The MacNeil/Lehrer NewsHour

INTRO

ROBERT MacNEIL: Good evening. Central America is still at the top of the news tonight although the President's congressional critics have left Washington for the Easter recess. The President has reportedly bypassed Congress and authorized emergency funds to aid El Salvador's struggling army. Nicaragua claimed it was fighting off major assaults by contras. The administration ordered a halt in case reviews that have thrown half a million people off disability benefits. The space shuttle landed safely in California, bypassing bad weather in Florida. A man believed to be the FBI's most wanted fugitive and a mass murderer has killed himself in New Hampshire. Jim Lehrer is off tonight; Judy Woodruff's in Washington.

JUDY WOODRUFF: Tonight we'll be taking another look at Central America from a new angle -- the contras fighting the Nicaraguan government may lose their U.S. aid. We ask, what's next? The athletes aren't alone in their pre-Olympic training. Security officials are also bracing for the big event. A new tax package emerges after 19 hours of Senate debate. We examine the fine print and its impact on tax shelters. And we look at a birthday girl. In her 75 years she's carved out a niche in the world of American literature.

President Reagan has decided not to wait for congressional approval of his request for emergency aid for El Salvador. Knowledgeable sources at the White House said that the President today authorized up to $32 million in emergency shipments of military and medical supplies to the Central American nation. The Senate has approved a $61.7-million package, but the House recessed today without voting on Mr. Reagan's aid request. Yesterday House leaders told the President they would not object if he used $32 million from money appropriated for other nations. However, the White House decided on a different, buy-now, pay-later plan for El Salvador. The White House decision did not please one of the administration's chief critics in Congress, Maryland Congressman Clarence Long, who said he didn't see the need for an emergency appropriation.

Rep. CLARENCE LONG, (D) Maryland: They were not out of money; there's $20 million there in funds under the Long-Specter amendment which have not been spent for this year, which could be spent anytime they got a trial and a verdict in the case of the murder of the nuns.And that provision was deliberately put there to put a bind on Salvador to get that trial going. It's gone on for 3 1/2 years with no verdict. And obviously what this message now is, "Any time you get pressured too much by Congress, we're going to come to your aid with a military draw-down." I think it's wrong, wrong, wrong, and I think -- and I told them I thought this was going to be counterproductive in the long run. I think it's about time Congress limited the ability of the executive to use these emergency funds to bypass Congress when it doesn't get what it wants, and I'm going to recommend to the authorizing committee, some of whom have already expressed their dissatisfaction to me over this procedure, that they severely limit the ability of the administration to resort to this.

WOODRUFF: One administration official said the $32 million the President authorized for El Salvador today would be enough for some short-term needs. He added the President wants the Congress to go on the record in favor of aid for El Salvador. Robin? Nicaragua: Contra Aid

MacNEIL: The Nicaraguan army said its troops are successfully holding off an attack by a force of rebel contras at the seaport of San Juan del Norte on the Atlantic Ocean a few miles from Nicaragua's border with Costa Rica. The contras claim they captured the town, but the Nicaraguan government said its men are holding on after three days of fighting had inflicted heavy casualties on the attackers. The anti-government force, called Revolutionary Democratic Alliance, which is based in Costa Rica, said it has 450 men equipped with anti-aircraft missiles attacking San Juan del Norte. The attackers said they want to use the port as a base for more attacks against Nicaragua. The contras, whose mining of Nicaragua's harbors with CIA help has created such a political furor in Washington, have also been using mines on land. They say land mines planted on roads near the town of Puerto Cabezas close to the Honduran border have blown up at least three Nicaraguan trucks. To tell us more about the contras' military effort and how it would be affected if U.S. aid were cut off, we have Retired Marine Lieutenant Colonel John Buchanan. Colonel Buchanan was in the Marine Corps for 22 years. He flew 223 combat missions in Vietnam.He's closely followed the military situation in Central America and has made many trips there. He's currently a consultant to the Center for Development Policy in Washington. Colonel Buchanan, how successful have the contras been in the two years they've been waging this fight against the Sandinistas?

JOHN BUCHANAN: Robin, to date they have not been militarily effective. Their mission has been to harass the Sandinista government in order to encourage repression and disaffection with the government and economically to cause sabotage and bring them down. They've not been very effective thus far.

MacNEIL: That has been their only mission? To harass and to cause disaffection? It has not been their mission to try and overthrow the Sandinistas?

Lt. Col. BUCHANAN: One of their aims, personal aims for them was to break off the northern area, probably Nueva Segovia, and declare it a liberated zone and set up a govenment there. They've not been successful in that, and they've not been too successful in harassing the government.

MacNEIL: What have they achieved?

Lt. Col. BUCHANAN: So far I can't say that they've achieved very much as far as their goals. They have achieved a purpose in the nation of Nicaragua of consolidating the support behind the Sandinista government.

MacNEIL: Could it not be said, as the administration has claimed, that the pressure the contras have brought, including economic dislocation, has brought the Sandinista government closer to wanting to negotiate and to conform to what Washington would like it to do?

Lt. Col. BUCHANAN: Perhaps, Robin, there's some truth in that, but the purpose of military action by any nation is to -- against another nation is to bring the other one around to a negotiated position. And any military achievements we've made -- the Reagan administration has made against the Sandinista government has not been followed by any effort at negotiation. So it's basically aimed at a military overthrow, or an overthrow of the Sandinistas, as far as I can see.

MacNEIL: So, just looking at it militarily speaking, you would say that the government in Managua still easily has the upper hand in this?

Lt. Col. BUCHANAN: That's correct. We -- the United States government, has expended tremendous political energy and capital on building an infrastructure in Honduras to support the contras, and I think they see that the contras are ineffective and are trying to make a final push here, in my opinion.

MacNEIL: If mining controversy results in Congress disallowing further aid to the contras -- U.S. financial aid to the contras -- what will be the result of that?

Lt. Col. BUCHANAN: If they disavow aid to the contras I think the contras are going to fall on their swords. I heard today, or read today, where they thought they would go to some Third World nations -- and I won't name them because I don't think it's fair to even make those kind of implications. They would go to Third World nations and get money to fund it. I don't believe they could. I believe that there would be a little money comming in from Miami and the supporters from that region, but it takes tremendous money to fly the helicopters, the DC-3s, to provide the support for ships to take in the cargo. Only the United States can supply the contras, no one else.

MacNEIL: So you believe the contras -- does that mean you think the contra effort would collapse?

Lt. Col. BUCHANAN: I believe it would.

MacNEIL: So the price of the mining controversy would be the collapse of the contra effort if it resulted in the Congress saying no more aid?

Lt. Col. BUCHANAN: If it resulted in saying no more aid it'd probably be the end of the contras. They might stay there for 15, 20 years, be grey-haired old bandits rustling cattle across the border, but that's about it.

MacNEIL: Can the U.S., for instance, with its installations in Honduras, help the contras without money? I mean, supposing the Congress said, "No more financial aid to the contras." I mean, are there other ways the U.S. could help the contras?

Lt. Col. BUCHANAN: I think it would be difficult over the long term. We've built an infrastructure where we have ports and airfields that we can bring in the supplies, fly them to the border reasons in the support of the contras and further fly them down deep into Nicaragua, which we are now doing in supplying the contras from base camps. But without that support, without the large-scale money for the funds for the fuel, for the funds for the ammunition and the medical support, I don't think they could do it, Robin.

MacNEIL: Have the contra forces grown in the years they've been fighting with U.S. aid? Have they attracted some more following to their cause?

Lt. Col. BUCHANAN: Well, I think we'd have to historically look at the region where the guerrilla forces are drawing their support from, and that's Nueva Segovia. That region has always been anti-government. I don't care which government it was. Anti-authoritarian. They followed Sandino against the Marines; they were liberal versus conservative and so on. Sandinistas versus Samoza. And there are a lot of people in that northern region who are closely associated with the Sandinistas, by blood, by relationship and the relationship of being former national guardsmen and descendants and brothers and so on. So they have some support in that region, and about that region only. But they also have a great deal of opposition in that region.

MacNEIL: I see. But has their support been growing? Are the various contra factions much larger than they were a year ago?

Lt. Col. BUCHANAN: I wouldn't think they were terribly significantly larger. They've grown some, but to grow from five or six thousand to 8,000 when you figure the question of unemployment in Honduras, [unintelligible] and all the other provinces, it's much easier to be a soldier on the CIA payroll than it is to go out and grub for beans and tortillas.

MacNEIL: Well, so when you sum it all up, you as somebody who has looked at them militarily, you don't seem very impressed with the contras' effort?

Lt. Col. BUCHANAN: The last time I saw the contra people that I talked to, they were pretty well shell-shocked. I've seen their hospitals and heard reports on their hospitals. I'm not saying they're probably individually not courageous and brave men. I don't want to cast any reflection on their bravery. But I don't think militarily they're being successful. I don't think they're going to overthrow the Sandinistas. I think the net result of the administration program is only to increase the support for the government in Managua. I think without the four-year program we've had long ago the disaffection would have probably been at a different scale and taken a different form. But right now we're just building cohesion for them.

MacNEIL: Well, Colonel Buchanan, thank you for joining us.

Lt. Col. BUCHANAN: Thank you, Robin.

MacNEIL: Judy?

WOODRUFF: They call themselves the Ace Satellite Repair Company, and today their 98-ton repair truck came home. The space shuttle Challenger with its five astronauts on board glided to a perfect landing at Edwards Air Force Base in California's Mojave Desert just after dawn this morning. The shuttle landing was delayed by about an hour and a half after it was re-routed from the planned touchdown site in Florida because of bad weather. But that last-minute change didn't detract from what shuttle commander Robert Frippen called a supermission, the first ever to demonstrate that a satellite could be repaired in space. Following their return from seven days in orbit, the astronauts flew back to their home base in Houston, this time by regular airplane. NASA's next shuttle mission has been scheduled for June. Robin?

MacNEIL: The Reagan administration today bowed to pressure from Congress and the public and suspended the controversial review of Social Security disability cases. Health and Human Services Secretary Margaret Heckler ordered benefits restored to 40,000 people who are appealing decisions cutting off their disability benefits. Another 210,000 people whose cases are under review will stay on the rolls until Congress can pass reform legislation and the Social Security Administration can replace what Mrs. Heckler called its "splintered and divided disability policies" with consistent nationwide criteria. Nearly half a million people have been ordered off the rolls since March, 1981 when Social Security began carying out a congressional order to screen 2 1/2 million disability recipients to see if they were fit to work. But Congress was flooded with complaints, and congressional panels have cited scores of instances in which people died, some as suicides, after the government cut off their checks. Mrs. Heckler has told Congress the cutoffs were saving over $1 billion a year. the decision was welcomed today by Bruce Freed, an attorney for the National Senior Citizens Law Center.

BRUCE FREED, National Senior Citizens Law Center: We're very pleased, I should say at the outset, that Secretary Heckler has taken this position. Thousands and thousands of people are going to be able to go to sleep tonight knowing that their incomes are going to be restored, at least for some period into the future. If there is a bottom line, it's that the White House and Secretary Heckler's decision today can be cast as an admission against interest. For the last several years the Social Security Administration officials -- Secretary Schweiker and now Secretary Heckler -- and officials at the White House have denied that there was a problem. In February of last year on this very show, Assistant Commissioner for Social Security Paul Simmons essentially denied that any of these problems were real, and yet now we see that Secretary Heckler -- very responsibly -- has finally owned up to the fact that these problems are not a fantasy but are painted in terms of real people and their lives.And, in some cases, their loss of life.

MacNEIL: The latest government figures out today showed the U.S. economy growing at a slower pace in March and inflation rising a little faster. U.S. industrial production increased 0.4%, the weakest gain in four months. The Federal Reserve Board said this was due to slower output of construction supplies and business equipment. In the same month wholesale prices rose a full half point, the second biggest jump in 16 months. The Labor Department pointed to a leap in food prices caused by a huge increase in the price of fresh fish because bad weather slowed fishing off the Northeast coast.

Wall Street, which had a strong rally yesterday, fell back today, the Dow Jones index of 30 industrial stocks closing down 7.01 at 1150.13.

Judy?

WOODRUFF: A report from Beirut Radio says that a suicide driver rammed a truck loaded with explosives into an Israeli army position about six miles east of Tyre in the Israeli-occupied zone of southern Lebanon. The report said that two Israeli tanks were destroyed and six Israeli soldiers were killed. The report has not been confirmed by Israeli military officials.

Earlier in the day Israeli assault troops made a lightning attack on a bus that had been hijacked by Arab guerrillas and taken to a village near the Egyptian border. The four guerillas, who had held 35 passengers as hostage for about 10 hours, were killed. So was one of the passengers, an Israeli. Here is a report from Keith Graves of the BBC.

KEITH GRAVES, BBC [voice-over]: It was a classic anti-terrorist operation. Minutes before dawn when the hijackers' resistance would be at its lowest, the Israeli special forces went in. The bus had crashed two roadblocks and continued for several miles with its tires shot out, stopping eight miles short of the Egyptian border. If they had crossed the border, the hijackers would have made their demands for the release of 500 Palestinians from Israeli jails from a position of strength. As it was, there was no chance their demand would be met. The rescue operation was over within seconds. Seven of the 27 passengers were wounded, but it was so swift that the hijackers had no time to detonate their grenades or explode a bomb. One passenger died, a 19-year-old Israeli girl soldier. But for such an operation it was, statistically, a small price to pay.

WOODRUFF: In Damascus the Popular Front for the Liberation of Palestine, a Marxist group within the Palestine Liberation Organization, claimed that its men carried out the hijacking. And, in Jerusalem, Prime Minister Shamir implied that Israel would retaliate. Robin? Olympian Security

MacNEIL: Today's Israeli incidents are just another reminder of how much terrorism is part of the world political climate today. That thought is increasingly on the minds of federal and state authorities in this country as they prepare for the Los Angeles summer Olympics. In Los Angeles today a Senate subcommittee held closed hearings on security preparations. Republican Senator Jeremiah Denton of Alabama convened the session to examine the likelihood and nature of any terrorist attack and look at the police measures being taken to prepare for it. June Massell has been in Los Angeles, also looking at those preparations.

ACTOR, "Blue Thunder" MOVIE: Red dummies represent the terrorists, the white the civilians, innocent bystanders.

JUNE MASSELL [voice-over]: This is fiction, a scene from the movie "Blue Thunder," in which a helicopter is developed to wipe out any terrorists at this summer's Olympics. Hollywood produced the movie, but it didn't invent the concern. The concern about a terrorist threat is real.

EDGAR BEST, Olympic Organizing Committee: Before Munich there really wasn't serious security planning that had to go on with an Olympics. What occurred in Munich really changed, probably forever, what is going to have to be done for an Olympics relative to security.

MASSELL [voice-over]: Munich, Germany, September, 1972. A group of Palestinian terrorists, known as Black September, murdered two Israeli athletes and held nine others hostage, later killing them all in an airstrip gun battle. It was the bloodiest moment in the history of the Olympic Games. Since then the Olympic Games have been free of violence, but acts of international terrorism have increased dramatically since the Munich massacre. In Los Angeles, heavy security preparations are now underway for this summer's Olympics.

ROBERT BRETZING, FBI: I believe, in view of what has taken place, and in view of the great potential that lies here in the Olympics, and in view of the very unstable political conditions --

MASSELL [voice-over]: Richard Bretzing is in charge of the FBI's L.A. office.

Mr. BRETZING: The normal precaution dictates that we be prepared. We obviously do our best to make Los Angeles such a place that terrorists, should they plan an activity here, would be most regretful with the consequences.

MASSELL [voice-over]: Robert Kupperman, an expert on international terrorism at Georgetown University, believes the possible sources for a terrorist attack are many.

ROBERT KUPPERMAN, Georgetown University: Clearly, the Iranians, particularly with the help of the Syrians, have been noticeably interested in doing us in in the Mideast. And for the first time in, say, years, we're now seeing the development of an infrastructure here in the United States of, for example, Libyans, Iranians that are pro- the Ayatollah, the Armenians, any of the Palestinian or Shiite groups against the U.S. generally; Croations could come alive again. And there are some homegrown groups.

MASSELL: Embarrassing the American government is not the only possible goal of a terrorist group. The Olympics will attract people of almost every nationality in the world, many with long histories of feuding. And authorities fear that the games may become a stage for foreign battles that have absolutely nothing to do with American foreign policy. [voice-over] Brian Jenkins studies terrorism at the Rand Corporation in California.

BRIAN JENKINS, Rand Corporation: An Olympics is like a little United Nations that will exist for a short period of time in this city. All the flags of more than 100 nations will be flying, and it could offer an opportunity for some extremist group to express itself on some particular issue, some quarrel which is beyond the shores of this country.

MASSELL [voice-over]: Unlike the United Nations, the Olympics will not be located in one place. There are 24 events at 23 different sites covering almost 200 miles. The L.A. Olympics will stretch from Santa Barbara to San Diego. So how does law enforcement make Los Angeles terrorist-proof?

Mr. JENKINS: You can't make it terrorist-proof. There is no such thing as absolute security.

MASSELL [voice-over]: But law enforcement says they have to be prepared anyway. This is the FBI's hostage rescue team training for a real-life rescue operation. It's one of the most sophisticated counter-terrorist outfits in the country. And it will be on hand should anything happen at the Olympics. So will more than 50 federal, state and local California law enforcement agencies, a web of overlapping jurisdictions that makes security coordination, not to mention security itself, an Olympian task. A virtual army of 17,000 security people will guard southern California in August. The Los Angeles police alone have spent almost $1 million on high-tech equipment. This is not a war zone in Beirut. It's the L.A. police parking lot, home of their bullet-proof rescue tank.

JOHN McCARTHY, L.A. police SWAT team: During the Olympics it could be used if there were a tactical situation where it was necessary to rescue injured or downed citizens, officers, to evacuate. This can drive right in, pick up citizens out of their houses or citizens that are caught in a field of fire and take them out.

MASSELL [voice-over]: The tank isn't the only thing the police have acquired. This electric taser, which shoots non-lethal darts into suspected criminals, is among the latest in police weaponry. Then there's Fearless Felix, a $62,000 robot who goes after bombs. But when the police tried to show him off recently, it was Felix who bombed, proving once again that even fancy equipment can blow fuses.

SPEAKER: Felix was running well until you people from the press showed up, and I guess he has stage fright.

MASSELL [voice-over]: When high tech doesn't work, old-fashioned horses may, so the L.A. mounted police is intensifying its crowd- and riot-control training. Some fear the fixation on security -- preparing for all possible dangers -- may itself be dangerous.

Mr. KUPPERMAN: I'm saying that the atmosphere in which this is occuring, the sheer number of SWAT teams around, the sheer number of people with guns, the sheer psychology of "the terrorists are coming!" is overreaction in itself. Indeed, if you look upon terrorism as a theatrical event, as highly choreographed theater, the terrorists have already won. They don't have to attack.

MASSELL: You use the word overreaction. What do you mean?

Mr. KUPPERMAN: They may end up with Kent State again. You may end up killing people who are innocent.Look, a child sets off a cherry bomb. It goes off, people get scared, and security forces start rushing in, and they kill them.

MASSELL: Is there an overreaction?

DARYL GATES, L.A. Police Chief: No, that's nonsense.

MASSELL [voice-over]: L.A. Police Chief Daryl Gates.

Chief GATES: The biggest reaction and the biggest overreaction, I think, comes from media. The media keeps pounding at this issue of terrorism and security and all of these terrible things. I think what we are saying, from a police standpoint, is that, hey, all of these things are possible. We recognize that terrorism is possible; we understand that crime is possible; we understand that traffic gridlocks are possible. We are preparing for all of those kinds of things. That should not suggest any kind of hysteria at all. There is none.

MASSELL [voice-over]: With all the attention being paid to terrorism, many residents of Los Angeles wonder if their safety will be in jeopardy.

MIKE LOFCHIE: The Los Angeles police department may be so busy providing security for athletes and visiting foreign officials and people in those categories that the average citizen is going to be less well attended to than is usually the case.

Chief GATES: Quite frankly, the people are going to be safer in the city of Los Angeles during the Olympic Games than they ordinarily are. What has happened both at Montreal and what happened at Munich was that crime went down. We think that's going to happen here because there is going to be more police presence than normally. And so we think crime is going to go down. We think people are going to be safer.

MASSELL [voice-over]: Whether its terrorism or crime, it all boils down to the same thing -- planning for the unknown and hoping none of it will happen.

Mr. BEST: The thought that gives us concern is, have we thought of everything? It's very difficult to forecast all the things that could be of a disturbance, and I don't think there's going to be any security planner that's completely comfortable until the games are over.

Mr. JENKINS: The problem we face is there is no sharp line -- at least, I don't know of any sharp line between prudence and paranoia. We don't know how much is enough. There's a basic asymmetry. Terrorists can attack anything, anytime, anywhere. We can't protect everything all the time everywhere.

MacNEIL: The cost of security has provoked a dispute between the Olympic Organizing Committee and the city of Long Beach, California. Long Beach is scheduled to host four Olympic events. But the city and the committee cannot agree on how much each is to pay for the extra police needed, so yesterday Long Beach authorities said they were suspending all preparations for the games until the dispute is settled. Meanwhile the International Olympic Committee has scheduled a special meeting in Switzerland to discuss Soviet complaints about the United States and the L.A. games. Moscow has charged that the U.S. is breaking Olympic rules and mounting an anti-Soviet campaign. A Czechoslovak newspaper picked up that charge today, saying anti-Soviet hostilitiy threatened to turn the games into an event reminiscent of the 1936 games in Nazi Germany.

A man believed to be Christopher Wilder, the object of a nationwide manhunt in connection with the kidnapping and murder of a series of young women, shot and killed himself today in a small town in New Hampshire. The man was accosted by police at a gasoline station in Colebrook, New Hampshire. The police said he pulled a gun from the glove compartment of his car and killed himself with two shots. One of the police officers also was wounded by the first bullet after it had passed through the gunman's body. The dead man's physical description and preliminary fingerprints match those of Wilder. He's an Australian who's wanted by the FBI in a string of 11 abductions of young women, including four who were killed. Wilder is described as a millionaire who operated an electrical contracting business in Brighton Beach, Florida, and raced sports cars as a hobby. Colebrook, New Hampshire, is about five miles from the Canadian border, and the police theorize that he was heading for Canada to escape the manhunt in this country.

[Video postcard -- Saranac Lake, New York]

WOODRUFF: It took until 5:30 in the morning and 19 hours of debate, but the Senate finally approved an election-year tax hike, spurred on by concerns about the large federal deficit, the Senate voted 76 to five to support a $48-billion tax package. The House approved its own $48-billion tax bill earlier in the week. While the bulk of the new taxes will hit corporations and high-income investors, all consumers will feel the impact once the House and Senate iron out differences between the two bills. Liquor taxes will go up 35 cents a fifth under the Senate's plan. The House approved a 60% [sic]-per-fifth hike. And the current 16 cents tax on cigarettes will drop, but not completely. The Senate allows an 8 cents reduction; the House approved a 4 cents drop. On the tax on diesel fuel, the Senate passed a 15 cents-a-gallon tax; the House came in half a cent less. But under both plans, owners of diesel cars would get a tax rebate.And both houses of Congress agreed to keep the 3% long-distance telephone tax until 1987 instead of letting it expire next year as scheduled. Much of the new legislation takes aim at tax shelters. Charlayne Hunter-Gault has more on that part of the story. Charlayne? Tax Shelters

CHARLAYNE HUNTER-GAULT: Eluding the tax collector is an old game, but in recent months thousands of upper- and middle-income taxpayers have latched onto an old game with increasingly new twists and more appeal. They are tax shelters, investment devices used to shelter income from taxation, usually for a period of years. A total of $14 billion was invested in tax shelters in 1983, up from $8 billion two years ago, according to Robert Stanger, a leading tax shelter expert. But with this rapid growth has come the question of abuse, followed by a massive crackdown by the Internal Revenue Service. What has drawn the ire of the IRS are such questionable items as luxury cars -- BMW once advertised itself as "the car that shelters you from boredom as well as taxes", movies, gems, billboards and even Bibles. In one of the most highly publicized cases of tax shelter abuse, Attorney General William French Smith claimed income tax deductions in 1981 and '82 totalling more than $175,000, three times his original $60,000 investment in two oil and gas ventures. No action was taken against Smith when he voluntarily decided to forego claiming tax benefits which exceeded his original investment. To explain more about tax shelters and why the federal government is cracking down on them, we talk with Jerome Kurtz, a Washington tax lawyer who was Commissioner of the Internal Revenue Service during the Carter administration. Mr. Kurtz is credited with starting the IRS's enforcement drive against tax shelters. Briefly, Mr. Kurtz, how exactly is Congress planning to try and deal with this in its legislation?

JEROME KURTZ: Well, basically, Charlayne, what Congress has done in this tax bill and in the tax bill passed a few years ago was to increase penalties and to increase enforcement mechanisms for tax shelters. That is, previous to that time the problem with enforcement in the tax shelter area was that a taxpayer would take a very questionable deduction. If it proved to be wrong and he lost the case, he would pay the tax and interest, which itself was not a bad deal. So that taxpayers were inclined to take rather extreme positions. In the last tax bill, and a little more in this one, penalties for taking very questionable positions have been increased in order to discourage taxpayers from doing it.

HUNTER-GAULT: So that they'd had to pay the amount that they would have paid in the beginning --

Mr. KURTZ: Plus some penalty.

HUNTER-GAULT: -- plus some kind of penaly, like what?

Mr. KURTZ: Well, it varies with various kinds of shelters and overstatements in the range of 10% or, in some, a deduction scheme. The taxpayer can lose the deduction completely. There are a wide variety of different penalties at this point.

HUNTER-GAULT: To your way of thinking, is that enough to deal with the problem?

Mr. KURTZ: Probably not, but it's a help.

HUNTER-GAULT: How do you actually crack down on abusers?

Mr. KURTZ: Well, the first problem the Intermal Revenue faces when it starts a program to deal with abusive tax shelters or any other particular area, is to identify those taxpayers, those returns which reflect that kind of activity. And --

HUNTER-GAULT: You mean everybody who lists a tax shelter -- I mean, it's obvious that there is a tax shelter when you look at the return?

Mr. KURTZ: Well, it's not always obvious, and in the computer selection of returns for examination, programs have to be developed which identify those characteristics of the returns that are likely to have shelters. There are other programs which are now enforced that give the government the authority, for example, to move in and get an injunction against the tax shelter promoter to prevent him from selling abusive tax shelters. That's new in the law and has been very helpful.

HUNTER-GAULT: Well, how do you draw the line between a legitimate tax shelter, because some are, right?

Mr. KURTZ: Many.

HUNTER-GAULT: -- and an abusive one?

Mr. KURTZ: Well, I think --

HUNTER-GAULT: Or abusive ones?

Mr. KURTZ: The simplest definition is that an abusive tax shelter is one which is not permitted under the law.

HUNTER-GAULT: Like what, for example?

Mr. KURTZ: Well, you have shelters that have been sold, for example, where a taxpayer buys Bibles -- you mentioned in coming into it. The tax shelter that was offered there was that a taxpayer could buy 1,000 Bibles for $5 apiece, let's say, and he would get an appraisal of $20 apiece and then would give them to churches, claiming charitable deductions of $20. That's clearly not allowed, and people can buy -- the deduction is for fair-market value. But if one can buy the item for $5, that's the best evidence of what it's worth. That's simply an abuse of a provision of the tax law which, if it were really worth it, the deduction would be allowed.

HUNTER-GAULT: Well, how does a taxpayer -- I mean, presumably people who are in an income bracket high enough to be dealing with tax shelters has someone advising them. I mean, how would you know that you were being advised to get into a tax shelter that isn't quite legit?

Mr. KURTZ: Well, my sense is that most people know. There are several rules of thumb in different types of shelters. If one looks at investments, for example, real estate or oil, which are tax shelters under the law if they're managed in a certain way. Some of them, though, promise benefits which seen too good to be true. The general rule of thumb is if a shelter promises benefits that appear to be too good to be true, they probably are. And common sense plays a substantial role.

HUNTER-GAULT: And what about legitimate tax returns? I mean, what's the rationale for tax returns in the first place, and --

Mr. KURTZ: Tax shelters.

HUNTER-GAULT: Yes, tax shelters.

Mr. KURTZ: Well, most of the provisions that have created tax shelters were put in the law at one time or another by Congress to encourage particular kinds of economic conduct, particular kinds of investments. For example, to encourage companies to drill oil wells they're allowed an immediate decuction for the cost of drilling the well, even if it produces oil. Very substantial depreciation allowances for real estate, much faster than real declines in economic value. Congress did that in order to direct investment into various activities. And they -- and taxpayers who follows those rules and do that are doing what Congress wanted them to do. The problem is that when you create -- when Congress creates an artificial deduction, which is what these encouragements are, then there's a great temptation to magnify the benefit of the artificial deduction through various very intricate financing devices, leases and things of that kind, to blow the shelter beyond what Congress ever intended, and then it becomes abusive.

HUNTER-GAULT: But isn't it inevitable, though, that no matter how much Congress tightens or narrows the loopholes, there are always going to be smart lawyers who are going to come along and figure out some way around it?

Mr. KURTZ: Well, that's certainly been the experience in the past. The basic -- the fundamental problem -- you're perfectly right. The fundamental problem is that when Congress uses the tax law in an artificial way, that is, puts provisions in the law which are not a part of measuring someone's income but they're put in in order to encourage an investment of a certain kind or a certain kind of conduct, it is almost inevitable that it will be abused. And, I might say, even if it's not abused, by and large it's not a good idea. Those benefits have tended to prove very wasteful. While they do encourage the conduct that they're supposed to do, they do it at really great costs and little control.

HUNTER-GAULT: Well, Mr. Kurtz, thank you very much for being with us. Robin?

MacNEIL: The Reagan's tax return was made public today. It showed President and Mrs. Reagan had a 1983 income of $422,834; $200,000 of it was salary as President. The Reagans paid $128,000 in federal taxes. but because they had overpaid through withholding and estimated tax payments, they will get a refund of more than $50,000. Judy? Campaigning on Public Funds

WOODRUFF: It's not Mr. Reagan's money, but the taxpayers' money that is becoming an issue every four years when the incumbent president starts to run for re-election. He's the head of government but he's also a candidate, and that inevitably stirs up some controversy, controversy highlighted by the trip Mr. Reagan took this week to Texas and Missouri.

Pres. RONALD REAGAN: All of us working together and ignoring the gloom-criers and the pundits who said it couldn't be done, all of us have hung tough. And today, as we see the auto industry and the economy humming with activity, aren't we glad we did?

WOODRUFF [voice-over]: The President spoke wednesday in Kansas City before an audience of blue-collar autoworkers, the kind of voters whose support the President needs if he's going to reconstruct the winning coaltion he had in 1980.

Pres. REAGAN: During the past three years I've appointed more than 1,400 women to top government positions, not because of their sex but because they were the best people for the jobs.

WOODRUFF [voice-over]: That was eight days ago in New York City, before an audience of women whose support Mr. Reagan also must have if he's to run strong in November.

Pres. REAGAN: I want you to know I've told the Treasury Department to come up with recommendations to make your taxes more simple, fair for families and for all Americans, and to increase incentives for economic growth by broadening the base and bringing your income tax rates down, not up.

WOODRUFF [voice-over]: And that was New York the same evening, before a group of Catholics whose support could also be critical to candidate Ronald Reagan's re-election. But the bill for these trips and others like them, which run into the 10s of thousands of dollars, is being footed by the taxpayers because the White House says their purpose is strictly official. The chairman of the Democratic National Committee, Charles Manatt, however, says what the White House is doing is outrageous.

CHARLES MANATT, Democratic National Committee: When he goes to Dallas to talk about his administration's policies to the homebuilders, and obviously tries to make a political statement on behalf of his own policies, it's a statement on behalf of his candidacy, and I don't think we the taxpayers should pay for it.

WOODRUFF [voice-over]: What Mr. Reagan is doing, of course, is what every other modern president does if he decides to run for re-election -- stay in close touch with the voters. Republican National Committee Chairman Frank Fahrenkopf insists that Mr. Reagan's trips are a legitimate part of his job.

FRANK FAHRENKOPF, Republican National Committee: Whenever that president, whoever he or she might be, leaves the White House and goes out and appears anywhere in the country, a charge could be made that they're out there for politics. So I think really that the Democrats are howling wolf here when there really is no merit to their charge.

WOODRUFF [voice-over]: It's never been legal to campaign at government expense. Since the Watergate scandals, detailed new laws and regulations have been written to spell out exactly what's permissable and what isn't. Lee Ann Elliott, a Reagan appointee and chairman of the Federal Elections Commission, which oversees these laws, would not comment on any of Mr. Reagan's activities, but she sees presidential appearances before constituency groups as entirely appropriate.

LEE ANN ELLIOTT, Federal Elections Commission: Even though the president is involved in an election, he has to continue his full duties as president of the United States. He has a great burden to continue to do that as far as the campaign goes.

WOODRUFF [voice-over]: Lloyd Cutler, who was a legal counsel to President Carter,

LLOYD CUTLER, former White House counselor: The president, of course, must go on being the president. And the Secret Service, funded by government funds, goes on protecting him wherever he goes, whether it's a political trip or a holiday or whatever. He is also, of course, he's accompanied by the black box and his military aides wherever he goes. And of course that's paid for. The whole communication system that goes with the president wherever he goes is paid for. These rules go on into such details as saying that the president's personal secretary and the press secretary can also be paid for by the government because the president will be issuing statements or responding to events wherever he may be. But, they say, that whenever it is a purely political trip then everyone else who goes has to be paid for by the campaign organization.

WOODRUFF [voice-over]: But for those times when the Carter Hite House did not want to run any risk of an official trip becoming political because of the cost to the Carter campaign, Cutler had specific guidance for members of the staff.

Mr. CUTLER: Don't mention your opponent, don't put in paragraphs that relate not to what you are doing as president but to the deficiencies of your opponent or how the other party ruined the country before you took over.

Pres. REAGAN: It hasn't been easy. Times have been rough, and yes, the recession was much deeper and longer than anyone had predicted. But these problems had been building up for 20 years and we were determined to find a real economic cure, not just resort, as they had so often in the past, to another political quick fix. There have been eight recessions since World War II, and seven of those was the political quick fix. There is no compassion in snake-oil cures.

WOODRUFF [voice-over]: The quick fix and the snake oil were obvious references to the Democrats without calling them by name. As long as the President avoids doing that or saying "vote for me." his advisers insist he's acting within the law.

Mr. FAHRENKOPF: This administration, I think perhaps more than any administration in history, has taken the position that if there is any question whatsoever the campaign should pay for that travel.

WOODRUFF [voice-over]: But Lloyd Cutler says no matter how careful the president's campaign is, it will be accused of abusing the office for political purposes.

Mr. CUTLER: I predict to you almost with certainty that whoever is nominated on the Democratic side will have his campaign committee bring a lawsuit charging the President is misusing his office.

WOODRUFF: Democratic Party Chairman Charles Manatt is considering filing a formal complaint against the Reagan campaign for using the office of the presidency to further Mr. Reagan's candidacy. But some Democratic officials concede that such an action, or even the threat of it, is designed more to keep the Reagan campaign on its toes and out of any real expectation of finding a violation of the law. Robin?

MacNEIL: Two freight trains collided head-on near Wiggins, Colorado, shortly before dawn today, and two of the diesel engines burst into flames. The Burlington Northern railroad said five members of the train crews were killed. Six others, crew members, escaped without injury. The westbound train was made up of five engines pulling 72 cars, and the eastbound train was made up of five engines pulling 77 cars. One was going at 50 miles an hour; the other was moving slowly as it approached a switch. Long after daybreak the wreckage was still burning. The scene is near the western edge of the town of Wiggins, but the nearest homes are several hundred feet away, and it wasn't necessary to evacuate the resident. However, the schools were closed for the day because of the smoke.

The Nuclear Regulatory Commission approved a limited, low-power operating license today to allow the Diablo Canyon plant in California to start up next Wednesday. The vote was four to one. Operation of the plant has been delayed several times by complaints about its construction. Commission Chairman Nuncio Palladino pointed out that the delay until next Wednesday would give opponents of the plant time to seek court action to prevent the commission's ruling from taking effect.

And, in sports, Pete Rose of the Montreal Expos passed a milestone today. He got his 4,000th hit, only the second player in the history of baseball to do so. The other was Ty Cobb of the Detroit Tigers. Here's how it went before 48,000 people watching the Expos and the Philadelphia Phillies at Olympic Stadium in Montreal.

ANNOUNCER: One ball and one strike to Pete Rose. He wants another run. Couple of veterans going at each other here. Rose, driving the ball to right field. That's a base hit! There it is!! He's on his way to second, and Pete Rose takes another big step for baseball immortality!

WOODRUFF: Once again, today's top stories. Informed sources at the White House say that President Reagan has authorized spending of up to $32 million for aid to El Salvador, using emergency funds at his disposal instead of waiting for the Congress to act. In Nicaragua rebel contras said that they have captured a small seaport on the Atlantic coast, but the government said its troops are holding out.

The space shuttle Challenger landed in California instead of Florida because of bad weather at Cape Canaveral.

The Social Security Administration ordered benefits restored to 40,000 people who had been taken off the disability rolls.

And a man believed to be Christopher Wilder, who was wanted in connection with a series of crimes against young women, killed himself when he was accosted by police. Robin? Eudora Welty at 75

MacNEIL: Today is the 75th birthday of one of America's most esteemed writers, Eudora Welty. She is the author of many short stories and four novels, including The Optimist's Daughter, which won the Pulitzer Prize for fiction in 1973. Her most recent book, One Writer's Beginnings, which chronicles the influences of her early life on her writing, is a bestseller.

[voice-over] Welty was born on April 13, 1909 in Jackson, Mississippi, where she has lived most of her life in the home her parents built. Her father was an insurance company executive and a camera buff, who eagerly traced Eudora's growth from the time of her birth until she graduated from the University of Wisconsin in 1929. Eudora inherited her father's skill with photographs and used it while traveling throughout Mississippi working for the WPA, Works Progress Administration.Her photographs of Mississippi in the Depression years formed an important part of how she learned to look at the world, teaching her how and when people reveal themselves. The lesson proved an invaluable one for the fiction writer she was becoming. In writing about her childhood she refers to it as a sheltered life. But in closing her new book she also says, "A sheltered life can be a daring life as well, for all serious daring starts from within." Our reporter Nancy Nichols talked to Eudora Welty about her life and writing, beginning with her parents.

EUDORA WELTY, author: They were serious people, that is, they were genuinely concerned about human values. That sounds like something they would never have said, but which they practiced. And they brought me up in a houseful of books, for which I'll be forever grateful. They were supportive of me, even though they thought I was making mistakes lots of times, which I did. They helped me get a good education, and supported my writing. My father never got to see any of it. He was a little dubious about fiction, because he thought that only -- that it was in essence a lie. I couldn't explain to him what I -- I didn't even try. He wanted me to write, but he wanted me to write non-fiction, something serious. And so he never read anything I wrote because he died young, when I was just out of college.I hope he wouldn't have felt that I was lying, because what I was doing was telling the truth the best way I knew how.And I think my mother knew that. I was good in my books, you know. I made good grades. So I felt that I understood the world and everything.

And it was -- New York was my first meeting with real theater, real paintings, real everything that I loved. All the arts. Perhaps I had gotten exposed enough to have some sense about those things. But about human relationships, which is the whole thing that my writing is about, I didn't have much idea. I just think it's the whole basis of our understanding of life, is what one person means to another, what one person does to another, what one person gives or withholds from another, what one person -- and the continuity of relationships. It's a self -- what it is is drama, and that's what a fiction writer is most concerned with -- human relationships constitute it, and they're the heart of it.

NANCY NICHOLS: In your book of photos you talked about imagining yourself into the lives of others.

Ms. WELTY: I think that's what led me to take the photographs. I had a job that was strictly a reporting job, going over the state and talking to people. But I found myself using the camera to take pictures along the way of what looked like -- almost looked like pantomimes of -- dramatizations of the situation that was going on in the Depression in Mississippi. You know, a woman hanging out her poor wash on the line, all this. It just told the story, you know. And so I could imagine myself as that woman and her family, you know. There it all was. It was performing itself in front of my eyes. So it was a great illuminator to me of the human condition at first hand, not like reading about how poor people are or how hard their life is. It's right there, and the thing that struck me most then was that human dignity.

Ms. NICHOLS: During the civil rights movement you were criticized for not having taken a more active role. How did you respond to that?

Ms. WELTY: Well, I tried to answer a little bit, but you can't talk to angry people at 2:00 in the morning on the phone. And I didn't like their asking me that because -- I mean, I didn't think that it was justified because I'm not an editorial writer.I'm a fiction writer. But I have always dealt with those questions in fiction, since long before the civil rights movement came. I was writing about justice and injustice and exploitation and misunderstandings and lack of communication and so on between not only black and white, but between old and young and male and female. I think a fiction writer's whole life depends on being able to make the jump between the self of the fiction writer into the self of another person and show these things. Let it be shown. And fiction people, the characters, are telling you what it is. It's not me. I don't stand to one side and say, "Look how rude this person was. Look how unjust this person was." You try to show this group the way they would really do it in their human action and in dialogue and in dramatic form, in other words. In a way, a fiction writer goes through things like that all the time, but I don't think he should be held in holy horror because he doesn't write an editorial. I still disagree because the strongest fiction, to me, is the kind that does not editorialize. Look at Chekhov, the best writer in the world, who made everything plain about the serfs, for instance, about everything. I mean, and never preached the word in his life. He didn't need to.

MacNEIL: Eudora Welty at 75. Good night, Judy.

WOODRUFF: Good night, Robin. That's our NewsHour for tonight. I'm Judy Woodruff. Thank you and have a good weekend.