The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Leading the news this Thursday, House Speaker Wright scheduled a vote on a smaller pay raise for Congress. The investigating arm of Congress said the government should take over 350 failed savings & loans. A vote on the confirmation of John Tower as Secretary of Defense was postponed after new allegations about his behavior. We'll have details in our News Summary in a moment. Jim.

MR. LEHRER: After the News Summary, we look at a high-tech revolution called high definition television. There's a report by Tom Bearden and then some disagreement between author George Gilder and scientist Charles Ferguson. Then come excerpts from the confirmation hearings of Clayton Yeutter, the Bush nominee for Agriculture Secretary, and we close with a Charles Krause interview with Jose Napoleon Duarte.NEWS SUMMARY

MR. LEHRER: There was action today on the 50 percent federal pay raise. But the end result remained very much in doubt. House Speaker Jim Wright announced a new vote procedure for the House as the Senate started floor debate on the issue. Under Wright's plan, the House would let the raises for members of Congress, judges and top federal officials go through as planned on February 8th, but then the next day vote to reduce the amount from 50 to 30 percent for everyone but the judges. Federal law prohibits Congress from rolling back the pay of the judiciary. Congressional opponents of the increase held a news conference to criticize the Speaker's compromise.

REP. TOM TAUKE, [R] Iowa: I will vote against any proposal for a 30 percent pay raise and I will vote against the resolution that Jim Wright apparently is attempting to offer, not only because I am opposed to a 30 percent pay raise, but also to express my outrage at the practice that is being followed to attempt to get this pay increase.

REP. TIMOTHY PENNY, [D] Minnesota: Speaker Wright's latest offer is nothing but camouflage. The vote will come a day too late and it will only serve to confuse the issue. The fundamental issue is whether Congress ought to consider a 50 percent pay raise in the same legislative session in which we have serious decisions to make in terms of cutting the federal deficit.

MR. MacNeil: President Bush welcomed Japan's Prime Minister Takeshita to the White House today. They met for over two hours discussing a number of issues, including budget deficits, foreign assistance and the trade imbalance between the two countries. Afterwards, at a departure ceremony both leaders said they were pleased at the progress their nations had made in coordinating their economies and further opening their markets to each other's goods and both pledged continued cooperation.

PRESIDENT BUSH: On occasion we may have differences, but these are the differences of friends, and in the last 40 years, our two nations have been truly close friends. The peace and prosperity we both enjoy are among the fruits of that friendship. Simply put, we respect one another, we need one another and we will continue to work together for the good of our peoples and of all humanity.

NOBURO TAKESHITA, Prime Minister, Japan: [Through Interpreter] The world faces a number of challenges but is rich with challenges. In your words, "The new breeze is blowing.".

MR. LEHRER: Clayton Yeutter had his day in the Senate confirmation sun today. Yeutter was the U.S. Trade Representative in the Reagan administration. President Bush has nominated him for Secretary of Agriculture. He told the Senate Agriculture Committee today he would work to improve the balance of trade for U.S. agricultural products in the world markets.

CLAYTON YEUTTER, Secretary of Agriculture Designate: Exports are critical, crucial, indispensable to the economic success of American agriculture, and that means we have a lot of work to do internationally to make sure that we have a level playing field in terms of trade barriers around the world and we know that that level playing field does not prevail today and to make sure that we're competitive if and when the playing field is leveled.

MR. LEHRER: In other cabinet news today, the Senate voted to confirm former New Mexico Congressman Manuel Lujan to be Interior Secretary, Jack Kemp to be Secretary of Housing and Urban Development, Michael Boskin to be Chairman of the President's Council of Economic Advisers. A Senate Committee also approved for full Senate vote the nomination of William Reilly as head of the Environmental Protection Agency. A scheduled vote of the Senate Armed Services Committee on John Tower did not happen. The ranking Republican on the committee, Sen. John Warner, said the delay was so he and Committee Chairman Sen. Sam Nunn could go over some additional information with the FBI. He declined to identify the information.

MR. MacNeil: The head of the General Accounting Office said today said that government regulators should take over 350 insolvent savings & loans. The GAO is the chief investigating arm of Congress. Its chief, Comptroller General Charles Bauscher, told the Senate Banking Committee that the failed institution should be taken over promptly by the Federal Savings & Loan Insurance Corporation. He said these institutions should be placed into receivership until a decision is made to liquidate or merge them. Bauscher said it would cost the government $85 billion over 10 years to deal with the insolvent thrifts.

MR. LEHRER: This was day two of Vice President Quayle's Latin American trip. He spent it in Caracas, Venezuela, attending today's inauguration of President Carlos Andres Perez. During the day, he also met with the leaders of several Latin American and Caribbean nations and the President of Spain. Tomorrow he goes to El Salvador for a one day visit. Former President Jimmy Carter was also in Venezuela for the inauguration. He met today with Nicaragua's President Daniel Ortega. That meeting brought criticism from Vice President Quayle. He said, "When you have a former President meeting with heads of state we don't meet with, it has a chance of complicating matters.".

MR. MacNeil: In Afghanistan, there was gun and rocket fire in and around the capital Kabul as the Soviets continued their withdrawal. A leader of one of the rebel factions said the government will collapse within weeks of the withdrawal due to be completed February 15th. But the head of the Soviet backed government dismissed that today. We have a report from Roderick Pratt of Worldwide Television News.

RODERICK PRATT: Soviet weapons are transported along the Salange Highway heading back to the Soviet Union. More than 100,000 Soviets poured into Afghanistan in 1979. Now most have gone and the Afghans have to sort out the problems left behind. In Kabul, President Najibullah held a news conference and continued to insist that his army could hold off a rebel onslaught, which is expected to follow the Soviet withdrawal. He also reiterated that he would not resign. The government claims that there were no shortages of supplies, but cues for cooking oils, petrol and diesel fuel grow daily along with the prices which have gone beyond the reach of the average Afghan. Hospitals are overcrowded as well and medical supplies are reported to be dwindling rapidly. As for food, there's an abundance of luxury goods, but an a shortage of bread and other staples which people need most. The prices in these black market shops on the outskirts of Kabul are again beyond the reach of those most in need. At the military airport, Soviet soldiers haul their baggage slowly to assembly points. The troops are moved rapidly from barracks to the cold tarmack. Then like soldiers everywhere they resign themselves to every army's oldest rule, hurry up and wait.

MR. MacNeil: The Soviet Commander in Chief of Warsaw Pact forces was replaced today. Sixty-seven year old Victor Kulikov has led the Warsaw Pact military since 1977. Soviet Leader Mikhail Gorbachev is replacing him with a 65 year old General, Pioto Lushev, who has called for more emphasis on conventional as opposed to nuclear arms. One of the most famous allied spies of World War II died this week. Sir William Stephenson was the man Winston Churchill called "intrepid". Stephenson spent the war years in New York, where he coordinated the British/American intelligence effort against Nazi Germany. Stephenson died at his home in Bermuda. He was 93.

MR. LEHRER: And that's it for the News Summary. Now it's on to high definition television, Clayton Yeutter's confirmation hearings and President Duarte of El Salvador. FOCUS - DEFINING THE COMPETITION

MR. MacNeil: As we reported, President Bush and Japanese Prime Minister Takeshita met today and the trade imbalance between the two countries was inevitably on their agenda. Tonight we look at a new product which could affect not only the trade deficit but the battle for technological supremacy between the U.S. and Japan. It is a new kind of TV called high definition television, HD-TV for short. It's been getting a lot of attention lately. It was stressed by the incoming Secretary of Commerce, Robert Mosbacher, at his confirmation hearing last week.

ROBERT MOSBACHER, Secretary of Commerce: It appears to me that high definition television is specifically a high priority item in which both the Japanese and perhaps the Europeans are moving well ahead of us in a very organized, cohesive way with the private sector and the public sector working together. Incidentally, these briefings have also indicated to me that although it's very very late in the game, it's not too late, and if we move quickly and together in both the legislative and executive branches and if further studies bear this out, that we can get back in the game, that we should do it through consortiums, through cooperation and need to move quickly and collectively in this way.

MR. MacNeil: We'll hear two different views on just how important it is to stay ahead in HD-TV, but first this report American companies face just to stay in the game. Tom Bearden reports.

TOM BEARDEN: This is the last American-owned television assembly plant in the United States, the Zenith factory in Springfield, Missouri. Americans invented the consumer electronics industry, radios, TVs, VCR's, computers, and until 20 years ago dominated the worldwide market. Today the U.S. share of that market has plummeted to less than 40 percent. Some say American companies dropped out because they couldn't or wouldn't compete with lower wage scales overseas, or that profit margins were too low to be attractive. But Zenith's Chairman, Jerry Pearlman says it's because the government has allowed foreign companies to take unfair advantage of America's open market.

JERRY PEARLMAN, Chairman, Zenith Corp.: For the last 20 years, inaction on the part of or own government, including Congress, Mr. Chairman, has let the industry born and bred here slip away. Severe price erosion caused by unpenalized dumping, duty circumvention and other unfair trade practices has made the industry unprofitable.

MR. BEARDEN: Pearlman joined a series of other witnesses at this Congressional hearing last fall to tell the government there may be a chance to get some of that market back or lose what is left completely. They were urging Washington adopt measures to help them compete against foreigners for a share of a brand new $145 billion market for a revolutionary kind of television. It's called high definition television or HD-TV. HD-TV sets like this prototype will begin appearing on the market within the next five years. The picture will be twice as sharp as the set you're watching now, we can't show you that, and it'll be a wide screen picture, much like cinemascope. The critical question facing American industry is who is going to build these sets. Japan's television network, NHK, has spent 17 years and billions of dollars on HD-TV. The Japanese have hoped their system would be adopted as a worldwide standard, resulting in billions of dollars in sales. But other national interests have squelched that hope. European companies with government backing are developing their own transmission standards that effectively exclude NHK's system. Richard Iredale is the founder of the Del Rey Group, a smaller company that is trying to raise money to develop an American HD-TV system.

RICHARD IREDALE, Founder, Del Rey Group: Our European colleagues are very concerned that our Japanese friends might be too strong in Europe and that they want to make sure that they are, in effect, held in check.

MR. BEARDEN: U.S. businessmen hope to build some walls of their own against the Japanese and the Europeans by promoting an American standard that will force any system to be compatible with existing television sets. The Japanese and European systems are not compatible with American sets.

RICHARD WILEY, Former FCC Commissioner: The American public has made a very huge investment in existing receivers and perhaps as much as 70 or 80 billion dollars, and certainly no improvement in the state of the television art should be permitted to out mode that sunk investment overnight.

MR. BEARDEN: But there's more to it than just protecting the consumer's investment. The requirement is also designed to protect American broadcasters. WTTW in Chicago is already experimenting with high definition television. They recently showed the results to their staff. Programs like this one can be delivered to the home in many ways, by TV stations, cable, VCR, video disc or by satellite. Only one of those mediums is regulated, the TV stations. Because they send their signals through the air, there must be an enormous amount of coordination to avoid interference with other stations and other users who share the available spectrum. That requires a government established standard of transmission. Other delivery systems which don't use the air waves don't have such constraints and aren't subject to listening. Theoretically, they could establish their own systems. The argument is made that if cable systems, VCR's and others are allowed to deliver high definition pictures and local broadcasters can't, then free TV will quickly wither away. The SEC has already endorsed the concept of a standard that would ensure local broadcasters would not be relegated to second class status, but some believe it will take more than just a restrictive standard for U.S. manufacturers to be competitive in the new world of HD-TV. Zenith Chairman Pearlman says it'll take tax dollars.

JERRY PEARLMAN, Chairman, Zenith Corp.: We estimate that the development phase of a really unique world standard high definition large screen picture tube would be about $15 million and then you get into the capital investment phase which would inside of an existing plant be about another $45 million.

MR. BEARDEN: Do you think some of that capital equipment investment should come from the federal government as well?

JERRY PEARLMAN: Yes, I think that it should. I think that perhaps it should come with some strings on it that got it an opportunity to get paid back out of future profits, but I think that there is a critical need for a U.S. investment base and a production base that is going to be supportive of a lot of other jobs and ultimately down the whole chain is going to be very supportive of defense policy and the entire semiconductor industry.

MR. BEARDEN: Pearlman not only wants R&D money, he wants money to actually build the factory. Jeffrey Hart is with the Berkeley Roundtable On International Economics.

JEFFREY HART, Berkeley Roundtable On International Economics: Well, we know that Zenith is in a lot of trouble. I mean, Zenith has been making no money, in fact, losing money in its consumer electronics end, and it hasn't been able to invest any money in R&D in consumer electronics or very little, so it's the only U.S. owned firm in TVs and so you know, obviously, Zenith is looking for an answer to its problems. Also, Zenith is being actively sought for acquisition by I think a Korean firm and I think perhaps a European firm, and you can't blame the Zenith management for trying to do whatever it can to ward off that acquisition, but you know, it's one thing to say what's in the interest of Zenith, another to say what's in the interest of the country, what's good public policy.

MR. BEARDEN: But to some it is an issue of public policy. They believe that nothing less than the future of the United States as a first class technological society is at stake.

RICHARD ELKUS, Prometrix Corp.: If the United States does not ultimately become a major, if not predominant, supplier of products into the HD-TV market place, the resulting change in technological leadership will have a profoundly negative effect on our standard of living, political and economic leadership, military preparedness and the general control of our destiny as a nation.

MR. BEARDEN: Richard Elkus runs the Prometrix Company in Santa Clara, California. They make quality control devices used in the manufacturing of computer chips. Chips are the fundamental building blocks in virtually every kind of industry today and are particularly vital in military systems. HD-TV receivers and associated equipment will consume huge quantities of chips. Elkus and others believe that unless American companies are big manufacturers of HD-TV sets, the chip industry will pass into the hands of foreigners. The argument is that those countries that build the sets will reap profits that will be used to design and build new generations of chips. But Hart thinks a lot of the rhetoric is overblown.

JEFFREY HART, Berkeley Roundtable On International Economics: It's one thing to use this industry as a symbol, another thing to use it as the basis for policy, and I think we're getting a lot of exaggeration about the importance of HD-TV for U.S. competitiveness as a whole. It may play a marginal role in consumer electronics of the future and in some related electronics industries. Electronics is definitely a strategic industry in the United States. But what you do in HD-TV will not be the definitive answer to all these other problems, so we'd have to keep it in perspective.

MR. BEARDEN: But Elkus's company has already seen the phenomenon in action. Their test equipment requires precision gears that are no longer available from American manufacturers.

SPOKESMAN: They're only available from Japan. I've had systems in from the American vendors but you just don't get the quality out of them.

MR. BEARDEN: Why not?

SPOKESMAN: I don't know. That's a very good question. We generated the technology to build the machines to produce these things but the Japanese actually went and did it.

MR. BEARDEN: Meanwhile, both the Japanese and Europeans have announced their intentions to compete vigorously in the United States by building HD-TV receivers to whatever standard is eventually adopted. That's because the United States by itself is by far the largest single market for consumer electronics. For U.S. companies who don't yet have a system developed beyond a demonstration phase the competitive clock is already ticking.

MR. MacNeil: How important is the technology of HD-TV and what should be done to give American companies a chance? We have two views. Charles Ferguson is a Fellow at MIT's Center for Technology, Policy, & Industrial Development, he joins us from Los Angeles; George Gilder is an economist and author of a forthcoming book on the semiconductor industry called Microcosm. He joins us from Albany, New York. In Los Angeles, Mr. Ferguson, how important is the HD-TV technology to the United States?

CHARLES FERGUSON, MIT: [Los Angeles] Well, I think it depends heavily upon which conception of HD-TV one is talking about. An initial system which will be compatible with existing receivers and broadcast technology is not really terribly important to the United States, however, over the long run HD-TV is going to become a much more important technology because the technologies of television, that is, of advanced displays and communications, are going to merge with those of the computer industry and the component technologies, particularly semiconductors and displays, will be enormously important to both. And the question, therefore, arises what will happen to the United States' general industrial technology base, particularly in electronics, generally in the computer industry, if we do not have the technologies available to support a large consumer industry with its mass production and mass markets.

MR. MacNeil: I see. And, Mr. Gilder, how important do you think the HD-TV technology is?

GEORGE GILDER, Author: [Albany] I think it will be obsolete by the time it's introduced. What you have to understand here is that we have two industries, not one industry. We have the computer industry and we have the television industry. The computer industry moves about a thousand times faster in technological advance and has throughout the post war era than the television industry which has had only a few significant changes and calls each of them a revolution, but they're dwarfed by the rapid changes in the computer industry. What's going to happen in the next 10 years is all the components in the computer will cost about 1/10 as much and be much more powerful and efficient. This will make it possible to create a graphics processor attached to fiber optics networks which is entirely solid state and digital and will contain virtually no current television technology in it. It will be a solid state computer and it will allow interactive digital treatment of video images, movies, educational programs, games, a wide array of possibilities that goes far beyond the television industry.

MR. MacNeil: Now just so I understand you, that is not the technology the Japanese have developed so far, the so called HD- TV, that is a leap beyond that.

MR. GILDER: That is definitely a leap beyond that.

MR. MacNeil: And you're saying somewhat the same thing, Mr. Ferguson, right?

MR. FERGUSON: Yes, I am. I think, however, it's very important to recognize that what's going to happen 10 years ago is that the two industries will be quite similar in their technology base. The question, therefore, arises whether real HD- TV is in the sense of a fully digital two way system delivered by digital fiber optic cable to every home in the United States will be the mechanism by which United States electronics producers get back into consumer electronics or the mechanism by which Japanese electronics firms penetrate the United States computer industry. That's what's really under discussion here.

MR. MacNeil: All right. Let's come to what we do about it now. First of all, do you agree with Mr. Gilder that the technology that the Japanese have already developed and which some people would like to catch up with here will be obsolete before it's really introduced?

MR. FERGUSON: I think that it's quite probably correct, yes. In this case, the Japanese bet heavily on an analog system which is broadcast, and, in fact, the United States retains a strong advantage in digital system's design and it looks as if by the time these systems will be deployed it will be economically feasible to us fiber optic cable to every home.

MR. MacNeil: Now do you believe that the United States should try, being so far behind already, should try to chase the Japanese in the existing technology, the new HD-TV technology?

MR. FERGUSON: I think it's an open question but certainly it's much less important, it's less important by a factor of 10 or 100 than it is that the United States not only catch up but have an extremely strong position when digital systems are deployed in the late 1990s and beyond, but in order to deploy those systems, we have to start doing R&D now and we have to have the government help us in doing that.

MR. MacNeil: But, Mr. Gilder, you would not support the president of Zenith in his idea that the government should come in or that lots of money should be spent on catching up with the technology the Japanese have already developed, is that correct?

MR. GILDER: The basic rule of competition as Peter Drucker has expounded it is never try to catch up, it's futile to try to catch up. You have to move ahead. And I think the United States is already well ahead in the relevant technologies for this digital computer television of the future.

MR. MacNeil: Now what happens if the Japanese then come in and people are hungry for some innovation and they start to market or do market the technology they or the Europeans have developed here? I mean, aren't they going to sweep the market for the next 10 years or so with what is already feasible?

MR. GILDER: I don't think so. I think we now have 40 million personal computers in the United States. We have a huge base of personal computers. That technology is moving incomparably faster than television technology and as it begins to offer television capabilities such as Intel's digital video interactive CD, compact disc technology which is now becoming available, I think people will buy more computers and fewer thousand dollar and two thousand dollar television sets.

MR. MacNeil: All right, Mr. Ferguson, what do you think U.S. industry should do given that it's behind the technology that the Japanese have developed but which you both say is outdated or will, can be outdated in the next few years and superseded by what you're talking about, the U.S. digital material, what should U.S. industry do now and what should the government do to help them?

MR. FERGUSON: Well, I think what we need is an extremely concentrated long-term, very focused and highly coordinated effort involving telecommunications companies such as the regional Bell operating companies who will be delivering fiber optic cable to the homes and computer manufacturers and also component manufacturers for the R&D and standardization and industrial development and infrastructure efforts required if we're going to succeed. I have to say, however, that I think it's really important to note that simply because the particular HD-TV system that the Japanese have developed, the so called muse system, is, in fact, an obsolete analog system, that does not imply that the Japanese are behind in the relevant technologies. In fact, Japan now holds 50 percent of the world's semiconductor market and most of the markets for the relevant advance display technologies. As a consequence, if we don't have a focused R&D effort, I think that there's a very real risk that we will lose even when the digital systems are deployed.

MR. MacNeil: By a focused R&D effort, do you support the idea that Secretary-Designate Mosbacher talked about of a government industry consortium?

MR. FERGUSON: Well, as I think perhaps Albert Einstein once said God is in the details. It depends on what the consortium would be like and how many consortia there would be and what their purposes would be, but in general, I do, in fact, yes, very much support strong involvement on the part of the government specifically and especially with respect to R&D funding and standardization.

MR. MacNeil: Do you, Mr. Gilder?

MR. GILDER: No. I think that the current R&D efforts in American industry which have given us 70 percent of the world computer industry and which still give us the global lead in semiconductors are sufficient to continue to sustain us in this competition with the Japanese.We have five times more computers installed in the United States than in Japan, three times more computer power per capita. We are way ahead, probably 4 to 1, in the production of software critical to the development of all these very resourceful video technologies and I think that if we continue to generate the kind of entrepreneurial activity which has given us or current lead, we will prevail in the future.

MR. MacNeil: Well, you have two views there of what government and private industry should do about leaping ahead to the new, yet to be developed technology. Come back to the technology that has already been developed, that is known as HD-TV now. You heard in our report that American industry would like it to be, would try and force it to be compatible with existing television sets or existing technology. Isn't there going to be a rush to get into the consumer market immediately with the kind of stuff that you call analog or soon to be obsolete and what should American industry do about that, just ignore it, just let the Japanese and the Europeans have it? Mr. Gilder.

MR. GILDER: The crucial thing is to tie up the American household with fiber optic cables. That's the critical move because that allows the transmission of digital information directly to computers in the household and that means perfect pictures without all the extraordinarily complex and expensive equipment needed today to massage the high frequencies broadcast and turn them into inferior images on the screen.

MR. MacNeil: Do you agree with that, Mr. Ferguson, U.S. industry should just ignore this stuff the Japanese and Phillips in Europe have developed and wait for these next eight to ten years while working on the new stuff?

MR. FERGUSON: Well, in fact, there are many HD-TV systems under development, not all of them are analog, but in general, I do agree with Mr. Gilder that it's extremely important that we go as soon as possible to an integrated, digital, probably fiber optically based system both for homes and offices, however, I want to emphasize that going towards such a system, moving towards such a system does not imply that we will automatically hold that market. It could quite easily be that such a system could lead to again the very rapid dominance of the Japanese electronics industry. It depends on what we do in R&D in technology and in government policy.

MR. MacNeil: Mr. Gilder.

MR. GILDER: I agree that that's true, but I want different government policies and I think we are, it should be understood that we have won in computers at this point. We hold 70 percent of the world computer market. We are --

MR. MacNeil: Don't the Japanese have a very considerable either lead or advanced position in super computers which would be necessary to make this new stuff work?

MR. GILDER: No, they do not have any lead in super computers. We are dominant in super computers. Cray Research still has about 60 to 70 percent of the world market in super computers and the wide array of massively parallel super computers which constitutes the next generation are nearly all being produced in the United States. We have hundreds of super computer projects that will eventually yield technology cheap enough to be put in your household television set and allow extraordinary capabilities in your home and in your office.

MR. MacNeil: Are you as confident, Mr. Ferguson, about the position of the U.S. computer industry?

MR. FERGUSON: To put the matter very mildly, I am not as confident, and, in fact, one thing that Mr. Gilder has omitted in his discussion is the fact that we are already a $4 billion net importer of computers from Japan. We're still a worldwide net exporter because we still export to Europe and Latin America and other nations, but with respect to the competitor we have to deal with over the next 25 years, we already have a deficit in computers and if you look at the semiconductor and other technologies that are going to be critical to those computers 20 years from now, we have to worry quite a lot.

MR. MacNeil: So just to wrap this up, which we need to, you, Mr. Ferguson think that it's vital for the U.S. R&D to get going on this new technology but it really will require the government to get in there too, right?

MR. FERGUSON: I think that's quite likely.

MR. MacNeil: And you, Mr. Gilder, do not think so, you think that there's enough R&D capacity in private industry to do it?

MR. FERGUSON: No. I mean, the government is deeply involved in our research and development already and it has a whole series of large government laboratories that are remarkably sterile and generating new technologies. I think there's no magic in some new consortium today dedicated to the creation of high definition televisions to save the American consumer electronics industry. I think the U.S. computer industry is moving thousands of times faster than the television industry and we have the lead in computers and we should aggressively exploit that lead and carry it into the home and carry it to Japan, itself.

MR. MacNeil: Okay. Well, Mr. Gilder and Mr. Ferguson, thank you both for joining us. Jim.

MR. LEHRER: Still to come on the Newshour tonight, Clayton Yeutter of Agriculture and President Duarte of El Salvador. FOCUS - CONSIDERING THE CABINET

MR. LEHRER: Now we continue our coverage of the Bush cabinet's confirmation hearings. The spotlight today was on Clayton Yeutter, the nominee for Secretary of Agriculture. He served as U.S. Trade Representative in the Reagan administration. President Bush asked him to stay in Washington as Secretary of Agriculture. It was the Senate Agriculture Committee that he appeared before today.

CLAYTON YEUTTER, Secretary of Agriculture-Designate: All of us know that there are significant segments of American agriculture that are still in very fragile economic shape and that will prove to be a challenge for all of us in the coming years and it will be a challenge difficult to meet because none of us is a miracle worker, including me. We will be operating under very tight budgetary constraints. Much of American agriculture is still inordinately dependent upon a flow of funds from the federal government. That's simply not a healthier, sustainable long-term situation. Exports are critical, crucial, indispensable to the economic success of American agriculture and that means we have a lot of work to do internationally to make sure that we have a level playing field in terms of trade barriers around the world.

SEN. THAD COCHRAN, [R] Mississippi: How significant do you see stability for producers and what do you see as some of the essential tools that the Department of Agriculture needs to have in farm legislation to achieve that stability?

CLAYTON YEUTTER: My fundamental judgment is that existing farm legislation provides essentially all the tools that we need to achieve the kinds of objectives you just outlined. Sometimes we ask too much of government in this area. We're never going to have a totally stable farm economy in this country, nor will we have a totally stable economy in any other industry. The world is just much too volatile for that. There is no way, no practical way, Sen. Cochran, that we can take away all the risk that exists in agriculture. It might be nice if we could do that for farmers all over the country so that it would be a risk free enterprise, but we live in a capitalistic society and most of us believe that the heart of that society is the dynamism that it provides and with dynamism comes some risk.

SEN. HOWELL HEFLIN, [D] Alabama: What is your feeling towards rural development during the upcoming four years?

CLAYTON YEUTTER: People in small towns have begun to recognize that they simply cannot become totally dependent on the economic well being of agriculture, production agriculture, or putting it another way, it's simply not prudent to place themselves in a situation of that vulnerability. Therefore, if we can do some things to diversify income sources in rural communities throughout the nation, we will have made a tremendous contribution to the stability of those communities and to their overall economic well being. My question is how do we get that done, Sen. Heflin, with very limited budgetary resources? It seems to me that the push, the stimulus and the initiative for rural development programs, should properly come from the local areas and must come from those local areas, both from the people, themselves, and from local governments and state governments. The federal government can't do everything for everybody and we shouldn't attempt to do that either.

SEN. JESSE HELMS, [R] North Carolina: Will you describe Mrs. Yeutter's reaction when she found out you're going to take the toughest job in government?

CLAYTON YEUTTER: I'll tell you what she said. She said first of all she concluded it must be temporary insanity and then her next reaction was why don't you pick an easy cabinet job someday, why do you always want to accept these brutal cabinet jobs?

MR. MacNeil: Yeutter said he does not see an easy solution to the trade flap that erupted when the European common market banned the importation of all beef containing hormones. He criticized the Agricultural Commissioner of Texas for proposing to sell the Europeans hormone free beef, saying it is against the law for individuals or local officials to get involved in the conduct of American trade policy. CONVERSATION

MR. LEHRER: Finally tonight a conversation with the President of El Salvador, Jose Napoleon Duarte. Tomorrow he meets with Vice President Quayle. Their discussion will likely center on the rising violence in the country as new elections approach. Duarte is the first democratically elected President in El Salvador's history. Last summer he was diagnosed as being terminally ill with cancer. He talked recently with Correspondent Charles Krause, who's interviewed him many times before.

CHARLES KRAUSE: The first time I interviewed Jose Napoleon Duarte was in 1980. It was just a few days after the American nuns were found raped and murdered near San Salvador. At the time, Duarte compared his country to the Wild West. There was no law and order, Duarte told me, no police, not even a sheriff, to stop those with guns from doing whatever they pleased. Many feared that Duarte too would be killed before he could complete his term as President which ends in June. Ironically, it now appears likely Duarte will complete his term only to die of cancer. He looks better than he did a few months ago and when it comes to defending his record, Duarte is still combative. We interviewed him at the Presidential palace in San Salvador.

MR. KRAUSE: You have certainly dealt with, you've metwith President Reagan three or four times in Washington. You've probably met more members of Congress than any foreign leader anywhere. Tell me about -- first of all your meetings with President Reagan -- did you feel that he had a clear understanding of the situation in Central America?

PRESIDENT DUARTE: I think that concerning San Salvador, he was very clear. When I met with him for the first time, I talked with him, the same things that I'm telling you now and I said to him I'm asking you to support a program based on humanization, based on democracy, based on participation, based on security, based on maintaining the economy because we are in a crisis, and this is what I'm going to do and this is also a policy that will be good for the United States, because at this moment the country is very close to be lost to the communists and I'm going to save the country from the communists but I need your help, and he accepted. He was very very faithful in complying with everything and he went over that. He was very friendly to me. He even went to see me when I was sick and he always have respond to me. There is people who say that I've been following Mr. Reagan's policy. I don't know about that but what I know is that I have set up the policies and that Mr. Reagan has supported those policies, like for example, the -- reform.

MR. KRAUSE: It is also said that you cannot make a decision or any important decision in this country without checking with the American ambassador here.

JOSE NAPOLEON DUARTE, President, El Salvador: No. What I can tell you is this. I believe in said words than that -- you put it very mildly -- but there's people who said that I am a puppet of the United States. That is absolutely false. I have -- make my own decisions, decisions against sometimes the policy of the United States, and I'll give you one, the position of the United States with the Contras and my decision not to make any definition concerning the Contras now. But if I want to have a loyal friend, I have to be loyal too and I've been very careful not to get involved in the United States' policies and this is the problem. When all the Senators and Congressmen came, hundreds, and they came and they wanted to talk to me and the Republicans wanted me to say that I support the policy of Mr. Reagan, supporting the Contras, and that I should call Congress asking for money for the Contras, the Democrats would come to me and ask me if I am against the Contras and if I would write saying that I'm against the Contras, and I always have said, the policy of the Contras is not a policy of Central America, it's a policy of the United States; they have to make their own decision.

MR. KRAUSE: What has been the most difficult political situation that you've had to make?

PRESIDENT DUARTE: The most difficult was in 1980, when we had to make the, the social pact with the army. You have to remember that for 25 years I was enemy No. 1 of the army and then I had to make the -- a pact with the army, and I was reluctant to it, but finally I decided and the party decided that we had to do it in order to open up the beginning of the space of the democratic possibilities. You have to remember that for 50 years we had a dictatorship, a military dictatorship and we knew that we were making a pact with the same army that had been managing this dictatorship.

MR. KRAUSE: Do you think you made the right decision?

PRESIDENT DUARTE: I think at this moment, I think we did, and you can see the results. In 1980, the country was in complete disorder. There were millions of people in the streets, thousands of people parading and demonstrating, terrorism all over the place. And the city was in a very bad situation. The country was completely lost of faith and you can compare now with all the problems we have, with eight years of problem after problem, earthquakes, drought, hurricanes and all kinds of natural problems, human problems like hate between people and a crisis, war, and everything else, but still the situation comparing today with 1980 is completely different. I think it was worth it.

MR. KRAUSE: On the other hand, why has the army of El Salvador, which is three or four times larger than it was eight years ago, which has received hundreds of millions of dollars from the United States, why is it unable to defeat the guerrillas?

PRESIDENT DUARTE: There's no one in the world who ever defeated a guerrilla. The guerrillas -- if they decide to forget about the guerrilla actions -- with one guerrilla man, with one guerrilla team, with five guerrillas, in a city they can do all the damage in the world, and we have reduced the amount of guerrillas. There were fifteen, twenty thousand guerrillas in the country. Now there are three thousand, five thousand, but that's enough to create all kinds of damage. Just imagine 5,000 guerrillas in New York, putting bombs all over the place. You wouldn't have no capacity with the police to control.

MR. KRAUSE: In that case, are you saying that El Salvador will continue to be torn by this war for the foreseeable future?

PRESIDENT DUARTE: I would say that if you analyze Guatemala, they've been having guerrillas for 30 years, if you analyze Colombia, they have guerrillas for 50 years. You have now Peru, it has guerrillas for 20 years. The problem is that it's easy to forget that it's generated in the minds of people some radical concepts and it's easy to make them think on that direction, but when they take actions it's almost impossible to make them go back. Just imagine a 13 year old child who saw when his father was killed, when his mother was violated, he has hate in his heart, he talks about the revenge, he goes to the mountain, he gets a rifle, he's been trained in communism and then tell him that the good thing is to fight for freedom and the only freedom is to kill all those who are responsible for killing his father and his mother so he starts killing people, he learns to kill people. And from that moment on, that 13 year old man will become a guerrilla up to I don't know when. But if we understand that the system has to change and that this change in the system will mean controlling the abuses of authority, controlling the death squads, controlling the injustice conditions, controlling the justice in the country, then things start changing. The social conditions are not any more favorable to the legitimate of the guerrillas.

MR. KRAUSE: You think they're going to finally come to realize that, or are they going to continue fighting until -- forever?

PRESIDENT DUARTE: I cannot express opinion that I don't have a base on but there will be people who will continue fighting forever and this is correct according to the communist theory so you see they have their strategy and we have ours. Mine is non- violence and democracy. Theirs is violence and totalitarianism.

MR. KRAUSE: Do you have any hope that perhaps as the Soviet Union appears to be changing its view of what is called wars of national liberation that possibly the Soviet Union may exert pressure on Cuba and Nicaragua to end support for the guerrillas here and in El Salvador?

PRESIDENT DUARTE: I don'tthink so. This is my personal view. I think that up to this moment, if you have heard Mr. Gorbachev, he has been talking about changes he's making without risking anything and he hasn't talked about Afghanistan, to risk the government, he hasn't talked about Cuba, to risk Cuba, he hasn't talked about Nicaragua, to risk Nicaragua. He hasn't talked about any of the guerrilla groups all over the world so I am not so sure that the communists are moving away from communism. I think Russia is moving to a more pragmatic position to obtain what their goals are, but that doesn't mean that they're leaving the communism and this is what they say in perestroika.

MR. KRAUSE: Is one of their goals El Salvador?

PRESIDENT DUARTE: I think it's not a specific goal. I think it's a specific goal for Cuba and for Nicaragua specifically. This is the way that they can save Nicaragua, by having an action in El Salvador.

MR. KRAUSE: Let me ask you about Irana and some of the extreme right in this country. Do you think that the very conservative land owners, the very conservative businessmen, the people who bankroll Irana and some members of the armed forces who may be sympathetic to them as well, have they come to accept the idea that the people have the right to elect their leaders and those leaders have the right to make decisions that could even hurt the interests of the wealthy people in this country?

PRESIDENT DUARTE: Let me put it this way. They are taking advantage of the democratic space we have given but they don't believe it. They want to use the instruments of democracy to get the totalitarian power, to get back, to set back all the process and to create back again the conditions in which they were the only benefits. You will see if they win the elections, you will see revelations every day, you will see all kinds of social problems in the country, you will see a lot of persecution and repression in the country because they cannot hold it otherwise, because they don't believe in democracy. That's the reason why you find often that Irana and the guerrillas sometimes work together and work for the same objectives and the objective is to eliminate the middle of the road, the democratic solution, the non- violent solution.

MR. KRAUSE: How do you want to be remembered by your people?

PRESIDENT DUARTE: A man of faith giving my country the courage to fight against the destiny, against nature, and against the enemies of their own people, which is I would like to be remembered as a democrat.

MR. KRAUSE: And are you at peace with yourself? Do you think you gave and did all you could?

PRESIDENT DUARTE: I did all I could with the instruments I had. I could have given more. I have the capacity, the courage, the guts to do a thousand things more but I didn't have the instruments so I did whatever I could with the instruments I had.

MR. KRAUSE: Do you think that in some ways it's unfair that you don't have more time perhaps to do some more things for your country?

PRESIDENT DUARTE: Mr. Fidel Castro in a dinner in Mexico was talking about this and he says, does any one of you believe that you can solve the problem in five years, I don't, he says, and that's the reason why we don't have this nonsense of the elections; just look at the Pope, he is there for life, and this is the way I believe that things should be. I was sick, I didn't answer, but I thought to myself, obviously, that is true for totalitarian, but I'm a democrat and a democrat knows when he is elected by the people and knows exactly when he has to leave and in that period of time, has to do his best. I believe that I have done my best for my period of time.

MR. KRAUSE: Thank you. RECAP

MR. MacNeil: Again, the main points in Thursday's news, House Speaker Jim Wright scheduled a vote on rolling back a proposed pay raise for Congress and other federal officials from 50 to 30 percent. The investigative arm of Congress, the GAO, recommended that the federal government take over 350 failed savings & loans, and a vote on the nomination of John Tower as Defense Secretary was postponed after new allegations surfaced about his behavior. Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.