The MacNeil/Lehrer NewsHour

er 30, 1987 Intro JIM LEHRER: Good evening. Leading the news today, it was another Black Monday on Wall Street as the dollar plunged to new lows against leading currencies. The U. S. warned Haiti, ''No more aid until the electoral process is restored. Polish voters defeated the government in a referendum on economic reforms. We'll have details in our news summary in a moment. Judy Woodruff is in Washington tonight. Judy? JUDY WOODRUFF: After the news summary, the falling dollar and what it's done to the stock market is our lead focus. Two economists join us. Then, the violence in Haiti. Assistant Secretary of State Elliott Abrams and Congressman Walter Fauntroy discuss what it means for U. S. policy toward that troubled nation. Next, Chicago pays its respects to Harold Washington. Correspondent Elizabeth Brackett looks back and then ahead.News Summary MacNEIL: It was another Black Monday on Wall Street as share prices had their third worst day since October 19th, and the U. S. dollar plunged to new lows overseas. In Tokyo, the dollar closed at an all time low of 132. 15 yen, and a new postwar low of 1. 63 German marks. The British pound and the French franc also rose against the dollar. The falling dollar depressed stock prices from Asia to Europe, but it hit Wall Street hardest. The Dow Jones industrial average was down 76 points during the day, closing at 1833. 72. In the broader day, 1577 stocks fell, while only 194 gained ground. Analysts said the traders were not buying stocks because of the dollar's fall, and foreign exchange dealers said the dollar was falling because of lack of confidence in the deficit reduction package worked out in Washington. President Reagan defended that package today, saying that it would lead to a strong U. S. economy in 1988. Judy? WOODRUFF: The President had some tough talk about the Soviet Union when he spoke to a conservative group in Washington today. Mr. Reagan warned that the Soviets may be planning what he called a ''breakout'' from the anti ballistic missile treaty, and in his words, ''The U. S. would be totally and dangerously unprepared for'' without his Star Wars missile defense plan. The President also stressed verifications as a key feature in arms control, and he praised the treaty that he and Soviet leader Gorbachev will sign next week to eliminate intermediate range missiles.

Pres. RONALD REAGAN: It will be the most stringent verification regime in the history of arms control negotiations. I would not settle for anything less. I urge you to join us for this historic treaty. We're also pressing ahead on an agreement to reduce our two nations' strategic arsenals by half. OurGeneva negotiators have made progress, but as I've said repeatedly, I've waited six years to get an agreement that's both reliable and verifiable. We must never be afraid to walk away from a bad deal. On that point there is no negotiation. WOODRUFF: Voters in Poland went to the polls yesterday and by their low turnout defeated a referendum that would have led to what the government had described as ''radical economical and political reform. '' The result was said to be a big blow to the plans of Polish leader Yaruzelski. He had strongly endorsed the referendum as a first step in what he called the socialist renewal of Poland. But the outlawed, independent trade union Solidarity had dismissed the referendum as a charade, and advised people not to vote. MacNEIL: In Haiti, nine members of the disbanded electoral council hid in Western embassies today, following a day of killing and cancellation of yesterday's presidential election. Two dozen people were killed and 67 wounded by marauding bands which shot people preparing to vote, as well as bystanders and foreign journalists. Many observers blamed former supporters of ousted dictator Jean Claude Duvalier and said the army did nothing to prevent the bloodshed. The U. S. , which announced a partial aid cutoff yesterday, said today it will not be restored until the electoral process is resumed. WOODRUFF: Half of the Cuban inmates who took over a federal detention center in Louisiana last week were transferred today to other prisons. Their standoff in Oakdale, Louisiana, ended yesterday afternoon, after an agreement was reached with authorities on how the inmates' individual cases would be treated. It was a different story, however, in Atlanta, where officials said the Oakdale settlement does not mean a similar one is imminent there. We have a report from our correspondent Kwame Holman.

KWAME HOLMAN: Federal officials started the day by pointing out that many of the Cuban detainees here have served jail sentences for more serious crimes than the Cubans who surrendered at the Oakdale detention center. PATRICK KORTEN, Justice Department: Oakdale is a minimum security facility. Most of those who were at Oakdale had committed less serious crimes and were not considered serious threats. That is not necessarily true at least about a certain proportion of those that were detained here in Atlanta. Some of them are more serious offenders.

HOLMAN: And by this afternoon, authorities made their strongest statement yet about the shifting leadership among the Cubans, which they say has hampered negotiations from the start. Mr. KORTEN: Our impression is that a majority of the detainees favor trying to come to an agreement on an end to this situation. Unfortunately, a small, but aggressive, minority appears to be able to intimidate this majority into dragging out the incident and avoiding a settlement. We have prepared to be as patient as necessary as we await a decision by the Cuban detainees to bring the incident to an end and settle on a fair and equitable basis.

HOLMAN: A further complication could be Atlanta's weather. The prison's heating system was destroyed at the outset of the takeover. With temperatures expected to dip into the low thirties tonight for the first time, hostages and Cubans could be in for an even more uncomfortable time. WOODRUFF: That report by correspondent Kwame Holman. In Alaska, thousands of people evacuated low lying areas along the South Central coast today after the second major earthquake to hit the state in two weeks. This quake measuring at least 7. 4 on the Richter scale, was centered offshore in the Gulf of Alaska about 300 miles southeast of Anchorage. Authorities at first issued, and later cancelled, a warning that there might be a huge tidal wave to follow the quake. People closest to the center said they felt a definite rumbling, but knew of no damage or injuries. MacNEIL: Mayors, senators, governors and presidential candidates joined thousands of Chicagoans today for the funeral of Mayor Harold Washington. More than a million people had paid tribute to the city's first black mayor since he died of a heart attack last Wednesday. People began lining up at midnight, and church bells rang throughout Chicago for the funeral services. The Reverend Jesse Jackson, who has joined in talks about Washington's successor, praised him as a man able to reach across ethnicity and make all of Chicago one. WOODRUFF: Another sign of improving relations between Iran and France today. A carefully arranged swap took place involving a French diplomat who had been held for months in Teheran, and an Iranian translator who had taken refuge in Iran's embassy in Paris and refused to answer questions about terrorist bombings. Both men were permitted today to fly to their respective homelands. There was speculation that the move was part of a deal that led to last week's release in Lebanon of two Frenchmen who had been held by pro Iranian extremists. MacNEIL: In South Korea, grieving relatives waited today for news of a South Korean airliner that went down along the Thai Burmese border. One hundred and fifteen persons were aboard the plane, most of them construction workers returning home from jobs in the Middle East. In the Indian Ocean, a search continued today for more wreckage of the South African Airways jumbo jet that went down Saturday with 159 persons aboard. Nine bodies have been recovered, along with a suitcase and an inflatable dinghy and several small pieces of debris. Rescue officials say they don't believe there were any survivors. WOODRUFF: Former House Speaker Tip O'Neill was said to be in excellent condition today after surgery to remove an enlarged prostate. It was the second major operation for O'Neill this month. Just two weeks ago, he underwent successful surgery for rectal cancer. That wraps up our summary of the day's news. Just ahead on the NewsHour, the falling dollar, violence in Haiti and its meaning for the U. S. , and Chicago remembers Harold Washington. Where the Buck MacNEIL:Stops First tonight, is a falling dollar good for the U. S. economy? As we reported, stock markets in the U. S. and around the world tumbled today as the dollar hit new postwar lows against the Japanese yen and the German mark. In Tokyo, the dollar closed at 132 yen, 45% lower than two years ago when the U. S. and its major trading partners agreed to let the dollar fall in value. In London, the dollar fell to 1. 63 German marks, or 43% lower than two years ago. None of this was good news for the U. S. stock market, which fell 76 points, to close at 1833. 72. Losing issues outpaced gainers by an eight to one margin. Despite the market downturn, some economists believe the dollar should continue to fall further. One of them is Martin Feldstein, former chairman of President Reagan's Council of Economic Advisors. He now heads the National Bureau of Economic Research, a Massachusetts based consulting firm. He joins us tonight from Public Station WGBH in Boston. Lawrence Chimerine believes a falling dollar would be bad for the economy. He's head of Wharton Econometrics, a Pennsylvania consulting firm. He joins us from Public Station WHYY in Philadelphia. Gentlemen, can we ask you first each to clarify why you think the dollar is still falling? What are the forces that are driving it down? Mr. Feldstein? MARTIN FELDSTEIN, economist: The dollar is falling because it is overvalued, because at the current level we are running a massive trade deficit and the only way we're going to get rid of that trade deficit is for the dollar to come down and make American goods more competitive, both here at home and also abroad. MacNEIL: Mr. Chimerine, what's your view of why it's falling? LAWRENCE CHIMERINE, economist: I agree with that, Robin. But I think that the foreign exchange market is now also a little bit disappointed over the recent budget compromise. It views it as being highly inadequate, and I think that's adding to the downward pressure on the dollar. MacNEIL: Some foreign exchange traders were saying today that they are reacting to an impression that the U. S. administration wants the dollar to continue to fall. Mr. Chimerine, what's your comment on that? Mr. CHIMERINE: Well, it would appear to be the case. The administration strategy for dealing with the trade deficit for the last several years primarily has been to push the dollar lower. And they've given every indication they would like to see it lower, and as Marty Feldstein points out, there's little evidence at this point that the trade deficit is improving, especially in nominal terms. And as long as that's the situation, there's going to be additional downward pressure on the dollar. MacNEIL: Do you believe that, Mr. Feldstein? Mr. FELDSTEIN: Yes, I basically do. I don't think the administration's pushing the dollar lower, but it is letting it fall. It would be a mistake for the Federal Reserve to push up interest rates to try to stop the dollar's fall. That's basically what it would take. MacNEIL: Okay. Let's go to what effect this falling dollar will have. Mr. Feldstein, why is its continued fall good for the economy? Mr. FELDSTEIN: I think it is basically good because it is shrinking our trade deficit, it is bringing back those industries, those jobs that we lost because of the overstrong dollar in earlier years in this decade. And of course also now it will help to keep the overall expansion of the economy going. It will give a boost to the economy in the coming year. MacNEIL: How will it do that? Mr. FELDSTEIN: Because as the dollar falls and our exports pick up -- the exports are up 20% in the last year -- as our exports pick up and as we substitute American made production for imports from abroad, the economy will simply be stronger, it will have more demand at home and less of our demand will go into buying goods produced elsewhere. MacNEIL: Mr. Chimerine, why is the falling dollar in your view bad for the economy? Mr. CHIMERINE: Well, I would say it's mixed, Robin. It depends where you are and who you are. As Marty Feldstein points out, if you're an exporter, it's clearly good. But the falling dollar is not a cost free solution to our trade deficit. It has negative side effects on the economy, it pushes up inflation, squeezes purchasing power, it keeps interest rates high. And those developments have adverse effects on the economy. So on an overall basis, it has a mixed impact. Good for exporters, but it isn't so good for the construction industry, for retailers and others who are affected by the negative impacts. MacNEIL: Mr. Feldstein? Mr. FELDSTEIN: I think the important thing for the viewers to understand is that it's not a question whether it's good or bad, but whether it's inevitable or not. And I think it is inevitable. I think the dollar has to come down, because the kind of trade deficit that we've been running -- $150 billion a year -- is simply unfinancable. Investors elsewhere in the world are not prepared to lend us the funds to finance that deficit year after year. So the dollar has to come down. And it's certainly true that as the dollar comes down, imports are going to be more expensive, and that's going to slow the rate of growth of our standard of living. We have no choice. MacNEIL: But whether it's fall is inevitable, it can be very unpleasant medicine, or it can be good medicine. And you're making it sound a lot less unpleasant, or more pleasant medicine than Mr. Chimerine is. Mr. FELDSTEIN: Well, I think the (unintelligible) bitter medicine of an overstrong dollar in the early part of the decade just shows how bad it is to have a dollar that is too high. The fact that the dollar coming down will raise the price of imports is a negative. Fortunately, our imports run only about 15% of our total consumption. So a 10% increase in the value of the dollar only adds about one percent to the overall cost of living, not very much. MacNEIL: Mr. Chimerine, how bad could the impact on inflation be? Mr. CHIMERINE: Well, it will be one or two percentage points, depending on how much the dollar goes down. And obviously if the dollar goes into a free fall, the effect will be larger. And it's not just the direct effect in terms of import prices. It sets a ceiling under which domestic producers raise their prices. And then if it ever starts feeding into the system in other ways, through commodity prices and higher wages, there's the potential of even higher inflation. I don't think it's going to cause enormous inflation, but it does squeeze purchasing power. It does limit living standards or hold down the growth of living standards. And of course you've got the secondary effect on interest rates, which also holds down economic activity. MacNEIL: What about that, Mr. Feldstein? The effect on interest rates? Mr. FELDSTEIN: I think that the falling dollar can actually help to stop interest rates from going even higher. For two reasons. One, the attempt by the Federal Reserve to stop the dollar from falling would require pushing up interest rates right now. The other thing, what a falling dollar does after a point is to make investments in the U. S. much more attractive for foreigners. Right now, indeed it's the reason the dollar is falling, foreigners are unwilling to buy U. S. bonds because they're afraid that even though interest rates are a bit higher here, they're going to lose as the dollar comes down. Well, after the dollar has come down somewhat further, they're going to be much more willing to come in and bid for bonds in this country. And that keeps to keep interest rates lower than they otherwise would be. MacNEIL: Mr. Chimerine, some of the people quoted on the wire services today in the foreign exchange markets were also talking about a lack of faith in the ability of this country and this administration to manage the economy. Do you see that as part of the seeds of what's causing the dollar to fall? Mr. CHIMERINE: Definitely, Robin. I think the truth of the matter is that we've put ourselves in a position where there are no easy answers, no easy solutions. I think the two fundamental problems are, first, we've lost the competitive advantages we used to have in world markets in technology and productivity and product quality. I think that's the major reason for a large trade deficit, and a major reason for the decline of the dollar. And secondly, our budget deficit that made the situation far worse. They're keeping pressure on interest rates, they're squeezing out productive investment, they've increased our reliance on foreign capital. And all of these have made our problems considerably worse. And I think the fact that we're not facing up to our budget deficit, and doing it in a constructive way and a way that shifts our priorities in this country more toward investing in the future rather than spending more and more of our budget dollars on current consumption and defense, is not being well received in foreign exchange markets. It is adding to the downward pressure that we've seen on the dollar in recent weeks. MacNEIL: Mr. Feldstein, despite the congratulatory noises that Congress and the White House have made to each other on the budget deficit cutting agreement, do you agree with Mr. Chimerine that the country is not facing up yet to the budget deficit? Mr. FELDSTEIN: Absolutely. I think that this budget agreement is actually a step backwards. I think what it showed was that Congress could manipulate the numbers in a way that produced what appeared on the surface to be a bigger deficit reduction. In reality, there's even less there than there would have been under the Gramm Rudman solution. And that's bound to be frightening to financial markets when they realized that we don't even have the political courage to stick with the rather modest Gramm Rudman proposals. MacNEIL: Mr. Feldstein, if it's inevitable that the dollar falls further, how far is it inevitable it will fall, how far can it fall, and what's to stop it? Mr. FELDSTEIN: Well, I think that the dollar has to come down another 10 to 15% to bring us back to the trade balance. And I think getting back -- MacNEIL: That would be a total devaluation of 45, or 55 or 60% from two years ago. Mr. FELDSTEIN: From the peak -- yes. But remember we are now back roughly to where we were in 1980, before the sharp run up in the dollar began. There are a variety of reasons why the dollar -- looking ahead -- has to be a bit lower than it was when we were in rough current account balance back in 1980. So the dollar has to come down another ten or fifteen percent. But then after that, if we continue to have higher inflation rates with the Germans and Japanese and others we trade with, the dollar will continue to fall, simply to maintain our current competitiveness. The prices are rising faster here than they are in Germany, where the inflation rate's only about one or two percent, or Japan where it's about the same. And of course the dollar will continue to come down in the future. I think we're going to see a yen at 100 yen to the dollar, and the German mark at about 1. 2 marks to the dollar. MacNEIL: One point two, or -- Mr. FELDSTEIN: One -- MacNEIL: I see, yes, I follow you. Mr. FELDSTEIN: Within the next five years, and perhaps sooner. MacNEIL: And that doesn't worry you? Mr. FELDSTEIN: No, it doesn't worry me. Remember, part of that, about half of that adjustment is the adjustment that we need just to get back to trade balance. The rest of that adjustment is simply an offset to the fact that inflation rates are higher here than abroad. I'd like to see our inflation rate come down. But as long as ourinflation rate is higher here, the dollar has to fall just to keep whatever level of competitiveness we achieve. MacNEIL: Mr. Chimerine, would a 10% fall be dangerous in your view? And are you satisfied that it will stop there? Mr. CHIMERINE: No. I agree the dollar is going lower, the markets will take it a lot lower. I hope that in the next several years we see some of the other currencies begin to appreciate, those against which the dollar is still highly overvalued, especially some of the Pacific basin currencies. Increasingly, that's becoming the problem. Our trade deficit is remaining large in part because the source of imports shifting away from Japan and Europe toward Taiwan and Korea and some of these other countries, and unless those exchange rates adjust, we're going to have a continuing problem. So I think Marty's right. On the long term basis, the dollar's going lower whether we like it or not, against all currencies, hopefully more against those that I just referred to rather than the industrialized currencies. But the one point I did want to make is that in the short run if the dollar drops too rapidly, there is the risk that instead of a smooth landing, slow adjustment process, this could produce recession, because in the short run, a free fall of the dollar in my judgment would put upward pressure on interest rates before we see interest rates stabilize, and create other conditions, perhaps even a weaker stock market, which could produce recession. So I'd like to see it happen on a slow, gradual, orderly basis. MacNEIL: Well, we have to leave it there. Mr. Chimerine in Philadelphia and Mr. Feldstein in Boston, thank you both. WOODRUFF: Still ahead on the NewsHour, the killings in Haiti and their implications for U. S. policy. And a remembrance of Chicago Mayor Harold Washington. But first, this is pledge week on Public Television. We're taking a short break now so that your public television station can ask for your support. That support helps keep programs like this on the air. Tractors MacNEIL: For those stations not taking a pledge break, the NewsHour continues with another economic story. This one about a bit of Americana that may never be the same. Joann Garrett of Public Station WHA, Madison, Wisconsin, reports.

JOANN GARRETT: Tractors. Big ones and little ones. Fat and skinny. As common to the countryside as red barns. They helped build this nation. And they depict the simple life of hard work and bountiful harvests. There is something American about them, even patriotic. After all, this country's the number one agricultural producer on the planet. We feed the world. But the next time you see a tractor, give it a careful look. It may surprise you. The American soil is being tilled by a red tractor, and make no mistake, the red tractor is red. It's not a Ford, John Deere or a Massey Ferguson. This is a Russian built tractor called Bella Russe, or as it's called in the United States Belarus. The word translates to White Russian. Its presence for some translates to resentment. MAN: I wouldn't buy one if it was the only one available. I'd get a team of horses.

GARRETT: At farm equipment trade shows, many farmers take exception to a Soviet tractor among the more traditional lines of farm implements. MAN: I've nothing against the Russian people, but to spend billions of dollars to defend ourselves against them and then have this kind of junk here, I can't see it.

GARRETT: Milwaukee, Wisconsin, has been home for the American headquartersof Belarus machinery. Most Belarus employees here in the U. S. are American. JIM HEALY, retired general manager: Belarus is a U. S. corporation. It is 100% owned by Tractor Export, a Russian company.

GARRETT: Tractor Export makes more tractors than the U. S. , France and Great Britain combined, and as a communist company, they sound suspiciously capitalistic. Mr. HEALY: We're here to make money, we're here to sell tractors and make money.

GARRETT: It's a four month trip from Minsk to Milwaukee, via Montreal. Once here, the tractors are painted and generally prepared for their final destination. Belarus has about 125 dealers in this country, mainly operating in the Midwest, South and East. In the tractor business, that's small. The competition, like John Deere, for instance, fields over 2000 dealers nationally. Mr. HEALY: We are a small company hoping to grow, and growing a little bit every year.

GARRETT: Progress has been slow in coming. The main problem, politics. At a recent trade show, one farmer was overheard to say, ''We don't talk Russian, we don't buy Russian. '' MAN: It's not made in our country. So you wouldn't consider it. We like American made. Certainly not Russian.

GARRETT: While it's doubtful politics may change, it's possible attitudes may. Especially given the cost of running the family farm and the price saving on the new Belarus. MAN: It's quite a bit cheaper than American made. I can buy a brand new Belarus cheaper than I can a used American made.

GARRETT: The Belarus price tag is about as impressive as Sputnik was in the late 1950s. It's common for the Russian tractor to cost 30, 40, even 50% less than its American counterpart. It was enough to make Wisconsin farmer Jim Brown, Jr. , by Soviet. JIM BROWN, Wisconsin farmer: This tractor costs $12,000 as it is, with the cab and everything on it. I was looking at a John Deere before I bought this, and without a cab the John Deere was $30,000. So I suppose it would cost another $2,000 for the cab, so this is $12,000, John Deere $32,000. Twenty thousand dollars is a lot of money.

GARRETT: By American standards, Belarus tractors are basic, maybe even crude, similar to those made in this country 30 years ago. They are neither fancy nor flashy, just a simple tractor that's easy to maintain and gets good fuel economy. Jim Brown and his family farm 450 acres and milk 96 cows. Farmer Brown is chasing the American dream on the wheels of a Soviet built tractor. He's proud to be a farmer, proud to be an American, even if the tractor is painted red. Mr. BROWN: The problem with most farmers is that they're worried about the color of the paint. I think we gotta worry about the color of the bottom line.

GARRETT: Jim Brown now owns three Soviet built tractors. Freedom of short and getting a good deal. That, says Brown, is the American way. Bullets Yes, Ballots No WOODRUFF: We turn now to Haiti and the sickening violence that yesterday shattered an election and plans to move to democracy in a nation controlled for 30 years by a family run dictatorship. The United States, with historic and economic ties in Haiti, now faces several questions. Did it do enough to stress the importance of the elections to Haiti's military leaders? And what will it do next? Most pressing of all, the safety of more than 100 Americans still in Haiti as unofficial election observers. We'll discuss that in a moment. But first, a report from Claude Adams of the CBC, as he filed it last night shortly before leaving the country.

CLAUDE ADAMS, CBC: Half an hour before the polls opened, the streets of Port au Prince were virtually empty, the people afraid to leave their homes. A night of shooting and bombings kept them indoors. Just before dawn, a few journalists visited a downtown polling station. They found the premises burned and ballots destroyed. Then came a hail of bullets. Six o'clock was the official start of voting. This polling station in a church rectory was deserted. The parish priest said the church had been fired on in the night, and no one dared to vote. As the church bells rang, more shots. Angry mobs of local residents arrived, chanting and waving machetes. They came not to vote, however, but to clear the streets of the dreaded Tontons Macoute death squad. But it was not enough. At this polling station, the death squad struck without mercy. In broad daylight, they fired automatic rifles and killed at least a dozen men and women and wounded others. Some of the victims tried to hide under tables, but they were mowed down. At least one child was injured. Neighbors said they saw nothing of the massacre. Hardly after the army and police left, the death squads returned to this scene and wounded a reporter. An ABC television crew was hit by gunfire, the driver was badly injured. Outside the downtown Holiday Inn, where most of the media congregated, soldiers continually raced by in firetrucks. At one city police station, however, scores of voters did appear, waved their registration cards at reporters. But they weren't allowed in, and officials said voting equipment hadn't arrived. But at least one man didn't believe that. He said he wanted to vote for the first time in his life. Others shook their fists in frustration, but none got to vote. By mid morning, the vote was cancelled by the national election committee. WOODRUFF: Now for the U. S. response. First from Assistant Secretary of State, Elliott Abrams, and also from the Chairman of the Congressional Task Force on Haiti, Congressman Walter Fauntroy of the District of Columbia. Mr. Secretary, let me begin with you. What is the situation today, after yesterday's violence? ELLIOTT ABRAMS, Assistant Secretary of State: Well, it's calm in terms of the streets. That is, there aren't that many people out, the level of violence has come down, and even now with night falling, it's relatively calm. So you've had two relatively calm nights. Our reaction, our immediate reaction yesterday afternoon upon learning of the dismissal of the elections committee, was to suspend all U. S. economic and military assistance to Haiti, except for humanitarian aid to demonstrate our own feeling about the cancellation of the election. WOODRUFF: Do you feel that you know, or is it known who was responsible for these attacks, shootings and so forth? Mr. ABRAMS: Well, if the question is do we have the names of individuals, the answer is no. But I think -- WOODRUFF: Who was behind it? Mr. ABRAMS: Yeah, I think that's pretty clear. It's people related to the Duvalier dictatorship. I don't mean that they're working for Duvalier, but presumably for some of his old cronies, and presumably some of these people are in fact Tontons Macoutes. They've been out of work for a while, thank God. WOODRUFF: And evidently the military, the army, in Haiti did little or nothing to prevent this. Is that the understanding of -- Mr. ABRAMS: Well, I think that is in fact true. That is, that the army did some things. There were polling places were open, there wereareas in the country outside of Port au Prince where polling was conducted. But in Port au Prince, they certainly did not provide adequate security, and in fact, we just saw this horrifying film of a lot of people getting hurt and indeed killed. WOODRUFF: What is the United States going to do next? You've said now you're going to -- the United States is going to withdraw non humanitarian aid, what does that mean? How much is that going to pinch? Mr. ABRAMS: Well, it'll pinch a fair amount. We'll continue with things like food, school lunches, that kind of thing. But dollars -- that is, cash that we give the government, we will stop giving. And that will have an impact on their ability to get money also from the World Bank and the Inter American Development Bank, and I think also it'd probably be on other donors, like the French and the Canadians. So I think it will pinch. WOODRUFF: Congressman Fauntroy, do you think that that is an appropriate response at this time? Rep. WALTER FAUNTROY, (D) D. C. : Well, quite frankly, as late as three months ago, I had (unintelligible) the suggestion that the international, or multilateral peace keeping force was necessary to assure the elections would go forward. I did that because I believed, as to the administration, this interim government when it's told us that we are going to see to it that the people have the democracy that they have embraced with this constitution and wish to carry out. I now believe we were deceived. I don't think they were telling us the truth, and when you think of people who wanted to vote, who were gunned down standing in line at the polls, and hacked to death -- there is no response that the international community can give, but to offer there be secured elections so that by February 7, 1988, the people can have what their constitution guarantees them and what they have indicated over and over again they want. WOODRUFF: But evidently, the Haitian government doesn't want outside help. I gathered in the statement they issued yesterday, they said we don't want foreigners, we don't want outsiders here. Rep. FAUNTROY: Well, that's a problem. No question about it. It was a problem in the 30's when I was a child, when people were screaming from within Germany that something was going on that needed international attention. And I promised myself when I read about that that if that ever happened again, and I think these people are helpless against a kind of marauding thugs there, they're helpless unless somebody helps them. WOODRUFF: Well, what are you suggesting? What do you think should be done? Rep. FAUNTROY: Well, I think we do need to explore the eastern Caribbean group, with the OAS, or the United Nations, a way internationally supporting the will of these people to have an election and to have their own government. WOODRUFF: What does that mean precisely? Rep. FAUNTROY: Well, at this point, we're going to be talking about that, I hope, with the administration. I talked with several of my colleagues on the Hill who agree with me that as members of this task force we have to explore every avenue of securing elections for the people. WOODRUFF: Including military intervention? Rep. FAUNTROY: Well, that's something that can't be ruled out. WOODRUFF: Secretary Abrams, is that a possibility? Mr. ABRAMS: Well, it's not one that I think we should turn to. Because where does that lead us? There are a lot of countries in the world, unfortunately, that are not democracies and in which people are preventedfrom voting. Do we really want to have an international peace keeping force in every one? We might disagree whether we need one in Central America. We might disagree on Chile and Paraguay. There are lots of places where people want democracy and can't get it. I think the first thing we need to do, and we are in fact doing it, is consult with the Haitians -- for example, the candidates, members of the elections commission, to say what do they want. It's not inconceivable, there were observers at this election, it's not inconceivable that there's a larger role for election observers in helping an election. But security basically needs to be provided by the government. And what we're doing right now is going back to them, insisting that they have got to do this if this election is ever going to be held. Whether they have the credibility to deliver this to the Haitian people is a question that remains to be answered. Rep. FAUNTROY: I think it's a question, too, which any teams of observers, or journalists, is going to ask. I believed that they were going to do the right thing. But after my observers went down there, I think they would be very leery about going down to another election where they'll be shot at, where they'll be macheted by obviously bestial and savage people. I think it's at this point people are nervous. WOODRUFF: You were quoted earlier today, or yesterday, as saying that you thought that the Reagan Administration should have pressed a little bit harder to make sure that the government of Haiti knew how serious the United States was about these elections. Rep. FAUNTROY: Let me say that I've been very pleased with our relationship with the administration in Haiti. We've been working hard at moving Haiti toward a democracy. I had thought we should have pushed a little harder, but I must admit at this point I think we were both deceived. We genuinely thought that what these people said they meant. And I don't think on the basis of what happened that was the case. WOODRUFF: Why do you say that? Just because of what happened, or the statements they issued? Rep. FAUNTROY: I'm telling you it was incredible to me that this (unintelligible) would allow people to run around with guns, machine guns and machetes and kill people! There's no justification for that, and they cannot tell me that they did all they could to prevent it. In fact, eyewitnesses suggested to me that some of the army personnel engaged in the shooting. And the beating and the maiming. So that I think we were deceived, and I think that we have to really figure out a way to protect these helpless people from a situation where there are those determined to keep the system that makes a few millionaires at the top and boat people at the bottom. WOODRUFF: Secretary Abrams, what about these hundred or so unofficial observers who apparently many of them are still down there, not all of them. Mr. ABRAMS: Well, some came out today. And others will be coming out tomorrow. So I think it's worth saying that no Americans have in fact been hurt. Not only not the observers, but any Americans who are residents of Haiti. About 15,000 American residents in Haiti. We're aware of none who've been harmed. But -- WOODRUFF: Are you concerned about the safety of those who -- Mr. ABRAMS: Well, no Americans have been targets. Of course we're concerned, but the observer delegations I think will be coming back tomorrow. So that problem will be solved. And we certainly do intend to continue to work closely with the congressman -- he's had aleadership role in this, and see what other things there are that the U. S. can do. WOODRUFF: Do you have a contact established now with the government of Haiti, such as it is, the military leaders? Mr. ABRAMS: Well, we've always had. I mean, General Namphy remains the head of the governing council, and in fact the ambassador had a lengthy meeting with him today. WOODRUFF: And what was said at that meeting? Mr. ABRAMS: Well, that's something that I'm not going to talk about on television. But I can certainly say that we reiterated again that our support is for the people of Haiti and it is for free elections and democracy. The reason we suspended our aid is that we're not interested in supporting whatever they -- happen to be the government of Haiti. We're supporting the people and we're supporting the democratic process. That is why Mr. Fauntroy and Congress gave us that foreign aid money for Haiti -- not for that government, but for the people of Haiti. WOODRUFF: But if I understood his point, it was that simply withholding some aid is not going to sufficiently make the point. Mr. ABRAMS: Well, I think it will begin making the point. But you know, if you were the kind of person who's going to go out and massacre people standing on line to vote, that one additional speech by me or Fauntroy isn't going to stop you. We're up against a very significant and deep problem there if people are willing to kill to remain in power. WOODRUFF: What do you think is going to happen? Right now, based on what was reported back to you on this meeting that our ambassador had today with General Namphy, are they listening to what we're saying, are they responsive? Mr. ABRAMS: Well, they always listen, and I'm sure they're getting some of the messages from other friends, such as the French. But where it is going in the next couple of days, I don't want to predict right now. I can just say what we're urging them to do is set an election date right now to try to set up a system which can give the guarantees and credibility. I think the congressman is right, they do not have it, and they have very little time to try to restore it. WOODRUFF: Do you think that's going to happen? Rep. FAUNTROY: I don't think so. I think we're going to have to find a new way to give the Haitian people the confidence that when they go to the polls and they want to, a thug's not going to be in the streets to kill them. That's a serious question. When you think about losing your life when you want to vote, it's unacceptable to have a situation like that. WOODRUFF: Secretary Abrams just said it's not realistic to think that we're going to have international peace keeping forces in countries like this. Rep. FAUNTROY: I know that's the case. But I think when the American people across this globe look at those films -- I mean, these people have done nothing but simply go to the polls on a constitution they had approved, which is the law of the land, and they're being denied that by a group of thugs. Some sophisticated thugs, as far as I'm concerned, in some places. WOODRUFF: What is the role of the United States, Mr. Secretary? Mr. ABRAMS: Well, the first thing is to make clear what our policy is and to make that clear, verbally and then with the use of our economic assistance and security assistance so that no one mistakes which side we're on -- we're on the side of the Haitian people who went out to vote. They did their part. They went out to the polls to vote at some risk. I think we should certainly join in discussing with Haitians and with other countries what further efforts can be made to try to get an election back on track and when it's going to be safe. Where I may part company with Mr. Fauntroy, and we'll have to discuss this more, is the notion of sending in an international force, because again this happened in Haiti, but it happens elsewhere in Latin America, elsewhere in Africa, Eastern Europe it happens. And the question really is in each of these cases are we prepared to have an international peace keeping force saying, ''Unless you're a democracy, we're going to send in soldiers. '' WOODRUFF: What about a unilateral America? A U. S. type of force? Mr. ABRAMS: Well, I don't think that there's -- Mr. Fauntroy would know better, but the notion that we should invade Haiti I think would not get too many votes on the Hill. Rep. FAUNTROY: I would agree on that. I think it would have to be a multilateral effort, but again I just feel that the people are helpless. Here's a situation -- there are no equities. There's no way in the world they can confront the people with all the guns and with the armed forces and the trucks and everything. There's not way they can defend -- WOODRUFF: Gentlemen, on that note we'll have to leave it. Thank you, Congressman Fauntroy, thank you, Secretary Abrams. Preserving the Legacy MacNEIL: As we reported, after four days of mourning, funeral services were held in Chicago today for Harold Washington, the first black mayor of the nation's third largest city. Correspondent Elizabeth Brackett reports on the Washington legacy.

ELIZABETH BRACKETT: His mourners came from the neighborhoods of Chicago, and they came from the capital of the nation, from precinct captains to presidential candidates. They came to honor a man who had become a symbol of a social movement that changed the nature of government and politics both at home and across the country. ERNEST BAREFIELD, Washington aide: You were a symbol for success for those who lost faith in the political process, for those who had lost hope in the future, and for those who had lost belief in their own dignity. But perhaps most important for the ordinary citizens, for the people who are outside, screaming to come in. For the people are really Chicago. You were just Harold.

BRACKETT: They spoke from the pulpit of the legacy of Harold Washington. In one of his final interviews, Harold Washington, too, spoke of a legacy. HAROLD WASHINGTON, late mayor, Chicago: It goes without saying I want open government, I want institutions that work, I want people to come together to work cooperatively and interdependently with each other and all those kinds of things. But fundamentally and basically, we've got to get people to an ideal working together through an ordered system of give and take. REPORTER: So he brought them into the processes here, legacy? Mayor WASHINGTON: Yes.

BRACKETT: A top mayoral staff member who rode sadly in her boss's funeral procession, says she was one for whom the system opened up. JACQUELINE GRIMSHAW, Washington staff: As one of those folks out there looking for entrance and access and been shut out all my adult career until Harold Washington became mayor, what Harold Washington did was to provide the opposite of what I had known all of my political life. And that's my appreciation for Harold Washington's reform.

BRACKETT: But the reform did not come easily. Harold Washington became the city's first black mayor after winning a bitterly divisive Democratic primary battle against two white opponents in 1983. His first term was rocked with bitter struggles with white Democratic machine aldermen reluctant to give up their power. But through court battles and political maneuvering, Washington gained control of the council near the end of his first term. In his reelection campaign early this year, he soundly defeated his white opponents in the primary and general election. In a final campaign rally, the mayor claimed he had changed the image of Chicago. WASHINGTON: Chicago had a reputation, not deserved, of course, undeserved. It had a reputation. When you get to some place and say you're from Chicago, they would say, ''Chicago? Al Capone, rat a tat tat tat. '' And now, wherever you go, if you say you're form Chicago, you know what they say? ''How's Harold!?!''

BRACKETT: While the mayor may have exaggerated a bit, what was not exaggerated, says Gary mayor Richard Hatcher, was Washington growing power base. RICHARD HATCHER, Gary Mayor: I would probably call Harold Washington the most powerful black politician in the country. If you measure power in terms of what a person is capable of delivering, and if you can deliver a state, and I think Harold Washington literally had the power to do that, then that's real power. Beyond that, however, Harold Washington had economic power. And sometimes people don't understand that mayors on an almost daily basis make decision that involve millions and millions of dollars, in some cases billions of dollars. That's power.

BRACKETT: Even his formerly bitter city council opponents admit that the city had begun to coalesce around Washington. RICHARD MELL, alderman: It's just ironic, in fact, that when the man -- seemed like everything was in his corner and everything was going his way, that the tragedy happened.

BRACKETT: It was perhaps this sense that the mayor was on the verge of greater accomplishment for the city that made his sudden death so painful for so many. Over one million people silently paid their respects as the mayor lay in state in the rotunda of City Hall. Outside, the line seemingly never stopped. WOMAN: I was a big fan of Washington's, both the man and what he did for the city. He did a lot. REPORTER: Will he be missed? WOMAN: Most definitely. MAN: He inspired me to seek new heights for myself and my family. REPORTER: Will he be missed? MAN: Rightly. REPORTER: Can he be replaced? MAN: Hopefully he can. Takes some giant shoes to fill, a giant person to fill his shoes.

BRACKETT: The city mourns. But even as Harold Washington lay in state at City Hall, the high stakes battle to succeed him had already begun. For Washington's political supporters, the fear that their delicately forged coalition would splinter meant a frenzy of political activity, even before the mayor was buried. LU PALMER, Washington supporter: But the reality is that we have lost an enormously popular leader. A man who undoubtedly has changed Chicago. Now the reality is that while we are going through this period of mourning, the wolves are on the prowl.

BRACKETT: For Washington supporters, the wolves were white Democratic aldermen who were meeting on the other side of town, and they had a candidate. UNIDENTIFIED MAN: I think it's doable. Whether in fact it's going to happen, I can't tell you that, but I think it is doable.

BRACKETT: But as the dealmaking progressed, it was this man, alderman Eugene Sawyer, who put a coalition of conservative blacks and machine white aldermen together. The move was seen as a setback for Washington reformers. With all the deals going down, it was a wonder the politicians had time for the funeral. The people did find time to say goodbye. As the mayor's funeral procession wound through the neighborhoods on the way to the cemetery, the streets were lined with mourners. And as the mayor was laid to rest, the people and the politicians said farewell. JESSE JACKSON, presidential candidate: You fought the good fight, Harold. You showed them, big wards, big city, big mayor. You ran a good race. The strongest last leg we've ever seen. Thank you very much. I'll see you in the morning, buddy. We will not let you down. We will not let you down. We will not let you down. Recap WOODRUFF: Now a final look at today's stories. Stock prices fell sharply on Wall Street, with the Dow Jones average closing down 76 points. Overseas, the dollar fell to record lows against major foreign currencies. U. S. officials said today that an aid cutoff to Haiti will continue until the electoral process is resumed. Presidential elections were cancelled yesterday, following widespread killings. Good night, Robin. MacNEIL: Good night, Judy. That's the NewsHour tonight. We'll be back tomorrow night. I'm Robert MacNeil. Good night.