The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening. In the headline this day Federal Reserve Chairman Volcker said there will be no change in money supply policy. Leading Democrats announced a plan for punitive trade measures. And Vice President Bush said President Reagan is making a dramatic recovery from cancer surgery. Robert MacNeil is away; Charlayne Hunter-Gault is in New York. Charlayne?

CHARLAYNE HUNTER-GAULT: After the news of the day the NewsHour cast features a debate over new get-tough moves in Congress aimed at unfair trading partners and the soaring trade deficit. Then there's the issue of whether Paul Volcker's current monetary policy will rekindle inflation. A documentary report looks at how professional baseball is grappling with the drug problem, and we zero in on the case of seven young people arrested for breaking into computer codes at the Pentagon. News Summary

LEHRER: Federal Reserve Board Chairman Paul Volcker said this was not the time to tighten the money supply. He said there was no sign new inflation was coming, so the Fed would stay its present course of allowing the money supply to grow, which contributes to a continued lowering of interest rates. He said it all in an appearance before the House Banking Committee to present the Fed's mid-year economic report.

PAUL VOLCKER, Chairman, Federal Reserve Board: The inherent strength of our economy and the momentum of our expansion have carried us a long way. In these circumstances monetary policy has accommodated a sizeable increase in monetary and credit growth, and interest rates have dropped appreciably, even though they are still relatively high in real terms. In that way economic growth has been supported at a time when the dollar has been particularly strong and inflationary pressures, at least in contrast to the 1970s and early 1980s, quiescent. But there are obvious limitations to the process of monetary expansion without threatening the necessary progress toward stability upon which so much rests.

LEHRER: The price of the dollar abroad went down to its lowest level in a year today, and the Federal Reserve decision designed to lower U.S. interest rates was blamed, because foreign money speculators bet on high U.S. interest rates. There were also two economic numbers out today that showed the U.S. economy doing better than expected. Americans' personal income rose 0.5 last month, and housing starts were up 1.9 . Both numbers had shown decreases the previous month. Charlayne?

HUNTER-GAULT: A bill aimed at unfair trading partners and the widening U.S. trade deficit was introduced in Congress today by several House and Senate Democrats. It calls for imposing a 25 duty on all imports from several countries, including Japan. Treasury Secretary James Baker denounced the plan, calling it protectionism in its rankest form. But sponsors, including House Ways and Means Committee Chairman Dan Rostenkowski, disagreed.

Rep. DAN ROSTENKOWSKI, (D) Illinois, Chairman, House Ways and Means Committee: This is not a protectionist bill. This is not a quota bill. We aren't out to bash any one country or industrial sector. We're not closing our ample markets. We're merely asking for greater access for American exports.

Rep. RICHARD GEPHARDT, (D) Missouri: While we open our markets to foreign imports, our products meet artificial barriers and restrictions in foreign markets. The bill we're introducing would begin in a modest way to reverse all of this. It would reverse this administration's sink-or-swim trade policy where we sink in trade abroad while we swim in red ink at home. And it would send a signal to our trading partners that they must open their markets to our products just as we open our markets to theirs.

HUNTER-GAULT: We'll have some heat and shed some light as we debate that proposal in our lead focus section tonight. Also on Capitol Hill, House and Senate budget conferees broke up again today, refusing to set a time and place to meet next. The Senate members of the conference committee rejected the latest compromise budget offer put forward by House members.

LEHRER: Every word about President Reagan's recovery from cancer surgery was again a good word today. Vice President Bush and White House spokesman Larry Speakes were among those who reported on Mr. Reagan's progress.

LARRY SPEAKES, White House Spokesman: This morning the President continues on a roll. In the words of Mrs. Reagan, who spoke with him by telephone shortly before she left on her day trip today, he's "flying high." His first words when he left the room for his morning walk was "tennis, anyone?" His vital signs are good, they're solid, they're normal. The temperature is entirely normal and has been for the last day or so. The President's digestive system is beginning to return to normal function. Dr. Oller has placed the President on a clear liquids diet. This customarily includes bouillon, Jello, popsicles, apple juice and tea.

GEORGE BUSH, Vice President: He was clearly read up and concerned about the various problems, just as if he were sitting there in the Oval Office. So I was impressed with the recovery, with his obvious strength. Clearly, he needs more time to get out and about, so to speak, but they have an expression in the oil business, "running high and looking good," on drilling a well, and that's the way he is, running high, looking good.

LEHRER: Mrs. Reagan went ahead with a previously planned trip to the aircraft carrier America. She flew by helicopter to the ship, which is cruising off the Virginia coast. The purpose of the visit was to attend a briefing on the Navy's drug and alcohol abuse program.

HUNTER-GAULT: In South Africa, three people died in rioting overnight as the violence engulfing other parts of the country returned to Soweto, the township near Johannesburg that was the flashpoint of the country's most serious racial rioting nine years ago. Police said the dead were a woman found after rioting near Johannesburg and two men who died when police fired at crowds in incidents elsewhere. A police official in Soweto, the country's biggest township, said that the rioting had reached "serious heights of intensity" during which a bus carrying tourists from the United States and West Germany was stoned. Here is a report from Michael Burke of the BBC.

MICHAEL BURKE, BBC [voice-over]: It was the children that started the rioting, lining the main road through Soweto and stoning every vehicle that passed. Delivery vans were looted. What had started as a political protest broke out into general lawlessness. Tens of thousands of black children boycotted classes today and started hijacking vehicles, threatening to kill blacks and whites alike. Until now this giant township has stayed relatively quiet. Police sent tear smoke machines to stop a planned protest meeting at Regina Mundi Cathedral. The army presence built up on streets that began to look like battlegrounds. Opposition leaders here threatened to make the black townships ungovernable. Many are already no-go areas for the authorities unless they move armed and in force. For a time today, Soweto, biggest, most threatening of all the townships, was out of control. The army and police took to driving at random down Soweto streets looking for trouble. Rubber bullets, tear gas and birdshot fired at any group of children that was around and looked like making trouble. It became a cat-and-mouse affair that lasted for most of the day.

HUNTER-GAULT: By nightfall, calm was restored in Soweto after the police arrested more than 400 people.

In India there are reports that the data recorder from that Air India flight that crashed off Ireland showed that an explosion ripped through the plane shortly before it went down. The Press Trust of India quoted sources close to India's official inquiry as saying that the explosion lasted 30 seconds and that the crackup began 30 seconds later. A U.S. scientist working on the flight data analysis cautioned, however, against drawing any conclusions so early in the analysis.

LEHRER: Finally in the news of this day, New Jersey authorities rounded up seven teenage boys on charges of using their home computers to commit credit and telephone fraud and to get access codes for high-ranking military officers. A prosecutor said the seven were "common little thieves who will be treated as common little thieves." We will look at the story further in a focus segment later. Balancing Trade

LEHRER: The Democrats made some international trade waves today. Three congressional leaders unveiled legislation that would punish Japan and other nations that import more than they export from the United States. The punishment would be a 25 surcharge on their imports. Japan would be a major payer of such charges, but so would South Korea, Taiwan and Brazil. The bill's authors are Dan Rostenkowski, chairman of the House Ways and Means Committee, Senator Lloyd Bentsen of Texas and Congressman Richard Gephardt. Congressman Gephardt is with us tonight, as is William Niskanen, who thinks that the idea is a really bad idea. He is a former member of President Reagan's Council of Economic Advisers who now heads the Cato Institute, a Washington think tank.

Congressman, Treasury Secretary Baker said what you proposed today is the rankest form of protectionism. Is he right?

Rep. RICHARD GEPHARDT: He's absolutely wrong. We believe this is very different than a lot of other surcharge or quota bills that have been put into the hopper. This bill gives an entire year for the President and the United States and other countries to solve this trade deficit situation. If it isn't done in that year, then we begin with a formula to apply surcharges against certain countries. If there is no progress in this period, then it would apply to four countries, Japan, South Korea, Taiwan and Brazil. Obviously in that year period, if actions are taken on both sides, for instance, if the dollar fell in price, it could very well be that no country would qualify for the surcharge. We're trying to state a national goal that we cannot put up with these kinds of trade deficits.

LEHRER: What would a country have to do or not do in order to qualify for a surcharge?

Rep. GEPHARDT: They could do any number of things. First of all, if we had a different fiscal policy in this country and got the price of the dollar down, that would help everybody. Secondly, a country abroad could open up their markets more to our goods coming in or they could slow down the amount of exports coming out of their country to the United States. Any number of things could help solve this problem. We don't have a good trade policy in this country; we're not focusing on the problem.

LEHRER: Who decides what country gets the surcharge?

Rep. GEPHARDT: We have a formula in the bill. The formula says that any country that's exporting to us 65 more than they're importing from us to them, they would fall into the bill and they would have to reduce that trade deficit by 5 in the first year and 10 in the second year after the passage of the bill.

LEHRER: Mr. Niskanen, is it protectionism of the rankest form?

WILLIAM NISKANEN: Yes. It's the worst trade bill that I have seen in many years. It will harm American consumers, it'll harm American exporters, it'll hurt our foreign affairs with some very important allies. It will probably destroy the prospects for a new trade round. It will hurt American bankers who have foreign loans. There isn't a good thing to be said about it.

LEHRER: How will it hurt consumers? Let's go through your list. How will it hurt consumers?

Mr. NISKANEN: It'll raise the price of products imported from these countries and other products that compete with these imports.

LEHRER: How will that happen?

Mr. NISKANEN: The surcharge itself will be added to the wholesale price of products in American ports, of these imports.

LEHRER: He's right about that. I mean, the end result, Congressman, is going to be higher prices on any product that has a 25 surcharge, correct?

Rep. GEPHARDT: Well, first, that assumes that the surcharge will go on. I think that's an assumption we can't make. Secondly, I think Bill's view is more stick our head in the sand, let's not do anything about the problem. Let's not set goals, let's not put pressure on everybody to solve this problem. In the flip side of that kind of policy is more unemployment for Americans.

LEHRER: Yeah, but let's be specific. He says that that will raise the price to the American consumer if a surcharge is put on a product. You don't deny that?

Rep. GEPHARDT: If the surcharge goes on, that's true. But query. If we continue to sustain this kind of structural damage to our economy through the loss of exports and the amount of imports coming in, what happens to the consumer from that situation?

Mr. NISKANEN: Employment has grown more rapidly in this recovery, even in the last several months, than in the typical recovery. There has been a major shift of jobs in this country away from certain trade-dependent sectors into other sectors, but the big trade deficit has not hurt total employment. Moreover, this measure would hurt some of the industries in Congressman Gephardt's district. It would hurt his commercial aviation industry, which exports a large part of their product. It will hurt the agricultural sectors in Missouri by reducing their exports. There is a necessary feedback between the dollars that foreigners have from the sale of their products to us and how much they spend in our markets. And there is no way to reduce the trade deficit by reducing imports alone, because it will lead to a corresponding reduction in exports.

LEHRER: What about your point that this would also hurt American foreign policy? In what way?

Mr. NISKANEN: We will be placing import surcharges on four countries that are among the most vigorous free-enterprise markets in the world. Three of those countries have not been subject to charges of unfair subsidy or dumping in the American market. Brazil is somewhat of an exception to that, but with respect to Japan, Korea and Taiwan, they have not been subject to charges of unfair trade practices in the U.S. market.

Rep. GEPHARDT: But the fact remains that each of these markets is not as open as it should be. There are tariff and non-tariff barriers in each of these countries that are far greater and worse than any we have in this country. And another message that is carried in this bill, I think, is the idea that these unfair trade situations must be ended. And if the only way we can do it is for Congress to say, "We're setting a goal, we can't have a trade deficit more than this amount," then that's what we need to do.

LEHRER: Mr. Niskanen, how do you get these unfair trade practices changed without using a hammer or whatever tactic similar to what the congressman is advocating?

Mr. NISKANEN: Well, we should first recognize that we are -- we have unclean hands in dealing with this matter. We have many, many trade restraints in the United States as well. A recent study suggests that the aggregate volume of trade affected by trade restraints in Japan is roughly the same as that in the United States. Now, I think it is appropriate for the administration to continue to press in individual sectors. We've had some cooperation from Mr. Nakasone's government in this regard. They've lowered tariffs, they've opened up the telecommunications market somewhat. They have increased some of their quotas on agricultural products. But to take an action of this nature, which harms almost everyone in the United States as well as our foreign policy and our prospects for future worldwide reductions of trade barriers through the GATT mechanism is foolish.

LEHRER: He says it harms everybody. Who, from your perspective, does get helped, Congressman?

Rep. GEPHARDT: I think it helps everybody. I think it helps the American economy. I think it helps to straighten out a trade imbalance situation which is unconscionable and cannot go on. And, further than that, I think it really works against protectionism. By getting everybody to solve basic underlying problems that have caused these trade imbalances, I think we increase the chance that we can keep the kind of open, free trading system that we've had since World War II.

LEHRER: How is it protectionism, Mr. Niskanen? Who gets protected under the Gephart-Bentsen bill?

Mr. NISKANEN: Any action that increases the price of foreign products sold in the United States must be described as protectionism. Now, there may be many laudable objectives for that kind of measure, but it has to be recognized as protectionism.

LEHRER: And why is that wrong?

Mr. NISKANEN: It makes us all poorer as a consequence. It makes us poorer, it makes the foreigners poorer, it destroys the prospects for coming to an agreement through multilateral means, through GATT, to address these trade problems on a worldwide basis.

LEHRER: Congressman?

Rep. GEPHARDT: I just think Bill's reaction is the same stick our head in the sand reaction we've had to these problems in the last few years.

LEHRER: You don't think they're getting any better?

Rep. GEPHARDT: They're getting much worse. We had a $123-billion trade deficit last year. Some say it'll be $150-, $170 billion this year. The question is, how long are we going to stand by and have this structural damage to our economy? I think enough is enough.

LEHRER: Consider yourself asked that question. How long does this go on before something like this has to happen?

Mr. NISKANEN: Something like this will never reduce the trade deficit. The trade deficit is a measure of the difference between investment and savings in the United States. If we're going to continue to invest more than we save in the United States, wehave to import real goods and services to make up the difference. Now, the most important things for the government to do to reduce the trade deficit is to reduce government borrowing and to increase the net saving available in this country. That is the most important measure for the government to do for any number of reasons.

Rep. GEPHARDT: On that we totally agree. I think the President's fiscal policy is a big part of this problem, and this bill will help incentivize everybody to solve that part of the problem as well.

LEHRER: Well, by my count you all have not agreed on anything, but don't go away. We move now to another piece of today's news on the economy, and Judy Woodruff has that. Judy? Easy Money?

JUDY WOODRUFF: As we reported earlier, Federal Reserve Board Chairman Paul Volcker went before Congress today to defend the Fed's policy of easing up on the nation's supply of money and credit, a policy announced just yesterday. There were questions from several members of Congress about whether this will lead to a rekindling of inflation. But Volcker said he believes inflation is under control. With us to pick up on this on-going debate about the inflationary risks involved is an economist who has been critical of Fed policy. He is Allan Meltzer of the Carnegie-Mellon University. He joins us now from public station WQED in Pittsburgh. First of all, Mr. Meltzer, can you explain to us in laymen's terms briefly just what the Fed did or what they announced yesterday?

ALLAN MELTZER: What they did, very simply, was miss their growth targets for the money supply, the announced targets that they have to try to keep inflation under control over a longer term. They missed them very badly during the winter and spring, and so they now have simply said, "Well, let's forget about that. We rebase to a new point. Excepting all of the money growth that we've had, we're going to have slightly faster money growth from here on out than we announced earlier, and we're going to do it from a higher level." And all of that means that we're going to have much faster money growth than this economy can maintain on any sustained basis without running into a serious inflation problem.

WOODRUFF: Easier credit, in other words, is what they were saying?

Mr. MELTZER: Faster money growth. Easier credit is a very nebulous and misleading term. It means different things to different people. There will be more credit. Whether its terms will be easier or tighter is a very separate question. I believe that interest rates will go up.

WOODRUFF: All right, what do you think the result of this will be? Why do you think it was the wrong move for them to make?

Mr. MELTZER: The way to head off the next round of inflation is to do something about it now. inflation isn't like a cancer that you cut out once. It's more like a cold that keeps coming back. In order to make sure that you're not going to get that cold, you have to keep doing something about it on a regular basis. What we're doing is repeating the mistakes of the late 1960s or of 1975, when we had low rates of inflation and brought it down at some cost in the 1970s, and then let it get back up again. We're doing the same thing again now. We're making short-term decisions at the expense of long-term costs that we're going to pay.

WOODRUFF: But with the economy as weak as most people acknowledge it has been over the last number of months, wouldn't it be risky to tighten now instead of do what the Fed has done?

Mr. MELTZER: But you have to remember that people kept making those arguments all through the '70s. It was always the wrong time to tighten. The end result of that was that we got to inflation rates which were much higher than people could -- were willing to stand. And then we tightened and tightened rather drastically, throwing ourselves into a very severe slump. We're setting ourselves up for that kind of problem again. Whether it comes immediately or a year from now isn't really the important issue. The important issue is that the high rate of growth now has to be brought down, and when we bring it down we're going to pay for the experience that we're having, the better times that we may have in the next six months.

WOODRUFF: The man you're criticizing, Paul Volcker, has pretty much built his reputation on fighting inflation. Are you saying he's thrown all that out the window?

Mr. MELTZER: The Fed has a record of being against inflation when inflation is a problem and producing inflation when inflation isn't the problem. Right now inflation isn't the problem. People aren't concerned about inflation. So it's the best time to pursue a moderate policy to prevent inflation from becoming a problem. What Paul Volcker is doing is what the Federal Reserve has done throughout its history. It's making short-term decisions and those short-term decisions are going to have long-term consequences that the next Paul Volcker or this Paul Volcker or someone else is going to have to fight later on.

WOODRUFF: When do you think inflation is actually going to pick up, based on your scenario?

Mr. MELTZER: That's much harder to say. Economics is very good at predicting what's going to happen. It's much worse at predicting when it's going to happen. But I think we'll see higher inflation than now by the end of the year, and I think we'll see still higher inflation in next year.

WOODRUFF: The dollar dropped today on the foreign exchange markets. Does that have any impact on what you're talking about?

Mr. MELTZER: Yes. The dollar has dropped from its peak. It's now about 15 lower than it was in February, and it's back where it was about a year ago at this time, perhaps a little bit lower. Now, as long as the dollar was rising, as long as the dollar was strengthening, we were hiding some of that inflation from ourselves, and when the dollar stops increasing, even if it doesn't drop any further, but just stays where it is now, inflation rates will creep up, on my calculation, about 1 percentage points over the next year. If the dollar drops from here, then the measured rates of inflation will pick up perhaps even more than that within the next year or year and a half.

WOODRUFF: Allan Meltzer, stay with us.

LEHRER: Yes, Mr. Niskanen, do you believe that Paul Volcker has done such a bad thing as Mr. Meltzer believes?

Mr. NISKANEN: No, I regret to disagree with my friend, Allan Meltzer. I think that the high rate of money growth in the winter and the spring was appropriate, given what has been a collapse of velocity, money velocity.

LEHRER: What does that mean?

Mr. NISKANEN: It means that the demand for money has increased a great deal, and the Federal Reserve Board supplied the funds to meet that demand. Now, basically what they've done is rebased their 1985 targets from the fall of 1984 to the spring of 1985. I think that that was a correct decision under the particular circumstances of what happened to money velocity.

LEHRER: And it will not cause inflation, as Professor Meltzer says?

Mr. NISKANEN: I don't expect it to have any significant effect on inflation. The key variable to watch is how fast current dollar GNP or nominal GNP is rising. And that has been growing at about a six- or seven-percent rate now for some quarters. That is not an inflationary path.

LEHRER: Professor Meltzer?

Mr. MELTZER: The time to head off inflation, as I said, is before it begins, not after. The costs of keeping it down are much lower than the costs of ending it. What we're now doing is really taking a very, very large risk. Niskanen may turn out to be right, but I think we know a lot about economic forecasting, we know a lot from our past experience with the effects of fine-tuning. We're playing the same kind of mistaken games now that we played in the late '60s and in 1974-75, and I believe that in those occasions we had severe consequences and we're gong to see some of those consequences returning in the next year to year and a half.

LEHRER: Congressman Gephardt, what's your view of this?

Rep. GEPHARDT: I think Bill and I nally agree. I think --

LEHRER: A bell just went off all over America. Go ahead.

Rep. GEPHARDT: Something's either right or wrong. I think that Paul Volcker and the Federal Reserve have had a difficult job because fiscal policy in this country is so far out of balance. And I think one of their great worries --

LEHRER: Meaning the federal budget?

Rep. GEPHARDT: That's right. And I think they are wrestling with this imbalanced administration fiscal policy. I have great sympathy for what they're trying to do. I think right now they're worried about slipping into a recession. They're trying to avoid that. If we go into a recession with a deficit of $200 billion a year -- it will be 300 and 350, and then I don't know what we do. So I have sympathy with what they're trying to accomplish.

LEHRER: But what about Professor Meltzer's point that the time to deal with inflation is when you don't have it, that's where you keep it from coming back?

Rep. GEPHARDT: Well, if we go into a recession or a deep recession we sure won't have any inflation, and I think their worry is more on the growth side or the recession side than now than it is on the inflation side.

LEHRER: Professor Meltzer, what's your view, by the way, of Gephardt's idea on the trade bill?

Mr. MELTZER: This time I have to agree with Niskanen. I think that it's a very bad idea and it aims at the wrong part of the problem. I mean, the problem that we have on the balance of trade is not a problem which has to do with Japan or Korea or Brazil. It's an overall problem in the balance of trade, which has to do with the amount of investment in the United States relative to saving. We shouldn't be worried at all about our balance of trade with Japan. We should be worried about those policies which would solve our overall problem.

LEHRER: Congressman?

Rep. GEPHARDT: Well, I think that both of them are overlooking the fact that in addition to our own problems we have markets abroad that are simply not open on the basis our market is, and I think Congress is disturbed about that and we intend to see progress in that area. We think this bill will get that progress.

LEHRER: Professor Meltzer, from your perspective, if the Gephardt bill is enacted into law, what do you think would be the general impact of that?

Mr. MELTZER: The main effect would be to raise prices to American consumers as that bill became, as Niskanen said earlier, and I think the other effect would be, of course, as it reduced the trade with countries like Japan and Korea it would in fact put upward pressure on the dollar. You have to remember that the last time that we tried this kind of surtax was when the dollar was a very weak currency back in the Nixon-Connolly days. We put on that surtax to strengthen the dollar, and it had the effect of strengthening the dollar. What it would do would shift some of the burden of the U.S. investment-saving program -- it would shift that onto other parts of the economy. It would hurt those industries which would be subject to the surtax because -- in foreign countries. It would hurt other industries unknown at the moment in the United States that are now exporting. Our best program, if Congress wants to do something about our trade problem, the Congress really has before it legislation which would accomplish that. It should be cutting government expenditure and cutting it very sharply. And that would reduce the deficit. That would help the balance -- the investment-saving account, and that would in fact improve the position of the U.S. economy in the world.

LEHRER: Why don't you do that instead, Congressman?

Rep. GEPHARDT: Because I have a different view of who's to blame. I think the administration has sent us four different budgets with over $200-billion deficits in them is supposed to be leading the country to solve that problem. It is not, and therefore the Congress is not.

LEHRER: Well, Congressman, Mr. Niskanen and Mr. Meltzer, thank you all three very much.

Mr. MELTZER: Thank you.

LEHRER: Charlayne?

HUNTER-GAULT: Still to come on the NewsHour, a documentary on drugs and professional baseball, and we look at the case of the seven young people arrested for breaking into computer codes at the Pentagon. Baseball and Drugs

LEHRER: Next, a focus report on baseball in the middle of a week that has been full of news about baseball. Monday the major league players union voted to strike August 6th unless there is an agreement on a new contract. And yesterday in Minnesota they played the annual All-Star game, won, as usual, by the National League. The score was six to one, it was the 13th win for the National League in the last 14 years. Our report is about a story most major league players and owners wish wasn't there to tell. Correspondent Tom Beardon reports.

TOM BEARDON [voice-over]: When people used to think of baseball their thoughts woiuld turn to scenes like from the film, The Natural. Visions of all-American boys slamming game-winning homeruns over distant fences, of warm summer nights and cheering fans. But of late that fantasy has given way to a harsher reality as the American public is learning our national pasttime is not immune to the national epidemic of drug abuse.

ALAN WIGGINS, baseball player: These words do not come easily to me because I know many people will have already made up their minds about what kind of person they think I am. I suffer from a disease, the disease of chemical dependency.

BEARDON [voice-over]: And Alan Wiggins, formerly with San Diego, until his recent trade to Baltimore, isn't alone. In the last five years some 25 major league baseball players have admitted to or been arrested for drug abuse, and the problem seems to be growing. This year Claudell Washington of the Atlanta Braves and Mike Norris of the Oakland Athletics have both been arrested for drug problems. Daryl Sconyers of the California Angels underwent treatment for drug abuse. Steve Howe of the Los Angeles Dodgers, who has had drug problems in the past, was recently released by the team. Rod Scurry of the Pittsburgh Pirates, another player with a history of drug problems, was suspended for missing a game and is now on the rehabilitation list. Ballplayers are particularly vulnerable to drug abuse because they have a great deal of free time between games. They also have the money to spend on drugs. Last year the average player's salary was $329, 000. Another major factor is the stress of playing the game. Dock Ellis, now 40, knows about the pressures of baseball. Before he retired, Ellis was a successful major league pitcher for 12 years, playing for the Pittsburgh Pirates and the New York Yankees, as well as several other teams. Ellis also knows about drugs.

[interviewing] What was your state of mind on the days that you were pitching?

DOCK ELLIS, former player: Tom, this is the old cliche. I was out to lunch on the days I pitched. I would start taking Dexomil(?) around 11 or 12 o'clock to get ready so when I got to the ballpark I was, like I said, out to lunch.

BEARDON [voice-over]: Ellis took Dexomil -- speed -- because he felt it helped his game.

Mr. ELLIS: Sometimes you're going to have pinpoint control so you feel that the drug has done this for you. And that's one of the things that plays on your mind, that, okay, I've taken this drug so now I've done well. So then if I can do this good with this amount, then I can take some more and do better. But you don't remember the times you go out there and get popped. Those times are erased from your mind.

BEARDON [voice-over]: A Los Angeles resident now, Dock Ellis occasionally attends pre-game batting practices at Dodger home games. Times like these bring back memories. Some good, some not so good. Like the game in 1974 when Ellis, under the influence of speed, purposely threw pitches at several players, including Pete Rose, now player-manager of the Cincinnati Reds.

Mr. ELLIS: I told him, I said, it's a shame that guys are involved with drugs like that and going out on that field because, as a pitcher I had their lives in my hands. I could have killed someone with that ball.

BEARDON: Perhaps the most extraordinary game for Ellis came here, in San Diego. The year was 1970 and Ellis was with the Pittsburgh Pirates. He didn't think he was going to pitch that day, so he took some drugs. He later discovered he was in fact the starting pitcher for that night's game. What is most surprising is that not only did Ellis manage to win the game, he pitched a no-hitter, he says, while under the influence of LSD.

Mr. ELLIS: While I was playing ball there was no way I thought I had a problem. I knew I could drink a lot, and I knew I could take in a lot of drugs. It is just that I was having fun, I was on a high roll.

BEARDON [voice-over]: Of all the drugs Ellis took, there was one in particular he found extremely difficult to shake. It also happens to be the drug that is causing most of the problems with today's ballplayers, cocaine.

Mr. ELLIS: With me it was my woman, my god, it was my life. And that's why it's so hard to become abstinent of that drug, is that you're giving up your life.

Dr. RON SIEGEL, UCLA Medical School: Cocaine is perhaps the most rewarding or reinforcing drug of any of the chemical substances that we have available on this planet.

BEARDON [voice-over]: Dr. Ronald Siegel is a drug abuse expert with the UCLA School of Medicine. He says cocaine is both seductive and extremely addictive.

Dr. SIEGEL: It sort of fit in with the Protestant ethic and the spirit of capitalism. When you were coked up you were showing all the behaviors that were reinforced by our society. You were working harder, you were energetic. And it became an American drug, the great American drug. And it's not surprising that the great American sport has been affected somewhat by the great American drug.

BEARDON [voice-over]: For Ellis, cocaine and the other drugs took their toll. By 1980 he was out of baseball.

Mr. ELLIS: Drugs and alcohol had taken over my life, and I had lost interest in the game, you know. That was a gradual thing. And that was it. When the interest was gone, I was gone.

BEARDON [voice-over]: Shortly after he retired, Ellis found the courage to check himself into a hospital to be detoxified. He followed up the treatment by attending Alcohol and Cocaine Anonymous meetings, something he still does. Today Ellis is a drug rehabilitation counselor in Los Angeles, spending his time helping others get back on track.

Mr. ELLIS: During your recovery what is happening is you're like a child learning to walk again, and what happens is you need the people that are recovering.

BEARDON [voice-over]: While Dock Ellis has so far been successful in beating drugs, he was only able to do so after leaving the high-pressure world of baseball. Some current players who have drug problems are finding it hard to stay clean and still play the game.

Dr. JOSEPH PURSCH, Care Unit: How much money will you spend on cocaine?

PLAYER: Oh, anywhere between $1,500 and $2,000 a week.

BEARDON [voice-over]: Dr. Joseph Pursch is the medical director at Care Unit, a California medical facility for drug and alcohol rehabilitation. He's treated a number of athletes, including Alan Wiggins, who he saw in 1982. Dr. Pursch says the teams are partly to blame for players relapsing.

Dr. PURSCH: Well, the team has to get away from the notion that now that this "kid" has been in the hospital for four weeks he is fixed, and we now no longer have to even think about that, let alone talk about it.

BEARDON [voice-over]: Dr. Siegel agrees that inpatient detoxification is far from a panacea.

Dr. SIEGEL: And we find a lot of people that are successfully detoxified and abstain from cocaine use, for example, in a 30-day hospital program, within a week after being released are right back doing it again. Interestingly, outpatient treatment seems to work at least as well, and in many cases better than inpatient care.

BEARDON [voice-over]: But Dr. Pursch says teams often fail to encourage their players to follow up with outpatient recovery programs, such as attending group therapy meetings such as this one at Care Unit. Dr. Pursch says another factor contributing to relapses is the growing antagonism between management and the players union over the best way to handle the recovery process. A case in point is the recent relapse of Alan Wiggins.

[on camera] The public first learned of Alan Wiggins' relapse here at Dodger Stadium when he failed to show up for a Padres-Dodger game in April. Prior to that time he was considered a model reformed drug abuser. It seemed he had come a long way from that night in 1982 when he was arrested for cocaine possession. When it became clear he was back on drugs, many of the people who had supported him were shocked and angry.

[voice-over] One of those supporters was Ballard Smith, the president of the Padres.

BALLARD SMITH, President, San Diego Padres: One thing I've done in the last year is every place I've been out speaking I've been telling people that I was as proud of the fact that Alan Wiggins was recovering as the fact that we won the National League pennant. And there's never been anything that's happened since I've been involved with this ball club that's been more devastating to me.

BEARDON [voice-over]: When he learned of the Wiggins relapse, Smith was firm. Wiggins would never play for his team again. That angered the Players Association.

DON FEHR, Baseball Players Association: Interestingly enough, for all of their protestations the San Diego club has that they understand drug and alcohol problems and so on, in connection with rehabilitation, a return to one's employment, a return to your regular job is a very, very important part of it. And the mere suggestion that one would make, much less the bald and continuing public statements that they made, that they will deny an individual that opportunity, regardless of what contracts they have or anything else, is calculated to do only one thing, and that's to make any rehabilitation far more difficult than it otherwise is.

BEARDON [voice-over]: Smith is equally critical of the union's approach.

Mr. SMITH: No, I unfortunately felt that the union was antagonistic from day one. Even before Alan was found, I had contacted the union to ask their support in dealing with the situation. Their response was, in effect, "You have no right to talk to Alan, we'll deal with the problem."

BEARDON [voice-over]: Smith cites the Wiggins relapse as proof the current joint drug agreement between baseball owners and the players union isn't working. The agreement empowers a three-person medical panel with responsibility for handling all drug cases, including whether or not a player should be tested for drugs. Smith would like the owners to have more input, as well as a mandatory drug testing program for all baseball players. He says such a program would have helped Wiggins. Fehr supports the joint agreement which he helped write, saying drug tests are unreliable and invade the privacy of players, assuming guilt rather than innocence.

Mr. FEHR: We don't want baseball players to have any more rights than anybody else in this country, but I'll be damned if they're going to have any less merely because they happen to be skilled athletes.

PETER UEBERROTH, Commissioner of Baseball [May 8, 1985]: We want the integrity of the game. It's up to me to see that there's no Tulane basketball baseball scandal.

BEARDON [voice-over]: Last May, in a move the union says was designed to pressure them baseball Commissioner Peter Ueberroth proposed a drug testing program for all baseball employees except players. The commissioner's program recently went into effect. Dr. Pursch sees all of these separate programs as counterproductive.

Dr. PURSCH: As a general statement, I think the entire sports world is not going to get anywhere with this illness until they abolish this nonsense of union regulations, owners' regulations and commissioners, each of them with very non-negotiable terms, shouting and yelling back and forth, and the player getting lost in the crunch.

BEARDON: So what would be the solution to that?

Dr. PURSCH: When it comes to addictive illness, there should be no matters of opinion at all. There is only one goal when someone is ill. You get him treated. You don't protect him unreasonably, you don't attack him viciously, and you don't bar him from the game for life.

BEARDON [voice-over]: Until such actions occur, Dr. Pursch fears there will only be more players like Dock Ellis, players who don't get help until they get out of baseball. Cracking the Code

HUNTER-GAULT: Our next focus section is about hackers, not the kind with tennis rackets, but computer buffs who use their machines to obtain trade information. Late yesterday, seven of them, all under the age of 18, were arrested in New Jersey, allegedly for using their machines to commit a variety of crimes, including exchanging stolen credit card numbers and information necessary to make long-distance phone calls. And, perhaps most serious of all, sharing information to make explosives and to call coded phone numbers in the Pentagon, although the Pentagon said today it had no reason to believe its security had been breached. The names of the seven juveniles were not released because of their age. They were charged under a New Jersey law that makes it a crime to obtain information from a computer without permission. The county prosecutor and a detective talked about the case today.

ALAN ROCKOFF, South Plainfield County Prosecutor: We have learned that there has been access unfortunately obtained by individuals into private property owned by various satellite communications systems, by the Defense Department, by the computer merchandise companies, and we're not even finished with the amount of fraud and theft that may be involved.

Det. GEORGE GREEN, South Plainfield Police: Our investigation and our computers here have led us to Oregon, California, Colorado, Pennsylvania, Stamford, Connecticut, and we've actually accessed these computers with our computer. We've called them up and talked computer to computer.

REPORTER: That's bulletin boards in those states?

Det. GREEN: The bulletin boards, yes. And we would suggest that other states pass these laws, too, and get a closer eye on these computers.

REPORTER: And these bulletin boards all had illegal information?

Det. GREEN: Not all of them, no, sir. Not all of them. Some of them were normal conversations, which is perfectly legal. Some of them weren't. -- we're investigating those that we feel are not.

REPORTER: What evidence do you have that there was any tampering with any satellites?

Det. GREEN: All right, the satellites were used to make free phone calls. The satellites were not rotated, moved or turned upside down or anything like that. They just redirected the telecommunications to where they wanted to make the phone call, which is the way the satellite works. And of course they billed it to somebody else.

REPORTER: What, in your opinion, then, is the biggest crime that was committed here?

Det. GREEN: The biggest thing was accessing computers without authorization, ordering merchandise with other people's credit card numbers, and making free phone calls and charging it to someone else.

HUNTER-GAULT: For some background on the story and the problems of defending against computer theft we have Neal Norman, district manager of corporate security for AT&T Communications. He's responsible for all corporate security matters, including computers and credit card fraud.

Mr. Norman, I know that there are limits to what you know about this case, but in terms of what we've just heard and what other information is public, the prosecutors say that these hackers obtain the codes that would cause satellites to be redirected, which disrupted transatlantic communications and so on. What's your response to that?

NEAL NORMAN: We have no indication that there has been any disruption or redirecting of any AT&T communications satellites. To support that, our control capability is entirely separated from the communications network. So it would be virtually impossible for a computer hacker to dial into the control capability for our satellites and redirect them. In addition to that, if there were something happening to the satellites, if they were tampered with in any way, our technicians at the air stations would immediately recognize that and we would have positive indications. We had no indications of any movement, any tampering with our satellites.

HUNTER-GAULT: But they were very specific, at least in the wire stories I read today and the story in The New York Times. It said that they were disrupted to the extent that telephone communications on two continents, and they named the countries -- Britain and Spain and other countries in Europe -- had their phone systems disrupted. You just say that's not possible?

Mr. NORMAN: International communication certainly uses satellite circuits. There are other companies who have communications satellites other than AT&T. One of the stories that I read referred specifically to AT&T Communications. There is a possibility that some other communications satellite could have been involved. I'm not aware of that.

HUNTER-GAULT: Why do you think he would make such a statement, if you say that this is virtually impossible, at least in terms of AT&T's equipment?

Mr. NORMAN: Anything I say here will be purely speculation, but obviously there was some reference to international calling during the interviews between the police and the persons who were arrested, and very possibly there could have been a misinterpretation or a breakdown in communications at that point in time. Further, there may have been a breakdown in communications between the detectives or the police and the reporters who then brought in the story.

HUNTER-GAULT: What about the whole idea of theft of phone services generally? Is there a lot of that going on these days through computers, and how do they do it?

Mr. NORMAN: Well, from AT&T's perspective it's a very serious problem. It's not nearly as serious today as it was a few years ago. But basically the problem that we're dealing with is theft of credit card numbers and illegitimate use of those -- illegal use of those to make free calls. There are other methodologies, such as electronic devices called blue boxes, that are used to bypass the billing equipment altogether. That type of bypassing is not as prevalent today as it has been in the past because of the technological developments that we have applied to the network in the blockage of that type traffic. So credit card remains our biggest concern as far as stealing service from us.

HUNTER-GAULT: What can you do about it? I mean, what are you doing about it?

Mr. NORMAN: We're doing a number of things. First of all, in 1984, AT&T distributed credit cards to customers throughout the old Bell system. In doing that we communicated to those customers the need to protect that card, the importance of it, to treat it like any other credit card -- a Visa, American Express, Master Card or whatever. So that our customers become aware of the need to protect that number. In cases where we suspect fraudulent usage of a credit card through looking at the numbers of occasions where it's been used, we make customer contacts to verify the legitimacy of the usage. If we can determine that there is fraud involved, then we take the card out of service immediately. In the case of international, we have the capability to look at calling patterns, and in doing that we are able to determine where the fraudulent calls are coming from, where they're going to, and we have restricted calling card billing from those points to those foreign countries. So those are the kinds of things that we're doing to protect ourselves and the card service area.

HUNTER-GAULT: All right, we'll come back. Jim?

LEHRER: Now a different perspective from Neal Patrick, a former hacker who received nationalattention two years ago when it was revealed he had broken into the computers of a California bank. He is now a 19-year-old college student. He joins us tonight from public station WMVS in Milwaukee.

Mr. Patrick, the prosecutor in New Jersey said these seven young people charged today were common little thieves who should be dealt with, and will be dealt with, as common little thieves. Is that what's involved?

NEAL PATRICK: Well, that's what it sounds like today. It sounds like all they did was somehow get credit card numbers one way or another and then just distribute them on electronic bulletin boards telling other people, telling their friends, almost as if you would steal them from a garbage can and make purchases, buy a TV set over the telephone line and have it sent to your house.

LEHRER: Is that an easy thing to do?

Mr. PATRICK: Well, I guess a long time ago it was, but recently the credit card companies have changed the carbons on their credit cards so that when you use a credit card the carbon is torn out and nobody can use the carbon to get the credit card number and make purchases that way. But I guess there are still some old credit card carbons out there, so people can still use them.

LEHRER: But, I mean, you don't have to be -- in other words, you don't have to be a fancy computer hacker in order to do that, right? If you have somebody else's credit card number you can just pick up the phone and do that. Is that what you're suggesting?

Mr. PATRICK: It's as easy as you say. You just pick up the phone, make a phone call, order some stereo equipment, order a computer, have it sent to a post office box, which sounds like it's exactly what they did.

LEHRER: What about some of the other things that these young people allegedly did? For instance, now, you heard what the gentleman from AT&T said, that he thinks it's impossible for them to have hooked onto a communications satellite. Do you agree with him?

Mr. PATRICK: Well, that's also what the detective mentioned earlier on the program, that in fact no satellites had been altered, they haven't been turned around, they haven't been moved at all. Maybe it just might have been the story of a reporter who is a little overanxious to get a good story.

LEHRER: Did you ever try to do anything like that?

Mr. PATRICK: No, not at all.

LEHRER: What about the other point, that these young people accessed some computer codes at the Pentagon, codes that were used by high-ranking generals? Does that sound plausible to you?

Mr. PATRICK: Definitely. If the codes just happen to be the telephone numbers of those generals, which, from what I heard, is what happened. They got the telephone numbers, secret office phone numbers for several generals in the Pentagon and they could have called them on their phone and maybe harassed them, but that's about it.

LEHRER: Yeah. Would that be a relatively easy thing to do based on your experience?

Mr. PATRICK: It doesn't sound like it would be too hard at all. Who knows how easy it could be?

LEHRER: Yeah. You know, the expression bulletin board was used by the detective in the press conference, and apparently what these young people are charged with doing is getting these various codes and things and putting them on what they call a bulletin board for other people. When you were using a computer, or do you still use a computer a lot?

Mr. PATRICK: Well, I'm a programmer, currently, with a company here in Milwaukee, so I still do use the computer a lot.

LEHRER: Yeah, well are these bulletin boards common things? People putting these things up all the time?

Mr. PATRICK: Well, I wouldn't say these things are being put up all the time, but there are still a lot of bulletin boards around the country. People with computers call them up to leave messages for other people, just like a bulletin board up on a wall down at the local grocery store.

LEHRER: But do you see things on bulletin boards now that you think shouldn't be there? I mean, somebody's private phone number or, here, do you want to call the head of the U.S. Marine Corps, call him at home, that kind of thing?

Mr. PATRICK: No, I don't see that kind of thing on the bulletin boards any more. There used to be a couple of bulletin boards here in the Milwaukee area that had that kind of information, but due to the recent crackdown because of the credit card scandal here in Milwaukee, those bulletin boards were shut down and those people were brought to trial.

LEHRER: The detective said in the news conference that the most serious crime here -- well, not the most serious crime, he listed two or three. But one of them was just accessing to somebody's computer without their permission. Do you see that as a crime? Should that be a crime?

Mr. PATRICK: Well, it certainly is, just as somebody would walk into your house without your asking them. I don't see any reason for these people to do that. I know I've done it before, but that was a couple years ago.

LEHRER: What is it that drives -- you've been there, you've done it, as you said. What drives a young person to even want to do something like that?

Mr. PATRICK: What drives a mountain climber to climb a mountain? Because it's there. These kids say, "Well, let's see. I betcha I can get into this computer or that computer or get the phone numbers for the Marine Corps," and they try and do it. And sometimes they succeed.

LEHRER: Just to see how smart they are, huh?

Mr. PATRICK: Basically.

LEHRER: Yeah. Well, thank you. Charlayne?

HUNTER-GAULT: Should that be treated as a crime in your view, Mr. Norman?

Mr. NORMAN: Should it be treated as a crime?

HUNTER-GAULT: Yeah, kids just trying to see how smart they are?

Mr. NORMAN: Well, certainly I think if you're accessing someone else's computer, someone else's private property, that's no different than walking into someone's house without authorization or without acknowledgement.

HUNTER-GAULT: So would you agree with the prosecutor that these are just common little thieves and they should be treated in that way?

Mr. NORMAN: Well, certainly I think they ought to be treated accordingly. The things they did, the laws that are in place. They used credit cards to, in effect, steal telephone service. Allegedly they did some other things that were illegal. So I think, based on the laws that are in place, they should be treated in the courts accordingly.

HUNTER-GAULT: And you agree with that, Mr. Patrick, right?

Mr. PATRICK: Well, from what it sounds, these students have used credit cards. For all I know they maybe used MCI codes, which is quite common yet, no matter what security representatives say.

HUNTER-GAULT: So you think they should go to jail if they're guilty?

Mr. PATRICK: Well, I don't know about going to jail.

HUNTER-GAULT: Well, what would be an appropriate punishment for this kind of mischief?

Mr. PATRICK: Well, going to jail is quite a bit. Think of it yourself. These kids, from what I heard, all they did was they made phone calls illegally -- and that's a crime, needless to say, but going to jail is a pretty stiff sentence.

HUNTER-GAULT: Mr. Norman, Mr. Patrick said that he thought it was plausible that they could have gotten into the Pentagon coding system. I know you said you didn't think it was possible for them to have gotten into the AT&T satellite system, but what about the Pentagon? Do you think that's plausible?

Mr. NORMAN: Well, according to the information that's been released, they did exactly what Mr. Patrick suggested. They got telephone numbers of personnel in the Pentagon, and that certainly would be a good thing to suggest. I mean, in view of the information that's been released, that could have happened.

HUNTER-GAULT: How worrisome is this to exectives like yourself and your company? I mean, there was a suggestion that more than just these kids could be doing this, that this kind of information, this kind of accessing could be utilized by people with far more serious intentions -- spies and so on. Is that a real big worry?

Mr. NORMAN: Well, it certainly is a concern in the business community, and I think it's becoming more of a concern as we become more aware of the capability of the hobbyists and the hackers and the people who deal with computers. And I think some of the incidents that have happened over the past several months regarding accessing various computers has helped to highlight that. So to recognize there is a risk there, yes, we do. And we must continue to recognize it as a risk there and deal with it accordingly. We can't simply turn our back and say the problem is going to go away. It won't.

HUNTER-GAULT: All right. Well, thank you very much for being with us, Mr. Norman, and Mr. Patrick in Milwaukee. Jim?

LEHRER: Again, the major stories of this Wednesday. Federal Reserve Board Chairman Paul Volcker said the Fed will continue to let the money supply expand because there was no immediate threat of inflation, and such action would continue to hold down interest rates. Leading Democrats announced legislation that would put a 25 surcharge tax on imports from Japan and other nations which have large trade imbalances with the United States. And President Reagan's recovery from cancer surgery was described by Vice President Bush as being dramatic. Good night, Charlayne.

HUNTER-GAULT: Good night, Jim. That's our NewsHour for tonight. We'll be back tomorrow night. I'm Charlayne Hunter-Gault. Good night.