The MacNeil/Lehrer NewsHour

INTRO

ROBERT MacNEIL: Good evening. Here is the news.Edwin Meese has asked for a special prosecutor to examine his finances, but President Reagan says he'll still be confirmed as attorney general. French President Mitterrand has had talks with President Reagan and addressed the U.S. Congress. The Navy is investigating the collision of a U.S. carrier and a Soviet submarine while the State Department is considering a protest to Moscow. Israel's Parliament voted tonight to dissolve and hold early general elections. Elsewhere in the Middle East, fresh fighting broke out in Beirut. Iran reportedly massed a million strong for a new attack on Iraq. In the New Bedford rape trial, two more men were found guilty. Jim Lehrer's off; Judy Woodruff's in Washington. Judy?

JUDY WOODRUFF: On the Meese story, we ask reporter Nina Totenberg where today's developments leave his chances of being confirmed. In the aftermath of that Soviet submarine incident, a naval expert tells us what the Soviet navy is up to around the world. Kwame Holman reports on the background behind California's troubled Diablo Canyon nuclear power plant. We also look at a bill passed by the House yesterday which would make it illegal for businesses to break union contracts when they file for bankruptcy. The world of high fashion has invaded the mass clothing market, and Charlayne Hunter-Gault looks at the man who has taken his high-priced designs into the shopping malls of America. And finally, A.C. Greene reviews a first-time effort by a critic turned novelist. The setting: a resort in Michigan just before the Second World War. Special Prosecutor for Meese

WOODRUFF: Edwin Meese, President Reagan's choice to be the next head of the Justice Department, took the unusual step today of calling for a special prosecutor to investigate his affairs. In a letter to Attorney General William French Smith, Meese wrote, "Because of unsubstantiated charges that have been widely publicized by those who oppose my nomination to be attorney general, I feel that there must be a comprehensive inquiry that will examine the facts and make public the truth." President Reagan said in a statement that he supported Meese's decision, and said he knew that an impartial inquiry would demonstrate what he called the high level of integrity and dedication which had marked Meese's career. Attorney General Smith began a preliminary investigation over the weekend into whether a special prosecutor was needed, and the Senate Judiciary Committee put Meese's confirmation hearings on hold. In his statement today, Meese said he won't ask the President to withdraw his nomination. The reaction to Mr. Meese's decision came quickly from members of the Senate Judiciary Committee.

Sen. ARLEN SPECTER, (R) Pennsylvania: He realizes that the attorney general, William French Smith, is a close friend of his. They've been in the same administration, very close to the top, worked together; and he wants to relieve any possibility that someone would say that if the attorney general did not appoint independent counsel or call for the appointment of independent counsel, that there was a whitewash. So this permits the process to go forward and to see a determination of really what's happening. There has been an aroma that Ed Meese has done something wrong. And I do not believe that that is justified on this state of the record. I believe the facts are that serious questions have been raised and that Ed Meese ought to have an opportunity to answer them.

Sen. JOSEPH BIDEN, (D) Delaware: I believe the next step is to wait to see who is appointed and what the scope of the investigation is. In the meantime, it should be made clear to everyone that the United States Senate Judiciary Committee is not bound by either the scope and/or the results of the investigation by an independent counsel.

REPORTER: Do you think realistically that this nomination can survive the length of time that that kind of investigation would take?

Sen. BIDEN: Yes, I do. I do think it can survive the length of time the investigation would take, if the culmination of the investigation at the hands of someone who is known by all to be impartial is the following. Not only did Mr. Meese not commit a crime; Mr. Meese made no real bad judgments here; there was a lot of confusion and misunderstanding; he is as clean as the newly driven snow. He could survive that.

WOODRUFF: The nomination has been in trouble since several disclosures about Meese's failure to list a $15,000 loan from a long-time California friend, and some six instances of financial assistance from people who later got federal jobs. With us again tonight to explain these latest developments is Nina Totenberg, a reporter with National Public Radio who has been following the Meese story.

Ms. Totenberg, why do you think Mr. Meese asked for a special prosecutor?

NINA TOTENBERG: He really had no choice. The chairman of the Senate Judiciary Committee, Strom Thurmond, a Republican, and the ranking Democrat, Joseph Biden, had drafted a letter that they were going to, and they did, release this morning, asking the attorney general to broaden his investigations to a whole variety of other charges. And that would have almost certainly assured that there would have had to have been a special prosecutor appointed. And yesterday, when Mr. Meese went to Capitol Hill, he met with Mr. Thurmond and with other Republican senators, and they told him this letter was going to be released and they told him that they couldn't stop it, and that there were Republicans who would sign a letter with the Democrats otherwise, and he realized that he had really no choice. What he did was launch a preemptive strike.

WOODRUFF: So it was going to happen anyway is what you're saying. Does this help or hurt his chances, the fact that he himself asked for the special prosecutor, do you think? Or does it make any difference?

Ms. TOTENBERG: I think it probably helps in the most marginal of ways. It helps in terms of appearances, that he stepped forward and he asked for the investigation. But it is very marginal.

WOODRUFF: What does the appointment of a special prosecutor or independent counsel, or whatever they're being called these days -- what bearing now is that going to have on his chances for confirmation?

Ms. TOTENBERG: Well, I would think -- and I am putting myself out on a limb here a little bit -- that it would be the most extraordinary circumstance if we ever saw Ed Meese confirmed as attorney general after this. This investigation is going to take months. Former Watergate special prosecutor Archibald Cox estimated to me today a minimum of three months, perhaps as much as even five or six months. After that -- and the language that a special prosecutor usually uses when he exonerates somebody is that hesays "We have found insufficient evidence to prosecute." Well, former Watergate prosecutor Cox said how can you have an attorney general go into office essentially with a card on his chest that says "insufficient evidence to prosecute"?

WOODRUFF: So you're saying -- what does this mean then physically for the nomination process? The President has nominated him, it's been submitted to the Senate; does that mean everything is just in a state of limbo while the prosecutor --

Ms. TOTENBERG: Everything will be in a state of limbo, and while the President is adamant today, and probably will be next week, my guess is that as time goes by and as perhaps there are more disclosures, as we've seen every day this week, almost, about perhaps minor things involving Mr. Meese, but nevertheless they make the front pages now -- the weight of the political evidence will be that the Republicans can't stand it as it gets closer and closer to the election.

WOODRUFF: Why did it get to this point? Was there a straw that broke the camel's back, or was there just an accumulation of new information that did it?

Ms. TOTENBERG: Well, there was an accumulation, but after the accumulation the straw that broke the camel's back was the $15,000 interest-free loan that he failed to disclose, and that in fact, as far as I'm told, he failed to disclose to anybody at the White House in hours and hours of grilling, moot courting that they put him through in preparation for the confirmation hearings.

WOODRUFF: Is there anybody now that you know of in the administration who's telling the President just to cut him loose and let him go?

Ms. TOTENBERG: Well, I don't now cover the White House, so I can't be sure of that.

WOODRUFF: Why is the Congress, why has his support in the Congress eroded the way it has?

Ms. TOTENBERG: Because when people like us are on the news every night talking about ethical questions involving Mr. Meese -- his interest-free loans, his failure to disclose, the fact that he didn't pay his mortgage for 15 months and the bank never foreclosed, and all the people who helped him out got federal jobs. Today we found out that the son of the guy who lent him $15,000 also got a federal job, in addition to the wife. Every night there are things like that. That is just not fun if you're a Republican. Majority Leader Howard Baker said today that although he still sticks by the nomination, still thinks Mr. Meese will be confirmed, he conceded that the nomination carries "a lot of baggage."

WOODRUFF: Do you have a theory about how all this came about? I mean do you have -- I mean Mr. Meese has said that it was inadvertent. The Democrats are saying that -- insinuating that there was something much more sinister involved. Is it somewhere in between, or is there any way to know at this point?

Ms. TOTENBERG: I don't think there's any way to know. And that of course is one of the things that the special prosecutor will be looking into. On the one hand, he'll have Mr. Meese telling him this was inadvertent -- "Mr. Thomas was an old friend of mine. I had no promissory note," which is what he told Senator Specter, Senator Specter said today. "And so when I went through my papers, my mind was -- my memory was not jogged." On the other hand, we have a pattern, perhaps, of six people who helped him who eventually got federal jobs. And then of course there's the common-sense question, which is, can a man who makes $60,000 a year forget a $15,000 loan?

WOODRUFF: All right, fine. Thank you very much, Nina Totenberg, for being with us again.

Ms. TOTENBERG: Thank you.

WOODRUFF: Robin? Soviet Sub in Caribbean

MacNEIL: The U.S. Navy today opened an official investigation into the collision between the aircraft carrier Kitty Hawk and a Soviet submarine yesterday in the Sea of Japan. According to the Kitty Hawk's captain, David Rogers, the 80,000-ton carrier had no warning before it hit the Soviet Victor 1-class attack submarine. The Kitty Hawk is on maneuvers off the Korean coast. Captain Rogers said his ship had been under almost constant Soviet surveillance for the past four days.

The Soviet navy is also making news in the Caribbean, where a helicopter carrier is steaming towards Cuba accompanied by antisubmarine warships. The Soviet task force activity marks the first foray by a Soviet carrier into the Caribbean in the past 15 years. To look at the way in which these events fit in to the newly apparent Soviet naval strategy, we turn to retired naval Commander Harlan Ullman. Commander Ullman spent 20 years in the Navy. He retired last year and now heads a maritime studies program at the Georgetown University Center for Strategic and International Studies in Washington.

Commander Ullman, why would a collision like this happen?

Cmdr. HARLAN ULLMAN: I think that there are three possibilities. First, the possibility of ineptness, and I think in this case the Russian submarine captain just made a very bad mistake. Secondly, it could have been done because of bad manners -- if the ship had been on the surface, the ship had not been abiding by the rules of the road. And thirdly, it could have been done as an actual act of policy, a political decision to demonstrate some particular purpose. I think the reason for this particular collision was one of inefficiency and ineptitude on the part of the Russian ship.

MacNEIL: Does it indicate that the Kitty Hawk and her escorting ships didn't know there was a Soviet submarine around?

Cmdr. ULLMAN: No, I think that every piece of evidence indicates that they not only knew, but they had a very good idea of her location. My best guess is that the Soviet submarine was trying to dodge the American underwater detection by going underneath the aircraft carrier.

MacNEIL: By hiding right underneath it.

Cmdr. ULLMAN: Underneath. And in so doing, it's very, very possible that the submarine lost depth control and therefore came to the surface.

MacNEIL: I see. Does the U.S. Navy shadow Soviet ships as closely as this?

Cmdr. ULLMAN: Well, obviously not, because we try not to collide with them.

MacNEIL: Well, I mean --

Cmdr. ULLMAN: Certainly both sides play this game of keeping what's called "tag" with the other in terms of surveilling, generally within several hundred or a thousand yards. Remember, there's an Incidents at Sea agreement that was signed in 1972 between the Soviet Union and ourselves which is part of our national law, which suggests -- not only suggests, but demands -- that both sides act in accordance with the rules of the road to prevent this type of thing from happening. And we abide by that very strictly.

MacNEIL: Are there a lot of incidents like this?

Cmdr. ULLMAN: Not really.

MacNEIL: You yourself were involved in an incident a couple of years ago, weren't you?

Cmdr. ULLMAN: Two, and that was really bad manners. On one occasion a Russian destroyer trained his guns on me, and that was really rather silly on his part. And second, in the northern Norwegian Sea, a Russian destroyer tried to cut me off, and again, we held our course and speed. That was really a case of bad manners rather than any kind of a political act on the part of the Soviet Union.

MacNEIL: Is there an element of staring one another down this way? We're going to hold to our course and do what our maneuvers call for, whether you're close to us or not? A sort of element of bravado in it on both sides?

Cmdr. ULLMAN: Yes and no. The reason for the Incidents at Sea Agreement was strictly to prevent this type of thing happening, because what eventually will occur is collisions, and that's not in anybody's best interest. To some degree there certainly is bravado, but really I think both sides try to adhere to the Incidents at Sea agreement because it's in the best interest of both sides to do so.

MacNEIL: The State Department said today it was considering whether to make a formal protest to Moscow, presumably after the Navy finishes its investigation. What would be grounds for a protest if both navies do this kind of thing a lot?

Cmdr. ULLMAN: Well, I didn't say they do this type of thing a lot. I mean, this was a collision that was done, that was caused by the Soviet Union. The evidence that I've seen indicates it was the Russian submarine that was at fault. And clearly, the reason for making a protest was that it was a violation of this particular agreement.

MacNEIL: I see. I see. Has the Soviet navy been projecting itself much more aggressively into the oceans of the world?

Cmdr. ULLMAN: Over the last 20 years, you know the Soviets have been expanding their naval presence. And really, about 1967 is when the Soviets made the actual decision to station their ships in what were called forward deployments. So this is really nothing new.And generally the Soviets will station ships in close trail to American units that operate in proximity to Soviet home waters. Indeed, in the Sea of Japan, that's less than 400 miles from Vladivostok, which is one of the Soviet main operating naval bases. But there's nothing new about this sort thing.

MacNEIL: Have Western experts concluded that this demonstrates a new overall naval strategy?

Cmdr. ULLMAN: No, on the contrary. The current Soviet naval strategy, which is indeed part of the overall Soviet defense strategy, is in essence about 25 years old, which has had modifications.It varies somewhat from our own, because the Soviet view of war is that the war would become nuclear, and therefore the purpose of Soviet military forces are to prevent that occurrence from happening. In this case the Soviet navy would be used to protect its own ballistic nuclear submarines as well as the Soviet homeland, and not being used to project power overseas as the United States and its forces would be required to do.

MacNEIL: Well, how then does the arrival of a helicopter carrier into the Caribbean fit into that sort of --

Cmdr. ULLMAN: Well, the Soviets have always tried to use their naval and military power symbolically in terms of signalling. I think with expanded American presence in Central America, the stationing of our aircraft carriers in the Caribbean, the Soviets felt it was time to signal, in a low key and cautious way, their own interests. And they did so by sending a helicopter carrier, which has very limited naval capability in an Udaloy class destroyer. So I think that their response was cautious. It's not a huge naval deployment; it's the sort of thing that we will expect to see in the future, and I think it indicates that the Soviets have interests which they are going to signal by naval power but they're not going to do it in a precipitous way.

MacNEIL: So the fact that the U.S. Navy has also sent a task force into the Caribbean to patrol off Central America, to show the flag a bit there during the Salvadoran elections and so on, that the presence of the Soviet carrier to the north off Cuba should not be a source of anxiety, you mean, to the U.S.?

Cmdr. ULLMAN: I don't think so. I think it also shows that the Soviets are not capable of sending what would be really very capable projective forces long distances. After all, that carrier has very, very limited capabilities, in no way comparable to our equivalent carrier battle groups.

MacNEIL: So there's no need for Washington to worry about this at all?

Cmdr. ULLMAN: I certainly wouldn't recommend worrying at this stage, nor in the future.

MacNEIL: All right, sir. We will take your recommendation.

Cmdr. ULLMAN: I thank you very much.

MacNEIL: Thank you. Judy?

WOODRUFF: There will be elections this year in Israel. That was the decision reached today by the Israeli Parliament after a small political party defected from the governing coalition of Prime Minister Yitzhak Shamir. It was a narrow vote, and it is viewed as a setback for Shamir, who had hoped to postpone Israel's next vote until November 1985.

In Lebanon there was more fighting today. Druse militiamen attacked and captured positions held by a Moslem pro-Libyan force. Both groups are members of the Lebanese National Movement Coalition.

Halfway around the world, in El Salvador, anti-government rebels increased their effort to keep voters away from this Sunday's ballot boxes. Rebels attacked a town 20 miles from the capital, San Salvador, and reportedly continued their anti-election campaign by seizing the identification cards carried by Salvadoran citizens. The cards are needed in order to vote in the election. However, the rebels repeated their pledge not to attack those who do vote.

Robin?

MacNEIL: Francois Mitterrand, the socialist president of France, and Ronald Reagan, the conservative President of the United States, had apparently cordial talks today. Mitterrand was welcomed at the White House at the beginning of a six-day U.S. visit which will include side trips to Atlanta, San Francisco, Galesburg, Illinois, Pittsburgh and New York City. His talks with President Reagan ranged from the Lebanon conflict to economic recovery. At the White House, Mitterrand, who's urged the U.S. to resume nuclear arms talks with Moscow, stressed the need for East-West dialogue.

Pres. RONALD REAGAN: In Lebanon, we Americans are proud that we are part of a peacekeeping force working together at great risk to restore peace and stability to that troubled land. We will always remember that in this gallant humanitarian effort we stood shoulder to shoulder with your brave countrymen. Our nations, two great world powers, have responsibilities far beyond our own borders. Your influence is a force for good in the Middle East. You have drawn a line against aggression in Chad, and you've extended assistance to other African nations seeking to preserve their security and better the lives of their peoples. These are but a few examples of the constructive global role that France is playing.

FRANCOIS MITTERRAND, French President [through interpreter]: Our main concern in 1984 must surely be the question of security in Europe and relations between the East and the West, and also between the North and South, which we'll be talking about. And here the firm and clear orientations that I have given to French diplomacy are known to yourself and to your administration and to our friends throughout the world, and based on the basic idea of unfailing loyalty to our friends and the concept of the balance of forces worldwide and in Europe. Firmness and determination are indispensable qualities, but they must go together with keeping the dialogue open, particularly with the Eastern bloc.

MacNEIL: Later the French president addressed a joint session of Congress and said there could not be peace until conditions in the Third World improved.

Pres. MITTERRAND [through interpreter]: But it is my conviction that many of the revolutions and wars in the Third World are rooted first of all in the soil of poverty and in the economic exploitation that exacerbates the traditional confrontations between ethic groups, religions and parties. Civil wars are not triggered by external influences alone, even if they may serve foreign interests. Their roots lie deep in the legacy of the past. Thus the peoples of Central America have a long history marked by military oppression, social inequality and the confiscation of economic resources and political power by a few. Today each of them must be allowed to find its own path toward greater justice, greater democracy and greater independence, and must be allowed to do so without interference or manipulation. Let us understand that before calm can return we must first reduce the level of misery in the world. It serves no purpose to hammer away at building peace while we allow the underlying causes of war to prosper.

MacNEIL: In economic news, new orders for big-ticket durable goods declined 1.2% in February, suggesting that the pace of the business recovery may cool off a bit in the months ahead. The decline was the first in eight months, and the Commerce Department said today it was due mostly to a falloff in orders from metals and machinery. On Wall Street, the Dow Jones average of 30 industrial stocks dropped almost 15 points to 1155.88, in a mood of concern over interest rates and the federal deficit. Diablo Canyon Nuclear Reactor

MacNEIL: Our next major segment tonight is on nuclear power, the industry that has suffered almost continual setbacks in the past few years. On Monday the Nuclear Regulatory Commission will vote whether or not to issue a low-power license to the troubled Diablo Canyon reactor in California. That would permit the plant to operate at 5% of capacity. A major hurdle was cleared this week when the commission staff recommended startup after having investigated and dismissed some 300 allegations of wrongdoing at the multibillion-dollar facility. More than 40 inspectors spent more than 8,000 hours studying those charges. Diablo Canyon is located on the Pacific coast just north of San Luis Obispo. It's become a symbol for both opponents and supporters of the nuclear industry. Kwame Holman reports.

KWAME HOLMAN [voice-over]: The long and tangled history of the Diablo Canyon nuclear power plant began over 17 years ago, when the Pacific Gas & Electric Company, the nation's largest investor-owned public utility, decided to build the plant. PG&E chairman Fred Mielke.

FRED MIELKE, chairman, Pacific Gas & Electric Company: Because it's a very valuable plant. It's worth shutting down all kinds of other producing facilities because Diablo will produce that power cheaper, with all the problems it has had. It's still coming in at a very, very great value.

HOLMAN: Nearly all the construction here at Diablo Canyon was completed in 1979, and twice since then the plant has been on the verge of going on line. But a combination oflegal challenges, engineering design errors, and the discovery of a major earthquake fault just three miles from the plant has repeatedly pushed back the startup date. Today, 17 years after ground breaking and at a cost of close to $5 billion, not a single kilowatt of power has been generated here, and PG&E is still trying to prove that its plant is safe.

[voice-over] The first construction delay came in 1973 when PG&E discovered the Hosgri earthquake fault three miles out in the ocean. Though the original plant design included earthquake fortifications, it did not take into account the Hosgri fault. The Nuclear Regulatory Commission told PG&E to modify the plant to withstand a stronger earthquake.

Mr. MIELKE: We finally decided it should be -- the plant should be redesigned to handle a 7.5 Richter scale earthquake. Although that was always considered an outlandish possibility that we could ever generate that kind of force, we nevertheless designed for it.

HOLMAN [voice-over]: Despite PG&E's corrections for a stronger earthquake, opponents still believe that the plant was not safe and staged this 1978 demonstration to stop further construction.

DEMONSTRATOR: If there was an earthquake, if there was an accident, a leakage of radioactive materials, it would affect everybody because of the ocean currents, the wind, you know, the water supply -- everything would be contaminated.

HOLMAN [voice-over]: One of the first groups to form was Mothers for Peace, followed by the Abalone Alliance, a group devoted primarily to nonviolent direct action. Nancy Culver lives in San Luis Obispo. She was one of the earliest opponents of Diablo Canyon.

NANCY CULVER, Mothers for Peace: There's a standing joke in California that says if you want to locate an active earthquake fault, ask PG&E to site a nuclear power plant. They tried several other locations before they settled on Diablo Canyon, each of them with serious earthquake problems.

HOLMAN [voice-over]: In 1981, opponents staged yet another demonstration, fearing the imminent licensing of the plant by the NRC. The license was awarded but then revoked days later, not because of the opposition's blockade but because of a huge design error discovered by PG&E engineers. Blueprints for the Unit One reactor had been used for the Unit Two reactor, and as a result earthquake supports had been put in backwards. The NRC immediately revoked PG&E's license and the error proved to be one of the costliest mistakes in the history of the industry. John Martin heads the NRC regional office that regulates Diablo Canyon.

JOHN MARTIN, regional director, Nuclear Regulatory Commission: This is a case where the NRC does not check all of the caluculations and all of the design. It should have been discovered much, much earlier.

HOLMAN [voice-over]: Over the past two and a half years, PG&E has spent millions of dollars trying to correct the design error. But the company says it would have finished those corrections sooner had it not been for the opposition.

Mr. MIELKE: If the plant did not have opposition from dedicated opponents to drag out the whole process of this re-review, which I think otherwise could have been done in six months' time, it would have cost less.

Ms. CULVER: The vast majority of the delays have been caused by PG&E's bad management, PG&E's errors. For two and a half years they've been trying to fix the fixes that they did wrong the first time at that plant. So I think that PG&E is pointing the finger when in fact they should be pointing it at themselves.

HOLMAN [voice-over]: Now that corrective measures have been taken and 17 years after ground breaking, PG&E says its plant is ready for operation. But concern about the construction of Diablo Canyon continues, and for the first time the charges come from people inside the plant, workers who actually helped build it. There are over 30 such whistleblowers. One of them is Harold Hudson, a quality assurance inspector.

HAROLD HUDSON, PG&E employee: Yes, I think there's enough evidence right now to suggest that there has been a significant breakdown in the quality assurance program.The program does not meet the code of federal regulations.

HOLMAN: Did you see anything at the plant that could create a major safety problem?

Mr. HUDSON: The major areas was welding. I identified, as an internal auditor and later on my own time, what I felt were significant quality assurance breakdowns in welding. This involved unqualified welders, unqualified welding procedures, using welding procedures that were not relevant to the type work being performed. The result in my opinion is we have a powerhouse out there that quality assurance cannot really assure that the plant is safe and ready to operate.

Mr. MIELKE: I can reject out of hand that there is widespread poor quality in the construction of that plant. Absolutely, flat out.

HOLMAN [voice-over]: Whether or not the plant is licensed, experts say PG&E customers will face higher utility bills. But if the plant is not licensed, PG&E chairman Mielke says California will face a shortage of low-cost power.

Mr. MIELKE: We're short of capacity in this state. That's why we planned the plant, to produce power at lower cost than we could provide that amount of power by any other source. That's what it's going to do.

HOLMAN [voice-over]: And if the plant is licensed, for some there will be fear.

Mr. HUDSON: My family and i, we live within seven miles of the powerhouse. There are many, many people here on the central coast like myself that are concerned that some night those evacuation signs will go off, meaning that there's been an accident, Diablo Canyon. I want to reduce that risk.

Ms. CULVER: I think that everyone in this country needs to care about how the NRC performs in the Diablo Canyon case. If they can license this plant, they will license anything.

MacNEIL: As we said earlier, the NRC has reviewed the allegations leveled by Mr. Hudson and the other whistleblowers, and concluded that they're unfounded. On Monday the commission is expected to make a final decision.

For the fourth time in the Reagan administration, Congress has overriden a presidential veto. The House voted 309 to 81 today to approve a $180 million program to support state programs in research on water resources. The Senate approved it yesterday by 86 to 12. In his veto message the President had said the program dealt with local problems and should be paid for by local money. But Western members of Congress argued that water programs meet national goals.

[Video postcard -- Mt. Gibbs, California]

MacNEIL: Loyalty to Israel became the issue today as the battle between Gary Hart and Walter Mondale moved to New York, where some 40% of the Democratic vote is Jewish. Campaigning for the April 3rd primary, Hart told a Jewish audience that he would move the U.S. Embassy from Tel Aviv to Jerusalem if he were president. When a listener pointed out a recent letter from the Hart campaign suggesting it might take international negotiations to decide whether to move the embassy, Hart said "I apologize for that ambiguity. It is unfortunate. I assume responsibility for it." Meanwhile, Walter Mondale charged that Hart had flip-flopped on the issue. Speaking in Los Angeles, where he attended a $1,000-a-plate fundraiser, Mondale said Hart's position represented "a blatant political shift." The Teagan administration opposes moving the embassy. In his New York speech, Hart charged that Mondale had supported weapons sales to Israel's enemies that he had opposed. Jesse Jackson took the day off from campaigning today after a tour of Virginia, which holds caucuses this weekend. Jackson predicted "We're going to win Virginia."

Judy? Bankruptcy Reform Bill

WOODRUFF: The House of Representatives passed a bankruptcy reform bill yesterday which has major implications for consumers. The legislation would make it more difficult for people who file for bankruptcy to wipe out their debts. It also grants ultimate authority over bankruptcy cases to federal district judges. But the most controversial part of the bill reverses a recent Supreme Court decision which made it easier for financially troubled companies to declare bankruptcy and break their union contracts. The House bill would allow companies to do so only with the approval of a bankruptcy judge, and then only if the judge found that continuing the labor contract would cost workers their jobs and lead to the financial collapse of the company. The House bill is being strongly supported by organized labor and fiercely opposed by the business community. And here to give us a flavor of the debate is John Irving, a management lawyer who has advised the U.S. Chamber of Commerce, which is lobbying heavily against the House bill. On the other side we have Bruce Simon, a special counsel for the AFL-CIO.

Mr. Simon, why did you fight so hard to see this bill passed?

BRUCE SIMON: Well, because we were convinced that the Supreme Court had completely misunderstood what the intention of Congress was in 1978 when it passed the original Bankruptcy Reform Act. We saw that companies such as Continental and Wilson were abusing the bankruptcy law and using it to achieve ends that we think are inconsistent with the American labor policy, which is to stabilize labor relations and to permit fair and free competition between companies on equal footing. The Beldisco decision, the Supreme Court decision, knocked that all into a cocked hat, and we thought it important for Congress to be able to reassert its primacy and to reassert labor policy in this area.

WOODRUFF: Mr. Irving, and why were you fighting so hard against seeing this bill passed?

JOHN IRVING: Judy, the real crux of the matter is that organized labor is seeking preference. They're not seeking a test that's fair; they're seeking to insulate union contracts from Chapter 11 bankruptcy. And let's be clear, when we're talking about Chapter 11 bankruptcy, we're really talking about reorganization. The fundamental purpose of a reorganization is to get the debtor back on its feet so that it can continue to operate, which in turn will --

WOODRUFF: A bankruptcy reorganization.

Mr. IRVING: A bankruptcy reorganization. So that the company can continue to operate and so that workers will continue to have jobs and creditors will continue to have their interests protected and so forth.What organized labor really wants is immunity from Chapter 11 reorganization. They want to protect the union contract in a way that everybody else is offended first. That is, the creditors, the nonunion people, the management, everybody that is connected with that company in any way gets hurt financially before the union contract is affected.

WOODRUFF: Mr. Simon, is that the case?

Mr. SIMON: Well, let's talk about common sense. I mean, who has a greater interest in the preservation of a company than the union that represents the workers that want to continue to have jobs for that company? The notion that unions would somehow act destructively and undercut the interests of their own members is absurd. The fact of the matter is, however, that labor contracts are special. It's not just like a contract for the supply of widgets. Labor contracts have a very special role in American law, recognized by Congress 50 years ago. It's a public policy that favors collective bargaining, that favors the stability of collective bargaining agreements and that provides that they should not be ripped up by a bankruptcy judge who knows nothing whatsoever about the national labor policy, simply because some banker insurance company thinks it has a priority claim.

WOODRUFF: All right, let's talk about a specific of this bill. Why should -- let me ask you about a specific. Why should a company have to be on the verge of collapse before it is permitted to tear up a labor contract?

Mr. SIMON: Because if the object is to preserve jobs and to preserve the company, one has to assume that a union would act in good faith, as we would expect management to act in good faith, to preserve those jobs. All we're saying is that it's only when we get to the point where the company cannot survive, where the interests that John quite properly identified as being fair interests can all be protected, that a fundamental national labor policy agreement should be able to be ripped up.

WOODRUFF: Mr. Irving?

Mr. IRVING: Judy, what organized labor is really trying to do is elevate the union contract to the apex of the problem such that it is really the union contract which is the ultimate thing to be protected and not the interests of all of these other creditors, as well as the employees. And if what you do -- the Supreme Court in the Beldisco case said that what you have to do is balance the equities, which means that you have to look at all of the different interests and not just the interests of the employees, but take a special look at the contract. And what organized labor is saying is that they want a test which says that the preservation of jobs is the ultimate thing to seek, and furthermore that a labor contract cannot be set aside, cannot be rejected unless the debtor is on the brink of collapse. And I would suggest that it's just too late in most cases.

WOODRUFF: All right. But isn't what labor is saying, though, is what the Supreme Court did, went too far in one direction, and they're saying that the scales should be tilted back in another direction? And what you're saying is let's go all the way in the opposite? Isn't there some middle ground?

Mr. IRVING: I'm just saying that organized labor is saying one thing and doing something else.

Mr. SIMON: We talk about organized labor. Let's remember, this is a nation of workers, not just union workers, and workers want jobs more than they want anything else, and they want stability in their employment. They obviously don't want to destroy an employer. What we're talking about here is a process. There is a process which has been favored by this country since 1935 called free collective bargaining. That does have a special character in our legal system and does have a character, I suggest, more significant than protecting the least efficient, the most inefficient of companies, the marginal companies that would seek to use and abuse bankruptcy codes to get a competitive edge over healthy business. I can't understand why healthy business would want sick businesses to be able to get a labor-cost advantage over them and to be able to compete unfairly against healthy businesses.

Mr. IRVING: You see, it is the public policy -- we can sit here and debate whether the bankruptcy laws are a good idea or not -- it is the public policy of the United States to shield companies that are on the brink of insolvency.

Mr. SIMON: Precisely, but not --

Mr. IRVING: And to try to keep them in business. And if the reason that the employer has gone into Chapter 11 in the first place is his union contract, he's going to wind up in liquidation if he can't do something about that contract.

Mr. SIMON: John, the problem is you've converted a shield into a sword. To be sure, bankruptcy courts are supposed to be a shield to the truly distressed. What's happened is that unscrupulous employers have taken that shield, converted it into a sword which they are using unfairly to obtain advantages they weren't able to get in collective bargaining, to the detriment not of union labor, but of labor in general and the American economy in general, including healthy American business.

WOODRUFF: Let me ask Mr. Irving, what will happen if this bill is passed by the Congress?

Mr. IRVING: I think it's clear if this bill is passed by the Congress, you'll see many, many more liquidations. And you'll probably see more liquidations with unionized employers than with nonunionized employers. Because if it is impossible to do something about the very thing that has driven them into Chapter 11 in the first place, they'll never come out of Chapter 11 successfully and they'll wind up in Chapter 7, which is liquidation.

WOODRUFF: And what are you saying will happen if the bill is not passed?

Mr. SIMON: The fact of the matter is that unitl February 22nd, one month ago, the standard in this country was the standard that Congress is reestablishing this week, so that there has been no flood; there have indeed been a few outrageous examples of employers abusing the bankruptcy laws. But by and large, there was not this flood. And all Congress is seeking to do is to restore the balance to the point it was until one month ago.

Mr. IRVING: Judy, that very balance is the balance that the Supreme Court said 9-0 that the Congress never intended.

Mr. SIMON: And that's why Congress is correcting the Supreme Court.

Mr. IRVING: And organized labor is going back to a balance which gets it well beyond the earlier balance that it wanted struck, and wants to do that without any hearings at all in the Congress.

WOODRUFF: We could go on for hours and it would be fascinating, but let me ask you a quick prediction: is this going to pass the Congress or not?

Mr. SIMON: We certainly think so. Congress knows what it intended and will do so.

Mr. IRVING: If Congress has any sense, it won't.

WOODRUFF: Okay. Mr. Simon, Mr. Irving, thank you very much for being with us. Robin? Halston & Penney -- Class Meets Mass

MacNEIL: Now we turn to a different sort of economic story. It's a story of high fashion, high volume and high finance, as one of America's big names in fashion turns populist. Charlayne Hunter-Gault has the details. Charlayne?

CHARLAYNE HUNTER-GAULT: It's been almost a year since the world of high fashion was jolted by a move of one of its top designers. Halston, the man who dresses the likes of Jacqueline Kennedy Onassis, Elizabeth Taylor and Liza Minnelli, cut a deal with the mass merchandising chain of J.C. Penney. In one highly-publicized stroke of the pen, Halston moved from class to mass. The reaction of the fashion world then ranged from shock to outrage.New York's bastion of old-line elegance, Bergdorf Goodman, dropped Halston's label after 18 years. But now, all indications are that Halston may have been on the leading edge of a revolution, and many believe that neither the world of fashion nor its customers will ever be the same again.

[voice-over] This is the world that Halston has always inhabited: elegant fitting rooms and showrooms on the 21st floor of the Olympic Tower in New York City. Far removed from the seaminess of Manhattan's Garment District, Halston creates here for America's upper crust. These gowns being shown to the press are part of Halston's spring collection. An average dress sells for around $5,000. But in what has been called the most significant license agreement in the history of the fashion business, Halston changed a lot of that when he signed with J.C. Penney. At a press conference last year, Halston gave part of the reason for his bold move.

HALSTON: Well, you know, strangely enough, when I was a kid I always shopped at Penney's. My mother always took me to Penney's to buy all the clothes that we wore to school and everything else. And it's true, I come from Des Moines, Iowa, and the Penney store in Des Moines, Iowa, is a very nice store. So my mother being a practical Midwestern lady always took us there.

HUNTER-GAULT [voice-over]: But there's more to the deal than sentimentality. The fashion business is just that, a business. In fact, Americans spend some $100 billion on clothes in one year. The agreement that Halston signed with Penney's guarantees $1 billion in sales over the next five years. Halston's share of that could be about $15 million a year.

HALSTON: That makes a very good mix for both catalogue and retail. And we signed the largest contract ever signed in the fashion business, in the history of the fashion business, which is a billion-dollar contract, guaranteed contract from J.C. Penney's over a five-year period, you see. So that is an enormous amount of money. Nobody's ever had a contract quite like that in our industry.

HUNTER-GAULT [voice-over]: The fashion industry, like any big business, is closely monitored by analysts like Walter Loeb of the firm of Morgan Stanley. Loeb says that the recession was one reason that designers like Halston looked for new outlets for their products, and he cites two other factors.

WALTER F. LOEB, senior retail analyst, Morgan Stanley & Company: Avarice, greed may have motivated some of it, but the reality of today's consumer may also have suggested it to designers that they should move in that direction. I think Halston and J.C. Penney started a trend. I think that there will be more of this trend visible in the next three and four years as more designers will accept commissions or challenges by the mass market to design merchandise for them.

CUSTOMER: I think the items are very smart, style-conscious, right in the ballpark with high style.

2nd CUSTOMER: I look for something that is versatile. You know, that you can dress up and dress down. And because most people don't have that big a wardrobe.

3rd CUSTOMER: Something that can go between work and home and going out on an evening, and can let the baby pull on it without getting torn apart, or something that's easy to care for without being too expensive.

WOMAN: They are very conscious of the price of things, and something has to give, and so they are looking for a stylish and elegant wardrobe like they're accustomed to, but they would like it at a smaller price.

HALSTON: It's really that mass merchandising public which Penney's appeals to, which is the popular American public that really, you know, doesn't have too much money to spend, but, you know, will spend maybe $65 for a skirt or something like that. It's noncompetitive with, you know, our other lines of fashion. You know, we make clothes up to maybe $100,000 for a for coat. You know, and things we make here made to order, start at about $3,000. But, no, it's a totally different client.

HUNTER-GAULT: How much of a difference is there in the Halston III line and the exclusive designer clothes that appear in very fancy shops?

HALSTON: Oh, well, they're totally different. You know, it's a different shirt, it's a different jacket, it's a different pair of pants, it's a different fabrication. It has certainly our signature -- you know, because we make our own clothes -- but I think it's a totally different offering. It's something more of a popular kind of a thing that I'm not able to do on the fancy end of the fashion business. It's more interesting to entertain a large public, you know -- the more the audience, the more interesting it is, perhaps. I think something like, I don't know, half of America at some point in time during the year shops at J.C. Penney's. You know, that's very interesting.

HUNTER-GAULT [voice-over]: At J.C. Penney world headquarters in New York, they find that more than just interesting; they see it as the key to bigger and better business. We spoke with David Miller, executive vice president.

[interviewing] Are these the traditional Penney customers, or have you been able to lure some of the more upper-crust shoppers away from some of the more exclusive stores because you have the Halston III line?

DAVID E. MILLER, executive vice president, J.C. Penney Stores: That's been the encouraging part. Half of the people who bought Halston merchandise from us had never bought apparel in a Penney store before. And 98% of those who bought said they would buy again.

HUNTER-GAULT [voice-over]: For the 1,700 Penney stores around the country, having the Halston line has had something to do with their sales of $11 billion this year. But Penney executives like Dave Miller aren't saying just how much. What he would say was this.

Mr. MILLER: We have a contract that has at least a 10-year life to it. I would be surprised if it didn't go beyond that.

HUNTER-GAULT [voice-over]: In the meantime, Halston is busy at work designing a Penney's men's wear collection, a line of children's fashions, and by 1985 he plans to add home furnishings.

[interviewing] What's the bottom line, who's the beneficiary of this move?

HALSTON: The American public. But you know, it always has to be good for everyone. I think it has to be, first of all, good for you; has to be good for Penney's; and it must be good for the American public. It has to equalize itself on all levels, or any business effort doesn't work. You know, it can't be just good for one person.

HUNTER-GAULT: Clearly, others in the fashion industry agree, the latest being Perry Ellis, one of the country's hottest designers, who just recently signed with Levi Strauss, the nation's largest apparel company. This latest deal has led some observers of the fashion industry to conclude that it's just a matter of time before the lines between mass and class are blurred beyond recognition. Others, like Halston himself, insist that no matter what happens, there'll always be an upper crust.

Robin?

MacNEIL: Earlier this week we showed a documentary report on a case of gang rape and its effect on the community involved, New Bedford, Massachusetts. Two men were convicted over the weekend in one trial stemming from the case, and today four others, who were tried separately, heard the jury foreman pronounce their verdicts. Here's how it went as broadcast by CNN.

JURY FOREMAN: We find the defendant John [unintelligible] guilty.

MAN: In the case of Commonwealth versus Victor Raposo, defendant #12268, how do you find the defendant, guilty or not guilty?

FOREMAN: Guilty.

MAN: Guilty of what?

FOREMAN: Aggravated rape.

MAN: In the case of Commonwealth versus Jose Vieira, defendant #13795, how do you find the defendant, guilty or not guilty?

FOREMAN: Not guilty.

MAN: In the case of Commonwealth versus [unintelligible], defendant #13796, how do you find the defendant, guilty or not guilty?

FOREMAN: Not guilty.

MacNEIL: The two men who were acquitted were not implicated directly in the attack on the woman, even though witnesses testified that they had interfered with attempts to stop or report the rape.

[Video postcard -- Lake Champlain, New York] Book Review: "Testing the Current"

MacNEIL: Finally tonight, our weekly book review. The book is Testing the Current by the Pulitzer Prize-winning literary critic William McPherson. Our reviewer is A. C. Greene.

MacNEIL: What is the story of Testing the Current?

A. C. GREENE, literary critic: Testing the Current is basically one year in the life of an eight-year-old boy. But it's under very unusual circumstances. It takes place in upper Michigan in a sort of a semi-resort town. They go out to the island in the summertime, the families do.And these are very sophisticated people. This is an industrial society, managerial society, we would call it today. Not too many terribly wealthy people, but people that don't have to really sweat out the Depression, which is winding down in 1939, the year that's involved here. The boy moves among these sophisticates; he doesn't realize quite what he sees, but the reader begins to see the stories within the story. And it's very intricately woven together, but very skillfully woven together.

MacNEIL: And what is different in this from the many other novels of the young boy growing up in his view of his parents' world?

Mr. GREENE: Coming of age and all. Well, this one doesn't -- it takes it from the boy's viewpoint but does not become a Tom Sawyer or a Huck Finn type book. The boy is the agent; he is the reporter, more or less. He sees these things; he tells what he sees, but he doesn't always understand, certainly not the significance. And I think William McPherson, the author, has used some very adroit handling of this kind of reporting.

MacNEIL: What is the book's success, in your view?

Mr. GREENE: The success I think is in lifting this out of the general area of the coming-of-age book, the boy or the girl being disappointed in their parents and that sort of thing. This young eight-year-old sees the society around him. He's picked up by the women and they tell him things. He observes his own mother in an adulterous situation -- he doesn't realize it. And yet it's not a flashback thing -- you don't come back 40 years later and find the foundations of all these houses and things. Only two places in the book is there a hint that there is a future, that something does change. And they involve only a couple of people that the reader ordinarily would like to know about.

MacNEIL: How good a view of it is it of that society in that year?

Mr. GREENE: I think it's a beautiful picture of that society. I was not familiar with that society. Frankly, I was about the same age as the boy, a little older, and where I was raised and among the people I was raised, these would be considered snobs. Very country club and that sort of thing. But the true human values are certainly reflected, and the boy -- I think the book is going to endure, if that's not too strong a word. I think it's a contribution to a kind of literature that we'll be going back to. Granted that today the shelf life of even the best book is about 60 days, I think that McPherson, who incidentally is a critic, is a book critic in Washington and has won a Pulitzer Prize for his criticism. But this is his first novel, and I think it's a real contribution to that literature. And I think that people who were not even born in 1939 can find themselves in their own growing up very easily through this book.

MacNEIL: Thank you.

MacNEIL: Once again, the book we've been reviewing is William McPherson's Testing the Current, published by Simon & Schuster. Judy?

WOODRUFF: Turning now to a final look at today's top stories. Edwin Meese, President Reagan's choice to become attorney general, asked the Justice Department to appoint a special prosecutor to examine the charges against him.

Francois Mitterrand, president of France, in a speech before a joint session of the Congress, called for a global effort to reduce the level of misery in the world.

The Navy is starting an investigation of the collision yesterday between the aircraft carrier Kitty Hawk and a Soviet submarine.

The House and Senate are headed for a showdown over the bankruptcy laws and a provision that would make it difficult for companies to break union contracts.

And finally, the Mississippi State Senate today ratified the 19th Amendment. That's the one that gives women the right to vote. The amendment went into effect 64 years ago, and it has yet to be ratified in one more state, Delaware.

Good night, Robin.

MacNEIL: Good night, Judy. That's the NewsHour for tonight. We'll be back tomorrow night. I'm Robert MacNeil. Good night.