The MacNeil/Lehrer NewsHour

INTRO

ROBERT MacNEIL: Good evening. The government confirmed today what farmers already knew: the drought has been a disaster for some key crops this year.

ED GOODE, Iowa farmer: We've got so many stalks here that are just barren like this, there just isn't any corn on it.

MacNEIL: Tonight, a report from the hardest-hit area of the Midwest and an examination of how this will play out in the prices we pay for food and the taxes we pay in farm support. Jim?

JIM LEHRER: Robin, we're also going to go through the day's developments on the Korean airliner tragedy and hear a debate between a state department official and a Soviet expert who believes the United States has mishandled the whole affair. Our third major topic is Chile, the South American nation now caught up in violence and unhappiness after 10 years of military rule. We have a documentary report on why -- why is there violence, why is there unhappiness.

ANNOUNCER: The MacNeil/Lehrer NewsHour is funded by AT&T, the Corporation for Public Broadcasting, and this and other public television stations. Drought Cuts Crops

MacNEIL: The government said today that heat, drought and reduced planting have drastically cut the 1983 corn and soybean crops. Corn and soybeans are the nation's two largest cash crops grown by farmers. Both are key livestock feeds, and higher prices for these commodities could produce significantly higher food prices next year. Last year the corn crop was a record 8.4 billion bushels. The agriculture department today estimated the '83 crop at half that -- 4.4 billion bushels. The soybean crop was down from 2.3 billion bushels last year to 1.5 billion this year. The reductions were caused in part by various federal programs that paid farmers not to plant this year to reduce the huge government surpluses. But the drought and heat wave were the chief cause. Tonight, how a major drop in two key farm commodities impacts on consumers, taxpayers and farmers. Jim?

LEHRER: Here to explain today's grim numbers is Assistant Secretary of Agriculture William Lesher, the department's chief economist. Mr. Secretary, first, what effect is all this going to have on food prices?

WILLIAM LESHER: Initially, in the short term, within the next, say, two to three months, there's probably going to be a reduction in food prices. That's because these commodities primarily are used for livestock feed. Farmers facing higher prices are going to liquidate more of their livestock, their animals, and put them on the market.

LEHRER: They've already begun to do that, have they not?

Sec. LESHER: That's exactly -- and this will exacerbate that. In 1984, though, it means, especially in the second half of that year, it's going to mean higher meat prices.

LEHRER: Very high meat prices?

Sec. LESHER: No, not at all. This year we have record meat supplies, a little less than 55 billion pounds of meat available. Next year, because of the drought, we anticipate perhaps a one, two percent reduction from that level. So we're not talking about any kind of a meat shortage. We're talking about a modest rise in meat prices and keeping in mind that the fruits and vegetables and other crops really aren't impacted by the drought as the corn and soybeans.

LEHRER: Now, I saw an Associated Press story today which said that the surplus of these two cash crops -- primarily, the two cash crops being corn and soybean -- are way, way down, lower than they've been since 1977. Is that correct?

Sec. LESHER: I don't recall seeing the story. The drought is very severe. The numbers you just put on the show show that. However, we also have a severe surplus problem. So they balance each other off to a large degree.

LEHRER: Well, hasn't that surplus almost been wiped out as a result of the drought?

Sec. LESHER: Because of the drought we are probably going to go into next year with what most analysts would call reasonable supplies of most of the commodities we're talking about here today.

LEHRER: Now, the farmers. What impact is this going to have on the farmers? The ones who have something to sell are going to have it made, and those who don't aren't, correct?

Sec. LESHER: If you live in an area you got rain, you're in good shape. If you participated in payment in kind program, or bought crop insurance, you're in fairly good shape. If you didn't, it's a fairly serious situation.

LEHRER: And the consumer is only going to feel this, initially at least, in meat prices?

Sec. LESHER: But not initially. It's going to be into the next year, perhaps the latter half of next year.

LEHRER: No, but we're going to feel it going down initially?

Sec. LESHER: Initially, and then moving up in 1984 with the other basic commodities, really, not affected that much.

LEHRER: Thank you. Robin?

MacNEIL: To see more clearly how the drought has affected these crops, we visited some farmers in the most badly-hit areas of the Midwest, specifically in Bloomfield, Iowa. Charlayne Hunter-Gault has our report.

CHARLAYNE HUNTER-GAULT [voice-over]: They're doing a land-office business down at the sale barn in Bloomfield, Iowa. Farmers are running short on feed, and they're selling their livestock in order to avoid the additional cost of buying feed. That's good news for consumers, at least in the short term, because beef prices will be coming down. But low prices are bad news for the area's farmers. Ken and Judy Dorsher are trying hard not to sell. Most of their 1,100-acre farm is corn and soybeans. But they've also got about 70 stock cows, which they breed to sell calves.

KEN DORSCHER, Iowa farmer: We're going to try to keep all our cattle. We'll feed them sileage for now and hay, and try to winter them through the best we can. We're not going to sell any of the cows or calves as of yet.

HUNTER-GAULT [voice-over]: Keeping these cows will not be easy because the drought has burned up the pastures where they ordinarily graze.

JUDY DORSCHER, Iowa farmer: The pastures would normally be up to your knees about this time of year, and there's very little green, and the cattle just can't survive on that alone. They're going to nip off every little green shoot that sticks up from here on out. And if you let them in there and graze it down too short, they'll start killing it out.

HUNTER-GAULT [voice-over]: The income of farmers in Davis County, Iowa, which includes Bloomfield, is split about evenly between livestock and crops, mostly corn and soybeans. In a normal year the Dorschers might store or sell this corn as a cash crop. This year they need it to feed the cattle.

Mr. DORSCHER: It's the only way you can use the corn right now is to feed to the cattle. So we chop every day to feed two bunches of cows. Corn isn't worth anything anyway.

HUNTER-GAULT [voice-over]: Another farmer, Ed Goode, has been farming in Bloomfield for 10 years. His wife Vickie works at a bank in town. This year they're going to need that extra income more than ever.

ED GOODE, Iowa farmer: The yield is real bad this year. You can tell by the height of the corn that we had a real good chance of a corn crop coming on, but the hot weather just stopped it. We've got so many stalks here that are just barren like this, there just isn't any corn on it. And you've got these here that would have come on and made corn if we'd had the moisture, so what I'm going to do right now, I want to count barren stalks. I'll start here with a stalk that has got an ear on it and we'll go to the next stalk that's got one on it.One, two, three, four, five, six, seven, eight . . . 28, 29, 30, 31, 32, 33. And there's the next ear of corn, and I'll guarantee you that won't put very much corn in the bin.

HUNTER-GAULT [voice-over]: The farmers of Davis County aren't the only ones suffering the effects of the drought. Those withered corn stalks also mean that store owners in Bloomfield and other towns are seeing their incomes dry up. The total loss to the county, according to one estimate, could range from $22 to $26.5 million. The loss would be even greater if it weren't for the department of agriculture's payment in kind or PIK program. Ed Goode is among the 92% of Davis County farmers estimated to have joined PIK. The way the program works is the government contracted with farmers not to plant a percentage of their acres, and will give them grain in return. In Ed Goode's case, he has laid fallow half his cornfields, some 168 acres for which he will receive 7,300 bushels of corn. At today's prices, that's worth roughly $24,000.

Mr. GOODE [voice-over]: The $24,000 that I'm going to get out of my PIK corn would just barely make my farm payments. On the land payments alone. That's it. Nothing on production, nothing on my livestock investment, nothing on my machinery investment.

HUNTER-GAULT [voice-over]: Because of the drought and the resulting short supply of corn, prices are higher this year than they've been in a long time, and net farm income is actually expected to increase by $5 or $6 billion over last year. But the high prices won't do Bloomfield's farmers very much good, so Judy and Ken Dorscher have helped set up a committee to petition the federal government for aid. The government's response may very well decide whether they, Ed Goode and others survive or not.

Mr. GOODE: It's going to be up to whatever the government program can do for us. Without them I'm afraid it's a lost cause.

LEHRER: We go back now to Secretary Lesher. That's Assistant Secretary of Agriculture William Lesher. Mr. Secretary, what are they going to hear when they come back to the federal government for help?

Sec. LESHER: Well, first of all, we talk about the payment in kind program that is providing about $8 billion worth of commodities out there during harvest season. We think that is enormous help to those farmers that have signed up. In addition, we have a federal crop insurance program that's subsidized by a one-third rate, which farmers can buy reduced premium for crop insurance. And also then we have, in counties that are declared disaster areas, we have a Farmers Home Administration loan programs, loans of up to $500,000 at up to 8% interest for seven years or more. And we think that this is a fairly good package. In federal crop insurance alone we're going to pay out, we think, perhaps $550 million this year. That's really more than most the aid put together in the previous droughts of '74 and 1980. However, I mean, even though we're doing all those things, there are certain individuals in certain areas that are -- I mean, your heart goes out to them. They really are hurting, and they're in a financial bind.

LEHRER: But there's nothing really that the federal government is going to do for them, right?

Sec. LESHER: Well, we've allowed them to first graze their conservation-use acres, the land they set aside for the payment in kind program; then we allowed them to bale them so they could transfer the hay from one field -- perhaps they didn't have a fence -- to their livestock. And we're continually looking at the situation. We had a large meeting in Chicago to get exchange of viewpoint of the various --

LEHRER: But that meeting, Secretary Block, the boss, essentially told those people in Chicago that this is -- what you just outlined is essentially it; there isn't going to be anything else. And that is correct, right?

Sec. LESHER: Well, I mean, you never say never, but as of this moment in time that is correct.

LEHRER: Yeah. The PIK program. Is that going to continue next year as a result of what's happened this year, the drought, and how it changed everything?

Sec. LESHER: We're going to run a more limited payment in kind program for wheat next year simply because we have an enormous supply of wheat left over -- 1 1/2 billion bushels. That's an enormous carryover. For the other commodities -- feed grains, rice, cotton -- we have not made a decision, but the likelihood of a payment in kind program is virtually nil.

LEHRER: All right. Also, Secretary Block two months ago was calling for a reduction in the amount of the federal support program for farm products? Is that going to go by the board now, or are you going to keep that about where it is now -- what is it, $35 billion a year?

Sec. LESHER: Well, for the farm price support activity it's about $21 billion in fiscal year 1983. We estimate that's going to go down to perhaps around $10 billion next year.But we're still interested in keeping the price supports at levels so that we do not encourage farmers to produce too much, as they have in years past, or too little. And we're seeking what we would think -- we call modest price support levels for the next two years.

LEHRER: Thank you. Robin?

MacNEIL: While the administration wants to hold or cut back on federal aid to farmers, congressmen from the drought-stricken farm belt will be under pressure to increase it. Republican Congressman Jim Leach represents southeast Iowa, including the part of Davis County we saw in our report. Congressman, you're just back, like the rest of your colleagues, today from that area. What kind of message do you come back to Washington with?

Rep. JIM LEACH: Well, in the drought belt there is a true sense of desperation. It just can't be underemphasized. If you recall in the '30s those great portraits by Thomas Hart Benton showing the lines drawn and etched in people's faces of real worry, it's there. In fact, in some ways this drought is worse than the '30s because in the '30s investment was so miniscule people had nothing to lose. They might have lost their farm, but they stayed on the farm. Today, in the drought areas such as southeastern Iowa, Missouri, Georgia, farmer after farmer is faced with the possibility of losing his farm and being thrown off his farm.

MacNEIL: But, just a few miles away, farmers who are sitting pretty.

Rep. LEACH: That's exactly true, and what we have is a two-farm culture where some farmers are going to be doing better than they ever have in the last several decades, if not in their entire life; other farmers, worse. In essence, you could have total farm income go up, but numbers of foreclosures go up in quantum magnitudes. That's what could well happen unless government responds and responds very sympathetically.

MacNEIL: Wouldn't it -- let me ask what may be a very cruel sounding question; I don't mean it that way.But wouldn't it be better, if this country is so enormously efficient in producing huge crops in normal weather conditions, that there were fewer farmers in the long run doing this?

Rep. LEACH: Well, I think that is an uncompassionate question, and let me just stress. We're down, in terms of real farming, that is, people that own over 40 acres of land, with less than 2% of the American people. How far do you want to go? If we want to preserve a small farm culture, a culture, a way of life, we're going to have to be very concerned about these farmers in trouble. Let me also stress that rural America is about to be wiped out by either large agribusiness or exceedingly large farmers unless we do something.And if we as a society want to keep a culture, let alone avoid a type of thing where the very large farms dominate pricing, we've got to respond and respond very quickly.

MacNEIL: Well, what kind of response are you going to be recommending?

Rep. LEACH: Well, I think that the basis of response does have to be the Farmer's Home Administration lending program. I personally would urge that it be slanted carefully to the smaller farmer, perhaps more compassionate guidelines. For example, the first $50,000 in lending authority at 3%; the second, at five, and then above that at eight. Beyond that I think we're going to have to enact something that used to be in statute, which was an emergency livestock feeding program. The livestock producer is being hurt at the same time that the grain farmer is being helped by PIK. But if you're a livestock producer without any production this year, in essence you have a situation where you've got higher costs of production. The government has worked against you, not for you. So I would personally argue that monies that are already in the department of agriculture budget, for the deficiency payments, be now moved to help the livestock farmer at the expense of the grain farmer to bring a little bit more equity back into American agriculture.

MacNEIL: Thank you. Jim?

LEHRER: Mr. Secretary, do you feel it is as serious as the Congressman says it is?

Sec. LESHER: Oh, I don't doubt at all the severity of the drought. It is a very severe drought. We also have a very -- abundance of supply, so they kind of balance out. In individual cases, it is true that there is going to be -- they're in a financial bind.But you take a Congressman who's in a district that's affected severely by the drought, but when you look at the PIK payments, you know, in commodities, and value them out, in fact you're really, on average, about $100 an acre. Well, averages, you get fooled, and there are individuals that are in severe situations. But the question is, all of us are compassionate and we'd like to help out every single farmer.The question is, how far does government go?

LEHRER: And you want them to go much further than the Secretary is willing to go? Is that what you're saying, Congressman?

Rep. LEACH: Well, I think I have to acknowledge that the United States government is responding at this time. Where I would say, frankly, is they can go a bit further, and no one in the farm belt wants a handout. No one's asking for great grants of money, but it just has to be stressed that, as Mark Twain once said, there are three kinds of lies: lies, damn lies and statistics. Overall, things might not be that bad, but in this drought area they're disastrous. I have one county where I think as many as half of all farmers could be out of business unless we have a compassionate government program.

LEHRER: Well, Mr. Secretary, I take it -- the government's position now -- and now, here again, I don't mean to sound -- I don't want to put words in your mouth, but essentially, okay, it may be that a few farmers may go under as a result of this.There really is nothing that can be done about that.Is that what, essentially, the government policy is?

Sec. LESHER: I would not -- I think I'm not getting the point across, that with the payment in kind program, with the crop insurance program, and with the Farmer's Home disaster lending right now, there are literally billions of dollars flowing to the farm community that's aiding drought victims.It is not aiding all drought victims, and they're the ones that are in a terrible situation. The only question that you have to ask yourself is, can the government or should the government respond to all farmers?

LEHRER: And somebody would say to you, Congressman, that in a period of recession that we've just gone through, there were small business in various parts of the country that also fell through the cracks and we've had an incredible number of bankruptcies. Why should the federal government step in and help these farmers?They didn't step in and help the drugstore owner and the long list of other small business folks that went down the tubes?

Rep. LEACH: Well, I think it's a fair question, and that's why we have to look at this as a natural disaster. It's very similar to Hurricane Alicia. Alicia might have been swift and savage, but this particular disaster is equally bad. In fact, for many people, far worse. In fact, one of the analogies here -- if you remember the pictures of Texas and the people coming out of their homes that had sides blown out. They had a job to go to -- steady income coming in. These farmers in drought areas, they don't have a job. They don't have steady income. It's a natural disaster. They don't want a handout. They simply want some reasonable government assistance.

LEHRER: They really do want it. They really do want a handout, don't they?

Rep. LEACH: Well, to the degree that a subsidized loan is a handout, I would have to say they want a helping hand. But they're not asking for gigantic shifts of direct capital to them that they don't have to pay back. They want a fair chance to stay in business, to keep a livelihood. And the alternative is being thrown off the farm at a time when there aren't jobs. Where are these people going to go? It's not like the '30s. It's worse than the '30s for these people that are affected.

LEHRER: He's right, isn't he?

Sec. LESHER: Well, he's right to the extent that if you're a farmer and you have 30-bushel yields of corn and you normally get 150, and you have no other forms of protection, then in fact you are in an economic tough situation. I mean, everyone, I mean, is compassionate with that sort of a situation. How far, though, can you go with providing those kind of protections with farmers and with the other 225 to 230 million citizens we have? That's the issue.

LEHRER: Yeah. And I take it -- here again, I don't want to put words in your mouth, but I hear what you're saying to the Congressman is that the line has been drawn and there is not going to be -- I mean, I'm not -- here again --

Sec. LESHER: No, I know. The line has been drawn at the upper end.Through the 1970s we averaged $3 to $4 billion in farm price support activity. This year it's $21 billion. I think it's unfair to say we're drawing the line at the low end and not providing support.

LEHRER: No, I wasn't going to suggest that. But wherever you've drawn the line, the line has been drawn, as we said.

Sec. LESHER: To a large extent that's true.

LEHRER: All right, gentlemen, thank you. Robin?

MacNEIL: There was also some bad news for dairy farmers today. Last April the federal government imposed a tax of 50" per hundred pounds of milk. The idea was to encourage lower production and help offset the cost of the milk support program now running at $2.3 billion a year. Dairy farmers in the state of South Carolina filed suit, claiming the tax was unconstitutional and would drive some farmers out of business. Today a federal court of appeals in Richmond, Virginia upheld Washington's right to impose the tax. We'll be back after a pause for a video postcard.

[Video postcard: Jemenez Springs, New Mexico]

MacNEIL: The Lebanese government called on the United Nations Security Council to declare a ceasefire in the factional fighting around Beirut. The Security Council was called into urgent session to hear the request from Special Envoy Ghassan Tueni. At the same time, Saudi Arabia was also reported trying to negotiate a ceasefire. But the fighting went on, with the Lebanese army beating off several militia attacks from the Druse militia on the village of Suk al Gharb in the hills east of Beirut. And three U.S. Marines were injured by mortar fire at Beirut airport. None was hurt seriously. In Washington, Republican Senator Charles Mathias introduced a bill authorizing the Marines to stay in Lebanon for six months, but requiring further congressional action for a longer stay. At a press conference he explained why.

Sen. CHARLES MATHIAS, (R) Maryland: I would hope that the President and his advisers would see the opportunity that's available with the introduction of this resolution to forge a consensus, not only within the Congress, but within the country in support of our general policies in the Middle East. We are not suggesting the immediate withdrawal of the Marines from Lebanon. We're not suggesting the pullout of American forces from the Middle East; far from it. The resolution contemplates the continued presence of American troops there, notwithstanding the casualties that we've suffered.

MacNEIL: In Israel Yitzhak Shamir has formed a new coalition to govern, and he will become the new prime minister, replacing Menachem Begin. Shamir, who is now the foreign minister, will have a majority of four votes in the Israeli parliament. A spokesman said the new government will follow the same policies as the old one.

This evening at the United Nations the Security Council took up a resolution to deplore the shooting down of the Korean airliner. Oleg Troyanovsky blamed the incident on the United States and Japan. He then cast a veto killing the resolution.

OLEG TROYANOVSKY, Soviet Ambassador to the U.N. [through interpreter]: In view of the importance of what has occurred, the Soviet Union set up a governmental commission in order to carefully investigate the circumstances surrounding that incident. As a result of the investigation which has been carried out, it has been established that after the invasion of the Southern Korean civil plane into Soviet airspace was a deliberate and carefully preplanned intelligence operation. It was directed from the territory of the United States and from Japan. The civilian vessel was deliberately chosen without even considering, or perhaps very carefully considering the possibility of victims.

MODERATOR: Those against?

MacNEIL: Then the resolution was put to a vote, and the Soviets voted no.

MODERATOR: The result to the voting is as follows. Nine votes in favor, two against, four abstentions. The draft resolution has not been adopted, owing to the negative vote of a permanent member of the Council.

MacNEIL: The nine votes in favor was the bare majority needed to force a Soviet veto. Jim?

LEHRER: There were several other developments today on the airliner tragedy from several different places around the world. In Japan another body washed ashore off its northeast coast, and authorities believe it to be a victim of the disaster. It's the third to be found. Today's body was so mutilated not even the sex could be immediately determined. In Athens, Greece, the 10 members of the European Community expressed regret over the tragedy, but because of objections from Greece, one of the 10, there was no condemnation of Moscow. The Greek foreign minister was reportedly adamant in refusing to sign a strong anti-Soviet statement, saying there had been enough of that last week at the NATO foreign ministers' meeting in Madrid. Elsewhere in Europe, airline pilots from nine nations began a 60-day ban on air travel to the Soviet Union, an action that will halt more than 40 flights a week. The pilots are from Britain, France, Italy, Spain, Sweden, Norway, Denmark, Finland and The Netherlands. And today the West German government said it would suspend all Lufthansa flights to and from the Soviet Union. Their two-week ban goes into effect on Thursday. Here in Washington resolutions were introduced in both the House and Senate condemning the Soviets shooting down the plane. Both houses are expected to approve them by week's end. And a state department official was rebuffed in an attempt to deliver a diplomatic note to a Soviet diplomat. The note contained a demand for financial compensation for the families of the 61 U.S. citizens who were among the 269 killed. The Soviet official refused to accept the note, and according to a state department spokesman, the U.S. refuses to accept the rejection. Robin?

MacNEIL: Meanwhile, the other dialogue continues, the dialogue of charges between Moscow and Washington.Yesterday the State Department revised its account of the incident after Russian-language experts had listened more carefully to the tapes of the Soviet fighter pilot. That showed the attacking pilot did say he had fired bursts some six minutes before the rockets that destroyed the 747.The State Department conceded that the pilot might have fired warning shots, as the Soviets had maintained, but Washington said this did not substantially change the U.S. position. Moscow immediately claimed that the revisions showed that the U.S. had been lying and, in Tass's words, "shifting and dodging and getting ever more entangled in its own lies." One man who believes this revision has hurt the U.S. case is Dimitri Simes, senior associate at the Carnegie Endowment for International Peace in Washington. Before coming to this country in 1972, Mr. Simes worked for the Soviets' major think tank on Western affairs. Mr. Simes, do you think that the new U.S. version weakens the charge against the Soviet Union?

Dimitri SIMES: Well, first of all, I have to say that the Soviet charge is absolutely preposterous. The revelation came from the state department so it is quite clear it is rather difficult to accuse the United States and specifically the State Department of misleading the public. We are talking rather here of public relations strategy. The question is why? We have to make all these accusations, very strong accusations that the Soviets shot this Korean plane in full knowledge that this was a civilian airliner, and then we get more and more facts which suggest that an alternative interpretation is possible. At first we hear about this U.S. surveillance plane, RC-135, flying in the same area. Then we are told by the same state department that there is some evidence to believe that the Soviets initially mistook the Korean airliner for this American surveillance plane.Then the tapes, again provided by the state department, reveal that the Soviets were trying to communicate with the Korean airliner using IFF frequency -- identify, friend or foe frequency. Only military planes are equipped with this system. Consequently, you have some indirect evidence to believe that the Soviets mistook the plane for a spy plane.

MacNEIL: Well, do you believe that the public relations aspect of it have not been handled as well as they might have been?

Dr. SIMES: I believe that the United States had a very strong case against the Soviet Union. I believe we still have a very strong case, but I believe that unfortunately we ourselves muddled the issue somewhat and provided the Soviet Union with some ammunition.

MacNEIL: How should we have done it, in your view?

Dr. SIMES: Well, first of all, I think I would give the Soviets some opportunity to respond through private channels before accusing them of terrorist acts, barbarism, aggression and etc. I personally do not think that they would be truthful anyway, but I definitely would give them a chance. This incident created a major damage to the U.S.-Soviet relations, to our very important negotiations with the Soviets on arms control, and I think we owed it to ourselves to give the Soviets a chance. We didn't. However, once the facts were established, I think we have to stick as close to the facts as possible. I appreciate the position of the state department that the Soviets had every reason to identify Boeing 747 as a jumbo passenger jet. That is, however, an assumption. You do not accuse another superpower on the basis of your intellectual assumptions. Let me say also that even if we accept a more benign interpretation, it is still clear that the Soviets are guilty as hell. They did not make every necessary effort to be sure that it was not a passenger jet. When they had to make a decision to shoot or to let the plane escape, they demonstrated a vicious disregard for human lives. So why should we overstate our case and make ourselves vulnerable in the process when the Soviets are incriminating themselves further and further?

MacNEIL: Thank you. Jim? Disaster Mishandled?

LEHRER: A response to Mr. Simes now from Tom Niles, deputy assistant secretary of state for European affairs. Mr. Niles has been closely involved in formulating and implementing official U.S. actions on the airliner tragedy. Is there now an alternative scenario, Mr. Niles, that it was mistaken identity, that the Soviet fighter pilot did not know this was a civilian airliner?

TOM NILES: Well, Jim, I don't think that the material which was released yesterday, the slightcorrection in the transcripts in any way changes the basic facts of the case. The circumstances remain as we described them at the beginning of this incident in the initial statement which the Secretary made, and the President's speech last Monday, new subsequent statements which we've made. The correction -- slight correction which does show the Soviet pilot as having said that he fired cannon first, does fill out the story a little bit. It does correct one area, but it does not change the totality of the case. Indeed, it seems to me that one interesting possibility based on this latest statement is that what the Soviet pilot was actually trying to do was to shoot down the aircraft with his onboard machine guns rather than using the air-to-air missiles.

LEHRER: Meaning there's no evidence that these were in fact warning shots that he fired six minutes before the missile?

Sec. NILES: He said he fired cannon rounds. He had his radar locked on the aircraft, the "target," as he called it throughout, the "target." He took the radar lock off and then says -- then said, "I have fired cannon rounds." Now, it could conceivably be tracer shells that he fired, but it could very well be that he fired cannon bursts at the aircraft in an effort to shoot it down. And in this connection I would recall that in the case of the Boeing 707 Korean airliner which blundered over Murmansk and then down in through -- over Korali, 1,000 miles into Soviet airspace in 1978, the Soviet fighters pursuing did blow up part of the wing and force the plane to land, killing two people on board with cannon bursts. So this is indeed a very plausible possibility. Not a certainty, by any means.

LEHRER: Sure, all right, but let's go to Mr. Simes' basic point, which is that the United States made a public relations error, a serious one, in being too quick off the gun to accuse a superpower of being a barbaric -- well, you heard what he said, before all of the facts were in.

Sec. NILES: Well, two things on this. One, it's not first and foremost a public relations issue. It is a matter of very serious gravity, very grave problem which the international community has with the Soviet Union. And I would reject any imputation that we've been playing this first and foremost as a public relations exercise.That's the first point. Secondly, as I said before, nothing which has come out since the Secretary of State's initial statement in any way changes materially the facts as he presented them at that time. What actually happened at that time is not in dispute. A few subsidiary facts have developed as we moved along, but I would claim -- I would -- I think I could make the statement with good substantiation that nothing in a way to invalidate the original statement has emerged. Now, as far as Mr. Simes' point about giving the Soviets reasonable time to responde. The Secretary made his original statement, as I recall, on Friday. The President made his speech on Monday night. The Soviets had ample time to respond, and what did they respond with? They responded with a story which they have changed at least five times materially since then in terms of what they did. So I think the Soviets had ample time -- the Soviets knew what we had. Let's not make any --

LEHRER: Was there a quiet --

Sec. NILES: No, no. I'm not claiming --

LEHRER: -- approach?

Sec. NILES: No, I don't want to claim any private approaches, but the Soviets knew perfectly well what we knew because they know what we can pick up out there. They knew what we had, and they knew what they had said. So they knew that we knew what they knew. And I don't think that there was any basis for thinking that we should have -- or for arguing, as Mr. Simes did, that we should, for instance, have waited longer.

LEHRER: Thank you. Robin?

MacNEIL: What harm has been done, Mr. Simes, by the rush to judgment?

Dr. SIMES: First of all, I think that once again we created a situation when people question what the United States was trying to accomplish. I believe that Mr. Secretary is quite correct, suggesting that the state department perceived the situation as a terrible tragedy, and it was not using it for propaganda purposes. But what the State Department intended to do and what many people in the world believe are two different things, and perceptions matter. And I don't think our record in this situation is very good.

MacNEIL: What do you think the perceptions are in this case?

Dr. SIMES: I think that there is a growing perception that the United States was trying to exploit this tragedy for propaganda purposes. But let me say something else, more importantly.You have to teach the Soviet Union a certain lesson when they kill 61 Americans and 269 people altogether. At first, I think, you are obliged to give them benefit of the doubt. You, before making a statement like Mr. Shultz did on the very first morning of Friday that there could be absolutely no excuse for what the Soviets did, you should be absolutely certain that you have the facts straight and the Soviets should take into account the very slow, bureaucratic procedures, had at least an opportunity to ascertain what actually has happened.

MacNEIL: Let's ask Secretary Niles about that -- that when you're dealing with two superpowers that, before you make a charge like that, you should be absolutely certain that you have the facts.

Sec. NILES: Well, all I can say in response to that is that subsequent developments have revealed that in fact Secretary Shultz did have all the facts that were necessary to make the statement which he made on Friday.

MacNEIL: But isn't Dr. Simes making the point that later facts do admit of a doubt and at least open the possibility -- am I right, Dr. Simes -- at least open the possibility that the Soviets did not know that they were shooting down a civilian airliner or that they had tried to warn it, and it had not responded to the warning.

Dr. SIMES: I think you put it very well. They opened the possibility. But let me make one point which I consider crucial. If the State Department and the administration in general are so firmly convinced that the Soviets knew what they were doing, that they intentionally have blown a civilian airliner out of the air, then I would call the administration's performance a shameful act of appeasement. Because, if indeed the Soviets were purposely and knowingly killing innocent civilians, I would not only refuse to send Secretary Shultz to Madrid; I would cancel the grain deal and I would not tell Mr. Nitze to go to Geneva. Killing 61 Americans purposely is an act of war. So either the State Department have overstated its case, or our response is pitifully weak.

MacNEIL: Secretary Niles?

Sec. NILES: Well, I would have to take strong issue with that. The point in this whole thing is that the President has been following a consistent policy vis-a-vis the Soviet Union. As he said in his Saturday radio speech, much of what has happened in this whole sad story has vindicated him, has given foundation for some of the statements for which he was criticized at the beginning of his administration. So the President's policy, policy based on strength, military and economic; of realism, of understanding what sort of a country we're dealing with when we deal with the Soviet Union; and a willingness, a willingness, despite all this and on the basis of military strength and economic strength, revitalizing alliances to negotiate with the Soviets, I think has been carried out quite effectively in this particular instance. And there was no reason for the President to break off the arms control negotiations or to cancel the grain deal. The action of the Soviet Union in shooting down this airliner, despicable though it was, in no way invalidated any of the basic assumptions on which the President has been acting since January 20, 1981.

MacNEIL: Not even if the U.S. rhetoric were taken as literally as Dr. Simes is taking it and saying that what was done was an act of war?

Sec. NILES: Well, I don't think the President has said that. Dr. Simes said that the Soviet act was an act of war. We have not said that the Soviet act was an act of war. An act of terrorism, an act of murder, a despicable act.

Dr. SIMES: The President said it was aggression. Agression to me means an act of war.

Sec. NILES: I think that, under international law, is a very questionable assumption. In any case, the President has not so characterized the Soviet act.

MacNEIL: Right. Well, thank you both. Jim?

LEHRER: There were also a couple of Russian spy stories to round out the Soviet-U.S. relations news of this day. The Soviet Union announced the expulsion of a U.S. diplomat and his wife, claiming the couple had been caught red-handed in the act of spying. Lon David Augustenborg is the diplomat. He worked as vice consul in Leningrad. His wife's name is Denise. The State Department here denied the two were spies and said there expulsion may be in retaliation for the U.S. having thrown out two Soviet diplomats late last month. Both were attaches at the Soviet embassy here in Washington, and both were accused of spying. There had been no publicity until today about their having been so accused and booted out of the country.

In Thailand a Bangkok newspaper reported today 33 Soviets have been expelled for spying in their country in the last two weeks. They included employees of the Soviet embassy in Bangkok, a Soviet trade mission, and the Soviet airline Aeroflot. Eight Thai citizens were aboard that Korean airliner when it was shot down, and the newspapers said the clean-out may have been in retaliation for that.We'll be back in a moment.

[Video Postcard: St. Simon's Island, Georgia]

LEHRER: Three more news items from the day. An Hispanic name will soon appear on all new U.S. currency, because today President Reagan appointed Kathryn D. Ortega to be treasurer of the United States. Ms. Ortega is a Republican, a certified public accountant and a former bank president from New Mexico, who was already in Washington as commissioner of the copyright royalty tribunal. It was no accident the announcement came today, the first day of National Hispanic Week. Ms. Ortega will succeed Angelo Buchanan, who is expected to take a position in Mr. Reagan's reelection campaign, assuming there is one, and most everyone is.

And if Mr. Reagan runs, George McGovern wants to be his opponent. It became all but certain today the 1972 Democratic nominee for President will formally announce tomorrow he will be a candidate again in 1984, joining the six Democrats already in the race for their party's nomination.

Also, that school strike in St. Louis is over. Today the striking teachers abandoned their walkout, agreeing to go back to work after the school superintendent threatened to fire them, and a federal judge threatened to fine and jail them if they didn't. There are other teachers' strikes in other parts of the country still in progress affecting more than 100,000 students. The St. Louis strike, however, was the largest. Robin? Chilean Protests

MacNEIL: Our third major topic tonight takes us to Latin America. For months opponents of President Pinochet in Chile have been holding protest demonstrations. There were more this weekend when Pinochet celebrated the 10th anniversary of coming to power in a coup which overthrew the leftist Salvador Allende. Yesterday Pinochet made a speech promising economic recovery and what he called "the extermination of violence." In the streets of Santiago, slum dwellers rioted and battled police throughout the night. A Canadian Broadcasting Corporation unit spent the last three weeks in Chile, and filed this documentry report on the situation there. The reporter is Russ Froese.

RUSS FROESE [voice-over]: It's been 10 years since General Augusto Pinochet Ugarte and his armed forces seized control of Chile. In that decade he and his soldiers have waged war on the left -- on any one considered an enemy of the state. More than 100,000 Chileans have been killed, tortured, imprisoned or exiled. Now soldiers share a meal with their president and commander in chief. They honor him for 10 years of distinguished military service. But this is a somber occasion for the General, for he has not won his war. Ten years of bloodshed and fear, combined with a severe economic recession, have caused a growing rebellion that is seriously threatening the military's iron grip on Chile. Pinochet coldly refers to the dissent in his speech.

"Ten years have passed," he says, "since the day we sought liberation. And once again the forces of chaos, destruction and terror are appearing. Once again those submerged forces are menacing men, women and children of our fatherland. And once again they are testing the tempers of the armed forces." The speech is another threat that he is again ready to use military force to eliminate what he calls Chile's subversive elements.

[on camera] The subversive elements -- the opposition -- that General Pinochet talks about gets its strength from the people here in the poblacions -- slums like this one outside Santiago circle every Chilean city. They house nearly 40% of the population. The middle and upper classes may have enjoyed temporary prosperity in the last 10 years, but the people here have seen their already meager incomes drop by as much as one third. These people have protested their plight, and the President has responded.

[voice-over] Anna Teresa Gomez, aged 21. On august 11th, she was shot in the head and killed by a soldier. It occurred during a day of protest. A curfew had been in effect, but Anna Teresa and her 16-year-old friend Patricia had gone to the store to buy cigarettes for her father. A shrine now marks the spot where Anna Teresa was gunned down, and where Patricia was wounded in the cheek.

Nearly 50 deaths and thousands of arrests since the protests began last spring, yet plans for future campaigns go on. Throughout the poblacions people defy the law and gather secretly to plan bigger demonstrations. Involved are many who have faced the guns and the clubs before. Widespread poverty and unemployment, the other major causes of the growing rebellion in the slums. Chile's official unemployment rate is 20%, but here in the shanty towns, it soars to 50 or 60 percent.

A Catholic church service in the slums. Instead of a traditional hymn, the song this morning at the Chapel of Mary, Mother of the Workers, asks Jesus to listen to his people fight for their liberty, to show them the road to liberation. The new priest, in his first mass, talks of the need for inner peace, but that does not mean complacency, he says. It does not mean we sit on our hands. Copies of Solidarity, a Catholic paper, are sold to parishioners. They carry graphic pictures of police brutality during recent protests.

The generals can do little to stop the church. Ninety percent of Chileans are Roman Catholic. The cardinal and the bishops don't like to say so, but with a 10-year ban on political parties, the Church has become the official opposition to the military. It has created the Solidarity Vicariate to help those who have been abused. The people who come here are given medical help or legal advice, and the Vicariate records any human rights violations.

Church lawyers say the disappearances that occurred in the '70s have virtually ended, but systematic torture is still widespread. The pictures and documents given to us by human rights groups and others are graphic proof of the brutality. Victims are usually arrested without charge in the middle of the night, blindfolded and taken to secret torture centers like this one in Santiago. There are more than 200 known cases of torture. The figure could well be in the thousands. Chileans are constantly aware that at any time of day or night they could be dragged away to such a place.

Bankrupt businesspeople hawking their wares on street corners. Chile's large middle class is also suffering. Most businesspeople and professionals applauded the '73 military coup. They were tired of soaring inflation and chaos under Allende. Many turned a blind eye to Pinochet's human rights abuses because for them conditions were better. Pinochet's free market experiment created a five-year boom. Then the recession hit. Chile's economy shrank 15% last year; bankruptcies have soared. Inflation is near 30%; unemployment, even among professionals, is high.

Take the case of Roderiguo and Jimena Valderama. He recently graduate as a doctor, but he and his wife are now forced to sell eggs and cheese to their neighbors just to make ends meet. Roderiguo earns $110 a month working in private clinics and nearly as much selling his eggs and his cheese.

RODERIGUO VALDERAMA [through interpreter]: I think Pinochet's time is up because, in the first place, the lower classes find themselves in absolute poverty. But there's also no doubt that the rest of the population resents the lack of civil liberties and opportunities for economic advancement. They are also pressing for Pinochet to go.

FROESE [voice-over]: Dr. Valderama was one of the thousands who took to the streets in protest in the last few days. He was also one of the more than 1,200 detained by police. Pinochet is playing a strange game of give and take with the population. On one hand, his treatment of opponents is brutal. On the other, he makes major concessions. Within the last month, thousands of exiles have been allowed to return home. Among them, leading political figures. More than 1,000 people were at the airport to welcome home Jaime Castillo, the outspoken leader of Chile's human rights commission. Also there to greet him were people like Gabriel Valdez, the leader of the Christian Democratic Party. Such open displays of political opposition were unheard of even six months ago.

"They will fall. They will fall." It's a chant being shouted with increased frequency and conviction in Chile. But will this revolt to end 10 years of dictatorship be used as an excuse by Pinochet to get tough again?Will he start another bloody battle to get rid of what he calls communists and agitators? The recent assassination of Santiago's governor was a test. Retired Major General Carol Urzua was gunned down outside his home. The secret police blamed MIR, one of the parties affiliated with the Marxist Allende government. They later announced they had killed or arrested the perpetrators, but many Chileans believe forces within the military could have ordered the killing so it could be used as an excuse to crack down again.

So far this strange give and take continues. The man appointed by Pinochet to begin discussions with the political parties, Interior Minister Sergio Jarpa, told me the assassination and the protests are the work of extremists, that they will not affect these political discussions. But then he dashed any real hope of change by insisting that Pinochet will not step down before 1989. Many Chileans now agree the main hope of success for the protest movement is to cause a rift within the armed forces, possibly leading to the forced resignation of General Pinochet.

But Chile's armed forces are highly disciplined, and they are dealing with a man who demands fierce loyalty, who believes he has saved Chile from the Marxist hordes, who has been entrenched in the new constitution as head of state 'til the end of the century. People wonder who will be the first general to tell him he won't remain in power long enough to occupy the $20-million, bomb-proof presidential palace he's having built in the hills overlooking Santiago. One general who has called for a quick return to democracy is Gustavo Leigh. He commanded the air force during the '73 coup and was forced into retirement for his stance. Leigh claims Pinochet has been corrupted by power.

GUSTAVO LEIGH: The power is terrible. I just watch in five years, in that time and I tell you that I am very happy to be out, [unintelligible]. This very work, I don't like.

FROESE: What's the protests in the last few months -- is it now inevitable that there will have to be more democracy in Chile? Is it a situation where the people are no longer afraid?

Mr. LEIGH: I think so. I think today the protest is impossible to stop. The protest of the people is growing and growing, and we go forever, I think, because the people is tired.

FROESE [voice-over]: Flowers are placed on the grave of slain President Salvador Allende. It's the thirteenth anniversary of his election, the last one to be held in Chile.They chant, "Pinochet is going to fall. He's going to fall."

[on camera] It's a symbolic gesture, the ultimate snub to the General. The fear is gone. It's a comment we've heard again and again in Chile. At one time people were afraid to speak out because of the guns, the torture, the secret police, the exiles. But now there's not one family in Chile that hasn't had a friend or a relative affected in some way by Pinochet's economic policies or his law and order campaign. His opponents are no longer talking about how many years he'll remain in power. They're talking about how many months.

This is Russ Froese for The Journal in Vina del Mar, Chile.

MacNEIL: That report was made for the CBC Journal. Jim?

LEHRER: To repeat before we go, the major stories of this day were the government's new forecast on the havoc the drought is bringing to the country's supply of corn and soybeans, among other things; the continuation of sanctions and words about the Soviets shooting down the Korean airliner amidst new developments, including a U.N. veto and a debate over the firing of warning shots. Plus, the teachers' strike in St. Louis is over, and the fight in Congress over the U.S. Marines in Lebanon and the War Powers Act is just beginning. Good night, Robin.

MacNEIL: Good night, Jim. That's all for tonight. That's our NewsHour. We will be back tomorrow. I'm Robert MacNeil. Good night.