The MacNeil/Lehrer NewsHour

INTRO

JIM LEHRER: Good evening. In the news today, the launch of space shuttle Discovery aborted with just four seconds to go. Gary Hart and Walter Mondale held a peace conference in New York. In Havana, Jesse Jackson said it was time for the U.S. and Cuba to forgive each other, and an air control official retracted his charge the nation's airways are unsafe. Robin?

ROBERT MacNEIL: And three of those stories we'll be exploring in depth on the NewsHour tonight.From Cape Canaveral we talk to the boss of NASA's shuttle program about today's aborted launch. On Democratic politics, a special report on where Hart supporters may go in November. We'll have extended coverage of the dramatic hearings on airline safety. and President Reagan says there's no excuse for rising interest rates. We hear a banker and an assistant treasury secretary disagree.

LEHRER: For the second day in a row six astronauts lay strapped on their backs for three hours waiting for the magic moment that never came. This morning they were just four seconds before lift-off when their mission on space shuttle Discovery was scrubbed at the Kennedy Space Center in Florida. This is how it looked and sounded.

NASA OFFICIAL [countdown]: T minus 15 seconds and counting. Ten. We have a go for main engine start.Seven, six, five -- we have main engine start. We have a cut-off. We have an abort by the on-board computers of the orbiter Discovery.

LEHRER [voice-over]: This was the first time in almost 20 years a flight has come so close to lift-off before scrubbed, since Gemini 6 was shut down just two seconds before blast-off in 1965. Today one of Discovery III's engines had already fired up when an on-board computer abruptly halted the countdown. The ignition touched off a small fire at the base of the rocket, but it was extinguished shortly after. NASA officials say the six crew members were never in what they called direct danger, despite their sitting atop 500,000 gallons of flammable fuel. The astronauts left the shuttle about 45 minutes later and were told to take the rest of the week off. NASA has now postponed the flight indefinitely. [voice-over] NASA said, by the way, today's problem had nothing to do with yesterday's, when a had computer caused the flight to be postponed for another day. Robin?

MacNEIL: In a statement issued later, shuttle commander Henry Hartzfield said the crew was prepared to bail out if necessary after the alarms went off. Hartzfield said, "At the seven-second point we had the normal big kick when the engines ignite, and almost simultaneously we had the engine alarm. It was then I knew we were not going anywhere, and my major concern was that the solids," meaning the solid fuel rocket boosters, "did not fire. The crew was very quiet, with very little or no conversation, and the launch team kept us very much aware of what was happening. There was never any great apprehension or concern," he said. Later in the program we'll be talking further about today's mishap with the NASA administrator in charge of the shuttle program, Jesse Moore, from Cape Canaveral. Jim?

LEHRER: There was talk of peace at a big-deal summit meeting in New York City today. There were two participants, both American, both Democrats, both candidates for president. And after it was over, this is what they said.

Sen. GARY HART, Democratic presidential candidate: Walter Mondale and I are united by two common beliefs and objectives. First of all, our commitment to the traditional principles and values of the Democratic Party. I've said throughout this contest that on fundamental beliefs and fundamental values there is no difference between Walter Mondale and myself. We are deeply committed to the principles of our party, to seeing that this party succeeds. We are also united in our profound fear of a second Reagan term.

WALTER MONDALE, Democratic presidential candidate: The things that divide us are modest compared to the things that divide the two of us from Mr. Reagan. The fact of it is that Gary Hart and I worked together for years in the Senate on a wide range of issues, and on many of them worked very, very closely together. Lee and Gary and Joan and myself have been friends for many, many years, and I think we respect each other. I said during the campaign if we could just get two good nights' sleep I think that would become obvious. Now, I've had my two nights. I don't know about Gary. But I feel a lot better, and I think this has been a very good meeting and it demonstrates again that basic respect that I have for him.

REPORTER: Yesterday Senator Hart said that he had absolutely no interest in being vice president. Did he say that to you this morning privately?

Sen. HART: We didn't, as both of us stated, we didn't discuss the ticket, or we didn't discuss the vice presidency. And I continue to assert that I am a candidate for the presidency and nothing else. The issue is, who is best qualified to govern this country, regardless of gender or race? And I am equally committed, if I am the nominee of this party, to give that serious consideration. I have my own list of possible running mates. Mr. Mondale is on it, actually, and so are a large number of women and minority people.

REPORTER: Senator, did anybody apologize? Did either of you two apologize?

Sen. HART: For what?

REPORTER: For saying bad things about the other one?

Sen. HART: Well, let me just make one thing perfectly clear here. Neither of us say -- in the course of this contest -- and, of course, it has been a serious contest for the leadership of this party -- neither of us accused the other, for example, of witchcraft, which my recollection is Mr. Bush accused Mr. Reagan of four of years ago.So I think in some respects the issue of personal conflict or animosity or hostility has been, if I may say so, overreported. If Not Gary, Who?

LEHRER: For those with short memories, that last was a reference to Bush's having called Reaganomics voodoo economics. This new breakout of peace in the Democratic Party has some formidable problems to overcome between now and November, and near the top of that list is turning Hart voters into Mondale voters. Judy Woodruff takes a look at how difficult that may be. Judy?

JUDY WOODRUFF: Jim, there were quite a few polls done during the primary season that indicated that many Hart voters wouldn't consider voting for Mondale. Well, in order to find out just what some Hart voters do think about Mondale, we decided to ask them. We travel to a state whose Democratic primary Hart won, Ohio, and to a city that you might say was all-American.

[voice-over] There is no such thing as a typical American city, but if there were, Dayton, Ohio, would come about as close as you can get. The home of airplane inventors Orville and Wilbur Wright, the place where the cash register and the ice cream cone were invented, Dayton is a blend of old manufacturing and new business, a bustling middlesized downtown and suburbs that go on for miles and miles. People here consistently vote Democratic, but this year at least that hasn't translated into any groundswell for the likely Democratic presidential nominee.

Here in Ohio's Third Congressional District, which encompasses Dayton and most of surrounding Montgomery County, Walter Mondale won less than 33% of the Democratic vote in last month's primary. Gary Hart beat him with more than 36%, while Jesse Jackson, thanks to an unusually high turnout among black voters, came in a close third. If Mondale wins his party's nomination, the polls are already indicating he'll have his work cut out for him.But what will make it even tougher is that even in largely Democratic areas like Dayton, Mondale still has to convince many Democrats that he's the best choice.

Even long-time Democrats like Steve Davis, who worked for the Carter-Mondale ticket in 1976 and again in 1980, think the odds are stacked high against Mondale. Davis, who lost a $23,000-a-year job when the Dayton Tire and Rubber Plant folded during the Carter administration, and who is now earning considerably less working in a department store, says Gary Hart is the first Democrat to offer any excitement since the Kennedys.

STEVE DAVIS, Hart delegate: I felt that Gary Hart was the person that could represent a new Democratic Party, a person with new ideas and a person that could communicate and a person that could beat Ronald Reagan in November.

WOODRUFF [voice-over]: Ironically, Walter Mondale's picture is one of many famous Democrats that adorn Davis den, but out campaigning in Dayton's blue-collar neighborhoods, Davis found less support for Mondale and more for Hart than he'd expected.

Mr. DAVIS: There was a lot of people put out of work, people that had to go out, knock on doors, find new employment, and in some cases making a lot less money than they were four or five years ago, and then all of a sudden they're faced -- you know, people in their 40s and their 50s, you know, people that you just can't get jobs every day, you know. A lot of these people were put out with nothing, and Gary Hart offered them some hope.

WOODRUFF [voice-over]: Davis' own experience wasn't a lot easier.

Mr. DAVIS: At first it was kind of tough making ends meet. My wife never had to work, and all of a sudden she put in the position where she had to work. And whether you like it or not, you know, you just have to accept it and go on.

WOODRUFF [voice-over]: Davis will be a Hart delegate at the Democrat convention, and says if Mondale wins the nomination he'll support him but not as enthusiastically as he would Hart. He fears that many other Hart voters in Dayton won't even do that.

Mr. DAVIS: Some of them have even indicated that they'd voted Republican in 1980, and that they were tired of the Republican administration, the way things were going; again, the economy, the deficits, and so forth. and they felt that with Mondale being a vice president in 1976 and serving four years under the Carter administration, they felt that he kind of had his chance and didn't do it.

WOODRUFF [voice-over]: Mondale did worse among blue-collar voters in the Dayton area than he did in many other sections of the country. This is one of the few places where a local union like the United Rubber Workers ignored their international union's endorsement of Mondale and decided not to endorse anybody.

JOHN LEWIS, United Rubber Workers Local 87: I was the gentleman who made the motion on the floor that this local union stay neutral, because I felt that national labor leaders were wrong for jamming Walter Mondale down the rank and file's throat.

ELDON HOUSE, United Rubber Workers Local 87: I think people vote the way they want to, and I do think they resent me for trying to tell them how to vote. And I'm one of those individuals that believe that they should have the freedom of choice.

WOODRUFF [voice-over]: But some union members who didn't vote for Mondale in the primary say they would support him in November.

CHICO HARDY, United Rubber Workers Local 87: Most of the people that voted for Hart, like myself, is going to back Walter Mondale because he's a Democrat, and he has vowed to keep some of the jobs within the United States, and that's our main concern. A lot of people tell me they associate him with the Jimmy Carter era, but they're going to have to forget that because he wasn't running the show back then.

WANDA ADAMS, teacher & Hart delegate: Why is Jerusalem an important city?

WOODRUFF [voice-over]: Wanda Adams teaches history at a high school just outside Dayton.

Ms. ADAMS: Christians, Jewish and? And Moslems. So all three religious groups have some vested interest in Jerusalem.

WOODRUFF [voice-over]: She belongs to the National Education Association, which long ago endorsed Mondale. But when she got a call asking if she'd run as a Hart delegate, she said yes.

Ms. ADAMS: I really hadn't had the time to make up my mind myself at that point, and I was just impressed by Gary Hart and the things that he says and the way he presents himself and his lack of attachment to so many special interest groups.

WOODRUFF [voice-over]: Adams did win election as a Hart delegate and will go to the convention. She's already prepared to switch allegiance to Mondale when and if that's

Ms. ADAMS: I am a Democrat and I will support whoever the convention nominates, and I would certainly rather see four years of Walter Mondale than four more years of Ronald Reagan. So I would support him with enthusiasm.

WOODRUFF [voice-over]: Bernie Dushman is also going to the convention as an alternate delegate pledged to Hart. He is a law professor who quit his job to run the Hart campaign in the Dayton area. He says he too is prepared to support Mondale if Hart loses. But he adds it won't be the same.

BERNIE DUSHMAN, Hart delegate: With Gary Hart I'd be working for the election of Gary Hart. With Walter Mondale I'd be working for the defeat of Ronald Reagan.

WOODRUFF [voice-over]: At the same time, Dushman doesn't but the notion that a lot of Hart voters, especially blue-collar workers, will vote for Reagan or just stay home in the fall.

Mr. DUSHMAN: I don't think that the blue-collar worker, even if he says, well, today I have a job and I didn't have a job when Jimmy Carter went out of office. I think that when he looks at things like the kind of people Ronald Reagan will appoint to the United States Supreme Court, the $200-billion deficit, which is just sitting out there and which is going to cause interest rates to rise, etc., and the risk of losing jobs in the near future, I think the blue-collar worker is going to come around to Walter Mondale even if he was supporting Senator Hart up to this point.

WOODRUFF [voice-over]: Back at the rubber workers union, the local president disagrees.

Mr. HOUSE: If it was based on the decision, as it is today, I think probably Mr. Reagan would have the edge. A lot of people are working and, like I said, if things are going good, we have a tendency to not want to rock the boat.

WOODRUFF [voice-over]: Whether Eldon House or Bernie Dushman is right about the blue-collar vote, what vitrually everybody agrees is that Mondale's toughest chore will be winning over the younger voters who supported Hart, the under-40s, the young, upwardly mobile professionals or Yuppies. We found dozens of them at lunch time one day in downtown Dayton's Courthouse Square. And, sure enough, with only a few exceptions, those who had voted in the primary for Hart were not eager to climb on the Mondale bandwagon.

1st YUPPIE: I'll vote for Reagan because I have always been halfway for Reagan, and I've always been a Democrat so I voted Democrat in the primary. But I'll vote for Reagan in the fall.

2nd YUPPIE: I don't know. Undecided.

WOODRUFF: You may vote Reagan, you may vote Mondale. Why wouldn't you vote for Mondale?

2nd YUPPIE: I'm not sure there would be any change, anything different. I don't see anything different in his policies and Reagan's.

WOODRUFF: It looks like Mondale's the one who's going to win the Democratic nomination. What will you do in November?

3rd YUPPIE: Vote for Mondale.

WOODRUFF: Why?

3rd YUPPIE: Anything I can do to oust Ronald Reagan.

4th YUPPIE: I'd vote for Reagan.

WOODRUFF: Why is that?

4th YUPPIE: I'm just not a Mondale fan.

WOODRUFF: Why not

4th YUPPIE: I don't think he has a good image.

WOODRUFF [voice-over]: Bernie Dushman, the Hart alternate delegate, says those Yuppies who supported Hart could be critical to Mondale's success, but he thinks they are the one group of Hart voters who will be most reluctant to switch to Mondale.

Mr. DUSHMAN: I think that's where the biggest selling job has to occur, because the so-called Yuppies tend to be people who have jobs, who have jobs that are fairly recession-proof, white-collar jobs. And they're going to have to be convinced that it is in their interest to change the way things are now. But Walter Mondale is going to have to do is to become a candidate of the future, to talk about what this country is going to be like in four or eight or 16 years if Ronald if Ronald Reagan is the president for the next four years. And I think it can be done, but it's going to take some work.

WOODRUFF: There is no way that we can claim that our findings in Dayton are representative of the rest of the country. On the other hand, there is at least a possibility that they are. Fourteen years ago, in a well-known book about the American electorate titled The Real Majority, the authors suggested the typical voter could very well be the 47-year-old wife of a machinist living in none other than suburban Dayton, Ohio.

Robin? Interest Rates: The Debate Continues

MacNEIL: The shock waves in world currency markets from yesterday's prime interest rate increase by U.S. banks subsided today, but the political argument remained alive in Washington. Both President Reagan and his spokesman Larry Speakes issued strong statements criticizing the increase from 12 1/2 to 13 percent in the rates big banks charge their best customers. President Reagan said there was no excuse for it, and said banks and the financial community were reacting to fear of the future, fear, he added, of renewed inflation. Larry Speakes said the administration was disappointed and later added, "We see no reason why the markets and the banks should continue to be skeptical about inflation. It is under control and the President means to keep it under control." To explore this further, we have first the banks' point of view. John Wilson is a senior vice president and chief economist with the Bank of America, the nation's second-largest bank. He joins us from San Francisco at public station KQED. Mr. Wilson, the President says no excuse.Is there an excuse?

JOHN WILSON: I think indeed there is, and the markets did not react to the high inflation or the fear of continued inflation as much as a very simple economic fact, and that is when demand exceeds supply, prices go up. And in this case the demand for funds exceeded the supply, and the prices -- i.e., the interest rates -- were raised.

MacNEIL: Why is the demand exceeding the supply?

Mr. WILSON: Two basic reasons. Number one, we have a very, very strong economy with very growing credit demands, particularly in business this year. And the second fact are the large budget deficits of the federal government. They will run $165-to $175 billion this year. So it's a combination of a strong economy with credit demands running four-square into a large budget deficit.

MacNEIL: But isn't the President right in saying that behind those observations you and the financial community have a fear that inflation will come back because of those reasons?

Mr. WILSON: When we look in the longer run, and I'm talking about 1985, 1986. I think the President is indeed correct. But of course he was referring to the current situation of inflation, which is quite low, fortunately. But it's well known and well understood in the financial markets that if we continue with these large budget deficits and a strong economy, inflation will resurge by the end of this year, and certainly, probably going into 1985.

MacNEIL: He said yesterday interest rates will only come down again when the financial community believes that inflation is licked. Is that correct?

Mr. WILSON: I would say that interest rates will come down when the White House takes decisive action in dealing with the budget deficit and Congress follows suit. We cannot expect interest rates to come down with budget deficits projected for $180 to $200 billion for the forseeable future.

MacNEIL: The Congress appears about to make a so-called downpayment of something like $150 billion on reducing the deficit over three years. Will that act start interest rates coming down?

Mr. WILSON: What the markets believe is that Congress will act to increase taxes about $50 billion this year, and the markets have pretty well assumed that this action will be taken. The other $100 billion we're anticipating will probably be set off until 1985, looking at the political reality. But what we really need to bring interest rates down is about $100 billion tax increase over a three-year period, matched by $100 billion in expenditure reductions, a package of close to $200 billon --

MacNEIL: Enacted when?

Mr. WILSON: That would have to be enacted in 1985 or 1986, early 1986. The sooner the better.

MacNEIL: And you don't believe interest rates are going to start coming down until that happens?

Mr. WILSON: I expect interest rates to continue rising a little bit more towards the end of this year and probably stabilize at about 100 basis points, or 1% higher than they are through the better part of 1985.

MacNEIL: A prime of 14%?

Mr. WILSON: I'm looking for a prime of 13 1/2 to 14 percent by the end of the year.

MacNEIL: Some people are saying another rise in prime is expected sooner than that. You don't see that?

Mr. WILSON: Well, the pressures are building up. If the economy doesn't slow down and we continue to confront the strong private credit demand we could see -- an increase in the prime rate to 13 1/2 long before the end of the year.

MacNEIL: Do you expect the Federal Reserve Board also to raise the discount rate soon?

Mr. WILSON: That's a key question because clearly the discount rate is way below where the market is today. Fortunately the discount rate wouldn't destabilize the financial markets' domestically, but the Fed may be forced to take that action to send a strong signal abroad that indeed they are concerned about slowing the economy down.

MacNEIL: So,in brief, you from the banking point of view say there is an excuse?

Mr. WILSON: I say there is not just an excuse. We were following the markets; we were forced to raise the prime because of our cost of funds were being pressured upward, and what is being worked out is the normal interaction of strong credit demand, both the budget deficit and private credit demand overwhelming the supply of funds.

MacNEIL: Thank you. We'll be back. Jim?

LEHRER: President Reagan, as we know, sees it very differently than Mr. Wilson. Mr. Reagan is not here tonight, but Manuel Johnson is.He is the assistant secretary of the treasury for economic policy.You heard what Mr. Wilson said. The banks were forced to raise the prime rate yesterday.

MANUEL JOHNSON: Well, I think the President's point was that especially for the long-term interest rates that inflationary fears, because of the usual acceleration of inflation at this stage of the business cycle has created some uncertainty or an expectation of rising inflation among the financial institutions, and therefore there is some inflation premium on especially the long-term interest rates. And I think that he was referring to that when he talked about fears of inflation. Certainly if you look at the near term, there is -- certainly it's evident that inflation is not going to pick up by the end of the year.I think that his other concern about the level of the federal funds rate, which is the interest rate charged on inter-bank overnight funds, was directed at the point of the short-term interest rate and that has been related to surges in short-term business borrowing and credit demands. But there are a lot of special one-time factors, I think, that have influenced those short-term rates, one being the fact that there has been a lot of merger activity in the first quarter, in the first month or so of the second quarter and carrying on into the second quarter. And then there has also been the facts that tax payments had to be all made by corporations earlier this year than later, when they usually make them, in June, and there had to be short-term business borrowing for that reason. And also there was a large inventory re-building going on in the first quarter and part of the second quarter which caused a lot of short-term financing. And I think that that's expected to begin to tail off some.

LEHRER: I'm not sure if you're telling me you agree with President or you agree with Mr. Wilson. I mean, it sounds to me like you just -- you said, well, Mr. Wilson's right. There were legitimate business reasons for the banks to raise the prime rate. The President said there weren't.

Sec. JOHNSON: No, I think the President's point was simply that in fact fears of inflation seemed to be affecting the long end of the market --

LEHRER: Yeah, but Mr. Wilson just said that wasn't it at all. They did it because he said demand exceeded supply, and you heard what he said. There are two reasons: the federal budget deficit and there was just more demand for private credit. And that's the reason the banks raised their interest rates. Are you saying he's wrong?

Sec. JOHNSON: Well, I think the point is that the banks' cost of funds have temporarily gone up because of a rise in the federal funds rate in the overnight market between banks. Now, what's caused that is partially due to credit demands, but at the same time I don't think that it has anything to do with the budget deficit because the budget deficit has been trending down substantially since last year.

LEHRER: But Mr. Wilson says that what the administration has done and what Congress has done is a drop in the bucket. It isn't going to do any good at all. It's going to take, he says, $200 billion, $100 billion in taxes and $100 billion in cuts, to get the job done.

Sec. JOHNSON: Well, I think he was a little mistaken about spending, that he was pointing out that he didn't expect $100 billion of spending reductions this year. But in fact they have already enacted -- not enacted but actually passed out of congressional conference the major portion of that.

LEHRER: I think he meant in addition, another $100 billion. Well, we'll ask him in a minute.

Sec. JOHNSON: Okay, well, I think the point is, though, that the deficit is coming down substantially. Just last year the Office of Management and Budget had estimated that the '84 deficit would be $231 billion. Now those projections have already come down to about the $177-billion range, quite a drop in one year, and they're continuing to fall. At the same time, there are very large state and local surpluses building up at the state and local level of about the $55-billion level. So there seems to be some relief in terms of the public credit demands.

LEHRER: Look, I think what it really boils down to is whether or not you and the administration believe that bankers like Mr. Wilson and others around the country are just on their own keeping interest -- raising interest rates for no legitimate reason, that they feel something in the air that really isn't there and they're just reading it all wrong, they don't have -- for instance, Larry Speakes' statement yesterday that they don't have confidence in the ability of, the performance of the Reagan administration in doing all these wonderful things the Reagan administration has done. Is that what you believe?

Sec. JOHNSON: Well, I think that there certainly is some uncertainty about whether this administration or, in fact, is committed to keeping inflation down, and we have tried to reassure them over and over, and the President's commitment towards an anti-inflationary policy, I think, has been extremely strong. And I think his point was that once they become convinced that in fact low inflation is here to stay, in fact the interest rates will reflect those lower rates of inflation, and I think that's correct.

LEHRER: But that's really all that's involved, from your perspective, is that right? That it's merely convincing the John Wilsons of this world that you guys are serious?

Sec. JOHNSON: Well, I think that's a large part of it. I think another part of it is, though, the demand-and-supply situation that exists in the short-term credit markets. And I think the President referred directly to that when he talked about the level of the federal funds rate.

LEHRER: Thank you. Robin?

MacNEIL: Is that just it, Mr. Wilson? Is it just a question of convincing you and your colleagues?

Mr. WILSON: Well, I think there's no problem convincing us that inflation has been brought down, and I would give the Reagan administration due credit for bringing inflation down. Now, unfortunately, it cost us a recession in the process. But I think the concerns in the financial markets, the banking community and the general public at large go far beyond inflation.I think that's a concern that, number one, we won't have another recession in 1985, being driven into it by a rise in interest rates, and, second, about the long-term growth potential and stability of the American economy. I think this is the real concern, is that we are maybe facing another recession in the next several months, certainly by mid-1985, the way things are going.

MacNEIL: What do you say to that concern, Mr. Johnson?

Sec. JOHNSON: Well, I think that in fact we do concern ourselves with rises in interest rates and the effect that might have on the economic situation.However, we think that we have in place a set of fundamental economic policies that will preserve and sustain the level of real growth in the economy. I think that part of the problem with the rising short-term rates, though, has been some of the uncertainty about the future as I reflected on earlier, and the fact that there is some uncertainty about the course of monetary policy in reaction to the economy's pace.

MacNEIL: In other words, whether the Federal Reserve Board is going to loosen up or keep a tight hold on the money supply?

Sec. JOHNSON: Well, certainly that raises uncertainty in the financial markets, and if the markets are in fact expecting a future tightening of Federal Reserve policy, that would cause the short-term rates to rise.

MacNEIL: Is that part of your anxiety, Mr. Wilson?

Mr. WILSON: We certainly, given the strength of the economy and the very large stimulus coming from the budget deficit, would not be surprised to see a tightening on the part of the Fed. But I think that when we look at the Reagan economy policies, what we see is massive policy imbalance. We see very large budget deficits, which force the Fed to keep overly tight monetary policy. And it's this policy imbalance between fiscal and monetary policy that's probably most disturbing to the private sector of the economy.

MacNEIL: Mr. Johnson just said the deficits are coming down. You heard the figures he quoted.

Mr. WILSON: Yes, I heard the figures. He said that, given the OMB forecast a year ago that the deficit would be $231 billion, it's come down to $177. What Mr. Johnson was quoting was the OMB estimate of a services-in-place budget, not reflecting the current administration's policies. Now, private-sector economists have long been saying that the budget deficit would be around $175 to $180 billion and we haven't brought those estimates down one dollar.

MacNEIL: Mr. Johnson?

Sec. JOHNSON: Well, I think the point would be that in fact this deficit down payment which is being enacted at the moment will certainly reduce the out-year deficit projections from this point by another $150 billion over three years. And certainly by the end of the three-year period a budget deficit around the 2% of GNP level could be expected, and I would think that that would bring about significant amount of confidence in the financial markets.

MacNEIL: Will it, Mr. Wilson?

Mr. WILSON: Well, I would agree that if we can bring the deficit down to 2% of GNP -- right now, for instance, it's running 4.5%; last year it was over 5%. If we can bring it down to that, which is about its historical rate over the past 15 years, the markets would have a strong renewal of confidence. But what we see right now being debated in Congress and likely to be passed and approved is about a $50-billion tax increase this year, not the $150 billion that Mr. Johnson's referring to.

MacNEIL: Mr. Johnson, as you work for the Reagan administration and you're an economist, how certain are you that your review is objective, given the year we're in and that so many political commentators say that the one area, a one area in which Mr. Reagan could be vulnerable in the election is on rising interest rates?

Sec. JOHNSON: Well, I think that the reason why the President would not be vulnerable onrising interest rates is he's taken very responsible actions to try and deal with the budget deficit, which has been some of the criticism, and he's been mainly concerned with the reduction in the rate of growth of federal spending. And I might point out that indeed it is expected that $150-billion deficit package will be enacted this year, not just the $50 billion in tax rates. The President has insisted that he wanted to reduce the rate of growth in federal spending $2 for every $1 in tax increases, and we're certainly on track for a reduction in the deficit by that amount, and a $100-billion reduction in the rate of growth of federal spending. I think that that is something that should be encouraging to the financial markets along with the lower inflation policy that we continue to pursue. So, I'm very confident that the American people will place confidence in the President and his policies for dealing responsibly for this problem.

MacNEIL: Mr. Wilson?

Mr. WILSON: We certainly hope that we could see the budget deficit brought down by $150 billion over the next three years, but what we're really anticipating is the tax increase to be approved this year, recognizing the reality of the election and, more than likely, a rather long and drawn-out congressional debate because there are major differences between the Democrats and the Republicans on where those cuts in expenditures should be and by how much.

MacNEIL: Do you view this -- Mr. Wilson, from your perspective, do you view this argument as an argument between economists on objective facts, or do you regard it as a political argument that's going on?

Mr. WILSON: I don't think we can overlook the fact that there are a lot of politics in an election year. What I do feel is that this is critical debate over the future direction of the country and what we see going on in election year is politicians on both sides taking a short-term perspective, for obvious reasons. And what the American public and the financial community and other institutions are saying is look, we're more concerned about the long-term growth potential of the economy and a return to economic stability. I think that's what we need to see in the financial markets.

MacNEIL: Do you have a final comment, Mr. Johnson?

Sec. JOHNSON: Well, I think that in fact we are seeing an extremely sustained pace of economic growth in the economy, and I think that in fact one thing that hasn't been recognized probably yet is that this is one of the strongest postwar recoveries that we've had since World War II. And I think that we can all be encouraged by that. We have created more jobs in this administration than any other expansion phase of any other business cycle, and at the same time we have an investment boom going on that has been growing at three times the rate of consumption in this country. And all of that I think leads to a very healthy pace in sustained economic recovery that we can all be proud of.

MacNEIL: Well, Mr. Johnson, thank you for joining us in Washington, Mr. Wilson in San Francisco. Jim?

LEHRER: A citizens' panel that includes six former civil rights commissioners today accused the Reagan administration of a concerted attack on affirmative action programs to promote the hiring of minorities. The Private Citizens Commission on Civil Rights issued a 184-page report calling on the administration to reverse its policies. It asks the President himself to re-examine the opposition of his administration to the affirmative action policies developed and implemented by his five predecessors. The chairman of the group, Arthur Fleming, was fired as chairman of the Civil Rights Commission by President Reagan in 1982. In a statement with the report Fleming said the recommendations are all designed to reverse the tone set by the present administration of open hostility or lukewarmness to the development and vigorous enforcement of affirmative action plans. The Justice Department had no immediate comment on the report, but yesterday President Reagan told black appointees in his administration, "Contrary to a lot of demagoguery that we're hearing, our administration has moved with vigor and vision in the era of civil rights enforcement."

[Video postcard -- Blue Mesa Park, Arizona]

MacNEIL: In Havana, Jesse Jackson sat down for a long talk with President Castro today hoping to obtain the release of some American political prisoners as a gesture of good will.Before the conversations began, Jackson said he thought the United States should restore diplomatic relations with Cuba. He also said Castro and President Reagan should exchange visits in Havana and Washington to negotiate peace in Central America.

[Voice-over] Last night Castro was at the airport to greet Jackson, and the Cuban president told reporters that Jackson's visit might possibly lessen strains between Cuba and the United States. When Jackson alighted from his chartered plane, Castro welcomed him warmly. The personal reception was an unusual gesture by a chief of state receiving a visit from a private citizen of another country. Castro said he'd invited Jackson out of friendship to the United States, and added that Jackson's visit was an honor. When Jackson spoke to the waiting reporters, he said the United States and Cuba should forgive each other after nearly a quarter of a century of hostility. He said it was time to move on and give peace a chance.

[on camera] The House of Representatives today joined the Senate in eliminating an administration request for covert aid to Nicaraguan rebels from a money bill covering various social programs. The Senate dropped the $21-million request by a vote of 81 to one last night. The House followed suit today on a voice vote, thus permitting a billion-dollar supplemental appropriations bill to go to President Reagan for signature. Among other items, it will fund a program of 100,000 summer jobs for young people.

Ironically, as the covert aid request was being shelved in Washington, U.S. representatives were meeting for a second day with representatives of Nicaragua's Sandinista government in Mexico. The talks, described by Nicaragua as an attempt to normalize relations, were being held under close security at a seaside club in the Pacific Coast resort of Manzanillo. The U.S. government had no comment on the extent or purpose of the talks today.

Meanwhile, six rebel groups called contras who are fighting Nicaragua's Sandinistas have reportedly expelled guerrilla commander Eden Pastora. A Pastora spokesman said he was dropped because he wouldn't join forces with those rebels who have CIA backing. Pastora was wounded in a bomb attack inside Nicaragua on May 30th. He has now recovered and is reportedly planning to go to Washington to see members of Congress.

Jim? Air Travel: How Safe?

LEHRER: Last Wednesday night we broadcast a story on airline safety by correspondent Elizabeth Brackett. The centerpiece of her report was a May 21st memorandum from Ralph Kiss, then air traffic manager for the Federal Aviation Administration in Denver. In it, Kiss told his FAA superiors, "There are too many aircraft in the system," that "controller workloads are such that capabilities are being overtaxed," which has "led to a reduction in safety or a very high risk of a mid-air collision," and "safety of the system is coming under jeopardy." Those words caused a publicity uproar last week and led to a congressional subcommittee hearing today. And the star witness was Ralph Kiss, now with the FAA in Salt Lake City. Kiss backed off considerably from his memo words, saying he wrote it to get quicker approval for a new control system in Denver. But some of the congressmen didn't like the explanation.

RALPH KISS, air traffic manager: It was never my intent to infer that the system was unsafe. I feel that I overreacted in stating my case to try to justify immediate approval.

Rep. ELLIOTT LEVITAS, (D) Georgia: Did you make that decision on your own, or did you have some discussions with some other parties before you made that decision?

Mr. KISS: Those are my own decisions, sir.

Rep. LEVITAS: You made that without any discussion with anyone else?

Mr. KISS: I have had no discussion in regarding them. That is my decision; I should not have stated it as I did.

Rep. LEVITAS: Air traffic controllers in general impress me, as you do, as being cool customers. I mean, you deal with a lot of traffic situation, and yet you maintain your cool. It is for that reason that when I read the memorandum of May 21st that you wrote, that being the cool customer that you are, and controllers are, that these words don't come lightly. And I am concerned that you said that you engaged in either exaggeration or overexaggeration in order to make sure that it got approval.

Mr. KISS: What I meant or what I said was that I overstated my case from a standpoint of trying to ensure that I got it approved before I left. And I did not feel that I had time to write it in the normal manner that I would for justificatioin. Time was pressing on me. I wanted it done before I left, sir. I used some terminology I should not have used.

Rep. LEVITAS: Now, what you are saying, at face value, is this. That, because of whatever reason -- time constraints, getting something done in a short period of time, getting it done at all, providing the necessary justification -- that you felt it was necessary, even assuming you didn't feel it was true, which I'll get to in just a minute, but you felt it was necessary to use words which have made headlines across this nation, which have caused great concern in a lot of people, including this subcommittee. Now, you know that that says about your view of the system and the agency with which you're dealing?

Mr. KISS: I can only comment from the standpoint that I at that moment and at that time felt it necessary to make those statements even though I did not believe the system to be unsafe.

Rep. LEVITAS: I think that's exactly, at face value, one of the problems that exists within FAA today, that a person who is within one year of retirement, an experienced manager, an experienced controller, felt that he had to make statements that were of such an alarming nature to get something accomplished in the time frame necessary that he would resort to this approach. I must tell you, in all candor, that I am more concerned after hearing your testimony today than I was when I read your memorandum, because if the pressures within FAA are such that you would disavow almost word for word what you described as facts on May 21st because of either actual or imagined pressures within the system, then there is something woefully wrong within the type of managerial setup there is in FAA.

Mr. KISS: I overstated my case. I should not have. It was my decision that I overstated it.No one put any pressure on me. There has been absolutely no pressure put on me in any way. I do not fear for my well-being or for my future.

LEHRER: Mr. Kiss' boss, FAA administrator Donald Engen, is scheduled to testify before the committee tomorrow, but on Capitol Hill today he said there was no pressure on Mr. Kiss to change his story.

DONALD ENGEN, Administrator, Federal Aviation Administration: To my knowledge I will brook no pressure on anybody. People should be able to say what they believe and what they feel. That's the safety of the system. And the fact that he could speak up makes the system work. And I support that.

LEHRER: And in a news item from Michigan, Consumers Power Company, the nation's 10th-largest utility, decided today to stop construction of its Midland nuclear power plant. Company officials said negotiations with opponents ranging from customer groups to the state attorney general's office had produced no agreement on how to finance its completion. So the project will be scrubbed. It's been under construction since 1967. Robin? Space Shuttle: What Went Wrong?

MacNEIL: As we reported at the beginning of the program, the Discovery space shuttle flight was canceled today after one of the engines fired and then shut down. To give us more detail about what happened and what it means, we have the man in charge of the space shuttle program, Jesse Moore, NASA associate administrator for space flight. He joins us from the Kennedy Space Center at Cape Canaveral.

Good evening, Mr. Moore.

JESSE MOORE: Good afternoon.

MacNEIL: Good afternoon. How much danger were the astronauts in when this incident happened today?

Mr. MOORE: Well, when the unplanned shutdown occurred, the launch team immediately went through safing procedures and, based on the analysis and assessment that we've made so far, the crew was not in any unusual danger. The launch team proceeded according to the plans that had been put in place; the fire suppression system that we have on the pad was activated, and everything went in a very professional and timely manner. So we feel there was very, very little danger, if any, the crew was in today.

MacNEIL: I see. Just to know a little more detail of this, earlier in the program we read the statement by Commander Hartzfield saying they were prepared to bail out but it proved not to be necessary. What would have made it necessary to bail out?

Mr. MOORE: Well, I think if we had not taken precautions in terms of putting fire suppression systems and learning from past experiences and making sure we had a lot of emphasis on safety at the pad, we may have had to go to a higher degree of danger and then asked the crew to bail out if that danger had persisted. But, as I said, we did not reach that. All the procedures were put in place and were activated in a very timely and professional manner.

MacNEIL: How do they bail out physically on this type of spacecraft?

Mr. MOORE: Well, they can get out quickly down the elevator, and there are also several other procedures that could be activated for bail-out -- ramps, etc.

MacNEIL: There's one where they get into a basket and slide down a wire? Is that --

Mr. MOORE: That's possible, yes. Yes.

MacNEIL: I just wondered, can you explain why that wouldn't be the first thing you'd do when there was an abort like this, get them up first and then --

Mr. MOORE: Well, let me say that the event that occurred today was part of the standard shuttle procedures in terms of an anomaly. This has been part of the program from Day One. These procedures were activated at the time we sensed an anomaly with engine number three, and the shutdown occurred in an orderly manner. And therefore we do not see any need to initiate any of those procedures. Other safing actions were taken by the crew and, as I said, the data looked very good as all the launch team was monitoring it, so we didn't see any need to implement that.

MacNEIL: Commander Hartzfield said the thing they worried about immediately was, with a little bit of fire, whether the big solid fuel rockets would go up. Why did that not happen?

Mr. MOORE: Well, the fire was, we think, residual hydrogen in the area and it was not continuning at a very high rate. The fire suppression system was activated and essentially burned the residual hydrogen, and we saw no dangers to the solid rocket motors at all.

MacNEIL: If this had happened, say, a minute or a minute and a half later, what would the situation have been?

Mr. MOORE: Well, a minute to a minute and a half -- the situation is that at about T minus -- or at launch minus 6.6 seconds, we send ignition commands to the three engines in a staggered manner. And the purpose of those ignition commands is to get the engines up running so that we can sense the operating parameters of the engines prior to releasing the orbiter from the launch pad. And at the time the orbiter is released from the launch pad, the solid rocket boosters are ignited. So this safety precaution occurred at about five seconds. So if in fact we would have ignited the solid rocket boosters, we had redundant channels in the engines, so it's not necessarily true that there would have been any danger at all in the flight.

MacNEIL: I see. What is different now in the design of this sort of situation from the situation in 1967 when three astronauts died on the launching pad in the Apollo program?

Mr. MOORE: Well, I really can't speak to that precisely because I was not part of that Apollo program. The only thing I know is we in NASA have really tried to learn from that experience and take all the safety precautions that we possibly can to prevent such an occurrence from happening again.

MacNEIL: So in other words the six astronauts today were safer staying in the capsule than any risk they would have run trying to get out in a great hurry? Is that your --

Mr. MOORE: That is our assessment as of looking at all the data and the behavior of the launch team and how the system was coming down after the stop commands were issued.

MacNEIL: Now, what actually happened to the engine, Mr. Moore?

Mr. MOORE: Well, the engine -- Engine 3 gets the first command to start up at about 6.6 seconds, and then at about 120 milliseconds later, Engine 2 gets a start command, and then about 120 milliseconds later, Engine 1 gets a start command Engine 3 was trying to build up to its nominal operating conditions, but the sensor we had on board switched from channel A to channel B, which is a redundant channel. And a comparison was made at the time right after the ignition command was sent, and it was determined that we had too much of a differential in one of the fuel valves between what we estimated should be there and what we had calculated, what we had measured was there. So that then sent a command back to the general purpose computer that stated an orderly shutdown of the engines.

MacNEIL: I see. Now, was the fault actually in the valve and in the engine or in the computer sensors?

Mr. MOORE: It's too early to really speculate. One suspect area is the main fuel valve on Engine #3. We do not think it had anything to do with the computer. We had gone through a complete checkout of the general purpose computers prior to ignition of the main engines, and their checkout had been very, very good. So we do not think it was there and suspect that there was some possibility of anomaly in the main fuel valve.

MacNEIL: How long is this going to set you back?

Mr. MOORE: That's very hard to see what -- say right now. What we're really doing is going back to flight readiness firing procedures. As you recall, we did a flight readiness firing on Discovery several weeks back, and we're going back to that particular set of procedures, and we're also assessing damage, if any, on the pad and to the orbiter, and once we've made that complete assessment, we'll be able to come out with what we think is a reasonable launch date for Discovery.

MacNEIL: Mr. Moore, the astronauts who are reknowned as cool customers, said they weren't particularly worried or scared today. Were you for a few moments?

Mr. MOORE: No, I was not worried. Once the procedures -- that the people started talking about the shutdown procedures and I saw the action that the launch team was taking in terms of making sure that the vehicle was safe, and the rehearsals and so forth that had gone through in terms of looking at procedures. So I felt confident that we would wind up shutting this thing down in a very, very safe manner.You have to be a little apprehensive when you don't get lift-off at the time you expect to get lift-off, however.

MacNEIL: Thank you, sir.

Mr. MOORE: Thank you.

MacNEIL: Jim?

LEHRER: Again, the top stories this Tuesday night. As we just heard, the flight of space shuttle Discovery is on an indefinite hold after its launch was dramatically aborted this morning four seconds before lift-off. Gary Hart and Walter Mondale had a summit meeting about peace, but did not make a deal about the vice presidency. And Jesse Jackson was in Cuba talking to Fidel Castro and urging the U.S. and Cuba to bury the hatchet.

And, finally tonight, the story of a man who is well known to sports fans in Boston and whose work is starting to be appreciated by a wholly different group of fans. Gail Harris of public station WGBH in Boston has this report. Sherm Feller: Baseball and Symphony

SHERM FELLER, the "Fenway Fixture" [announcing ballgame]: Number 26, Wade Boggs.

GAIL HARRIS [voice-over]: He's known as the Fenway Fixture. For the past 17 years Sherm Feller has been the public address announcer keeping score for the Boston Red Sox. And although it might seem an incongruous transition, Feller's latest score has nothing to do with baseball. This is part of a 10-minute symphony called "John Kennedy" that Feller recently completed. Although Feller is a rookie at writing symphonies, he does have a track record that includes writing or co-writing such pop hits as "This is Heaven," "When She Was Five and He Was Ten" and "Snow, Snow, Beautiful Snow." Feller cheerfully admits that his combination of careers is a bit unusual.

Mr. FELLER: Being a songwriter or successful at anything, I think, you have to have all the other things rub off on you. It's an 18-or 24-hour day with me. You can't do anything all of the 24 hours. You've got to have a little change. That's why some people like California, where they have sunshine all year long. I like New England because I like it cold once in awhile.

HARRIS [voice-over]: The "John Kennedy Symphony" is a five-movement orchestral suite. Work on the 10-minute piece began the day the President was shot. With the financial support of former Red Sox centerfielder Fred Lynn, Feller was able to write a piece that he says captures a special spirit embodied by the Kennedy family.

Mr. FELLER: It's a family that made it's impact on history, I'd say, and there's nothing around in music to really underscore that. I certainly felt and feel that John F. Kennedy contributed a period in history to America as a president that very few presidents had achieved. And there are people, of course, who didn't want to play this actually because they said it was too political. They told me this. Richard told me this -- Hayman, the director -- and I said, "Well, I didn't even vote for Kennedy."

HARRIS [voice-over]: Conductor Richard Hayman recently directed the debut performance of the "john Kennedy symphony" in Baltimore. Hayman gave the piece high marks.

RICHARD HAYMAN, conductor: The pieces themselves, I thought, were woven together quite nicely and, as I said, it told a story in song that needed to be told without having words about it. We all know of Kennedy's life and tragic ending and everything.And I think this is portrayed quite graphically in the music.

HARRIS [voice-over]: The success of his symphony hasn't changed Feller. He says he'll continue to write music, but he'll spend most of his time at the ballpark.

Mr. FELLER: One hundred years from today if somebody plays this music the way I've written it they'll know that there was a spirit, a feeling, an atmosphere, and children and love and tragedy.

LEHRER: Good night, Robin.

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