The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, Kwame Holman and Gwen Ifill look at the argument over who's to blame for California's energy troubles; Elizabeth Brackett reports from Chicago on the failures of public housing; Terence Smith adds up the economics of newspaper book review sections; and Roger Rosenblatt thinks about what might have been. It all follows our summary of the news this Wednesday.

NEWS SUMMARY

JIM LEHRER: The governor of California today demanded $9 billion in energy refunds. Gray Davis said electricity companies had overcharged the state by that much over the last 12 months. He spoke at a Senate hearing. On Monday, the Federal Energy Regulatory Commission imposed limited restraints on electricity prices in the west. Davis said the agency should order refunds as well. We'll have more on this story right after the News Summary. There was more trouble for the FBI Today and a new move to reform the agency. A security expert in the FBI's Las Vegas office was accused of selling secrets to organized crime figures. Agent James Hill was arrested Friday, and appeared today in federal court. He allegedly received $25,000 from mobsters over the past year and a half. The Hill case follows espionage charges against veteran agent Robert Hanssen, and the failure to disclose hundreds of documents in the Oklahoma City bombing case. In Washington, Attorney General Ashcroft announced a broad internal review of the FBI; it will be led by top federal law enforcement officials. Separately, a Senate committee examined the agency's problems today. It heard from former Senator John Danforth, among others. He investigated the Waco tragedy of 1993; he said the FBI had to be more willing to admit mistakes.

FORMER SEN. JOHN DANFORTH: I believe that the most important reform is to change that culture, and I don't think that there is any easy way to do it. I think oversight from this committee, on a systematic basis, not just every now and then, is very, very important. I believe that the President of the United States, the Attorney General, the director of the FBI have got to make it clear to every agent, from day one at the FBI Academy, that there are worse things than making mistakes.

JIM LEHRER: There are already investigations of the FBI underway by the Justice Department Inspector General and an independent panel of experts. The Bush administration today defended plans to come to terms with the tobacco industry. Spencer Michels reports.

SPENCER MICHELS: A White House spokesman said today the Justice Department will approach the federal lawsuit against big tobacco in two ways.

ARI FLEISCHER: In general, the President does believe that we are much too litigious a society, that there are far too many lawsuits, and that it's preferable, if you can reach agreements, to reach agreements. In the case of the tobacco matter pending before the Department of Justice, the Department of Justice is going to proceed on a two-track approach, one involving litigation, the other involving possible settlement talks, and the President supports that approach.

SPENCER MICHELS: The plan to seek a settlement is a departure from the stance of the Clinton administration. Two years ago, during the State of the Union Address, Mr. Clinton announced his plan to file a multi-billion-dollar lawsuit against cigarette makers to recover costs for smoking- related illnesses. In 1998, 46 states settled their claims against five major tobacco companies for more than $200 billion in health-related costs, but on the federal case, cigarette makers have expressed little interest so far in going to the negotiating table with the Justice Department. Philip Morris, the nation's largest tobacco company, issued a short statement saying that it was "not aware of any settlement discussions" and that the case against them "is without merit." Some health advocates decried the news of a possible deal, saying it might let cigarette makers off the hook.

MATTHEW MEYERS, President, Campaign for Tobacco-Free Kids: The real tragedy is the Department of Justice lawsuit is an important vehicle for holding the tobacco industry accountable and for requiring it to make fundamental change in things like the way they market tobacco products to children. A sweetheart deal that doesn't require fundamental reform by the tobacco industry would be a serious lost opportunity.

SPENCER MICHELS: On Capitol Hill, where some Republicans have sought to cut off funding for the litigation against the tobacco companies, many Democrats denounced the news of a possible settlement.

JIM LEHRER: Last year, a federal judge dismissed part of the lawsuit, but she did allow the government to continue a racketeering case against the industry. The Justice Department is appealing that decision. Republicans have picked up another seat in the U.S. House. Virginia State Senator Randy Forbes won a special election last night. He'll take the Congressional seat left vacant by the death of Democrat Norman Sisisky. The House will now have 222 Republicans, 210 Democrats, and two independents. One seat does remain vacant. That's it for the News Summary tonight. Now it's on to energy fault lines; poor housing in Chicago; the business of book reviews; and a Roger Rosenblatt essay.

FOCUS - THE BLAME GAME

JIM LEHRER: Finger-pointing over energy problems: Kwame Holman begins.

KWAME HOLMAN: Californians are preparing for a long, hot summer of possible blackouts and power outages as the state's energy woes continue.

SEN. JOSEPH LIEBERMAN: I thank you for joining us today...

KWAME HOLMAN: But who's to blame for the shortages generated heat of its own at a hearing of the Senate Governmental Affairs Committee today. Democrats and Republicans took a largely partisan view on the role of California's Democratic Governor, Gray Davis.

SEN. FRED THOMPSON: I want to ask you how it was that you seem to let things get totally out of hand?

KWAME HOLMAN: Fred Thompson, the committee's senior Republican, took Davis to task for blaming electricity suppliers for creating the problems, the same companies Davis is now counting on to build new power plants.

SEN. FRED THOMPSON: At a time when the regulatory environment is very uncertain for these people to start with, and now they're finding a very hostile political environment, is that a wise strategy at this time? Are you concerned about the completion of these plants and these suppliers who are expressing these serious reservations?

GOVERNOR GRAY DAVIS: With all due respect, the people I represent are mad. They don't like paying 700% more for electricity. Small businesses in San Diego don't exist anymore because they had to face this problem head on in the year 2000. And they want us to fight back, and that's what we're doing. This is a rough business. You know these energy companies. Many of them have a wildcatter mentality. My grandfather had something to do with the oil business. I know what that attitude is like. So California has been a cash cow to a lot of energy companies around this country who have done extraordinarily well, and occasionally some harsh words get exchanged, but my job is to fight back and say, "we're not going to take it." And I suggest to you if it weren't for a good deal of what you might consider political hyperbole, we might not have gotten the attention of the Federal Regulatory Commission that stiffed us for almost a year.

KWAME HOLMAN: Partisan politics and California's power woes have been joined elsewhere. Republican strategists, supporting energy providers, began running this ad on Monday attacking Democrat Davis' stewardship of energy policy.

COMMERCIAL SPOKESPERSON: That's why newspapers say Davis ignored all the warning signals and turned a problem into a crisis. Grayouts from Gray Davis.

KWAME HOLMAN: And the political arm of Democrats in the House of Representatives aired this ad a few weeks ago.

AD SPOKESPERSON: California's energy crisis is deepening, with summer blackouts predicted and rate

hikes of up to 80%. Yet President Bush has offered no relief to hard-pressed rate payers, his spokesman saying the President continues to believe that the issue is mostly a California matter.

KWAME HOLMAN: At today's hearing criticism for the Republican- controlled Federal Energy Regulatory Commission, which until this week took only limited action to help level off California's skyrocketing energy prices. It came from New Jersey Democrat Robert Torricelli.

SEN. ROBERT TORRICELLI: FERC has been late. Its response has been inadequate. I am glad they have acted, but unless or until this response carries the state of California through this building program, until you have adequate supply, their response is not adequate, and I hope every member of the board who hopes to return to this United States Senate listens very carefully to those words. This is now a Democratic majority Senate; it will remain so for some years; and we are watching how the people of California are treated, and we are watching very, very closely.

KWAME HOLMAN: The Federal Energy Regulatory Commission, or FERC, acted Monday to slow the rise in western energy prices by ordering so-called soft price caps. Starting today, the policy sets an upper limit on wholesale power prices 24 hours a day. The price ceiling changes periodically because it's tied to recent market prices, and suppliers may charge more than the cap only if they can justify doing so, but Governor Davis wants stricter electricity price caps, based on what it costs producers to generate energy, and today, he demanded the FERC order billions of dollars in refunds to California energy consumers from suppliers, who he says overcharged improperly.

GOV. GRAY DAVIS: Whether or not there is a precedent for refunds on this magnitude... of this magnitude, they're owed; they should be paid; and this oversight committee, I believe, and with respect, should hold FERC's feet to the fire and ensure they issue the orders to give us back our money. That's the only message the energy companies will understand.

KWAME HOLMAN: After more than an hour at the witness table, Davis was followed by officials from other western states, and the partisan jabbing continued. Judy Martz is the Republican governor of Montana.

GOV. JUDY MARTZ: The facts show that the primary responsibility for the electricity crisis lies within the state of California: A series of mistakes by the state, and failure to take corrective action more than a year ago led directly to the crisis we're in now.

KWAME HOLMAN: But Washington State Attorney General Christine Gregoire, a Democrat, said she's investigating the role of utility companies in the price spikes.

CHRISTINE GREGOIRE: We are concerned that the energy prices and supply in the past year do not appear to be the result of natural market forces. In the past year, let me tell you what we have observed that has led us to this investigation. First, the wholesale market rates for a megawatt hour of electricity skyrocketed from about $30 to $300, sometimes even as much as $3,000. Were these massive price hikes caused by some form of unfair business practice or collusive activity among the generators and the marketers?

KWAME HOLMAN: Finally, the five members of the Federal Energy Regulatory Commission appeared to explain Monday's rate- regulating decision. Curt Hebert, appointed chairman by President Bush in January, denounced the strict price caps favored by Governor Davis.

CURT HEBERT: Under that scenario, Mr. Chairman, the most inefficient units would be guaranteed profits that they wouldn't get under our plan. Even more disturbing, regulation based on cost would provide no incentive for the various suppliers to become efficient and to reduce their costs and thereby lower prices for consumers.

KWAME HOLMAN: But committee Chairman Joseph Lieberman worried the FERC's solution still leaves the door open to higher prices.

SEN. JOSEPH LIEBERMAN: The notion of a cost-of- service plus a cost-based regulation plus some reasonable profit seemed much more simple and certain and easier to administer to me. As I look at the system you've chosen, it can be a pretty darned high ceiling. There still can be a lot of latitude for unjust and unreasonable pricing underneath that ceiling.

KWAME HOLMAN: Members also said FERC responded too slowly to the California crisis. Chairman Hebert responded.

CURT HEBERT: I have said before and I will say again that FERC probably made a mistake... Not probably; FERC did make a mistake in giving too much deference to the state of California in waiting too long to intervene and step in. We hate for government to intrude at any time that they don't need to, but clearly we had a dysfunctional market. We needed to step in. We have done so now. I think the record will speak for itself that we are doing a good job of that.

KWAME HOLMAN: The new FERC price controls take effect tomorrow.

JIM LEHRER: Gwen Ifill takes it from there.

GWEN IFILL: The politicians and the regulators had their say on Capitol Hill. Now we turn to two economists, to guide us through the thicket of the energy debate. Severin Borenstein is director of the University of California Energy Institute. And Lawrence Makovich is senior director and co-head of the North American Energy Group at Cambridge Energy Research Associates, an energy research firm in Massachusetts.

Welcome, gentlemen. Mr. Borenstein, what we have heard about price mitigation, we have heard about price restraints. Is what the Federal Energy Regulatory Commission has done, is it a price cap?

SEVERIN BORENSTEIN, University of California Energy Institute: Well it's certainly what economists would call a price cap. It's a floating cap that will change as the cost of production changes, which we definitely need. But it is still a cap. Obviously for political reasons, everybody wants to give it a different name.

GWEN IFILL: Mr. Makovich, is it price cap encourage or discourage increased supply?

LAWRENCE MAKOVICH, Cambridge Energy Research Associates: Well, the reason people don't want to use the term "price cap," is that most people agree that although well intentioned, they seldom solve problems like this. It's not likely it will add any supply nor reduce demand. We've already seen in California that price caps on retail rates increased demand and made the shortage worse and price caps also forced the largest utility, Pacific Gas and Electric, into bankruptcy in four months.

GWEN IFILL: So what should have been done instead?

LAWRENCE MAKOVICH: There were lots of missed opportunities here. In just the recent months, there were missed opportunities to bring in emergency power, barge-based power, and other emergency power systems that could have made a very important difference for this upcoming summer.

GWEN IFILL: How about that, Mr. Borenstein? Was this the right way to go, price caps?

SEVERIN BORENSTEIN: California is building a lot of power plants. Some of them are going to be online this summer, but the fact is the sellers in this market, this summer, will have tremendous power to raise prices above competitive levels. Even the FERC has now recognized that. They've decided that although they don't want to intervene in a heavy-handed way, they do feel the need to keep the prices from spiraling out of control. Without these sorts of price caps this summer we certainly could have seen prices that were four or five times the levels that these caps are going to be. You really don't need prices that high to encourage investment in the state of California. These caps are going to allow the generators to earn plenty of money.

GWEN IFILL: Mr. Borenstein, members of Congress and members of the Commission said today that no matter what happened with these price caps there would still be blackouts this summer out there in California. Why is that?

SEVERIN BORENSTEIN: Well, I think that's right. We still face blackouts. These caps are not going to fundamentally change the amount of supply by very much at all in either direction. What they're going to do is just change the amount of money that gets transferred from consumers to the producers of the power. The reality is though we do also have a real shortage of power, and if we don't conserve in California and conserve pretty strenuously, we are going to have blackouts.

GWEN IFILL: Mr. Makovich, we just heard Senator Lieberman say in Kwame Holman's piece that he was concerned there's still too much room for prices to go up that basically all generators have to do is make a case that they need the prices to be higher and they can still raise them. How does the Regulatory Commission police this?

LAWRENCE MAKOVICH: Well it's very, very difficult because the problem here is one of a fundamental set of flaws in the power market. Prices right now are too high because there is a fundamental shortage. If we go back four years before the shortage at the point in time given how long it takes to site and permit and build a power plant and look at the power prices four years ago, it's very clear they were only half the level of what was needed to encourage supply. So we didn't get the investment needed in California. Instead people built power plants in Texas and New England. And the fundamental flaws that made California an unattractive place to invest still exist. Right now most of the construction is being backed by contracts from the Department of Water Resources in California. And one of the unintended consequences down the road may be a fiscal crisis because California really can't finance this power sector on an indefinite basis.

GWEN IFILL: A short-term price savings perhaps?

LAWRENCE MAKOVICH: Well, the short term, because so many opportunities have been missed, there really is very few alternatives at this point. Blackouts are going to happen. And the scarcity will make prices quite high.

GWEN IFILL: Mr. Makovich, what is the incentive for power generators to comply with this plan?

LAWRENCE MAKOVICH: Well, I think this plan does create a disincentive to investment. Power prices are higher than they need to be right now to encourage investment, but someone that is going to build a power plant that is going to last for 30 years cannot count on periodic shortages to produce prices high enough to recover investment and earn a return. Unfortunately, the record in California is when the market is in surplus or in balance, prices don't support investment because the market was set up wrong.

GWEN IFILL: How about that, Mr. Borenstein?

SEVERIN BORENSTEIN: Well, the fact is that these power plants do last 30 years. When an investor makes a decision, they're looking at the future environment of prices over a 30-year period. These are very short-run price caps. The Bush administration, I think, has credibly said that that's going to be the case. So it's very hard to credit the argument that they're going to discourage investment. There's a lot of investment in the state right now, and it was occurring before DWR started buying-- the Department of Water Resources in California-- started buying power. So we have plenty of power being built. The issue is a short-run crisis in California this summer. We do have to conserve. We have a real supply shortage. But our research that we've done said... Looked at 1999 when we paid $7 billion for power and in 2000 when we paid $27 billion for power. Some of that increase was just due to a real shortage of supply, but $7 billion of it, at least by our calculations at the UC Energy Institute, was due to market power; that is, firms raising prices above the competitive level.

GWEN IFILL: Ifill: Price gouging?

SEVERIN BORENSTEIN: Certainly not a competitive market. And pretty much everyone has recognized that now that we haven't had a competitive market. I think we will in the future, but we have a short-run crisis. It requires action from both California on the conservation side, and from the FERC on the price side. The FERC has done its job. The real issue I think now is how well they will enforce this real price cap.

GWEN IFILL: Mr. Makovich, did it take too long as Mr. Hebert suggested at the congressional hearing for the regulatory commission to step into this -- all the time when we heard President Bush saying it's not the country's problem; it's California's problem. Did it take too long?

LAWRENCE MAKOVICH: Well, yes, the fundamental flaws in the market right from the start when they passed the legislation in '96 and set the market up in '98. There's an awful lot of blame here to be placed on people in positions of responsibility who were charged to monitor this market. You know, over the past five years the California economy grows by a third, electricity consumption grows by a quarter and the amount of generating supply actually goes down. And the people that were monitoring this market primarily at the state level but at the federal level as well seemed to have been asleep at the wheel.

GWEN IFILL: Mr. Borenstein, there is all this backing and forthing, as I'm sure you know, finger pointing about who really is to blame. From an economist's point of view who takes the bigger hit?

SEVERIN BORENSTEIN: Well I think that both sides were really not doing their job. The monitors actually of these markets associated with the California independent system operator were raising red flags back in 1998. They were saying we have a real problem here and prices could skyrocket. The FERC was made aware of these problems back in 1998, and they basically punted on it. The FERC by the way also approved all of the set-up of the market; that is, all of the different ways that... all of the different ways that now clearly are flaws in the market were approved by the Federal Energy Regulatory Commission.

GWEN IFILL: Now, one of the things Governor Davis suggested today is that $9 billion in overcharges be refunded to rate payers. Do you think that's a good idea? Does that help the situation any?

SEVERIN BORENSTEIN: Well, I don't think it's going to have much effect on the situation one way or the other. The reality is that the Federal Energy Regulatory Commission operates under the Federal Power Act, and the Federal Power Act requires just and reasonable prices. If they find that the prices were not just and reasonable, then they are supposed to order refunds. I think they are moving towards finding... That finding. How big the number will actually be will, I suspect, go through a lot of negotiation. But I suspect there will be significant refunds. So far the FERC has ordered $100 million or so in refunds, which has got to be considered an insignificant number compared to the payments.

GWEN IFILL: Mr. Makovich, we heard Senator Lieberman talk about cost-based regulation. What that and why would the Democrats support such an idea?

LAWRENCE MAKOVICH: Well, the idea there is that because this market is flawed and not working properly, they want to intervene and set prices to a level where people will be encouraged to utilize the power plants that exist. They won't be given the disincentive not to run because the price isn't high enough. Of course the one issue that they fail to address at all is the long-term issue, since this is one of the most capital-intensive businesses in the U.S. economy, how are people going to make a return on capital and a return of capital in the long run if prices are always set just on fuel and O and M costs.

GWEN IFILL: And, Mr. Borenstein, speaking of long term solutions what about conservation? Does that fit into the formula at all.

SEVERIN BORENSTEIN: The California Public Utilities Commission did raise rates, which should help toencourage conservation. Frankly I think California has a lot more work to do. The leadership of California needs to push a lot harder on getting the conservation. We are going to conserve our way through this summer. The only question is whether we'll do that conservation through rolling blackouts, which is just the stupidest way to do it, or through a more moderate form of conservation by everybody cutting back a bit. Normally that's done with the price system. Higher prices encourage people to cut back. Unfortunately, it's now the middle of June. Summer is upon us. We have to conserve now. There isn't time to do more price adjustment.

GWEN IFILL: Briefly, Mr. Makovich, what do you think about the conservation piece of this, Mr. Makovich?

LAWRENCE MAKOVICH: Conservation is obviously a very important part of closing this gap -- decreasing demand, increasing supply. I think the important thing to realize is conservation alone cannot close the big gap that exists in California. It has to be attacked from both sides.

GWEN IFILL: Okay. Gentlemen, thank you both very much for joining us.

JIM LEHRER: Still to come on the NewsHour tonight, redesigning public housing; vanishing book reviews; and a Roger Rosenblatt essay.

FOCUS - THE BLAME GAME

JIM LEHRER: Elizabeth Brackett of WTTW-Chicago has the public housing story.

ELIZABETH BRACKETT: In big cities across America, the consensus is public housing doesn't work. And in Chicago, it's coming down. (Explosion) Chicago began using federal housing dollars to blow up or knock down high-rise public housing in 1993. The plan shifted into high gear when the city signed a $1.5 billion deal with the U.S. Department of Housing and Urban Development. Under the plan for transformation, Chicago will destroy more public housing than any city in the country, and many public housing residents thought it was time.

RESIDENT: They've finally arrived. They're coming down. Now we're going to get some nice housing here in the community.

ELIZABETH BRACKETT: 51 high-rises are slated to go down, nearly 14,000 units. Ironically, this is being done under Mayor Richard M. Daley's administration. Daley's father, Mayor Richard J. Daley, is credited with building much of the high-rise public housing his son is now tearing down, though the current mayor says his father never really wanted the high-rises.

MAYOR RICHARD J. DALEY: They wanted families, and they wanted walk-ups to basically make it part of the community. The federal government said, "no way-- it's high-rises or you get nothing."

ELIZABETH BRACKETT: So he took the high-rises.

MAYOR RICHARD J. DALEY: Oh, yeah. Everybody took the high-rise across the country.

ELIZABETH BRACKETT: But packing poor families with children into high-rise housing eventually led to disastrous living conditions. Author Susan Popkin describes those conditions in her book "The Hidden War: Crime and the Tragedy of Public Housing in Chicago."

SUSAN POPKIN: I think these building were probably among the worst places to live in the country when they were opened. I've been in this particular building when the incinerator was backed up to the seventh floor, and the smell was just unbelievable. The elevators frequently broke down, and people had to climb up the 15 flights of stairs. The scariest thing about this building is the hallways are in the inside, and the gang members would knock out the light bulbs, and it would be pitch black inside.

ELIZABETH BRACKETT: Since the high- rises began coming down, the debate over what should replace them and who should live therehas been fierce. Terry Peterson heads the Chicago Housing Authority, or CHA.

TERRY PETERSON: We've said that we're going to create mixed-income communities. We're not looking to build 100% public housing back on site. The past 30 or 40 years have showed that it doesn't work.

ELIZABETH BRACKETT: And Chicago has led the nation in creating mixed- income communities. New market-rate townhouses have sprung up in the shadows of the dilapidated towering high-rises; public housing residents mixed in with owners who have paid top dollars for their new homes. The mixed-income approach has worked best in the neighborhood surrounding the notorious crime- ridden Cabrini Green development.

RESIDENT: When I come, walk down the street and come home, I feel so proud, you know-- this is where I live.

ELIZABETH BRACKETT: After living in Cabrini Green for 25 years, Marsha Crosby became one of the first to be chosen to sign a lease with the CHA for one of the 40 new units set aside in this complex for Cabrini residents. Another 318 new single-family homes, condos, and townhouses are being sold at market-rate prices.

MARSHA CROSBY: When I have friends or family come over, I feel so proud, you know. Actually more people visit me now, and there's no shame, you know. I just... I feel good. I just feel good. It makes me feel better about myself.

ELIZABETH BRACKETT: Yet it's only a half a block from where you used to live.

MARSHA CROSBY: Only a half a block. Only a half a block.

ELIZABETH BRACKETT: How many worlds away?

MARSHA CROSBY: A thousand worlds away. You know. Like, across the ocean.

ELIZABETH BRACKETT: Crosby was thrilled to get her son out of Cabrini Green. Now 15, he was only ten when his schoolmate, Dantrell Davis, was shot in the head walking hand- in-hand with his mother from his CHA building across the parking lot to his grade school. The killing changed her son.

MARSHA CROSBY: When I really noticed that it was really bothering him, it was almost New Year's, and he said, "oh, mom, it's 1995. I'm still alive." I mean, that just broke my heart.

ELIZABETH BRACKETT: Now, as Crosby shows off her new two-bedroom apartment, her son's room is a favorite spot.

ELIZABETH BRACKETT: And how does he like his room?

MARSHA CROSBY: He loves it. He loves it.

ELIZABETH BRACKETT: Crosby admits that she was a little nervous when she first moved in, worried that her neighbors might treat her family differently because they had come from Cabrini.

MARSHA CROSBY: At first I felt a little uncomfortable, but the longer I live here, got to know my neighbors-- I have wonderful neighbors-- I don't feel uncomfortable any more.

ELIZABETH BRACKETT: Her next door neighbor, 27-year-old saleswoman Susan Fox, was a little nervous, too, as she considered plunking down $140,000 for a two-bedroom condo just across the street from Cabrini Green.

SUSAN FOX: There were some reservations buying, I guess just with everything that's going on in the city, you know, the changes, and I figured, you know, I'm going to take a risk.

ELIZABETH BRACKETT: What did you friends and family tell you?

SUSAN FOX: There was probably more no's, like "don't do it." But, you know, I'm the one that's going to be over here, so I went ahead. We had to go with my gut feeling.

ELIZABETH BRACKETT: A little over a year later, her condo has nearly doubled in value, thanks in part to the investment the city has made in the area: A new police station; a renovated park; a new library and new school; and, to many the surest sign of a hot neighborhood, a new shopping center with aStarbucks. But there are questions about how well mixed-income communities will work in areas of the city where the real estate market is not as hot, and CHA board member Ernest Gates admits that some CHA tenants weren't ready for their replacement housing.

ERNEST GATES: You had people that were moving out of the high-rises, moving into scattered sites and then to the new housing, and there were a series of problems that were erupting in those units. There were people that were mopping carpets, for example. There were some units were being completely trashed inside of a few weeks.

SPOKESPERSON: You know, Miss Ward, I want to see everything.

ELIZABETH BRACKETT: As a result $37.5 million has been included in the plan for transformation to help residents with the transition from high-rise living to their new homes.

Clearly the plan for transformation is working for tenants who've obtained replacement housing like this, but the question remains, will there be enough replacement housing for those tenants still in the high-rises scheduled to come down? CHA Chief Terry Peterson insists that the housing will be there.

TERRY PETERSON: That $1.5 billion will assure that at the end of the day that we produce 25,000 units of new or rehabbed units for the residents who currently live in public housing.

ELIZABETH BRACKETT: And how many residents are going to need that public housing now?

TERRY PETERSON: Right now there are 24,700 and about 73, approximately, residents living within the Chicago Housing Authority today.

ELIZABETH BRACKETT: But for Legal Assistance Foundation Lawyer Richard Wheelock, the numbers don't add up.

RICHARD WHEELOCK, Legal Assistance Foundation: The residents are very concerned, because the CHA is planning to rehab or build on 25,000 new units over the next five years, but if you consider that they're going to demolish all the high-rises and put back in place low-rises-- that is, decrease the density-- and then of what you put back on site, only a portion of which will be public housing, then the question immediately arises: How are you going to put all the families back on site that you're moving off site?

ELIZABETH BRACKETT: That's what worries Juanita Williams. She was Marsha Crosby's next- door neighbor at Cabrini Green. Now the building is scheduled for demolition, and she is not sure what she, her daughter, and two grandchildren will do.

JUANITA WILLIAMS, Public Housing Resident: I'm hoping that I can be able to find me a place, you know, so I just won't be out on the streets now, and I'm hoping they will try to find me a decent place to stay, you know-- if it's not over here on the North side, maybe out West or South or one of them.

ELIZABETH BRACKETT: Do you have any guarantee that they will?

JUANITA WILLIAMS: Ain't no guarantee about nothing, but I'm hoping they will.

ELIZABETH BRACKETT: Actually, thanks to a federal lawsuit, Williams has a better guarantee for replacement housing than CHA residents who do not live in Cabrini Green. Richard Wheelock filed the lawsuit on behalf of Cabrini residents, challenging an earlier demolition plan for the development. A consent decree ending the four-year-old legal battle was signed in August.

SPOKESMAN: There are provisions in the consent decree that guarantees the right of return for lease- compliant families to come back, and there's an innovative provision in the consent decree that allows the residents to partner with the private developer in the development that's going to occur on CHA land. So that will add an additional layer of resident participation in the process.

ELIZABETH BRACKETT: Wheelock hopes the consent decree will be the model as the CHA works to provide replacement housing when the remaining high-rises fall, but in the plan for transformation less than a quarter of the replacement housing will be new construction, and none of that construction has begun yet. The rest of the 25,000 residents will be eligible for housing vouchers or renovated low-rise CHA housing. Housing activist Rene Maxwell says that's just not good enough.

RENE MAXWELL, Coalition to Protect Public Housing: The coalition to protect public housing asked for a moratorium to stop the demolition until replacement housing is built. We just ask in humanity's sake that they would think about people first.

ELIZABETH BRACKETT: To complicate matters, a 20-year-old federal court decision known as the "Gatreaux" Case, designed to increase integration, prevents the CHA from building replacement housing on CHA land unless it can be shown that a racial and economic mix is possible. That works in the Cabrini Green area, but other developments throughout the city are in neighborhoods that are at least 80% minority. That raises the specter of high- rises being torn down with nothing remaining but vacant lots. The mayor says it may be time to take a new look at "Gatreaux."

MAYOR RICHARD M. DALEY: What the people say, "I want to stay here, mayor." We said, "fine." I have no problems. If they want to stay, let's keep them there, because they know it's getting better, and why should, when it's getting better, they have to leave? And that's one of the issues with the "Gatreaux" decision, a federal court decision, they have to look at.

ELIZABETH BRACKETT: But the federal court has shown no inclination to modify "Gatreaux," leaving many CHA residents watching the wrecking ball and hoping there will be a home for them when the one they live in is on the ground.

FOCUS - CRITICAL CUTBACKS

JIM LEHRER: Now the vanishing newspaper book review. Media Correspondent Terence Smith has our report.

TERENCE SMITH: Book reviews are the latest casualty of the economic downturn in the newspaper business. In recent months, several newspapers have cut back their book review sections in response to higher newsprint costs and reduced advertising sales. Book advertising has rarely covered the cost of reviews, but in some newspapers books get a section, or a world, all their own. In Seattle, for example, where the "Seattle Times" recently endured a costly seven-week strike, editors cut back book reviews by two-thirds earlier this year. Recently the "San Francisco Chronicle" also revamped its separate 12-page book review. The paper now runs about seven book pages inside its weekly arts section, prompting angry letters. One writer described the change as "a world-class disgrace," another as "a slap in the face to the large and lively Bay area literary community." In defense, the paper says, some reviews have been replaced with features about books and authors. And in Boston, the "Globe's" freestanding book section has been collapsed into its Focus section. Even the "New York Times," which is known for its extensive and influential book review, has pared down. The section is currently running one page of its books-in-brief reviews, down from two. At the same time, other media cover books. The bimonthly "Book Magazine" is filled with reviews and articles about authors. Oprah Winfrey, with her television show and magazine, has single handedly made celebrities of her favorite authors by selecting them for her book club.

WOMAN: Everyone in Papuhara has secrets, even the animals.

TERENCE SMITH: And online book retailers include reader and critic reviews on their web sites. Even with fewer reviews, of course, there are still big books. "Bridget Jones's Diary" was a hit on paper, is currently a success as a film, and a sequel is on the best-seller lists.

JOYCE CAROL OATES: When you read poetry...

TERENCE SMITH: Prominent authors...

NEWT GINGRICH: Thank you. Hi.

TERENCE SMITH: Political figures or controversial celebrities have no trouble getting attention for their books. But they represent a small fraction of the 50,000 books published annually. Of those, just over 2,000 get even brief notice in the larger newspaper book sections. That leaves another 48,000 titles struggling to find an audience.

TERENCE SMITH: For more on the role of book reviews, we turn to three guests who influence what gets into print. Jason Epstein spent a career in publishing, largely at Random House. He co-founded the "New York Review of Books" and is author of a publishing memoir, "Book Business: Publishing Past, Present, and Future." Matthew Storin is editor of the "Boston Globe," and Deirdre Donahue, a publishing reporter at "USA Today," has reviewed books for that paper for the past 12 years. Welcome to all three of you.

Jason Epstein, there seems to be a trend here, and so I wonder what, (a), what you think of it, and whether you think book reviews are still important?

JASON EPSTEIN: Well, I think they're, I think they're indispensable. They're not the whole story, but without books, we'd have no idea who we are or how we got here. In fact, without books, we'd have no newspapers, we'd have no NewsHour.

TERENCE SMITH: Matt Storin, do you have... First of all, Boston considers itself a quite a literary community.

MATTHEW STORIN: Yes.

TERENCE SMITH: Your book reviewer, Gail Caldwell, just won the Pulitzer Prize for criticism, and yet the "Globe" is going to reduce the number of reviews. Why?

MATTHEW STORIN: Well, it's very reluctant, Terry, as you can figure, and last year we made a number of expansions in what we do with the paper, both in business and our suburban coverage, and all of a sudden the bottom fell out, particularly of help-wanted advertising, and in high-tech areas like Boston, this was particularly painful. We've made a number of other cuts here and there, perhaps not as visible, before we've had to make this one in our book section.

TERENCE SMITH: Why this, then? If... I understand that the pain has to be spread around, but I don't suppose if tire manufacturers take fewer ads you cover fewer sports. Why books?

MATTHEW STORIN: No, as a matter of fact, it's not really related to book advertising, although we don't get a great deal of it. In fact, I tallied up that our book section probably costs us about $900,000 a year to produce, and the advertising is somewhere just over $300,000.

TERENCE SMITH: Mm-hmm.

MATTHEW STORIN: But when we had to make cuts, we had to make them in whatever places were available, and this section, which only four years ago we had established as a freestanding section, ultimately got on the target list because there was nothing else left. It was really the last thing that we wanted to cut.

TERENCE SMITH: So very much a bottom- line consideration for you.

MATTHEW STORIN: Very much so, and we hope it's temporary. We expect it to be temporary.

TERENCE SMITH: Deirdre Donahue at "USA Today," you take a different approach. Books are widely covered in your paper.

DEIRDRE DONAHUE: Yes. In fact, we are not cuttingback on our book coverage, we're probably expanding it, and we do do the traditional book review. We just recently reviewed Philip Roth's book. So we cover the big hitters, but we also really try to write a lot of trend stories, for example. Just recently we ran a big story on the front page about World War I books. There's tons of... Excuse me, World War II books -- about why is it there's this renewed interest in the world war generation? So I think that we also look at trends. We do very serious books, but we also do front page of the life section views of John Grisham. We try to keep it within the mix of entertainment as well.

TERENCE SMITH: And books as entertainment.

DEIRDRE DONAHUE: Yes. We like to review, for example, John Grisham within the context of the other John Grisham books. We do not... We feel that sometimes some book reviews, they talk down to the reader who actually enjoys pop fiction, and we like to feel it's sort of a supermarket. You know, we provide the fromage, but we also provide, perhaps, American cheese.

TERENCE SMITH: Mm-hmm. Jason Epstein, given all the other sources that exist today-- the internet, television-- for information about books, are newspapers and newspaper book reviews as important today as they once were?

JASON EPSTEIN: Oh, I think so. I don't think that anything replaces them. I don't think that the little television snippets or casual book chat can replace a serious book review. Not that all newspaper book reviews are all that serious. They have many kinds of audiences to appeal to. But, no, nothing will take the place of the book review.

MATTHEW STORIN: I agree, Terry. I think that the... There are many audiences for books, of course, and the Oprah show and the Imus show, some of those other television broadcasts, may appeal to a wider audience that is not heavily into books, but for your core book audience, I think newspaper reviews are probably their primary means of finding out what is new and what is good.

TERENCE SMITH: Deirdre, you still have limits, obviously, on space. How do you decide what books to review and which not to review?

DEIRDRE DONAHUE: Well, we have two book reviewers, and we also have other people who contribute to the, you know, to the coverage. We like to provide a mix. We like to provide... We like to write about books that seem to connect with readers. For example, we were one of the first to review "Angela's Ashes," and I don't think anyone thought that, you know, a memoir by a 66-year-old retired New York City school teacher would end up becoming a global best-seller. I think that we, we like to try to sort of, you know, when you open up a book, what jumps out. You know, I remember there was an excellent book called "There Are no Children Here," and that was a book where I started at 11:00 in the morning and at 4:00 I was still at my desk reading it. It was very compelling, about, you know, two boys growing up in a housing project in Chicago.

TERENCE SMITH: Jason Epstein, do reviews, do you think, still sell books?

JASON EPSTEIN: Well, I'm not sure that they... I think what really sells books is word of mouth, what people tell other people. I don't think book advertising helps very much. We do it in a limited way for other reasons.

TERENCE SMITH: Too limited, I would say, for Matt Storin, from what he said before.

JASON EPSTEIN: Well, of course, but we, but book publishers don't have much money either to throw around. We've got to be careful, and we know that book advertising doesn't really produce the kinds of results that other forms of publicity and especially word of mouth produce, but I think book reviews are important not simply for the promotional value, because they contribute to the dialogue, that ongoing, open-ended Socratic dialogue that is our culture.

TERENCE SMITH: What about that, Matt? They introduce ideas, and sometimes, of course, they're news.

MATTHEW STORIN: They can be wonderful to read, and they do, for some people, they substitute for the book, of course, for reading the whole book, and to get to your earlier question, Terry, there's no doubt that at least some reviews do sell books, although I agree with Jason that word of mouth is very important. The way you can tell is that we'll run a review of a book that we happened, at least versus some of the other papers we see, to be the only paper to review that day, and we can tell from amazon.Com, where they keep track of sales, that a book will start moving based on the publication of that review.

TERENCE SMITH: Deirdre Donahue, there are all these other sources, not only for information about books, but reviews. Amazon.Com does something different, and other web sites like it: They run reader reviews rather than critic reviews.

DEIRDRE DONAHUE: Yes.

TERENCE SMITH: What does that reflect?

DEIRDRE DONAHUE: Well, actually I think it's very interesting, because I do think that perhaps, you know, John Katz, the media critic, has written very interesting about this, that we've become something of a less hierarchical society, that there's less of the oracular critic telling the masses what to buy; that in fact people, partly because of the web, are very interested in interacting, and they are... For example, I think the explosion of book groups, the fact that people are having them, whether Oprah Winfrey or your local bookstore or my sister's book club -- it's that idea that people want to sit and they want to read the book, but then they want to share their opinion, and it's interesting because I do think it reflects a certain interactive quality in our society that has... It's interesting because I do think that this is unusual and this is growing, that people want their opinion to be heard, that whole thing with amazon.Com. You know, I remember doing a story, a big story on "Cold Mountain," and I had gotten some people from amazon.Com, some of the people, some of the people who had written in, and these wonderful, very passionate responses to the book, and these were people who had read the book and then wanted to express how they had felt about it, and some of it was very insightful.

TERENCE SMITH: Jason Epstein, what do you think of that trend? Is it a substitute for, you know, a serious review of a serious book by a serious author?

JASON EPSTEIN: No, of course not. It's part of that ongoing Socratic dialogue that I mentioned earlier, but it's not the most important fact by any means. What you want of a serious book is a serious commentary by someone who knows what he's talking about.

TERENCE SMITH: Matt Storin, you suggested earlier that this trend might be reversible if there's a change in the advertising, in the bottom line. Is that correct?

MATTHEW STORIN: Yes. I'm personally committed to restoring at least what we were doing, and we're still going to run a good two dozen book reviews a week of one kind or another.

TERENCE SMITH: Deirdre, what do you see as the future trends? You're dealing with this every day.

DEIRDRE DONAHUE: Well, I think one of the things that torments all book reviewers is the idea that there's this brilliant first novel, it's not getting a lot of promotion-- you know, the fact that that book's not getting the attention it deserves, and it could be a classic, and it is true that the mid-list author suffers. I mean, it is terrible. If you have an established reputation, you know, you're golden, you get the review, but the idea that sort of young writers or unknown writers, you know, that there's less space, less interest in them, and I think that's something that really torments people, the idea that there could be... Where is the place for reviews of people who don't, you know, you don't recognize their name and they haven't won the Oprah lottery?

TERENCE SMITH: Good question. Jason Epstein, what's the answer?

JASON EPSTEIN: Well, I have... I have a hunch that this electronic future we're heading into, if we aren't already there, is going to answer a lot of these questions because it is going to be possible to sustain at various levels that dialogue that I've been talking about over... From one web site to another, and who knows what that's going to be like?

TERENCE SMITH: All right. So that may be the brave new future.

JASON EPSTEIN: I wouldn't be surprised.

TERENCE SMITH: All right. Thank you, all three, very much.

JIM LEHRER: For the record, it's not just the book review sections that are suffering from the slowdown in advertising. In recent days, the "New York Times", which also owns the "Boston Globe" and other media outlets, announced it will cut 1,200 jobs as part of a cost- savings plan. Knight Ridder, the nation's second-largest newspaper chain, announced 1,700 job cuts.

FINALLY - THE ROAD NOT TAKEN

JIM LEHRER: Finally tonight, essayist Roger Rosenblatt wonders about the what if's of life.

ROGER ROSENBLATT: The life you meant to lead. Remember that one? The painter you intended to become after years of study in Paris in your garret with that bath of spring light. Then more years working on oceans at Rockport, Mass., and still more in the springs section of Eastern Long Island, where all the other painters struggled, and you producing poor imitations of Picasso and de Koonig, whatever, until one sun-blasted morning, when you looked sideways at a canvas you were working on, and-- voila! Eureka! Wow! You've painted something new and different and wholly yours. That was the painter you were meant to be, all right, but then there was the choice you made back when you did not become that painter, that detour you took to the life you have now. Or was it plain fright and cowardice in the face of a chance? No matter. The life you were meant to lead, you didn't. What do you think of that? Anne Tyler thinks of that in her latest, typically rich and multi-layered novel "Back When We Were Grownups," which opens with the sentence, "Once upon a time, there was a woman who discovered she had turned into the wrong person." Is that possible? It is one thing to say that you shoulda, coulda, woulda become a painter, singer, acrobat, novelist, podiatrist, point guard, mother of five, but constitutes the wrong person? Were you actually destined to become someone else? Is the wrong person what everybody becomes? Jim Jeffords woke up recently to discover that he wasn't a Republican. I put it to you only as a challenge: The person you became is the person you were meant to be. I'm talking to you, Michael Jordan, the day you put on the Chi Sox baseball uniform and thought, "now, this is what I really am." Or, for the sake of argument, I put it to you that no life fits the one who lives it, that every road taken should have been the other one, and ain't that too damn bad? "Imagination is funny. It makes a cloudy day sunny." It makes for Kevin Spacey in "American Beauty" or for "being John Malkovich" or for Bellow's "Henderson the Rain King." Poor Gatsby had to sit by while Daisy told him that you can't undo the past. "Of course you can," said Gatsby, who meant it down to the mother lode of America. It's an American story, after all, perhaps the American story, told over and over. "Peggy Sue Got Married" unhappily, then was transported back to high school, where she fell in love with Nicholas Cage all over again. But Nicholas Cage himself made the most of his second chance in the movie "Family Man." In "Back to the Future," Michael J. Fox takes advantage of time travel to turn his future father into the man his mother deserves. Woody Allen said recently that he would have preferred to be Louis Armstrong or Sugar Ray Robinson. Sometimes we bring in the devil for makeovers. I myself never wanted to write essays. I wanted to write plays or play basketball or be a jazz pianist and accompany myself while I sang. How about it, Satan? In the market for one slightly damaged soul?

ACTOR: To my big brother George, the richest man in town.

ROGER ROSENBLATT: Reporter: Identity searches are usually a set-up for realizing that you really did have the best life possible after all, the lesson of "It's a Wonderful Life," made secure every Christmas. And that may be true for all us dreamers, of course. And then again, it may not. In any case, the tantalizing question may be more satisfying the answer, though it gets more difficult the more you dwell on it. If you actually knew the life you were meant to lead, knew that it fit like a glove, would you, in fact, start over and lead it? How much do you want to be you? Regrettably, and not, I'm Roger Rosenblatt.

RECAP

JIM LEHRER: Again, the major stories of this Wednesday. California Governor Davis said electricity generators have overcharged the state by $9 billion, and he demanded a refund. Late today, a civilian court in Peru convicted American Lori Berenson of collaborating with leftist rebels. She had been convicted in 1996 by a military court but received a new trial after U.S. pressure. She could now get 20 years in prison. We'll see you online and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.