The NewsHour with Jim Lehrer

MARGARET WARNER: Good evening. I'm Margaret Warner. Jim Lehrer is on vacation. On the NewsHour tonight: The Fed hikes interest rates, the latest on Turkey's earthquake disaster, a new surge in summer schools, and a conversation with dancer Merce Cunningham at 80. It all follows our summary of the news this Tuesday.

NEWS SUMMARY

MARGARET WARNER: The Federal Reserve raised two key interest rates today. The vote by the Fed's Open Market Committee hiked the benchmark Federal Fund's rate and the discount rate by a quarter point each. Fed Chairman Greenspan vowed last month to move "promptly and forcefully" at the first signs of inflation. This is the second time this summer the Fed has raised rates. We'll have more on this story right after the News Summary. On Wall Street today, the markets responded mildly to the Fed's decision. The Dow Jones Industrial Average fell 16 points from yesterday's record high to close at 11,283. The NASDAQ Index was up 32 points at 2752. The official who triggered an investigation into suspected Chinese espionage at Los Alamos National Laboratory has resigned. Notra Trulock quit yesterday as acting deputy intelligence chief at the Energy Department. In newspaper interviews, Trulock protested a recent report by the Department's inspector general, which failed to back up Trulock's charges of political interference by the Clinton administration. A spokeswoman said today Secretary Richardson was disappointed with Trulock's decision. The official death toll from last week's earthquake in Turkey has now reached 18,000. More than 42,000 are reported injured, and another 200,000 are said to be homeless. Turkish officials pleaded for more international aid, including tents and bulldozers. They also repeated warnings that thousands of unburied bodies could set off an epidemic. But World Health Organization officials tried to debunk those fears. Dr. Michel Thieren said the real health threat was poor sanitation and contaminated water. He spoke at a news conference in Geneva.

DR. MICHEL THIEREN: Dead bodies do not create germs. The germs you can find on the dead bodies are unlikely to be found on the living person. There is no relationship. There is no observation of epidemics after... in the presence of large quantities of dead bodies. So this rules out typhoid fever. This rules out dysentery, gastroenteritis, vaccine preventable diseases, botulism, and I would say all other diseases.

MARGARET WARNER: Turkey's capital, Ankara, was rattled today by an earthquake registering 4.7 on the Richter Scale. There were no reports of injuries or damage. We'll have more on Turkey's recovery efforts later in the program. The remnants of Hurricane Bret soaked Southern Texas and Northern Mexico again today. Flash-flood warnings were in effect along the Rio Grande River from Del Rio to Laredo, and around San Antonio as well. Meanwhile, in the Atlantic and Caribbean, three tropical storms are churning. Cindy is veering North and West away from land, Dennis is closing in on the Bahamas and could threaten the East Coast, and Emily is stationary but generating high winds Southeast of Barbados. That's it for the News Summary tonight. Now it's on to the hike in interest rates, Turkey's earthquake efforts, more kids in summer school, and dancer Merce Cunningham.

FOCUS - CONTROLLING INTEREST

MARGARET WARNER: Our business correspondent, Paul Solman of WGBH-Boston, explores today's interest rate decision by the Fed.

PAUL SOLMAN: The economy zooms, the stock market booms, and the Fed raises interest rates for the second time this summer. To help explain it all, we're joined by: Alice Rivlin, who stepped down last month as vice chairman of the Federal Reserve Board to join the Brookings Institution and serve as chairman of the District of Columbia's Financial Oversight Authority; David Levy, director of the forecasting center and vice chairman at the Jerome Levy Economics Institute; and Allen Sinai, chief global economist at Primark, a forecasting and analysis firm. And welcome to you all.

Alice Rivlin, what was the Fed hoping to accomplish today?

ALICE RIVLIN: I think they were hoping to slow down the economy a little bit, a quarter point doesn't make a lot of difference. But their general perception is the economy is growing at too rapid a rate. It's an unsustainable rate. And it's time to slow it down a little bit.

PAUL SOLMAN: Why raise both the discount and Fed Fund's rate? They don't always do that, right?

ALICE RIVLIN: No, they don't. And the discount rate is not actually very important at the moment, because not many banks are borrowing at that rate. But the effort was not to leave too much of a gap between the Fed Fund's rate and the discount rate.

PAUL SOLMAN: Okay. So the Fed's worried about inflation.

ALICE RIVLIN: It's a little bit worried about inflation.

PAUL SOLMAN: A little bit worried, a quarter percentage point worried.

ALICE RIVLIN: Right.

PAUL SOLMAN: David Levy, is that what you're worried about, inflation?

DAVID LEVY: Well, I'm not worried in the long-term, but I think we are in a position where the unemployment rate has come down enough, and the labor markets have tightened enough so we are getting evidence that pay increases are starting to become larger. And if that could continue, that would become a inflationary pressure that the Fed would have to respond to.

PAUL SOLMAN: Do you worry, I gather you worry about the stock market, as well, however?

DAVID LEVY: You directing that to me?

PAUL SOLMAN: Yes.

DAVID LEVY: I'm very concerned about the valuations in the stock market, and particularly because we've gotten to the point where it's going to be very difficult to have both rising profits and interest rates that remain flat to keep the stock market from experiencing a decline. And the reason I say that is that if profits continue to rise, employers are going to be hungry to expand and tend to bid up the priorities of labor.

PAUL SOLMAN: Allen Sinai, do you agree with that?

ALLEN SINAI: I think we're going to get a slow down in the rate of growth from cost push factors and because interest rates are a little higher.

PAUL SOLMAN: Cost push, just explain what you mean -- less corporate profits because...

ALLEN SINAI: What I am seeing is some pipeline inflation in the costs of materials that companies buy that shows up in the Producer Price Index, the lower stages of processing level, the lower levels of that index. And wage inflation is picking up. Now, that's really a good thing for American workers, but it is a cost to business. So we'll get some eroding away of profits on account of that. And those potentially, if companies can pass those costs on in an active economy with strong demand, potentially could be a source of higher inflation. And I think that's what the Fed was stepping out against. It wants to keep inflation nice and low. Low inflation has been the main source of our great prosperity.

PAUL SOLMAN: David Levy, I've read you say that you're worried about the stock market gettingout of hand, the Fed not acting strongly enough -- and then a sudden correction, which could have serious effects on the economy.

DAVID LEVY: Well, I would say, the stock market I think has been out of hand for quite a while. We've had a 17-year bull market that's just been unprecedented in American history. And like any major bull market, it's tended to go a little bit on momentum. I'm concerned valuations are already high. And the market is very vulnerable. What makes us particularly concerned is that unlike any other period in American history, the stock market is absolutely dominating the performance of the overall economy -- evidenced most directly through the behavior of consumers who have accelerated their purchases relative to their incomes to an extraordinary extent over the last several years. They now spend more than they receive in income, excluding capital gains.

PAUL SOLMAN: So they're spending because they figure they're rich?

DAVID LEVY: Exactly. And if something should happen to the stock market, and suddenly they don't feel so rich, particularly because a lot of them may have some leverage behind that - those stock market positions, we could see a very sharp pullback in consumer spending, particularly so in this period because so much of what is called - might be called discretionary spending is going on, buying automobiles, buying home furnishings, taking expensive vacations, things that are easy to cut back on if hard times arrive.

PAUL SOLMAN: So they'd stop spending and then that would hurt the economy significantly?

DAVID LEVY: That would be the concern. So I think the Fed is trying to walk a fine line, putting some resistance on the strength of the economy to cool things down, but being very careful not to jolt the stock market and cause a very sharp deflation. I think that's why the Fed bend over backwards in the statement today to emphasize that they felt they had done a lot to fight inflation and to make no... give no hint they might tighten in the future. Obviously they will continue to watch and take things as they come.

PAUL SOLMAN: Alice Rivlin, that sounds like what the Fed was thinking when it was taking the deliberations it has been taking in the last 24 hours?

ALICE RIVLIN: Well, remember, we've had strong growth in the economy for quite a long time now, and over the last year, the Fed has made three down moves in the interest rates, three quarter points. And now, the economy continues strong. It may weaken, as Allen Sinai suggests, but it hasn't shown any clear signs of doing that yet. And the rest of the world is strengthening. The thing that prompted the down moves of last fall was real concern that the world economy was falling apart and that that could affect the U.S. economy very negatively.

PAUL SOLMAN: And so the U.S. economy had to be kept going for that reason?

ALICE RIVLIN: The Fed responded and may have contributed to the fact that the disaster didn't prove quite as bad as people thought. World economy is reviving; U.S. economy remains strong. And yet interest rates here, short-term interest rates are actually lower than they were a year ago. So the Fed is, I think, doing a partial correction of what might have been an excessive concern with possible weakness in the economy.

PAUL SOLMAN: But you're not... You don't think the Fed is thinking that much about the stock market?

ALICE RIVLIN: Well, the stock market, as David points out, is highly valued at the moment. You have to be very optimistic about the earnings of U.S. companies to think that these values on the average are normal. On the other hand, the Fed can't worry just about the stock market. The stock market is important as it affects the whole economy. And it has to focus on what's happening to the whole economy. Is it growing a little bit too fast? And their move today indicates they think the answer to that is yes. One might have said, well, there isn't all this much inflation, and as Allen said, the economy may slow down. And it would have been arguable to wait a little while. But they decided not to do that -- to take out the insurance against the inflation with another move now.

PAUL SOLMAN: Allen Sinai, I want to get to this connection, because I think a lot of people are interested in the stock markets, since so many of them invest in it. How vulnerable is the economy to a stock market softening, such as you suggested could be possible if the costs were going up for companies and their profits would then go down?

ALLEN SINAI: Well, I think we are more exposed and vulnerable than we have been throughout much of our history. But, relatively speaking, I don't think a good-size correction in the stock market or the stock market itself could really do our economy in. It certainly could dent some categories of consumer spending, but we have to remember that what drives consumer spending more than the stock market is jobs and income. Consumers spend more out of a dollar of income than they spend out of a dollar of extra wealth or net worth that comes from stock market gains. And so long as that's going well, consumers will spend pretty close to trend, which is over 3 percent a year now for the last four years in real terms. But nevertheless, if we do have a major stock market problem, a big decline, we do have more individuals, more families with more stock holdings as a proportion of assets. We have more pay plans tied to the stock market. We've had a lot of M&A activity which has been motivated because of purchases using inflated stock prices. And executives certainly are remunerated quite well. There is a mantra in the U.S. situation now, which is maximize shareholder value. And all of us are tied more to the stock market than ever before. And so I think if we had a severe problem in the stock market, it wouldn't happen by itself. I don't really agree with David in terms of valuations. I think in this new world, we are not overly valued. We are well valued. But if we had a major stock market problem, I think we would lose more spending, more jobs, more business activity, more entrepreneurial activity than in the past. But I absolutely do not believe it would be decisive in our business cycle; it would not throw us into a recession or anything near that.

PAUL SOLMAN: So, David Levy, how come the stock market rises as it did dramatically when the Fed raises rates? That is, it's going to tighten the economy. And traditionally you would think that that would be something that would make the stock market go down. And you say it's up at all-time highs anyway.

DAVID LEVY: First of all, you know, I think there's the old expression, buy the rumor, sell the news, or sell the rumor, buy the news in this case. And I think what had happened is the stock market got nervous about a series of Fed tightenings and increasingly began to believe there would be fewer tightenings than they had earlier thought. And I think the view is that the Fed has done what it's going to do, and now the stock market will be free to rise without worrying about interest rates. I don't share that view, because I think if earnings are going to continue to perform well, we're going to continue to bid up the price of labor and, you know, you are going to get some interest rate pressures that would upset the market. I also want to disagree with my colleague here.

PAUL SOLMAN: Which colleague?

DAVID LEVY: Dr. Sinai. Allen makes the point that, which is certainly correct, that we spend a lot more out of our wages than salaries, almost all of it, than we do out of our gains in the stock market, which is a tiny fraction. However, keep in mind that the ability of the stock market valuations to change, particularly given how large the market's become at this point, is enormous. We've seen a $9 trillion change in the value of the stock market in the past four years. In fact, that's without even dealing with the '99 part of the rally -- from '95 to '98. And you take a way a few trillion, you can get a very sharp decline in consumer spending, enough to wipe out GDP growth in a quarter and trigger a recession. So I think we have a to be very, very cautious about dismissing that as a risk. And I think, and perhaps the former vice chairman of the Federal Reserve Board, you know, might comment on, this but I think the Federal Reserve has over the years been aware that there is a wealth effect and has certainly been taking that into consideration, even though the Fed very clearly does not want to target the stock market or try to set any limits or deflate bubbles or anything of that sort.

PAUL SOLMAN: The wealth effect being that you spend more if you have more in stocks and you think you're worth more.

DAVID LEVY: If your stock portfolio appreciates, you feel wealthier, you don't feel you need to save, you can go ahead and buy that new car or whatever.

PAUL SOLMAN: All right.

ALICE RIVLIN: There's certainly evidence that that's true, but it can be exaggerated. More people own stock now than used to. On the other hand, not -- the average family doesn't own a lot of stock. They may have some in their pension plan, but they may not be terribly conscious of what's happening to the value of the pension plan such that it would affect their daily spending. So I would rather come out where Allen Sinai does. The reason we've had such... the main reason we've had such strong consumer spending is people have jobs. Their incomes are rising. They feel good about the economy. And they're spending.

PAUL SOLMAN: Okay. Well, let's leave it there. Thank you all very much. Appreciate it.

UPDATE - AMID THE RUINS

MARGARET WARNER: Next, we update the post- earthquake situation in Turkey. We start with two reports from Independent television news, the first from correspondent John Irvine.

JOHN IRVINE: An image of hope is on the front of Turkish papers today. From his hospital bed, Ismail Cheaman could see himself stare back. This is a little boy for whom funeral arrangements had been made. When we arrived at hospital last night, he told doctors, "I've been buried alive." He had cried out for help, but none came. Yesterday, as his life ebbed away, rescuers found Ismail Cheaman. He had been lost to the world for six days. Now only distant relatives can comfort the child. His mother lies injured in the same hospital, his father is dead, so are three of his sisters. The boy is sedated. Tranquilizers limit the disturbing flashbacks.

GABY RADO: Despite the desperate hopes of thousands that some miracle may still deliver their trapped relatives alive, the clearing and the bulldozing rubble has now fully got under way. The rescue operation has been winding down; British, German, and Israeli teams all leaving Turkey in the past 48 hours. Local people have been taking remarkable risks in trying to salvage belongings. It's a sign both of their plight, and of the lack of official safety supervision, which has marred the earthquake catastrophe in the past week. Beyond anyone's control, however, has been the savage weather. As if they haven't suffered enough from the quakes, the population in the coastal areas of Northwest Turkey are having to contend with torrential rain storms. It's not only making survivors' lives more miserable, but it's hindering relief work, and is increasing the danger of waterborne diseases. Medical teams are worried about the risks to children in particular. Seven days into the tragedy, and large numbers of tents have now arrived in the disaster area, though not nearly enough for the 200,000 people thought to have been made homeless. When autumn and harsh weather arrives, though, canvas won't be sufficient. And relief agencies are having to plan for building shelters able to withstand earthquakes and the cold. The Turkish government is appealing to the outside word for blankets, torches, disinfectants, and various vaccines to fight infections. As their shock wears off, the people's anger is starting to show. Legal action was today launched by 300 homeless people to establish negligence by builders of houses which collapsed. A TV station, which has been criticizing the government for its lax response to the disaster, has been shut down for being too provocative. The death toll now stands at 18,000, and Turkey has asked the U.N. for 45,000 body bags.

MARGARET WARNER: For more, we turn to the U.S. Ambassador to Turkey, Mark Parris. I spoke with him earlier today from Ankara.

MARGARET WARNER: Welcome, Mr. Ambassador. Thanks for being with us.

What is the Turkish government's priority now, a week after this earthquake?

MARK PARRIS, U.S. Ambassador, Turkey: Well, obviously, it's shifting. The priority in the days immediately after the quake was to stabilize and to provide immediate medical attention to those in greatest need. As they worked their way through that problem, their focus has shifted to meeting the longer-term needs of the survivors, providing shelter, ensuring that they have adequate drinking water, restoring communications, electricity, those kinds of things. And that's what they're beginning to focus on at this point.

MARGARET WARNER: How much progress is the government making on restoring say basic water and sanitation or beginning to cope with the housing problem?

MARK PARRIS: Well, these are not problems that lend themselves to quick fixes. Infrastructure has just been shattered by the quake. I was in Istanbul when it occurred and drove back to Ankara for a meeting that I had to attend in the early hours immediately afterwards. Roads were closed, there was no communication, and everything that they found out since has reinforced the reality that the damage is very severe, very extensive, and that it will take some time to get permanent infrastructure back in shape. The government here has established a crisis center, which has been working closely with the United Nations, as well as with international missions here, including our own, to try to begin to get the material, the expertise necessary to meet housing, to meet sanitation, to meet water needs. And that process is going forward with increasing effectiveness and coherence as we move through it. We will be, as the United States, bringing in tents, for example, during the course of this week. We are in the process of bringing portable water -- potable water purification plants, as well as a ship capable of supplying the same kinds of services which should be on station by the end of this week and supplying somewhere in the neighborhood of 500,000 gallons of potable water a day. Others are making complementary efforts. Housing is going to be the biggest problem because somewhere over 60,000 homes were destroyed. There are 200,000 people currently without housing; they are living in makeshift arrangements with various degrees of sophistication. So the government has placed a very high priority on bringing in tenting and on beginning to build prefabricated units which can house these people until something more permanent can be established.

MARGARET WARNER: We --

MARK PARRIS: I should add that over the past 24 hours -- I'm sorry --

MARGARET WARNER: No, go right ahead. I was going to just ask you about the U.S. effort. We understand some Navy ships have arrived. And what is really the focus of the U.S. effort at this point?

MARK PARRIS: Well, yesterday, the U.S.S. Kiersage along with two other ships associated with the Marine exhibitionary unit arrived in the Gulf of Izmit in the vicinity of the quake. This flotilla brings an enormous capacity to help the system, the rescue effort. They have a large number of helicopters, including those with a substantial lift capability. They have landing craft that can move goods and personnel to sites that are currently inaccessible by sea because of damage to docking and other facilities. They have a large medical capability, which is not so much an issue with regards to acute injuries as it is being able to deal with the outbreak of diseases, that sort of thing, in the days ahead. The Kiersage and its commanders have spent the day talking to senior Turkish military interlocutors about how they can best sort out the assets that they bring, how they can best be deployed to move equipment, to move tents, to move water purification equipment, to assist the efforts that the Turks themselves are making in these areas. They've established liaison offices ashore in a number of locations. They have done site surveys of a number of airfields that they would be operating from. And they're beginning to develop a list of specific tasks that they would be doing in days ahead, like setting up water plants, like setting up tent facilities, like establishing sanitation facilities to be used in connection with these.

MARGARET WARNER: Is it the Turkish military that's doing the coordination? I was wondering how all this international assistance is coming in. Who is doing the coordination? How do people know where they're needed, what's needed?

MARK PARRIS: Well, to some extent this is a mirror image of our own effort; that is, there is a civilian component and there is a military component, and both obviously are important. The Turkish military component, I think, was initially suffering from the fact that their largest military asset in the region, the Golcuk Naval Base, which normally would have responsibility for taking charge of these kinds of operations, was hit very hard, among the hardest hit locations during the quake. And it's taken them some time to sort through that and to develop a plan and put it into action. But we see every day evidence that they're moving through that and are working with increasing effectiveness, including with our own military throughout the course of today and the past several days. On the civilian side we have established good working liaison relationships with Turkish help and other facilities on the scene. Our consulate general in Istanbul has a permanent presence in the area hit by the quake. People have been working very hard in some cases going without sleep or sleeping in cars on the scene to assist with that effort. And obviously you don't set up this kind of mechanism in a day. But over the course of the past week there's been real progress, both on the civilian and on the military side in terms of communication, coordination, and I think the effectiveness of the assistance that's being delivered. I would take the opportunity to emphasize, in fact, that from the very opening hours of this quake in terms of getting American personnel and equipment and expertise here, we've had superb coordination and cooperation from Turkish authorities. We had a team from Fairfax County, Virginia, specializing in emergency rescue here within 36 hours on the job, on a site working. We had an emergency surgical team from the Navy in position taking care of patients within 48 hours. That requires a lot of work on the Turkish side to get visas, clearances, transportation, et cetera, and this was right after the quake took place.

MARGARET WARNER: There has been - as I know you know -- both there and we read about it here -- a lot of criticism, nonetheless, of the government for not being prepared for this in any way and for lack of coordination. What do you think is going to be the mid- and long-term political impact of this quake and its aftermath on Turkey's system, on Turkey?

MARK PARRIS: Well, I think that you're dealing with something which is fairly natural. There are a lot of people without homes, without electricity, without ability to communicate, looking for potable water, I'm sure, as to what the situation is going to be. And naturally, they are frustrated; they are angry; they want to know when this situation is going to stop. That's a perfectly human reaction, and it's one that I think you often see in these kinds of circumstances. I remember after Hurricane Michael in Florida a few years ago there were many of the same kinds of views expressed. I think, the fact of the matter is if you see the devastation on the spot that has been wrought by this quake, and you -- you appreciate that this area was essentially cut off entirely from any communication, surface, phone, or any other, for 36 hours after the quake took place, it's hard to suggest that any government would have been able in a flawless manner to meet all of the needs required as efficiently anyone would like. This was a major catastrophe. The death toll will eventually place this probably in running for the worst earthquake in the history of Europe in this century. So, while there is anger, I think that there is also an awareness that the magnitude of this task would have been a difficult one for any government, however well prepared, to deal with. I think one must also understand that this is a government that has been in office only since June. It was a government that established over the course of the summer a very positive reputation here and internationally for the very decisive measures that it had begun to take, moving economic reforms, democratization reforms, a very impressive, necessary agenda through the Turkish parliament to the point the New York Times a week and a half ago was describing the government as the most successful Turkish government in a decade. The causes of the enormous destruction to the extent that they're a function of poor construction, of inadequate inspections. These are problems that have been going on here for years, if not decades, so I think, as a practical matter, it will be difficult to put the blame for the extent of the damage itself on the government, which has moved with increasing effectiveness over the past several days to get a grip on the problem and to move ahead.

MARGARET WARNER: All right. Well, thank you very much, Ambassador Parris. Thank you for being with us.

MARK PARRIS: It's a pleasure. Thank you.

FOCUS - MAKING THE GRADE

MARGARET WARNER: Still to come on the NewsHour tonight, the new surge in summer school, and dancer Merce Cunningham at 80. Betty Ann Bowser has the summer school story.

JOANNE CAPALANO: Does anyone here think they're a little bit like Amelia-Bedelia?

MARGARET WARNER: On a recent hot summer school morning, the kids in Joanne Capalano's class at Joseph Lee Elementary School in Boston, worked on their reading.

LITTLE BOY: It didn't say to dry them back in.

JOANNE CAPALANO: Does that make sense to you?

LITTLE BOY: No.

BETTY ANN BOWSER: They also worked on their spelling.

JOANNE CAPALANO: Silly.

BETTY ANN BOWSER: And while "silly" may seem like an easy word for second- graders to spell, in Capalano's class it was a challenge, because all her students are behind grade level. Bernadine Murphy is also a teacher at Lee Elementary.

BERNADINE MURPHY, Elementary School Teacher: I tested a girl this morning entering grade three, and she was having difficulty identifying the alphabet. She wasn't able to write the alphabet without singing the song "a-b-c-d." And at that, there were several letters that were missing as well.

BETTY ANN BOWSER: Low-achieving students are a big problem for public schools all over the country, so this summer, cities like Boston made them go to summer school in hopes of helping kids catch up. And it wasn't voluntary, like summer school programs of the past. It was mandatory, because a judgment day is coming.

THOMAS PAYZANT, Superintendent, Boston Public Schools: In Massachusetts, we're facing in 2003 requirements that students pass state assessment or they won't get a diploma. That's different.

BETTY ANN BOWSER: Dr. Thomas Payzant is Superintendent of the Boston public schools.

THOMAS PAYZANT: You can't do in 180 days, six hours a day, what is needed to give students who often were behind on basic skills and then have to close a larger gap to get to these new higher standards that they're going to have to meet in order to be able to access opportunity.

TEACHER: And the number below the fraction bar, what is this called?

BETTY ANN BOWSER: All over the country, states have adopted education reform programs that will soon require kids to pass achievement tests in order to get a high school diploma. No longer will grades be the primary determining factor.

TEACHER: Four times nine makes?

STUDENTS: 36.

TEACHER: Very good.

BETTY ANN BOWSER: So helping kids who are functioning below their grade level catch up has become a top priority. Hundreds of school systems are imposing mandatory summer school programs as a way to make that happen. It's spread so quickly that the U.S. Department of Education has been unable to keep up with exactly how many school systems or children were involved this year. But nationwide, it's estimated at least five million kids were required to go. That's about one out of every ten public school students in the country.

STERLING SCOTT: Count your tubes, and make sure you have this number.

BETTY ANN BOWSER: In Boston, summer school classes were kept to ten kids or less. Teachers were given extra training, and special remedial materials were supplied.

STERLING SCOTT: How many do you have?

BETTY ANN BOWSER: All six of the children in Sterling Scott's Boston summer school class were behind.

STERLING SCOTT: How many do you have, Demetrius?

BETTY ANN BOWSER: The day we were there, Scott gave the children colored cubes and asked them to arrange the cubes as many different ways as possible to make the number seven.

STERLING SCOTT: Very good.

BETTY ANN BOWSER: Only one child was able to do that right away. Others eventually succeeded. But one student never did completely get it. He watched the other kids, and finally he copied what they did to arrive at a solution.

STUDENT: I feel like...

BETTY ANN BOWSER: It was the same when the kids moved into reading groups.

STERLING SCOTT: Was-n't. Can you say that, wasn't?

STUDENT: Wasn't.

STERLING SCOTT: Okay.

BETTY ANN BOWSER: Still, Scott was undaunted by what was happening in his classroom.

STERLING SCOTT: I see changes in their attitudes towards the work they're doing. I see confidence building as well... as well as the ability to take initiative and do some of the work independently. Are they at level overnight? No, they aren't. However, they are seeing that education is not a baffling process for them. There's a systematic way of going about things.

STERLING SCOTT: (speaking to students) Read together.

STUDENTS: "I still have..."

BETTY ANN BOWSER: The foundation of Boston's summer school program is early intervention, reaching kids like seven-year-old Demetrius Dunston. He faced the prospect of being held back to repeat a grade again if he didn't do well in summer school. Demetrius' older brother Robert also had to go to summer school. But at 15, catching up was harder for him, so their mother, Marilyn Jones, was pleased that Demetrius was getting help so early in school.

MARILYN JONES: At least I got a better perspective of what he needs, and I think he'll be all right. And a lot of kids, though, are just getting passed to the next grade.

BETTY ANN BOWSER: You don't think that makes sense?

MARILYN JONES: No. No, because they get to 12th grade and they haven't learned anything, but because they slipped through the cracks or whatever... you know, they've gotten all the way to the 12th grade, and then when they go to take a test, get ready for college, they don't know anything.

BETTY ANN BOWSER: The teachers at this Boston middle school hope falling through the cracks is not what 14-year-old Darrow Patton will continue to do. He was in summer school because he behind in math.

BETTY ANN BOWSER: What's different about summer school that's helping you?

DARROW PATTON: Well, it helped me a lot in fractions and division a lot.

BETTY ANN BOWSER: Why, because the class is smaller?

DARROW PATTON: Yeah, it's kind of easier because it's not... the class is smaller and it makes it, like, easier to, like, get the teacher's attention.

BETTY ANN BOWSER: For Patton, the smaller classes were a welcome relief from regular school, where he frequently got lost in a class of 30 students. He showed us what he had learned about multiplying numbers with decimals.

DARROW PATTON: I learned that you have to put the zero, then the two, and then the decimal goes over two spaces.

BETTY ANN BOWSER: Right, to get that six in the right place? Then they go over right, for the rest? You got it.

DARROW PATTON: The decimal goes here.

BETTY ANN BOWSER: Right, but you couldn't have done that before this summer, huh?

DARROW PATTON: No. I couldn't have done none of this.

BETTY ANN BOWSER: Okay, go ahead, go ahead.

BETTY ANN BOWSER: Across the hall, teacher Joseph Condon was trying to keep his students engaged in a reading project.

STUDENT: So he won't be in trouble by his mother?

JOSEPH CONDON: Right, he didn't want to get in trouble.

BETTY ANN BOWSER: Some of these eighth-graders rank in the bottom 10 percent of all Boston public school children on standardized tests.

JOSEPH CONDON: From the story, I've got a few vocabulary words that I'd like you to find the meaning of.

BETTY ANN BOWSER: One girl who had no books or pencil on her desk, sat and stared into space. Others seemed to be equally distracted.

JOSEPH CONDON: Michael, give out those dictionaries, please.

BETTY ANN BOWSER: And Condon thought there was little hope, even with smaller classes, that these kids would improve much this summer because they are so far behind.

JOSEPH CONDON: I think they just need so much in support and patience.

BETTY ANN BOWSER: Do you find this depressing?

JOSEPH CONDON: (Laughs)

BETTY ANN BOWSER: Or challenging?

JOSEPH CONDON: I suppose a little of both. I mean, it's scary with the grade levels. It would be nice... I mean, the class size here even with this group of ten was difficult, but hopefully some improvement. We gave a reading test the first day, and we're going to give a reading test the last day. I suppose it's unrealistic to expect too much of a gain.

BETTY ANN BOWSER: Still, public policy experts say attempts must be made to reach low-performing kids however possible. Bob Schwartz is director of a nonprofit organization that monitors education reform efforts.

BOB SCHWARTZ, Director, Achieve Inc.: The degree of learning decay that takes place over the summer, particularly for low-income kids and kids who aren't doing anything that's education-related in the summer, they actually lose ground. So the question is, to what degree can public policy try to intervene to make use, better use at least, of the summer months, again, not just for poor kids but for kids who for whatever set of reasons haven't been able to learn what we hope they could learn in the normal nine-month school year.

STERLING SCOTT: I'm going to start from page 12.

BETTY ANN BOWSER: When they were tested at the end of summer school, the second-graders in Mr. Scott's class all showed improvement.

STERLING SCOTT: How about you, Demetrius?

BETTY ANN BOWSER: Boston school officials will expand their efforts to bring low-performing children up to grade level by providing more remedial help in regular school this fall, and they may require some kids to go to school on Saturdays.

FINALLY - AGELESS ART

MARGARET WARNER: Finally tonight, celebrating dancer Merce Cunningham. Elizabeth Farnsworth looks at a long career.

ELIZABETH FARNSWORTH: He has been performing for more than 60 years, and has produced a style so idiosyncratic, it is almost immediately recognizable as his work. There were years when some audiences found his dances too modern, too challenging. He often choreographs by chance, throwing dice to decide where a dancer will go, and how. And movements may be independent of any rhythm or theme. But over the decades, Merce Cunningham has won over legions of admirers. In July, his company filled the New York State Theater at Lincoln Center four nights straight with a celebratory program that paid homage to his lifetime of experimental work.

MERCE CUNNINGHAM: One, one. One, two, three. One.

ELIZABETH FARNSWORTH: Though arthritis limits Cunningham's motion, he still practices with his dancers five days a week, leads his company on their tours around the world, and continues to produce new work each year.

BANU OGAN, Dancer: I remember sort of thinking, "I will never be able to do this fluidly." You know? And he gave me like a certain amount of foot changes, and then an amount of arm changes and he said, "Now, the arms go not with the feet, but you do them sort of fluidly throughout the phrase." And I thought, "There's no way I'll be able to do this." And then eventually it came, and I remember feeling like, "Oh, yay." And now it feels good, you know?

ELIZABETH FARNSWORTH: Cunningham was born in Centralia, Washington in 1919, the son of a lawyer and homemaker, neither with any connection to theater. He studied dance in his hometown with a former vaudeville performer, and attended the Cornish School, now the Cornish College of the Arts, in Seattle. In 1939, he joined modern dance pioneer Martha Graham's company. She used to say he was so buoyant, he seemed made for air. Six years later, Cunningham left Graham's company to pursue his own vision. He collaborated closely with composer John Cage, who was experimenting with sound, using even twigs as instruments. The two, along with painter Robert Rauschenberg and other artists, produced over 50 works in which music, dance and set were often kept separate. At times, dancers rehearsed without even knowing what the music would be. And in recent years, Cunningham has begun using computers to break down motion and find new ways to move. In his most recent work, "Biped," which debuted in April in Berkeley, California, Cunningham experimented with computer animation artists to develop a haunting dance which included digitally produced figures projected onto a scrim in front of the stage. Over the years, legions of dancers, including great ones like Mikhail Baryshnikov, have performed Cunningham's works, and his choreography continues to influence modern dance worldwide. His company tours Europe this fall, and will premier a new work at the Kennedy Center in Washington, D.C., In the spring. I spoke to him recently in a rehearsal room at the Kennedy Center.

ELIZABETH FARNSWORTH: Merce Cunningham, thank you very much for being with us.

MERCE CUNNINGHAM: Thank you.

ELIZABETH FARNSWORTH: You have been dancing on stage for, what, 60 years now -- more than that if we go back to your childhood, I guess?

MERCE CUNNINGHAM: Sixty years plus.

ELIZABETH FARNSWORTH: Plus. How did it all start? When did you know you wanted to with a dancer?

MERCE CUNNINGHAM: Well, I actually wanted to be in the theater. But I had in Centralia, Washington, I had tap dancing with Mrs. Maude Barrett, who was a remarkable woman with an enormous energy and thrust to make you want to do what she was giving you, which were, particularly, tap dances. She taught us in her kitchen at some point, on the linoleum. And I can still hear her, see it actually, making taps with her foot. She hit the front, the side, and the back. And then we would get out these little clips and plowed away. And she'd say, "No, that's not it." And then she'd get up and do it. And I can still hear the difference. The rhythm was so wonderful. And then, eventually, I, with her daughter, we did exhibition ballroom dancing, and we performed in clubs and amateur shows.

ELIZABETH FARNSWORTH: So just from the time you took those lessons with her, you loved it?

MERCE CUNNINGHAM: Oh, yeah. Well, I... theater. I knew it was theater. How then I didn't know, but theater, obviously.

ELIZABETH FARNSWORTH: Why modern dance and not ballet, not traditional ballet?

MERCE CUNNINGHAM: I know nothing about so- called serious dance. And then I went to the Cornish School in Seattle after high school. And there it was a school run by a remarkable woman again, Ms. Nellie Cornish, where her idea, if you wanted to be in the arts, you should know something about all of them, visual and performance. So I wanted to be... I went to be principally to be in the theater about being an actor, but there was dancing, and I took it. And Ms. Cornish said when she was making out my schedule, she said, "Well, of course, you will do the modern dance." And I didn't know one from the other. So I said, "All right."

ELIZABETH FARNSWORTH: Amazing how these things are decided.

MERCE CUNNINGHAM: Well, it's chance. And in the end, I think for me it was very good chance.

ELIZABETH FARNSWORTH: As you well know, there's been lots of writing about the fact that you design a dance sometimes by chance. You've even thrown dice, and depending on the roll of the dice, decided important elements of the dance. Tell us about that and why you do it.

MERCE CUNNINGHAM: Because on the simplest possible level, it opens up things I wouldn't have thought of. It opens up. And chance does this for anybody. You can toss the coin about something in your daily life. And you do what it says, and you find out something you hadn't thought of before. Well, in the larger sense with this, I have done it in all of the dances, used it in various ways, all of the dances since... 20 or more years, more than that, 30 years probably-- in various ways, because it is such a large way of working. It can be so complex that it's almost impossible to decipher it. What it does do for me is if something comes up even that is, you might say it's physically impossible for humans, okay. But you look at what it is, and you see something else that you can do, which you had not thought of before.

ELIZABETH FARNSWORTH: Oh.

MERCE CUNNINGHAM: So that's the kind of philosophy all right, but it's also a marvelous way for me to work, because it is a way of getting at something in a way that I might not think of.

ELIZABETH FARNSWORTH: And were you also rejecting... were you trying to avoid clich s that can occur in narrative dance? Is that part of what you were doing? I mean, in dance it tells a story.

MERCE CUNNINGHAM: Yes, yes. Well, narrative dance has never interested me regardless, because I think that movement by itself is so fascinating and that one can experience it directly. But the chance thing has furthered that. And also, it just isn't easy to do, because of the complexities it leads you into. But you do find out things, not only about dancing, but about people.

ELIZABETH FARNSWORTH: It is really a philosophy of life that this is a reflection of it, isn't it? I mean, being attuned to the very moment, instead of looking at what's happening next, is that part of what you're talking about?

MERCE CUNNINGHAM: Yes, exactly. Yes. You get someplace. In that sense it's like Zen. You are what you are at the moment of time and space. Okay, now what do you do next? Instead of having planned something, you go by chance, using the chance operation, and it sends you some other place, and you have to figure out how to get there.

ELIZABETH FARNSWORTH: Uh-huh. Is this why... is it true, by the way... I read that you did... sometimes you introduced your dancers to the music the day of the dance. You didn't write the dance for the music. Is that true? You were collaborating with John Cage, your longtime partner.

MERCE CUNNINGHAM: Yes.

ELIZABETH FARNSWORTH: Is that true that you did that?

MERCE CUNNINGHAM: Oh, of course. We still do. Everybody thinks it's odd, but you do it in your life every day. But it's, again, in a way, it's political move. It's saying that one person isn't better than somebody else-- in this case the composer and the choreographer -- that we both... that the two arts occupy a length of time, say two minutes, five minutes, thirty minutes, whatever. And the composer cuts it up in one way, and the dancer can cut it up in another, and they do it at the same time.

ELIZABETH FARNSWORTH: You've always collaborated also with artists who were very much ahead of their times, you might say, Robert Rauchenberg and others. And in the July birthday performance, you have digital artists involved. Tell us about that and how you got into that.

MERCE CUNNINGHAM: Well, it's the motion capture work. I can't speak in technical terms, because it's too complicated for me, but I met Paul Kaiser and Charlie Escar, and I saw their work, their individual work with computer and on screens and so on. And we wondered if we could work together some way. We ended up... my having to make a number of very short phrases for two of my dancers, which we then took to the dancers and the phrases to San Francisco to be shot in a motion picture studio. And we shot them, and that was the beginning material for the two digital men. Then later we did some more shooting of movement. All of this was used by the two men to make material which they could then put on project, which in the case of "Biped" is projected on a large scrim, which is in the front. If you're the public, here's the scrim, and the shapes would appear. They're both figures recognizable, say, as human or distorted humans. And behind it were the dancers doing the dance. You could see through this. And it makes a double image, in a way.

ELIZABETH FARNSWORTH: How do you explain your ability to stay so young? I mean, you still dance. You're doing major performances every year. You're using the most... the most cutting edge technology- art. How do you do it?

MERCE CUNNINGHAM: I get up every morning, and I try stand up straight, and then I try to bend over. And from that I try to begin. That's not easy. It's very hard. But most of all, I think it's simply about dancing. It's been what I do all my life. And it's what interests me. And it remains just as fascinating now as when I began, because I constantly am finding something I don't know about, so that I try to find some way to deal with that. Then further, I live at a time when there is an enormous change in visual... both in art, with the artists with whom I've worked, Jasper Johns and Robert Rauchenberg, for example. They've brought very different visual ideas into art. And I've been lucky enough to have been able to collaborate with them. And in this situation, it was another visual thing. You see, I think that's what puts the dance, for me, and technology together. It's visual. It's what you look at. With dancing, it's something you watch. You don't have to like it, but that's the way you experience it, by looking. And so is so much of the technology. So I thought, from the beginning, well, they should go together.

ELIZABETH FARNSWORTH: What do you think your main contribution to dance has been so far?

MERCE CUNNINGHAM: Oh, I suppose to keep on going. I don't know. But I do... have felt very strongly for many years about the ideas with which I work, that they are interesting ideas in terms of movement and in terms of dance. And in the beginning, there was of course a great deal of opposition to the kind of work I was doing. And I remember sitting one day and thinking, well, I don't really like what they say, because I think these ideas are part of the world I live in. Now, I may not be working at them very brightly. That's okay. I could put up with that. But the ideas themselves were fascinating. And I think if you simply look around at the way the technology is in our lives at any moment, that unless you just want to avoid it totally-- and of course, you can be inundated about it-- you have the slide through some way.

ELIZABETH FARNSWORTH: Well, Merce Cunningham, thank you very much.

MERCE CUNNINGHAM: (Laughs) You're welcome. Thank you.

RECAP

MARGARET WARNER: Again, the major stories of this Tuesday. The Federal Reserve's Open Market Committee hiked two key interest rates by a quarter point each. And the death toll from Turkey's earthquake climbed to 18,000, with reports of more than 42,000 people injured, and another 200,000 homeless. We'll see you online, and again here tomorrow evening. I'm Margaret Warner. Thank you and good night.