The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Leading the news this Thursday, Pres. Bush and the leaders of Colombia, Bolivia, and Peru met for a one day drug summit. Pres. Bush vowed to reduce the demand for drugs in the United States. Another Baltic republic, Latvia, voted for independence from the Soviet Union. We'll have the details in our News Summary in a moment. Judy Woodruff is in Washington tonight. Judy.

MS. WOODRUFF: After the News Summary, we go first to political analysts David Gergen and Mark Shields for a look at Pres. Bush's trip [FOCUS - GERGEN & SHIELDS] to the Colombia drug summit and other of the week's events, then Correspondent Paul Solman [FOCUS - DEBT, BE NOT PROUD] reports on how to finance a deficit government style. Next is the baseball lockout [FOCUS - INSIDE BASEBALL]. We talk with Baltimore Orioles player representative Phil Bradley and Sports Illustrated writer Tim Kurkjian. We close with [ESSAY - UNTOUCHABLE REPUTATION] Essayist Clarence Page's look back a fateful St. Valentine's Day.NEWS SUMMARY

MS. WOODRUFF: The leaders of the United States, Colombia, Bolivia, and Peru met today for a one day drug summit. The meeting took place under extraordinary security in the Colombian seaside city of Cartagena. The leaders agreed to coordinated effort against cocaine producers and traffickers. The United States also promised to ease trade restrictions against Colombia's legal exports such as coffee, flours and sugar. After the meeting, Pres. Bush answered criticism that the U.S. was not serious about reducing the demand for drugs in this country.

PRES. BUSH: I owe it to the children of America, the United States, and I owe it after this cooperative meeting to these three presidents to guarantee them that we will do everything we can to cut out the demand for narcotics in the United States, and that means going after any cartel, any individual, any law breaker of any kind who is violating the laws of the United States, or indeed international law, when it comes to narcotics.

MS. WOODRUFF: Also in Colombia, police said an American priest was kidnapped today. Father Francisco Amico Ferari was seized in a suburb of the town of Colley in Southwest Colombia. Pro- Cuban guerrillas are assumed to be responsible for the kidnapping. Two other Americans were seized earlier in the week by members of the so-called National Liberation Army who were protesting Pres. Bush's visit to Colombia. Robin.

MR. MacNeil: Another Soviet republic has decided to challenge Moscow's authority. Latvia's parliament today voted to try to secede from the Soviet Union and become an independent state. Latvia is one of three republics on the Baltic Sea annexed by the Soviet Union 50 years ago. The other two, Estonia and Lithuania, have already called for independence. Next week, the Soviet parliament is expected to debate whether to allow secession under certain conditions. In East Germany, one of that country's best kept secrets, how it produced so many Olympic champions, is beginning to come to light. This week, Western journalists were allowed to see one of East Germany's top athletic training facilities. We have a report narrated by Tom Brown of Worldwide Television News.

MR. BROWN: From outside, the building looks unimpressive, but underground, it's a showpiece of high-technology equipment. The low pressure air chambers have been used to train East Germany's top athletes since the '60s, the simulated high altitude conditions super charging their blood by increasing red corpuscles, leading to outstanding athletic performances. The athletes went into the chambers just before events. Olympic walking champion Peter Frenkel admitted he couldn't have taken three seconds off the existing record if he hadn't worked out in the chamber. Money appears to have been little object. In 1980, a huge chamber the size of a football field was constructed. The new complex incorporated a running track and rowing center. During East Germany's string of sporting successes, Keinbaum was one of its best kept secrets, but the center wasn't without its problems. One athlete broke down with lung damage. Later officials said they had corrected the problem. West German athletes might well be offered the use of the center too if there's a united German team in the next Olympics.

MS. WOODRUFF: In South Africa today Nelson Mandela met with Jesse Jackson at his home in Soweto. Afterwards, Jackson held a news conference with Mandela by his side and he disputed the notion that Mandela is a free man.

REV. JESSE JACKSON: These headlines across the world that Mandela is free is a misnomer. He is out of jail, he is not free, so the freedom struggle to end apartheid and create a free and democratic, non-racial South Africa is before us, and beyond apartheid will be South Africa's, a new South Africa's brightest days.

MS. WOODRUFF: In the capital, Pretoria, several thousand pro- apartheid whites held a rally to protest Mandela's release and other reforms of Pres. F.W. DeKlerk. The rally was organized by the conservative party which won 30 percent of the white vote during last year's parliamentary elections.

MR. MacNeil: Back in this country, there was record breaking economic news. The Commerce Department reported housing starts up 29.6 percent in January. That was the largest one month gain since the department began keeping the statistic in 1959. The rise was attributed to recordbreaking warm weather last month following a severe cold spell in December.

MS. WOODRUFF: A federal grand jury in Washington today indicted Washington, D.C. Mayor Marion Barry for perjury and for possession of a controlled substance. The indictment comes four weeks after Barry was arrested for cocaine possession in a federal sting operation. The charges followed a 14 month investigation by the grand jury. Barry is now undergoing treatment at a substance abuse clinic in Florida. Also today in a Miami court a Panamanian pilot pleaded guilty to flying $800,000 in cocaine profits from the U.S. to Panama. Eduardo Parda became the first of sixteen people indicted in 1988, including former Panamanian dictator Manuel Noriega to plead guilty in the drug trafficking case. Parda was arrested in Panama City after the U.S. invasion in December. He faces five years in prison and a $10,000 fine.

MR. MacNeil: Finally in the news, First Lady Barbara Bush was treated yesterday for a common form of skin cancer. Her office said today that Mrs. Bush had a small basal cell carcinoma removed from her upper lip at Bethesda Naval Hospital. Basal cell carcinomas often occur on areas of the skin which are exposed to the sun. That's it for the News Summary. Now it's on to Gergen & Shields, financing the U.S. deficit, baseball's spring training lockout and a Clarence Page essay. FOCUS - GERGEN & SHIELDS

MS. WOODRUFF: First up tonight is the political analysis team of Gergen and Shields. The main topic is today's Drug Summit in Cartagena, Columbia where under tight security her held a one day Summit meeting with the Leaders of three major cocaine producing countries, Colombia, Bolivia and Peru. The four men signed a series of bilateral agreements designed to intensify the war against drugs. Before leaving Colombia late this after noon the four Presidents talked with reporters. Here is some of what was said.

VIRGILIO BARCO, President, Colombia: [Speaking through Interpreter] It is the first time we have developed a common key for common action and we have agreed on a very clear cut road to be followed.

DAISSY CANON, Revista Cromos [Colombia]: [Speaking through Interpreter] With all these security systems that have been established you show that there is a lack of trust regarding the Colombian Authorities. Perhaps you thought we could not protect your life and the people that came with you. Now we would like to know we also have a lack of trust regarding the cartel of drug users in the UNited States and people who have been bribed in the United States. Are you willing to fight against those in the United States?

PRESIDENT BUSH: I wouldn't be here if I had any such lack of belief. I am here. I have great respect for what President Barco is doing on the War on drugs and I hope that my coming as with President Garcia demonstrates a solidarity of support for him. And the security arrangements have been very good and I would say that there has been a lot of speculation about that in our country that probably compelled you to ask the question. I don't know what cartel you are talking about but I owe it to the Children of America the United States and I owe it after this cooperative meeting to these three Presidents to guarantee them that we will do everything that we can to cut out the demand for narcotics in the United States and that means going after any cartel, any individual, any law breaker of any kind who is violating the laws of the United States are any international law when it comes to narcotics.

MS. WOODRUFF: We'll look at the Drug Summit and the rest of the weeks political events now with our political analysis team of Gergen and Shields. David Gergen is Editor at Large at U.S. News and World Report. Mark Shields is a Syndicated Columnist for the Washington Post. Gentlemen was this Summit just a show of solidarity between these four countries, was more symbolism or was there something really substantive that was accomplished. David,

MR. GERGEN: I think that it was an important Summit. I think we have to remember the United States has 5 percent of the World's population and we consume 50 percent of the World's cocaine. Most of that cocaine, 80 percent of comes from these three countries, Colombia, Bolivia and Peru. It is important that we try to cut that off. I think that the President by going there taking the risk that he did sent a message to these Presidents and to the people of those countries that he is quite serious about this and the United States is prepared to put additional resources in to the fight. I don't think that we should expect instant miracles. We can talk about that but I do think that this was an important step.

MS. WOODRUFF: Mark.

MR. SHIELDS: I think symbolically it was important and it had a reality to it as well. President Barco and the Officials of Colombia who have made heroic efforts against the cartels there are taking risks that no Officials other than policemen on the beat and drug enforcement agents in the line take. I mean the Attorney General and Cabinet Officers don't. They do. They do they put their lives, their faith, their families, their fortune in many instances on the line and I think that George Bush had to go in that sense. I mean he really was committed to supporting President Barco. Beyond that it was almost a meeting between the suppliers and producers, I mean the consumers and producers. And the irony of today and George Bush put it well. He said we have to do something about demand. I mean they are the suppliers but we are the ones that consume it. The irony was that on the very day of the meeting the Mayor of a the Capitol City of the United States was indicted for possession of cocaine and perjury and lying about his possession of cocaine.

MR. GERGEN: Eight counts.

MR. SHIELDS: Eight counts. You know it really puts the case of the Latin American nations in context. That say that is really where the problem lies.

MR. GERGEN: I don't think that we should believe that this is going to go quickly. The papers are reporting now that while Colombia has done an excellent job cracking down, President Barco has done an excellent job, that the levels of cocaine being produced in Colombia are back to 80 percent of what they were before. It is also important to understand that the three Presidents, Bush met today two of them are going to be out of office in a year. The Presidents of Peru and Colombia. The third President comes from Bolivia. You have a 180 military coups there in the last 125 years. It is not a very stable country. One Bush Official said that Bush is meeting with two lame ducks and a wild card.

MS. WOODRUFF: But these Presidents wanted something very specific, among other things they were asking for some economic incentive for these farmers who were growing the coca plant to grow something. Are they going to get that kind of a promise from this Administration, from this government?

MR. SHIELDS: Well I mean yes they are going to get help. They are not going to get the kind of help we are talking about. We are talking about replacing half the exports of a country, I mean, so we are not going to do that and once you start you get in to political problems. Tip O'Neill had a great maximum all politics is local and the local politics in the United States is farmers and if you tell them what you ought to do is grow. You have got perfect territory there in Colombia and Peru to grow citrus fruits and you want to bring those in the United States and what is Florida and California and those Congressional delegations going to say to that. So that is what has to be ironed out. Obviously as you mentioned earlier in the broadcast in the news round up coca, cut flowers and sugar we have to in good faith make our markets and more available.

MR. GERGEN: We do have to open our markets but I think that we have to understand why the President's of those countries are still concerned. They estimate that this cocaine business is worth 4 billion dollars a year to them at this point. We are prepared to put on the table about 250 million dollars quite a lot less than what they are.

MS. WOODRUFF: So realistically what are we saying?

MR. GERGEN: I think realistically what we are saying is this is going to take a long time. It is going to take a lot more money than we have been willing to put in. I think this is the first step toward them gradually jacking up the amount of money they want from the U.S. and opening our markets, as Mark says, to their exports of alternative products.

MS. WOODRUFF: And right now it is a very small percentage of our overall foreign aid that goes to these countries.

MR. GERGEN: Only 4 percent of our total drug budget is going in to helping these countries. It is only a tiny proportion of the 10 billion dollars we are spending. Most of it is going right here at home. So we have a long way to go to get this thing done but hey you have to get started somewhere and I think the President was wise to take this trip and I think that it was a bit risky but I think that it was wise to do it.

MR. SHIELDS: Politically, Judy, there is one other factor that can't be over looked. George Bush has announced that this is the number one problem facing the nation and it is the issue on which his Administration will be judged and I think that for him not to go there to the front lines, and let's be very frank about it, most Americans I know are holding their breath while George Bush is out of the Country.

MS. WOODRUFF: For his safety.

MR. SHIELDS: For his safety and there was an anxiety level that was higher than that when George Bush was Vice President or when Walter Mondale was Vice President or when Hubert Humphrey was Vice President.

MR. GERGEN: Right.

MS. WOODRUFF: One other thing. This Administration has been saying up until very recently that they were still prepared to provide some sort of military escort, American Navy Ships to be based off shore some of these countries to help them in fighting in the drug trafficking. These countries have sent a clear signal that are not interest in that. Is that right?

MR. GERGEN: We don't know everything, of course, at this point that was said within the Summit and there has been some hope with in the Bush Administration when things calm down the Latin American post Panama period it will be possible to post ships off there but President Barco of Colombia did tell reporters today no we do not need them they are not coming. We don't want American forces down here off our shores. We don't want a blockade.

MS. WOODRUFF: This has been an extraordinary week as we all realize in terms of international events. We have had the four power agreement to pursue the German reunification question,. We have had the agreement between the NATO and the Warsaw Pacts on troops cuts in central Europe. In South Africa you had Nelson Mandela's release. There are some signs of a possible Israeli, Palestinian issue. Look at the Bush Administration for a minute and tell me is there something that this Administration has done on purpose that has made all this possible or is this just a lucky period that we happen to be going through?

MR. SHIELDS: Brilliant. There is a great word in American politics when good things happen when the President is in office on that President's watch that President prospers and benefits from them. If bad things happen quite apart from any of the President's policies occur than that President suffers politically. George Bush is obviously prospering and the two that you mentioned are rather ironic. German reunification where he is getting a little flap at the White House. He was unaware or at least unwilling to reveal that the proposal virtually at that very moment was being out on the table in Ottawa by his own Secretary of State and secondly the release of Nelson Mandela which was accomplished in part most of the critics would acknowledged by the applications of sanctions which were opposed by George Bush and the Administration which he so loyally served. So you have this mix, I think, that at the same time you have to say the collapse of Communism and the economic burden that it carried before it collapsed had to be attributed in part to the defense build up of the Reagan years. So sure there are policies that have implications and ramifications and it is a truly remarkable time and he does prosper politically.

MS. WOODRUFF: David.

MR. GERGEN: I have several thoughts but I am not sure that I want to cut in to that cloud.

MS. WOODRUFF: Cloud. Be nice to your friend here.

MR. SHIELDS: One thing you have to say watching that film clip. If you are going to bet on the 1992 Olympics you have to bet on Germany. I mean West and East together.

MR. GERGEN: I think that George Bush, of course, he hasn't unlocked all these doors and opened everything up but I do think that he has managed changed well. He has particularly managed change well with regard to the Soviet Union and Eastern Europe. He has not exploited it. I think that he made it easier for Gorbachev to go forward with his proposals and his ideas. He has also taken the lead among the Western Nations in helping to smooth the transition for German unification. If he would have said no it would have been extremely difficult. We would have had explosions with in the Western Alliance but Bush was out in front on that. So I do think on that score he deserves credit. I would certainly see that the right was wrong and I was skeptical on sanctions on South Africa. We were wrong about that.

MS. WOODRUFF: You have heard it here Mark.

MR. GERGEN: But as long as others would concede and I think Mark did it tonight that Reagan's defense build up had a lot to do with what the Soviets have done in retreating and backing away. And I do think that you have to say that Reagan and his ideas of freedom and his commitment to that. He helped spread those ideas. I do think that some of what is happening in the World. That the United States stood for those values in the Reagan years and then previous years and I think that has made a difference around the World.

MS. WOODRUFF: Mark.

MR. SHIELDS: Judy, the German reunification I don't want to give George Bush too much credit for it because I think that it was a historical and emotional reality all the time this debating was taking place.

MS. WOODRUFF: But David was saying of Bush had opposed it?

MR. SHIELDS: If Bush had opposed it. It took on an air of inevitability itself.

MR. GERGEN: The people of Germany are determining their own fate.

MR. SHIELDS: They are determining their own fate and future. I would not pass out their bouquets to the President that David has here tonight for his leadership. I don't think that it has been bold, I don't think that it has been particularly imaginative or terrible inspired. It has been stable, it has been thoughtful and not impulsive but one can hardly say that at this crucial moment in history that the United States is providing the leadership.

MR. GERGEN: No question about that. On Eastern Europe we are still very much on the sidelines and when you go to Europe people are treating us as if we were very helpful to them in solving their past problems while not exploiting their future. In that point I do agree but I think in a quiet way he has been helpful on German reunification.

MS. WOODRUFF: Alright just one other thing. This week it was decided that the California, we are really shifting to domestic politics. The California Presidential primary will apparently now be shifted back a few months to March. Significance of this? Mark.

MR. SHIELDS: It's a terrible terrible thing. I mean I have great respect for California. California is a enormous nation state. Sixth largest gross national product in the World if it were a separate entity. More people then there are in Canada, East Germany or lots of other places. But the idea of having California as the third primary behind Iowa and New Hampshire just wipes out the under dog candidate. The outsider, the candidate who doesn't have a big bankroll. We are talking about running a campaign in a State where to run a Senate Campaign it is requiring 20 million dollars. What it comes down to is upping the anti who can get to the table in California and you are probably talking about Mario Cuomo and.

MS. WOODRUFF: You don't think the unknown was already out it?

MR. SHIELDS: Well the great thing about Iowa and New Hampshire that some one could make that connection that Chemistry. George Bush did in 1980. Pat Robertson and Dick Gephardt in 1988.

MR. GERGEN: Well I agree that money has to much influence but there is a lot to say there is lot to be said for national experience and for having nominees from these parties who have been around their track and not somebody who comes in spends three years bicycling around the States and comes out of nowhere to take the nomination of his party. That is not the best way to run a national government. And I would say ..

MS. WOODRUFF: You are not going to name any names are you?

MR. GERGEN: I think that in retrospect the Dukakis candidacy how well would have he fared if there were a California early?

MR. SHIELDS: He would have won.

MR. GERGEN: I am not so sure.

MR. SHIELDS: He would have won because he would have had 12 million dollars David. he had the ability to raise money and if that is what you want the measure to be Nelson Rockerfeller should have been nominated four times for your party.

MR. GERGEN: But Mark the point is that we and other countries of Western Industrialized nations people work their way up through the system to get to the top as George Bush has through experience and I think that helps when you have experience.

MS. WOODRUFF: I have a feeling that this is one we are going to be coming back to. David Gergen, Mark Shields, thank you both. Robin.

MR. MacNeil: Still ahead on the Newshour how the U.S. finances its debt, baseball's Spring training lock out and a Clarence page essay. FOCUS - DEBT, BE NOT PROUD

MR. MacNeil: Next, what do you do when you're deep in debt? If you're the United States government and you own $3 trillion, there's only one place to turn for quick cash. Last week, the U.S. Treasury held one of its regular auctions to raise billions of dollars. Our special business correspondent Paul Solman was there.

MR. SOLMAN: This is part of the bond market you hear so much about, the New York trading floor of Japan's Yamaichi Securities, one of the forty-six brokers which buys bonds directly from the U.S. government. Now, as you may know, these U.S. government bonds are simply the IOUs the U.S. government issues when it borrows money. We're sitting here on Thursday, February 8th, as the government is about to borrow $10 billion by issuing $10 billion worth of bonds. And the question is how much will the U.S. government and therefore you and I have to pay in interest to attract $10 billion from lenders?

MR. SWANBORN: I'm not going to buy 'em. I have no interest in buying these things inside of 50.

MR. SOLMAN: Our fate depends on how dealers like Mel Swanborn behave at the bond auction 90 minutes away when he will literally do the bidding of his Japanese customers and bosses. At the moment, U.S. 30 year bonds are pre-trading among speculators at an interest rate of 8.45 percent. The word is that the Japanese won't buy at that price. Now how do the Japanese decide whether or not to buy our bonds and thus, lend us money? The same way any lender sizes up a borrower. To illustrate and spice up this story just a bit, consider that beacon of American lending, The Money Store, known through the TV ads of its pitch man, baseball's Phil Rozutto. Now captains of capital from Japan to The Money Store are always eager to lend. Since The Money Store seems so eager to lend, we set up a meeting supposedly to borrow a few bucks.

JOSEPH A. COSTA, The Money Store: What can we do for you?

MR. SOLMAN: I'd like to borrow some money.

JOSEPH A. COSTA, The Money Store: By all means, sit down.

MR. SOLMAN: The Money Store agreed to play along.

JOSEPH A. COSTA, The Money Store: What is your name?

MR. SOLMAN: Paul Solman, but I'm actually here on behalf of the United States of America.

JOSEPH A. COSTA, The Money Store: The United States of America. How much do you want to borrow?

MR. SOLMAN: Today we need about $10 billion.

JOSEPH A. COSTA, The Money Store: $10 billion. $10 billion? How long do you need it for?

MR. SOLMAN: Thirty years. We'd like to borrow it for 30 years.

MR. COSTA: What is the total amount of your debts outstanding?

MR. SOLMAN: Actually just over $3 trillion.

MR. COSTA: $3 trillion, that's a lot of money. May I ask what your income is?

MR. SOLMAN: Income is about $1 trillion a year.

MR. COSTA: And what are your expenses?

MR. SOLMAN: About a trillion two, something close to that.

MR. COSTA: You're running into a deficit each year?

MR. SOLMAN: That's right, that's right. Actually for the last 10 years, we've been running into one pretty consistently.

MR. COSTA: Well, if you're running into a deficit, how do you anticipate being able to repay the $10 billion?

MR. SOLMAN: The idea is that over time expenses would go down and the economy would grow and so we'd take in more taxes and balance the budget ultimately.

MR. COSTA: When do you need the money?

MR. SOLMAN: Tomorrow. Do you think you can get me the money tomorrow?

MR. COSTA: Well, The Money Store will lend money for any purpose. $10 billion is an unusual amount. We'll give it every consideration and we'll give it our best shot and we'll get back to you.

MR. SOLMAN: Well, thank you very much. I appreciate it, Mr. Costa.

MR. COSTA: You're very welcome.

MR. SOLMAN: So those are the basic questions any lender will ask if you want to borrow money. But if you want to borrow billions and billions on the international market, a whole set of other questions comes up, and for those we need to go back to Yamaichi. It's 12:20, 40 minutes to the 1 PM auction. The 30 year interest rate at the moment, the second line from the bottom [on computer screen] is 8.466 percent. Oops, it's just gone up to 8.47. That blip could cost you and me a couple of bucks. You see, even though we're only talking fractions of a percent here, my very rough calculations suggest that every 1/10 of 1 percent could cost the average taxpayer as much as $30 a year.

DEALER: The current talk is that the Japanese are a little mad that it's under 8 1/2. Okay, that's the street talk.

MR. SOLMAN: The interest rate creeps up, but not yet enough to lure Japanese investors.

MR. SWANBORN: It's a situation where I don't think the Japanese are going to chase it.

SCOTT PARDEE: I don't think so either. From what I learned last week, I don't think they're going to chase it at all.

MR. SOLMAN: Mel Swanborn's boss on the left is Scott Pardee, the chairman of Yamaichi, New York. This morning he's just back from Tokyo, where he was trying to sell U.S. bonds to Japanese investors. He found them as frustrated as ever about America's deficit.

SCOTT PARDEE, Yamaichi International: Nothing has been done about the fiscal deficit at all. We see all of these things coming out of Washington and there's nothing that's credible, so for the investor, American investors, foreign investors, it's the same thing. The bonds are coming at us over and over again and there has to be some concession by the United States government to investors to place money even in U.S. Treasury securities at this moment.

MR. SOLMAN: Scott Pardee works for the Japanese, but when he complains about the deficit, he's not just mouthing the Pardee line. The previous evening at New York's Japan Society a panel on the politics of the U.S./Japan relationship immediately focused on economics. One of America's foremost critics of Japan, however, Pat Choate sounded as critical as the Japanese about our national debt.

PAT CHOATE, Author: It has soared from $950 billion in 1980 to over 1.3 trillion today. It is the cause of the major portion of our problems with other nations. It is one of the reasons that the United States finds itself increasingly vulnerable to lenders. It is a reason why the United States and the Treasury holds with bated breath these Treasury auctions to see whether foreign lenders will come.

DEALER: [On Phone] I sold 99 million right, before? Okay.

MR. SOLMAN: Well, back at Yamaichi 20 minutes to Thursday's Treasury auction and foreign lenders are still holding back. Mel Swanborn's Japanese customers, for example.

MR. SWANBORN: [On Phone] They just told me there is no portfolio interest in Tokyo. I don't see anything, really, I mean. I can't, they're telling me, looking me right in the eye, there's no domestic portfolio interest at these levels.

MR. SOLMAN: Since the Japanese haven't yet committed to buying for their investment portfolios, the interest rate is rising in order to attract them. By a quarter to 1, it's up another tenth to 8.48. Back at the Japan Society debate, investment banker Bob Hormats gave another reason why America has to pay more and more to borrow money.

ROBERT HORMATS, Investment Banker: The fact is that the United States has a short fall between its savings and its investment of roughly $120 billion a year give or take, which means in order to make our economy go without having to cut back investment, we have to import $10 billion a month from abroad.

MR. SOLMAN: 10 billion a month mainly from the Japanese who want to know how long this is going to continue.

SCOTT PARDEE, Yamaichi, International: The Japanese have a savings rate of about 15 percent. Ours moved up last year to 5.7 percent, which is improving, but as long as the Americans can't finance, we cannot finance our own deficit from our own savings, then it is expected that money would have to come from elsewhere. Well, they want to know how much is that excess that's going to be needed, so they ask a lot of questions about the savings rate. They follow the savings rate in many ways more closely than we do.

MR. SOLMAN: It's because of Japan's high savings rate that we've come to rely on their lending in the past. Even in the past few days when shorter-term U.S. bonds were being sold, Japanese investors bought more than a third of them, but at today's interest rate they're holding back because of the deficit, because of our low savings rate and because increasingly, as Scott Pardee points out, they have other places to invest.

MR. PARDEE: Western Europe is growing, Japan is growing, the newly industrialized economies are growing. Now we see Eastern Europe coming in with additional demands. There's a feeling that interest rates may rise further around the world.

MR. SOLMAN: Now with all this doom saying, you begin to wonder if Japanese investors might stop lending to America entirely. I put this question to Kazuo Nukazama, who represented his country at the Japan Society debate. How long do you think the Japanese will continue to lend to the United States?

KAZUO NUKAZAMA, Economist: We will continue to invest until we learn that the United States has become incurably ill.

SPOKESMAN: What is your definition of incurably ill?

MR. NUKAZAMA: Well, it's -- when I stop investing in you --

MR. SOLMAN: Well, let's see how our national health is holding up. The interest rate is still rising to 8.49 percent. At the wire Yamaichi bids for nearly a billion dollars worth of bonds at an average of 8 1/2 percent. Yamaichi won't know how many bonds they'll actually get till all the bids have been tallied. The announcement will come in a couple of hours. But here at least, Japanese investors did step up at the last moment. Partly that's because that's the interest rates finally rose high enough. Partly, it's because America's lenders have not yet diagnosed our economy as incurably ill. It's 3:05 and the results of the auction have just hit the screen. Swanborn and Yamaichi were right on the money. The interest rate is 8.50, so they get their bonds. They are satisfied. And for today at least the United States of America should probably be satisfied as well. Our economic problems have cost us an extra $75 million in interest a year on these bonds alone, but given our dependency on foreign money, it could have been a lot worse. You watch the trigger happy bond market and see America's dependence on it and you wonder suppose we weren't the world's largest debtor? Well, then we wouldn't have to go hat in hand to lenders, wouldn't worry about every little blip on the screen. We'd borrow less, issue fewer IOUs or bonds. And since America would then be solvent as well as enormous, investors would gobble up the few U.S. bonds hitting the market. So we could offer less and less interest, you and I would owe less, our mortgages would cost less and so on. But as long as our deficit remains high and savings low, we'll continue to borrow like crazy, continue to be dependent on forces well beyond our control. FOCUS - INSIDE BASEBALL

MR. MacNeil: Next, will major league baseball strike out this year? Today was to have been the first day of spring training, but team owners kept the players off the field until a new contract can be negotiated. For months, baseball players and team owners have negotiated without success on a new agreement to replace the players' contract that expired at the end of 1989. We'll discuss the issues in a moment after this backgrounder by Kwame Holman.

MR. HOLMAN: In a normal year, the approach of spring would find these Baltimore Orioles in training at their baseball camp in Sarasota, Florida. But this is not a normal year for the Orioles or the 25 other teams in major league baseball. Team owners say camps in Florida and Arizona will remain closed until a new contract with players is struck, so the Orioles worked out on their own yesterday under the stands of their Baltimore Stadium, and today baseball owners locked players out of facilities belonging to teams throughout the major leagues.

MICKEY TETTLETON, Baltimore Orioles: Just like everybody else, just in the wait and see process, you know.

MR. HOLMAN: At stake in this latest dispute is the same central issue that's divided professional baseball players and team owners for more than a century. Who decides how much a player earns, what benefits he receives and what team he can play for? Until 1975, owners had that control. That year, a court ruled in favor of pitcher Andy Messersmith, establishing that professional baseball was subject to federal anti-trust laws and ending the owner's longstanding practice of forcing a player to stay with one team throughout his career. One result was that players could become so- called "free agents", able to negotiate the best contracts they could with the highest bidder. To hold on to their best players, owners offered multi-year, multi-million dollar contracts, but those contracts resulted in some huge losses when players became injured or otherwise unable to perform. Still, baseball through the 1980s was far from bankrupt, helped particularly by record sums television paid to show an increasingly popular sport. By the time of this final out in the 1987 World Series, players were well on their way to the multi-million dollar a year salaries that are common today and team owners were approaching combined earnings that now stand at an estimated $1.2 billion a year, but the labor/management unrest continued. Team owners were found guilty of agreeing among themselves not to bid for each other's free agent players in 1987 and again in 1988.

DONALD FEHR, Baseball Players Association: [August 31, 1988] Arbitrator George Nikolow has found not only that there was a conspiracy but that everybody knew it.

MR. HOLMAN: A third so-called "collusion grievance" against team owners is pending and players such a history makes them suspicious of the owners' latest offer. The owners insist their new plan is necessary to make costs predictable and to stabilize the labor/management relationships. Major features of the owners' offer are so-called pay-for-performance, salaries for younger players based on performance statistics, a cap on the salaries of the older free agent players that would be triggered when a team's payroll hit a certain ceiling. The plan would be funded by sharing with players a portion of the owners' revenues. In response, the Baseball Players Association specifically rejected the pay-for- performance concept and offered its own demands. Make players eligible to have their salary set by an independent arbitrator during their second year instead of their third, raise the minimum player salary from $68,000 to as much as $125,000, add one player to the current limit of twenty-four players per team, have owners sign a contract agreeing not to collude or conspire against players in the future. The players said they would have been content to continue within the same terms as their last contract, but team owners wanted changes and said they wanted to get matters settled now rather than risk a disruptive mid-season strike. That's what happened in 1981. Players walked out for two months in July, frustrating the fans who pay the bills for both sides in this dispute.

MR. MacNeil: What does the lockout mean for this year's baseball season? We have two views. Phil Bradley plays left field for the Baltimore Orioles and is one of the player representatives involved in the negotiations. Tim Kurkjian is covering the story for Sports Illustrated. The owners declined our invitation this evening. Phil Bradley, any progress in the talks today?

PHIL BRADLEY, Baltimore Orioles: I don't think you can necessarily call it progress. I think the fact that the owners have backed down from a few of their proposals, they've taken pay-for- performance off the table, they're backing down from revenue sharing, and they're starting to talk in terms of minimum salaries, salary arbitration, free agency, and the benefit play, things that we've been discussing and fighting over since the basic agreement came about.

MR. MacNeil: That would sound to an outsider like progress if they dropped two of the major demands that the players had resisted. Does that sound like progress to you, Tim Kurkjian?

TIM KURKJIAN, Sports Illustrated: Well, it sounds like it but the new proposals that they put up really aren't any better than the old proposals. They dropped revenue sharing but their ideas on salary arbitration are not going to solve the problem for the players at all, so even though it may look like progress, and it is in that they're both in the same ball park now, they're still quite a ways away.

MR. MacNeil: They're still asking for a cap on salary disputes that are arbitrated, right, there can only be a 75 percent increase over the player's existing salary when it's arbitrated?

MR. KURKJIAN: Yes, that's correct, but the problem is players today are getting 170 percent gains and losing their arbitration cases, so a 75 percent cap on arbitration is a very small one, and I don't see any way that the players would accept that.

MR. MacNeil: Give us an example of a recent salary that was arbitrated which would have been much less if there had been such a cap on there. Can you think of one?

MR. KURKJIAN: Well, I believe Randy Meyers of the Reds just lost his arbitration case yesterday. He got a 170 percent raise and his salary went through the roof on it. Given the 75 percent cap, it would have never been applicable.

MR. MacNeil: That is one that the players are just going to stand on, you're just not going to agree to the cap?

MR. BRADLEY: No, we don't like that idea of a cap at all. By setting a 75 percent cap, it's going to actually give the owners what they're looking for and that's called certainty, therefore, they'd be able to relatively predict if a player does well for the next three years during arbitration how much we might have to pay him as opposed to a free market system where if a player has a good year, he can get whatever the market's going to pay him.

MR. MacNeil: In other words, you're saying what the owners are trying to do is claw back some of the kind of free market that was created after the anti-trust case?

MR. BRADLEY: Yes, that's very correct.

MR. MacNeil: Let's leave the issues for a moment and go to what the effects are. How long can spring training be delayed and not interfere with the start of the baseball season?

MR. KURKJIAN: Phil's a better guy to ask. I personally think spring training is a little bit too long right now anyway, but I think if they get back on the field by March 10th, that'll give them about three weeks and I think they could push it and be ready to start the season on April 2nd, if they get it going by March 10th. Any time after that, it's going to be pretty rough.

MR. MacNeil: Do you agree with that, March 10th?

MR. BRADLEY: Well, you know, ordinarily during a regular season, a player wouldn't be required to report till February 28th, and wouldn't have to play in a game until 10 days after that, which is about March 10th, so I would say somewhere in-between the 1st of March and maybe March 10th, would be probably a date if all the players were in camp we could probably get the season started on April 2nd.

MR. MacNeil: So you've got a couple of weeks to negotiate before it begins really interfering with the season.

MR. BRADLEY: A couple of weeks, perhaps we must also take into account the fact that it's going to take the guys a few days to get down there. You can't call a guy on say February 28th and say be down on camp on March 1st. So you have to allow for a few days for people to get moving down to spring training.

MR. MacNeil: Your contracts have expired, the '89 contracts expired. Are baseball players being paid at the moment?

MR. BRADLEY: Actually, baseball players do not get paid until the season starts. There are a few exceptions where maybe players get paid over the course of 12 months. Basically most contracts run from the first day of the season till the last day of the season so actually players are not losing money. They just stand to lose money if the season doesn't get started on time.

MR. MacNeil: The owners also stand to lose a great deal of money. In fact, Shirley Povich, the sports writer at the Washington Post, today said the owners are just bluffing, they would never risk losing all the revenue from TV and everything else by really seriously eroding, running the risk of eroding the season. Are they bluffing, do you think?

MR. KURKJIAN: Well, I think some of them are willing to sit out the whole season if that's what it takes to get what they want, but I think the majority says, you know, we have too much to lose by locking them out for an entire season or something like that, so I personally think the owners are going to vote eventually to end this and get the season to go. But others are steadfast in locking them out until they get what they want.

MR. MacNeil: Do you think the owners are bluffing?

MR. BRADLEY: No. I think the owners are intent on trying to get baseball the way they want it.

MR. MacNeil: Some owners would take a hit for the whole season on revenue to get what they want?

MR. BRADLEY: I think so, but I also think both sides understand there is a lot there to be lost. You know, there is a lot to be gained by both sides, but at the same time we both stand to lose, and we, hopefully, we can get both sides together and get something settled here so we can get spring training started and get the season off on time.

MR. MacNeil: Why are the owners getting tough this year after they've lost two cases on the collusion thing? There, as we heard in Kwame Holman's report, they face another collusion charge. Why are they getting tough now?

MR. KURKJIAN: Well, it's just the start of a new contract and they just want to have their way for the life of the contract. They figure that now is the time to do it, you know, salaries are escalating, we've got to try to stop them, so let's put the brakes on right now.

MR. MacNeil: Do you want to add to that? Do you have a view of why they're getting tough now?

MR. KURKJIAN: Basically they feel like they don't like salary arbitration and they feel like they've lost, they don't like the fact that players are making money the way they are and they want to try to put some kind of cap on how much money players can make.

MR. MacNeil: Let's have your view from the players' side of how the growth in your money as players compares to the growth in the owners' money in profits.

MR. BRADLEY: Well, basically if you go back in 1985, when the report came on there just recently, a couple corrections we must make, the players do want salary arbitration back to two years. It's not that we're trying to go back. We had salary arbitration at two years and then the roster sizes, the rosters used to be 25. The ball clubs kind of arbitrarily went to 24.

MR. MacNeil: So it would be restoring it to 24?

MR. BRADLEY: Right. It's not like we're trying to acquire something new. We're just trying to get things back to the way they were because back in 1985, the owners were saying they were going broke and players actually made concessions to say okay, you can have one year back on the salary arbitration.

MR. MacNeil: Let me ask an objective observer here, a journalist, sports journalist, how do you think the percentage of growth in the players' salaries, which in some cases have been phenomenal, some people have signed on for $15 million over the length of the contract, and the growth of the owners' profits over the last few years, how do they compare?

MR. KURKJIAN: Well, it's very difficult to tell, but I have to think that the owners' revenue is going up as quickly as the escalating salaries. I mean, the owners' television contract of $1.5 billion was just immense. I mean, no one could even fathom how much money that was and now all the owners are in the black, they're all making money, no one is predicting, you know, failure at this point, so I don't think they have a particularly strong case for saying players' salaries are going up, we're in trouble. They can't do that because their revenue has gone up just as quickly.

MR. MacNeil: Do you want to forecast the outcome of this? Do you have a feeling how it's going to go, how long and what the outcome is going to be?

MR. BRADLEY: No. I just hope we can get it resolved quickly, but at the same time from a player's point of view, we have to make sure that we protect all the players. You know, last time when we signed an agreement, the younger players kind of got sacrificed by giving up one year of salary arbitration, and this time around we must make sure that we protect the zero to three year players, at the same time don't sacrifice the welfare of the free agent also.

MR. MacNeil: What's your prediction on what's going to happen?

MR. KURKJIAN: Well, I'm optimistic by nature. I think that they're going to get together eventually and I think that maybe a part of the season will be lost, but just a very small part, and I don't think it's inconceivable that the whole season will be saved, that the owners will come back and realize how strong the players are on these issues, realize they can't change their minds, realize there's too much to be lost and they work out an agreement in March and get everything going by April 2nd.

MR. MacNeil: Well, Tim Kurkjian, Phil Bradley, thanks both for joining us.

MR. BRADLEY: Thank you.

MR. KURKJIAN: Thank you. ESSAY - UNTOUCHABLE REPUTATION

MS. WOODRUFF: Finally tonight as Valentine's Day fades into memory for another year, essayist Clarence Page reminds us of another Valentine's Day, one that has special meaning for the people who live in Chicago.

MR. PAGE: Sometimes a city is haunted by its past. Atlanta will never forget the Civil War. New Orleans will never forget its river boat gamblers. When you think of Indianapolis, you think of the 500. What do you think of when you think of Chicago? Ah, yes. Other cities may have their distinctions, but Chicago is the only one that associates the feast of St. Valentine with a massacre. They don't call the Thompson submachine gun a Chicago typewriter for nothing. When we Chicagoans visit other parts of the world and say we're from Chicago, we just know we're going to hear some reference to Al Capone. We like to think Chicago is more than that. Sure we have gangsters, but no more than any other major city. Today we Chicagoans praise our great symphony, our great art institute, our great writers like Nelson Algren, Gwendolyn Brooks, Richard Wright, and Sol Bellow, our great pizza, deep dish pizza, our Cubs, our Bears, our Mike Ditka. That's Chicago's present. Still, we're haunted by our past. It's part of our local folklore. It's part of us. It's also a tourist attraction. You can sign up for this Untouchables tour and take this bus to famous sights of the prohibition era, the Biograph Theater where John Dillinger had his final date with the Lady in Red, and the ally down the street where he died in a hail of FBI bullets, a combination safe house, boarding house, bordello and speak easy where Capone housed some of his hit men and the passage way in the back through which they escaped from the police. Maxwell Street Police Station where some who didn't escape wound up. Our past sells itself. Just ask Geraldo Rivera. When he cracked into Capone's vault in the old Lexington Hotel on national television, he didn't find anything, but he did win the biggest ratings any syndicated show ever had. Speaking of shows, Tony Dunn's Garage, an old fashioned speak easy only a block away from police headquarters. If you want to catch a little bit of a fantasy, this is the place. The speak easy, the flappers, the scandal, the Untouchables, the mob. Although we Chicagoans seem ambivalent about our gangster past, secretly we're proud of it. It's the pride of knowing that, yes, we are what Chicago poet Carl Sandburg called us, the city with big shoulders. It's the pride of the tough police sergeant in the Untouchables who said to Elliot Ness.

POLICE SERGEANT: Do you want to get Capone? Here's how to get him. He pulls a knife, you pull a gun. He sends one of yours to the hospital, you send one of his to the morgue. That's the Chicago way.

MR. PAGE: Yeah. That's the Chicago way. A city is more than brass and steel. A city is a state of mind. Yeah, we're from Chicago. We handled Capone, we can handle anything. Don't call us the second city. RECAP

MR. MacNeil: Once again the major stories of this Thursday, Pres. Bush and the leaders of Colombia, Bolivia, and Peru held a drug summit in Cartagena, Colombia. The four nations pledged to work together to stop the flow of drugs to the United States. Pres. Bush said the issue of whether the U.S. Navy should patrol the Colombian coast was not discussed. The Baltic republic Latvia vowed to pursue independence from the Soviet Union, and a note on tomorrow's program we will have extended News Maker interviews with Secretary of State Baker and Nelson Mandela. Good night, Judy.

MS. WOODRUFF: Good night, Robin. That's our Newshour for tonight. We'll be back tomorrow night. I'm Judy Woodruff. Thank you and good night.