The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. I'm Robert MacNeil in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Tuesday, we get Israeli, Egyptian, Palestinian, and American views of the big new push for peace in the Middle East, and we sample the Bush versus Clinton political and educational arguments over school vouchers. NEWS SUMMARY

MR. LEHRER: Federal Reserve Board Chairman Alan Greenspan had some encouraging words today. He said economic growth will improve the nation's employment picture next year, but both Democratic and Republican members of the Senate Banking Committee said the Fed was moving too slowly and timidly in face of a weak recovery. Committee Chairman Don Riegle, a Michigan Democrat, said rising unemployment required more aggressive steps. Greenspan told the committee the Fed's interest rate cuts were slowly helping the economy grow again.

ALAN GREENSPAN: The recent easings of Reserve's conditions should help to shore up the economy and coming in the context of a solid trend towards lower inflation have contributed to laying a foundation for a sustained expansion in the U.S. economy. The economic expansion is likely to strengthen moderately to a range of 2 3/4 to 3 percent over 1993. Such a pace is expected to reduce the unemployment rate noticeably over the next year and a half.

MR. LEHRER: British Airways announced today it will invest $750 million in USAir. British Airways was the world's most profitable airline last year, making some $540 million. USAir lost more than $400 million in 1991. Robin.

MR. MacNeil: Bill Clinton today fired back at President Bush for criticizing his economic plan as smoke and mirrors. He said the president was an expert at using those tricks. He also accused the Bush administration of having the worst economic record since the Great Depression. Clinton spoke to reporters during a campaign stop in Lanesville, Indiana.

BILL CLINTON: We're losing our economic leadership. Most people are working harder for less money, record losses of family farmers, depression in the city and in the rural area.

SPOKESMAN: So you're predicting a win?

BILL CLINTON: I'm predicting that we are going to give them a good fight here.

MR. MacNeil: President Bush today campaigned for his education proposals. He spoke at a Catholic high school in Philadelphia about his so-called "GI Bill for Children." It would prove a thousand dollar voucher for poor and middle income students to use at private schools.

PRES. BUSH: I look at it in the sense of real opportunity to help families here, to help kids here achieve what they want to achieve, but not at the expense of the public schools. And that's the point we've got to make. So when you hear the big assault on us in the fall about this question, please do not be taken in by that rhetoric. This is going to enhance education all across the board in my view.

MR. MacNeil: We'll be discussing the President's voucher proposal later in the program.

MR. LEHRER: Israel and Egypt held their first summit in six years today. Israeli Prime Minister Rabin and Egyptian President Mubarak met in Cairo. They announced no specific agreements, but Mubarak said a new chapter in the two countries' relations had begun. He said he accepted an invitation to visit Israel and would work with Rabin to accelerate the Mideast peace process. Sec. of State Baker continued his Mideast peace mission in Jordan. He again called Israeli settlements an obstacle to peace, though Rabin has placed new limits on them. Baker spoke about the peace process after meeting with Jordan's King Hussein.

SEC. BAKER: It's just important, in our view, that there be a reconvening of the bilaterals fairly promptly in order to take advantage of the possible momentum that could be engendered by a change in government in Israel.

MR. LEHRER: Baker later flew to Damascus, Syria, where he will meet tomorrow with President Assad. We'll have more on the new peace initiative right after this News Summary. An Israeli soldier was killed in South Lebanon today. It happened when Muslim guerrillas attacked the positions in Israel's self-declared security zone in the region. Five other Israeli troops were wounded. The Israeli army shelled suspected guerrilla camps in retaliation, wounding three people.

MR. MacNeil: Members of the United Nations Security Council have warned that Iraq could face a military strike in its latest standoff with weapons inspectors. The inspectors have been camped outside an Iraqi ministry since July 5th, blocked from searching it and facing mounting Iraqi protests. We have a report narrated by Vera Frankel of Worldwide Television News.

MS. FRANKEL: It's almost as if Iraq is spoiling for trouble. Anti-UN demonstrations grow more hostile. UN weapons inspectors continue their sit-in protest. The Iraqi government's refusal to let the inspectors into the agriculture ministry to search for ballistic missile documents is draining the Security Council's patience. Other Gulf War truce terms are also being violated. Iraq won't admit UN guards and relief workers. Britain's ambassador to the UN reflects the Security Council mood.

SIR HANNAY: More trouble is caused in international affairs by miscalculation than by calculation. And I'm afraid that the rulers in Baghdad are well known for their miscalculations. And I just hope they're not making one now.

MS. FRANKEL: Other senior U.N. diplomats are warning Iraq it faces tragic consequences if it doesn't observe the truce terms. Under consideration is the punitive multinational air strike to show Saddam the U.N. isn't all bark and no bite.

MR. MacNeil: The United Nations Security Council today voted unanimously to cut off foreign aid to Cambodia's Khmer Rouge guerrillas. The Khmer Rouge are alone among the country's four warring factions in refusing to disarm under a U.N. peace plan. They are believed responsible for the deaths of a million people during their four-year rule in the late 1970s.

MR. LEHRER: Food and medicine began arriving again today in the Bosnian capital of Sarajevo, but continued fighting made the international airlift difficult and dangerous. The city's airport closed at least once during the day. Also today, U.N. officials accused the warring parties of a new disturbing tactic in their civil war. Terry Lloyd of Independent Television News reports from Sarajevo.

MR. LLOYD: As sporadic fighting continued around Sarajevo Airport today, giving the new truce little chance of success, the U.N.'s commander confirmed that the warring sides have shelled their own people to break previous cease-fires and blame the enemy. It's a callous tactic deployed to seek propaganda and to start fighting all over again. There have been rumors before, but now Gen. Louis MacKenzie says the U.N. has evidence of such foul play.

GEN. LEWIS MacKENZIE, U.N. Commander: It's a little bizarre, but if you have a particular agenda that -- a message that you want to send to the world or you want to initiate a cover story or whatever, then there are some logical explanations to it from the point of view of what it does to your own people. It's got to be bizarre to the extreme. As I said, I've never, ever run into that before.

MR. LLOYD: So these poor people will never known if they were injured and maimed by the enemy or their so-called "friends." The U.N.'s information was gathered by simple observation, but this new turret-mounted machine, known as Cobra, will find out much more. It's a bombardment radar detector used normally to conduct counterattacks. But here in Sarajevo, the peacekeeping forces will use it merely to spot the guilty parties and discover what artillery they're firing. Meanwhile, at the airport, the RAF nosedived back in between gunfire to resume the much needed relief operations. They were cancelled yesterday when the base came under heavy attack. But the air force was on standby to return with all haste. Normally, they fly back empty, but this one had another mission, to fly out a Canadian soldier who was shot at the airport yesterday. One of the next Hercules to return will be ferrying part of a million pound consignment of urgently needed medicines and medical supplies from Britain.

MR. LEHRER: The sanctions committee of the U.N. Security Council today banned Yugoslav teams from the summer Olympics. Individually, Yugoslav athletes will be allowed to compete in the game which begins in Barcelona, Spain, this week.

MR. MacNeil: Researchers at the International AIDS Conference said they've discovered a puzzling side effect of the AIDS epidemic, a new strain of tuberculosis that resists all forms of treatment. A researcher from Mexico said the new strain of TB is a threat to healthy people as well as AIDS patients. Tuberculosis is a highly contagious respiratory disease that spreads through the air. Two murder charges against Jack Kevorkian, the so-called "suicide doctor," were dismissed today by a Michigan judge. Kevorkian was charged last year in the deaths of two women who were chronically ill. He's also assisted in two other deaths. In making his ruling, the judge ordered Kevorkian to refrain from assisting in future suicides until the issue was resolved by the courts or legislature.

MR. LEHRER: And that's it for the News Summary tonight. Now, it's on to another go at peace in the Middle East and the school voucher debate. FOCUS - PUSH FOR PEACE

MR. LEHRER: The newest new move toward a Middle East peace is our lead story tonight. It started with the new government in Israel under Prime Minister Rabin. He said he was ready to bargain with the Palestinians in the occupied territories and to halt most settlements there. U.S. Sec. of State Jim Baker set off Sunday for Israel, Jordan, Syria, Egypt, and Saudi Arabia. Today, Rabin met with Egyptian President Mubarak in the first Israeli-Egyptian summit meeting in six years. Where is it all headed is the question we ask tonight. Our answers begin with a report from Cairo by Robert Moore of Independent Television News.

ROBERT MOORE: No Israeli leader has been to an Arab country for six years. Yitzhak Rabin came just seven days after taking office, evidence of the extraordinary pace of diplomacy and of Rabin's desire to inject real substance into the peace negotiations. Egypt is the only Arab country to have relations with Israel. And President Mubarak has been bold in declaring that Rabin is a man he believes Arabs can do business with. They talked for several hours, two soldier politicians who have fought on opposite sides in three wars. Now with their focus on dialogue, they reflect a mixture of real hope and caution.

YITZHAK RABIN, Prime Minister, Israel: We are dealing now with new realities within a new framework, but with the purpose to achieve peace that will give tranquility, progress and prosperity to all the people of the region.

PRES. HOSNI MUBARAK, Egypt: Bearing in mind that Mr. Rabin is only one week in office, so we didn't go through so many details or ask for miracles. We exchanged views.

MR. MOORE: The ironies of this visit were apparent when Rabin visited the Tomb of the Unknown Soldier. Many Egyptians have been killed in fighting Israeli forces under the command of Rabin. But the tone of Middle East politics has changed. In Cairo today, the first moves towards a revitalized peace conference have been taken.

MR. LEHRER: Now, four perspectives on what's going on. Bill Brown, a career foreign service officer, recently retired as U.S. Ambassador to Israel. Mohamed Hakki served as President Mubarak's press secretary. He's now a journalist with the Saudi newspaper Okaz. Shimon Shamir is a former Israeli ambassador to Egypt. He's now a fellow at the United States Institute of Peace. Khalil Jahshan is a Palestinian American who heads the National Association of Arab Americans. He just returned from Jordan and Syria. Amb. Brown, is this finally it? Is a real process in the works now?

AMB. BROWN: Well, we're off to a good start, and I'm delighted seeing the media coverage to see that Mr. Rabin, Prime Minister Rabin, has handled himself well. So have the Palestinians thus far, meeting with Sec. Baker in Jerusalem, and of course, this dramatic announcement by President Mubarak, which highlights the very positive role in the process which Egypt can play. One hears that King Hussein standing next to Sec. Baker today also played well and the big question is, from my viewpoint, Assad in Syria.

MR. LEHRER: Is that a big question from the Arab point of view, from the Palestinian point of view, Mr. Jahshan?

MR. JAHSHAN: Basically, I think there is optimism on the Palestinian side for Sec. Baker's visit to the region, the fact that Palestinians have been impatiently awaiting for the results of the Israeli elections to restart the process. So the visit was crucial in this respect.

MR. LEHRER: From the Palestinian point of view, is Prime Minister Rabin doing all the right things so far?

MR. JAHSHAN: Not necessarily. I think thus far, from a Palestinian perspective what has been heard from Rabin is actually less than what we've heard from him during the election campaign. His -- the Palestinians were generally left discouraged by his inaugural address in the sense that he has left some key elements out of that speech and they resented to a certain degree the threatening note of that speech. They would have liked, for example, instead of theatrical gestures inviting Arab leaders to Jerusalem and expressing willingness to visit Arab capitals, they would have preferred some very specific and tangible steps taken by the Israeli side in response to the rather abysmal situation in terms of human rights abuses in the occupied territories.

MR. LEHRER: From an Israeli point of view, is it considered that Mr. Rabin has already taken some big steps?

AMB. SHAMIR: Absolutely. You must remember that the new prime minister, the government was inaugurated only a few days ago, and he already had a very important meeting with Baker that moved the forces forward, a very important meeting with Mubarak. The government has made important decisions on the freezing of settlements, most settlements. There was a test to this government at the Naja University, where there was a confrontation with Palestinians. And I think Rabin showed by solving diplomatically that problem that he's not seeking a conflictual policy toward the Palestinians. There is now talk about joining the multilateral committees that the previous government avoided participating in. In other words, in very short time, both have substantial steps forward and also signals indicating further steps forward toward the solution of the problem.

MR. LEHRER: Mr. Hakki, the Egyptians are now cast in a very key role in this, are they not? How does President -- I know you don't speak for President Mubarak, but what's the Egyptian view of where things rest right now, what Mr. Rabin has done, what the Arab response has been, and what the prospects are?

MR. HAKKI: I think for us it has always been ever since 1967, the crucial question has been and still is how are we going to coexist with each other. I think there is -- as everybody's saying here today -- there is a good feeling -- there is a new beginning. The fact that the Israeli voters have chosen the road to peace means that they have buried the idea of the greater Israel once and for all. There are quite a number of leaders in the Labor Party who are dovish and who really believe in land for peace.

MR. LEHRER: Of course, that's Mr. Rabin's party, the Labor Party, right?

MR. HAKKI: This is Mr. Rabin's party, so we generally feel that Egypt has always played the role of the catalyst, because when Palestinian uses the word "catalyst" we think it's insulting for America and for us. If there is a catalyst, it is Egypt that has brought both sides, the Jews and the Arabs, closer to the sense of realism in the whole business.

MR. LEHRER: Well, Mr. Shamir, Mr. Rabin has said that he feels, as you just outlined, that he's taken some steps now and that the next moves are up to the Arabs. What specifically does he have in mind? What do you think that the next step should be by the Arabs to move this thing along?

AMB. SHAMIR: Well, I can't say exactly what is in Rabin's mind.

MR. LEHRER: Sure.

AMB. SHAMIR: But I can tell you what the expectations of Israel are. There are expectations that the first step would be the cancellation of the Arab boycott. This is something that was raised even before the new government was inaugurated, the boycotting the companies that trade with the Israelis is illegal essentially, and this could be a gesture showing that the Arabs are also ready for a new approach.

MR. LEHRER: What about that Mr. Jahshan, why doesn't the Arab world do that and get that behind them and move on?

MR. JAHSHAN: Well, actually the whole idea of exchanging a cancellation of the boycott in return for some Israeli gesture regarding the settlements was an Arab idea. It was proposed by Egypt initially and was adopted by several Arab parties to the negotiating process. What they are awaiting for is some unequivocal policy commitment or decision on the part of the Israeli government.

MR. LEHRER: Like what?

MR. JAHSHAN: The freeze of Jewish settlements in the occupied territories, or something close to a territorial freeze. Now, we have heard some positive statements from Mr. Rabin as he assumed the position of prime minister in Israel, and in the last couple of days since he embarked on his visit to Egypt regarding the settlements, but these statements are stillnot clear. I mean, I'm not privy --

MR. LEHRER: Sure.

MR. JAHSHAN: -- to the details of what was said with Sec. Baker, but it still falls short of an Arab response to basically cancel the break-up, but I think the Arab parties have reached a decision several months ago when they made that proposal.

MR. LEHRER: Amb. Brown, you are an experienced diplomat; I am not. It seems to me, listening not only to what these gentlemen have said, but also what has come out of the region, itself, out of the mouths of officials, that these folks are not very far apart on this particular issue, are they?

AMB. BROWN: Well, it's that last -- it's that last 20 percent or 10 percent or 2 percent that so often befuddles us and frustrates us in this business. But certainly the signs are there. I mentioned before another key component, and that is the Syrian aspect to this. You know, the late King Abdallah, I believe it was, said many years ago before he was assassinated by Palestinians up at the Alaxa Mosque in Jerusalem that in the context of that time you couldn't make war without Egypt and you couldn't make peace without Syria. Now, the Syrian-Israeli dispute over the Golan and the Syrian role currently in Lebanon, today's news reports further fighting in South Lebanon. The prospects of elections in Lebanon - - should I say Syrian style -- the implementation or partial implementation of the Taif Accord, the Syrian role at this time I think can be very, very important. We ought to focus on it.

MR. LEHRER: But what about the specific question here though that was just raised, and that is, okay, the Israelis are ready for the Arab world to lift the boycott and the Arab world is ready for Israel to freeze the settlements, I mean, that seems -- that's what I was speaking of specifically, that the ground there is even less than the two inches, is it not?

AMB. BROWN: It's fairly close. You have to reckon, however, that there are over 100,000 Israelis now living already in those settlements. They produce children and they will have their incremental housing demands of a room here and a road there and a water line there and so forth, so I don't think you're going to see an absolute zero total freeze on everything up in the settlements, but you can get awfully close to it and I think you can do the trick.

MR. LEHRER: Do you agree with that, Mr. Shamir?

AMB. SHAMIR: Yes. I think the exceptions are not substantial. They include such things as accommodating natural growth of the settlements already existing. There are a lot of technical problems. It must be understood that Rabin inherited 60,500 housing units under construction. And there are a lot of legal problems, financial problems involved here, and the government is seriously studying it with the purpose of eventually freezing all political settlements at least. This excludes Jerusalem.

MR. LEHRER: Yeah. Mr. Hakki, does that make sense to you, that Egypt might have a role in here to come in and figure out a way to walk this middle ground that would satisfy both parties, the lifting of the Arab -- could it, for instance -- could Egypt, do you think, have any influence in getting Syria to agree to lifting the boycott on Israel in exchange for the settlements, some element of freezing, and does this make sense to you, in other words?

MR. HAKKI: Egypt has always, always, from the very beginning, played the role of bringing, you know, incrementally the sides closer together, whether it was at Madrid, both Egypt and Saudi Arabia played the role in bringing the sides together. And the questions that have always been asked of the Arabs, they have done it, including the last, you know, this last 24 hours, when Mr. Baker asked Hanan Ashrawi and the Palestinian delegation that he should in a sense accept that America would give Israel the loan guarantees, don't make a fuss about it now, we are still adamant in our position about interpretation of the settlements and we are not -- they are not going to expand and so on. Egypt has always played the role of going to the Syrians, going to the Palestinians, going to the other Arabs and saying, we are not dealing with a normal situation, we have somehow to walk with America, because this is an extremely difficult problem for the President domestically and for the Israelis. If we have a formula that you don't give up any part of your land in exchange for real peace, then why not? It is still in its embryo, still new, but it can be done.

MR. LEHRER: Sure. And I realize we can't negotiate the deal here. I'm not trying to do that. But, Mr. Hakki mentioned the loan guarantees thing and all the speculation is that Mr. Rabin is on a course where he's going to get those -- and I would explain to people who may have forgotten what that issue is, it's a $10 billion deal to -- loan guarantees from the United States to guarantee housing in Israel for Jews who have come over from the Soviet Union. Now, the Palestinians have said if the United States does that, then they'll walk out of the peace process. Now, where does that stand as we speak? Has something been worked out on that?

MR. JAHSHAN: I'm not sure that the Palestinians have taken a position that they would walk out should the U.S. grant guarantees. I think they certainly would do so if these loan guarantees are granted to Israel carte blanche, without any sort of --

MR. LEHRER: Without any conditions.

MR. JAHSHAN: -- conditioning. But the administration has made it very clear from the very beginning in a very forceful manner and risky manner during an election year that they will not grant Israel these loan guarantees unless Israel takes some very tough position on freezing settlements. And I hope that the administration is still sticking with its position and all indications point in that direction.

MR. LEHRER: Mr. Shamir, reading today, I got the impression that -- and Mr. Hakki also just reflected -- that this is also a surmountable problem. Would you agree with that?

AMB. SHAMIR: I think it's absolutely a surmountable problem. Without being privy to the talks between Sec. Baker and Prime Minister Rabin, the impression projected by both of them is that they are moving ahead and perhaps in August we shall hear the final proclamation about granting the loan guarantees on the basis of the kind of settlement freeze that Rabin is working out now.

MR. LEHRER: And the kind of settlement freeze that would be acceptable, that would make the loan guarantees acceptable to the Palestinians. Does this make sense to you, Mr. Ambassador?

AMB. BROWN: It certainly does. And there's another aspect as well, and that is some extra conditionality possible, i.e., that the Israelis take those tough measures for internal economic reform for which we have been waiting so long.

MR. LEHRER: And how is that tied into the loan guarantees?

AMB. BROWN: That could be added as a condition that we would like to see them fulfill those programs to which Mr. Rabin has associated himself, in addition to firm guarantees that not one penny of the U.S. taxpayers' money will go into anything like settlements or --

MR. LEHRER: I see.

AMB. BROWN: -- that aspect.

MR. LEHRER: I see. I want to ask each one of you -- beginning with you, Mr. Hakki, now -- from this point on -- everything up till now has been very slow and tedious -- there's no question about it -- in terms of even getting to where we are -- I mean, putting together a program like this on the MacNeil-Lehrer NewsHour would have been difficult, you know, not too many years ago -- things have been happening, but it's all been very slow and tedious. Are we to a point now where there could be some major dramatic breakthroughs like a Camp David Accord or something like that, or is it going to remain slow and tedious?

MR. HAKKI: Quite honestly, I think the answer lies in if there is a new spirit in Israel. What we're waiting for is a change in the tone. The Israelis used to tell us in 1967 and 1973, we are in the Middle East but not of it. We belong to the West culturally and politically and historically and so on. There is a new generation of better educated Israelis born in Israel who are looking at the situation in a different way. Are they in the ascendancy? Are they going to be the ones who are going to sit across the table with us? We sat -- you know, Egypt had the longest experience with the Israelis. It started in Camp David, long hours. They used to tell us, why are you making such a fuss about the settlements, they are all bedroom communities, there are only 10,000 -- we can't even fill them -- there were only 12,000 housing units at that time. And so the question is not whether we're going to have a hundred thousand or less or more. The question is how are we going to coexist with each other, as equals with mutual respect, or what.

MR. LEHRER: Amb. Shamir, how would you answer that question?

AMB. SHAMIR: I would like to react to two points in Mr. Hakki's explanation of the situation. First he's absolutely right that this government represents a different cross-section of Israeli society. I don't know if many in the Arab world noticed that except for one or two, all ministers in this government were either born in Israel or were born in one of the Arab countries of the region, like Tetlak, Yemen, Iraq, and Morocco. I think this is quite significant.

MR. LEHRER: So they are of the world?

AMB. SHAMIR: They are of our region, absolutely, and I think this adds a new perspective to what we have already said about the new spirit and the new orientation. Second, it was true that at one point there were only 10,000 settlers. This was the time when both Israel and the United States proposed to the Palestinians and to others to start a serious process based on the Camp David Accords. At the time -- this was about 10 years ago -- it was rejected by the Palestinians. Now we have more settlers. It's a greater problem.

MR. LEHRER: Yeah. But do you believe that we may have a major breakthrough, or it's going to be slow or --

AMB. SHAMIR: I'm afraid a little bit that our discussion here will project an overtly optimistic or unrealistic image of what is waiting for us. It is going to be a very difficult process of negotiation. There are many very sensitive issues involved here. If anybody wishes, he can see this by comparing the two documents that were put on the table by the Israelis and the Palestinians in the previous rounds of the talks. How each side envisages the self administration in the territories, there are very wide gaps separating this position.

MR. LEHRER: A long way to go?

AMB. SHAMIR: A long way to go.

MR. LEHRER: Do you agree?

MR. JAHSHAN: Yes, I do agree. I don't think we do expect a breakthrough. What we expect to see is probably some easier time with the Rabin government in terms of dealing with the transitional period. I think he would be more cooperative with the sponsors of the negotiating process and with his counterparts in terms of putting in place a self government that authority during those first three years of the peace process. Once we get to the final status, I think we're going to hit a wall as stubborn as Mr. Shamir, maybe on different basis, but it's going to be a very, very difficult protracted negotiating process that will take at least five years and probably three to five years of implementation. There is no breakthrough expected in the near future.

MR. LEHRER: Amb. Brown.

AMB. BROWN: I don't dispute that. At the same time, there is an extra element. An earthquake has occurred in the Middle East with this Gulf Iraqi War. We're seeing a proliferation of weapons of mass destruction and the means of delivery. And as one who sat there during the Iraqi Scud attacks on Tel Aviv a year ago, I can testify that while so much of it has evaporated it in the minds of the rest of the world, Israelis feel very vulnerable having gone through that experience of Scuds bursting around their heads. We've all got to move this thing notwithstanding the well- known difficulties, philosophical, political, cultural, and so forth, but I think we have to apply full force effort. Tedious it will be. I hope it will be a little faster this time than it was before, because lurking just over the horizon are tremendously important developments that are a great menace to all concerned. All of them are hurting economically. The debt, inflation and economic situations of all of these players is something that they can do without.

MR. LEHRER: In a word, it's in everybody's best interest to get on with it as quickly as possible?

AMB. BROWN: It certainly is, as quickly as possible.

MR. LEHRER: Does everybody know that?

AMB. BROWN: Let's hope so.

MR. LEHRER: All right. We'll find out. Gentlemen, thank you all four.

MR. MacNeil: Next tonight, state-sponsored gambling. Many states, caught in the familiar squeeze of ambitious programs and declining revenues, are turning to state-run games of chance to reverse their financial fortunes. The trouble is the states may soon be in cut throat competition with each other, and with charities and native American tribes that also rely on gambling to raise funds. Lee Hochberg has details from Oregon Public Broadcasting in Portland.

WOMAN: Tonight we're a little bit in the hole. But we might get it back before we go home.

MR. HOCHBERG: It's the third time this week Peggy Turner and Edith Campbell have come to Joe's Cellar in Portland to try their hand at state-run video poker.

WOMAN: I asked my son -- I said, do you think I'm going to be able to live on my retirement, my interest without any of my principal, and he says, well, mother, that depends on how often you go.

2ND WOMAN: Come on. Those three's aren't any good at all.

MR. HOCHBERG: The two widows often went to Nevada to gamble. Now, they and thousands of other Oregon residents can play games of chance right in their neighborhoods. In the first two months after the state opened video poker, Oregonians dumped $32 million into the machines.

MR. HOCHBERG: In the last minute, how much money have you gone through?

WOMAN: Easy, probably say five or ten dollars.

MR. HOCHBERG: The state plans to have 7,000 poker machines in taverns by year's end. Meanwhile, it's beaming keno games into taverns and convenience stores, luring as muchas 2 1/2 million additional dollars per week. It's gunning for $125 million in gambling revenues this year, helped by an aggressive ad campaign.

AD ANNOUNCER: The top 100 most excellent things to do -- No. 12, washing those hard to reach places -- No. 85, Monte Carlo.

BOB STRAUB, Former Oregon Governor: It just kills me that the state not only permits it, but they promote it. And they buy TV advertising to encourage people here in Oregon to buy lottery tickets and secure the opportunity of a vast relief to their financial woes. It's disgusting.

MR. HOCHBERG: Former Oregon Governor Bob Straub laments the state's new reliance on gambling, but Oregon isn't alone. In three short years, legal gambling has exploded into a $26 billion a year industry in the U.S. Thirty-four states now offer state-run lotteries. Million dollar purses in one state are met by 2 million dollar purses in bordering states. Twelve states offer casino-style gambling. New riverboat casinos steam up and down the Mississippi in Illinois, Mississippi, and Louisiana. And in Chicago, Mayor Richard Daley is pushing for a $2 billion, four casino complex downtown.

MAYOR RICHARD DALEY, Chicago: For one reason, jobs, jobs, jobs, jobs. It's 10,000 construction jobs.

BILL EADINGTON, Economist: Well, you can start with a quote out of Hemingway, but his definition of a banana republic was one where the trains never ran on time and you could buy lottery tickets in the street. I think we've moved well beyond that.

MR. HOCHBERG: Economist Bill Eadington of the University of Nevada says it's only the beginning of an avalanche of legalized gambling.

BILL EADINGTON: You will probably find casinos in much the same way you find bars and taverns, or theaters. This is one conceivable possibility, that people will be able to gamble at their corner 7- Eleven Store or convenience store.

MR. HOCHBERG: Churches actively involved in bingo no longer offer moral opposition. Tax rebellions and reduced federal funding have left gaping holes in state budgets. Betting dollars are ripe for the taking.

WAYNE FAWBUSH, State Representative, Oregon: The things that we're doing with the lottery money are absolutely essential. It's keeping Oregon's head above the water.

MR. HOCHBERG: The head of the Oregon legislature's economic development committee says gambling revenue has been a savior. Oregon faces a looming billion dollar deficit after state voters capped property taxes last year.

WAYNE FAWBUSH: We helped provide the loan and grant money that built a senior retirement center out of an old hotel. We built $80 million worth of prisons. Without lottery dollars, you would see no economic initiative being taken in this state because the state general fund is broke.

MR. HOCHBERG: The state put 16 million lottery dollars toward Portland's light rail system, 15 million to a new convention center, even some to acquire TV programs aired on Oregon Public Television.

TV ANNOUNCER: Funding for tonight's programming has been provided in part by the Oregon Lottery.

MR. HOCHBERG: And loggers in dying logging towns across Oregon utilize a lottery-funded logger retraining program. Dave Sulick is studying to become an emergency medical technician.

DAVID SULICK, Retraining Logger: If it wasn't for the program and the help I've received down there, I wouldn't be here. There's no question about it. I wouldn't be in school today.

BOB STRAUB: Maybe we ought to charge prostitutes and encourage them to come to the state of Oregon and get revenues from them to support desirable legitimate activity.

MR. HOCHBERG: Critics like former Gov. Straub say shifting the cost of government onto the backs of those who gamble is unfair. [PEOPLE GAMBLING]

MR. HOCHBERG: They add the availability of easy gambling money has set off a feeding frenzy for legislators, hungry to bring home the pork. Oregon State Rep. Mike Burton.

MIKE BURTON, State Representative, Oregon: There were legislators who'd come up to me and say, Mike, I know this is a bad policy. I know the state shouldn't be doing this, but if I don't take this home with me, I'll never get re-elected. The addiction is already upon us. There's just no doubt about that.

KATHY JAYNE, Gambling Addict: They act basically the same way I did when I was gambling, more, faster, and better, just keep it coming, keep that money coming. When the money slows down, then bring another game in to get some more.

MR. HOCHBERG: Recovering gambling addicts say the pervasiveness of state poker is making it harder for them to go straight. Kathy Jayne was penniless after selling most of her valuables for gambling money. She says the fast moving video poker is far more addictive than traditional once a week lottery drawings.

KATHY JAYNE: It's a rush. It's like a shot of adrenalin. It's a high. And I see people playing and yeah, it creates an urge for me to go play.

SPOKESMAN: It's more fun than lotto or keno or any of those things, because it's quicker, you know, more action. It has more action.

MR. HOCHBERG: State lottery director Jim Davey answers that even before the state went into the poker business, Oregon gamblers wagered $100 million a year on illegal video games.

JIM DAVEY, Oregon Lottery Director: I think there's a percentage of people out there that can't control the gambling and they're going to have that problem whether there's a lottery or not.

MR. HOCHBERG: He says under new state policy, Oregon at least allocates $10 million from gambling revenues for treatment programs.

MAN ON STREET: We don't want Oregon to become another Vegas arena, do you?

2ND MAN ON STREET: No, not really, but that's the way it is.

MAN ON STREET: Then please sign.

MR. HOCHBERG: Petitioners are combing Oregon's streets, gathering signatures for a ballot measure that would ban video poker. Meanwhile, Straub and another former governor, Vic Atia, have sued the state, charging the new games actually turn taverns into casinos, which are prohibited under the state constitution. But even if Oregon voters snuff out gambling there, all signs are the surge will continue in other states. In Washington State, legislators are being lobbied to approve a plan to erect 18 casinos for charity casino nights like this event. A Canadian company pushing the plan says in exchange for 45 percent of the take, it would help non-profit groups stage more profitable fund-raisers.

JACEE SCHAFFER, Great Canadian Casinos: All the volunteers here tonight -- although they're well-meaning -- they're making mistakes throughout the night. They're slow. And it's just not an efficient night to actually raise funds for charity.

SPOKESPERSON: How are we doing? Are we making money or are we losing?

WOMAN: Mulligan's is your most profitable area right now.

SPOKESPERSON: It's profiting?

WOMAN: Yes.

SPOKESPERSON: Oh. I thought we were losing.

MR. HOCHBERG: After three months of hard work netted only $4,000 for his group, the organizer of this event said he'd welcome the Canadian professionals, a prospect that makes Washington Attorney General Ken Eikenberry shudder.

KEN EIKENBERRY, Washington State Attorney General: Our concern is that we're moving from a small potatoes gambling, which doesn't carry the prospect of organized crime or racketeering, to very large scale, large cash flow gambling, which has great potential for infiltration by organized criminal activity.

MR. HOCHBERG: More than 75 Indian tribes are also getting in on the action. The Federal Indian Gaming Act permits them to operate casinos if similar games are already taking place in the state. At the Lumi nation in Washington State, where dwindling salmon runs threaten the livelihoods of 700 tribal fisherman, many at this salmon ceremony are grateful that gambling has come to the reservation.

FREDERICK LANE: The work here is steady. I enjoy the job and it's --

MR. HOCHBERG: Here in the casino.

FREDERICK LANE: Yeah. Here in the casino. It's a more reliable income.

MR. HOCHBERG: Frederick Lane fished for the last 20 years, but this summer he'll deal cards at the Lumi's new $3 million casino.

WOMAN: I don't want a gambling casino in my backyard.

MR. HOCHBERG: With the push to gamble on the increase, the real issue is becoming who should be allowed to benefit from it. In Salem, Oregon, the Celeste Indians are facing resistance if they try to take advantage of the Indian Gaming Act and open a small casino.

MAN: But she is sitting in judgment, a moral judgment of us to do what we have a legal right to do.

MR. HOCHBERG: The tribe needs final approval from the state government, but Oregon Governor Barbara Roberts is fighting the plan, saying it violates the state's ban on casinos, that despite the fact she allows her own government to earn millions of dollars off poker and keno games. Roberts refused repeated requests for interviews.

SPOKESMAN: I don't see how we can turn around to the Celeste Indians and say, no, you can't put a bingo parlor down in Salem, but by the way, right across the street, we're going to have an off track betting parlor with video machines and so on and so forth. That's ludicrous and hypocritical.

MR. HOCHBERG: Competition for the gambling dollar will only get fiercer. Already, developers in New Orleans and Hartford, Connecticut, have announced bans to bring in urban casinos. That, says economist Eadington, could be a bigger gamble than anyone bargained for.

MR. EADINGTON: There is going to be a very serious issue of what happens when you put wide open casino style gambling in the middle of a major urban population center. North America has no experience whatsoever with this phenomenon and the implications either for problem gambling or for related forms of crime are as yet undiscovered.

MR. HOCHBERG: Government leaders will deal with that later. For now, with lots of red ink showing, it's the familiar gambler's refrain, "Shut up and deal." FOCUS - AN EDUCATED CHOICE

MR. MacNeil: Finally tonight, the hottest education issue in the Presidential election debates, President Bush's proposals to provide vouchers to low income families to use on the school of their choice. The plan would provide $1/2 billion of federal funding already earmarked for education. Families who qualified would receive a thousand dollars towards tuition at a public or private school. The President pushed the plan in Philadelphia today at a Catholic high school.

PRESIDENT BUSH: Our GI Bill for Children is not conceived out of denigration for the public school system. Indeed, the way our proposal works, it would enhance and strengthen the public school as well as providing choice for the families that want to send their kids to parochial schools, private schools, be they religious or not. And so we've got a good proposal and I support it all the way and I will fight for it and I believe that it'll make all schools better, not just those that are selected by the people who participate in this marvelous program. But here is an issue upon which I have a distinct difference with my opponent, and I will be making that case, not in a negative way, but then here's what I am for, here's what I am going to fight for. And if you believe in this, you ought to vote for not only for me, but for members of the United States Congress whose support is going to be necessary to pass this legislation.

MR. MacNeil: The President said his school choice proposal was stalled in Congress because it is opposed by the National Education Association, the country's largest teachers union. Earlier this month, Gov. Clinton addressed the NEA's annual convention and explained why he's against any direct or indirect federal aid to private or parochial schools.

GOV. BILL CLINTON: I believe in the cause of school reform. I will challenge all of you to enlist in it. I want us to continue to have honest debates about the dimensions of school restructuring and empowering teachers and principals and how much public school choice there ought to be, but we shouldn't give our money away to private schools in a system that will undermine the integrity of the public school system. So I don't think we can afford to siphon our money off. I don't mind good and healthy competition; if private schools want to get up and get going, let 'em have at it. Let anybody who thinks they can do a good job in education and meet standards and have their kids measure up get after it. I just don't think that with the situation we're in now we can afford to divert public funds to private schools when we're already uncompetitive.

MR. MacNeil: Here to debate these ideas we have two views. Lamar Alexander is the Sec. of Education and the key proponent of the President's choice plan. Gov. Roy Romer of Colorado has worked closely with Gov. Bill Clinton on education reform. He opposes using federal funding for private schools. Sec. Alexander, the President, we just heard him say today that his proposal would enhance and strengthen the public schools. How would it do that?

SEC. ALEXANDER: Well, let's take the example of Denver since Gov. Romer is here. Denver wants to participate in the GI Bill for Kids; it could apply and then there are about 40,000 children in Denver, about 62 percent of all of those who attend elementary and secondary schools of any kind who would receive a thousand dollar scholarship. That money would then go to the school their parents feel meets the needs of those children the best, or it could go also to other academic programs, such as after-school programs, Saturday, or summer academic programs that add to the child's education. The money can go to public as well as private schools. And so it provides the impetus for change for opening a school till 7, for adding a program, for retraining teachers, and consumer power that gives parents a chance to say this school doesn't help my child, I want to move down the street to the other public school, and when I go, the thousand dollars moves with me, or to the other private school.

MR. MacNeil: So your theory is that the plan would give public schools an incentive to make themselves attractive enough to attract students bringing a thousand dollars with them, is that - -

SEC. ALEXANDER: The incentive and the money to make these changes. See, 40 million new dollars into Denver alone is a lot of money. That's -- 15 million is all Denver gets today in education grants from the federal government. This is 40 million new dollars for middle and low income families to spend at the schools that parents feel help children the most. It's hard for me to see how anyone can oppose that while for the last 50 years we've been doing that with all of our colleges and universities, public and private, and it's helped to create the best system of colleges and universities in the world.

MR. MacNeil: Gov. Romer, would it strengthen public schools, as the Secretary suggests?

GOV. ROMER: Absolutely not. And I have worked with Lamar and the President on education in the past and I will in the future, but I've got to tell you this is one of the worst things I've seen been proposed. It's fatally flawed. Let me tell you about five reasons. One, it deceives people. If you're really to apply this for all children in America, it'll cost $38 billion. So for Lamar to say look what it would do to them or look what kind of money, look, it would only touch one out of every sixty-four students in the United States with 1/2 billion. Secondly, it's one of the worst kinds of intrusion of the federal government into state educational policy. We happen to have a constitutional amendment, a provision in our Constitution that prohibits this in Colorado. Yet, in order to participate, we'd have to change our policy. We say that we should not use any public funds for a church-supported school. And I am very surprised that the administration would propose such an intrusive measure to try to force states to change what ought to be a matter of local control. And you know, look, this is not -- there's no choice in rural America. I came from Holly, Colorado, 800 people. There's one elementary school, one high school. There is no choice in Holly, Colorado. So, you know, this discriminates against half the country, the rural America. The final thing is choice and competition is a good idea within the public school system. And if they want to really help, simply change that law, but the most serious problem is: Why so late? You know, as the President just said on tape, I want a difference with my opponent, Mr. Clinton. I think this is obviously a political bill. It was filed within the last two or three weeks in the middle of a Presidential campaign. If you really believed in it, where were you four years ago when you began this administration? I just don't think this has real substance. I think it's a political move.

MR. MacNeil: Let's take the secretary through a couple of these points. First of all, if it really applied to all students, it would cost 38 billion, not 500 million, Mr. Secretary.

SEC. ALEXANDER: That's true. Only a big spending liberal would propose a $38 billion plan without testing it. The President's been talking about this for four years. He's proposed to Congress a variety of ways to get middle and low income families more of the same choice as wealthy families have. And now this is the biggest, new program in the federal government that the President's proposed, $1/2 billion, 1/2 million children, 25 cities the size of Little Rock to participate for four years. Many will want to. So it's a lot of money.

MR. MacNeil: So it's a test program?

SEC. ALEXANDER: It is a demonstration program for four years. And as to the choice about rural areas, let me take that as an example. My grandfather sold his farm, moved my father into a little town called Maryville so he could attend a better public school in Tennessee. Time Magazine says that Bill Clinton's parents brought him in from the country to attend a Catholic school in Hot Springs, Arkansas, because they wanted him to have the best school. Now, what's good enough for Gov. Clinton and what's good enough for me ought to be good enough for all the families of America and their position, Gov. Romer and Gov. Clinton, is that only the rich ought to have a choice of all the schools. The President's position is that middle and low income families ought to have a choice of all schools as well.

MR. MacNeil: How would Gov. Clinton reply to that, Mr. Romer?

GOV. ROMER: Well, you know, look that argument is so wrong on its face. You know, Lamar Alexander just said, we moved our towns in order to get better education. The implication is that a family would pick up and move in order to take advantage of the thousand dollars a year. You know, that's ridiculous. The thought is wooly- headed in this proposal. I'm sorry to use such direct language. But, you know, we have so many real reforms we need to do in American education, we ought not just be throwing out half a billion on the table in the middle of a political campaign and to try to leverage states to change educational policy that ought to be theirs locally to make. And I would challenge Lamar Alexander to answer me. Are you trying to dictate to all states that you're going to have to follow this in order to participate? Colorado would have to change its constitution in order to participate in this program.

MR. MacNeil: Sec. Alexander.

SEC. ALEXANDER: Well, Gov. Romer is a distinguished governor and he knows much better than that, because today half the college students in Colorado have federal grants or federal loans which they may spend at any college or university, public, private, or religious. The low income families in Colorado have federal vouchers which they can spend at Baptist day care centers as well as public day care centers. So that it would take no change in the Colorado constitution to spend new federal dollars at any elementary or secondary school. What we're saying is let's use the 50 years of experience we've had with the GI Bill, federal grants and loans, to build the best system of colleges and universities in the world and apply the same principles to elementary and secondary schools, make them change, help them change and give them the money to change, with most of the new money going to the public schools that the parents choose.

MR. MacNeil: Sec. Alexander, the objection I've heard raised to your plan is that it would -- since private schools choose the students they want to admit, that they would just, if they accepted students, say poor students from the inner city, they would just skim off the most able and promising students and leave behind in the public schools all the disadvantaged or problem students that public schools are required by law to take.

SEC. ALEXANDER: Well, that's usually said by people who have their children in private schools somewhere. I sat next to a lady in Philadelphia today who runs a Catholic school there in Philadelphia. 90 percent of the kids are poor kids, they're minority kids, most of them not Catholic. In Harlem, there is a program of school choice among public schools that has closed the bad schools and opened better schools. What competition usually does in America is keep people on their toes. If I take my child out of your school because it's unsafe, because it closes at 3 and I work till 6 and because you think my child can't learn and you move -- and I move my child to another school, you might change your practices and create a better school and attract me back. That's the idea.

MR. MacNeil: What do --

SEC. ALEXANDER: It'll make all schools better for all children.

MR. MacNeil: What do you think of that, Gov. Romer?

GOV. ROMER: Well, you see the program is not well thought out. First of all, it costs about four thousand dollars, forty-two hundred dollars per student in Colorado to educate somebody in public schools. So a one thousand dollar option does not entitle a family to buy that same kind of education in the private sector. Secondly, you know, the argument that this is the same as a GI Bill is simply fallacious. It's fallacious. The GI Bill was a great program. It encouraged GI's who missed college to come back to college. But what that bill did is gave GI's a good education. It did not reform colleges. It just did not reform colleges.

MR. MacNeil: Gov. Romer and Sec. Alexander, I'm going to have to interrupt you here. We intended to have a much longer discussion of this, but we ran into some satellite trouble which shortened our discussion tonight. We will certainly come back to this subject. I thank you both for being with us this evening. RECAP

MR. LEHRER: Again, the major stories of this Tuesday, Federal Reserve Chairman Alan Greenspan said he expected the economic recovery to slowly gain momentum and to improve the nation's unemployment picture next year. And Israel and Egypt held their first summit in six years. Israeli Prime Minister Yitzhak Rabin and Egyptian President Mubarak pledged to accelerate the Middle East peace process. Good night, Robin.

MR. MacNeil: Good night, Jim. That's the NewsHour tonight and we'll see you again tomorrow night. I'm Robert MacNeil. Good night.