The NewsHour with Jim Lehrer

MR. LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, the judge who changed his mind on some drug evidence as seen by former White House counsel Lloyd Cutler. The big Baby Bell and health care mergers, Paul Solman runs the Baby Bells, Charlayne Hunter-Gault looks at the health care deal. And rebuilding Bosnia, Margaret Warner talks to the European official in charge. It all follows our summary of the news this Tuesday. NEWS SUMMARY

MR. LEHRER: The U.S. economy grew only 2 percent last year, according to a Commerce Department report today. That's the weakest showing since 1991. The Gross Domestic Product grew just .5 percent in the last three months of the year. Also today, another gauge of economic activity showed some future strength. The Leading Economic Indicators rose in February by 1.3 percent. That figure comes from a Conference Board report. It forecasts economic activity six to nine months in advance. President Clinton today defended his criticism of a federal judge in New York who handed down a controversial drug ruling. The judge reversed that decision yesterday. The President, Senate Minority Leader Dole, and others had criticized Judge Harold Baer for dismissing drug evidence and a videotaped confession. Baer said yesterday additional testimony caused him to reverse that ruling. The President said he did not regret appointing Judge Baer.

PRESIDENT CLINTON: I think that it's important not to get into the business of characterizing judges based on one decision they make. Judge Baer had a rehearing on it, made a decision. I support the system we have. I support the independence of the federal judiciary. I do not believe that means that those of us who disagree with particular decisions should refrain from saying we disagree with them. It doesn't mean we won't obey them. We'll all obey them, but if we don't agree and we have reasons for not agreeing, we should be free to say that.

MR. LEHRER: Judge Baer originally ruled police did not have probable cause to search a car. The driver of that car later confessed she came to New York as a drug courier. Bags in the car held drugs said to be worth $4 million. We'll have more on this story later in the program. A federal appeals court in New York today struck down a state ban on doctor-assisted suicide. It ruled doctors can prescribe drugs to end the lives of terminally ill patients who are mentally competent. On Bosnia today, war crimes investigators arrived in a village near Srebrenica. They are preparing to inspect mass grave sites where thousands of Muslims are believed to be buried. American troops in the NATO peacekeeping force will guard the investigators. The man in charge of implementing the civilian side of the Dayton Peace Accords was in Washington today. European Union Representative Carl Bildt said he hoped the NATO force would be able to leave Bosnia in December as scheduled. He spoke in a NewsHour interview.

CARL BILDT, European Union Representative, Bosnia: I think it's important that we make clear that it is not our country. The responsibility for the future stability, security, prosperity, whatever, is for the political leaders, themselves; that they will have the maturity and the responsibility to have the full responsibility for their country. That implies that we will be there to help them, of course, but I can see no foreseeable circumstances in which we would need 60,000 soldiers there after the end of this year.

MR. LEHRER: We'll have that complete interview later in the program. At the Pentagon today, the commander of NATO forces in Bosnia was cautious. Adm. Leighton Smith said he did not yet know whether all peacekeeping forces should leave at the end of the year.

ADM. LEIGHTON SMITH, NATO Commander, Bosnia: I'm not prepared to make any recommendation about stay or go right now. I think there are too many variables in this plan, and I would prefer, frankly, to not be quoted as saying one way or the other. I am prepared to wait and watch the development. We've got time before we have to make that decision. From a military perspective, we've got plenty of time.

MR. LEHRER: The admiral said the real question was whether a military force would be required to stay long enough to guarantee a lasting peace. In Moscow today, the Presidents of Russia and Belarus signed a treaty linking their economies and political systems. The new union would be governed by a council of leaders from both countries. It would eventually have a common constitution, budget, and currency, but each country would keep its independence. But in the capital of Belarus today, there was a demonstration against the new alliance. The demonstrators carried signs reading, "Save Belarus." In Haiti today, UN officials confirmed as many as 104 people died in a shipwreck last Thursday. Their bodies have now been recovered. The ship, a 45-foot ferry, ran into rocks off Southwestern Haiti. Forty-three passengers still are unaccounted for. Only three survivors have been found. And that's it for the News Summary tonight. Now it's on to the judge who changed his mind, the big mergers, and rebuilding Bosnia. FOCUS - POLITICS AND LAW

MR. LEHRER: We go first tonight to an issue of law and politics and to the case of a federal judge in New York City. Our coverage begins with this backgrounder by Kwame Holman.

KWAME HOLMAN: Last January, Judge Howard Baer, Jr., a Manhattan U.S. District Court jurist and Clinton appointee, set off a storm of criticism when he ruled that 80 pounds of cocaine and heroin found by police in a car could not be used as evidence. The incident involved these two New York police officers who searched a car after seeing four men put duffle bags in the trunk in the Washington Heights section of the city. The men ran away when they spotted the police, but a woman, who owned the car, was arrested. In declaring the drugs inadmissible, Judge Baer said there was no probable cause to search the car because it is not unusual for people to be leery of police in an inner-city neighborhood like Washington Heights. Soon after, New York City Mayor Rudolph Guiliani publicly criticized Baer's decision.

MAYOR RUDOLPH GUILIANI, New York City: I think Judge Baer is wrong. I think the opinion is wrong. I have read it, and I think what he's done to the reputation of, of at least one police officer, probably two, is very, very unfortunate.

MR. HOLMAN: And so did New York Governor George Pataki.

GOV. GEORGE PATAKI, [R] New York: His comments towards the police are outrageous and I think certainly question whether or not he should sit in any case involving New York City police.

MR. HOLMAN: But February, Republican leaders in Congress were criticizing Judge Baer in speeches on the House and Senate floors. Other Republicans suggested they'd make the Baer decision an issue in the Presidential campaign. Sen. Orrin Hatch of Utah was a frequent critic.

SEN. ORRIN HATCH, [R] Utah: captioning on screen: Morning Business is the period of a day when Members may introduce bills or speak on any subject. Morning Business may take place at any time of day. Judge Baer sparked outrage throughout the nation when he suppressed evidence seized during the stop of an automobile by police who had witnessed four men drop off two bags in the trunk of a car at 5 AM without speaking to the driver and who then rapidly left the scene when they saw the police officer looking at them. The bags turned out to contain about 80 pounds of drugs, hard drugs.

MR. HOLMAN: House Speaker Newt Gingrich was joined by more than a hundred House Republicans in calling for Baer's resignation, and in his victory speech after the Midwest primaries on March 19th, Sen. Bob Dole cited the Baer case as an example of the kind of judges President Clinton appoints versus those who would be appointed under a Dole administration.

SEN. ROBERT DOLE, Republican Presidential Candidate: It's a choice between the candidate who will appoint conservative judges to the court and a candidate who appoints liberal judges who bend the laws to let drug dealers free.

MR. HOLMAN: Then, two weeks ago, Judge Baer was denounced at a White House briefing. White House Spokesman Michael McCurry hinted that President Clinton might ask for Baer's resignation because of his ruling.

MICHAEL McCURRY, White House Spokesman: You know, we would evaluate Judge Baer's record as anyone legitimately should on the full breadth of his cases. There are a lot of Reagan-appointed judges, Bush-appointed judges that have made wrong-headed, stupid decisions too, and I haven't seen the Republican Congress urge their resignations.

REPORTER: Again, back to my question, is that a no, no, he is not going to call for the resignation?

MICHAEL McCURRY: That's--we are interested in seeing how he rules in this upcoming consideration of the case.

REPORTER: Are you leaving open the possibility?

MICHAEL McCURRY: I think I made that pretty clear by that answer.

MR. HOLMAN: The statements by McCurry and the Republican leaders drew sharp criticism from judicial leaders as a threat to the independence of the court. Four New York federal appeals court judges issued a statement saying the criticism of Judge Baer had gone too far. They wrote: "These attacks do a grave disservice to the principle of an independent judiciary and, more significantly, mislead the public as to the role of judges in a constitutional democracy." The White House has made public a letter written by the White House counsel saying the President supports the independence of the federal judiciary and that the issues before Judge Baer should be resolved in the court. And yesterday, Judge Baer reversed his decision. He said he changed his mind based on new evidence presented at a second hearing in the drug case. Today, President Clinton did not back off of the White House criticism of the Judge.

PRESIDENT CLINTON: I think there's been a little overreaction to this. The Judge has lifetime tenure, so that to insulate the judge in our system from pressure. That does not mean that the judge, or any judge, should be entitled or any court to be entitled not only to lifetime tenure but a gag rule on everyone else.

MR. LEHRER: Now, two perspectives on all of this. Sen. Orrin Hatch, Republican of Utah, is chairman of the Senate Judiciary Committee. Lloyd Cutler served as White House Counsel during the Carter and the Clinton administrations. Mr. Cutler, is there any question that outside pressure, that all of this--all of these complaints caused Judge Baer to reverse his decision?

LLOYD CUTLER, Former White House Counsel: I don't think that's really true. The temptation is to think he gave in to public criticism. But he's a very conscientious judge. I've read both of his opinions, and I've read the Justice Department's petition for reconsideration. I agree he was probably wrong the first time, but the second time around, the Justice Department came in with much stronger evidence as to what had happened to give the basis for a so-called reasonable suspicion that that car should be searched, and I prefer to believe that independent judges make conscientious decisions and that Judge Baer made two. And in the second one, he changed his mind because the balance of credibility shifted in favor of the government and the government's witnesses, and he also went out of his way to apologize for the criticism he had made of one of the policemen, the only one who testified the first time, saying that, that he had doubted that man's credibility and he was sorry about that.

MR. LEHRER: Senator, what do you think? Do you think the criticism from you and others caused Judge Baer to make the reversal?

SEN. ORRIN HATCH, Chairman, Senate Judiciary Committee: [Capitol Hill] Well, I don't think the reversal would have occurred but for the criticism, but I would prefer to agree with Lloyd Cutler on this, that judges have a right to review their decisions and, and there's no question in my mind he made a terrific mistake the first time and his gratuitous comments that these people had--it would have been unusual for them not to have run after they deposited the drugs because of, of the police reputation for brutality and, and correction in that area, it was a slander to everybody in--or libel, I might say--to everybody in the Washington Heights section, plus the policemen as well. But the point here is not that Judge Baer should be thrown off the bench because he makes one wrong decision. Frankly, I don't--I would, I would fight to keep him on the bench because we have to have an independent judiciary in this country. The point is, is that frankly, a lot of the people that are being appointed are just softer on these issues because they are more liberal than the Republican judges that have been appointed in the past, although I can point out, and I did last Friday, some Republican judge failures as well.

MR. LEHRER: Do you believe, Senator, that--you agree with what President Clinton said today, that you and everybody else has a right to criticize any judge's decision and nobody should stand back from that?

SEN. HATCH: Well, that's why they write the decisions and opinions, is so we can know what the law is in accordance with their, their writings. On the other hand, they understand that those opinions are subject to criticism and through criticism, sometimes we can get judges to live within the law, rather than just making law from the bench. You know, these people are nominated and confirmed for life. They are not elected to these positions, so, therefore, they should be interpreting the laws as they are meant to be interpreted, and, and not making them from the bench as super legislators in black robes.

MR. LEHRER: Mr. Cutler, where do you draw the line between criticizing the judge's decision and suggesting that because of a judge's decision, as some people did in this case, suggested that he should either resign or that he should be impeached for having done this?

MR. CUTLER: Well, I would certainly draw the line so that asking a judge to resign or suggesting that the President demand his resignation is over the line and goes too far. Trying to impeach a judge because in good faith he made what many people believe to be an erroneous decision is over the line. You can only impeach for so-called high crimes and misdemeanors and just being wrong on a judicial or factual issue is not a high crime or misdemeanor. But I do want to make the point in response to what my friend, Sen. Hatch, is saying, and he is my friend, that in 182 out of 185 appointments that President Clinton has made to the lower courts, that is, the district court and the court of appeals, they were unanimously approved by the Senate Judiciary Committee, including Sen. Hatch, and went through the Senate without even a vote, which can only be done with the approval of who--this happened on my watch--approval of Senator Dole as the Minority Leader. The fact is that all of these judges, and Judge Baer, remember, had 10 years of experience as a federal prosecutor before he was appointed to the bench, all of these judges are sent--especially the district courts--are selected by the home state senators. Judge Baer happened to be selected on the merits. Sen. D'Amato signed a so- called blue slip saying he had no objection. And he went unanimously through the Senate Judiciary Committee. He went unanimously through the Bar Association, which gave him its highest rating. He went through the vetting we did in the Justice Department and the White House. There was no way anybody could have told from his past record that he would have made that initial decision, and as Sen. Hatch has frankly admitted, there are Republican-appointed judges who have done the very same thing.

MR. LEHRER: So you reject the Senator's complaint that President Clinton and Democrats tend to appoint judges who are softer on crime than Republicans?

MR. CUTLER: Well, he went along 182 out of 185 times.

MR. LEHRER: Sen. Hatch.

SEN. HATCH: Well, let's just understand the way this, this thing plays out. Every one of those judges said when they appeared before us that they would not be activist judges, that they would not be substituting their own visceral feelings for what the law really is. And yet, we find with Democrat-appointed judges, whether Carter or, or Clinton, that they are softer on crime, they do look for more technicalities to let these people off and to find excuses for their inappropriate and criminal conduct. Let me give you an illustration. There will be a report out in just a couple of days in the Fourth Circuit Court of Appeals where the rest of the Reagan and Bush judges have sided with the criminal defendants about 40 percent of the time protecting their constitutional rights. The two Clinton judges in this particular case have sided 86 percent of the time. That is happening all over this country. And, frankly, if you look at judges like--let me give you an illustration--Judge Sarakin on the Third Circuit Court of Appeals and Judge Barquette down in, in the Eleventh Circuit Court of Appeals, both of whom we fought when they came up because they had activist records before they went on the bench. We weren't able-- we're not always able to tell how a judge is going to rule in most of these cases, so we do approve what the President desires. On the other hand, in those two cases, we had records of how activist they were and how much they ignored what the laws really say, and unfortunately, since they've been put on the bench, we fought them, we lost on the floor, since they've been on the bench, their activism has continued, and I criticized it last Friday in a rather lengthy speech where I felt that they went off the, off the wall in some of these criminal matters. They're not alone. As a general rule, the Democrat President-appointed judges are much more liberal, they are much more prone to make excuses for criminal defendants than Republican judges, although I think you can point to some illustrations on both sides.

MR. LEHRER: Yeah. Mr. Cutler, is that true?

MR. CUTLER: No, I don't believe it is true. In the case of this Fourth Circuit Appointee, Judge Beatty, a very distinguished black judge in North Carolina, when he was appointed two years ago by President Clinton to the District Court, the appointment was warmly praised by Sen. Jesse Helms, who certainly is a litmus test of who's soft on crime. Sen. Hatch's attacks on Judge Beatty to go on to the Fourth Circuit have been criticized by virtually every newspaper in North Carolina. I thought Sen. Hatch was going to refer perhaps to Chief Justice Warren and to Justice Brennan, one might say, in their defense of constitutional rights were "soft on crime," whom President Eisenhower described as the two biggest mistakes he'd made in the White House.

MR. LEHRER: What is--how would you define, Mr. Cutler--and then I'll ask Sen. Hatch--how would you define soft on crime in a judicial sense? What does that mean to you?

MR. CUTLER: Well, I think it's one of those phrases like--it's like a motherhood phrase. It's a catch word, soft on crime. The fact is we are a country of religious dissenters and smugglers and that's why we have a Fourth Amendment against unwarranted searches and seizures. Most of the people, granted, who, uh, make a Fourth Amendment defense and say something was illegally seized from them may turn out to be convicted in the end and are criminals in the end, but remember, there is a presumption of innocence, and there are many, many people who are indicted and tried who are acquitted. And the Fourth Amendment exists for them. To say, for example, one can make a better case that "soft on crime" applies to Chief Justice Warren and to Earl Brennan and Thurgood Marshall than you can make for Judge Baer or Judge Beatty, or any of these other people, but I would think even Sen. Hatch would never suggest that they were not great interpreters of our Constitution.

MR. LEHRER: Sen. Hatch.

SEN. HATCH: I happen to believe much good was done in the Warren Court and certainly even by Justice Brennan, but I would define soft on crime judges like Judge Sarakin who found excuses in two cases of absolute murders, where there's no question of guilt, where the law was clear and where it was proven without question, where he found excuses to try to get rid of the death penalty in both cases, or Judge Beatty. Judge Beatty in the case where because one of the jurors went to look at the tree where the gun was lodged, Judge Beatty basically on at technicality like that, even though there was overwhelming evidence, other evidence that proved the defendant's guilt would have done away with the guilt of that defendant in that particular case, or like Judge Barquette, who is down in the Eleventh Circuit Court of Appeals, found fault with road blocks for traffic violations and possible drug violations, even though in the rest of the country--

MR. LEHRER: Is this--

SEN. HATCH: --that's permissible. Now, these are people that-- soft on crime judges are judges that are always looking for excuses who believe that society is at fault, rather than the criminals, themselves, that we've caused these problems and that these poor people must be given compassion and consideration, even though they're vicious, vicious criminals who commit murders and are selling drugs to our kids and ruining our kids' lives.

MR. LEHRER: In a word, Senator, is this going to be an issue in the upcoming Presidential campaign?

SEN. HATCH: Well, it's a big issue, because the next President of the United States is going to appoint at least two in my opinion and maybe three Supreme Court Justices. If President Clinton is reelected, he is going to be able to appoint up to 50 percent of the total circuit judges and probably 50 percent of the district court judges, and if that's so, you can expect much more liberal judges on the court than you've got now.

MR. LEHRER: Big issue, Mr. Cutler?

MR. CUTLER: I think the Republicans are going to try to make it into a big issue, but I think it's a phony issue. I think the two Supreme Court appointments President Clinton made, for whom Sen. Hatch voted, are very distinguished appointments. They are not Justices who are soft on crime, and as I said--and something like 40 percent of the judges whom President Clinton appointed in 1995 were all former federal prosecutors, and I defy anybody to say that a former federal prosecutor is something likely to be soft on crime.

MR. LEHRER: We have to leave it there, gentlemen. Thank you both very much. FOCUS - BIG DEALS SBC - RECONNECTED - PACIFIC BELL

MR. LEHRER: Now the two big deals and two big industries. The merger in the phone business is first. Our business correspondent Paul Solman of WGBH-Boston has that.

PAUL SOLMAN: Yesterday was a big one for the telecommunications industry. SBC Corporation, formerly Southwestern Bell, announced it was buying Pacific Telesis for almost $17 billion in less than one fell swoop became the second largest phone company in the nation. The new company says it will more efficiently provide telephone services to better than 30 million customers in the Southwest and the Far West and wires, that is, cellular phone service nationwide. But critics fear that when two Baby Bells get together, you get a Big Brother Bell. With us to explain and debate the consequences of the changing phone business are Howard Anderson of the Yankee Group, a communications analysis company here in Boston, and Bradley Stillman of the Consumer Federation of America in Washington. Gentlemen, welcome to you both. Now, Mr. Anderson, this is basically the old local California and Nevada phone companies buying up the old Southwestern company of Texas, Oklahoma, Kansas, and so forth. Why did they do it?

HOWARD ANDERSON, The Yankee Group: [Boston] You got it just backwards. It was the Southwestern company who bought Pacific Telephone.

MR. SOLMAN: Okay. I'm sorry.

MR. ANDERSON: They did it for a few reasons. One, you can expect telephone companies to start pairing up like animals going up Noah's Ark two by two. The second reason--

MR. SOLMAN: Why?

MR. ANDERSON: Mainly for efficiencies. There is enormous cost savings to be taken out by having two companies take some of those operations and make it one.

MR. SOLMAN: What's an example of this?

MR. ANDERSON: The computing billing system, for example, writing specialized software. Why will two companies do it when one can do it, and both can share it?

MR. SOLMAN: Okay. So they consolidate the operations, they lose some jobs, and it's more efficient, more productive.

MR. ANDERSON: Very much like banks, yes.

MR. SOLMAN: Okay. So that's one. What's the other reason you were--

MR. ANDERSON: The second reason you're going to see these kinds of mergers is because all these local telephone companies are going to be in the long distance business and the wireless business, so they can sell their own brand of long distance in their serving area, so they have those efficiencies also.

MR. SOLMAN: Let's clarify this. Mr. Stillman, who are these Baby Bells that we're talking about so that we at least get some background on who we're talking about?

BRADLEY STILLMAN, Consumer Federation of America: Well, these seven companies were created after AT&T was broken up as a result of an antitrust suit brought against the old Ma Bell. The concern was that Ma Bell was preventing consumers from using equipment that they could purchase for much lower prices than AT&T was selling. They weren't getting the benefits of competition for the long distance industry, and as a result, the government stepped in and created these seven regional holding companies that were engaged primarily in the business of local phone service.

MR. SOLMAN: And these are two of the seven?

MR. STILLMAN: Exactly.

MR. SOLMAN: And then there's AT&T as well. Is this connected to the recent passage of the telecommunications bill, this particular- -it is the first of the mergers of these companies, isn't it?

MR. STILLMAN: Well, I would argue that it is in a way. Now, there was nothing that prohibited these companies from trying to get together before the bill was passed, but I think the reality is if they went into court and tried to tell Judge Green, who was then overseeing the telecommunications industry, that they wanted to get back together, there was no chance that he would allow that to happen. So I do think it's an outgrowth of the passage of the law.

MR. SOLMAN: Okay. Mr. Anderson, is this a big deal? I mean, for the Pacific Telesis shareholders I guess it's a big deal, and I guess if you had a phone in California or Texas. But for the rest of us, is it--is it somehow momentous or meaningful?

MR. ANDERSON: Tempest and teapot. The users in California will be very little affected by it. They will still have the Pactel brands. The users in Texas will be little affected by it. You will see, however, Pactel getting into wireless. They had a wireless division.

MR. SOLMAN: Pactel is the Pacific Telesis--that's the California one.

MR. ANDERSON: Pacific Telesis, yes. They had a wireless division now called Air Touch, which was spun off two years ago.

MR. SOLMAN: And so now they'll be back. Well, they have been buying wireless already, or have they not?

MR. ANDERSON: No, they haven't.

MR. SOLMAN: Southwestern Bell has been buying--

MR. ANDERSON: Southwestern was an early and vigorous entry into the wireless business.

MR. SOLMAN: Mr. Stillman, tempest and a teapot?

MR. STILLMAN: Well, no, I think it's much bigger than that. I think there's at least two major concerns for consumers in the market served by these companies. First, the merger of these two companies making a massive economic power house makes it less likely that somebody's going to decide to go in and compete anytime soon. As a result, consumers end up with telephone bills that are higher than they would be in a competitive market for a much longer time. The second concern, I think, is particularly for the people in California, you're talking about a merger of two companies who have very different corporate philosophies, very different relationships with their states, with the consumers in their states, and I think that the people in California may be in for a shock because Pacific Tel has a history of being fairly progressive on issues like Lifeline service, which is for low-income consumers, and consumer education, and I think that Southwestern Bell, now known as SBC Communications, is much, much more difficult to deal with.

MR. SOLMAN: Well, let's take these two, Mr. Anderson. First of all, for our many Californian viewers, do they really have something to worry about, is Mr. Stillman telling us something they should be concerned about?

MR. ANDERSON: These two companies are very much alike. California is a high-tech areas so subjects like internet become very important. Lifeline telephone--

MR. SOLMAN: Access to the internet on the phone line.

MR. ANDERSON: Access to internet, but they are all ex-Bell employees who are running these groups. They are more alike than different.

MR. SOLMAN: Okay. What about this issue that we've heard a lot about, which is too much power? I mean, the telecommunications bill supposedly is creating more competition, yet here we have consolidation, less competition--that's what Mr. Stillman's saying.

MR. ANDERSON: You're going to have an oligopoly here.

MR. SOLMAN: What's an oligopoly?

MR. ANDERSON: Oligopoly is competing by a notable but not a infinite number of participants.

MR. SOLMAN: A few big players dominating the market.

MR. ANDERSON: You will have 11 companies offering long distance service in most major markets: AT&T, MCI, Sprint. You will have each of the seven, now six regional Bell companies, plus companies like LCI, LDDS, and whatever.

MR. SOLMAN: Whatever else.

MR. ANDERSON: These are other, No. 4, No. 5 long distance companies. So having nine, not ten or ten, not eleven, doesn't seem to me to be contracting competition.

MR. SOLMAN: So Mr. Stillman, I read somewhere that you said six companies is enough to make a market, a competitive market. He's got 11 here, so are we okay?

MR. STILLMAN: Well, the economist would say that you need six to ten equal size competitors to have a vigorous competitive market. The problem with getting to competition is that the last vestige of the old Bell monopoly is at the local level. That is not going to change anytime soon. AT&T and MCI and Sprint, and all of the other competitive companies still have to go through your local monopoly phone company to reach you, to reach every customer. And until that changes, that allows the monopoly to remain the gatekeeper. They get to control competition.

MR. SOLMAN: You're shaking your head, Mr. Anderson.

MR. ANDERSON: No. We will have local competition by every cable company in North America.

MR. SOLMAN: Cable companies coming in, challenging the phone companies.

MR. ANDERSON: Giving you telephone service through your cable system, we will have local competition from your AT&T companies. We will have local competition from MCI and Sprint. The price of long distance--

MR. SOLMAN: How--how will we have local competition from them-- this is this wireless stuff?

MR. ANDERSON: You will see it. Wireless is a very effective competitor to local Lou, and you're seeing it that way also.

MR. SOLMAN: So you're going to--so plenty of competition, so Mr. Stillman, if there's going to be--we're seeing wireless, there's this first PCS, Personal Communication Services, so what's the problem?

MR. STILLMAN: Well, it's theoretical versus actual competition. There is no actual competition in virtually any market across the country if you're a residential rate payer for telephone service. That is not going to change overnight. And so long as the so-called "competitors" have to rely on the monopoly to reach their customers, you're never going toget vigorous competition. It's sort of like asking a company to compete with their own distributor. It just doesn't lead to vigorous price competition.

MR. SOLMAN: Mr. Anderson, do you think that we're going to get more and more consolidations? I mean, is it possible that the old AT&T, having been torn apart by federal decree, is now going to be put back together, not AT&T specifically, but that one company could wind up again dominating the way AT&T of old did, because there are all these efficiencies you were talking about earlier?

MR. ANDERSON: No. I think the answer is that you may see a few mergers and most of these mergers don't always work out as well. You will never see the seven put back together again. The Department of Justice and Ann Bingham won't allow it, and I don't think the country would allow it.

MR. SOLMAN: So, Mr. Stillman, you're not worried about that, I take it?

MR. ANDERSON: Well--

MR. SOLMAN: There can only be one company or two companies.

MR. ANDERSON: I'm more worried about there being only one major company in each major market, so that if you have six big companies but they're all competing or not competing in their own discreet areas, you don't have the benefit of competition for consumers. And as a result, your rates remain far too high.

MR. SOLMAN: Is the--is the only thing you worry about the price here, or do you worry about the issue of sort of power for its own sake?

MR. ANDERSON: No. The, the backdrop to all of these mergers, whether you're talking about Disney, ABC, or the phone companies, is who's going to have access to the home, who's going to control our access to information. That company that decides what comes and goes to and from your house is going to have immense power in the information age, and we have to make sure that we don't concentrate that in too few hands.

MR. SOLMAN: A very short last response to that. You don't worry about some company having too much power to give us our information and withhold it from us?

MR. STILLMAN: In some cases, the wired system is already obsolete. We're going to have a half dozen wireless options, and that will bring us competition.

MR. SOLMAN: Okay. Well, thank you both very much. I appreciate it. AETNA - MEDICAL MERGER - U.S. HEALTHCARE

MR. LEHRER: Now, Merger No. 2, the one in the health industry, and to Charlayne Hunter-Gault.

MS. HUNTER-GAULT: The changing world of health care changed a little more yesterday. Aetna Life & Casualty announced it would by U.S. HealthCare, a leader in the move towards managed care for $8.8 billion. The new company will serve 23 million people. For analysis of this deal and its impact on consumers, we turn to Sara Nichols, Washington director for Physicians for a National Health Program, and J.D. Kleinke, a health economist with HCIA, a health care research company in Baltimore. And starting with you, Mr. Kleinke, what is the significance of this deal?

J.D. KLEINKE, Health Economist: Well, the significance of this deal is this is a major step forward in a continuing story of consolidation throughout health care, not just health insurance but the pharmaceutical community, the hospital community, the physician community, just about every aspect of health care, as we know it, is coming together in alliances of this magnitude.

MS. HUNTER-GAULT: And this particular merger, is it a mega merger?

MR. KLEINKE: It's not quite a mega on the order of other mergers we've seen, for example, among drug companies, but it comes close. And it's certainly relevant to those, those 23 million peopleyou described, particularly those in Aetna, who are going to have access to a whole new set of health care kinds of systems as a result of this merger.

MS. HUNTER-GAULT: Explain that to me briefly. I mean, why does Aetna want to move--explain its traditional role and why it would want to move into this.

MR. KLEINKE: Well, Aetna's traditional role was simply to pay the claims for whatever health care was delivered to populations that it insured. That's kind of the traditional insurance system as we know it. We went to a doctor. We went to a hospital, when we were sick and the insurer paid the claim and passed the cost of that along ultimately to who was purchasing the care for you, usually your employer. That system started to fall apart in the late 80's as costs ran out of control, and they ran out of control for a number of reasons. What happened in the wake of that cost, cost crisis, which is really what it mushroomed into and by the early 90's hence health care reform was the managed care revolution. The managed care revolution brought to health care a much more organized rational way of delivering health care. You don't just pick any old doctor. You don't wait till you're sick and go to the hospital. What the HMO's and other managed care kind of companies attempt to do is to maintain your wellness or maintain your health to prevent things like that from happening, to help steer you toward physicians who have better demonstrated quality.

MS. HUNTER-GAULT: Do you agree, umm, with all that you've just heard, Ms. Nichols, I mean, the significance of this and the importance of it?

SARA NICHOLS, Physician Advocate: Well it's a huge merger. I don't think it's a step forward. I think it's a very big step backward for health care consumers. You've got to look at what Aetna is really buying here from U.S. HealthCare. When they buy it, they're not buying hospitals. They're not buying clinics. They're not buying any real stuff. What they're doing is they're buying patients, and they're spending about $3,000 a pop for these patients. If they could go out to the lobby to a vending machine and put in $3,000 and get out a patient, they'd stand there for the rest of the century. Why? Because it means big, big money for them to get all those guaranteed premium dollars in and then they also buy the expertise of U.S. HealthCare in maximizing their profits. U.S. HealthCare is really good at squeezing money out of a dollar and putting as much of it as possible to their shareholders and as little as possible to providing actual patient care.

MS. HUNTER-GAULT: A step backwards?

MR. KLEINKE: Oh, I don't agree with that at all. I think that getting the typical patient into a system, into a managed care system, costs about 10 percent of that $3,000 figure through normal marketing channels. What they're buying is not those lives. What they are buying are systems. And those systems are not cheap, and that's why we see consolidations not just in this instance but across the health insurance landscape. The systems I'm referring to are disease management systems, information systems for tracking patients, information systems that are required to understand which hospitals are delivering quality care and which hospitals are not doing a good job.

MS. HUNTER-GAULT: So more efficient, they're buying more efficiency and better services, is that what you're saying?

MR. KLEINKE: Correct. They're buying a much more organized delivery system, and that is not, not--it's not a trivial asset to be purchasing, and that's why the high price.

MS. HUNTER-GAULT: What's wrong with that?

MS. NICHOLS: Well, it's not a trivial asset at all. Uh, what's wrong with it is really the effect it's going to ultimately have on health care consumers. The reason that they want this is obviously to make money, not to help patients.

MS. HUNTER-GAULT: Why do you say that?

MS. NICHOLS: We would hope the two things would go together. Well, simply because that's what corporations do. They have to make money for their shareholders, and that's why they enter into a giant merger like this. And what they need right now more than anything is to be positioned--they have to have enough market power that they can make money in the new era. What's coming down the pike is that in every single state in the union they're proposing taking Medicare beneficiaries, the people over 65 who are on health care, and putting them into HMO's, and unless you are a big company in one of those states, you are not eligible to take those Medicare beneficiaries onto your roll. And so what Aetna wants to be able to do by buying U.S. HealthCare is expand their market share, expand the number of states they're in, and expand their bottom line by getting all that government money. What we're concerned about is only 70 cents out of every dollar is making its way down to providing care. U.S. HealthCare is taking 30 cents out of that dollar and putting it to profit, to administrative overhead, to their CEO getting $900 million just by this deal being cut, and that's not making its way to providing health care for people.

MS. HUNTER-GAULT: What do you say to that?

MR. KLEINKE: Well, I'd say to that those 30 cents issues you're referring to are, in fact, the case, and one of the reasons for the efficiencies that come out of mergers like that is to start to carve into that 30 cents.

MS. HUNTER-GAULT: Wait a minute. Explain that to me.

MR. KLEINKE: Well, there are 30 cents in what are referred to as the gross margin between what is spent on medical care and what it takes to run an HMO today. And out of that 30 cents, yes, there is profit, and that's what's required to, to run a business and raise capital on Wall Street today. What--what Aetna and U.S. HealthCare and all the rest of them are seeking to do is with the additional 15 cents is to attempt to--attempt to minimize that. There's a tremendous amount of duplication in administrations. If this country had seven hundred or eight hundred HMO's forever, we'd have a tremendous amount of duplicative systems and paper work and claim forms and all the other sorts of things that the Clintons were very aware of during health care reform. And, and by consolidating these health insurers, we're getting rid of a lot of that redundancy that creates exponential redundancy all down through the providers.

MS. HUNTER-GAULT: Ms. Nichols, we heard in the previous discussion on the phone mergers that efficiencies was one of the reasons for these kinds of mergers. You heard him just lay out all the efficiencies that be achieved by this merger. Wouldn't that result in better service for consumers?

MS. NICHOLS: Well, actually, I think that the efficiencies are going to be at the expense of health care consumers. What U.S. HealthCare does best, what they've perfected and why they're really special to be bought by Aetna is putting all the financial risk onto physicians and giving them financial incentives to under-treat their patient.

MS. HUNTER-GAULT: What do you mean? Explain. Give me an example.

MS. NICHOLS: Okay. A U.S. HealthCare doctor who has a typical patient load of say 1500 patients, if they, umm, don't refer to emergency rooms, don't give expensive procedure tests, don't give a lot of the health care that they may think it's in their best judgment to do, they could net $150,000 a year more than they otherwise would if they follow the financial incentives of U.S. HealthCare. If they follow their own physician judgment, they may end up getting zero, no dollars over the cost of their practice. In other words, they may make nothing. So there are these tremendous incentives for them to under-treat their patients.

MS. HUNTER-GAULT: Mr. Kleinke.

MR. KLEINKE: Well, I agree completely. I think that's a fantastic situation where you can align an incentive so that a physician is rewarded for not having a patient under his or her care needing to go to the emergency room.

MS. HUNTER-GAULT: But that wasn't what you were saying.

MS. NICHOLS: No. I'm saying that if somebody needs to go to the emergency room, they'd better go, and that I as a physician would not want--shouldn't be put in a position where I would actually make money if I went against my better judgment. And that is why our doctors are getting very angry and very worried and very concerned about mergers like these.

MS. HUNTER-GAULT: Are you seeing more mergers like this coming down the pike, I mean, the future?

MR. KLEINKE: Well, there have been a rash of mergers a lot like this but none of this scale to date. But there certainly will be a number as a result of this. For the other larger insurers and HMO's to stay competitive, they're going to need to create the same critical mass that I think Aetna and U.S. HealthCare are going to achieve under this merger.

MS. HUNTER-GAULT: And would there be checks on the kinds of things that Ms. Nichols is concerned about?

MR. KLEINKE: Well, I don't think there need to be checks on this. I think what Ms. Nichols is describing is precisely the fix for a market dysfunction that we've had for centuries in Madison, which is that physicians, unlike every other producer of an economic good in society, they have not had to worry about what it cost. They have only had to worry about the revenue brought in, and so physicians for centuries have been free to maximize revenue without having to worry about the ramifications of, of what they do.

MS. HUNTER-GAULT: You get a quick last word, Ms. Nichols.

MS. NICHOLS: Health care is not like any other commodity. It's not an economic good. It's a human right. We all need it.

MS. HUNTER-GAULT: All right. We have to leave it there. Thank you for joining us. NEWSMAKER

MR. LEHRER: Finally tonight, a Newsmaker interview with the key man of peace in Bosnia. Margaret Warner has that.

MS. WARNER: The Dayton Peace Accord that ended the war in Bosnia is being implemented on two fronts. The military job of separating the warring parties is being run by Admiral Leighton Smith. He commands a NATO-led international force of 60,000 troops called IFOR. The civilian job of rebuilding the country economically and politically is overseen by Carl Bildt, a former British Swedish prime minister who now represents the European Union. Mr. Bildt was in Washington this week briefing the administration on his progress. I spoke with him this morning.

MS. WARNER: Mr. Bildt, thanks for being with us. NATO troops are supposed to leave Bosnia by December. What do you have to achieve on the civilian side between now and then? What's your timetable for doing it?

CARL BILDT, European Union Representative, Bosnia: I think the most important thing that must be achieved is the setting up of the new common institutions of Bosnia and Herzegovina, between those who were conducting war with each other only a few months ago. They must by the end of the year of the democratic elections be ready to work together in the common government. In order to do that, we have to go through a number of phases. We now have the first phase, which is the military phase, behind us. That's been a success. It's not been really challenged by either party. It has been a success. The second phase and in summary is going to be the preparations for elections, the beginning of economic reconstruction, where I hope that different governments and nations are going to contribute as generously as they've done to the military side, and the beginning of the return of the refugees. Then we've got the election campaign, highly, highly important, and that must be a free and fair election, and then we've got the final phase, which is the setting up of the government, the taking out of the implementation force, the NATO force, and the resolution of some of the outstanding difficult issues.

MS. WARNER: You wrote a column that ran in the "Washington Post" on Sunday in which you said that you and the secretary of state had had a conversation last week about whether the civilian or political side was just frozen or irretrievably broken down. What has happened or not happened to cause you to even ask a question like that?

MR. BILDT: There have been a number of difficulties, primarily in getting the two parties to cooperate with each other. That has been influenced also by the fact that there are power struggles, you can say, going on in both of the entities. There have been--

MS. WARNER: You're saying in the Bosnian Serbs--

MR. BILDT: Among the Bosnian Serbs--

MS. WARNER: --and the Bosnian government.

MR. BILDT: --very clearly being those that want to cooperate with the international community and those--the Karadzics and others that don't. On the federation side, within the Bosnian Croats and the Bosnian Muslims, there have been the adjustment process inside the federation as well as the beginning of an election campaign, with new parties being set up and, and new forces of political competition coming in. This has made it more difficult to start the political process of reconciliation and cooperation between the entities, that is so central to their role of political operation.

MS. WARNER: And tell us--give us your assessment of the situation on the ground, itself. I mean, do you see the political will to create a multiethnic Bosnian state that was called for in the Dayton Accords?

MR. BILDT: At the moment, the forces that are there are working for ethnic separation. And those forces are the forces of fear. People fear, which is perhaps not entirely unnatural after this extremely bitter and brutal war. Those forces are stronger. They're the forces of reintegration. And it is only by starting reconstruction, starting reconciliation on the political level, dealing with war criminals, and getting the common institution set up that I think we can start to reduce the fear factor that is now driving the ethnic separation that we, sorry to say, still see in Bosnia.

MS. WARNER: Was it fear, do you think, that drove that spectacle we saw when the--so many Serbs left that suburb in Sarajevo?

MR. BILDT: It was primarily fear. I spent long, long, long hours with very, very ordinary people discussing with them, and they feared. Some of that fear was fueled by extremists on the Bosnian Serb side, but it was not sufficiently answered, in my opinion, by confidence-building measures on the side of the Bosnian government. And they were driven by fear away from what in very many cases were their homes since generations back, and that's a tragedy. Unification of Sarajevo was good. We've been aiming at that for a long time, but the fear was so great that it also contributed to the separation of Bosnia and Herzegovina, and that we must overcome.

MS. WARNER: And what are the motives of both the Bosnian Serb government, those elements that didn't want this to happen peacefully, didn't want Bosnian Serbs to stay there, and also the Bosnian government for not reassuring Serbs they could stay?

MR. BILDT: There are, of course, after war like these those who'll say, well, let's be with our own people, this reintegration, reconciliation is too difficult, it will have to take time. Umm, and they seek security and safety among their own, so to say, among their own either Serbs or Croats or Bosnian Muslims, and, umm, in an age of negative political campaigning it's also very easy to fuel those fears and play on them for a particular political purpose, and that is to a certain extent done on all sides, and that's what I mean when I say that the forces for ethnic separation are so far stronger than the forces for ethnic reintegration. And it will require statesmanship and wisdom and political leadership and quite a lot involvement of the international community to, to break this up, but I think we can do it, and I think we will do it. But it is not an easy task.

MS. WARNER: So what will it take from the international community now in the non-military side in this six, seven months you have remaining?

MR. BILDT: Well, a lot. First, umm, to start with economic reconstruction, and there will be the need in the order of 1.8 billion U.S. dollars this year. Some of that money is there; some of it is forthcoming; more will be needed. Help people moving back- -more than 50 percent of the population of Bosnia-Herzegovina have been displaced the one way or other during this war.

MS. WARNER: Given what happened in Sarajevo, do you expect--how many of the refugees do you really expect to want to return to areas of Bosnia that are now controlled by another ethnic group as they may see it?

MR. BILDT: I think a lot of them would like to do that, but they are asking themselves, do we dare to do it, is there a climate for security--of security, do I dare to go back to my home, if that has been in an area that is now ethnically cleansed by the one community or the other? We find these problems on all sides. And that remains to be seen. I think the next few months is going to tell us to which extent this is going to happen. So far, we have had in the order of 50,000 refugees returning, but they have- -almost all of them have been returning to areas where so to say their own people live. During the Spring, we'll see more attempts to get people moved back to other areas. And that will be very important.

MS. WARNER: So if I were a Bosnian refugee of any ethnic stripe and I were to say I wanted to return to my home area, is it safe, what would you say?

MR. BILDT: I would encourage that, and then I would hope that we with the presence of IFOR, with the presence of the international police task force can contribute to the security and the safety. If that person were to ask me can you guarantee my personal security, I would, of course, have to say no, I can't. I don't have that instrument. IFOR is not a police force. The international police force is not doing law enforcement. We don't run the country. Umm, but we do have humanrights monitoring mechanisms. We do have a number of instruments that should make it easier, but this is going to be one of the most critical and one of the most crucial aspects of the entire process.

MS. WARNER: Are there any things that you would like IFOR, the international or NATO force to be doing to help you on the civilian side that it isn't doing? Is there anything more it could be doing?

MR. BILDT: Well, quite a lot, and we are discussing that, and the IFOR commander, Adm. Leighton Smith, and myself, and the NATO authority, we, we agree in most of these things; that now the essential military tasks are behind IFOR, they are still very important, but we have 60,000 military men, vast resources there, and they can be used for other things. They can help with rehabilitation in economic terms; they can help in issuing the freedom of movement by taking on checkpoints; they can help with training people to do the de-mining that's going to be so important; they can help with transportation for key political meetings. There are a number of things that they can do, and which they are also ready to do.

MS. WARNER: Did Adm. Smith say that American troops are ready to do these things?

MR. BILDT: Yes, well, American troops and others. It's a unified force. The same applies to Russians, Americans, and Swedes and Germans, and, and Brits, and that's a decision that's been taken by the North Atlantic Council, and I've had discussions here yesterday with the chairman of the Joint Chiefs of Staff, General Shalikashvili, who is also very forthcoming when it comes to what- -with respect for the primariness of the military mission, the IFOR forces can do.

MS. WARNER: War crimes have received a lot of international attention. How important to your civilian side, your civilian operation is the apprehension and prosecution of war criminals?

MR. BILDT: Longer term I think is crucial for the process of reconciliation, and it's very important that there is not established collective guilt in the sense that all of the Serbs, all of the Croats, all of the Muslims, depending upon the perspective of the different nations, are responsible. They are not. Responsibility lies with political leaders or those that actually committed the crimes. And the tribunal is the instrument to ensure that individual responsibility for these hideous crimes that makes it possible long-term for the peoples to live together in peace.

MS. WARNER: Defense Sec. Perry and other IFOR military leaders have said we are not a police force, we're not out there to apprehend these war criminals. Are you comfortable with that, or do you wish they would do more?

MR. BILDT: Well, they are a military force, I agree to that. They are not a police force. I have great confidence in the IFOR forces. They're very professional, but they are a military force. And, and the responsibility with dealing with war crimes rests primarily on the part of themselves. Then, of course, if IFOR, when they are doing something runs into a criminal--or he runs into them or whatever--then, of course, I would expect them to apprehend him or her, whichever it is. And I'm quite certain they will do that.

MS. WARNER: Finally, do you think American troops will be able and NATO troops will be able to leave in December?

MR. BILDT: Well, I would hope so. I think it's important that we make clear that it is not our country. The responsibility for the future stability, security, prosperity, whatever, is for the political leaders, themselves; that they will have the maturity and the responsibility to have the full responsibility for their country. That implies that we will be there to help them, of course, but I can see no foreseeable circumstances in which we would need 60,000 soldiers there after the end of this year.

MS. WARNER: Well, thank you, Mr. Bildt. Thanks very much.

MR. BILDT: Thank you. RECAP

MR. LEHRER: Again, the major stories of this Tuesday, the U.S. economy grew only 2 percent this year according to a Commerce Department report, but the Index of Leading Economic Indicators of future strength froze 1.3 percent in February. President Clinton defended his criticism of a federal judge in New York. The judge reversed a drug ruling last night. And European representative Carl Bildt, as you just heard, said on the NewsHour he hoped the NATO force would be able to leave Bosnia in December. And we'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.