was Dick Darman's research assistant some years ago at Harvard, and he had a major hand in this. I think Baker did as well, but it was a conceptualization that I would argue probably ought to be the frame work for the acceptance address this next Thursday night.

MS. WOODRUFF: Well, why haven't we been hearing that from George Bush before now?

MR. GERGEN: Because Bob Zelleck's been working for Jim Baker. He's now coming to the White House with Jim Baker.

MS. WOODRUFF: What is -- Mark, were you going to add something here?

MR. SHIELDS: I was just going to add one thing. It gives -- it gives immediately -- I mean, Jim Baker, the jockey, which is what Jim Baker is, it comes down to the mount. I mean, in spite of those of us who have been managers like to think that gee, we've made the difference, it really does come down -- Jim Baker can make a length or two's difference in a four-mile furlong, a four-mile race. I mean, he's not going to win this for George Bush. He does give George Bush a couple of advantages though that George Bush didn't have going in, and maybe have over Bill Clinton today. The first is he's a peer. He is somebody who can go in to George Bush and say, you've screwed up, you haven't given a good speech; you've got to do these three things. There's nobody in the Clinton campaign who has that kind of a relationship with Clinton over a sustained period of time and over a shared foxhole of a national campaign. Secondly, he -- there's no doubt as of this moment who's in charge. There's no appeals court in the Bush campaign -- there's no factions. There's no second guessing. It is Baker.

MS. WOODRUFF: You're saying Baker rather than Bush?

MR. SHIELDS: Baker is running the show. Baker is the campaign manager. There will be no international court of Hague appeals beyond Baker's decision. That is not the case in the Clinton campaign. And they haven't been through a campaign together the same way. And it does provide a small tactical advantage.

MS. WOODRUFF: What --

MR. GERGEN: Could I make a stretch here, because I think Baker is more than that. I think Baker, in effect, is becoming deputy president for the next three months.

MS. WOODRUFF: That's what I -- are we looking at a co-presidency practically?

MR. GERGEN: I'm not sure it's a co-presidency, but it's the greatest sharing of power that I can remember, because, in effect, Jim Baker in this campaign is going to be to George Bush what Al Gore has already become to Bill Clinton. In effect, we're going to have Clinton and Gore versus Bush and Baker in this campaign. And Baker is almost on the line --

MS. WOODRUFF: Well, wait a minute.

MR. GERGEN: -- because you elect Bush and you get Baker to boot for a second term.

MS. WOODRUFF: Well, wait a minute. There is a vice president named Dan Quayle --

MR. GERGEN: I know. I know that.

MS. WOODRUFF: -- who is still --

MR. GERGEN: I know that. But I would argue that --

MS. WOODRUFF: What about him? And Jim Baker didn't want Dan Quayle to be selected as a running mate four years ago.

MR. GERGEN: I think we're going to have a very interesting rivalry over the next few months, and a little of tension.

MS. WOODRUFF: Isn't that the catch, John? You've written about that.

MR. NEWHOUSE: Well, I think that Dan Quayle is going to have a thin time if Bush is re-elected, because Baker has spent a fair amount of time over the past four years trying to not deep six Dan Quayle, but to keep him as far out of sight and as quiet as possible. And whether he takes on that assignment now, or whether he thinks that Quayle can be useful doing what he's been doing, I just don't know. We'll have to wait and see, but I think in a sense for George Bush at this moment, the thing he really understands more than anything else, I think, is he wouldn't be President but for Jim Baker, because he wouldn't have been Vice President but for Jim Baker. Jim Baker got him the vice presidency. But it's also true -- and this campaign is going to be interesting for a number of reasons, one of which is Jim Baker has a God given gift for avoiding trouble, for distancing himself from bad news, and that - -

MS. WOODRUFF: The teflon business --

MR. NEWHOUSE: -- that was true --

MS. WOODRUFF: -- you mentioned a minute ago.

MR. NEWHOUSE: -- that was true when he was chief of staff, when he was secretary of the treasury, and it's been true in the State Department. He's not going to be able to hide. He's not going to be out on the ranch in Wyoming during this campaign. So I think that's going to be interesting to see too, is how he handles bad news.

MS. WOODRUFF: I don't want to be the skunk at the party, but what about -- are there any ethical considerations? I mean, this man is going from running the State Department, running foreign policy, to the White House to run the campaign. And we saw today -- there was a memo put out by Boyden Gray, the White House legal counsel some months ago, saying the White House ought to stay completely away from campaign involvement. How do you -- is that going to become a sticky area, David, or can they finesse that?

MR. GERGEN: Judy, I think the campaign ethics laws will not be a problem. I do think a legitimate question is going to be raised on the other side, and we're already starting to hear it today, of course, and we'll hear it more I think in your next discussion, about the propriety of moving someone at such a sensitive time in world relations when so many troubled spots are boiling around the world and it requires a delicate handling by the State Department to take the cockpit of the State Department, not just Jim Baker, but the team around him, which has been the very close-knit team, that has run affairs for the last three and a half years, and they're moving him over. I think that's a tough go.

MS. WOODRUFF: But I'm talking about just blatantly putting someone in charge of running the White House and saying at the same time this person is also running the campaign. I mean, that was in essence what we were told.

MR. SHIELDS: Yes, now it was --

MS. WOODRUFF: I'm asking --

MR. SHIELDS: I think there is a legitimate ethical question there. I think the reality is that every campaign for re-election is run out of the White House, and it has been the case --

MS. WOODRUFF: And that's the way it is.

MR. SHIELDS: That's the way it has been. I think there is a legitimate ethical question. I think -- I take slight issue with David on the point of a Democratic criticism. I think those Democrats who were uniformly, almost uniformly uncritical of a settlements policy of the Shamir administration in Israel --

MS. WOODRUFF: Israel.

MR. SHIELDS: -- now second guessing Jim Baker, who, if anybody has I think been responsible for bringing the hopes and reality of Arab-Israeli peace to fruition, I mean, it's Jim Baker. I mean, he has really -- and for them to be second guessing him at this point, as Sen. Gore appeared to be doing in the clip, I thought looked like rather cheap carping and doesn't stand up to scrutiny.

MS. WOODRUFF: All right, well, gentlemen, we'll leave it at that. Robin. FOCUS - GLOBAL VISION

MR. MacNeil: Yes. We now look at the other side of the Baker switch, his and the President's stewardship of foreign policy. Baker gave a valedictory assessment today. Ironically, his audience was State Department career employees, many of whom have complained that Baker and his immediate circle shut them out of policy making more than any secretary in history. Here's an excerpt.

JAMES BAKER, Secretary of State: Now this group, better than anybody else, knows well that United States diplomacy has required coordinated, professional execution in many corners of the globe. Perhaps the most important feature of this worldwide strategy was our engagement of the Soviet Union, what we referred to at the time as a search for points of mutual advantage. Working across a range of issues we probed the Soviets new thinking, then we tried to infuse that thinking with a fundamentally new content on regional conflicts, human rights and democracy, the standoff in Europe, conventional arms cuts, nuclear cuts, proliferation, economics, and of course trans-national topics as well. That's how the Cold War was brought to a quiet and a peaceful and a democratic end. People said the Soviets would never permit free elections behind the Iron Curtain, in Poland, Czechoslovakia, Hungary, and elsewhere. People said the Red Army wouldn't go peacefully, but it did. When the Berlin Wall came down, the doubters told us we couldn't unify Germany peacefully and democratically while retaining the 40-year ties to the West and to NATO, but together, we did. Four years ago, the children of America still had to go to bed at night with worries about a nuclear Armageddon, movies about "The Day After," and articles about "ground zero" etched into our minds the precariousness of our security. Our experts discussed how to build new and ever more dangerous missiles, missiles that would maintain a deeply disturbing balance of terror. But with a lot of help from some of the finest people that I've ever had the privilege of working with, we ended that nightmare. In the aftermath of the Gulf War, skeptics said the United States might be able to win thewar, but that that success would mean nothing if we lost the peace. So we set out to see how we could build on that victory. And I'm very proud to say that I don't think we've done badly. For the first time ever, all of Israel's neighbors are sitting down to discuss peace with her. On top of that, 13 Arab states are meeting with Israel to discuss arms control, water, the environment, and other issues that are essential for creating a totally new outlook in the Middle East. Later this month, a new round, indeed, a new phase of negotiations will move us further along the road to peace among the biblical lands that have been in a state of war for far too long. Of course, I have some regrets. One is that I know we still have a lot of work to do together. It's still a dangerous world, as we see daily, of course, in Bosnia. It's also though a world of great opportunity. There are still great risks if we fail to make the right choices and great risks if we fail to engage. I firmly believe that the United States of America is without question the only country in the world that can exercise the necessary leadership in the decade ahead.

MR. MacNeil: We get two views of the Bush-Baker foreign policy. Condoleezza Rice served on the National Security staff in the first three years of the Bush administration. She's now an associate professor of political science at Stanford University. She'll be a California delegate at next week's Republican convention. Michael Mandelbaum is a foreign policy adviser in the Clinton campaign. He's a professor of political science at the Johns-Hopkins School of Advanced International Studies and director of the Project on East-West Relations with the Council on Foreign Relations. He joins us from Los Angeles. Mr. Mandelbaum, before we evaluate the overall record, what impact on current foreign policy does it have to move the Secretary of State, this Secretary of State, out of that job and into the White House?

MR. MANDELBAUM: Well, as a strong supporter of Gov. Clinton, I'm hoping we have both a new President and a new Secretary of State after November, so I'm not sure it's precisely a calamity for American foreign policy. But I think there is one important point to make. The Arab-Israeli peace talks, as your previous discussants said, are at a very delicate phase. They're at a very important phase because now, as Sec. Baker, himself, said, the burden is on the Arabs to make concessions, to come off their long held positions which, if held to, will make it impossible to move forward. This is the heavy lifting of the peace process. This is the most important and most difficult task. Sec. Baker has said so. He's been indispensable to the process so far. And now he's leaving. That's bound to be a setback.

MR. MacNeil: Bound to be a setback, Condoleezza Rice? He's leaving just as the heavy lifting begins?

MS. RICE: Well, I know Sec. Baker and I do not believe that he would have left, regardless, if he believed that his absence was going to fundamentally harm the peace process. He has invested a great deal in it, as has President Bush, and I think he and the President have made the judgment that the Secretary can come to the White House now to lead the campaign, and that the peace process can survive and, indeed, prosper. I just don't believe that these are people who would have made the choice had they believed differently.

MR. MacNeil: Does that suggest he can continue to have a hand in the Middle East negotiations from the White House?

MS. RICE: I think there are questions as to whether he could continue to have a hand, but let me say --

MR. MacNeil: You mean, that would really be improper?

MS. RICE: I think that there would probably be difficulties there, but let me say that for those of us who believe that the re- election of George Bush is the single best thing that we could do for American foreign policy in the future, this is a very welcome move.

MR. MacNeil: How much credit, Ms. Rice, can Baker claim for his -- for getting all of Israel's Arab neighbors to sit down to discuss peace for the first time, which he mentioned, himself, in his speech today?

MS. RICE: Well, I believe that this administration, led by President Bush and Sec. Baker's excellent diplomacy, can take a lot of credit for this. I think, as he said in his statement, that very few really believe that face-to-face talks between the Arabs and the Israelis were a possible outcome of the victory in the Gulf War, but they pressed the advantage very quickly after Operation Desert Storm was complete. They held firm on the issue of settlements and loan guarantees. It turns out that the Israeli people were ready to turn to a government that was more committed to the peace process. And I think by that firmness and that initiative, they take a great deal of credit for that, but ultimately, the parties, themselves, I think are at the place that they want peace.

MR. MacNeil: Michael Mandelbaum, you heard Mark Shields say a moment ago it ill behooves Democrats who were complacent about the settlement policy of the Likud government to carp now about the effect of Baker's leaving. Do you think -- how much credit do you think Baker should -- can legitimately claim for getting the parties together?

MR. MANDELBAUM: Well, I think he does deserve some credit. But let me take issue with one of the things my friend, Condy Rice, said or implied. There is absolutely no evidence from the exit polling of the Israeli election that the issue of loan guarantees and the way the Bush administration handled it was at all decisive in the Israeli election. The Israeli people voted for change on a whole host of issues and they expressed their confidence in Yitzhak Rabin and that was a personal triumph for Yitzhak Rabin. Now, as for getting the peace process and the peace talks started and bringing the belligerent parties together face to face for the first time, I think the administration does deserve some credit. And by the way, Gov. Clinton has given the administration credit and has said publicly and in his meeting with Prime Minister Rabin yesterday that he wants these talks to continue. He wants them to succeed. If it is possible, to make progress between now and the election, he will be delighted, and he will give the Bush administration credit if progress is made. Having said that, let me step back and try to step into my role as a professional student of foreign policy and say that there were a number of factors contributing to this turn in Arab-Israeli relations, the most important of which I think was the collapse of the Soviet Union. Without the Soviet Union, the radical Arab rejectionist front has no super power patron to back up its policies of intransigence. For that reason, Syria decided that it was willing at least to come to the table with Israel. And that made this negotiation possible. Where we go from here is hard to say, because as I've noted the positions of the Arab states and of the Palestinian negotiators are incompatible with what the Israelis are willing to give up. So we do need some intensive diplomacy if Mr. Baker is unable to perform it, and I take it that in the White House he will be completely tied up with the re-election campaign, then somebody else ought to step in his shoes. And it seems to me that Larry Eagleburger, a very able diplomat, ought not simply to be a place holder for James Baker. He ought not simply to keep his seat warm at state. If the President wants him to conduct American foreign policy, the President ought to send his name up to the Senate for confirmation as Secretary of State.

MR. MacNeil: Let's move on here. Ms. Rice, Mr. Mandelbaum just mentioned the collapse of the Soviet Union. That is going to be the big claim that the Republican President and Secretary of State are making to the country and the party, that they have, to them goes a great deal of the credit, we've just heard, for the peaceful ending of the Cold War and ending the nuclear nightmare. How much credit can they actually claim, given the hand they were dealt by Reagan and Gorbachev?

MS. RICE: Well, let me first return to something that Mike said. It is very true that circumstances have to be right among parties to get progress on any important foreign policy issue, but what you make of those circumstances is a matter of leadership and diplomacy. And this administration did a terrific job of playing this hand in a way that brought about a peaceful end to the Cold War. Sec. Baker mentioned, for instance, German unification on Western terms, the liberation of Eastern Europe. I don't understand how one can argue that any of this was inevitable. Leadership in the White House is what brought these events to fruition, and I think that our lives realize that. I think our former foes in the Soviet Union realize that, and I think that deep down inside Mike and the Democrats realize that too, but they have a very difficult job. They have to convince the American people that a President who was at the helm when all of these events took place and all of these changes took place is less qualified to take us into the future than the Governor of Arkansas. And so I don't blame them for trying to downplay the administration's role.

MR. MacNeil: White House leadership, the leadership of this President in the White House deserves a lot of credit for the way the Cold War ended?

MS. RICE: Absolutely.

MR. MacNeil: I was going to ask Mr. Mandelbaum that.

MR. MANDELBAUM: Thank you, Robin. Let me quote Gov. Clinton in his speech to the Los Angeles World Affairs Council today and I'm very glad you're going to be devoting some time tomorrow, because I think that in the greater scheme of things that will be seen as a much more important event in the history of American foreign policy than Mr. Baker's peregrinations within the Bush administration. Gov. Clinton said that for George Bush to take credit for the fall of communism is like a rooster taking credit for the dawn. I'd be a little -- I'd soften that a little bit. I think that there was some skillful diplomacy, especially in the unification of Germany, and my friend Condy Rice played a very important role in that. But communism was toppled not from the White House, but by the bravery of the people who lived under communist subjugation for 40 and 75 years. It's the Lech Walesas and Vaclav Havels and Boris Yeltsins who deserve credit with a supporting role in some cases by the United States. That, I think, is the achievement of the Bush-Baker foreign policy. The great failure is the absolute inability to come to terms with the post Cold War world. There are huge challenges and opportunities out there and as far as I can see, this administration is simply helpless before them. It has no vision. It has no plan. It's really not doing much, except coasting on the achievements of the past.

MR. MacNeil: Let's go back to Ms. Rice on that.

MS. RICE: Yeah. May I respond to that. First of all, I would say that the Bush administration continues to achieve, as was demonstrated in the press conference with Prime Minister Rabin yesterday or the day before yesterday, with the North American Free Trade Agreement, which speaks to the global economy, and the need of the expansion of markets for the American economy. This is an administration that hit the ground running in 1989 and hasn't stopped running yet. I've never understood the argument that somehow this President was not prepared for the post Cold War era when it was this President who when Boris Yeltsin was brave enough to stand on the tanks, was this President that mobilized international opinion against the coup plotters at a time when I might add Gov. Clinton said that he was unsure and perhaps it was disturbing and we'd have to watch. So let's be clear here. The post Cold War era has been underway for better than a year now and this administration's been very active in it.

MR. MacNeil: Right. Well, we're going to pick this up tomorrow when we analyze Gov. Clinton's approach to foreign policy. Thank you both for joining us. NEWSMAKER

MR. MacNeil: And finally, we have a Newsmaker interview with Israel's new prime minister, Yitzhak Rabin, who returns to Israel tonight after talks with President Bush and other Americans. I spoke with him in his New York hotel room earlier today and asked for his reaction to the Baker job switch.

YITZHAK RABIN, Prime Minister, Israel: Well, I don't believe it's an issue that I should be involved in passing any judgment about. And I understand that in every democracy there are elections and for elections to be elected, it's legitimate to do what is considered to be helpful for the election. I am sure that in our country we have all our own considerations and we act in accordance to them, therefore, I don't believe this is the issue that I should be involved in by saying anything about it.

MR. MacNeil: Does it signal in a way that the crucial U.S. role in bringing these talks about has ended now, that the U.S. isn't needed now in this process?

PRIME MINISTER RABIN: I wouldn't say so. After I spent over a day with the President, with Sec. Baker, I found them really interested in the continuation of the negotiations. Let's not forget the Bush administration through Sec. Baker brought about the Madrid Conference and what has followed the Madrid Conference, the bilateral talks that Israel needs, face to face heads of the main Palestinian delegation, a Syrian delegation, and a Lebanese delegation. I don't believe that the United States or the present administration will give up to follow closely what will be developed in this bilateral talk, as well as when in September the multilateral talks will be convening.

MR. MacNeil: Did the Bush administration stand on the settlements and the loan guarantees play an important role in the peace process, do you think?

PRIME MINISTER RABIN: I believe that the question of settlements in the territory, it's an old issue between the United States and Israel. I remember several Presidents before President Bush that made it clear that it's against the U.S. policy that Israel will have settlements in the territories. I believe the same position has been taken now in continuation to the longstanding American position. I believe that basically when it comes to the relationship between the United States and Israel, we know that there are certain differences of opinion, positions, what should be done, what shouldn't be done, and we learned in many cases in the past, and I believe that this time in talks that I conducted with President Bush, Sec. Baker, we learned to agree to disagree on certain issues, but at the same time to find ways what to do together or at least in agreed way to move ahead to achieve what we believe should try to be achieved, therefore, the question is not if we had agreed about everything. All told, the long history of the relationship between the United States and Israel, there were differences, there were ups and downs in the relationship. The problem was always first to try to be friends one with another, to build to the extent it is possible trust and confidence, and second, to find operative ways how to move ahead in what we believe that should be moved, knowing that we defer on certain issues.

MR. MacNeil: In agreeing to the -- offer you the $10 billion in loan guarantees -- assuming the Congress goes along with it -- it's reported that you've accepted some conditions on that, and one of them is that after one year, the sum each year will be reduced by the amount your government spends on continued construction in the occupied territories. Can you confirm that?

PRIME MINISTER RABIN: It's true. It is to say that even before I came to office this was the position of the Congress and our administration, that there will be fundability, as they call it, of reduction, but it will be started once the bill will pass, will it be the second half of September or the first of October, I hope that we have agreed that for the first year we'll get $2 billion, but after that, of course, there will be a deduction of what Israel would pay from its own resources, the government resources in the continuation of the building of settlements that they'll -- construction will be continued after the 1st of October of this year.

MR. MacNeil: What is the long range justification for continuing or initiating any settlements, security areas or not, in territory that will ultimately be subject to negotiation and what, you yourself called territorial compromise in a peace settlement?

PRIME MINISTER RABIN: Well, there were two schools -- or there are two schools of thought in Israel, that you can make the Likud that aspires to the whole end of Israel and the Labor Party, which is ready for certain territorial compromises, but by no means to return to the pre Six Day War alliance. For all practical purposes, the present negotiations with the Jordanians and the Palestinians are not related to the permanent solution. They are related for the idea of which is called now is the interim self-government arrangement for the Palestinians. In the past it was called autonomy for the Palestinians as an interim agreement, for transition period of five years, therefore, we are not going to negotiate now the boundaries of Israel visibly in Jordan in this context. Therefore, these issues will not come up. We retain to ourselves the way that we believe at least the possibility to negotiate peace without return all the territories. We're ready to make compromise, first and foremost because we don't want Israel to be a bi-national state. We don't want to swallow into Israel as a sovereign state additional 1.7 or 1.9 million Palestinians. It will make Israel a bi-national state, therefore, we are talking once we pass the interim agreement of the autonomy hopefully once it will be created new realities will be come and surface. We hope that this arrangement will start eroding suspicion, hatred, prejudices, that no doubt exist on both sides when it comes to the Palestinian-Israeli problem. Might be new ideas will be brought up. For example, when the head of the Palestinian delegation came after the Madrid Conference to the territory, he was interviewed on television, he was asked, what is your opinion about a federation or confederation with Jordan? His answer was, why not with Israel? I'm not saying that this is the opinion of the Palestinian nowadays, but I believe the whole wisdom of the interim arrangement is to bring about changes, changes in attitude, because what we offer the Palestinians, even though they claim it's too little and too late, none of the Arab countries offered them. When Jordan was in occupation of the West Bank and Egypt in occupation of Gaza, we offered them autonomy to run their affairs by themselves, with the exception of security, a responsibility to the Israeli settlements, and foreign affairs.

MR. MacNeil: Is your government so open to new ideas down the line that it would consider a federation with the Palestinians?

PRIME MINISTER RABIN: I don't know what is federation.

MR. MacNeil: Well, didn't you just say --

PRIME MINISTER RABIN: Might be we have to define. We have to define. I wouldn't exclude new ideas once we start -- not now -- once we start and reach a point that interim self-government arrangements prove themselves, that that attitude is changing, might be that new ideas will come.

MR. MacNeil: What is the best thing, from your point of view, that can come out of this next round of talks?

PRIME MINISTER RABIN: I offer to Sec. Baker and also publicly I'm ready to say that in April-May 1993 general election will be held in the territories in which the Palestinians will reside, will elect by themselves from themselves administrative council, not what they demand, a legislative body, to run interim self- government arrangement, then to set a date -- let's say 1st of December -- as the date by which we should reach an agreement about modalities of the election, then another date, 1st of February, that by that we'll finish what spheres of activities will be handed to the Palestinians to be run by the administrative council. The problem is that they don't agree about it yet. You ask me what I expect. I believe it will be in the spirit of the Camp David Accord to which Egypt, Israel and the United States are committed internationally. It will be in the line which is embedded in the letter of the invitation by the United States and the Soviet Union to the participants of the Madrid Conference. And I believe it's the only way to start moving towards a solution of the conflict between the Palestinians and Israelis. Any attempt to move by one from now, from the present situation, to a permanent one, will lead nowhere.

MR. MacNeil: There is a view in Washington that having offered the loan guarantees President Bush and the administration are now covered politically to agree to the sale of UF-18s to Saudi Arabia. Do you see it that way?

PRIME MINISTER RABIN: No, I don't see. There is a longstanding position of Israel about this issue and we'll see what will happen.

MR. MacNeil: Is Saudi Arabia still a danger to Israel?

PRIME MINISTER RABIN: No, I can't see them as an immediate danger, but in the future, who knows? Who knew three years ago or two and a half years ago that Saddam Hussein will invade and occupy Kuwait, even though the regime in Saudi Arabia is entirely different, but who can promise me that this regime will be there for the next 20 years?

MR. MacNeil: You met Bill Clinton during your visit here. If he were elected in November, would you feel that U.S.-Israeli relations were in secure hands?

PRIME MINISTER RABIN: Well, I wouldn't pass judgment first who will be elected because I don't believe that it will be proper for me to intervene in this problem. Whoever the United States people will elect, we'll have to work with him, and I'm sure that we'll find ways to work for the benefit of our two countries with whomever will be elected.

MR. MacNeil: Well, Prime Minister, thank you very much for joining us. RECAP

MS. WOODRUFF: Again, the main stories of this Thursday, President Bush announced that James Baker will resign his post as Secretary of State to become White House Chief of Staff and oversee the President's re-election bid, and the U.N. Security Council authorized military intervention in Bosnia, but only as a last resort to ensure the delivery of relief aid and to open detention camps for inspection. Good night, Robin.

MR. MacNeil: Good night, Judy. That's the NewsHour for tonight. We'll be back tomorrow night with a look at Bill Clinton's foreign policy position as outlined in today's address in Los Angeles. We'll have extensive excerpts and Michael Mandelbaum and Condoleezza Rice will be back, among others, to argue the fine points. I'm Robert MacNeil. Good night.