The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MAC NEIL: And I'm Robert MacNeil in New York. After tonight's News Summary, we have two reports updating the situation in Bosnia. Then a Newsmaker interview with the new director of the CIA, John Deutch, we have a report on how the new policy on gays in the military is working, and two reporters discuss the leadership struggle in organized labor. NEWS SUMMARY

MR. LEHRER: President Clinton will offer a new budget proposal tonight. He'll do it in a speech from the Oval Office. Press Secretary Mike McCurry said the plan will include a proposal to reduce the cost of Medicare and Medicaid. McCurry said the plan is being offered as a compromise to Republican budget proposals now before Congress. He spoke at a White House briefing.

MIKE McCURRY, White House Spokesman: Many of the same goals are shared by the President and the -- and the Republican Congress. The goal was deficit reduction leading to a balanced budget, savings generated from cuts in certain programs, many of them dear to Democratic constituencies to be sure, a very modest tax relief for middle income. But it also reflects many of the President's priorities, putting an emphasis on education, investments in those things that will help the economy grow over the long-term.

MR. LEHRER: McCurry said the President hoped to achieve a balanced budget in 10 years. Mr. Clinton's speech is scheduled for 9 PM Eastern Time. Senate Majority Leader Bob Dole will deliver a Republican response immediately afterward. Robin.

MR. MAC NEIL: The Bosnian Serbs today freed at least 26 of the UN hostages they've been holding for more than two weeks. They claim to have released 130 of the peacekeepers, but UN officials said about 100 of them were still trapped by mined roads and other obstacles. The first of a new contingent of French soldiers arrived in Croatia today. They were part of a multinational rapid reaction force being sent to Bosnia to strengthen the UN mission. Formal authorization of the force was stalled in the Security Council today over how to pay for it. We'll have more on Bosnia after the News Summary.

MR. LEHRER: U.S. and North Korean negotiators have reached a nuclear agreement. Despite initial objections, North Korea agreed to accept two reactors from South Korea. The agreement followed three weeks of talks in Malaysia. Secretary of State Christopher spoke about it today at the White House.

WARREN CHRISTOPHER, Secretary of State: This agreement reached in Kwalalampoor opens the way to further implementation of the framework agreement and very important for our security continues the freeze of the dangerous North Korean nuclear program. I want to compliment the negotiators. It was a first rate job of negotiation, and I think it moves this process a very important step forward.

MR. LEHRER: France will conduct eight tests of its nuclear weapons starting in September. France's new president, Jacques Chirac, said today the tests will be finished by next May, in time for France to sign a worldwide ban on nuclear testing.

MR. MAC NEIL: A group of labor leaders said today they will support an alternative candidate for president of the AFL-CIO. John Sweeney, who now leads the Service Employees International Union, will run against Tom Donahue, the hand-picked successor to outgoing president Lane Kirkland. We'll have more on this story later in the program. In economic news today, the Commerce Department reported retail sales rose .2 of a percent in May. The report credited a comeback in home furnishings and auto sales. Consumer prices rose .3 percent last month. The Labor Department said that was largely due to an increase in energy costs.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to Bosnia updates, the director of Central Intelligence, a gays in the military story, and the AFL-CIO's leadership struggle. UPDATE - QUAGMIRE

MR. MAC NEIL: An update now on the situation in Bosnia, where today's release of some UN peacekeepers was accompanied by preparations for renewed fighting between government forces and the Bosnian Serbs. We have two reports from Independent Television News, beginning with Peter Morgan.

PETER MORGAN, ITN: Tired but free, the latest group of UN peacekeepers released by the Bosnian Serbs leave Pale on their way to the Serb capital, Belgrade. Other UN captives blockaded into their command posts were allowed to move freely again, among today's group of Iran's 130 soldiers, an RAF officer and five Royal Welsh Fuseliers, clearly reluctant to discuss their experiences. Soldiers from other countries did not want to talk in detail about their time with the Bosnian Serb army.

SOLDIER: Since the regular army took over, I've been treated very well, no problems whatsoever.

MR. MORGAN: At least 14 UN soldiers remained captive. The Bosnian Serbs blame technical difficulties for their continued detention, a reference say the UN to hostages held in isolated areas and to those held by rebel units of the Bosnian Serb army. Today's release followed a by now familiar formula. Yevica Stanosic, Serbia's security chief, was on hand as twice before to guarantee the hand-over. The Bosnian Serbs' leader tried to make some capital out of his concession.

RADOVAN KARADZIC, Bosnian Serb Leader: We considered this crisis over, and we do hope that there will be no more crises of that kind. We are not -- we do not want to fight against the international community. We do not want to fight even against our enemies.

MR. MORGAN: No coincidence though that the release has come as the UN's rapid reaction force for Bosnia takes shape. The first wave of France's contribution arrived in Split today armed with mortars and painted in camouflage, not normal UN white. But the final role of this 10,000 strong force will be unclear until the UN decides on a new mandate for its Bosnia mission later this week. UN officials on the ground appeared divided, unsure whether to go back to traditional peacekeeping or use the new force for a more direct style of peace enforcement. The Bosnian Serbs are trying to take advantage of these differences.

NIKOLA KOLJEVIC, Bosnian Serb Deputy Leader: The Serbian side is ready for improvement and re-establishment of operations with the UNPROFOR. We are ready actually to go back to status quo ante, of course on the understanding that there won't be any hostile acts in future.

MR. MORGAN: Such claims, though, are being made from an increasingly difficult position. Although well equipped with heavy weapons, the Bosnian Serbs do not have enough troops to defend their extended front lines. They're also short of fuel, a result of Belgrade's promise to seal its border with Bosnia. Such strategic strains are being exploited by the Bosnian government's army, seen here according to Bosnian TV after a recent offensive in the Treskavica Mountain region South of Sarajevo. The Bosnian army is short of weapons but well supplied with troops, up to 90,000, according to one recent UN estimate. By comparison, the Bosnian Serbs have around 70,000 soldiers. Bosnian government commanders in Sarajevo have tried to take advantage of this numerical superiority by moving on several fronts at the same time.

MR. MAC NEIL: The decision of the Bosnian Serbs to make hostages of the UN peacekeepers had one possibly unintended result. It prompted Britain, France, and the Netherlands to beef up their troop contingents in Bosnia and deploy the so-called rapid reaction force there. Some of the soldiers already have been deployed, even though questions arose today at the UN over how the contingents will be financed. Nik Gowing of Independent Television News met up with some of the British troops in Vitez. Here is his report.

NIK GOWING, ITN: The 12 British 105 millimeter light guns are ready, a new weapon in a new political and military strategy of brinkmanship and bluff conceived by UN commanders, accepted by NATO government ministers to apply pressure and keep the Bosnian Serbs guessing.

MAJ. SIMON WORSLEY, British UN Forces: We're fully operational. We deployed in a very short time. We're now here. We've got men out on the ground. We're planning for every eventuality. We're ready for anything which our commanders give us.

MR. GOWING: The Royal artillery's spotter teams are now on the confrontation lines, mapping Serb gun positions with the precision needed by this advanced computer guidance technology. What happens next to the guns and where they go depends on how far the Bosnian Serbs have struck UN operations and reject UN requests for the many convoys urgently needed to refill food warehouses. The world's biggest helicopter, the Russian built MI-26, is expected to be used to move forward the guns, hidden unseen inside the fuselage, leaving the Bosnian Serbs uncertain if or when the guns are being deployed. Ultimately, the guns may be moved inside road containers in the same way they first arrived here last week. Hundreds of tons of shells and ammunition have already been shipped forward, underlining an international political willingness and intention to use the new weapons if pushed. But every move is being weighed carefully, designed to force Bosnian Serb cooperation, not military confrontation. The UNPROFOR mission is undergoing a fundamental change. This training for combat is the result of the new robust British-French policy. High in the mountains of central Bosnia we found part of what is now renamed the British Battle Group on a training mission.

MAN AT SITE: Full platoon who are currently up there, Grid 965399, will move down to --

MR. GOWING: Well back from the confrontation lines and 60 miles from their base at Vitez, Britain's Devon and Dorset regiment, spearhead of task force Alpha, are learning to shed some of the restrictions and frustrations of a traditional UN peacekeeping role for what may now become a peace enforcing role, or perhaps worse.

LT. COL. JEFF COOK, British UN Forces: Quite clearly, the requirements for peacekeeping differ to those of becoming a rapid reaction force. Quite simply, I'm adjusting the mind set of soldiers to make the transition from one to the other.

MR. GOWING: But can a peacekeeper suddenly become potentially a battle fighter?

LT. COL. JEFF COOK: Yes, he can. Our preparations for deployment initially were in the peacekeeping role, but we were ever mindful that we might have to shift.

MR. GOWING: And the shift may go much further. These members of the battle group are training for foot patrols which have never been undertaken during the three years British troops have been in Bosnia. Under British command, we found this Czech battalion practicing its bridge building. This week, a shipload of similar British equipment will arrive from Germany. "We are preparing to punch across areas we have not been in so far," said one officer. In this case, punching could mean not just going forward but also withdrawal. Many signs here point to advanced contingency planning for such a withdrawal, under the cover of the rapid reaction force deployment, of which bridge building is a vital part. The aim: deploy big to withdraw fast, if necessary.

MR. MAC NEIL: Still ahead, the director of the CIA, gays in the military, and who will lead organized labor. NEWSMAKER

MR. LEHRER: Now to the director of Central Intelligence. John Deutch went to the CIA, after being the No. 2 man at the Defense Department. He had come to the Pentagon from a career in science in academe as a professor and administrator at MIT. He's with us now for a Newsmaker interview, the first of its kind he's done since taking over at CIA one month ago. Mr. Director, welcome.

JOHN DEUTCH, Director, Central Intelligence Agency: Good evening, Jim.

MR. LEHRER: First on Bosnia, was there an intelligence screw-up involving the Serb missiles that led to the shooting down of Captain O'Grady?

DIRECTOR DEUTCH: Jim, I don't believe so. I think it's only in America that a story that has turned out so well, a heroic pilot, a valiant rescue involving all of the combined efforts of the United States, its intelligence services, and it's military, only in America could it be that we ask whether this was a failure. We are going to do -- Secretary Perry and I are going to do a very careful and thorough review. We're going to ask Gen. Shalikashvili to look at the operational aspects of this. When that story is done, we will have all the lessons learned, but it's my suspicion that it will be a lesson of -- the lesson will be of it's an event we can be proud of. I do not believe we're going to find failures here in the rescue of this heroic fellow and bringing him back here. It's something we ought to be proud of, not something we should be embarrassed about or worry about.

MR. LEHRER: In general, is intelligence pretty good from and about Bosnia?

DIRECTOR DEUTCH: I think that intelligence has been quite successful in Bosnia in reporting on the former Yugoslavia for the past several years, right from the beginning of the break-up four years ago of the former Yugoslavia. The issues in Bosnia and the former Yugoslavia are not poor intelligence; they're hard policy choices.

MR. LEHRER: All right. Let's go on to the CIA and your job there specifically. What -- what's the problem at the CIA?

DIRECTOR DEUTCH: Well, the CIA is an institution that is important for the country. Intelligence collection is a very vital matter to help our decision makers, to help our leaders from the President on down make informed foreign policy decisions. But it's an institution that has got to re-orient itself from -- into the post Cold War era. The demands on intelligence are going to be even greater. The demands on human clandestine intelligence are going to be greater in a world which is fractionated and in a world that characterized the Soviet Union, the bipolar competition. What we have is a situation where that agency, that culture has got to be encouraged and given the opportunity to re-orient itself so it performs the national security function that is so vital and that it has to do for us.

MR. LEHRER: But when you were appointed, the consensus was that Deutch has been appointed to go over there and fix it. Now, what is it specifically that you want to fix?

DIRECTOR DEUTCH: Well, I think that there are a series of matters that I have laid out in the public testimony I did at the time of my confirmation hearings. I want to make sure that the intelligence community serves the President, the Secretary of State, the Secretary of Defense, and our other foreign policy leaders. I think the intelligence community has a tremendous responsibility to support military operations whenever there's a conflict, as we've seen here last week, even in the rescue of a single pilot. I think we have very new demands at a time when there's a growing international terrorism, international drugs, international crime. I think we also have to be alert for the penetration with which enemies of ours penetrate our national security apparatus such as happened in the case -- the famous Ames case -- of a penetration of a mole over a many year period in the Central Intelligence Agency. These are new challenges, challenges that the work force there, the techniques must be directed towards in order to assure that information comes in, comes in a timely manner, accurately, and responsibly gathered for our senior policy makers.

MR. LEHRER: You used the word "culture." The word is that the culture is dead wrong out there to do any of the things, or do most of the things that you just outlined that it has to do now, that it's a male dominated, old boy network, that not only mistreats women, but is not even prepared for this new world. Is that true? Is that an accurate wrap?

DIRECTOR DEUTCH: I do not believe that the culture out there is all bad. I do believe that there has to be a change, a change in the culture, a change in the generation of people who are managing and working, especially the clandestine service side of the agency. I am personally committed to assuring that there is a fair work place there, a work place where every individual is treated according to performance.

MR. LEHRER: Including women?

DIRECTOR DEUTCH: Especially women, without reference to gender or race, and I intend to be sure that that is put into place absolutely without question in the agency. I've just asked Nora Slatkin, the new executive director of the Central Intelligence Agency that I appointed when I came in to head a --

MR. LEHRER: She came in from the outside?

DIRECTOR DEUTCH: That's correct. She came --

MR. LEHRER: And the first woman to hold that high a job, right?

DIRECTOR DEUTCH: She is the first woman to hold the executive director job in the agency. She came from the Department of the Navy, where she was the assistant secretary of research, development, and acquisition. She's tremendously qualified, tremendously able. I've asked her to chair a human resource council of -- new council for all of the leading managers in the agency to make sure that everyone understands that the work place in the Central Intelligence Agency, like the work place everywhere in the United States, will be governed by good performance, by tolerating diversity, and making sure that people get ahead according to their accomplishments and not with regard to their sex or their race.

MR. LEHRER: Are you confident that you can change that culture, that part of it?

DIRECTOR DEUTCH: I am confident that I can begin a process of change. Change does not happen overnight. Change does not happen in a day or a week, and change does not happen with only one individual. I am convinced that the people in the Central Intelligence Agency are enormously talented. They know that there are problems there. They are eager to take part in a process for change, and I hope that I and the new team that I've brought in there can catalyze that change. So I do believe that we will see a different Central Intelligence Agency several years from now, maybe even several months from now, but it can't be done overnight, and I have not promised anybody, the President or the people of that agency, that it will be done overnight.

MR. LEHRER: The Ames case, how much damage has that done to the agency?

DIRECTOR DEUTCH: The Ames case has done a tremendous amount of damage to the agency, not only internally to the business of spy craft, not only to the business of our collecting secrets and attempting to keep our sources and our methods secure. The Ames case has also done tremendous damage to the morale of the agency and tremendous damage toits public credibility and its credibility with Congress. Now, in the world of espionage, it is inevitable, since the beginning of history, that there have been penetrations and counter-penetrations. It's part of the business. It's stealing secrets and protecting secrets, but we cannot allow -- we cannot allow one event, the Ames event, to be the characterization of how the Central Intelligence Agency is. And we are going to work to change that impression.

MR. LEHRER: People on the outside, most people on the outside, remain absolutely astonished about that, Mr. Deutch, that here a man, who was clearly -- clearly had a drinking problem, clearly had been a simple competency problem, and was living beyond his means - - whenever -- most people say an amateur spy could have figured this one out, that this guy's got a problem. And yet, all of the professionals, all of these talented people for some reason didn't find it, or if they did, they didn't want to find it. What happened? What is your analysis of that?

DIRECTOR DEUTCH: Well, the facts say -- and I agree with those facts -- the facts say that this individual should have been spotted a long time before indeed he was identified. In my judgment, that is an unexcusable, inexcusable oversight, and one that should not be permitted to happen. Now, I've been at this agency for one month. I cannot explain to you how it happened several years ago. And I can't guarantee that other mistakes won't happen in the future.

MR. LEHRER: Mistakes like that, you can't guarantee?

DIRECTOR DEUTCH: I will have to be cautious about guaranteeing.

MR. LEHRER: Sure.

DIRECTOR DEUTCH: Can't assure that mistakes can't happen. What I can assure is that we will have an accountable, careful, discipline management of our clandestine service, so that the possibility of penetrations such as this are as low as possible.

MR. LEHRER: Now, another part of the culture that outsiders talk about, there are all kinds of people -- there are a lot of people who believe that the CIA is populated by people who, who are essentially running their own foreign policy. They're out there around the world, doing their own thing. Is that true?

DIRECTOR DEUTCH: I don't believe it is true. I believe that we have a quite disciplined process, beginning with the President's decision on what our intelligence priorities should be which govern the way we are allocating the intelligence assets we have throughout the world, whether they're technical intelligence assets or human intelligence assets. I have a practice of meeting weekly with the Secretary of State, with the National Security Adviser. I meet twice a week with the Secretary of Defense to assure that I understand what their intelligence requirements are. I'm a very customer-oriented person. If we do not have a senior policy or military person or some senior official in this administrationeeds our product, or our product is not needed, we are not going to collect intelligence or carry out any intelligence operations.

MR. LEHRER: All right. You've been there a month. You're suddenly responsible for all of these folks all over the world operating on behalf of not only the Central Intelligence Agency but on behalf of the United States of America. Are you confident that you know what they're doing, that there isn't anything going on out there that you don't know about? I don't mean little nit things but important things?

DIRECTOR DEUTCH: I am confident that I am getting all the information that time has allowed me to hear and assimilate. I have not found any reluctance toshare with me past errors, past successes, future plans, current operations. I am very comfortable that all parts of the intelligence community, whether it's a National Security Agency, a defense intelligence agency, or the Central Intelligence Agency, satisfy their legal requirement to keep me fully informed of everything that's going on. You could ask how much time have I had -- have I had time to assimilate it all, the answer to that is most assuredly not, but I do think that there is a dedicated work force out there that wants to do better, needs leadership, is looking for leadership, and is very eager to serve this country.

MR. LEHRER: When you went in there, I assume you said, okay, I want to know what's going on. Did you hear anything that caused you to say wow, I didn't know, or have a clue about that, my goodness, or is there anything that stuns you about what the CIA is doing? I don't mean in any kind of negative way, but just period.

DIRECTOR DEUTCH: I must say that because of my experience as deputy secretary of defense I did have a very broad understanding of the former service on the President's Foreign Intelligence Advisory Board in the Bush administration, I did have a fairly complete sense of what the operations were. There were occasions when I was and have been tremendously impressed with the dedication and real cleverness, if you like, of our professionals in going out and gathering the information that this country needs to protect itself, so while i wouldn't say that it was worthy of a complete movie, I would say to you that there were moments there where I was really quite struck at the inventiveness that has been used to get the information that we need to protect this country.

MR. LEHRER: Things that you found out about since you've become head of the CIA?

DIRECTOR DEUTCH: That's correct. Yes, that's right.

MR. LEHRER: You insisted on being a member of the cabinet. The previous head of the CIA was not; in fact, I think the previous two were not. I don't remember how many before. Why was that? Why was that important to you?

DIRECTOR DEUTCH: Well, I've just come from a cabinet meeting, where I listened to the President's plans here for the new budget. I don't participate on policy matters in the cabinet. But I do think that what was in the President's mind and what was in my mind at that time was very simple. I think the President wanted to send a signal that intelligence was important to him and to this administration. He felt and I agreed and I do think it's important that both the public and the people in the community know that the President views intelligence and intelligence's role, an appropriate role in the policy formulation process as being important. And secondly, I think it signaled his confidence in me personally which I also think is important for my success. So I think it was more an issue of the symbolism of the new director rather than signaling any change in what is the appropriate role of the nation's chief intelligence officer of advising on what the information, rather than advising on policy.

MR. LEHRER: Are you concerned, however, that as serving as a member of the cabinet, where you would be involved in policy discussions or at least being told what policy was with one hand and maybe even carrying out a policy through a covert action of the CIA at the same time in the intelligence function of the CIA, which is a different function, giving bad news about a policy? I mean, do you see conflicts there?

DIRECTOR DEUTCH: I don't for two reasons. One is most of the important foreign policy deliberations don't occur in the cabinet. They occur in the National Security Council, where the director of Central Intelligence would be a participant anyway as an adviser on what the information is, what do the facts say. My job in the foreign policy deliberations of this country are to assure that the highest levels of government, the President, the Vice President, the Secretary of State, Secretary of Defense hear the unvarnished facts as best I understand them, not to make policy proposals, not to comment on policy proposals but rather, what are the facts that exist out there in foreign circumstances, whether it's Bosnia, whether it's Haiti, whether it's anywhere in the world, where U.S. interests are involved, and say, Mr. President, Mr. Secretary, these are the facts as I understand them.

MR. LEHRER: You confessed after your -- finally, a personal thing -- you confessed after your appointment that you'd already had -- you've always had a kind of secret desire to be the head of the CIA. Why? What was it about it that attracted you?

DIRECTOR DEUTCH: Well, I think it is part of the great successes that have happened and I say mostly on the technical side from satellites, from the wonderful stories of breaking codes. We are I hope in our effort to be more open going to give the American people some examples of past successes fifty, forty years ago. I think it's the ability for technology to help in the process, as well as clandestine service and technology, to find information out which helps this country remain strong. That has always attracted me. I think the story of the satellites and what they've done to help this United States learn about what's going on in hidden areas of the world is very important to responsible policy making, so I'm pleased to have this opportunity. It's very, very exciting for me, and I'm learning a lot, enjoying it, and I hope to make a difference.

MR. LEHRER: And after 30 days?

DIRECTOR DEUTCH: Thirty days, we've made a lot of progress. I think we've got a new set of people in there. I think morale has turned around. We're certainly moving aggressively, and bringing our information forward. I'm very pleased about what's happened in the first 30 days.

MR. LEHRER: John Deutch, thank you very much.

DIRECTOR DEUTCH: Thank you, Jim. FOCUS - DON'T ASK - DON'T TELL

MR. MAC NEIL: Next tonight, court challenges to the Clinton administration's policy on homosexuals in the military. Late today, a federal court in Alexandria, Virginia, upheld the administration's "don't ask, don't tell" policy. The challenge was brought by a Navy lieutenant who was ordered discharged after openly declaring he was homosexual. The ruling was the latest in several conflicting federal court decisions. We have an update report by Rod Minott of public station KCTS-Seattle.

ROD MINOTT: Mark Philips never waited to be asked. Instead, he told the Navy he was gay. On TV talk shows and elsewhere, he's been busy explaining why he spoke out.

MARK PHILIPS: It's really hard to live a double life, and it's really exhausting. And you feel like you're lying to yourself, and that's something I just don't like to do. If I'm going to be honest -- you know -- I always thought you have to be honest with yourself to be honest with everyone around you, and it's what I do.

MR. MINOTT: The Navy petty officer is one of the first openly gay soldiers to challenge the Clinton policy on homosexuals, known as "Don't Ask, Don't Tell, Don't Pursue." Two and a half years ago, while serving aboard the USS Nimitz, based near Seattle, Philips advised one of his commanders of his homosexuality. It happened before "Don't Ask, Don't Tell" took affect. At the time, Philips says he was hopeful President-elect Clinton would lift the ban on gays and lesbians in the military. The Navy petty officer says he has no regrets about his decision to come out.

MARK PHILIPS: I want to keep my job. I want to stay in the Navy and finish out what I've -- what I've obligated for at this point and possibly continue on further, but it's basically to change the policy so that no one has to feel that fear anymore, because I felt that fear.

MR. MINOTT: That sense of mission has led Philips to wage a federal court battle to overturn both his discharge and the "Don't Ask, Don't Tell" policy. His suit is one of six cases now pending specifically against the Clinton administration's policy. Experts predict one of these cases will eventually go all the way to the U.S. Supreme Court. Jett Whitmer, Philips's attorney, says "Don't Ask, Don't Tell" has failed to improve life in the military for gays and lesbians.

JETT WHITMER, Philips' Lawyer: When they served under the old policy, they did it closeted and they did it by hiding. The new policy requires the same behavior. They require that people be closeted about their sexuality, you can't say you're gay without going to a discharge proceeding, and you certainly can't act as a, as a homosexual.

MR. MINOTT: In the two years since the Clinton "Don't Ask, Don't Tell" policy has been in effect, seemingly little has changed. Gay rights groups charge harassment continues, while conservatives say the policy doesn't do enough to keep homosexuals out of the military. Defense Department figures show in 1994, under the new policy, 597 servicemen and women were dismissed for homosexuality, a rate of discharge that remains unchanged from previous years. It was Margareta Cammermeyer who helped stir public debate over the fairness of the old policy, which imposed an absolute ban on homosexuals. The highly decorated Army National Guard colonel was discharged three years ago for announcing she was lesbian. Cammermeyer was later reinstated by a federal court. Her case was one of several which ruled the old policy, a total ban on gays and lesbians, unconstitutional.

PRESIDENT CLINTON: I have come here today to discuss a difficult challenge.

MR. MINOTT: President Clinton unveiled his new policy in the summer of 1993. It was designed to end what gays consider witch hunts but would not lift the total ban on homosexuals in uniform. The new policy barred the military from asking recruits about their sexual status. Gays and lesbians in uniform were to be left alone, as long as they kept their sexual orientation private and remained discreet about their conduct. But that didn't stop either the discharges or lawsuits. One suit recently landed a major blow against the policy. A federal judge declared it unconstitutional, ruling the policy discriminated by bowing to the prejudices of heterosexual troops. The case was filed in New York by six gay and lesbian members of the military. Attorneys for the plaintiffs praised the decision as a breakthrough.

MATTHEW COLES, Plaintiff's Lawyer: He's reduced this case down to what it's really about, the dislike of some service members for other service members because they say they're lesbian and gay, and he has said that is the one thing that the First Amendment doesn't allow the government to do.

MR. MINOTT: The government said it plans to appeal the ruling, which bars the discharge of only the six plaintiffs. Theirs was not a class action suit on behalf of all gays in the military. At the Pentagon, a spokesman defended "Don't Ask, Don't Tell" as sound policy.

KENNETH BACON, Pentagon Spokesman: (March 30, 1995) We believe our policy is constitutional, and we intend to defend the policy. Both the Secretary and Gen. Shalikashvili have commented on the policy and say from their standpoint it seems to be working very well and it seems to be working very well from the standpoint of the commanders.

MR. MINOTT: But gay rights advocates say the new policy isn't working as well as it should be. Recently, one of those groups, the Servicemembers Legal Defense Network, released a study on "Don't Ask, Don't Tell" that documented more than 340 apparent violations of the policy.

DIXON OSBURN, Servicemembers Legal Defense Network: We have found that when service members are asked about their sexual orientation, they're often asked repeatedly. When service members are harassed, they're often harassed incessantly, and when they're pursued, they're often pursued continuously.

MR. MINOTT: According to the report one of the worst examples of harassment happened last year in Okinawa, Japan. In what the Servicemembers Legal Defense Network calls a witch hunt, at least 21 U.S. Marines were questioned about their sexual orientation and activities.

CRAIG HAACKE: And this one is for good conduct, and you get that one for every three years.

MR. MINOTT: Craig Haacke was one of those Marines questioned. He took these pictures of what happened next. He says the investigators ransacked his room, confiscating his diary, letters, and any photographs of him touching other men, including photos like this one of him with his father. At the time, Haacke remains silent and even now he still refuses to answer questions about his sexual orientation.

MR. MINOTT: Was there anything to this?

CRAIG HAACKE: Well, I really can't answer that question just for the simple fact that I still am in the inactive reserves, and I can't say I am, and I cannot say that I am not, you know.

MR. MINOTT: Eventually, Haacke managed to get a lawyer, and no charges were ever filed. With his tour of duty up shortly after the incident, he left Japan, honorable discharge in hand.

CRAIG HAACKE: Gays can't serve openly. You can't be gay and in the military. That's just a simple fact. The "Don't Ask, Don't Tell" is just a simple way of saying, if you get caught, you're going to get kicked out.

MR. MINOTT: According to the Servicemembers Legal Defense Network, since 1980, more than 19,000 gays have been kicked out at a cost to the federal treasury of more than $1/2 billion to train replacements.

ELAINE DONNELLY, Center for Military Readiness: It isn't that you say that you're homosexual that disqualifies you. It is that you are a homosexual that disqualifies you, and that's the way the law is written.

MR. MINOTT: Some conservatives, like Elaine Donnelly for the Center for Military Readiness, say President Clinton ought to be doing more to root homosexuals out of the ranks. Donnelly argues gays pose a threat to good order and discipline among heterosexual troops. She spoke to producer Liz Callen in Washington, D.C..

ELAINE DONNELLY: Sexuality is an important factor. People who serve in the military in many cases on deployment have minimal privacy. For the government to say that we expect you to expose your body in a very personal way to persons who are sexually attracted to you is not right. That's a violation of their privacy rights.

MR. MINOTT: Mark Philips says he's never had any problems from heterosexuals he's served with.

MARK PHILIPS: You know, my peers have always been very supportive. They're like, you know, hey, do what you got to do, it's a good thing, you know. I don't know anybody that's come up to me and said I'm really bothered by working with homosexuals.

MR. MINOTT: In fact, since being transferred off the Nimitz to shore duty at this base near Seattle, Philips has fit in so well with his co-workers he was recently awarded the Navy achievement medal for serving with honor and distinction. Even so, the sailor found himself back in federal court trying to stop the Navy from discharging him. He's accused of engaging in consensual sexual relations with non-military men while off duty and off base, a charge he disputes. In court, Philips faces one big hurdle with a key clause in "Don't Ask, Don't Tell." It's known as rebuttable presumption. It allows suspected gays and lesbians a chance to keep serving if they can prove they won't engage in homosexual acts. According to legal records, Philips told his commanders he would continue having homosexual relations. Philips's lawyer, Jett Whitmer, calls the policy discriminatory.

JETT WHITMER: Homosexual conduct is defined as touching a person but with the intent to gratify your sexual desires, touching a person. That is not the same regulation that is applied to heterosexuals. You can touch a person with the intent to gratify your sexual desires, two adults can do that. You can do that with your wife in the privacy of your own home. If you're gay, you can't do that with your partner.

MR. MINOTT: Eventually, after much legal wrangling, a federal court ruled against Philips, finally allowing the Navy to expel him. He's now appealing to the U.S. 9th Circuit. Within hours of the court's order, Philips exited his base, a civilian after six and a half years in uniform. Jobless, he carried with him an honorable discharge paper with a note that explains to potential employers why he was dismissed: homosexuality. FOCUS - LABOR MOVEMENT

MR. MAC NEIL: Next, the battle for leadership of organized labor. Yesterday, Lane Kirkland announced he was stepping down as head of the AFL-CIO, which he's led since 1979. His long-time No. 2, Thomas Donahue, quickly announced his candidacy to succeed Kirkland. But today a growing opposition formally announced a rival slate led by John Sweeney, president of the Service Employees International Union. At stake is leadership of the nation's largest federation of unions now numbering 80 different unions, with a total membership of 13.3 million workers. Today one of the leaders of the opposition made the case for new leadership.

GERALD McENTEE, President, AFSCME: I think it's the best time to get into a fight over the leadership of the AFL-CIO, because the timing is imperative. The numbers, as you know, within the federation have been declining on almost a regular basis. We have suffered a number of defeats, both in the political arena and in the social arena. The American labor movement does not have the influence, power, that it once had for working people. We can't wait any longer and watch the continued decline of the American labor movement. That's why we felt we had to -- we had to move now.

MR. MAC NEIL: Now two journalists who cover labor issues. Frank Swoboda is with the Washington Post. Aaron Bernstein is with Newsweek Magazine. Mr. Swoboda, the implication of what Gerald McEntee just said is that a lot of this is Lane Kirkland's fault. Is that -- is that what the opposition thinks?

FRANK SWOBODA, Washington Post:I think to some degree it thinks that, but it's sort of a collective guilt by all of them. If you look at them, they're all roughly the same age, the same background, the same demographic mix, and they see their world disappearing in front of them. The American labor movement is sort of melting away like an ice cube left at room temperature. The private sector is less than 10 percent of the work force. In total, it's only about 15 percent. And I think this is an act of people who feel the need to change and did not like the pace.

MR. MAC NEIL: Mr. Bernstein, how much is the decline in labor's fortune since 1979, how much is it Lane Kirkland's fault, and how much is it circumstances?

AARON BERNSTEIN, Businessweek: Well, I think there's clearly large economic and social forces that have been driving down labor's membership. The economy has gone global. Corporations fight unions and resist them much more than they did in the past. But I don't think they're using --

MR. MAC NEIL: And there's a new conservative philosophy -- not new but much more influential than it was in 1979 in the country.

MR. BERNSTEIN: That's quite right. Ronald Reagan in his presidency certainly had an impact on the atmosphere for organized labor in this country. But that doesn't mean that, you know, I don't think Lane Kirkland could have reversed the tide, but I also don't think that he did very much. He basically sat there and waited for a Democrat to come back in the White House. And that was his answer for how to save organized labor. And he waited 12 years, and the labor movement dwindled as he waited.

MR. MAC NEIL: But a Democrat did come back in the White House.

MR. BERNSTEIN: That's right. And that's one of the reasons why a lot of these member unions are fed up, because finally, after 12 years of waiting, they got a Democrat in the White House, and it didn't do them a lot of good. It was clear that that was not the problem and that if they don't take the initiative and start actively making their case to the American public and trying to find new ways to bring in members, that they're going to continue to become more and more irrelevant.

MR. MAC NEIL: Did Kirkland, Mr. Swoboda, did Lane Kirkland want to run again? What happened there?

MR. SWOBODA: I think he did. I think that he very much wanted to run again. I think that he's a proud man, and I think Tom Donahue put it right the other day when he said he was hurt and angry by the opposition. At the same time, I think that by his waiting to make this decision he probably has forced the confrontation that's there today. Tom Donahue was the candidate of the insurgents when they first formed their group. Now that time has passed, and it remains to be seen whether he can be the unity candidate.

MR. MAC NEIL: What kind of a head of organized labor had Lane Kirkland been, and what has he not been that people wanted to be now?

MR. SWOBODA: Well, Lane has done two things that I think that will go on his record as bright moments. He probably single- handedly with the AFL-CIO led the fight to keep solidarity alive in Poland. They helped smuggle in equipment and money and everything else to keep that movement alive during the 80's. And when he came in, in 1979, he pledged that, that he wanted to bring the house of labor back together again. And he did that. He brought all the unions except for the largest union in the country, the NEA, back into the AFL-CIO fold. Those are his accomplishments. But Lane Kirkland was not a public man. He was not comfortable being the spokesman for labor, and that isone of the reasons I think that his opponents are now pushing for someone who will be more visible.

MR. MAC NEIL: What do you see about his style of leadership and why it's left people unsatisfied?

MR. BERNSTEIN: Well, I think a lot of it is that he spent a lot of time in Poland, and -- or helping people in Poland, rather than in America.

MR. MAC NEIL: So he contributed to the end of the Cold War in that sense.

MR. BERNSTEIN: He helped a lot, and I think a lot of people in the labor movement liked that, but they also after a while began to feel like they've got more problems here at home that he should be dealing with. And I also think that he, that Lane Kirkland is, as Frank said, a proud man, and it gives him a condescending and sometimes arrogant manner about him. And I think that that's not the message that a lot of other labor leaders feel like the head of the U.S. labor movement should have.

MR. MAC NEIL: Tom Donahue, his picked, chosen successor now, the one he would choose to run, and John Sweeney, who is opposing him, are friends, they're both white men in their 60's. Will it make a big difference which one of them is elected?

MR. BERNSTEIN: I think they would both be much stronger leaders. I think they both have a lot more ability to change the labor movement. I think they'll probably do a lot of the same things. They will, I think, redirect a lot of the organization's efforts and finances towards organizing drives and trying to find new members and trying to become more relevant to workers. I think that Tom Donahue probably has more of a burden because he's been there. It would be harder for him to dramatically shake up the staff in Washington and to do really bold moves. On the other hand, most of the bold moves that they've done in the last 15 years have been his idea and his initiative. So it's clear that he could do it. It's a little easier for an outsider perhaps like John Sweeney.

MR. MAC NEIL: Mr. Swoboda, what do you see to choose between these two men now, which of them would make a real difference?

MR. SWOBODA: It's hard to say. It's not either one of those at the top that I think will make the difference, because they both are two peas out of roughly the same pod, two New York Irishmen out of the same union, roughly the same age, and of the same background. I think the cast around them will be important, how this election comes out. This is very much, I think, a period much similar to when John L. Lewis eventually pulled out of the AFL back in the 30's and formed the CIO and went after industrial organization. That's really what's at stake. How can labor focus its attention really on the poor, low-wage workers who are today's unorganized, who are today's industrial workers, and the cast of characters behind these two men will be what will decide that.

MR. MAC NEIL: There's a very big change in who those workers are in ethnic and racial terms compared with the old -- compared with the leadership of the union, of the AFL-CIO right now, isn't there?

MR. SWOBODA: 40 percent of the labor -- of union members are female. The work force is becoming more and more diverse. It's women and minorities, and the hope of certainly of the coalition that opposed Kirkland and that is now opposing Donahue is to help bring these people, the minorities and women, to the forefront, people who haven't had the time to spend a lifetime working up through the political ranks. Sweeney has done this in his own union. It's a union that's grown enormously, organizing the unorganized workers like several other unions, and it has taken on the talents of women and minorities.

MR. MAC NEIL: Do you believe, Mr. Bernstein, that just new leadership can really reverse the decline in organized labor's prestige, or are the historical forces against it too strong?

MR. BERNSTEIN: Those forces are very strong, but I think that leadership can make a difference. I think if you look at the unions that have not just sat around and bemoaned their fate but got out and tried to do something like the service employees which John Sweeney is the head of, they have had successes. He's doubled the size of that union amongst low-wage women and minorities, and janitors, and home health care workers. And he's done that by spending a third of his union's budget on the drive for new members. Most unions spend 2 to 4 percent of their budget on members. Most of them don't really try.

MR. MAC NEIL: We -- don't really try -- we ran a piece here on this program a couple of weeks ago, a very colorful piece about the efforts to organize the bike messengers in New York City, a really aggressive effort. Are you saying that that spirit still can turn things around for the union, by finding new areas of the work force and instilling them with the same kind of drive that unions have always done?

MR. BERNSTEIN: And it's happening. It's happening at a number of unions. In the last year or two in particular, unions like the Teamsters and the laborers that have never really tried to do much than pocket their members' money or service their members, but they've never tried to expand, they have been doing so. And they're having successes, and that's something new.

MR. MAC NEIL: Do you agree with that, Frank Swoboda?

MR. SWOBODA: I do.

MR. MAC NEIL: They really can turn it around?

MR. SWOBODA: I think so. It's really hard work. It's the hardest work that labor unions can do, and they've had lots of successes in small shops, low-paid workers, even in the South, which has traditionally been hostile to unions. But they've been losing as many as they've gained. So it's been often a zero sum game. But a lot of unions are, are organizing a lot of workers just to keep up where they were.

MR. MAC NEIL: What about the historical forces I was asking Mr. Bernstein about against them?

MR. SWOBODA: It's hard in a global competition. I think today less global competition than technology. You're now having technology replace low-paid workers in the service sector. Robert Reich talks about it; every time you use an ATM card, you displace a bank teller. Every time you use a credit card at the gas pump, you displace somebody else. You see this all over the place. Technology is now moving so fast that jobs are disappearing even in the service sector.

MR. MAC NEIL: So would you expect, even with very aggressive, new leadership, that 10 years from now we would see a big change in the percentage, upwards of the percentage of workers organized?

MR. SWOBODA: Not if it continues this way. If this group or if this debate -- and it's a very rare, open debate in the AFL-CIO and in organized labor -- if this debate produces the kind of energy, I would say, yes, you can begin to see it. Ten years in the time of history is a short period of time, but if the debate produces more of the same, you'll just see fewer and fewer union members.

MR. MAC NEIL: Mr. Bernstein, the dissidents claim, who are behind Sweeney now, claim to represent unions that would account for more than half -- I think 57 or 58 percent of the votes that would be cast in October. Have they got it sewed up, or can it still change?

MR. BERNSTEIN: Well, it's four months away, but it looks like they do. I think that John Sweeney is probably going to be the next president.

MR. MAC NEIL: Are you as confident of that, Mr. Swoboda?

MR. SWOBODA: No, I'm not. This is a labor movement that's much more comfortable in the back room than in the front room, and we're now in the front room. It'll be interesting to see how long they can stay out there. If they stay out there, I think Mr. Sweeney will win. If they go to the back room, I think Mr. Donahue will emerge.

MR. MAC NEIL: He appealed today for a consensus candidate to avoid a big fight in, in the fall. Is that likely to happen?

MR. SWOBODA: It could happen. A week ago, I would have said it was, it was the most likely outcome. Today I, I am less certain of that. I think a lot of people are concerned that, that a split in the labor movement, particularly the Democrats in Congress and in the White House, a split labor movement at a time when the Democrats have no committee chairmanships could produce a disaster for Democratic candidates. And I --

MR. MAC NEIL: To get a consensus candidate, Mr. Bernstein, would Donahue have to retire or pull out of it in favor of Sweeney, given the dynamics of what's going on?

MR. BERNSTEIN: Well, just three weeks ago, he was the consensus candidate, so it's sort of an odd position. I think a lot of the dynamics here will turn on how these two men choose to campaign against each other. It's a very awkward situation for both of them. They're long-time friends, and they're being put in a situation where they're going to have to start calling each other names I guess and saying, well, I'm better than you. And since John Sweeney has wanted Donahue up until very recently, and it seems like maybe even still does, I don't know how that, that dynamic, the personality will play out between them.

MR. MAC NEIL: We'll have to watch and see it. Thank you both for joining us. RECAP

MR. LEHRER: Again, the major stories of this Tuesday, President Clinton will announce in a speech to the nation a proposal that would balance the federal budget in 10 years. Both Medicare and Medicaid would be overhauled. And the Bosnian Serbs released at least 26 of the remaining UN hostages. They claim to have freed 130, but UN officials dispute that. Good night, Robin.

MR. MAC NEIL: Good night, Jim. That's the NewsHour for tonight, and we will see you again tomorrow night. I'm Robert MacNeil. Good night.