The MacNeil/Lehrer NewsHour

MS. WARNER: Good evening. I'm Margaret Warner in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Monday, we have full coverage of the two top stories of the day, the release of President Clinton's budget proposal and the debate over how to stop the killing in Bosnia. NEWS SUMMARY

MR. LEHRER: President Clinton today proposed a $1.5 trillion budget for 1995. It would bring the federal deficit to its lowest level in six years, mostly by eliminating over 100 government programs and reducing hundreds of others. Some of the savings would be used to build highways, house the homeless, and fund a Head Start program for children. The budget proposal makes no major changes in income taxes but does include some user fees on a new tobacco tax to help pay for health care. Mr. Clinton spoke about his budget plan this afternoon to a business group in Houston, Texas.

PRESIDENT CLINTON: It continues to cut spending because these budget caps are very tight. It's the toughest budget on spending cuts the Congress has yet seen. I hope that you will encourage the members of your delegation, especially this year when we're not having this contentious fight over the tax issue to vote for this budget, because if we don't do it, we cannot keep the economic recovery going, and if we do it, we can keep the recovery going.

MR. LEHRER: Republicans said they were pleased with the cuts in government spending but said the savings should not be used to fund other programs. Sen. Pete Domenici of New Mexico, the ranking Republican on the Senate Budget Committee, said the Clinton plan does not really reduce the deficit. We'll have much more on this story right after this News Summary. Margaret.

MS. WARNER: Despite international outrage over this weekend's devastating mortar attack on a crowded market in Sarajevo. There's still no consensus in the West on what to do about it. The President's advisers met in Washington and European Union ministers met in Brussels, but the day ended without any agreed-upon course of action. Mr. Clinton did endorse a call by the U.N. Secretary General that NATO prepare for retaliatory air strikes, but he stopped far short of calling for actually launching such strikes. The President spoke in Houston this afternoon.

PRESIDENT CLINTON: The United Nations Secretary General Boutros- Ghali has asked the North Atlantic Council to take the necessary decisions which would enable NATO's military forces to respond to requests for air strikes directed against artillery and mortar positions around the city of Sarajevo that can do the kind of horrible things you saw on Saturday. If the United Nations mission there determines who is responsible for the attacks, in other words, the Secretary General has now asked that authority be given to our commanders there on the ground to take appropriate action. I very much welcome that request.

MS. WARNER: This afternoon, Sec. of Defense Perry pledged that by Wednesday the U.S. would propose several options to NATO, possibly including air strikes, and in Brussels, European ministers called for demilitarizing Sarajevo using air power to enforce that if necessary. But in Moscow, Russia's foreign minister warned that air strikes would be the least successful way to resolve the conflict. Meanwhile, more of the victims of Saturday's carnage were airlifted to an American military hospital in Germany. The U.S. has sent a 13-member medical team and several cargo planes to Sarajevo. We'll have more on the story later in the program.

MR. LEHRER: Israel launched air and artillery attacks against Shiite targets in South Lebanon today. It came after an ambush of Israeli soldiers. Richard Vaughan of Worldwide Television News narrates this report.

MR. VAUGHAN: Israeli warplanes retaliated against the ambush with a massive show of force. Three villages in the Hezbollah-held mountains south of Beirut were pounded by rockets. Artillery batteries and tanks in Israel's buffer zone also fired more than 100 shells into the Hezbollah territory. Israel was responding to the bloodiest attack on its forces in six months. Three Israeli soldiers were killed and four injured when guerrillas with machine guns and anti-tank rockets hit an armored Israeli patrol on the edge of Israel's self-declared security area. The injured were treated across the border in Northern Israel. Similar attacks against Israel's buffer zone are expected later this month as fundamentalist guerrillas in Lebanon mark the second anniversary of the death of Hezbollah Leader Sheikh Abbas Musawi, who was killed in an Israeli ambush.

MR. LEHRER: A fourth Israeli soldier died after that report was filed.

MS. WARNER: A Teamster strike against United Parcel Service got underway today, but its impact is far from clear. Teamster officials claimed a near total walkout in New England and some mid- Atlantic and Southern states, but other Teamster locals ignored the strike call, and UPS officials insist that there's been no disruption in its service so far. Friday a federal judge issued a five-day restraining order barring a strike, but the union ordered one anyway to begin at 8 AM today. The union is protesting a recent UPS decision to more than double the weight limit on its packages to 150 pounds. UPS's main competitor, Federal Express, already carries 150 pound packages.

MR. LEHRER: Actor Joseph Cotten died yesterday at his home in Los Angeles. He starred in movies for more than 40 years, his first big role being an Orson Welles' 1941 classic "Citizen Kane." He was 88 years old. And that's it for the News Summary tonight. Now it's on to the Clinton budget plan and what to do about Bosnia. FOCUS - BALANCING THE BOOKS

MS. WARNER: First tonight, the President's new budget proposal. Last year, the administration took on the fight of its young life to get a Congress to pass the long-term deficit reduction package. This year, the Clinton administration and everyone else is having to live with the consequences. That's what this new budget represents. In a moment, we'll talk to Budget Director Leon Panetta and two lawmakers on Capitol Hill. First, this backgrounder from Kwame Holman.

MR. HOLMAN: Budget Director Leon Panetta opened this morning's briefing for reporters noting the President's budget is user- friendly.

LEON PANETTA, Director, Office of Management & Budget: Again, in keeping with the spirit of the administration, if you're a high- tech wonk, we also have a CD-Rom which has the budget as well. It doesn't have all of the appendix here, but at least it's got the, the basic elements that are contained in this as well.

MR. HOLMAN: Panetta said that tax increases and spending cuts passed as part of last year's Clinton budget are in large part responsible for the growing strength of the economy and that this new budget would continue that trend.

LEON PANETTA: What this budget reflects is the importance of staying on track with what the President and Congress and the nation built last year. In terms of deficit reduction, continuing the deficit downward, this is the most consistent deficit reduction in 40 years.

MR. HOLMAN: Speaking to business leaders in Houston this afternoon, President Clinton picked up on that theme.

PRESIDENT CLINTON: If the Congress adopts it, it will keep the deficit coming down, it will keep interest rates down, it will send a clear signal to the Fed and to the rest of the world that we mean business and that the investment climate will continue. These lower interest rates, if they can be maintained, will save over $20 billion in deficit in next year's budget alone and over $150 billion in the next five years.

MR. HOLMAN: The President had little room to maneuver in writing his budget, because Congress passed new budget laws last year that tapped federal discretionary spending. That includes all government spending, except for entitlement programs such as Social Security, Medicare, and Medicaid, and interest on the deficit. The administration proposes to cut $25 billion from discretionary spending. About 17 billion of that would be applied, instead, to the deficit, leaving about 8 billion dollars to fund new spending the administration planned. The administration proposes to cut the budget by eliminating 115 programs and reducing 200 others. That includes such items as cutting the federal work force by 118,000, reducing mass transit assistance to states and closing regional offices of the Department of Agriculture. Some of the new spending would occur in prime programs, including money for new police hires and more money for programs such as Head Start and energy conservation. On Capitol Hill, Republicans responded quickly and skeptically to the Clinton budget.

REP. JOHN KASICH, [R] Ohio: To say that $176 billion deficit is reason to pop the champagne corks really kind of tells you that we have lulled ourselves and we are almost anesthetized by deficits now. And now is the time, now is the time to make some dramatic changes to reduce the overhead of the federal government, and they haven't done it.

MR. HOLMAN: Now begins the debate in the committees of Congress over the President's budget, a debate likely to be complicated by efforts by Republicans and some Democrats to cut the federal budget even further.

MS. WARNER: Now we talk to the man in charge of putting the President's budget together and to two people who will have to wrestle with the budget in Congress. Leon Panetta is the Director of the Office of Management & Budget. Pete Domenici of New Mexico is the ranking Republican on the Senate Budget Committee, and Democrat David Obey is a member of the House from Wisconsin and chairman of the Joint Economic Committee. Welcome, gentlemen. Mr. Panetta, let me start with you. I wish we had time to cruise that CD-Rom of yours, but since we don't, tell us, is this mostly a spending cut bill, a deficit reduction bill, or is it primarily a way of redirecting spending into priorities that the President cares about?

MR. PANETTA: Well, it's both. This budget, obviously, is a very tough budget. The main target for the budget aims at trying to reduce the deficit and continuing the track that we established last year with the economic plan. The deficit is reduced by $126 billion from what it was projected to be at $302 billion before, and now we're aiming for $176 billion. It's about a 40 percent cut on the size of the deficit. It's the most consistent deficit reduction in over 40 years, but at the same time, by doing that, we want to keep the economy on track by continuing to reduce the deficit. And just as importantly, we want to redirect some of these funds to the investments that we think are most important for the future, investments in technology, in education, in crime enforcement, in areas related to education and children. These are the key investments that the President wanted to stress. But overall, we are talking about a very tight budget that demands that the President and the Congress establish priorities, what programs need to be cut and done away with, what programs ought to be emphasized for the future.

MS. WARNER: And how do the improving economic conditions affect your -- both your assessments and your plans for this budget?

MR. PANETTA: Well, let me give you an example. Of the $126 billion reduction in the deficit, about $83 billion of that is due to the economic plan, half of that coming from the revenues of the economic plan, half of that coming from the spending cuts that are part of that plan. About 22 billion comes as a result of improvement, particularly in interest rates, affecting obviously the revenues that flow into the government, but obviously affecting lower interest rates and, therefore, lower cost for the federal government. So you could say over $100 billion of $126 billion is due to the economic plan that was put into place. The fact is that as the economy improves, we do benefit from that, but that's the whole purpose here. The purpose is to discipline federal spending and in doing so, send a major signal to the economy that we are getting our economic house in order and that we can proceed with an economic recovery, continue low interest rates, continue the kind of job production that we've seen. I think it is a major signal, that we ought to be confident about the direction of the American economy for the future.

MS. WARNER: Well, some of these programs you're suggesting cutting are great old Democratic favors, things like reducing the subsidies for home heating oil for poor people or cutting mass transit subsidies. President Bush proposed a lot of these cuts and got nowhere. What gives you the confidence that Mr. Clinton can succeed with those?

MR. PANETTA: Well, there's tough choices here. Nobody questions that. We're talking about a hard freeze with regards to discretionary spending, and as a consequence, we've got to make some very tough decisions. How can we better manage the government? How can we better target federal programs? Where can we find the savings that need to be found? Those were the kind of themes that we used as we approached the budget. With regards to the programs that you talked about, those kinds of management themes were applied. On low income fuel assistance, for example, this is a program that does target legitimate assistance to people in need, particularly in hard, in cold weather states. But the problem is that the formula for that particular program instead of just distributing the funds, targeting the funds to those states in need, also at the same time distributes funds to Hawaii. For example, last year, almost 1.5 million dollars went to Hawaii. I mean, this is fuel assistance supposedly for cold weather states largely. But we distributed about $2 million dollars to the Virginia Islands and to Guam and Puerto Rico. That makes no sense! Let's better target that program, and we're asking Congress to work with us on that. Same arguments can be made on public housing. We've got $8 billion in the pipeline on public housing. We're not against public housing. We just want to make sure thatthe public housing is being constructed. And so it gives us the opportunity, therefore, to slow down what goes into the pipeline and ensure that it's coming out the other end. I think there are legitimate arguments that support those recommendations. I'll tell you this. I think Congress is going to have to look long and hard at some of these reductions, because they too are operating under a hard freeze cap. They're going to have to find savings in order to fund the investments that we care about, but more importantly, in order to meet the cap that's in the budget agreement.

MS. WARNER: Of course, from the conservative side, you're going to hear members of Congressman Kasich was, that $176 billion is still a huge deficit, and we've become anesthetized to the size of those deficits, and there should be more. I mean, what do you say to them, this is the best we can do?

MR. PANETTA: Well, you know, I remember during the '80s that every budget that came up showed a deficit that continued to climb and to climb and to climb. We were going to $300 billion deficits. We were going to $400 billion deficits by the end of this decade. When we got into the next century we were going to be at $600 billion annual deficits. I'm rather pleased as Budget Director that we have a plan that's taking us from $302 billion down to $176 billion. If we pass health care reform and put health care costs in control, we'll continue to have a downward trend with regards to the deficit. You know, sure, people can always talk about, gee, why don't we do away with $176 billion? The fact is that most members who talk about that never make the tough choices about where the cuts are going to be made. It's a little bit like the Balanced Budget Amendment. Everybody always says, oh, I'm for changing the Constitution to balance the budget, and when you ask them exactly how they're going to do it, they never tell you. This is an opportunity to keep this nation on track with solid deficit reduction. It's the first time we've done that in years, in years. We didn't see that for the last 12 years of Republican administration. We haven't seen three years of consecutive deficit reduction since 1948. I mean, I think it's fine for people to say we ought to do more. How about if we work together for the first time in a long time to try to stick to the targets that we set in the economic plan? I think the American people would be pleased if we just did what we said we're going to do, which is to meet these targets.

MS. WARNER: Well, let me bring Sen. Domenici in now. Senator, first -- well, why don't I just get your reaction to that.

SEN. DOMENICI: Well, I was talking to Leon today. You know, we worked a long time up here together, and actually I told him he was a fantastic spin salesman on this, that he was better than, that Darman, he was better than Stockman, and I didn't even know that he'd put it all on tape for the computers. Now we really have something going. But anyway, let me suggest that -- let me phrase the budgets that Presidents Bush and Reagan sent up to the Democrats up here and see what they used to say. They used to say, "It's dead on arrival." I have a phrase for the President, but let me predicate it on this. Frankly, I think what we have is a President who is an extreme activism, wants to do more with government each year, and yet, he's pushed and constrained by a mandatory fiscal straight jacket not of his own doing, and so I think this is what I would choose to call a missing in action, an MIA budget, because what we have to be worried about is what's not in this budget. And I'll go into four or five of those in a minute just to give you a couple of examples. But, but first let me suggest the deficit reduction, as far as all of the programs that Congress appropriates, all of defense and all of the things we do every year in appropriations, that number was fixed in law at five and forty-two billion, four hundred million dollars in the 1990 budget summit. So the President inherited that number because Congress stuck by it. What that meant was that the President didn't have any real alternative, other than to submit a budget that met those targets, unless he wanted to acknowledge that he would have to cut across-the-board the budget he submitted that would be in excess of that. So I think everybody should know that. Second --

MS. WARNER: Well, what's missing, Senator? What's missing in action?

SEN. DOMENICI: Well, missing in action, let me just tick off a few. Can I?

MS. WARNER: Yes.

SEN. DOMENICI: First, the budget, itself, says that the defense budget is $20 billion short of the bottom-up review. So that has to be found some time. The President said we're already cutting too much, so there's 20 billion that's missing in action there. It leaves out welfare reform, which is a very expensive new program with job guarantees and the like, and essentially it says it isn't going to cost anything. It leaves off the mandatory taxes to be imposed on federal, on all companies in America to fund the President's health care program. It leaves off $11 billion in losses of revenue that are going to result from GATT. It leaves off 3 billion in new taxes needed to pay for Superfund. We can go on from there, but let me suggest this is the result of a President who wants to do more and is rigidly tied by caps. And my last point is so we don't get too excited about all of the cuts and terminations, I figure them to be worth $3 1/2 billion in 1995 on the outlay side, and actually the budget will go up about 11 1/2 or 12 billion on the domestic side. So whatever you cut there will be spent somewhere else, because the cap of 542 will be the overall control on spending. Now, frankly, all of this is good, so long as we do not think it all came from last year's activities. It really didn't. There was a lot of re-estimating besides taxes that go into this. Nonetheless, the budget's coming down, and my last point is, Mr. Panetta's right, we used to worried about the out years, and we ought to be worried again, because the Congressional Budget Office says they'll be back up to about $350 billion at the turn of the century if we don't control some of the uncontrollables in this budget.

MS. WARNER: Well, Congressman Obey, do you agree that at least the administration is going in the right direction, as Sen. Domenici believes?

REP. OBEY: Well, I don't think there's any question. You know, I have to sit here chuckling because I can remember that before Ronald Reagan walked into office, this country never had a deficit larger than $74 billion. Now, just in the last year and a half alone, you will see the deficit come down by more than the entire deficit before Ronald Reagan took office. I think that's making some very substantial progress. And I think --

MS. WARNER: Can you support the President's budget as he's proposing here, these spending cuts?

REP. OBEY: Well, I think that you are going to find many of those cuts being accepted, some of them being modified. That's, that's the American way. No President expects to get 100 percent of everything he sends down, but the Congress is going to live within those ceilings. You'll have, I think, reasonable people sitting down to work out areas where they might disagree. For instance, one small area where I might disagree somewhat is the Leahy program. I might not agree with the reduction the administration makes. But it seems to me have a responsibility to work with them so that we can stay on this downward glide path on the deficit and see to it that we finally do get, as Leon has indicated, three straight years of the deficit declining, which hasn't happened since the end of World War II.

MS. WARNER: So can I conclude from your comments that Democrats and liberal Democrats in Congress are going to pretty much support the President's proposal?

REP. OBEY: I think all kinds of Democrats are anxious to work with a President who is finally taking on these problems. For years, we sat and Pete Domenici tried to help sometimes, I remember, we sat while those deficits were going up. We tried to get negotiations between the Budget -- I mean, between the White House and the Congress. Often those negotiations were cut off at the pass. We now have a situation where the Congress is working closely with the President. I think we've seen some good results last year on the budget, and we're going to see more, more this year, and there is no question that you will see Democrats, regardless of political philosophy, working with the White House to try to keep that deficit on a downward glide path.

MS. WARNER: Well, Mr. Panetta, what do you make of what you just heard? Does this give you hope that you're going to get this budget through? Where do you think the biggest threat comes from, from those who want you to cut more, or from, from some liberal Democrats who say you aren't reinvesting enough, you're not putting enough into these spending programs?

MR. PANETTA: Well, I've worked with enough budgets in the time of I've been in Congress and now as director of OMB to know that, as always, this proposal goes to the Congress. Both the House and the Senate will work with it in their budget resolutions. We want to work with the Democrats. We'd like to work with the Republicans in trying to fashion a budget resolution that hopefully reflects a lot of what the President has presented here. I think this is a time when we ought to be pulling together. I know it's always easy to kind of engage in kind of what I call partisan gamesmanship about picking this point or picking that point in the budget. I think the time has really come for all of us to work together to try to get this deficit path downward. We've made some remarkable progress here. It hasn't been easy. It was a tough battle last year. I'd like to see us work more closely together with people like Pete Domenici and others this year, so that we don't have to engage in partisan wrangling.

MS. WARNER: What about Senator --

MR. PANETTA: I think the elements are here to try to do that, and I'm hopeful that we can try to do what's in the best interests of the country.

MS. WARNER: What about Sen. Domenici's point that major items were left off the budget, that welfare reform, health care reform, how about earthquake relief? I mean --

MR. PANETTA: Pete, Pete knows better. One of the disciplines that we also passed that he didn't mention was what's called the Pay-Go Rule, which means that if you provide any increases in entitlements or cut any taxes you've got to show how you pay for that. We have not at this point decided what's in welfare reform. When we do decide what's in the welfare reform proposal we sent to the Congress, we will pay for it. We have to. And that's the time to, to discuss that issue. We haven't avoided that issue. With regards to the GATT legislation, which is the trade agreement that we've worked out, we would like to negotiate with people like Pete Domenici as we did on the NAFTA agreement, to try to decide how we pay for that. That's got to be done on a bipartisan basis. It's not something we can avoid. We think it's something we have to negotiate on with, with the Congress. So we've been very up front with, with regards to what's here and what, what we have to confront. We don't have to hide anything from the American people these days. I think what we have to do is say to them we're committed to trying to discipline the budget, which is something we haven't done a very good job of these last few years, and we're beginning to understand the importance of doing that, particularly when it comes to our economy.

MS. WARNER: Let's talk a minute about what this does for the prospects of the Balanced Budget Amendment which is coming down the track. Sen. Domenici, what do you think the President's budget, what impact will it have on the prospects for this Balanced Budget Amendment?

SEN. DOMENICI: Well, obviously, there is a psychological plus going around, because the deficit is coming down for a lot of reasons, not the least of which are re-estimating the costs of such things as the Resolution Trust Corporation, huge savings that nobody did anything about it, just that it costs less. So I think optimism on getting it under control may hurt those who are for the balanced budget. But I think the reality will be that a $170 billion deficit going back up at the turn of the century when we don't even know how much health care reform is really going to cost, I think that will put some realism back in. You must know that when we called the 1990 summit, just to put things in perspective, the deficit was $170 billion. And that was thought to be the -- you know, it needed President Bush to go to the summit and change his political commitments because it was so bad. We're there now, and we're not going to go down very much from that. So I think there would be good arguments on both sides. This will not be conclusive, but it will be a little bit of a plus for those who oppose the balanced budget.

MS. WARNER: And, Congressman Obey, where do you think the public is right now on this whole question of spending cuts, are they still screaming for more spending cuts, as you read it?

REP. OBEY: I think what the public wants is to see the economy grow, and I think they want to see the economy provide good jobs, and they expect their public servants in Washington to behave like adults and try to work out the right mix of policy, so that the combination of deficit reduction, new investment, lower interest rates, and, and some attention to their problems, such as health care, gets put in the mix, and you come out of it with something that makes the average family's life better in this country. I think that's what they're looking for.

MS. WARNER: Mr. Panetta, do you think the average family has yet felt any of the cuts that were enacted last year, for example, or is that still to come in terms of the public really experiencing the impact of them?

MR. PANETTA: I, I think frankly what's happened is the public's experienced the benefits of the deficit reduction we've engaged in, because what you've seen happen is that interest rates have come down, investment has gone up. We've seen jobs being produced in our economy for the first time in a long time. We've seen a greater confidence about the direction of the economy. Alan Greenspan, himself, basically commented on the fact that because it looks like we've disciplined ourselves with regards to the budget it is having a direct impact in terms of the economy. I think that's what people are looking at. Yes, you know, all of us have had to make a little bit of a sacrifice. Here we should when it comes to dealing with the deficit. Both the wealthy, as well as others, need to sacrifice a little bit. But I think deep down the American people know that it's for the right reason which is to strengthen our economy and strengthen our future. There was a point a few years ago where people were worried about whether their children were going to have a better life because of the condition of the economy in this country. Now I think there's some restored confidence that, in fact, we can give our kids a better life, and that's what the American dream is all about.

SEN. DOMENICI: Let me respond on the cuts, whether the American people are accepting them or not. Frankly, there were no cuts excepting in defense. And the American people, in particular, California is very worried about that.

MR. PANETTA: That's not true, Pete. You know, that --

SEN. DOMENICI: Well, there's a little bit of --

MR. PANETTA: -- we cut almost $100 billion of entitlement programs, from Medicare, from Medicaid, from agriculture, from veterans programs. Those are cuts.

SEN. DOMENICI: I'm speaking about 1994. There were very little. Those were applied over five or six years. There were very little, Leon. I'm not trying to say you aren't doing a great job. I'm very proud of what you're doing. I think we're on the right path. I'm merely suggesting that we ought to be careful when we're talking about so many new things that are not in this budget. For instance, we're assuming that health care reform with four new programs will cost us less, and we will save money on the deficit. That's an activist President who wants to get this done, who's operating under some severe budget constraints, and I'm merely suggesting that may not work out that way in the long run.

MS. WARNER: Senator --

REP. OBEY: Well, let me point out that the Congressional Budget Office has specifically indicated -- and that's an agency that Pete often refers to -- they specifically told us that without health care reform, the kind of which the President is proposing, we are not going to get savings in those entitlements in the out years.

SEN. DOMENICI: Well --

REP. OBEY: Let me point out that last year, we cut over 250 programs below last year's level.

MS. WARNER: We're going to have to leave it there. Thank you, Senator, Congressman, Mr. Panetta, thanks very much. FOCUS - CLINTON'S MOVE?

MR. LEHRER: Bosnia, the tragedy that only gets worse, is next tonight. There were many meetings today in Europe and in Washington to discuss how to respond to the latest round of killings, but there were no decisions on air strikes or any other military action. Our coverage begins with two reports. The first is from Paul Davies of Independent Television News on the aftermath of the Sarajevo attack in which 68 people were killed.

PAUL DAVIES, ITN: In the mountains outside Sarajevo today, Bosnian Muslim soldiers took journalists to their front-line trenches to express outrage at Serbian accusations that they fired the mortar into the marketplace deliberately killing their own people to provoke air strikes by the West.

UNIDENTIFIED MAN: You can't imagine that you can kill your children, your family, your parents, you can't imagine that, a family.

MR. DAVIES: This soldier said he heard the mortar being fired from nearby Serbian positions on Mount Merkovici. The U.N. is being careful not to blame the Bosnian Serbs for the massacre. Their experts say evidence left by the mortar is inconclusive.

WILLIAM AIKMAN, U.N. Spokesman: We can approximate the area from which it came, but it was over a couple of kilometers and a couple of kilometers, which is all they could come down to as an area was right over the confrontation line, both sides included.

MR. DAVIES: The U.N. has been continuing its operation to evacuate the survivors of the attack. Dozens remain critically wounded. Their best hope lies in hospitals in Western Europe. In what passes for normal circumstances in Sarajevo, if the U.N. wants to take injured people out of the city, it must first get clearance from the Bosnian Serbs and Muslims. So that means evacuations are usually delayed for months or simply don't happen. In this instance, however, such niceties have been dispensed with. The priority is getting the wounded out. The instruction comes direct from the White House.

GABY RADO, ITN: The foreign ministers meeting took on a new urgency after the weekend slaughter in Sarajevo. Not for the first time though it is the British who appeared most cautious about launching air strikes against the Serbs.

DOUGLAS HURD, Foreign Secretary, Great Britain: We have to take into account consequences for the humanitarian effort and the food supplies of Sarajevo. We have to take into account the effect on the U.N. forces there, how they would be protected. That's not to rule out the use of air power. It's been clear since August in principle we are willing to use it.

MR. RADO: Though the meeting had been arranged before the latest Bosnian atrocity, it quickly dominated the agenda. Among the most outspoken were the French, who despite having more troops on the ground than the British, seemed in favor of far more drastic action.

ALAIN JUPPE, Foreign Minister, France: [speaking through interpreter] France would like an ultimatum to be set, a deadline set for the lifting of the siege. We have to show that, if necessary, we are prepared to use air strength, carry out air strikes. France, with its U.N. troops in the area, is prepared to assume such a responsibility.

MR. RADO: The British foreign secretary appeared out of step not just with his own prime minister, who is signalling a much more muscular approach, but with his European colleagues. In the corridors, Germany's Klaus Kinkle, whose country has influence but no troops in Bosnia, was making clear his anger at simply doing nothing, while on the other sound of town, NATO ambassadors held a hastily convened unofficial meeting in response to the overnight message from the U.N. Secretary General. But then the EU's peace negotiator, himself against air strikes, arrived from Serbia with news designed to deaden any momentum building up in Brussels.

LORD OWEN, European Union Negotiator: The Bosnian Serbs are ready for the first time to discuss the demilitarization of Sarajevo districts and putting it under UN administration outside an overall settlement. And that obviously offers one of the best ways that we can of avoiding tragedies like we saw on Saturday.

MR. RADO: The outcome of a whole afternoon discussing the Bosnian crisis is a declaration with nothing new to add to previous such statements.

MR. LEHRER: In Houston today, before his budget speech, President Clinton talked about the Sarajevo attack.

PRESIDENT CLINTON: As you know, there was an outrageous attack on innocent civilians in Sarajevo on Saturday. And our government is talking with our allies about what steps ought to be taken in response not only to this outrage but to the possibility of future attacks on innocent civilians in the future. We're also talking about whether there is something more we can do to help the parties agree to solve the conflict. Until those folks get tired of killing each other over there, bad things will continue to happen. And sooner or later, they're going to have to decide that it's in their interest to let their children grow up in a world free of war. The United Nations Secretary General Boutros-Ghali has asked the North Atlantic Council to take the necessary decisions which would enable NATO's military forces to respond to request for air strikes directed against artillery and mortar positions around the city of Sarajevo that can do that kind of horrible things you saw on Saturday. If the United Nations' mission there determines who's responsible for the attacks -- in other words, the Secretary General has now asked that authority be given to our commanders there on the ground to take appropriate action - - I very much welcome that request. I've hoped that that would be the case for some time. I have directed our representatives at NATO to support the Secretary General's request when it is discussed there in the next couple of days. That is all I have to report at this time, except to say that once again I hope very much that the horror of all these innocent people dying will sober all those who are responsible and lead to a renewed effort to get a peace agreement there.

MR. LEHRER: Now three perspectives on what else, if anything, the United States should do about Bosnia. They come from Lawrence Eagleburger, Secretary of State under President Bush, former ambassador to Yugoslavia, William Hyland, Deputy National Security Adviser to President Ford, former editor of "Foreign Affairs Magazine," now an international affairs professor at George Hyland at Georgetown University, and Anthony Lewis, columnist for the New York Times. Tony Lewis, to you first. What do you believe the President should do? Is he doing enough? You heard what he just said. We ran his statement. Is that what he should be doing right now?

MR. LEWIS: The Bosnian Serbs have not been impressed by such empty words before, and they will not be impressed again. There's only one thing that will impress them, and that is action, to lift the arms embargo on the victims, the crazy embargo that embargoes the victims, and strike at those who are doing the killing, namely the Serbian soldiers. That's all they have ever listened to. It's the only thing they'll listen to.

MR. LEHRER: Strike at them with air power --

MR. LEWIS: With air power.

MR. LEHRER: -- in a massive way or a token way?

MR. LEWIS: Air power at the artillery and mortar points as has been said just now, air power at the bridges over the Drinja River, over which the Serbian army, the Yugoslav army, in fact, the former Yugoslav army, are pouring into Bosnia, and I think also strike at the munitions dumps and headquarters in Bosnia where the Serbs as in Kahle, a short distance from Sarajevo, are planning their murderous attacks.

MR. LEHRER: So you believe air strikes to do much more than just send a message. You want air strikes to actually do real damage on the ground to the Serbs?

MR. LEWIS: I want air strikes that will send an important message. I personally think, as Margaret Thatcher does, and would have done, that long ago there should have been an ultimatum from NATO, stop what you're doing, or we will then strike you. And that's what the French have proposed now. It's about 18 months too late, but it still should be done. I remind you that last October the head of the Bosnian Serbs, Dr. Karadzic, said, "The siege of Sarajevo is over." That's a direct quote. It was a lie then. It remains a lie now, and it will remain a lie until someone does something about it.

MR. LEHRER: Bill Hyland, what do you think of what Tony Lewis wants done?

MR. HYLAND: I think it's dangerous and foolhardy, and I would be opposed to it. I think this -- what he's talking about is going to war against Serbia, perhaps even Croatia, starting with military action in the air, but -- and inevitably the war is going to spread. It's going to get worse.

MR. LEHRER: Why is that inevitable?

MR. HYLAND: Because it's a military action designed to damage their ability to continue fighting. Either they quit, or they fight harder, and they've been fighting for two years. I don't think a few air strikes will back them off. So what is the end point? It's the same question we've had from the beginning of this crisis. How do you end it? How do you take action that will effectively stop it? And certainly using Americans to fight for Bosnian is not my idea of how to end this war. I think it would only lead to further involvement, and even if it didn't, I'm not sure that it should be done in any case.

MR. LEHRER: Why not?

MR. HYLAND: Because it has no point, it has no strategic, political objective. You can't use force just to make yourself feel better, just because we're outraged with the Serbs. There are plenty of countries around the world that probably deserve to be bombed or at least to be taught a lesson, that people are being killed in the Sudan. Fifty people were killed yesterday in Angola. The United States can't use its military forces to make itself feel better. We have to have some way of bringing the war to an end. And frankly, I don't see that air power, and especially the kind of limited intervention where you hit a dump here, we hit a city there, or the outskirts of a city, that's really a feckless military campaign. It's really a question of either all in or all out.

MR. LEHRER: Is that, is that the issue, Sec. Eagleburger, all in or all out? You've heard the two arguments.

SEC. EAGLEBURGER: Yeah. Basically, I think that is the essential issue. I have never believed that the use of force in this issue - - in this mess short of ground forces on the ground, which none of us want, is going to bring the fighting to an end. And I've always believed that this air strike issue is, is -- it is feckless. We're not going to get that 120 millimeter power mortar that fired the shot the other day. But having said all of that, and basically agreeing with Bill's approach to it, I must say that we have thumped our chest so many times, we, the United States, and NATO, that there is another issue here now which is an issue of credibility. And I think Tony Lewis is right when he says they aren't going to pay any attention to anything that's been said up to this stage, because they have no reason to. If we're going to use force, and I'm not happy about it, I prefer not to, but if we're going to use force, then we ought not do it on a tit for tat basis, sort of on the grounds that play to what the Serbs, both Serbs and Bosnian Serbs can respond to so easily. If we're going to use force, then it would seem to me I would take Tony Lewis's point and carry it a little bit further. Rather than worry about air strikes in and around Sarajevo, let's take it to the Serbs, themselves, bond some bridges. Let's take on an oil refinery, or something of that sort, let's let the Serbian people, themselves, understand that this is no longer something from which they can stand back and not be punished. I say all of that, but with the real caution that I'd prefer not to do any of that. But if we're going to use force, let's not get suckered into this little tit for tat sort of nonsense.

MR. LEHRER: Do you agree with Bill Hyland that if you were, in fact, have to do that, what Tony Lewis outlined, that the United States would, in effect, be at war with Serbia?

SEC. EAGLEBURGER: I'd put it a different way. I don't know whether we're at war or not, but any of these steps, it seems to me, lead to potential consequences that we may have to face. What happens if we attack the Serbs and then we attack the British and the French troops in Bosnia? We could not then stand back and watch those troops we attack. We will have to get involved. There are any number of --

MR. LEHRER: And you believe you can't do it without ground troops, is that right?

SEC. EAGLEBURGER: Well, you can't succeed in bringing this war to an end without ground troops. Maybe you'll get the Serbs' attention with some air strikes. Having lived in Yugoslavia for seven years, I'm not at all sure that you'll get enough of -- the attention you'll get is the kind you want. But that's the risk you take if you take air strikes, for example. They may work. I have no reason to doubt that people believe they may. But if they don't work, we are on a slippery slope that we better have thought through what the next steps will be when, in fact, the fighting gets worse.

MR. LEHRER: Now Tony Lewis, you believe they will work, is that right? In other words, what you outline, if it's done, it's done effectively, that the Serbs will back off and this war will end?

MR. LEWIS: I think two things, Jim. First of all, the Serbs have after every one of these empty threats over the last year and a half, have backed off for a few days or a week or so, because they think something might happen. Then when they see nothing is going to happen, that it's just more hot air, then they send their mortars back and kill some more civilians, slaughter some more people in their genocidal attacks. The other thing I believe is, of course, we have to watch out about consequences. What Bill Hyland and Sec. Eagleburger say is quite true. You can't go into a place without worrying about consequences. But what have the consequences been of a year and a half of doing nothing? The credibility of NATO and the United States and Europe are at a historic low level. We've been in Europe for 40 years with billions and billions of dollars and masses, hundreds of thousands of American troops to keep the peace, and that's in tatters right now, because nobody believes us. We have extreme nationalism springing up in the Soviet Union or rather in Russia, very dangerously, and all through Eastern Europe. And if we don't stop it now, believe me, the consequences, that word, are going to be very serious, indeed.

SEC. EAGLEBURGER: Could I make two points?

MR. LEHRER: Sure.

SEC. EAGLEBURGER: First of all, let's not confuse now bringing the war to an end and preventing further attacks on Sarajevo. Those are two quite different things. And if what we're trying to do is stop the attacks on Sarajevo, that is one thing. If what we're trying to do is bring the war to an end, that is a much more complicated, much more difficult task. That's the first point.

MR. LEHRER: Well, I think you're talking about both, are you not? You're -- Tony.

MR. LEWIS: No, I agree with that statement. Our first need right now is to make true the statement that Dr. Karadzic made last October, the siege of Sarajevo is over. The first thing you have to do is end that. And if we do, then I think the path to ending the war will be much more open.

SEC. EAGLEBURGER: I'm not sure we can do either, but that's --

MR. LEHRER: All right.

SEC. EAGLEBURGER: But the second point, again, Mr. Lewis is right when he, he raises this specter of nationalism. It is rampant. It just looks a lot more like 1890 than it does 1994. And it is, it is unleashed in Bosnia, but it is not simply there. It's in Abhazia, Georgia, all sorts of places. And my point here again is I don't -- in fact, I frankly don't believe that if tomorrow morning by waving a wand we could stop the mess, the slaughter in Bosnia, that that will have very much impact on rampant nationalism in other parts of the world. Nationalism in this sense is totally irrational, and I don't think you're going to be able to deal with it by some, some example in Bosnia, unless, of course, you're prepared then to repeat somewhere else what you decide you're going to do in Bosnia.

MR. LEHRER: Because you set a pattern, you mean. If you do it here, you've got to do it there, you've got to do it there.

SEC. EAGLEBURGER: By not doing it, we set a pattern.

MR. LEHRER: Sure. Bill Hyland, both Sec. Eagleburger and Tony Lewis have used this word "credibility," that there's much at stake here, whether you go the nationalism argument line or not, just the credibility of the United States of America and NATO and the rest of the world. We have to do something.

MR. HYLAND: I don't agree with that. I think the credibility of the European powers, or the major European powers, is badly damaged. The credibility of the United States has been damaged by Clinton, because he's talked, I think, too wildly from time to time and still is talking in a way that I think is dangerous. But I don't understand the argument that it's the responsibility of the United States to be the leader, to provide the airplanes, to provide the pilots, to provide the bombs, to provide the targeting, and the others urge us on and cheer, especially the French. I think this is totally cynical. The French, the British, the Germans -- even the Germans -- the Veno-Lux -- the Italians, are perfectly capable of bringing this war to an end or certainly punishing, damaging greatly the Serbians.

MR. LEHRER: Why won't they deal without us?

MR. HYLAND: Well, because they're afraid. If we take the lead, then they don't have to do much. We'll be sending planes off carriers. We'll be bombing. We'll be doing everything, and I find there an incredible turn of events that a European crisis that affects them much more than it affects us has to be solved in the end by us.

MR. LEHRER: What do you think -- excuse me -- let me just ask Bill Hyland one follow-up. What do you think the consequences would be of no action at all by the United States, in other words, of doing just exactly -- if the President's listening, say, Hyland's got it right, I'm going to go out and do that tomorrow, what would the consequences be?

MR. HYLAND: Unfortunately, the war will continue. At some point it will end. All wars end. It may end with the extinction of Bosnia as a state. That would be a tragedy, but I don't think it's worse than --

MR. LEHRER: You don't think the Europeans then would act on their own, in other words? That's what I'm trying to get at.

MR. HYLAND: The Europeans have had two full years to deal with this crisis decisively one way or another. They've got plenty of troops. They've got plenty of equipment. They sponsored the diplomacy of Lord Owen. Why can't they get in there and do something, if they consider that important? I think they're just simply trying to draw the United States into the war to solve it for them.

MR. LEHRER: Tony Lewis, why is it the responsibility of the United States of America to solve this in Bosnia?

MR. LEWIS: Well, I honestly am very surprised to hear Bill Hyland, a man so experienced in these matters, say what he's just said. For 40 years, the United States has been "the" key member of the North Atlantic Alliance. We have not wanted a separate European army or a separate European defense system. We have wanted a North Atlantic Alliance, and we are the leaders of that alliance. And there's no way to change that, because we are the one superpower in it. And, of course, I agree that the Europeans are the ones closest to the scene, and they're the greatest moral and political responsibility, but it is a fact of life. Surely, Bill wouldn't deny that. But they look to us for leadership. That's the burden of being what we are. And we have to supply it. I want to add that I think something important has to be said historically here, and that is that if Margaret Thatcher had been in power when this all began, none of this horror would have happened, in my judgment. I think she would have done at the beginning what we're talking about now, beginning when the shells, the Serbian shells fell on Dubrovnik, she'd have said, Mr. Milosevic, you can't do that, that's not allowed, and if you do it one more day, the next day there will be bombs on Belgrade. She'd have done it through NATO, but her forcefulness would have led NATO to take that position.

MR. LEHRER: Sec. Eagleburger was in power at the same time Margaret Thatcher was in power.

SEC. EAGLEBURGER: I want to thank Tony Lewis for not having reminded us of that.

MR. LEHRER: Yeah, but I did, right.

SEC. EAGLEBURGER: I think, first of all, I love Maggie Thatcher. Out of power and able to preach is one thing; in power and have to deliver is another. I have serious doubts, one, that she should have gotten the alliance together to move on the issue. I will not claim for one minute that the Bush administration solved the problem. We certainly didn't. And, in fact, we searched for ways to try to solve it, including handing it to the Europeans.

MR. LEHRER: They wouldn't take it, would they?

SEC. EAGLEBURGER: They wouldn't really take it. But the one difference I will say between us and the present administration is at least we didn't thump our chests and say this is intolerable and tomorrow morning if you don't do something about it, the heavens will fall on you. But --

MR. LEHRER: Where do you come down on this responsibility issue?

SEC. EAGLEBURGER: I --

MR. LEHRER: U.S. responsibility?

SEC. EAGLEBURGER: Fundamentally, I am with Bill Hyland in the sense that there has to be a time when the Europeans no longer can hide behind our skirts. And I think that time has more come than not.

MR. LEHRER: Tony Lewis says that's impossible.

SEC. EAGLEBURGER: Tony and I often don't agree, and on this one I don't think we do either. And I'm not saying the United States has to give up world leadership. I am saying, however, that this is not 1950 or 1960, '70, and the Europeans really do have to step forward and take more responsibility. Having said that, Iam on the horns of the dilemma that Tony has, in fact, pointed out, which is neither do I think we are a second rate power. And the United States in this administration and NATO and the U.N. have all pontificated for so long that you can't go on much longer without our performing. And let me make the point here, you know, every time we make a threat and then don't carry it out, the Kim Il Sungs of this world in Pyongyang, as they think about building that weapon --

MR. LEHRER: North Korea.

SEC. EAGLEBURGER: -- in North Korea, as they think about building that atomic weapon, they say, well, you know, why do we have to worry about what the Americans say? This is sending messages around the world that we cannot continue to do.

MR. LEHRER: Bill Hyland, whether you like how we got where we are today, do you not agree -- do you agree that whether there has been some thumping, now there are things that the United States and the rest of the world now has to deliver on, or the rest of the world is going to say, hey, these guys are not trustworthy, you can't believe 'em?

MR. HYLAND: I really don't care what the rest of the world says. We've got to follow our own interests. Larry has mentioned a very critical problem, nuclear weapons in North Korea. That could lead to a real war. Those are the kinds of issues that have to be at the top of our agenda, not solving a wretched civil war that's been going on for almost three years in Yugoslavia which could be brought to an end by the British and the French, and Mrs. Thatcher's successor, John Major, if they want to do it. I don't think it's our place to do it. We have got plenty on our plate, especially inside this country, without wandering into another war in, in South Europe.

MR. LEWIS: Could I --

MR. LEHRER: Yes.

MR. LEWIS: Jim, could I ask a question of both Sec. Eagleburger and Bill Hyland. Listening to you, I thought I heard a call for the end of the North Atlantic Alliance or the NATO military organization. Let the Europeans do it, we should stay out. And that's counter to everything that has existed for the last 40 years. It's not 1960. It's not 1950. Does that mean, Mr. Secretary, that you would just say, let's break up the alliance and let the Europeans form their own military system?

SEC. EAGLEBURGER: No, no. As a matter of fact, it was when you were talking, it was one of the points I wanted to make and then passed over. First of all, NATO was not created to deal with the Yugoslav civil war. And to some great degree, that's still what it is. That was not the purpose of NATO. NATO is important. NATO should, in fact, in my judgment, now expand to include Poland, the Czech Republic, and Hungary, and make some clear distinctions there as to who is and who is out. But to ask NATO as an alliance to become involved in the Yugoslav thing is, you can do it if you want, and we have now moved in that direction, but please don't let, don't let it be assumed from what I said that I think NATO is any less important now than it was. That really should not be NATO's principal task. It is becoming one, because we're falling into it.

MR. LEHRER: We have to --

MR. HYLAND: If NATO wants to fight in Yugoslavia, let 'em go. We can support that politically, but I don't see why we have to supply bombs, planes, troops, and all of the equipment.

MR. LEHRER: All right. Gentlemen, we have to leave it there. Thank you all three very much. RECAP

MS. WARNER: Again, the other major story of this Monday, President Clinton proposed a $1.5 trillion budget for 1995 that would abolish at least115 government programs. It would also reduce the federal deficit to its lowest level in six years. Good night, Jim.

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