The MacNeil/Lehrer NewsHour

MS. FARNSWORTH: Good evening. I'm Elizabeth Farnsworth in New York.

MR. LEHRER: And I'm Jim Lehrer in Washington. After our summary of the news this Tuesday, we look at the Federal Reserve interest rate decision, the new approach at the House Ways & Means Committee, today's government report on commuter airline safety, while essayist Richard Rodriguez considers family values. NEWS SUMMARY

MR. LEHRER: The Federal Reserve Board raised interest rates again today. The hike was 3/4 of a percent on two key short-term rates. it was the sixth increase this year, the largest in fourteen years. The action will increase the cost of consumer borrowing on everything from mortgages to car loans to credit card rates. Major U.S. banks quickly reacted by increasing their prime rate by 3/4 of a point to 8 1/2 percent. We'll have more on the story right after this News Summary. In other economic news today, the Federal Reserve reported industrial production was up .7 percent last month. Output at U.S. mines, factories, and utilities rose to nearly 85 percent of capacity. The Commerce Department reported retail sales increased 1.1 percent in October, the fifth straight gain. Two large companies announced cutbacks today. Whirlpool will eliminate 3200 jobs in North America and Europe and close two plants. And Kodak will cut 800 jobs as part of a restructuring. Elizabeth.

MS. FARNSWORTH: At the economic summit meeting in Indonesia today, President Clinton and the other APEC leaders concluded an agreement that will create the world's largest trading bloc within 25 years. The 18 participants wore traditional indonesian shirts for the meeting. The country's represented are responsible for half the world's economic activity. Mr. Clinton stressed that the agreement would provide benefits for U.S. workers. He spoke at a press conference in Jakarta after the announcement.

PRESIDENT CLINTON: These free and fair trade agreements will benefit Americans for a simple reason. Our nation already has the most open markets on earth. By opening other markets, our products and services become more competitive, and more sales abroad create more high-wage jobs at home. Under this agreement, individual APEC nations will have to tear down trade barriers to reap trade benefits, and no country will get more in benefits than it gives, no free riders.

MS. FARNSWORTH: Mr. Clinton will meet with Indonesia's president Suharto tomorrow to discuss human rights issues before returning to the United States.

MR. LEHRER: First Lady Hillary Rodham Clinton spoke today about last week's elections. At a stop in Indonesia, she said she would leave interpreting the meaning of the results to pundits, but she said, "I think the President has to stick with his principles and protect the progress that has been made." She said he didn't think the American public wanted dramatic cuts in Medicare, a reversal of deficit reduction, or cutbacks in college loans for middle class students. Back in Washington, the man who's expected to become House Speaker, Republican Newt Gingrich of Georgia, said social programs of the past needed to be changed, and he called for open debate on how to do it.

REP. NEWT GINGRICH, House Republican Leader: Once you have set the premise we're going to go in this direction, we're going to replace the welfare state, we're going to reassert American civilization, we're going to develop the opportunity society, and we're going to move into the information age, and we're going to compete in the world market, and we're going to reassert civic responsibility, then anybody who's willing to work within that framework we want to have a total dialogue with, and we want to accept good ideas from everybody who agrees on the general direction. But we don't particularly want to have a single ounce of compromise with those who still believe that they can somehow improve and prop up and make work a bureaucratic welfare state and a counterculture set of values which are literally killing the poor.

MR. LEHRER: Gingrich and the Senate's new majority leader, Bob Dole,met on Capitol Hill today with President Clinton's chief of staff, Leon Panetta. Gingrich said they discussed areas of cooperation and a potential meeting between the President and the Republican leaders in the near future. Mr. Clinton said today school prayer could be an area of agreement with the Republicans He said he thought there was a way to allow the expression of faith without violating separation of church and state, but he said he would reserve judgment on a constitutional amendment.

MS. FARNSWORTH: Tropical Storm Gordon continued to churn across South Florida today towards the Gulf of Mexico. The storm, with heavy rains and winds up to 50 miles an hour, is blamed for one death in Miami yesterday. Forecasters said it may gain strength as it moves into the Gulf and could threaten Florida's West Coast. Over the weekend, Gordon claimed the lives of more than one hundred people in Haiti and four others in Jamaica and Cuba.

MR. LEHRER: The National Transportation Safety Board recommended today that commuter airlines be regulated under the same guidelines as major carriers. NTSB Chairman Jim Hall said the regional airlines were safe but stricter regulations would make them even safer. The Federal Aviation Administration accepted the recommendation and said tougher standards would be implemented promptly. Commuter airlines have come under greater scrutiny since the crash of an American Eagle plane two weeks ago in Indiana that killed 68 people. We'll have an interview with Chairman Hall later in the program.

MS. FARNSWORTH: The federal government sponsored at least eight radiation studies on cancer victims during the Cold War. A report released today said the experiments involved bombardment with total body radiation. The records were uncovered by the Advisory Committee on Human Radiation, the presidential task force which has been looking into the ethics of government testing. The report said that in many cases the treatments had no medical value, and it was unclear if the patients were warned of the risks involved. That's it for the News Summary tonight. Now it's on to the interest rate hike, the new chairman of the House's Tax Writing Committee, commuter airline safety, and essayist Richard Rodriguez. FOCUS - INTERESTING NEWS

MR. LEHRER: The big interest rate hike is our lead story tonight. The Federal Reserve raised short-term rates by 3/4 of a percent today. It is the sixth and largest increase in what has been a year of steadily rising rates. The impact is felt on everything from short-term bank accounts and credit card debt to long-term borrowing on mortgages and auto loans. This afternoon, Business Correspondent Paul Solman led a discussion about today's decision.

MR. SOLMAN: To discuss the latest Fed rate hike we have with us two economists who practice in the real world, where the interest rate hikes are, in fact, felt, Allen Sinai, chief economist for a Wall Street firm, Lehman Brothers, and in Washington, Jerry Jasinowski, president of the National Association of Manufacturers. Jerry, the members of your organization, how do they feel a rate hike like this 3/4 of a percent, and how do their workers feel it?

JERRY JASINOWSKI, National Association of Manufacturers: Well, I think that it's going to slow down the economy. It's going to hit small business that has to finance inventories. It's going to affect interest rate sensitive industries, and will slow the economy down substantially, and it will probably mean somewhat less job creation and a slowing down of the economy. That's the way they're going tofeel it.

MR. SOLMAN: And that's why you were against this to begin with?

JERRY JASINOWSKI: Well, I think that's part of it, certainly Paul, but I think the larger issue for us was that we simply argued that the Fed ought to wait and see real evidence of inflation increasing. And the reason we said that is because we think that there's a whole new economy out there, that global competition, increases in productivity, a lot of competition in the wage market has really given us the capacity to produce more with less inflation. So we think we've got a new economy, and there's no real signs of inflation yet.

MR. SOLMAN: Good. We'll get to that point in just a minute. But before we get to that, what about, Allen, consumers, borrowers, the biggest borrower of all Uncle Sam, lenders, how are we all, or they all affected by this?

ALLEN SINAI, Economist, Lehman Brothers: Well, everybody's costs of financing will go up. People who might want to buy a home, people with existing adjustable rate mortgages will pay 50, 60 dollars a month extra now because of the rate increases. Corporations, because of commercial paper financing, the borrowing they do, will pay more.

MR. SOLMAN: Commercial paper meaning the short-term.

ALLEN SINAI: Short-term notes, the borrowing --

MR. SOLMAN: Borrowing.

ALLEN SINAI: -- that goes on. So this interest rate hike hurts really everyone. The only beneficiaries of it are people who have funds invested in money market funds and short-term cash and equivalents. They will earn more on their investments now than they were before. But everyone else, including the government, feels a hit from these higher interest rates.

MR. SOLMAN: And you're -- the people you advise are going to feel this too?

ALLEN SINAI: Oh, rising interest rates are very bad for the business of Wall Street firms. There's a tremendous amount of financing that goes on by those firms. Those costs of financing are a big part of doing business, and none of those firms have had very good years this year. So it is -- higher interest rates no one can like. Rising interest rates, it hurts.

MR. SOLMAN: Then the entire audience has got to be sitting here figuring, well, then why in the world or who here on the panel is possibly going to defend the higher interest rates if it hurts virtually everybody? Allen, you want to start?

ALLEN SINAI: Sure. I think what's going on here is a prevent defense by the central bank. The central bank is trying to prevent --

MR. SOLMAN: The Federal Reserve is our central bank.

ALLEN SINAI: Yes. The people who raised rates today are trying to make sure that the business expansion lasts a long, long time, and that the kind of problem that always ends our expansion or sets up conditions to lead to a recession, spiraling inflation, does not occur. And so they are erring on the side of caution, raising rates sharply earlier than usual to slow the economy down in the hopes that inflation, which isn't obviously a problem now, will never be a problem.

MR. SOLMAN: Okay. Now, Jerry said before, and we get back to the central point I guess of what you're saying, inflation not only is not apparently a problem, it isn't even really a problem, right? I mean, that's your position?

JERRY JASINOWSKI: It really is not a problem. First of all, you don't see it in the numbers now, as Allen suggested, and that's an important point to recognize. But if you take his argument that it needs to be a preemptive strike, what we would argue is that that's not necessary because the economy has changed so dramatically. Manufacturing productivity has been growing at 3 percent a year, plus international competition prevents us and many others from raising prices. There are so many part-time workers in the labor market that nobody can really go for big wage increases, so all of those mean we can produce more in the American economy today t at lower levels of inflation, and, therefore, it's a different kind of economy, and the Fed is to some extent fighting the old war.

MR. SOLMAN: Okay. So now he's making a number of specific points about why the numbers suggest and the reality suggest that there isn't this, this latent push towards inflation that you're trying to preempt by -- or the Fed is trying to preempt -- I know you didn't raise the rates here personally -- by raising rates. What's wrong with what he's saying?

ALLEN SINAI: Well, I think some of the measures of full employment that are being used to guide Federal Reserve changes do have the kind of characteristics Jerry is talking about.

MR. SOLMAN: Full employment. You mean that they look at the unemployment number.

ALLEN SINAI: They're looking at the unemployment number, 5.8 percent, which is thought to be essentially full employment. Today's capacity utilization rate, which is the highest utilization rate since 1982, saying that are factories are going all out, many of them are going all out, and the other is where we are in relation to our potential ability to produce, and all of those measures and a few others Jerry didn't mention, prices paid to manufacturers, which have been rising very rapidly, slowness of deliveries of goods, suggesting we may have some bottlenecks building up, all of that are signs of possible higher inflation later. It's that risk that the central bank is trying to remove, the risk of the higher inflation. In fact, this approach, it is experimental by the Fed --

MR. SOLMAN: Right.

ALLEN SINAI: -- will be successful if we never see an acceleration in the normal price indices, their policy will have been a success.

MR. SOLMAN: But you've taken too many things at once for us. Let's take them one at a time. Unemployment. You say 5.8 percent is full employment. I guess some people would wonder first of all - -

ALLEN SINAI: Many people think that. It's a conventional wisdom.

MR. SOLMAN: Jerry, do you think that?

JERRY JASINOWSKI: I don't think so. In fact, I think that's a perfectly good example if you look at the labor market today, you've got a lot more part-time people, you've got people who are on contingent employment, and there's a lot of competition out there for jobs, permanent jobs. And so as a result, you're not seeing the kind of basic wage increases that you've seen in other recoveries. And just think about it in your own common sense terms. How many people do you know that are working that are in a position to go out and ask for great big wage increases? It's not possible to do, so, therefore, the full employment rate is probably something at 5.5 percent or less, substantially below where it is, and that's one reason why there's not inflationary pressures in the wage market.

MR. SOLMAN: So the point is that if people aren't -- can't get jobs as easily as they might have in the past with this same relative rate, then they're not going to ask for higher wages, and it's not going to push up inflation, and so we don't have to worry preemptively or otherwise?

ALLEN SINAI: Actually, over the last three months at an annual rate average hourly earnings have risen 4 1/2 percent. And about a year ago, they were rising at 2 1/2 percent. So there has been an acceleration. I don't think that's a major problem, but that is a data fact. So, again, and that's the cost of production which at some point companies pass on. The fundamental question is: How do we avoid the situation that always gets us into a recession? The answer is: The way to avoid it is to make sure inflation doesn't pick up, and this -- these hikes of interest rates are designed to do that. It hurts while the rates are going up for all of us. It's a little bit of castor oil to preserve the health of the patient, the economy, in the long run.

JERRY JASINOWSKI: Paul, let me just --

MR. SOLMAN: Yeah, Jerry.

JERRY JASINOWSKI: -- suggest that I think the preemptive strike idea is a good policy, and I think the Fed was correct in pursuing it earlier this year, and I think most business leaders think the same thing. The problem is we had five interest rate increases before this one, and a large part of those have not yet been felt on the economy. Now we've got another 3/4 of a percentage point increase, and so we've built in a lot of interest rate increases into this economy without seeing what it's effect would be. Given the fact that there's no evidence of inflation, given the fact that there are some improvements in our capacity to produce, all we were suggesting is let's wait and see until the first quarter of next year. And so I think there is a certain amount of pretty high risk associated with this preemptive strike, where we don't have clear criteria as to how much of it to do. We think the Fed's done a good job in '95, but now we're getting up to 8 percentage points on long-term rates, and the risk is getting higher and higher.

MR. SOLMAN: But Jerry Jasinowski, don't you worry sometimes about the psychology of inflation? The world looks to Alan Greenspan and the Fed to make sure that we don't print too much money, that we don't become too expansive, and certainly your organization has historically been very sympathetic to that, you know, National Association of Manufacturers. Don't you worry that the psychology of inflation might, in fact, lead to inflation, and, therefore, it's important, if only for symbolic reasons, that they hold the line?

JERRY JASINOWSKI: I couldn't agree with you more, Paul, and I think the psychology of inflation is a large part of what's affecting bond traders' attitudes, and historically, we've always had this business cycle where inflation would rev up. I think that today's action, if one wants to look for a silver lining in it, is that the Fed ought to now have convinced bond traders that not only is it serious about inflation, it's even serious enough to have this big an increase, even when there's not evidence of inflation. So hopefully, the bond market will be convinced that the Fed is absolutely serious about inflation, which I think it is. And given the changes in the economy I've talked about, hopefully we'll see no further interest rate hikes for some time so that we can decrease the uncertainty and get on with the production of goods and services.

MR. SOLMAN: Allen Sinai, any other reasons, besides what we've been talking about, however partially we've been talking about it, any other reasons why you would have interest rates, why the Fed would raise interest rates?

ALLEN SINAI: Oh, again, after today I think the Federal Reserve will now wait and what really will call the tune is how the economy does. If the economy continues to grow, as it has been, at pretty hefty rates and we keep on getting a lower unemployment rate and a higher utilization rate, then they'll raise rates again.

MR. SOLMAN: Utilization means that the factories are operating at almost full capacity?

ALLEN SINAI: Very high capacity, but those numbers are very murky, actually very poor numbers or measures of that. There's a lot of room here. This is now an art. It's not a science that the Federal Reserve is engaged in. I do think now they will simply wait, look at the economy, how it does, and if what Gary says is true, if manufacturing slows down, there's less jobs creation, hopefully not too much less jobs creation, and other measures of the economy ease off, and the economy gets into a 2 1/2 percent growth rate mode, the central bank will not do anymore.

MR. SOLMAN: But if the numbers aren't that good -- and that's one of the points that Jerry Jasinowski keeps making here -- if the numbers aren't that good, aren't you a little bit afraid of doing this prevent defense, this preemptive strike that you keep talking about at the risk of with high consumer debt and so forth right at this moment throwing the economy into the kind of recession that he's worried about?

ALLEN SINAI: No, not really.

MR. SOLMAN: We have just about 30 seconds.

ALLEN SINAI: I'm not really worried about it. The history is that our economy is great at escaping the pain of higher interest rates. There are all kinds of ways to avoid higher interest rates. And we keep on growing too fast. I think we've been seeing that. We're still growing very fast. When we slow down, the rate rises will stop.

MR. SOLMAN: And Jerry Jasinowski, are you really worried?

JERRY JASINOWSKI: I think that the economy is healthy. I think it's going to survive these interest rate increases. I only hope that now the Fed will declare victory, that they'll get out of our face in terms of further interest rate hikes, uncertainty will decrease, and we can go about what I think is a fairly dramatic comeback and a very strong expansion. So let's hope that this ends this interest rate debate for a while and we look at what happens in the real economy over the next quarter.

MR. SOLMAN: Well, it probably won't end the debate forever, and I bet you we'll be back with it at some point. Thank you, gentlemen, both very much.

MR. LEHRER: Still to come on the NewsHour tonight, Ways and Means, commuter airlines, and a Richard Rodriguez essay. SERIES - CHANGING THE GUARD

MS. FARNSWORTH: Next tonight, we begin a series of Newsmaker interviews with several of the key new congressional committee chairmen. After last week's election, of course, that means we're talking to Republicans who move into the chairman's seat long occupied by Democrats.

MS. FARNSWORTH: First stop is Congressman Bill Archer of Texas, who will be taking over the House Ways & Means Committee. The 66- year-old Congressman was elected in 1970 from Houston's affluent 7th Congressional District, succeeding former President George Bush when Bush ran for the Senate. Archer started in politics as a Democrat in the Texas legislature but moved to the Republican Party before running for Congress. Since then, he has a firmly conservative voting record. As the new chairman of Ways & Means, Archer will be heading one of Capitol Hill's most powerful committees. For decades, Ways & Means was ruled by Dan Rostenkowski with an ironclad Democratic majority. After 21 years in the minority, Archer now will oversee perhaps the pivotal committee in the new Republican-led Congress.

REP. BILL ARCHER, [R] Texas: This committee room right here will be the focal point of much of what is in the contract with America. All of the tax changes, coupled with welfare reform, will have to come through this committee.

MS. FARNSWORTH: Ways & Means has jurisdiction over taxes, trade, and entitlement programs such as Social Security and Medicare, all critical parts of the Republican agenda.

MS. FARNSWORTH: Congressman Archer joins us now from Capitol Hill. Thank you for being with us, Congressman Archer. Good evening.

REP. ARCHER: Elizabeth, nice to be with you.

MS. FARNSWORTH: First of all, what do you think about the Federal Reserve's decision to boost interest rates? Was it warranted?

REP. ARCHER: Well, politically it's not going to be popular, and it remains to be seen whether it's warranted or not. It will certainly slow down home construction, and that is a creator of a lot of jobs, so I think we've just got to wait to see, but it is certainly not something that's going to be welcomed up here on Capitol Hill.

MS. FARNSWORTH: You've talked a lot in recent days about important changes in the way you want the Ways & Means Committee to function. What was wrong with the way it functioned under Chairman Rostenkowski?

REP. ARCHER: Well, it's not just the Ways & Means Committee. It was the whole sentiment of the Congress and the way that it operated for many, many years. Forty years is the longest time I believe in any democracy where the legislative branch has been held by the very same people. And that's going to change. The American people are going to see it. They're going to see it right off the bat. In our committee we're going to cut the staff by 1/3. This going to save millions of dollars that have been spent unnecessarily. We're going to eliminate proxy voting, so if your vote is going to be counted, you're going to be at the committee. We're going to have open meetings, and yes, I want to operate the committee on a bipartisan basis. This is the country's business, not the Republicans' business. And we need to understand that. But frugality begins at home, and we're going to show the American worker that we're going to spend his and her tax dollars in a very, very efficient way in the Ways & Means Committee.

MS. FARNSWORTH: You've talked about all of the tax cuts that you want to make, and, of course, we have the contract with America that lists some of them. Could you tell me how you're going to start.

REP. ARCHER: Well, we won't start at one place. The contract with America has a number of changes in the tax code, and they will all be treated equally, and they will all come out of our committee in a package. So that means capital gains will have rate reductions, an index of the cost basis for inflation, for the capital assets, for the first time the ability of homeowners to take a loss, a tax loss when they sell their home at a loss. Too often we've seen a Congress that has said heads and government wins and tails the taxpayer loses. We're going to change that. And we're going to do a lot relative to Social Security, which is to permit seniors who want to continue to work to not suffer the loss of their benefits if they do go out and work, to eliminate the recent, I think, very, very bad tax increase on Social Security benefits, to increase the exclusion under the estate tax so people can protect their family farms and their businesses from being taken by the federal government in the event of death, to create fairness in the code so that the marriage penalty will be phased out. It's really wrong for people who live together as singles without being married have a better tax break than they will have when they get married. In addition, we will have a $500 per child tax credit that will help families be able to sustain the extra cost of raising children. We think this is very, very important. These are some of the major tax changes that will all go hand in glove together in the package that we have committed to put on the floor of the House for a vote within a hundred days. Let me also just say though that there are other things that the public's going to see. They're going to see a chairman of the Ways & Means Committee for the first time in generations who does his own tax return. I think that's very, very important. This committee passes the tax laws that are so complicated and then runs away from the responsibility of how difficult it is, and this committee chairman knows how difficult it is. I am committed to try to get the IRS intrusion into our personal and private lives and business lives as much out of the picture as possible. In addition, this is the first chairman since PACs were legally authorized who does not take PAC contributions. And that sends a signal to the American people that PAC, special interest influence is not going to be the name of the game in the Ways & Means Committee.

MS. FARNSWORTH: Now, all these tax cuts will add up to a lot of money. I've seen differing estimations, anywhere from 148 million to 200 million dollars. How are you going to do all that without adding to the federal deficit?

REP. ARCHER: Well, first off, it's like Mark Twain said, "The rumors of my death are premature." All of these rumors about what this is going to cost are sort of back-of-the-envelope estimates that have been made by people but the actual proposals have never been scored. They are not going to cost that much money, and whatever we do is going to be paid for by spending cuts. And that's going to have to be folded into an overall budget that puts together the scored tax cuts with spending cuts and enables it not to increase the deficit.

MS. FARNSWORTH: What spending cuts?

REP. ARCHER: Those spending cuts are going to have to be devised not just in the Ways & Means Committee. We're going to do a good bit on welfare reform, which is in our committee's jurisdiction. We can save up to $50 billion over five years in welfare. We have spent five trillion dollars on welfare since the war on poverty began thirty years ago. And today, the Census Bureau tells us we've lost the war. We must do something to re-shape the welfare program so that the taxpayers working in this country are no longer burdened to a greater and greater degree for programs that create dependency and don't solve problems. So we will begin there. But in addition, we're going to have to find savings from other areas outside of the Ways & Means Committee's jurisdiction, and that is going to be determined by a going over of the entire budget by the Budget Committee. But the one thing the American people know is it's going to be paid for.

MS. FARNSWORTH: Congressman Archer, where in welfare might you cut? I mean, let's really just get down to the nitty gritty.

REP. ARCHER: Well --

MS. FARNSWORTH: What are you thinking about?

REP. ARCHER: -- Elizabeth, if we had an hour to talk about it, I'd be glad to explain it to you, but --

MS. FARNSWORTH: Just briefly.

REP. ARCHER: -- but we are going to do a lot relative to illegitimacy and the payment to mothers who have illegitimate children. We are --

MS. FARNSWORTH: By cutting welfare out for mothers who have illegitimate children?

REP. ARCHER: A bulk of it, yes, a bulk of it, if they're under 18 years of age. Perhaps not all welfare benefits, but a bulk of the welfare benefits. And this is tough, but the American people are prepared, I think, for us to be tough. I think that's a signal that they sent in this election. In addition, we are going to talk about welfare benefits for illegal aliens. We're going to talk about welfare in a number of categories that desperately needs to be reformed. In addition, we should be talking about giving the states more flexibility so that we can send welfare money back to them in bloc grants, so that they can take care of the problems in a more efficient way. And in doing so, we can also cut the federal budget.

MS. FARNSWORTH: What do you say to critics who point out that if you talk about capital gains tax reductions and estate tax reductions, that sort of thing, it benefits mostly the rich, but that the welfare reductions will hurt mostly the poor? What do you say to people who say that's unfair?

REP. ARCHER: That's the age old class warfare rhetoric of the Democrats which they have pursued for year after year after year. The reality is if you're going to create better, high-paying jobs to allow family income to go up for working Americans, you've got to have more capital investment. And if the federal government is taking away from the nucleus of capital investment, we are going to have less good paying jobs in this country. The American people don't like foreigners to come in and own our businesses and provide the capital. Having the federal government do it doesn't work. Socialization of factories doesn't work, hasn't worked anywhere in the world. It has got to come from people who have savings. And if we take a giant vacuum cleaner and take all of that out of the economy, we will be consigning ourselves to a lower standard of living. So this is absolutely for the benefit of all Americans and particularly for those who want higher paying jobs and need the capital investment by domestics, i.e., the domestic saver in order to be able to have those jobs.

MS. FARNSWORTH: Congressman Archer, last week in a press conference, you mentioned that you'd like to see a complete replacement of the income tax with a national sales tax.

REP. ARCHER: I did not say that, Elizabeth. I've been misquoted by you now and by many, many other people. I said that I think we have to find an alternative means of taxation which will do several things: get at the underground economy, which today is costing us between a hundred and two hundred billion dollars, which means we as taxpayers who do pay are having to bear the load for others who don't pay; something that will increase the incentive for savings dramatically, a tax system that will give us an edge in competing overseas because we have to export and get those higher paying jobs; and also that we'll apply part of the cost of our government structure onto incoming foreign products and services. And, and to me, the only way I've seen so far is some sort of broad-based consumption tax. But there are many, many designs, and right now I have got staff and task force working on what might be the best design for this country. But let me tell you, that's not something in the immediate offing. That is something that has got to be pursued down the line over the long-term. But if we don't do something like that, we will really put ourselves behind the eight ball in the world marketplace because we will not have the advantage to our products and services to compete overseas that we desperately need.

MS. FARNSWORTH: Well, you may have been misquoted, but it does look like that's going to be on the agenda, doesn't it? I mean, it's kind of astounding that somebody would be arguing for a complete replacement of the income tax with a national sales tax, although this has been --

REP. ARCHER: No. The national sales tax is only one form of a consumption tax, and for you to keep saying that to the American people is misrepresenting the position that I have.

MS. FARNSWORTH: No.

REP. ARCHER: Why do you insist on that?

MS. FARNSWORTH: No. I wasn't trying to say that you were saying it. I just wanted to get your position straight. Actually, what I'm curious about is, is that going to be part of the agenda that will be argued in the next couple of weeks or months or years?

REP. ARCHER: I do -- or years?

MS. FARNSWORTH: Yeah.

REP. ARCHER: If you're talking about years --

MS. FARNSWORTH: Two years.

REP. ARCHER: -- I would hope that we could really get our teeth into a system of taxation that would be more, more friendly to the users, we get the IRS out of our lives, simplify things, and a broad-based consumption tax would definitely dismantle the IRS. It would eliminate so much of the litigation, all of the wasted, non- productive effort that's going on in this country right now, and those are the kind of things that we need to strive for. And we've got to think creatively. As far as any timetable, I'm not going to stand here and tell you that there is a specific timetable.

MS. FARNSWORTH: Is there likely to be a race, do you think, between Republicans in Congress and the White House over who can move fastest on these tax cuts and on deficit reductions? After all, President Clinton has also talked about middle class tax cuts.

REP. ARCHER: Well, we have to originate all tax legislation in the Ways & Means Committee, and the Senate cannot originate any tax legislation. So we will have to act first and do our work and then send that over to the Senate, and then, of course, they will have to take it up under their very special rules of procedure.

MS. FARNSWORTH: Tell me what your broad vision is as the new chairman of Ways & Means. What is it that you want to do broadly?

REP. ARCHER: Okay. Broadly I want to assure the American people that their dollar that they send up to Washington is going to be spent efficiently, that there will be a completely new way of operating in the Congress, secondly, that the tax code should, wherever possible, become more savings friendly and more user friendly and more simple, because doing my own tax return I can tell you it is an abomination of arcane complications. We've got to change that, and I intend to push for that sort of thing in the tax code and at the same time to try to eliminate some of the unfairnesses which were mentioned earlier which is unable to take a tax loss on the sale of a home and the marriage penalty and some of these other things as we move along.

MS. FARNSWORTH: Congressman Archer, thank you very much for being with us.

REP. ARCHER: Good to be with you.

MS. FARNSWORTH: Jim.

MR. LEHRER: Still to come on the NewsHour tonight, commuter airline safety and a Richard Rodriguez essay. FOCUS - SAFETY CHECK

MR. LEHRER: Now today's report on the safety of commuter flights. It was issued by the National Transportation Safety Board. Tom Bearden, who has been covering air safety issues for the NewsHour, has the story.

MR. BEARDEN: The NTSB has issued dozens of safety suggestions for commuter airlines since 1980. Today the Safety Board said commuter airlines ought to be subject to the same stringent regulations as the major airlines. We'll discuss that recommendation with NTSB Chairman Jim Hall right after this background report on the record of smaller airlines.

MR. BEARDEN: The crash last month of American Eagle Flight 4184 en route from Indianapolis to Chicago, which killed 68 people, once again heightened safety concerns about regional airlines. Some are owned by the major airlines, as is American Eagle. Others are a patchwork system of independent operations, in partnership deals with the big carriers, sharing paint colors and flight codes but often not the same safety standards. Most of the planes flown by regional carriers are defined as commuter aircraft, small turbo prop or piston engine propeller planes with 30 or fewer seats. FAA safety regulations are often less stringent for those small planes, and critics say crash records indicate they are, indeed, more dangerous. In the last five years, the big carriers, which fly mostly jets, have averaged 2.9 accidents per million departures. But commuter carriers have averaged 6.6 accidents. Some crashes can be attributed to lower standards for safety devices, like the one last December in Hibbing, Minnesota, that killed 18 people. The 19-passenger turbo prop hit some trees and then a hill after the flight crew lost track of altitude. Unlike larger planes, the commuter plane had no ground proximity warning system which would have alerted the crew to pull up. After that crash, the FAA required proximity alarms in all turbo props with ten or more seats but not in those with fewer than ten seats, and they account for a quarter of all planes used by regional airlines. Pilots of small planes may also have lower training requirements. FAA rules specify minimum training hours for big plane pilots but regional airlines can have varying training requirements, and co-pilots don't have to complete training before they can fly passengers. Crew inexperience may have been to blame in the January crash of a 30- seater in Columbus, Ohio, which killed five of the eight people on board. The NTSB accident report cited the crew's low time in the airplane as a possible factor. Just yesterday, the International Airline Passengers Association said small commuter planes should be avoided for safety reasons but increasingly, passengers have little or no choice on whether to fly small planes. Since industry deregulation in 1978, about 250 U.S. cities once served by big carriers now have only regional service, and most of that on small prop planes.

MR. BEARDEN: We're joined now by Jim Hall, the chairman of the National Transportation Safety Board. Mr. Hall, you released a long list of recommendations today. In your view, what are the most significant, most important ones?

JIM HALL: Well, Tom, I think probably the most significant are those that relate to crew training and their particular qualifications. We are looking as was -- as has been reported -- to extending the part 121 regulations that apply to major transport aircraft, to all aircraft 10 seats and above. This we think will have a major impact across-the-board, but specifically in the area of training that the crew is going to receive. We think it will be a major advance.

MR. BEARDEN: When you say part 121, you're talking about the Federal Aviation regulations that apply to air carriers?

JIM HALL: That's correct.

MR. BEARDEN: Why is crew training so important, and why is it different at the commuter airlines and at the major airlines?

JIM HALL: Well, of course, a lot of the regulations that the Federal Aviation Administration have had grew out of the old air taxi service back when mom and pop operators went into smaller airports in smaller cities with some schedule but primarily unscheduled service. We've seen a tremendous growth in commuter airlines or the regional airlines in the last 10 years. We have seen really that the number of passengers flown in 1993 was over 53 million passenger enplanements, more than double 10 years ago. There are three times as many commuter aircraft in service as there were 15 years ago. There are 333 airports in this country that are served primarily and only by commuter airplanes, so the growth in this particular industry I think has -- has now resulted in needing to address and extend safety regulations so that we have one standard of safety out there for the passengers whenever they buy a ticket on a scheduled airline.

MR. BEARDEN: Is it really one standard of safety though, because I understand that aircraft that have ten seats or fewer will not be subject to more stringent regulations, is that right?

JIM HALL: Well, a lot of the airplanes that are ten seats or fewer are flown in the state of Alaska, which is a unique environment where aviation is, is essential and everyday down here as the passenger car. We are going to hold a study. We are conducting a study and we'll hold hearings in Alaska in May of next year to look at that particular segment of the industry, ten seats and less, different from the category of ten seats and above, which we have addressed in this study, which primarily takes into consideration most of the passenger service that we see in the lower 48 states.

MR. BEARDEN: Consumers who look at this study may wonder why there were a dual standard established in the first place, that their lives are just as valuable flying in whatever size airplane as flying in a major airline. You've talked about the growth but what's the background? What's the rationale behind that? Is it essentially that these kinds of standards cost the commuter airlines more money?

JIM HALL: Well, I don't really think so. I think that, you know, my feeling, personal feeling is that safety sells seats in the airplane business, in the airline business. I think, as I pointed out earlier, the rationale is that this grew out of an air taxi system, the industry, the growth of the industry really got ahead of the government regulations. And there have been improvements that have been made, as was pointed out based on some of the recommendations of NTSB, a number of things are available in commuter aircrafts now, the cockpit voice recorder, flight data recorder, the ground proximity warning system, the collision avoidance system. Those improvements had been made and are presently in service or will be in service at the first of the year. So it has not been a stagnant situation. It's just that I think now is the appropriate time to package these together, working with the FAA, and upgrade all of the service in ten seats and above to essentially the same level and standards of government regulation.

MR. BEARDEN: Some pilots have been concerned for some time about the different standards and rules that regard rest and the numbers of hours that can be flown during a period of time. Your report addresses that. What's that all about, and is that a serious problem?

JIM HALL: Well, fatigue -- we are learning more and more about the subject of fatigue as it applies not only just to the operation of our air service but whether it be in rail, highway, or other areas, and we are finding obviously the importance of rest in terms of the operation of what is now very high technology equipment that you find in modern aircraft. These recommendations, if implemented by the FAA, will basically provide the same hour schedules under - - consistent across the industry in all service, and the whole rest area is something that the board has made some recommendations to the FAA on and an area in which I think we need additional examination.

MR. BEARDEN: Some reports, published reports, have discussed the safety of commuter airlines in general. And as you know, the International Association of Airline Passengers recently released a recommendation advising people not to fly in certain kinds of small planes. What's your reaction to that recommendation?

JIM HALL: Well, let me say that, you know, this is an area, the area of air safety that is a sensitive one and one where it has been the history of this board to be responsible and to deal with the public based on the factual information that's available. And commuter airlines are safe. They are a very safe way to, to fly. I had a concerned parent call my office about their, putting their daughter on a commuter airline for the Thanksgiving holidays. You know, I think it was characterized today in our board meeting, that statement borders on being irresponsible. If you look at the record of commuter airlines in the United States in 1993, there was one million flights in between accidents in 1993, and certainly, the safety of a commuter air service versus your safety on the highway, you're certainly much safer on a commuter airplane. Now, are there areas that we need to improve? Certainly. And that's what this report is all about. But I think it's very important that the information that we have be made available to the public for their consideration and not be done in a way of trying to just, just alarm people.

MR. BEARDEN: At the risk of splitting hairs, though, at the basis of that recommendation is the assertion that commuter planes are less safe than major carrier aircraft. Is that a fair statement or not?

JIM HALL: I think that based on the information available that right now based on accident records they're very close but that a commuter air service is not as safe as major transport aircraft service in this country. But, again, both of those types of transportation are safer than being on the highway.

MR. BEARDEN: Your report also talked about the FAA's inspectors and needing additional training to be able to adequately deal with smaller airlines. What is it that they're not adequately trained to deal with now?

JIM HALL: Well, if you look at the commuter industry in terms of the aircraft that are coming on, we're finding very new, sophisticated airplanes. The ATR, which was mentioned earlier in the Indiana accident, is a state of the art new technology, glass cockpit aircraft. The jet stream aircrafts have been newly introduced, the jet stream 41 that was in the Columbus crash. It's important that the FAA investigators, inspectors that have the responsibility for oversight and inspection of these services, you know, are knowledgeable of these type of aircraft and can effectively perform their job. And this, of course, is a question of being sure that there's uniform training for them as these new aircraft are brought into service. And that's one of the areas that we also addressed.

MR. BEARDEN: Are they less than knowledgeable right now?

JIM HALL: Well, I would say that if the world was perfect, we would not be addressing our concerns. I think they do an excellent job, as was pointed out today, in the maintenance area. Over 75,000 inspections were conducted in a six-month period in 1992 on commuterairlines by the FAA inspectors across the United States. So I think they're doing a good job, that we need to be sure that we are encouraging them to be, you know, vigilant and diligent about their responsibilities as we see new and modern aircraft come into the country and new training opportunities and possibilities like cockpit resource management or simulator training, that we need to be sure that they're keeping up with the technology in this area as well.

MR. BEARDEN: FAA responded very positively to your recommendations this morning. How long do you think this is going to take to implement? They said quickly, but how quickly is quickly?

JIM HALL: Well, let me point out that particularly with the code sharing airlines, as we said at the board meeting today, I would encourage those airlines, Northwest, unfortunately, on the hills of the Hibbing accident got into a partnership with their Northwest Air links and their code sharing partners in terms of assisting them in the safety area. There are other major airlines that operate in this country that don't need to wait on FAA regulations or recommendations from the NTSB. They can go ahead and, and participate in safety audits, safety training, and assistance to their code sharing partners. I would hope that that would take place. There are a number of airlines that, major airlines that presently do that. There are some that don't. You know, administrator Henson and deputy administrator Linda Hall Daschle have been very supportive and very proactive in terms of safety, as all of the, I think, the initiatives under Sec. Pena over at the Department of Transportation across all the modes of transportation, that they are looking out after the public interest in terms of safety. The rule making process takes time. But I think there hopefully will be a coordinated effort now and in the FAA to expedite that process now that we've focused on exactly what needs to be done.

MR. BEARDEN: Jim Hall, chairman of the National Transportation Safety Board, thank you very much for joining us.

JIM HALL: Thank you, Tom. ESSAY - CULTURE CLASH

MR. LEHRER: Finally tonight, essayist Richard Rodriguez, editor of the Pacific News Service in San Francisco, speaks of family values.

RICHARD RODRIGUEZ, Pacific News Service: Family values: The term has become a political mantra. We use the term to criticize welfare mothers. We use the term as a way of abhorring the calamity of the inner city. Kids murdering kids. We use the term to attack the so- called lifestyles of homosexual Americans. We use the term to attack decadent Hollywood. The only trouble is there is no such thing as family values in America -- never have been. Our culture was formed in an act of adolescent defiance against a mad British king. To this day, we are disrespectful of authority, pop, dad, father. The old man is a figure of mockering American culture. Homer Simpson, Archie Bunker, Mad King George. The enduring romance of America is the story of a boy who steals away from home. Huckleberry Finn's pappy is an old drunk. The other day I asked a friend of mine from South America who is twenty-nine years old why he is still living at home. He said, "It would be an insult to my mother and father to leave their home before I got married." I've never heard an American say such a thing. In America, we show how much we love our children by raising them to leave home. We do not expect our children to hang around. We don't like a mama's boy. We like our daughter to stand on her own two feet. American mothers are not stupid. They have realized that there is little glamour in being a homemaker in America. The expansion of America, our history book has been the story of leaving home. America values the woman who leaves home, has a career, earns her own money. America honors Annie Oakley, or Madonna much more than we admire mom and her fattening apple pie. Today's irony is that those very same Americans who most loudly profess family values are the very ones most suspicious of recent immigrants from South of the border and from Asia. Here in San Francisco, a common complaint against Chinese immigrants is that they are too tribal, too family- oriented. And those Mexicans, when are those Mexicans going to learn English and give up their family language? All over the world, from Peruvian villages to Chinese cities, the siren call from America is the first person, singular pronoun, the "I." Leave your parents behind, leave your home, come to America, and become someone new. No greater glamour do we offer the world than the first person, singular pronoun. The price we pay for our famous individualism is loneliness. 18th century Protestants who fled the tyranny of the British crown used to gather together in America to share the experience of being alone before God. Now, we talk on the Oprah Winfrey Show about our solitary lives. We have grown dangerously homesick. We think we remember our leafy hometown, the way people greeted each other, how polite children were. Of course, we conveniently forget the individual reasons we left home. If our national strength has been our individualism, our blindness is that we refuse to recognize our ties to one another. Today, on the cultural left there is much talk about multiculturalism, but multiculturalism is an evasion at least as old as the wariness of the 13 colonies to recognize their national identity. Today we celebrate diversity in America. It is much easier than confronting our commonality. On the cultural right, Americans morally separate themselves from the inner city, from non-Christians, from their own gay children, from their television sets, to insist on family values. The question for the future is this: Can we Americans moderate our individualism long enough to recognize that we share values in common, that our lives are intertwined, that we belong to an American family? In any true American history, Huck Finn is related to the inner city rapster, the lesbian and the Christian fundamentalist are truly neighbors. In any true history, Thomas Jefferson's son is Dennis the Menace. If we were truly people of family values, we might recognize this ultimate irony -- what Americans share in common is the notion that we share nothing in common at all. I'm Richard Rodriguez. RECAP

MR. LEHRER: Again, the major stories of this Tuesday, the Federal Reserve Board raised interest rates for the sixth time this year. Major banks followed by hiking their prime lending rates. And in Indonesia, President Clinton and the other 17 leaders of the Asia Pacific Economic Summit agreed to create the world's largest trading bloc within 25 years. Good night, Elizabeth.

MS. FARNSWORTH: Good night, Jim. That's the NewsHour for tonight. We'll see you tomorrow. I'm Elizabeth Farnsworth. Good night.