The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Leading the news this Friday, Kurdish rebels battled government troops in Northern Iraq. Iraq admitted it was building a long range artillery gun. Israel expressed concern over a U.S.-Syria agreement for MidEast peace talks. We'll have details in our News Summary in a moment. Jim.

MR. LEHRER: After the News Summary, we have an interview with Soviet President Gorbachev done by the British news organization Independent Television News. Charles Krause from Moscow follows that with a report on Americans in the Soviet Union. Nina Totenberg and Bruce Van Voorst update the CIA Iran-contra Robert Gates story, and David Gergen and Mark Shields offer their weekly analysis. NEWS SUMMARY

MR. MacNeil: Kurdish rebels battled the Iraqi army for control of two cities in Northern Iraq administration officials said today. Pentagon Spokesman Pete Williams said fighting broke out Wednesday in the towns of Suleimaniyeh and Erbil following a Kurdish demonstration protesting high food prices. He said it occurred outside the UN security zone established along the Turkish border to protect the Kurds. UN officials in Geneva said about 500 people were killed or wounded in two days of clashes, but a Kurdish leader in Baghdad put the casualty figures at around a hundred. Allied troops completed their withdrawal from Northern Iraq earlier this week. In Washington, State Department Spokesman Richard Boucher had this reaction to the fighting.

MR. BOUCHER: We are keeping an eye on everything that's going on in Northern Iraq. We're very concerned about the new outbreak of fighting and we're in close touch with the United Nations agencies who have people on the ground. We urge both sides to avoid any escalation or spread of the violence.

MR. MacNeil: This evening a Kurdish official said the two sides had agreed to stop fighting. Iraq has admitted it's been trying to build two so-called "super guns" capable of firing chemical, biological, or nuclear weapons. The confession came in a report to the UN Special Commission charged with destroying Iraq's weapons of mass destruction. Western countries accused Iraq of trying to build such a gun last year after Customs officials in Greece, Turkey, and Britain seized parts for the planned weapon. At the time, Iraq claimed they were to be used in an oil project. Jim.

MR. LEHRER: New questions were raised today about how much Robert Gates knew about the Iran-Contra Affair. Gates is President Bush's nominee for director of Central Intelligence. The New York Times reported he was briefed regularly in 1986 about the CIA's efforts to help the Nicaraguan Contras. The briefings are said to have focused on the legal congressionally approved operation, not the secret arms deal, however. They were conducted by Alan Fiers, a former CIA official who last week admitted he helped cover up the Iran-Contra Affair. We'll have more on this story later in the program.

MR. MacNeil: Sec. of State Baker continued his Middle East peace mission in Cairo today where he held talks with Egyptian President Hosne Mubarak. The Egyptian leader offered a concession to Israel if it would end settlement of occupied territories. The Egyptian offer came a day after Syria agreed to the U.S. formula for a MidEast peace conference. We have a report narrated by Vera Frankel of Worldwide Television News.

MS. FRANKEL: Syria's move has put a spring in Sec. Baker's step and given Middle East peace its first real chance in years. The Syrians have agreed to U.S. proposals for a peace conference, including giving the United Nations only an observer role at the conference. With that sealed, Sec. Baker went on to Egypt to further the process with President Mubarak. The two are now looking for ways to encourage Israel to join the peace talks.

SEC. BAKER: With respect to the statement that you just made respecting reciprocal steps, that is, suspension of the Arab boycott of Israel in exchange, in effect, for a suspension by Israel of settlement activity in the occupied territories, I think if steps like that could be taken, clearly, it would evidence, I think, a mutual desire to improve the climate for negotiations.

MS. FRANKEL: But Baker knows such flexibility is in short supply. Israel is already playing down what many others see as a new chance for peace.

MR. MacNeil: Defense Minister Moshe Arens spoke for the Israeli government today. He said Baker was unlikely to get Israel to agree soon to any Middle East peace conference. Baker will meet with Israeli officials in Jerusalem on Sunday.

MR. LEHRER: President Bush praised Greece today for its support in the Persian Gulf War. He promised new military aid and then went on to the Island of Crete. There he toured the U.S. Naval base of Suda Bay that was a key staging area for U.S. forces in the Gulf War. The President was criticized by Greek cypriot leaders today. They accused him of hypocrisy for going to war with Kuwait and doing little to end the Turkish occupation of Cyprus. The President goes to Turkey tomorrow. Riot police clashed with anti-American protesters there today. The protesters burned a U.S. flag and shouted slogans denouncing Mr. Bush. Soviet President Gorbachev went home to Moscow today. He admitted he didn't get all he wanted at the Western summit, but he said it was the beginning of a long, promising success. Earlier in an interview with Britain's Independent Television News, he spoke philosophically about his reforms.

PRES. GORBACHEV: Now that I know more about my country and the world, I'm even more convinced that what we began was necessary. We really should have begun much earlier maybe.

MR. LEHRER: We will have an extended excerpt from that interview right after this News Summary.

MR. MacNeil: The South African government today admitted it funded rallies of the Inkatha Freedom Party, the main rival of Nelson Mandela's African National Congress. It was the first official disclosure of government backing for Inkatha whose supporters have fought frequent and bloody battles with ANC backers in South African's black townships. Kevin Dunn of Independent Television News filed this report from Johannesburg.

MR. DUNN: It was confirmation of what has always been denied, that the South African police have actively and secretly supported Chief Mangosuthu Buthelezi's Inkatha Party in its power struggle with the African National Congress. But official admission came only after the publication of secret documents, including one written by Security Police Major Louis Botha, seen here opening a car door for President DeKlerk's wife. Major Botha, here over President DeKlerk's right shoulder, secured secret police funds for Inkatha, in particular 30,000 pounds to stage a rally aimed at bolstering Chief Buthelezi over ANC Leader Nelson Mandela. The rally was a wash out, but the political fallout from it will severely embarrass Chief Buthelezi who today still claimed to know nothing of the payments.

CHIEF BUTHELEZI: But I said before the large court that I don't know of another way that the police ever deposited any money in that account.

MR. DUNN: But the official statements hardly satisfied Nelson Mandela.

NELSON MANDELA: The ANC and the government are on a collision course. There can be no question of us being involved in any peace process once we are convinced that the government is following this double strategy of conducting a war against us and at the same time talking peace.

MR. MacNeil: At least 5000 people have died in the past several years of fighting between supporters of the rival ANC and Inkatha. The ANC has already suspended talks on a new constitution over what it says is the government's deliberate failure to halt the chronic black factional violence.

MR. LEHRER: And advisory committee to the Food & Drug Administration today recommended approval of a new drug for the treatment of AIDS. The drug, known as DDI, was submitted to the agency just three and a half months ago. FDA Commissioner David Kessler called the quick action a milestone. DDI's use was recommended only for those patients who cannot take the only other approved AIDS drug, AZT. The FDA has promised a speedy final decision. Record high temperatures were everywhere in the country again today. The National Weather Service reported 90 to 100 degree temperatures from New England all across the plain states to California. Many communities issued health advisories. The heat is expected to continue through the weekend. And that's it for the News Summary tonight. Now it's on to a Gorbachev interview, the new American presence in Moscow, a Gates CIA Iran-Contra update, and Gergen & Shields. NEWS MAKER

MR. MacNeil: We go first tonight to a News Maker interview with Soviet President Mikhail Gorbachev. He gave it at the end of his four day visit to the summit of Western leaders in London. The interviewers were John Snow of Independent Television News and Valentin Zorin of Soviet TV. The English translation appears as subtitles. Mr. Gorbachev was asked what he accomplished at the London economic summit.

PRES. GORBACHEV: [Speaking through Interpreter] That's the most important result of this meeting. It wasn't a finance meeting -- though credits and finance are important -- our task here was quite different. The Soviet Union has made a choice. It's chosen to join the world economy. To do that it has to change radically - - to accept the rules of the game. We've made our choice, and chosen the path of reforms towards a market economy. JON SNOW, ITN: Mihail Sergeivich, even while you have been out of the Soviet Union, conservatives like Col. Alksnis have been calling for your resignation, have been attacking you. Which is the greater threat to your efforts to bring about economic perestroika -- the right wing as represented by people like that or the radical wing?

PRES. GORBACHEV: [Speaking through Interpreter] Well, in any country with opposition parties you will hear calls for the governments' resignation. Colonel Alksnis's demands are a sign that democratic processes are alive and well in the Soviet Union. Pluralism is taking shape -- in thought and politics. I want to turn his speech to my advantage. It's a sign that democracy is developing. But democracy demands traditions and responsibility. The appearance of people like Comrade Alksnis shows we still have a lot to learn about living in a democratic framework. But let me answer the main question -- without being too analytical. Perestroika has been going on for several years. Some distinguished experts came to the Soviet Union recently and they kept expressing their surprise. On their visit last year, the excitement was all in Moscow and the large cities. Elsewhere, people were undisturbed. Now the process has got the whole of society moving. What we started at the top is now being powerfully supported by the people. People are for change -- if it leads to better lives. The movement for radical change has caught up the healthy forces in the country -- be they left, right or center. The excluded ones are charlatans of left and right -- lightweights who should never be allowed near political power. Plurality of opinion allows us to examine our policies -- and move forward.

MR. SNOW: Can I just press you on that, Mikhail Sergeivich? Perestroika has produced in the republics some democratically elected non-Communist Presidents. Can you, therefore, foresee a day when it is possible that there might even be a non-Communist President in the Soviet Union? And could you be that man?

PRES. GORBACHEV: [Speaking through Interpreter] You are right that some of those elected are non-Communists. But something of their Communist background must remain. We'll have to see which party they end up in. But that's not the issue. The point is we've established a democratic framework. Free elections are the guarantee that from one election to the next society will have an ever clearer view of the candidates and will make better informed choices. And that will guarantee that at all levels -- from local elections to the Presidency itself -- it will be people who've shown themselves worthy of trust who got the electorate's vote. You can't carry out reforms if you don't enjoy people's confidence and support. Which party is elected is a completely separate issue. There will be many parties by then. The elections will take place in a multi-party system. They'll be complete on their manifestos, candidates and leaders. The winner is the one who gets the most support and will lead the country in the next round of reforms. It's very important for us to see that this gets across here. With political pluralism others will make their contributions to the political process.

MR. SNOW: In your Nobel Prize speech, you said in 1985, in April of that year, you never conceived how immense the problems you would have to deal with in the Soviet Union would prove to be. If you had your time over again, is there anything you wish that you could have done differently?

PRES. GORBACHEV: [Speaking through Interpreter] I think that if I had to start the process over again, I would still do it without any doubt. But now, with hindsight, knowing more about my own society and about the rest of the world, I can see even clearer how much it was needed, and how clearly it should have been started ten or twenty years ago, if not before! But that's too vast a subject. As for how we would have tackled it, the main framework would have been the same. There was much discussion of where we should start, from the economics or the politics -- the economic reforms or the political. Or alternatively when and how we should solve the issue of developing into a federation, renewing the political structure. The issues could still be argued and it's very possible that in places we didn't synchronize it properly. Sometimes we were too slow. At other times we ran ahead of ourselves. We didn't think it through and abolish the old structures before we had established new ones. All that did a certain amount of damage. So tactical improvements could have been implemented with hindsight. But the basic elements of Perestroika, would remain the same. I'm even more convinced on the basis of what I know now of how much although it should have started much earlier. FOCUS - AMERICAN INVASION

MR. LEHRER: Now to another part of the Soviet Union story, the impact of Americans who want to be part of this new Russian Revolution. Correspondent Charles Krause reports from Moscow.

MR. KRAUSE: As Moscow awaits President Bush and the small army of aides and journalists who will accompany him to the summit, an American invasion of another kind is already underway in the Soviet capital. This summer there seemed to be more American Christians, capitalists and culture in the Soviet capital than at any time in recent memory. For the first time ever, the Mormon Tabernacle Choir played the Bolshoi, just a few blocks from the Kremlin. In the audience opening night, two quintessential Americans, Bill Marriott of the Marriott Hotel Corporation, and Howard Baker, Republican of Tennessee. Marriott, a leading Mormon, says it was an event he never thought would take place.

BILL MARRIOTT, President, Marriott Corporation: I was here 16 years ago and I would have never thought sitting here today that we would be listening to the Tabernacle Choir singing in the Bolshoi Theater and having one of the missionaries on the streets of Moscow preaching our religion to the Soviet people. I just would have never believed it. To me it's a modern day miracle as far as our church is concerned.

MR. KRAUSE: What does it say about changes in this country overall?

MR. MARRIOTT: It says that changes have been extremely 180 degrees from where they were before.

MR. KRAUSE: Also in Moscow this summer, members of the Christian Fellowship from Columbia, Missouri. Every day for two weeks they were in Pushkin Square trying to convert Communists to Christ. It was hard to tell for sure whether the crows of Muscovites who gathered each day were there for the message or the music. But there's no doubt that after 40 years of isolation average Russians are hungry for contact with Americans and fascinated by the United States.

MALE SOVIET CITIZEN: I want to go to Massachusetts, Michigan, and Washington. I want to walk around America, yeah, really.

MR. KRAUSE: Why?

MALE SOVIET CITIZEN: Because I don't know -- because America, it's wonderful country, it's wonderful city, wonderful, pretty, and wonderful people. It's great.

MR. KRAUSE: At the other end of Pushkin Square, Moscow's premier movie theater, the Lucia, shows American films. Even at noon on a weekday there's not an empty seat in the House. That's not so surprising because Hollywood films and Hollywood stars consistently rank No. 1 in the Soviet Union. Ludmilla Vasielieva is a sociologist and researcher at Moscow's Film Art Institute.

LUDMILLA VASIELEVA, Sociologist: The most popular film in our country was King Kong.

MR. KRAUSE: King Kong?

LUDMILLA VASIELEVA, Sociologist: Yeah. And a role in 1990 -- the most popular film all over our country was "Crocodile Dundee." And the most popular American -- the most popular actors were American actors among the teenagers, among the young people, such as Sylvester Stallone and Arnold Schwarzeneger. The American movies are more and more popular than Soviet movies and more popular than movies of other countries and singers of other countries and actors of other countries.

MR. KRAUSE: Real life scenes like these attest to the new freedom that already exists in the Soviet Union. Just what Mikhail Gorbachev thinks of his presence in Pushkin Square remains a mystery. Nor does anyone know what he thinks of the Christian Fellowship or the influx of Hollywood movies. But the Soviet leader has made it clear most recently in London that American capitalists are more than welcome. So far, direct U.S. investment in the Soviet Union remains a modest $300 million. That's unlikely to change in a big way until the Kremlin is able to resolve festering sovereignty disputes with its rebellious republics. Political stability is crucial to investment here, according to Marriott.

MR. MARRIOTT: I was with a banker this morning and he said there was just no money available as far as he could tell for loaning in the Soviet Union, and until things got straightened out politically and they could get certain guarantees and banks were willing to come in and loan money and knew they could get their money back out again, and could own property, there's been a big problem here in real estate investment as to who owns the land and who owns the building, and it's always been owned by the government and how do you participate in something where you're assured of getting an adequate return and are assured of recapturing your money.

MR. KRAUSE: But despite the obstacles, most importantly a ruble that can't be converted into dollars and restrictions on money that can be sent out of the country, American businessmen had been flocking to Moscow this summer anyway.

SPOKESPERSON: [Speaking through Interpreter] The creation of joint ventures now will not be a simple and easy matter.

MR. KRAUSE: Despite the uncertainties, several large American oil companies are reportedly near agreement on billion dollar deals. Representatives of four of them were here a few weeks ago to discuss environmental regulations with Soviet and Russian republic authorities. But so far the three most prominent American companies in Moscow are strangely enough two fast food restaurants and a perfume shop. Muscovites can't get enough of them. It takes an hour or more in line to buy a slice of pizza or a Big Mac, but that's nothing compared to the three to four hours it takes to enter the very glamorous and special world of Estee Lauder. Nowhere else in the Soviet Union can average citizens so completely indulge their fantasies and their romance with the West. Galya Dushechkina works in a bank where she earns 220 rubles a month. Twice a year she waits in line to spend her whole month's salary buying eye shadow and perfume from the United States.

GALYA DUSHECHKINA: [Speaking through Interpreter] Soviet cosmetics in general are terrible, very bad, and these are good. And I can't say anything bad about them. They're expensive but they're good.

MR. KRAUSE: Do they add something to your life?

MS. DUSHECHKINA: [Speaking through Interpreter] There's not that much that's nice and cosmetics are nice.

MR. KRAUSE: Each business deal in the Soviet Union is different and the Estee Lauder deal is particularly complicated. But so far Lauder is making money and Soviet women have a window on the West. As a result, they've become far more sophisticated than when the shop first opened 18 months ago, according to Elizabeth Susskind, the shop manager.

ELIZABETH SUSSKIND, Manager, Estee Lauder: When we opened up the shop, we noticed that women were traditionally buying the very neutral type of shades, you know, not really experimenting with the new fashionable shades. Now they're requesting -- they're saying, why don't you have the newer shades, you know, we want that, and so there's a trend that as glasnost has opened up the country, as more and more magazines, and television programs, et cetera, are available, women have also changed.

MR. KRAUSE: The reason why Estee Lauder is so successful can be found right down Gorky Street. There one of Moscow's best cosmetic shops called Gifts offers French perfume for 90 rubles and a local brand called Blue's for 12. There's not a lot of variety, nor is there a lot of business, especially compared to the lines outside Estee Lauder. Galina Vasieleva told us she'd come all the way from Megadon, a gold mining center, eight hours by plane from the capital. We asked her impressions of the United States.

GALINA VASIELEVA: I think that this country is a rich country but you have more here to build such country than we had. We have only 70 years and you have more than 200 to build such kind of country and I think that more that you -- the conditions of your life is much better than we have.

MR. KRAUSE: And why is this perfume worth spending two or three hours in line waiting for?

MS. VASIELEVA: Because it smells just very good. It's a very good smell it has. That's why I prefer the American perfume.

MR. KRAUSE: Simple things, but as the Soviet Union emerges from 40 years of isolation, they've become important. Soviets no longer afraid to speak with Americans -- Estee Lauder on Gorky Street -- Big Macs in the heart of Moscow. as President Bush pointed out in London, it's important to keep things in perspective. That being the case, who would have ever thought even two or three years ago that the Mormon Tabernacle Choir would be singing the Battle Hymn of the Republic to a full house at the Bolshoi Theater just a block from Red Square?

MR. LEHRER: Still to come on the NewsHour tonight, a CIA Iran- Contra Robert Gates update and Gergen & Shields. UPDATE - UNDER SCRUTINY

MR. MacNeil: Yes. We now update the Iran-Contra investigation and its impact on the nomination of Robert Gates to be director of the CIA. This week special prosecutor Lawrence Walsh said he would increase his staff to investigate information received from former CIA official Alan Fiers and on Tuesday, the Senate Intelligence Committee decided to postpone the Gates confirmation hearing until mid September. With us are two journalists who followed the investigation from the start. Bruce Van Voorst is a senior correspondent covering national security for Time Magazine. Nina Totenberg is Legal Affairs Correspondent for National Public Radio and the NewsHour. Nina, do the developments this week mean the Gates nomination is in serious trouble?

MS. TOTENBERG: Yes is the short answer. I'm sure that Mr. Gates still thinks that he can be confirmed as CIA director or director of Central Intelligence. I'm sure that the President is still dedicated to this nomination. But what we are seeing is a process not unfamiliar in Washington of death by delay. And we've already seen this week new stories about Gates' knowledge -- limited knowledge agreed but still more knowledge than we knew about, about aid to the Contras -- and we will see increasing leaks, I suspect, of this kind of information, some of it interestingly coming from CIA officials, themselves, and I just don't see any way that the President can end up having this nominee.

MR. MacNeil: So you think he's going to withdraw him, is that it?

MS. TOTENBERG: In the end, I think that the President will decide it's not worth the candle, that he needs a CIA director, that he needs a reorganization of the intelligence community. He's made that very clear and most intelligence experts agree that that's needed right now. In fact, the director of Central Intelligence who's leaving, Judge Webster, says it's needed. And you just can't wait on this forever. And it's -- although Judge Walsh, the independent counsel, says that this investigation, he will hurry it along and he will seek to answer some of the committee's questions by mid September when these hearings are scheduled to begin. It's really very unlikely that that can be done in a couple of months time and it was the Republicans who agreed to this delay of two months' time and that's because you see on Capitol Hill already the water starting to go out of the glass and the Republican desire to confirm this man as director of Central Intelligence.

MR. MacNeil: Bruce, do you see Gates in that kind of trouble?

MR. VAN VOORST: I'm sorry to differ with her, but I see the same phenomenon that she's describing here. But I don't think that they all add up yet to serious trouble. Certainly after the hearings have been postponed, as they have, for a couple of months, and the other little things that have happened in the last few days, that doesn't help his candidacy at all. But I think that there are several factors which are still on his side. First of all, the President really is very firmly committed to this. He stakes a lot of political capital on it. The President surely has checked out before the nomination was made some of the issues which might arise. It's a standard procedure as you call him in and say, is there going to be anything, and in this case, they knew that the Walsh special prosecutor was sitting and there might be some indictments. But I think the important thing is that on the basis of fact not much has changed and certainly very little against Gates. The Fiers testimony, as we now know, is not at all going to indict -- going to make more difficulties for Gates. The tapes are well known and there's apparently not a great deal more there. The fact that Gates was called in to the Walsh committee and asked to testify as a subject was known, because this happened before the nomination took place. So on balance, the factual situation has not changed. In fact, in some ways it's improved because Gates in the past couple of weeks has heard about there being charges that he was involved in the October surprise. There were charges that he was involved in exports of arms illegally to Iraq. Both of these charges seem to be waning for lack of substance, so on balance, although the atmospherics certainly have not improved for him, he's still in for a good battle. He's going to give them a good battle.

MR. MacNeil: Nina, do you agree with Bruce that the testimony of Alan Fiers, the former CIA man, not testimony, but the confession that he knew more than he -- that he lied to Congress - - that that is not going to create difficulties for Gates?

MS. TOTENBERG: It's already created difficulties. Look, we have Mr. Fiers having said in court in a statement agreed to that was published in court that he told the No. 3 man, the head of clandestine services, about the diversion and about the North operation aiding the Contras.

MR. MacNeil: And that's the man immediately under Gates.

MS. TOTENBERG: That's the man immediately under Gates. So we now have Casey who knew, that's Gates superior, and now we have Gates underlings know, the No. 3 man knew, the No. 4 man has said he had some information to this effect. We know that the head of the Latin American division, who was Alan Fiers, he knew. Now we learned today that Mr. Fiers at Mr. Gates' request briefed Gates about so- called future aid to the Contras a half dozen times in 1986 when this illegal operation was going on.

MR. MacNeil: Excuse me interrupting, but is your point that it thereby increases the strain on our credulity or --

MS. TOTENBERG: It absolutely does.

MR. MacNeil: That Gates wouldn't know.

MS. TOTENBERG: We now are asked to believe that Gates was either so stupid that everybody above him and beneath him knew about it, but he didn't, or that he lied. And either way, it seems to me he's in a difficult position and he's charged with proving a negative. He now has to show that he didn't know something that everybody else knew.

MR. VAN VOORST: I think, Robin, the point is procedurally there is a bit of a problem there, because the Intelligence Committee really doesn't want to confirm Bob Gates until some of these issues are clarified. Now whether or not Fiers and Clair George can, in fact, involve Bob Gates further is one question, but when this is going to happen is another, and we may well find ourselves in the beginning of the hearings in September, and the issue of Clair George's participation and his role in this with Bob Gates may not be clarified, because Clair George, himself, faces the possibility of an indictment, and so that could drag on.

MR. MacNeil: Bruce, what do you think from your knowledge of the CIA and the situation here, what do you think would have to happen to put Gates' nomination in real peril, in your view?

MR. VAN VOORST: Well, the first real thing if there's any sign at all that he perjured himself in all these previous testimony - - all the previous testimony that he's given -- he testified to the intelligence committees, he then testified to the Iran-Committee, Tower Commission, even one of his strong supporters, Sen. McCulski, said that if it's proved that he lied, he's finished. So that much is really clear, if that comes up at all. It may well be though that the Iran-Contra involvement, itself, may be murky. There is some sign in town this week that the focus is switching more to the question of should have Gates known. In other words, do you want somebody at the head of the CIA, a very secret operation, one not subject to the normal checks and balances, who intentionally looks aside when there's a possibility of criminal action?

MR. MacNeil: Nina, is Gates actually a target of Walsh's, the special prosecutor's investigation now?

MS. TOTENBERG: Well, target is a term of art. It means if you imagine a target board that the prosecutor has set on a person as a bull's eye, and he is not a target. He is a subject of the investigation, which means he's within the scope of the inquiry. He's not a lesser fish in the sense that he's not just a witness. He is a subject of the inquiry. He has been a subject for a long time. The White House knew he was a subject of the inquiry at the time that President Bush named him, but I do not think that the White House knew about the Fiers deal that was in the offing. And, in fact, the nomination may have been made before some of the most serious statements that Fiers has made were made to investigators, so that Walsh may not have even known at the time that the nomination was made how seriously this might jeopardize Gates. But the fact is he's in grave jeopardy now and this is a political dance that we've seen in Washington before. I don't think there's much doubt about how it has to end.

MR. MacNeil: Bruce, if Gates were withdrawn, if his nomination were withdrawn, what are the consequences of that for the President in the context of the Iran-Contra investigation, and more in a wider sense politically?

MR. VAN VOORST: Well, I think first of all, in the narrow context of Iran-Contra, if he has to withdraw the nomination of Gates, it will imply that he was not prepared to take the heat and see the facts unfold about this alleged cover up and, therefore, there will be suspicions that he -- there's already suspicion among the conspiratorial thinkers that he has nominated Gates as a payoff for Gates being quiet on the then Vice President's involvement. But the Vice President has got a lot riding on the -- then Vice President, now President has got a lot riding on this and if he backs out of that at this point, after all, don't forget that the Walsh investigation will continue and these other indictments will come out, he can't really avoid facing up to some of these issues.

MR. MacNeil: Nina, how much time has Walsh got left before the statute of limitations runs out on some of these possible crimes?

MS. TOTENBERG: Well, the first statute of limitations deadline is this October, but it's only the first of many and by statute of limitations we mean that there's five years in which the government has to prosecute a perjury case, and after that, the person who allegedly perjured himself cannot be prosecuted. But there are repeats of the alleged perjury that went on after this October, so there other deadlines that allow him more time and he is quite determined to finish out this investigation and he's said that that's his assignment by the court that appointed him and he can do no less.

MR. MacNeil: Well, Nina and Bruce, thank you both.

MS. TOTENBERG: Thank you.

MR. VAN VOORST: Thank you. FOCUS - GERGEN & SHIELDS

MR. LEHRER: Now, how the Gates matter and other events of this week look to our regular analysis team of Gergen & Shields, David Gergen, editor at large of U.S. News & World Report, Mark Shields, syndicated columnist for the Washington Post. David, is the Gates nomination damaged beyond repair?

MR. GERGEN: No. It's been damaged this week. The postponement of the hearings I think has left him in a position where he is going to be vulnerable to new charges, to new innuendos, and indeed, you know, people are going to hang him in the press. I mean, if the argument is going to start up, as we just heard, either he knew and therefore he's disqualified, or he was too stupid to have known, and therefore he's disqualified.

MR. LEHRER: He's a loser either way.

MR. GERGEN: He's a loser either way, but I don't think in fairness to him that's the real issue. The issue is: Did he know or didn't he know? And until we have more testimony on that, I don't think we can give this man a fair hearing.

MR. LEHRER: Mark.

MR. SHIELDS: He's in big trouble. First of all, August works against him. August is the cruelest month politically in Washington. Congress goes, the people who are left here in the press are quite querulous because they've been left here in the heat and the humidity and the haze of August. This is the only story. There's no great legislative battle out there. There's no great congressional fight going on. This is it. And all the news that's going to come out about him is going to be bad. There isn't going to be any good news about him. There's going to be further suggestions, whether he was a subject, whether he's a target, or whatever else and I just think when you put it off for two months, Frank McCulski, the Republican ranking member in the Intelligence Committee was absolutely right. If he had testified, as some people were suggesting last week, including my good friend to the left, who's usually to the right, then his testimony would have been out there for two months to be subject to scrutiny, criticism, contradiction, and correction. They were right not to do it, but I think in the long run, his nomination is in serious, serious trouble.

MR. LEHRER: But, Mark, what about Bruce's point that factually nothing has changed since the man was nominated?

MR. SHIELDS: Factually nothing has changed. What we have learned,I think an awful lot has changed. I mean, in all respect to Bruce, what we've learned is that Alan Fiers -- as Nina said right on this broadcast seconds ago -- Alan Fiers, who was the No. 3 man there in charge of the Central American project, briefed him six times, the No. 1 man, Bill Casey, knew, I mean, nobody questions that, the No. 3 man knew, Fiers being No. 4, and that he didn't. I mean, we didn't know that. I mean, the public didn't know that. The Senate didn't know that. And the Senate is getting cautious. With the Senate, they were for him, they liked him, they thought the issue --

MR. LEHRER: Everybody said he was an easy go.

MR. SHIELDS: That's right. It was a laid down hand, Jim, but right now, they're scared stiff that there are other things sitting out there.

MR. GERGEN: I would agree with Mark that the Senate is getting cautious. I think that this has not been a good week for Bob Gates. But I would also -- I think the President by all accounts coming out of the White House today is very determined to fight this to the end. I've seen no evidence that he's going to give up and, indeed, what you're going to see is what the White House has not done yet, is mount some sort of offensive to help this guy. For example, the argument is made, well, as the No. 2 person, if No. 1 and No. 3 knows, he has to know. Well, it's been true in the past that the No. 2 guy has been compartmentalized out. Bobby Inman, who served honorably in the CIA --

MR. LEHRER: As No. 2.

MR. GERGEN: As No. 2.

MR. LEHRER: He was also head of the national security --

MR. GERGEN: That's right. He's now supporting Bob Gates and he'll make the argument, look, it's frequently true in the CIA that the No. 2 guy is compartmentalized out on some issues that go to covert activity. This is not unique. So I think, again, if Mr. Fiers identifies Bob Gates as somebody who told something about this illegal activity or if somebody else in the chain nails him, then it's over.

MR. LEHRER: Yeah.

MR. GERGEN: But absent that --

MR. LEHRER: But if nothing else happens other than what we already know, then -- but your point is that no matter, well, unless something awful like that is revealed, George Bush is not going to back off Bob Gates. The Senate is going to have to turn him down, in other words?

MR. GERGEN: The Senate's going to have to turn him down. I think that would be a tough thing for a lot of them to do unless they've got hard evidence.

MR. SHIELDS: Good point David makes about Bobby Inman, a very respected man, he'll have to come up and testify. Let him come and testify before the Senate Intelligence Committee and explain how a No. 2 man doesn't know what No. 1 and No. 3 knows. I mean, for most people that's not understandable. It isn't the way MacNeil- Lehrer operations, thank goodness.

MR. LEHRER: Certainly not. David, the mystery to some people is why would the President go through this again with Bob Gates and why would Bob Gates go through it again.

MR. GERGEN: Well, I think --

MR. LEHRER: Just to refresh everybody's memory. He was nominated in 1987, there were some questions raised, peripheral questions raised then about what he knew or did not know, and he withdrew his nomination -- that was in the Reagan administration.

MR. GERGEN: Right.

MR. LEHRER: Now here they're back four years later, not only President Bush but Gates, himself.

MR. GERGEN: Well, it's the fact that they would allow themselves to go through this that suggests they both believe he didn't do anything wrong. What rational man would puthimself in a position to be found out on something like this if this thing falls apart?

MR. LEHRER: -- and Fiers sitting out there --

MR. GERGEN: Exactly.

MR. LEHRER: -- who could some day turn state's evidence and say, I told Bob Gates this, I told Bob Gates that, why would he take a chance?

MR. GERGEN: That's exactly right. Now I would say George Bush has come to rely heavily on Bob Gates while he's been in the White House. He believes in him now and he stands up for people like that and when Bob Gates comes in and says I'm clean on this, he believes him.

MR. SHIELDS: I mean, just to add a couple of things, I think George Bush obviously likes and respects and trusts Bob Gates. That is obvious. I think his commitment is total. I think there's a couple of other things. George Bush reacts badly to any suggestion that Iran-Contra was a terribly important thing because he was hardly curious George himself as Vice President. I mean, all of this was happening around him. George Bush went to dozens of meetings. There's no mention of his saying anything at any of the meetings when he was Vice President of the United States. So I mean he doesn't like this thing rekindled and re-examined. I mean, that's pretty obvious.

MR. GERGEN: That's a fair point.

MR. SHIELDS: Okay. And then what I'd add to that is that there's at work here, in my judgment, the belief that it had gone away as a problem. And the Fiers thing, the indictment of Alan Fiers, has brought it back. And there was, I mean, it looked, it greased his confirmation.

MR. GERGEN: That's true but Bob Gates still knew that Alan Fiers was out there and if he thought that he had a potential killing blow to land on his nomination --

MR. LEHRER: Or anybody, Clair George or anybody. Look, let's go on to another story, and that's the Senate pay increase. It happened in the dark of Wednesday night, and here's a sample of the floor debate that led up to the big vote.

SEN. ROBERT BYRD, [D] West Virginia: [Wednesday] The salary increase for Senators is a sound long-term investment in better government. Given the gravity and the dimension of the many decisions that Senators are called upon to make daily, do we not need to try to attract the best and the brightest to Senate service?

SEN. PAUL WELLSTONE, [D] Minnesota: I find myself in opposition to the pay raise. And the main reason for that is that I feel very strongly that there is already too great a disparity between the income of those who are elected to office and the people that they represent. I really believe that.

SEN. BENNETT JOHNSTON, [D] Louisiana: No one can fail to grasp the significance of the fact that there are staff members on the House side making more than United States Senators, that federal judges make more, that federal bureaucrats make more. Now, Mr. President, what the teachings of these Senators, Sen. Byrd and others, through the years has been that when it comes to the institution of the Senate, Senators rise up above their parochial interest, they rise up above their personal interest, and they do what is right.

SEN. CHARLES GRASSLEY, [R] Iowa: We should raise our salaries only after we show that we can manage government efficiently and effectively. If the Senate is to restore public confidence in its ability to lead the country back to fiscal sanity, we cannot raise our own salaries first out of the block.

SEN. TIM WIRTH, [D] Colorado: This is becoming an institution that people who do not have money cannot afford to come here. The world has gotten increasingly complicated and expensive, particularly for those of us in the West who have to come a long way, carry two households, people don't understand that very well, but I understand it when you watch how people are unwilling now to run for the United States Congress, and that's wrong.

MR. LEHRER: David, Ralph Nader and the talk show hosts are going at these Senators for what they did Wednesday night. Should they be gone after?

MR. GERGEN: Yes. They deserve to get $125,000 a year. The point that Bennett Johnston was making about House aides, some House aides, some people in the federal bureaucracy making more than they do, good point, but to raise their salary in the middle of a recession in the same week that the federal government has just disclosed that they're going to have a $350 billion deficit next year, these guys are running a ship that's sinking fiscally, and then to give themselves a pay raise, I think a lot of people are going to say, gentlemen, that's a good thing to have at some point, but why don't you get your job done first and then we'll talk about a pay raise.

MR. LEHRER: Mark.

MR. SHIELDS: Two points, Jim. First of all, being a United States Senator is a full-time job. It wasn't anticipated in the Congress. It is and we've enlarged the member of Congress to be an ombudsman, to be somebody there all the time. Second premise is that public employees ought to be paid by the public. I mean, they ought not to be out tin cupping before organized groups with speeches to groups that appear before their committee who have a legislative interest and so forth, they ought to make their money at the public, doing the public's business. And David is absolutely right. The way it was done was absolutely wrong.

MR. LEHRER: Well, we need to point out that when they raised it, they did more than just raise their pay.

MR. SHIELDS: That's right.

MR. LEHRER: They banned honoraria.

MR. SHIELDS: Exactly.

MR. LEHRER: I didn't make that clear.

MR. SHIELDS: The $27,000 that they could make up until they passed the pay raise. But there is something at work here. There's a sense that that federal government doesn't work. It started really with President Carter and the idea that the problems were intractable. It was reinforced by the conservative rhetoric and anti-government attitudes of both Ronald Reagan and George Bush that the federal government was the problem. And we've got this helpless, pitiable giant. We're paramount internationally. We can do anything. We're the leading and only power in the world. But at home, in education, as Sen. Al Gore pointed out this week, George Bush's initiatives in education call for spending less money than Michael Milken put up for bond for his own indictment. So there's a sense of helplessness and you say these guys raised $23,000, raised their salary, which is more than some American families have to get buy on, there is a sense of rage, and it's understandable, and it's predictable.

MR. GERGEN: Do you think it was a good idea or bad idea?

MR. SHIELDS: I think it's a good idea to have public employees paid by the public, yes, I really do.

MR. LEHRER: In other words, get rid of the honoraria?

MR. SHIELDS: But I can understand the rage. I can understand the rage. And it's real.

MR. GERGEN: You're on both sides.

MR. SHIELDS: No, I'm not on both sides. Would I have voted for it if I was in the Senate? Yes, I would have voted for it -- and understanding fully -- I mean, let's be honest about the political problems. I mean, there are a lot of talk hosts who made a lot out of it when the House did the same thing and there wasn't a single House member who lost. There was one who had a hell of a scare for a minute and that was Newt Gingrich, the Republican Whip in the House but nobody else lost.

MR. LEHRER: There was a Democrat from California who claimed he lost -- there was a letter to the editor this morning in the Washington Post where he says -- his name is Bates, Jim Bates -- he said --

MR. SHIELDS: Jim Bates was reprimanded by the House for sexual harassment, which did not help his campaign, believe me.

MR. LEHRER: Okay.

MR. GERGEN: If they thought it was an honorable thing to do, why would they do it after all of the news shows had closed down, reporters had gone home, and on the same day, the last day of the summit, and so that they could bury the score?

MR. LEHRER: That's the -- how do you answer that?

MR. GERGEN: Only because of the cowardice and I think if they need a pay raise, come up, come forward, let's talk about it, you know, put it out in the public --

MR. SHIELDS: They're on record now -- I mean, let's be honest about it -- in fairness to these guys, they're on record, anybody who wants can look and see who voted for it and who voted against it.

MR. GERGEN: But you agree --

MR. SHIELDS: Of course. There are a lot of things done in the dark, David.

MR. GERGEN: That's right.

MR. SHIELDS: Perhaps even some by you.

MR. LEHRER: What's the difference though if they did it in the middle of the night or whether they did it at 10 in the morning? They have a recorded vote.

MR. GERGEN: This is the greatest deliberative body in the world that has to have a vote -- and now when nobody knows it's coming, there's no pre-debate, there's no attempt to really talk it through and talk about the merits. This is a fait de complis that's presented this way.

MR. SHIELDS: David's right.

MR. GERGEN: This is wrong.

MR. LEHRER: Quick thing. Did the decision by Richard Gephardt this week not to run for President surprise you?

MR. SHIELDS: It did surprise me. I talked to Dick Gephardt about it and central -- I thought Dick Gephardt, the House Majority Leader, had developed almost a perfect political pitch. I mean, I think he was --

MR. LEHRER: An economic thing --

MR. SHIELDS: Understood where the Democrats had to be politically as well or better than anybody else in the party, but he said it wasn't in him, and there's two things you can't talk anybody in to: You can't talk anybody in to running for President and you can't talk anybody out of running for President, as my friend said. And he said his own mother, who campaigned tirelessly for him in 1988, had said to him, Dick, you know, you have to finish what you begin, you've got a job as majority leader, and he said, you know, she's right.

MR. LEHRER: David.

MR. GERGEN: I think it's a loss to the Democratic Party not to have him in the race. He would have been a strong candidate. He's one of the few candidates that gets under George Bush's skin, and might have gotten him riled up in a campaign, but I do think we're going to see Dick Gephardt back in 1996, and I think --

MR. LEHRER: Why? Why do you think that?

MR. GERGEN: Because I think he was in a situation, Jim, where essentially you can take two swings at the bat in this game, and he'd take one swing, and didn't get the nomination. If he came back now and didn't get the nomination or lost, he would not be able to run in '96. This way he preserves his option for '96.

MR. SHIELDS: I don't think we'll see him in 1996 because he'd never challenge a Democratic incumbent in the White House.

MR. LEHRER: I thank you. We must go now.

MR. GERGEN: We certainly should.

MR. LEHRER: We must go. Thank you both, gentlemen. RECAP

MR. MacNeil: Again, the major story this Friday, there were fresh reports of clashes between Kurdish rebels and Iraqi army troops outside the allied security zone, a Kurdish leader said about a hundred people were killed or wounded, he also said both sides had agreed to stop fighting. Good night, Jim.

MR. LEHRER: Good night, Robin. Have a nice weekend. We'll see you on Monday night with a look at the latest Middle East peace initiative. I'm Jim Lehrer. Thank you and good night.