The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, the opening round of the Washington budget and tax struggle: Paul Solman goes through the numbers, Mark Shields and Paul Gigot do the politics; then, two Latin America perspectives-- Ray Suarez talks to Senators Dodd and Hagel about the drug war in Colombia, and Margaret Warner interviews the President of El Salvador. It all follows our summary of the news this Friday.

NEWS SUMMARY

JIM LEHRER: Federal Reserve Chairman Greenspan endorsed tax cuts again today. But in testimony before the House Budget Committee, he did not specifically support President Bush's $1.6 trillion plan. He said he preferred some cut to high spending, which he said was unwise.

ALAN GREENSPAN: If long-term fiscal stability is the criterion, it is far better, in my judgment, that the surpluses be lowered by tax reductions than by spending increases. The flurry of increases and outlays that occurred at the conclusion of last fall's budget deliberations is troubling, because it makes the previous year as lack of discipline less likely to have been an aberration.

JIM LEHRER: Greenspan also defended the Federal Reserve against criticism it did not react fast enough to the current slowdown. He said if the Fed had begun cutting interest rates sooner than January, the economy would have been worse off. President Bush today called on Congress to stay within the spending levels of his new budget. He said that was the only way to ensure there'd be enough money for his tax reduction. He commented at the White House this afternoon.

PRESIDENT GEORGE W. BUSH: Surely Congress will be willing to work with the administration to bring-- control the appetite by 4%, and I believe when people are willing to take a hard look at setting priorities and different programs we'll be able to meet that target and thereby be able to send part of the surplus back to the people, which is a sure part of making sure the economy gets a second wind.

JIM LEHRER: We'll have more on taxes and the budget right after this News Summary. The President also met at the White House today with President Flores of El Salvador. Mr. Bush promised more than $100 million in aid to help El Salvador recover from two recent and devastating earthquakes. We'll talk with President Flores later in the program tonight. On the Northwest earthquake story today, dozens of buildings in Seattle and Olympia, Washington remained closed and unusable and some bridges and roads were still closed in Tacoma. Some homes were evacuated because of the threat of mudslides. Damage estimates have surpassed $2 billion. President Bush declared the region a fed al disaster area. Napster said today it will block the trading of copyrighted music through its web site starting this weekend. The online service announced that in a San Francisco courtroom as it appealed to a federal judge to allow it to stay in business. There was no word on when a ruling would come. Napster lost in a lower court to the recording industry. Colombia's drug-fighting efforts were attacked today at House Subcommittee hearing. Lawmakers said aid then- President Clinton had committed to the campaign-- $1.3 billion-- was ending up in the wrong hands. We'll have more on the drug war story later in the program tonight. Also coming, Greenspan and Solman on the numbers, Shields and Gigot and the President of El Salvador.

FOCUS - CRUNCHING THE NUMBERS

JIM LEHRER: The Washington battle over the budget and taxes: At the heart of the debate this week was, how big is the surplus and how reliable are the numbers? At a hearing today, Federal Reserve Chairman Greenspan was asked about the key numbers generated by the Office of Management and Budget and the Congressional Budget Office.

ALAN GREENSPAN: Well, Mr. Chairman, we've looked at the various projections of both OMB And CBO And the previous administration's OMB-- They're all very close. And they're all close not because the outlook is so sharply in focus that it's very difficult to deviate, but what tends to happen in periods such as this is you try to get a sense of what the various probabilities are out there. What both CBO And OMB Are trying to do is give you a middle estimate. And they can just as well... Just as easily be wrong by being too low as being too high. And so we have to confront the possibility of both types of problems. And I think they are problems in the sense that having very large chronic surpluses, while obviously a far more benign phenomenon than having large deficits, nonetheless do create significant economic problems in the allocation of capital. And I think we ought to be aware that allowing either side, may it be extremely large surpluses or extremely large deficits, both have significant negatives. And so I think that one of the real issues that confronts us is to get a sense of where we are in all of this. And that's why I think-- as CBO and indeed, OMB points out very correctly-- the crucial issue here are these longer-term productivity growth numbers. And we will not get a truly effective fix on them, one that creates a good deal of confidence, until we have been through this full cycle, which we're now working our way through, and see where we come out when we're back to normal. The data to date, as I indicated in my prepared remarks, are quite encouraging in that regard, but we're not there yet, and there are considerable possibilities that the numbers that are being projected can turn out to be significantly off.

JIM LEHRER: For more on this, a report from our numbers man, Paul Solman of WGBH-Boston. He's been talking to some people who do the counting.

PRESIDENT GEORGE W. BUSH: My budget protects all $2.6 trillion.

SPOKESMAN: $2 trillion.

McNULTY: $3.6 trillion.

STARK:$200 billion.

SPOKESMAN: 292 --

STARK: Oh, $300 billion.

PAUL SOLMAN: Just what are these numbers everyone's talking about? How are they generated? And how reliable are they? We went to the source: The number crunchers at the Congressional Budget Office. Deputy Director Barry Anderson was our Virgil leading us through the data.

BARRY ANDERSON: The Congressional Budget Office is the Congress' budget arm -- 230 people who keep score of all the legislation that Congress passes, and take a look at the future and see what the

impact is going to be in the future. Mostly we're economists and public policy analysts.

PAUL SOLMAN: The CBO is a 25- year-old, non-partisan agency of Congress. Its mission: To analyze, estimate, forecast, and count. And it's housed in a building that's seen its share of Washington history.

BARRY ANDERSON: In fact, the building was built so long ago, before desegregation, that there are still two sets of water fountains still remaining.

PAUL SOLMAN: Its racist days behind it, the ford house office building now stores the hundreds of reports CBO does for Congress, as well as the big document of the moment, the CBO's annual budget projections.

BARRY ANDERSON: Here's our budget and economic outlook that we just issued this past January 31 that projects that the surpluses for the next ten years will be $5.6 trillion.

PAUL SOLMAN: And this picture shows how that could be possible?

BARRY ANDERSON: This picture portrays our forecast for labor productivity, which is perhaps the most important factor in terms of our real economic growth projections and the resulting surpluses.

PAUL SOLMAN: The main reason for a projected surplus in the trillions then, is higher economic growth, which means higher incomes and profits, which means more money in taxes. But there have been other related revenue surprises -- so-called real bracket creep: As Americans earned more because of higher-than-normal economic growth, they climbed into higher tax brackets. Growing income inequality, the rich pay the highest tax rates. As they get richer, faster, so does the Treasury. And finally, the unanticipated 1990s stock market surge meant big capital gains on which people paid unanticipated taxes. Moreover, as revenues were rising, expenses were ebbing. Defense spending moderated, post-Cold and Gulf Wars. A series of budget agreements further constrained government outlays. We stopped running deficits, thus stopped borrowing money, thus lowered our national interest payments. And how many of these trends did the forecasters at the CBO anticipate? Well, no more than the rest of us. In fact, as recently as 1997, CBO projected a $36 billion deficit for fiscal year 2001, now projected to end with a surplus of $281 billion. Barry Anderson spent 18 years at the Office of Management and Budget where the executive branch makes its projections. Experience has taught him humility.

BARRY ANDERSON: If we have the same errors in the future that we've had in the past, then we can expect with some probability that instead of $400 billion surpluses, we might have a deficit in five years of $50 or $60 billion.

PAUL SOLMAN: This chart was presented to Congress recently. Where it begins fanning out, it depicts the range of uncertainty for the next five years. The horizontal line is a balanced budget. Above, and we'd rack up surpluses; below, deficits.

PAUL SOLMAN: I see, so that fan of blue lines represents the bracket of probability given your accuracy or lack of accuracy in the past?

BARRY ANDERSON: Exactly. Fan of probability -- the darker the shading, the more probable our estimate; the lighter the shading the less probable.

ROBERT DENNIS: What it shows is a measure of uncertainty of future budget projections actually going out only five years. You can see it - it becomes very wide.

PAUL SOLMAN: Bob Dennis is the CBO's chief budget projector.

PAUL SOLMAN: So, I see -- by the time you're out five years, you are talking about the difference between $1 point something trillion - surplus -

ROBERT DENNIS: And a small deficit, that's right.

PAUL SOLMAN: So that's a trillion-dollar difference.

PAUL SOLMAN: Tom Woodward, in charge of the CBO's tax analysis division, stresses, though, that much of the uncertainty is built in.

THOMAS WOODWARD: The point to be emphasized though is that this is not a forecast surplus. This is a baseline. That means what is going to happen to the budget if there is no change in policy.

PAUL SOLMAN: The CBO says it knows better than anyone how iffy its projections are, particularly when it comes to recessions. For instance, its recent presentation to Congress clearly showed every recession since 1955, those thick gray vertical lines. But its projections to the year 2010 do not include a major downturn. The CBO has its critics, of course. On the right, economists like Larry Hunter, who contend the CBO is understating future surpluses by under-projecting revenue growth, especially if there's going to a tax cut.

LAWRENCE HUNTER: Since 1986, when we had tax reform, and since that time two major tax increases -- revenues have grown about 18% faster than the economy. Since 1993, revenues have grown about 37% faster than the economy. And yet the Congressional Budget Office now assumes that for the next two years revenues will grow on average less than the economy will grow; it will grow slower than the economy.

PAUL SOLMAN: You think that's just ridiculous?

LAWRENCE HUNTER: I think it's ridiculous.

SPOKESPERSON: Congressional Budget Office.

PAUL SOLMAN: The CBO responds that lots of unusual events have contributed to the numbers in recent years, and you can't count on them for the future.

BARRY ANDERSON: The amount of money that we have collected through capital gains is considerably more than what we collected before the late '90s, and is considerably more than we are forecasting in the next decade.

PAUL SOLMAN: To other critics, however, the CBO is forecasting too much revenue. That is, it is not understating the surplus, but overstating it.

BOB McINTYRE: They make some very strange assumptions.

PAUL SOLMAN: Bob McIntyre of Citizens for Tax Justice, a research and advocacy group on the left, says there are inevitabilities that CBO simply doesn't take into account. Population growth, for example, which puts new demands on costly government services; at current spending rates, 1% a year per population growth would mean hundreds of billions of dollars in extra expenses over the decade. Then there are widely expected policy changes like extending the popular $500 per child tax credit that's due to expire. So-called "extenders" would add another $200 billion or so, McIntyre estimates. Add it all up, he says, and big surpluses vanish just when they'll be needed two years from now for expected shortfalls in Social Security and Medicare.

BOB McINTYRE: You know, members of Congress - well, a lot of them like the big numbers because then they can pass their tax cuts or their spending plans and pretend they are being responsible. But the Congressional Budget Office numbers are not helping people be responsible I don't think. They are encouraging people to do things they really shouldn't do.

PAUL SOLMAN: To the CBO, however, getting criticism left and right is part of the process.

SPOKESPERSON: As long as everyone is mad at you, you are probably doing your job the right way.

PAUL SOLMAN: We had one last question: If these numbers are so subject to change, why project them so far ahead? The answer, like so much about the budget process, turns out to be based more on politics than economics. If you project ahead, say, five years, says CBO Director Dan Crippen, politicians will write bills whose costs only kick in at year six.

DAN CRIPPEN: We are now in this ten-year projection because precisely people are trying to play with the rules. Up until '95 we did five-year projections, not ten. Every time the timeline was set, the budget line, people would draft legislation so that it was effective just beyond.

BARRY ANDERSON: Good, you've got it up to $5.8 trillion.

PAUL SOLMAN: So projections go out a decade, while everyone understands that they're most probably off target.

BARRY ANDERSON: For 200 years, we forecasted not ten years out, not five years out, but only 18 months out. You look at the private forecasters; they're really not doing too much more than that right now. I know the Congress needs estimates that go out ten years and we will supply them. But we make no bones about it that there is an awful lot of uncertainty about what our projections are ten years hence.

PAUL SOLMAN: Would you bet me $100 that your projections will be within 10% of the ultimate reality?

BARRY ANDERSON: No, and the reason being is because I would bet you many times $100 that Congress will enact legislation that will change those projections somewhere different than the $5.6 trillion. But I don't know what legislation they're going to en act.

PAUL SOLMAN: And you don't know if it will make the number higher or lower.

BARRY ANDERSON: Exactly.

PAUL SOLMAN: At the end of our CBO tour, then, there was only small bet that crunching surplus numbers is a hit or miss proposition.

FOCUS - POLITICAL WRAP

JIM LEHRER: Now, some analysis of the tax struggle, among other Washington matters, from Shields and Gigot; syndicated columnist Mark Shields, "Wall Street Journal" columnist Paul Gigot. So, what does what Paul Solman just told us, how does that translate into the politics of the struggle that is now under way up on the Hill, with the President, et cetera, sir?

MARK SHIELDS: First of all, I mean, it was a jewel of a piece, because it really did explain why we've gone from five-year projections to ten-year projections, and that is legislatures, politicians, human beings like to provide pleasure and like to postpone pain. That's why those sixth-year projections. Jim, when I think about the projections, I'm reminded of just the last time we had a new President -- 1993. Bill Clinton came in, he introduced his package, his longest deficits as far as the eye could see. Phil Graham, still a major player, Senator from Texas, said this is a one-way ticket to recession. Dick Armey, the House Majority Leader, an economist, said this is it, this is going to send unemployment and the deficit through the ceiling. Newt Gingrich said it's going to double and swell the welfare roles. Well, that didn't happen. And it ought to be an exercise in humility, just as Paul pointed out, for all of us. And I think when you're making ten-year projections, you're basically saying, you know, this is what I want it to be to some degree. The CBO does a great job, don't get me wrong.

JIM LEHRER: But the question is politically, so the numbers don't mean anything, it's basically a political argument about philosophy?

MARK SHIELDS: I think they're serious; I think they're conscientious, but intervening a single percent in change of spending can change it. A single change in the economy can change it. Now we're hearing that the economy is cooling, it's slowing it's sputtering, it's stuttering.

JIM LEHRER: Okay. Paul, how would you answer the question about how these numbers, what do they mean now in terms of this struggle?

PAUL GIGOT: They don't mean very much-- except... well, I think they're essentially speculative and even sort of phony basically, not that anybody's dishonest about it, but -- unfortunately they have very real consequences, because both sides use them as weapons in the political fight. And for years, the lack of surpluses were used to block tax cuts. Now that we have big surpluses, they turn the tables and they're assisting the cause of tax cuts, because it looks like there's more room for it. So it makes some of the skittish Republicans more likely to vote for them. So there's no question in my mind, though, right now the surplus estimates have really changed the politics of tax cutting and they've changed them in the direction of the Bush tax cut and the Republicans.

JIM LEHRER: So the numbers really do mean something?

PAUL GIGOT: They have real, real consequences, even though they're probably not real numbers, they have real political consequences. Absolutely -- and that's, in part, because the Congress wants protection. So they set up - they rig these numbers so they can point to them and say see, we've got this, or they do the long projection not just to postpone the pain, but sometimes to stop us before we spend again.

JIM LEHRER: So we've had one vote that was in the House Ways and Means Committee yesterday, and it was on a party line vote on the President's plan, or most of the-- it's not all there, but most of it - a hundred billion dollars of it is -- what does that mean about the future of this whole exercise?

MARK SHIELDS: Well, it means a couple of things, Jim. First of all, it means the new chairman of the Committee, Bill Thomas of California, it was an intramural statement, a political statement on his part. What he was basically saying to the Republicans in the Senate is stiffen your spines. Look, we're going to pass this over here, we just took the tougher part, that's the rate reduction without the sweeteners of marriage penalty being removed or the child credit being increased or even the estate tax. We just-- we've been attacked by the Democrats on kilting to the rich and rewarding the well off, we just passed this, we just stood up and did it. I think that's the message he wanted, we want to move it quickly, we want to strike while the President is in his honeymoon period. I think that was the political message that was sent. There will never be a vote in the United States Senate on what came out of the Ways and Means Committee tomorrow.

JIM LEHRER: We'll get to that in a minute. How do you read what was happening?

PAUL GIGOT: Take advantage of the momentum of the President's speech, no question about it, that's the big message, and also try to do early because you put maximum pressure on the Democrats if you're making this argument that you need a tax cut to stimulate the economy, you do it now when the economy looks a little soft -- and hope that that sells. Unfortunately, the bill that they passed only has a lot of the tax cuts-- only one of the tax rates retroactive to January 1 of this year, so I think they undercut their own argument.

JIM LEHRER: About helping stimulate the economy.

PAUL GIGOT: Right, but that's the political message they want to send. I think a better tax cut would have been a better way to back that message up, but anyway, that's why they did it right now.

JIM LEHRER: Does it mean anything? Is it going to have any effect?

PAUL GIGOT: Sure, it's going to have, I think -- they're going to vote on it in the House next week, at least they plan to. It will probably pass the House. Remember, tax bills have to start in the Ways and Means Committee in the House before the Senate can do anything under the Constitution. So this is trying to build some momentum so some of those weak-kneed Republicans and moderate Democrats in the Senate will see that you can pass tax cuts and get the momentum.

JIM LEHRER: Does it also set a pattern that this is definitely not a bipartisan issue?

MARK SHIELDS: I think that was fairly visible yesterday. I think what he has done, what Bill Thomas has done, and he's an effective legislator, I do not underestimate him, but he has united the Democrats. I will be willing to bet there will be fewer than a dozen Democrats voting for a popular President's popular tax cut next week. That's a big turnaround from 20 years ago when the last Republican President came in with a big tax cut, Ronald Reagan. Who were the ones who were the initial defectors? They were all the southern conservative Democrats. They were the most staunch and stalwart in opposition to this.

PAUL GIGOT: Most of those are Republicans, now, Jim.

MARK SHIELDS: You're talking about the blue dog Democrats, the blue dog Democrats -- the Gene Taylors, the Charlie Stenholms.

PAUL GIGOT: There are a lot fewer of those guys was my point.

MARK SHIELDS: Alan Boyd -- I agree there are. In 1991 they turned out to be turncoats, Phil Graham and Shelby among them.

JIM LEHRER: A lot of people are not as informed as you two, as we go through this debate over... we've heard the numbers, we've heard what Greenspan said today, we just heard what Paul said from the CBO, et cetera, the politics of this, lay out what you think is truly at the heart of the argument between the Democrats and the Republicans for us to watch as this thing unfolds.

PAUL GIGOT: Well, it's a philosophical argument about the size of government. What you want to do with the surpluses, do you want to spend it or return it to the people, that's I think the core part of the argument more than anything else. I really do.

JIM LEHRER: And the rest of it is just around that.

PAUL GIGOT: Yeah, I think ultimately...

JIM LEHRER: Would that mean then that the moderates in the middle who don't feel that strongly philosophically either way are going to resolve it?

PAUL GIGOT: They're going to move with the politics. I think the politics are heavily on the side of a new President in this case. Chairman Greenspan made that a lot easier with his statements supporting tax cuts in general, and also taking, I think... going a long way to taking the debt reduction argument off the table. Bill Clinton did a great job of turning into Bob Dole as the old accountant Republican, root canal Republican and saying look we have to pay down the debt first. What Greenspan said is look, we're paying it down so fast already that within a few years we're going to be piling up, we're not going to be able to reduce any debt in any one year, because there's not going to be enough to reduce that matures in any one year. The surpluses will be larger. So the government will then accumulate assets, and he's saying we don't want to do that, so better now get on a glide path of lower revenues. And that's been a big help to tax cutters in the last couple of weeks.

JIM LEHRER: Do you agree first of all - we'll come back to my question - do you agree that Greenspan is really helping the President?

MARK SHIELDS: Greenspan has helped the last two Presidents. Greenspan really gave support to Bill Clinton for his tax increase in 1993 as part of deficit reduction, and he's helped George W. Bush, there's no question about that.

JIM LEHRER: Draw a simple line where you see the argument here.

MARK SHIELDS: I think the argument is made, first of all, Jim, we're doing this in the dark. I mean, it is... the Congress has lost, its own rule. You have a budget. What George Bush did the other night in his presidential speech was to lay out a lot of pleasure, a tax cut and spending increases. We know there's going to be spending cuts. There's absolutely no indication of where those spending cuts will going to be. And what Democrats and some Republicans are saying we have to have a budget before we can do that. The President agreed with that before he appeared before the House Democratic caucus meeting. He said yes, we should have a budget before we have a tax cut. That's one. The second is over the next ten years, the $555 billion of the tax cut - and the numbers are already there -- will go to the top 1%, which is more than the President talks about in spending increases for all prescription drugs, all education, all health care -- research, all national defense increases. So that's what we're really talking.

PAUL GIGOT: The difference, there aren't going to be budget cuts of the kind Mark talks about. The cuts... this is the thing that surplus has allowed bush to do. He's allowed to increase spending by 4%. You don't give the Democrats the opening and say cuts in school lunches. He proposed a reduction in transportation because they've already spent three or four years building a lot of bridges and roads. You don't need to have the big increase. But this is the big difference in the debate, the surpluses mean you don't have to do that tight of budgeting and everybody can get something.

JIM LEHRER: So it's not as much about priorities as it used to be, it's just how to-- no?

MARK SHIELDS: I don't think there's any question that the spending caps worked to a considerable degree in the past because of the deficits. I think once the deficits are removed, I think spending will increase dramatically. But the third factor, you know, they talk about cold showers and root canal work. But, I mean, people want the debt paid down, Jim. Last year in debt payment, interest on the national debt last year, we paid more than we paid for all our veterans, all our FBI, all our national parks, all our senior citizens.

JIM LEHRER: And how do the Republicans respond to this?

PAUL GIGOT: We're already paying it down so fast, they're going to pay off $2 trillion. It's going away. You don't really have to worry about it. The other thing about the class fair argument, he talks about the rich, look, it really doesn't matter, because, you know, a lot of the tax cut is going proportionately to lower and middle class people -- not in dollar terms, but proportional terms. They don't pay as much-- they're getting a bigger tax cut proportionately than the rich are.

JIM LEHRER: Well, I just want to thank you both for clearing this up. Thank you both.

FOCUS - SOUTHERN NEIGHBORS - DRUG WAR

JIM LEHRER: Still to come on the NewsHour tonight, two angles on Central America: The drug war in Colombia, and an interview with the President of El Salvador. Ray Suarez has the Colombia story.

RAY SUAREZ: When Colombian President Andres Pastrana came to Washington this week, he asked for more help in his battle against Colombia's drug lords and also in his country's four-decade civil war. He got some promises of help at the White House Tuesday when President Bush pledged to increase legitimate commerce with Colombia, and fight drug abuse at home.

PRESIDENT GEORGE W. BUSH: I explained to the President that we're fully aware of the narcotics that are manufactured in his country. But I also told him that many of them wouldn't be manufactured if our nation didn't use them. And we've got to work together, not only to help Colombia, but to help our own country.

RAY SUAREZ: But the U.S. declined an invitation to observe next week's peace talks between Colombia's government and the country's chief Marxist guerrilla group, known by its Spanish acronym-- FARC. The U.S. Government has refused official contact with the FARC since the group killed three U.S. aid workers in 1999. Colombia produces two-thirds of the cocaine sold around the world and two-thirds of the heroin used in the U.S. Last year, Congress pledged $1.3 billion to help fund what's known as Plan Colombia, Pastrana's program to choke off the drug economy. Washington is contributing late model combat helicopters to spray and kill coca crops, though the new installment has yet to be delivered, and training for new anti-narcotics battalions. But President Pastrana says Plan Colombia, which includes a large amount of domestic funding, is much more than military hardware.

PRESIDENT ANDRES PASTRANA (Translated ): More than 80% of plan Colombia, that is to say $7.5 billion, is going into social investment. 20% is going into the fight against drug trafficking, so I would call it a plan for peace.

RAY SUAREZ: So far, government forces have busted a number of drug rings, taken control of several drug plantations, and destroyed drug processing plants and up to a quarter of the country's coca crops. The remaining drug growers have powerful alliances with the guerrillas, who control and protect much of their land, and then charge a fee that funds the insurgency. Guerrilla leaders have assailed the United States for taking sides in Colombia's civil war. That conflict claims 70 lives per day and has four main combatants. On one side are the FARC and a rebel group known as the ELN. Both were founded in the 1960s by leftist leaders, and in the 1970s joined forces with the new drug traffickers. The guerrillas have battled the Colombian military and the right-wing paramilitary groups that protect landowners from the rebels. Earlier this week, the State Department's annual human rights report said the Colombian government's record "remains poor" and that "paramilitary forces find a ready support base within the military and police." As for the guerrilla groups, the report says, "the FARC and the ELN regularly attacked civilian populations, committed massacres, and summary executions, and killed medical and religious personnel." The war has spread beyond Colombia, forcing a million refugees to neighboring countries. One neighbor, Ecuador, has become a haven for FARC guerrillas. That topic arose at Defense Secretary Rumsfeld's confirmation hearing in January.

SEN. EDWARD KENNEDY: How are we going to deal with these reports that we've read recently about the spillover in the area and in the region? And how are we really going to be able to determine the difference between the counterinsurgency and the counter narcotics?

DONALD RUMSFELD: If the demand persists, it's going to find ways to get what it wants, and if it isn't from Colombia, it will be from somebody else. And if I were the neighboring countries, I'd be concerned about spillover as well.

RAY SUAREZ: Two weeks ago, the on-and-off peace talks resumed after President Pastrana met FARC leaders on their turf. The next round of talks begins Thursday. While the U.S. won't be at the peace table, a group of American representatives and Senators last week flew to an isolated Colombian jungle base to assess plan Colombia.

RAY SUAREZ: We talk with two of those Senators, Democrat Christopher Dodd of Connecticut and Republican Chuck Hagel of Nebraska. Both are members of the Senate Foreign Relations Committee.

Chuck Hagel, let me start with you. What did you see down in Colombia, and what did you make of it?

SEN. CHUCK HAGEL: Well, we saw some rather disturbing events, activities not surprising. We have a regional problem on our hands. It's a problem that affects the United States domestically, economically, and geo- politically. This problem is part of the western hemisphere problem. It's in our backyard. And the United States is going to have to continue to work with Andean nations and the nations of Latin America to deal with this. I came away with some hope, however. I think President Pastrana is making some progress with his government, reforming that government, reforming the military. Yes, there's still problems, there's still abuses, imperfect. But with our help and with new assets, I think they can win this. We must win this. It's in the best interest of the United States to help the Colombians and all of Latin America regain their sovereignty. And literally it is a fight over sovereign, so yes, we've got a long way to go, but I think progress is being made.

RAY SUAREZ: Chris Dodd, what did you see, and what should Americans know about what you saw?

SEN. CHRISTOPHER DODD: Well, I think Senator Hagel has captured it pretty well. This is a very... Americans don't, I think, appreciate enough what the nation of Colombia has been through over the last two decades. They've... just to put it in perspective for you, as a result of the drug wars, the narco trafficking that goes on in Colombia, they've lost four presidential candidates, some 150 journalists, 300,000 people have lost their lives. Just in the municipal elections a few months ago in Colombia, 36 municipal candidates for mayor were assassinated, and 50 were kidnapped. So when you put this in perspective... 200 justices of the courts have been assassinated. 2,000 police officers and prosecutors have been executed by narco traffickers. This is all in the space of 20 years. This country is being shredded. A million people are displaced in Colombia. Well over 100,000 a year try to leave. In fact, our embassy tells us that almost 1,500 people a day line up to apply for an exit visa to get out of Colombia. Almost 70% of the people in a recent survey in Colombia said they would leave tomorrow if they could get out of the country. That's how bad this is. There's a real danger that these narco traffickers are about to gain sovereignty of the nation. And of course, given that 16,000 people a year die in the streets of the United States in drug- related deaths, that this is a massive consumption here in this country, we're contributing very directly with U.S. dollars, if you will, going back down to finance and subsidize to support this effort. Colombia is in real trouble. It's spreading to Ecuador, it was in Bolivia, it's still in Peru to some extent, Brazilians are worried about it, the Venezuelans are worried about it. Transit points in Costa Rica and Panama and the Dominican Republic and other nations; this is a spreading cancer. And if we don't take it on aggressively, more aggressively, here at home and abroad, it can get a lot worse.

RAY SUAREZ: Senator Hagel, people staying at home in the United States could follow some of the bad news from Colombia in the newspapers. What are the kinds of things that you made sure you saw when you were down there to give you a feel for what's going on in the country?

SEN. CHUCK HAGEL: Ray, we met with President Pastrana and his cabinet, his top military leaders. Then we got out into the country. We went down into a region of Colombia that the government has not controlled for a many, many years, the Putumayo area. This is where the coca fields are everywhere. The eradication effort that we have made... are making down there is being somewhat successful, a long way to go, but at least I think we're making some progress. So we went down there and looked at our base where we have a joint task force with the Colombians. We have United States army special forces training a special anti-narcotics Colombian army brigade down there. I was impressed with what I saw. It appears to me that they're developing not only a very confident military, but tactical, strategical elements of that military to deal with this problem. We went even further down into that area of Colombia, a place called Tres Esquinas, and there is an area that is very remote. You get there only through air or boat, and, again, more operations, more eradication efforts, very dangerous. My friend Senator Dodd talked about Ecuador. We went over to Ecuador and spent a day and a half there, met with President Ochoa and his cabinet. I think there's progress there. They are very vulnerable in Ecuador. It's a small country, small recourses, small army. We went on the Pacific side of Ecuador to look at our base there, Manta, where we are developing a strong base of operation for surveillance, the P-3's flying out of there. So we were able to really get out into the countryside and take a good look at what's going on.

RAY SUAREZ: Well, last year the Congress voted for a transfer of funds as part of Plan Colombia down to the country. Do you come back to the United States feeling secure that the money's being well spent, that the program is being well administered?

SEN. CHUCK HAGEL: Generally, I do. These kinds of programs always have problems. There are always concerns, there are always questions, but generally I am satisfied that we made the right decision. We have appropriated the right amount of money for that effort, and we have a ways to go. We've got to get yet some Black Hawk helicopters down there and some other things that we need to do better. But overall, I think they are using the money wisely, and it is an investment for our future as well as the future of Latin America.

RAY SUAREZ: Senator Dodd, both you and your colleague have told a pretty depressing story. He says he's an optimist. Are you?

SEN. CHRISTOPHER DODD: Yeah, I am. I think that Chuck has got it right. I think overall there's no question in my view that President Pastrana is committed, both to resolving the civil war... There are two problems in Colombia. There's a civil war and the narco war, and they spill over in various areas. I think he's committed to trying to resolve that 40-year civil conflict with these guerrilla groups... two guerrilla groups-- one large, one called the FARC; a smaller one, the ELN. There's progress there, although there's been some setbacks, but he's moving in the right direction. And on the narco front, clearly the equipment we're providing is making it possible for the eradication efforts to do a lot better job than they were in the past. But there's some problem areas, and they're worth pointing out to you I think, and one is we need to have better cooperation between the police and the military in Colombia. They've been at loggerheads with each other, and they've got to start working more closely together, and they've got to start working with their counterparts in neighboring countries. Number two, you've got problems... a growing problem with the paramilitaries. Their numbers have now been growing to about 8,000 people in their ranks. Many have been involved directly in the narco business, the narco trafficking. And if they end up becoming a major source of difficulty, it's going to be hard for us to sustain the kind of support financially. And lastly, we need more cooperation on this issue. Chuck mentioned this in the outset of his remarks, and I couldn't agree with him more. This is a regional problem. It's not just a U.S./Colombian problem. And the Europeans have got to live up to their commitments as well as other nations in the hemisphere so that this is not just U.S. and Colombia. And lastly, economic assistance; the Andean trade agreement, which expires this year, should be reauthorized. You need to revive alternative economic hope for these people. If you're telling them not to grow the coca leaves and not to be involved in drug trafficking, you better have an alternative for them or you're never going to convince the local population to support your efforts, and we need to do more of that as well.

RAY SUAREZ: Senator Hagel, some members of the House and Senate are starting to openly question the United States commitment down there, and Americans themselves looking at more money, and now American personnel and American citizens heading down there might be a little skittish as well. What do you tell them?

SEN. CHUCK HAGEL: Well, partly we tell them what Senator Dodd and I have been discussing here the last few minutes. You tell them the truth. There's where you start. This is complicated. There are many factors, as Chris pointed out a minute ago. On starting with guerrillas and the paramilitaries, and narco traffickers, corruption, human rights, all that's mixed into this witch's brew that is dangerous and complicated. But we don't have any choice here. We can't turn our backs. We must continue to work with the people down there, the leadership down there. It doesn't mean we fight their war for them; we're not talking about that. But surely we can continue to do the things that we are doing. They can get better; they need to get better. But I think explaining the facts to the American public and to our colleagues-- encouraging our colleagues to go down and see for themselves-- but be honest, tell the truth, inform, and give as much information as we can to the people of this country. I understand their frustration. We're frustrated, we're all frustrated. But it is not a matter of either this or not doing anything. We're going to have to help them see this thing through. And one last point I'd make, and Chris alluded to it, if we didn't have the demand in this country, we wouldn't have the problem. So we're going to have tounderstand that this problem is a direct result of our demand.

RAY SUAREZ: Chuck Hagel of Nebraska, Christopher Dodd of Connecticut. Gentlemen, thank you both.

NEWSMAKER

JIM LEHRER: And now, the President of El Salvador, and to Margaret Warner.

MARGARET WARNER: On January 13, a massive earthquake hit the tiny nation of El Salvador. At 7.6 on the Richter Scale, it shook the capital, San Salvador, and triggered landslides in the suburbs nearby. Exactly one month later, another quake measuring 6.6 hit. This time the greatest devastation was felt in the country's hard-to-reach mountainous areas. Combined, the two quakes killed at least 1,300 people, wounded 4,000, and left nearly a quarter of the nation's six million people homeless. El Salvador's President Francisco Flores came to Washington this week looking for help. And at a White House meeting with President Bush, he got it. He won an increase in U.S. earthquake aid from the $10 million originally pledged to more than $100 million, and an agreement to let an estimated one million Salvadorans working illegally in the U.S. stay on for now. Those immigrants send more than $1.5 billion each year to relatives back home, a vital part of the economy for what is Central America's smallest, most densely populated country. Francisco Flores, 41, was elected President in 1999 as the candidate of the conservative Arena Party. A graduate of Amherst College in the U.S., He served as President of the legislature before winning election. President Flores was in the forefront of trying to help El Salvador recover from the quakes, urgently asking other countries for help. Many countries responded with pledges of aid, and British and Taiwanese workers were among the first on the scene.

SIMON WALLER: I'm quite sure that the incidence of diarrhea would have gone up. We could possibly be facing the outbreak of something like cholera, typhoid, hepatitis, or dysentery that are common diseases that could creep in very quickly.

MARGARET WARNER: But since the first quake, relief officials say, the help has tapered off. And they specifically faulted the United States for initially pledging only $10 million. That's about the same amount Washington is spending to construct a new staging platform in El Salvador for U.S. soldiers and aircraft to monitor drug trafficking in the region. Even with today's increase, U.S. earthquake relief will be less than the $150 million it sent after a deadly quake in 1986, at a time when the U.S. was supporting the government in its bloody 12-year war against leftist guerillas.

MARGARET WARNER: And joining us now is President Flores. Thank you for joining us, Mr. President.

PRESIDENT FRANCISCO FLORES: Thank you, Margaret, thank you very much for the opportunity.

MARGARET WARNER: Are you pleased with the outcome of today's meeting?

PRESIDENT FRANCISCO FLORES: Yes, I am pleased. As you know, the most effective aid will come to Salvadorians from Salvadorians. There's a very important Salvadorian community in the United States that fears, you know, that they might be sent out of the country. So these temporary protective stat us will allow them to have more permanent jobs and to help their families in El Salvador.

MARGARET WARNER: Do you think that will increase-- they're awfully sending an awful lot, $1.5 billion.

PRESIDENT FRANCISCO FLORES: Yes.

MARGARET WARNER: Do you think this temporary amnesty will actually increase that amount?

PRESIDENT FRANCISCO FLORES: Yes, I think it will. We have an experience with this, Margaret in the past. The United States granted a TPS for Salvadorians close to the signing of the peace accords in 1992. And this created a sense of security in Salvadorians, they assumed more permanent jobs, and we're expecting remittances to go up 20% to 25%.

MARGARET WARNER: So how it the recovery going from the earthquakes?

PRESIDENT FRANCISCO FLORES: Well, it's a very difficult situation. It's a very difficult to understand the magnitude of it. It has affected one quarter of the population which are homeless, and it has shook-- shaken the-- all the mountain chain in El Salvador, which means that is 158 municipalities of 260 have been devastated. This is equal to-- I don't think you have ever experienced anything like this in the United States. It would be like all the states of the South being devastated, or the central region. So it's something that has an immense magnitude.

MARGARET WARNER: Are you getting the kind of international aid you need?

PRESIDENT FRANCISCO FLORES: We hope we will get it. We have... we are very satisfied with what happened in Washington today. The relief package, which is $52 million in relief for this year and $58 (million) for next year, is going to be very important in the effort. We're going to Madrid next week to a consultative meeting where we'll present the damages of the earthquake, and we hope to find more resources.

MARGARET WARNER: You said yesterday you planned to point out in your meeting with President Bush to point out the discrepancy between the massive and very quick aid that the United States sent after the war and the paltry response this time. Did you raise that with him and what was his response?

PRESIDENT FRANCISCO FLORES: First, Margaret, there was no need because in the meeting I had prepared to do a very convincing speech around the TPS and the relief package. Right from the beginning he said Mr. President yes to both, yes to the TPS and yes to the relief package, so he left me with no argument.

MARGARET WARNER: Do you think that America's deep involvement in your 12-year civil war, during that time now gives the U.S. a special obligation to help El Salvador in a time of peace?

PRESIDENT FRANCISCO FLORES: I think more than an obligation in the sense of having been involved in hell Salvador's conflict. I think what's happened is El Salvador has a functional economy, an economy based on free enterprise, open market economy, and has redesigned institutions to create those two objectives I mentioned first. So I find that El Salvador is the country that has in Central America advanced much more in ideas that we share with the United States, and I find the commitment of the United States more related to those values than to their involvement during the war.

MARGARET WARNER: So you don't feel that somehow once the war was over that the United States lost interest or didn't show as much interest in your country as before?

PRESIDENT FRANCISCO FLORES: Well, I find that there has been a cycle of U.S. involvement with the region and then a distancing from the region, and I find that this is something that is very negative. I think that President Bush's decision to be involved in Latin America is very important to the region, and I find that in those periods of time when the United States has distanced itself from its neighbors, then there is a tendency to revert many reforms that are very positive for region.

MARGARET WARNER: Now, the U.S. military is also getting reinvolved in El Salvador, and one of these monitoring posts, these anti-drug trafficking posts that we saw in the piece in Colombia is also being set up in El Salvador. Why did your government agree to that, to let the Pentagon come in?

PRESIDENT FRANCISCO FLORES: You see, Margaret, the U.S. has been very effective in facing the cartels in Colombia. And these cartels were centralized, the Cali Cartel, the Medellin Cartel and they operated in Caribbean, you know, in the corridor that went from El Salvador to Florida and to the states of the South. Now, the United States and the Colombian government were effective in facing these centralized cartels. When these cartels were dismembered, there was a decentralization of the cartels and they started using the Pacific corridor. As you know, El Salvador is in the Pacific Coast and has no boundary with the Caribbean Coast. So we started experiencing that the corridor was through El Salvador. We didn't have the capacity to monitor that, and we needed an alliance with the United States to face a problem. The last thing we need is a Colombianized El Salvador.

MARGARET WARNER: Is there that danger? Do you feel your country is threatened by the drug, the drug phase or the anti-drug war?

PRESIDENT FRANCISCO FLORES: Yes, there is the danger and that's the reason why we took the decision. And even though El Salvador is not a destiny, by becoming part of the corridor, it can face many, many of the problems. I think we are in time to stop it.

MARGARET WARNER: Well, when you say part of the corridor, do you mean that part of the El Salvadorian economy is now becoming involved in the drug trade?

PRESIDENT FRANCISCO FLORES: What we experienced was, for example, we would find an area that had intense level of violence and delinquency and we went to these areas to find out what was going on, we found an airstrip. So what happens is these narco traffickers, what they do is that they protect themselves by a belt of delinquency and violence. So these are the very negative things of being part of that corridor.

MARGARET WARNER: Do you share the dire view that Senators Dodd and Hagel that just outlined about really the state of central America or Latin America or the parts that are affected by the drug trade, that it's really that bad?

PRESIDENT FRANCISCO FLORES: Yes, I do share with their opinions, though I feel that the decision of the United States to forward the Plan Colombia is the best decision. Because you see, in Colombia, the most important thing is to know who you're going to fight and who you're going to have a political dialogue. And I think that Plan Colombia makes that distinction very clear, that they're going to fight the narcos and they're going to deal with political problems in a civilized way. So I find that is the most important strategic element of the Plan Colombia.

MARGARET WARNER: Finally, your leftist opposition in the legislature of course opposed this and argues that return of U.S. military to Latin America ultimately could mushroom beyond fighting the drug war and get involved in political conflicts in the region. Is there any danger of that?

PRESIDENT FRANCISCO FLORES: Not at all. You know, the monitoring facility in El Salvador, the ones that are involved in the monitor facility don't even use weapons. It's a technical device used to monitor whatever happens in El Salvador, its coast or in its airspace and providing information to our authorities so that we can attack the problem. I find no problem with that.

MARGARET WARNER: All right, President Flores, thank you very much, and good luck with the earthquake cleanup.

PRESIDENT FRANCISCO FLORES: Thank you very much. Thank you very much, Margaret.

RECAP

JIM LEHRER: Again, the other major stories of this Friday. Federal Reserve Chairman Greenspan endorsed tax cuts again, but not specifically President Bush's $1.6 trillion plan. And dozens of buildings in Seattle and Olympia, Washington, remained closed and unusable; some bridges and roads were still closed in Tacoma after that powerful earthquake. We'll see you online, and again here Monday evening. Have a nice weekend. I'm Jim Lehrer. Thank you and good night.