The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After the News Summary this Friday night, two economists discuss what grounds of hope the economy offers President Bush and American voters a month before the election. Gergen & Shields and six regional editors discuss the politics of unemployment and other economic signs. We conclude with a report on the Senate race in Wisconsin. NEWS SUMMARY

MR. LEHRER: The nation's unemployment rate was 7.5 percent in September, a .1 percent drop over the previous month and a third straight monthly decline. It was the last unemployment report from the Labor Department before the election. President Bush immediately called it good news. He spoke on ABC's Good Morning America.

PRESIDENT BUSH: Look, as long as anybody's out of work, everybody has to care about it, but I think this is encouraging news, and certainly goes against the political grain where some are saying everything's getting worse. It isn't. We've had -- as a matter of fact, we've had five consecutive quarters of growth, not recession, but growth nationally. And I think that's important against this backdrop of a slightly improving jobs market. But we've got to keep going and I wish -- I wish some of the things I wanted to stimulate the economy have been put into effect. And I think we'd be doing a lot better.

MR. LEHRER: Gov. Clinton saw it differently. He said unemployment remained high, with no end in sight. He spoke at a campaign stop in Toledo, Ohio.

BILL CLINTON: The final accounting of the Bush presidency before the election is in. It says that in the last four years -- listen to this -- as a nation we have lost 35,000 jobs in the private sector. All the income -- job growth in America since George Bush has been President has come in the government jobs he loves to attack. We've lost 1.3 million manufacturing jobs, with no recovery in sight.

MR. LEHRER: In another report today, the Commerce Department said orders to U.S. factories fell 1.9 percent in August. It was the second decline in a row and the largest in eight months. Today's news had some fallout on Wall Street. The Dow Jones Industrial Average closed down nearly 54 points. We'll have more on the economy and the presidential campaign right after this News Summary. Robin.

MR. MacNeil: The Bush and Clinton campaigns have reached tentative agreement on a schedule for debates. The details are still being worked out, but campaign sources told news agencies there would be three presidential debates, with the first on Sunday, October 11th. There would be one vice presidential debate. Ross Perot and his running mate, James Stockdale, are expected to be invited to take part. The Perot campaign got underway today by negotiating for more than a million dollars worth of advertising time on the television networks. The ads will air next week. A spokesman said the Texas businessman would rely heavily on paid advertising and television appearances, spending limited time on the political hustings.

MR. LEHRER: President Bush today called for a United Nations resolution banning all military flights over Bosnia. He said in a statement the U.S. would help enforce the zone if requested to do so. Until now, the U.S. and its European allies have agreed to use force in Bosnia only to protect humanitarian aid operations. More than 1500 newly released Bosnian prisoners of war arrived in a Croatian border town overnight. They came from a detention camp in Northern Bosnia which is run by Serbian forces. Michael Nicholson of Independent Television News reports.

MR. NICHOLSON: They left the Serbs last night as prisoners of war. They joined the Croats as refugees. They'd been traveling 16 hours from the detention camp at Trinopoli, 1,561 men, women, and their children. And yet, they looked surprisingly well, if you remember ITN's pictures of them two years ago when Penny Marshall reported the suffering and starvation in the camp she visited. By first light this morning, the square in Karavajc was filled with families who had waited a day and a night to see the face they were almost convinced they would never see again. Some now know they never will. All had their stories, their personal testimonies to Serbian brutality, some barely believable, rape, torture, death by beating. They said the educated prisoners, the doctors and teachers, the political and religious leaders, businessmen, had been segregated from them and killed.

MR. LEHRER: U.N. relief officials said today Serbs were escalating their ethnic cleansing campaign in Northern Bosnia. They said it could cause an exodus of up to 200,000 people in the next few weeks.

MR. MacNeil: The Navy today ordered investigation into the U.S. aircraft carrier's accidental firing of missiles at a Turkish battleship. It happened last night about 80 miles off the Turkish Coast. The captain of the Turkish ship and four crew members were killed when at least one missile struck its bridge. Fourteen other crew members were injured. The USS Saratoga fired two missiles in all. Both were Sea Sparrow surface to air missiles, but there was no information on how the firing happened. The ships were taking part in NATO exercises at the time of the accident. The U.S. apologized to Turkey and agreed to discuss compensation for the incident.

MR. LEHRER: The House of Representatives failed today by 10 votes to override President Bush's veto of an abortion bill. The legislation would have removed the so-called "gag rule" which prohibits the discussion of abortion by counselors at federally- funded family planning clinics. The rule went into effect yesterday. Here's a sampling of the debate that preceded today's vote.

REP. BARBARA BOXER, [D] California: To put a gag around health care workers, to stop them from telling the truth, to force many clinics to turn away needed federal funds that they need desperately to provide health care in this nation, where already the health care system is breaking down, that is wrong. Let us overturn this gag rule. Let us stand up for liberty and freedom of speech.

REP. HENRY HYDE, [R] Illinois: Freedom of speech does not require the government to buy a typewriter for everybody or a megaphone. What this family planning program is, is a family planning program. It's not an abortion, it's not prenatal or post natal family planning, abortion is not a part of family planning.

MR. LEHRER: Opponents of the rule have also challenged it in U.S. District Court, a ruling that is expected shortly. There will be no crime bill passed in the Congress this year. Senate Democrats support a plan to require a waiting period to purchase handguns. Many Republicans oppose that provision. They say they would support it only if the crime bill also put restrictions on the number of times death row inmates can appeal their cases. Sen. Joseph Biden, Democrat of Delaware, said this afternoon the failure to reach a compromise meant the bill was now dead.

MR. MacNeil: President Bush today signed an energy bill which includes $570 million for the super conducting super collider in Texas. Mr. Bush said the giant physics experiment will create 7,000 jobs. Critics said the $8 billion takes money away from other important scientific research. The energy bill also included the ban on underground nuclear weapons testing. Mr. Bush opposes the ban and said he would propose legislation to reverse it.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to the economy, politics with editors and Gergen & Shields, and the Senate race in Wisconsin. FOCUS - ROAD TO RECOVERY

MR. MacNeil: Unemployment, the economy, and the election is our main story tonight. As we reported, the last unemployment figures to come out before the election showed a slight improvement today, down 1/10 of a percent. We'll hear what these figures mean politically, but we start with two economists. David Bostian is chief economist and investment strategist at Hertzog, Heine, Gadul Incorporated, a New York investment firm. He joins us from Ft. Lee, New Jersey. And David Jones is the chief economist at Aubrey G. Lanston & Company, a New York securities firm that trades government bonds. David Bostian, are today's figures goodnews, as President Bush says?

MR. BOSTIAN: Well, the unemployment rate coming down was a bit of an aberration but I do think the fact that the payroll loss was only in the 50,000 range as opposed to the 100,000 that was expected and could have been a 30,000 gain if the hurricane and summer jobs program were taken into consideration, directionally it is grounds for optimism.

MR. MacNeil: Just slow down and explain that -- that payroll jobs. That's the -- the number of jobs lost was smaller than it was in August and smaller than it was expected to be, is that correct?

MR. BOSTIAN: Yes, that is exactly correct. The consensus on Wall Street looks for a loss of probably a hundred to a hundred and twenty thousand. And the loss was only 50,000. But it's important to point out that if you adjust for the problems of the hurricane and the summer jobs program winding down, that the gain -- it actually turned into a gain of approximately 30,000. And if you relate that back to the hundred and fifty, hundred and sixty thousand loss in the previous month, it certainly is a substantial improvement.

MR. MacNeil: Good news, David Jones?

MR. JONES: Not at all, Robin. We have an economy that's basically dead in the water, and when it grows, it grows so slowly that it won't create essentially any new jobs. We've seen a miserable job market. One thing I would point out is the manufacturing sector, which is supposed to be the engine of recovery. Jobs have actually been declining. We saw another 26,000 job decline in the month of September. We can't get this economy going until we see some kind of sustainable strength in manufacturing, as well as outside that area. So in essence, what we've got here is a public that is panicked over jobs. And we've got an economy growing too slowly to create any. And I think by the end of the year we could even be growing more slowly than we will have seen in the summer or spring months.

MR. MacNeil: David Bostian, just add in those other figures beyond unemployment. Today the Commerce Department reported that factory orders were down and order backlogs were at a three and a half year low. Does that temper your little bit of optimism there a bit?

MR. BOSTIAN: No. Because I think you have to raise the question why we are in a very bizarre election year. If you are a businessman, or business woman and you're thinking about buying new plant and equipment, you have no idea what the economic policies are going to be after November the 3rd, and you have economic decisions placed on hold. I think that is the primary reason for these rather gloomy statistics. I think it's important that the case for optimism be communicated, and I think once we move beyond the election into early '92, you're going to see a pick up in payroll employment, you're going to see a backlog start to move up, and any number of other positive statistics.

MR. MacNeil: I'm going to come back to your projections for next year in a moment. David Jones, is that -- could that be the case - - an awful lot of the poor performance at the moment is just uncertainty because of the election?

MR. JONES: Certainly political uncertainty is a part of the picture here, but Robin the key point here is that we've seen interest rates -- short-term interest rates -- come down to the lowest level in three decades. And no one is responding. There's no more borrowing and spending. That's mainly because what we have here is a financial problem. People are trying to get their balance sheets and they're trying to reduce debt on the liability side, and they're still suffering from declining asset prices. Houses and other assets they hold and hope would appreciate are actually falling till we work through that process -- and it may really be a five-year process -- from let's the second stock market collapse in 1989 until 1994, before we can work through that. We're doing - - we're making some progress there. People are restructuring debt. Businesses are restructuring debt. Banks are getting a little healthier because of those low cost of funds, but it takes a long time. And until that happens, this economy probably will remain virtually dead in the water.

MR. MacNeil: Can Mr. Bush hope for his -- one month from tomorrow by the calendar -- can Mr. Bush hope for any better economic news before the election? Are there any surprises that can come along?

MR. JONES: The die is cast. As a matter of fact, there could be worst news. Look at the stock market today. The stock market was hoping that in this election year the economy would begin to pick up steam, that profits would begin to keep up steam. All the estimates on Wall Street of profits were very high. Now they're being revised down and the disappointment is showing up in the stock market. The second thing is if the Fed does ease again, bring interest rates down to try to get people borrowing again, we could see in the international market a sharp decline in the dollar which in a sense limits how far the Fed can go. Our rates are too low compared to the rates in Germany. International investors are moving their money out of the U.S. into Germany. And there's a danger of a sharp dollar decline that would make the financial markets even more nervous.

MR. MacNeil: Do you agree with that, David Bostian, the die is cast, there can be no more good economic news, but there could be worse news between now and the election?

MR. BOSTIAN: David Jones makes some good points. And, obviously, nothing dramatic is going to come up between here and the election. You have little swallows that may indicate a spring -- like a slight upturn in help wanted advertising. But I think that there are events that can occur that could help the President. I still believe there's at least a 60/40 probability that the Fed will lower the discount rate and the Bundesbank, despite their talk to the contrary, lower rates. That could help the financial markets, and investment psychology worldwide. I also think there's an outside chance that the President may still decide to issue an executive order indexing capital gains and also in doing that, dramatize that Congress has been intransigent over the last year or so.

MR. MacNeil: Is there anything, Mr. Bostian, that could happen to give consumers and voters more confidence in the economy between now and the election?

MR. BOSTIAN: That is the real challenge for the Republican Party, even if my optimistic case is right. People are very, very skeptical. And I think it's important that the President in the upcoming debates emphasize the optimistic long-term case of the U.S. in a global context and that this recession will come to an end. There are secular forces which will point it out in terms of the debt overhang, the negative side of the peace dividend, which is the layoffs that we have to deal with. But on the other side of this fog that we're in is a very bright sunshine. And I think that that has to be communicated partially on faith to the consumers.

MR. MacNeil: So the only positive thing that could happen to increase consumers' or voters' confidence in the economy now would be rhetorical, effective rhetoric, not any kind of action that could happen, is that what you say?

MR. BOSTIAN: Well, that is partially true, but as I said, I think the financial markets, stock and bond markets both, would rally if you had joint cuts in the discount rate here and in Germany. And I think the President still could issue some executive orders and show a bold initiative that would show people that he is willing to lead ahead where Congress has drug its feet in the past.

MR. MacNeil: Can you see any of those things adding to consumer confidence between now and the election, or voter confidence in the economy?

MR. JONES: Not really. One of the amazing features of this entire economic slowdown and weak growth period has been confidence. Confidence has actually been running below where reality would be because people keep reading. If you take a middle management type person, a white collar worker, the one that might have voted for President Bush, either a friend of his or he has his own job threatened. At a large auto company I visited this past week the reference was, I used to have a career in this company, a blue ribbon company, now I only have a job, and I don't know how long it's going to last. Furthermore, the two college age children may be home from college after paying tuition and they don't have a job. What we have to do is change the entire pattern of confidence, as well as the reality in the jobs picture before we can get out of this.

MR. MacNeil: Okay. If nothing can happen between now and the election to improve the picture, as I said a moment ago, the only thing that President Bush can do is -- apart what Mr. Bostian says, rhetoric -- he's now -- he's been saying for a long time, the economy -- the economy is poised for a really good recovery, that the signs are good. Is he right?

MR. JONES: He is right in the sense -- the President is right in the sense that next year there will be somewhat greater growth than this year, but I think what has to come, what has to bring that growth will be a Roosevelt type package of spending.

MR. MacNeil: You mean, if he does nothing -- supposing he's re- elected -- or Clinton does nothing -- it won't happen?

MR. JONES: It won't happen. We will gradually pull out of this as we pay off the debt and help our financial markets heal, but that would be 1994 and 1995. The only way to change next year in any significant way to make it grow is for a confidence building package and perhaps a huge does of potential spending on infrastructure and other kinds of areas. It's the only thing left. Washington has to lead. There has to be a speech that says we have nothing to fear but fear itself. And there have to be programs that essentially back that up in order to give the economy a significant boost --

MR. MacNeil: You mean, Mr. Bush just can't run as Harry Truman, he's got to run as FDR too, is that --

MR. JONES: I think that's exactly right.

MR. MacNeil: Mr. Bostian, do you agree that just going as it is, the projection that the economy is poised for recovery, without further intervention, won't produce a big growth next year?

MR. BOSTIAN: Well, I'm looking for 3 to 4 percent real GDP. A normal first year of recovery is five to six. Maybe I'm a bit on the optimistic side, but I think the banking system is beginning to function in this country. There's a slight up tick in commercial industrial loans. The bank purchases of government securities, which is where the money has been going, as opposed to going into loans, has slowed down. We can use some fiscal stimulus. Additionally, I think whoever is President andwhatever the fiscal stimulus is, it has to be applied gently, because we don't want to panic the bond market and run up long-term interest rates, and then create a bigger problem than we have currently.

MR. MacNeil: So you don't agree with David Jones that in order to produce that kind of growth next year, there's got to be a big stimulus package?

MR. BOSTIAN: I would like to see a targeted stimulus package, but I don't think you have to have FDR type stimulus to produce 3 to 4 percent growth.

MR. MacNeil: I see. Just come back to it at the moment. Mr. Bush saying everything is now poised for recovery, it's poised for recovery if something more is done. Do you agree -- if something more gets done -- not just as it stands at the moment, hands off?

MR. BOSTIAN: I would say the dynamics of the business cycle are turning positive to where if nothing additionally is done, and that would not be my recommended position, you could get 2 to 3 percent growth, if there is some responsible, targeted fiscal action, investment tax credits, perhaps job training tax credits, and other types of recommendations which even Ross Perot has mentioned, you could probably tack on 1 to 2 percent to the real GDP growth. It's there, but it will be better with intelligent fiscal stimulus.

MR. MacNeil: Okay. Well, David Bostian, David Jones, thank you both. Jim. FOCUS - EDITORS' VIEW

MR. LEHRER: The economy is one of several things political we want to take up now with Gergen & Shields and our regular group of six regional editor commentators. Gergen & Shields are David Gergen, editor at large of U.S. News & World Report, and syndicated columnist Mark Shields. The six others are Gerald Warren of the San Diego Union Tribune, Erwin Knoll of the Progressive Magazine in Madison, Wisconsin, Clarence Page of the Chicago Tribune, Lee Cullum of the Dallas Morning News, Cynthia Tucker of the Atlanta Constitution, and Ed Baumeister of the Trenton, New Jersey Times. Let's start with the economy and with you, Jerry. Do things look positive on the economy in San Diego right now?

MR. WARREN: They don't look very positive, Jim. We don't get our unemployment statistics at the same time the state and the nation does. We trailed by two weeks. But it looks like we are a little bit higher than the nation and somewhat below the statewide figures.

MR. LEHRER: Higher, worst problem, you mean, higher unemployment rate?

MR. WARREN: Yeah. 7.9 is where we were at the last reporting period. And it looks like that's where we'll be the next time. So there are some economists who think we may have bottomed out, but there are no optimistic economists around here.

MR. LEHRER: Are there any other signs, other than from economists, that things are getting better?

MR. WARREN: No, there really aren't. We're still losing defense jobs. Service jobs are holding firm and a little higher than a year before, but there are no real optimistic signs here.

MR. LEHRER: Yeah. Ed Baumeister, how do things look in New Jersey, in Trenton?

MR. BAUMEISTER: Well, in this current downturn, the state has lost 235,000 jobs, and it's been calculated that they're being lost at the rate of 6,000 a month. Even people who have jobs are unhappy. One of the economists referred to this. I talked to a woman today whose father was unhappy because he'd like to change jobs, and he can't. He feels stuck. And he also has the worry that he'll be let go. The chairman of the Republican Party was in Trenton this week, Rich Bond. And he said that if Clinton is elected, that the state will lose 250,000 morejobs. So it's really still the big issue in the state.

MR. LEHRER: Yeah. And the word confidence that David Jones said that was consumer confidence, public confidence, that's very much a factor in New Jersey, correct?

MR. BAUMEISTER: Yes, very, very much.

MR. LEHRER: Clarence Page, Chicago, Midwest.

MR. PAGE: Well, we unfortunately have a more diversified economy and yet, George Bush is doing very badly in Illinois right now, indicating that perceptions are still gloomy. Does the very fact that odd numbers have sort of fluctuated in recent months but have actually done better than the nation on the whole.

MR. LEHRER: Do you see a connection between the economic problems and George Bush's problem in Illinois?

MR. PAGE: I see a connection between the perceptions.

MR. LEHRER: Maybe not the numbers.

MR. PAGE: Yeah. But Ed Baumeister hit on something when he talked about the sense of -- of confidence or lack of confidence in the future. I think this is very important. We have talked to people who are good Reagan Democrats in the Chicago area who are now out of work, or who have been out of work at some point in the last year or so. Their outlook is much gloomier than it was four years ago. And I think that's the way -- what can determine the election.

MR. LEHRER: Lee, what are the politics of the economics in Dallas in Texas?

MS. CULLUM: Jim, the situation is not good. Our unemployment is up from 6.9 to 7.7. That's a pretty significant rise. And it's a little bit higher than national unemployment figures.

MR. LEHRER: From what period to what period?

MS. CULLUM: Well, from the previous -- I think it's from the month of August to now.

MR. LEHRER: I see. That big a jump?

MS. CULLUM: Yes.

MR. LEHRER: Oh, my goodness.

MS. CULLUM: So you have to remember about Texas that we've been at this for a long time. The price of oil fell in 1986. We were thinking that we would recover in a couple of years. Of course, in a couple of years the recession started, and we were back in the tank again. So Texans have been feeling tremendous pressure for a long time. And they don't see any relief in sight.

MR. LEHRER: Do the polls in Texas show that President Bush is held responsible for this?

MS. CULLUM: It's hard to tell about from the polls. Well, actually he and Clinton are neck and neck at the moment. So maybe that is an indication. Bush, by all rights, should be ahead. Four years ago, he was 16 points ahead of Dukakis in Texas at this stage in the election. And now he's barely holding his own with Clinton. So yes, I would say that does indicate more dissatisfaction with Bush in Texas than would be normal.

MR. LEHRER: Yeah. Cynthia, what's the situation in Atlanta and Georgia? Economically, things are not that bad compared with everything else, right?

MS. TUCKER: No. Things are not that bad here according to the numbers. Atlanta and Georgia are faring a tad better than the rest of the country. Georgia's unemployment rate is thought to be around 7.3. But I think what matters, as everybody else has been saying this evening, is perception. Atlanta for the last 20 years has enjoyed a very vigorous, very robust economy. In 1982, we rode out the recession in much better shape than most of the rest of the nation. So people here have very high expectations. This time around, we've taken our licks, just everybody else. Some things that are somewhat peculiar to us -- we suffered the death of Eastern Airlines in early 1990. That was a major part of our economy. Thousands of jobs were lost. They have good paying jobs. They haven't been recovered. So people here tend to look at the way things were in Atlanta five years ago, or ten years ago, and compare the current situation to that. So against that yardstick, the economy is not doing as well here as people would like. And I have to say I think that the President is suffering from that. Polls currently show that Bill Clinton is leading George Bush in Georgia by about 6 percentage points. And I think the only reason for that is perceptions of the economy.

MR. LEHRER: Yeah. Erwin Knoll in Madison, Wisconsin, you're part of the Midwest, plus the readers of your magazine. Is the economy still the big thing?

MR. KNOLL: I think it is, even though here in Wisconsin, and especially Madison, we haven't been nearly as hard hit. But the word that Cynthia used --

MR. LEHRER: Why not? Why not? What do you think has kept you from not feeling this?

MR. KNOLL: Well, the same things that Clarence talked about, the fact that the economy is more diversified, that we've never been as dependent on military industry, which is a very small factor in Wisconsin. We've never been that dependent on heavy industry. So the trends of the recent past have not hit us as hard. But the perception still is, as Cynthia said, that the economy is in deep trouble, the President is held responsible for that. We do have pockets of severe rural poverty, as well as poverty in the inner- city of Milwaukee. Yesterday Bill Clinton and Al Gore were here in Madison and turned out what everyone concedes was a huge crowd, about 30,000 people. And the polls show that they are definitely ahead in this state.

MR. LEHRER: Yeah. Mark and David, take the wisdom that you just heard, add your own wisdom, and is the economy still the issue of this presidential campaign?

MR. SHIELDS: The economy -- the economy affects, influence transcends everything else. And even though there was a tick down today, as somebody put it, instead of getting an F, they got a D minus for their score card. And Bob Teeter, the president's own campaign chairman, put it well several years ago. He said, it takes a full quarter, three months, for a turnaround in public perceptions on the economy. Even if the figures had been, I guess the one consolation today for the Republicans, even if the figures had been dramatically better, there probably would have been enough time to change the perceptions.

MR. LEHRER: Do you agree with that, David, that from the political point of view, from the Bush/Quayle point of view, the economy is -- there's nothing that can happen in this next 30 days to change it for them?

MR. GERGEN: Well, Jim, the Republicans were very worried today that the unemployment number would go way up, and that would have been devastating for them. So they, in effect, dodged a bullet today, but I think are the risks are on the down side. If there's good news, people are going to tend to treat it as a blip, you know, and they'll dismiss it, but if there's bad news, they'll take it as further evidence of a weak economy. I think Mark is right. You know, the cake is essentially baked on the economic issues. They are very bad issues for George Bush. He may still be able to win this election, but not on the economy.

MR. LEHRER: All right. Let's go to the return of Ross Perot. Clarence, your analysis of that.

MR. PAGE: Of Ross Perot?

MR. LEHRER: No, no. His return. His return.

MR. PAGE: Thank you.

MR. LEHRER: I'm not going to ask you --

MR. PAGE: I would need long distance ESP powers to figure out what motivates Perot's return. My --

MR. LEHRER: Let me give you adirect question. What do you believe the impact of his return is going to be on what we've been talking about, which is the presidential election?

MR. PAGE: I suspect, first of all, I believe the polling numbers that we've seen, the CNN tracking poll showing 7 percent yesterday, 8 percent today, I suspect he may hit double digits. If he does better than that, he'll do better than George Wallace or John Anderson. I don't expect him to do much better than that though. The perception I get, including my grandmother in Florida, who was really impressed with Ross Perot in June and early July, now she says, oh, is he getting back in the race, he doesn't need to be, he's just a spoiler. When my grandma is using language of Mark and David here, you know, talking about spoilers and all this, it shows you people --

MR. LEHRER: Watching a lot of television.

MR. PAGE: -- are getting -- well, she's a regular MacNeil/Lehrer viewer, every night, but, you know, people out there are a little more sophisticated I think than this -- this idea of mice in a maze that we tend to have as pundits or political handlers. People were excited about Perot early this summer. Now they see him as a bit of a nuisance. I don't think he's going to go anywhere, and I doubt if he's really going to have that much of an impact on this election.

MR. LEHRER: Speaking of impact, Texas is one of the states where everybody says the return of Ross Perot is going to be a big deal. Do you agree? And analyze that for us.

MS. CULLUM: Jim, as of this moment, it does not seem to be a big deal. I spoke with a pollster in Houston today whom I confer with often. And he said that thus far Perot seems to be drawing two or three or four points each from Clinton and Bush. Clinton and Bush are still neck and neck in Texas. And I'm rather surprised. I thought Perot would have greater impact. And perhaps by next week or as he starts to campaign he will. As of this moment, I think Texans are feeling very guarded. You know, in Dallas particularly people were euphoric in May and June and devastated in July, when he pulled out, and I think somewhat embarrassed by the whole thing. And they're going to be guarded in their response. At this point, the impact in Texas is not nearly what might have been expected.

MR. LEHRER: A guarded response in Madison, Wisconsin, Erwin?

MR. KNOLL: A man told me this morning that he has a 10-year-old car that he's going to call Perot because sometimes it runs, sometimes it doesn't run, sometimes it runs. I -- I think the -- the re-entry of Perot into the race means, first of all, and perhaps this is its only significance, that instead of having two major candidates who don't talk about poverty, who don't talk about homelessness, who don't talk about the crisis of the cities, we're going to have three candidates who don't talk about poverty, and don't talk about homelessness, and don't talk about the crisis in the cities.

MR. LEHRER: Does it look that way to you, Ed, Ed Baumeister?

MR. BAUMEISTER: Well, Mr. Perot does have a very detailed plan to cut the deficit, which is interesting, and somebody should be talking about it, you know, raise the gas tax a dime a year for five years, raise the cigarette tax and so forth, but I think he's -- he's gone because his former state, New Jersey state coordinator told us yesterday that he wouldn't follow Ross Perot out of a burning building. So I think what you have left -- at least in New Jersey -- the people who are at his headquarters in Edison are some of the people who really, really believed in, some of the people who were characterized to me today as believing that he can walk on water. But I don't think he's going to have much of an impact in New Jersey at all.

MR. LEHRER: What about in California, Jerry? All of the conventional wisdom is that California has already gone to Clinton over Bush. Does the second coming of Perot change anything?

MR. WARREN: Jim, for once, the conventional wisdom is probably accurate. I don't think it changes a thing, except it muddies the water. And anything that disturbs the trends that we have been noting for the last couple of months has to be helpful to Mr. Bush. It won't be helpful enough because he's too far behind in this state.

MR. LEHRER: Cynthia, what about in Georgia?

MS. TUCKER: On Wednesday, the Journal Constitution opened up its phone lines to readers to ask them what they thought of the prospect of Ross Perot re-entering the race. This is certainly not a scientific sampling, but it gives you some idea of what our readers are thinking. Four hundred people said, yes, they thought Mr. Perot should come back. Sixteen hundred people said, no, shut up, go home, be quiet, we're tired of hearing from this guy. So I don't think people here are eager to have him come back. Ed Baumeister said a little while ago that Ross Perot has a detailed plan for eliminating the budget deficit that somebody should be talking about, it's true. It's a plan that offers some ideas worth thinking about. But even Mr. Perot won't talk about it.

MR. LEHRER: Yeah, okay. David and Mark, let's move to the debates. It looks like now there are going to be three presidential debates and a vice presidential debate. The question is this, David. Who won the debate over the debates?

MR. GERGEN: I think they split. It seems to me that Bill Clinton very much wanted to have debates. He was challenging the President. He wanted the format with one moderator. He got his debates. He got at least one debate with one moderator. The President insisted he wanted a panel, and he said he wanted to debate. It was unclear that he wanted to until recently. He got his debates. I think the Clinton people very importantly did not want debates in the last two weeks of the campaign. What we seem to be seeing -- we'll know officially tomorrow -- I gather -- is that we'll have three presidential and one vice presidential compressed into about a nine-day period. You have to wonder again how many people are going to be able to -- will watch all four of those. That's going to be quite an interesting question, whether it'll build audience or lose audience as it goes. And I think that the two people came out pretty well split, and I think what came out of these negotiations.

MR. LEHRER: Do you agree, Mark?

MR. SHIELDS: Yeah. I think President George Bush understands the fundamental truth that in order for him to be a success as a candidate he needed these debates, to have any hope of being a success. And I'm not sure the candidate, Bill Clinton, understands that for him to be a successful President, he needs these debates. Bill Clinton has to clarify, has to narrow, and has to express his mission, his goals to the country, and I think the debates are the best opportunity. I think they're a gift for Clinton. If he's going to win, I think this week we've heard the first faint rumbles in the distance of the early echoes of a landslide in the making. I think if that's going to happen and Bill Clinton's going to have a chance of governing, he has to have these debates, and he has to do well in them.

MR. LEHRER: Yeah. Cynthia, some people have suggested, oh, my goodness, these debates really don't matter that much. You heard what David and Mark have said. What do you -- how do you feel about it?

MS. TUCKER: I think the debates do matter. I think that it was - - it is important that Bill Clinton have an opportunity to look presidential. Clearly with President Bush as far behind in the polls as he is, he needs the opportunity to go up there and remake his case to the American public. But this is another place where Ross Perot's getting back in the race matters. Perot clearly will be invited to the debates. And he will have a great opportunity to cloud all the issues. So the debates with Perot in will be very different from the way they would have been without Perot.

MR. LEHRER: How important are they going to be, Gerry Warren, do you think?

MR. WARREN: I think they're very important for the reasons given. And I think they're more important for President Bush than for anybody else. I think he has to really hit one out of the park during the first debate because I believe David is correct, that we may not have the audience for the third that we have for the first. But I think they're essential for the American people to sit at home and say which one of these persons is presidential? Who do I trust?

MR. LEHRER: Yeah. Lee, do you agree?

MS. CULLUM: Yes, I agree completely. And I especially agree with what Gerry Warren says about President Bush. They're essential for President Bush. I also feel they're essential for Ross Perot. If he's going to make any contribution at all in this second adventure of his, it's got to be through these debates and he must start speaking specifically about his own plan.

MR. LEHRER: Ed, what do you think the level of interest is going to be, of public interest is going to be, not our interest, but the public interest is going to be in these debates?

MR. BAUMEISTER: I think it's going to be reasonably high. This is going to be the only chance people will have to see these people in sort of their natural state, without the music track, without the precisely crafted sound bite. And I think people are confused by the campaign. It's, you know, such silly issues as a Connecticut Yankee who went to Yale calling a fellow from Hope, Arkansas, an elitist who went to Oxford. I mean, it's upside down. People are saying what is going on here. There's a measure people want to take that I talk to of these people as human beings, as unpackaged, unvarnished, unshellacked human beings, and this is the only opportunity they're going to get.

MR. LEHRER: But, Clarence, some people would say, wait a minute, what's the connection between being the leader of the free world and standing on the stage on national television debating somebody?

MR. PAGE: The important thing here is not so much leader of the free world as it is the person who's been picked in a democratic society. The better the public is informed, the better off that we all are. And it's --

MR. LEHRER: But is it informed on the person, about the person more than it is the issues at this point? What more is there to find out about --

MR. PAGE: It's both. You know, there's a beauty contest here, and there's also a focusing on the issues. That's why I like the idea. It puts us out of work, but I like the idea of a single moderator and the two candidates going at it. I think Ross Perot, by the way, being in this debate trivializes it. He's the real winner of this thing, guys. It's not Bush or Clinton. It's Ross Perot. The fact that he's getting into that debate elevates his stature at a time when he needs that elevation desperately. What he's going to do with it I have no idea, but in any case, everything else is true. Bush needs it right now, because he's stuck with about a 10 percentage point gap behind Clinton. Clinton needs it to gain more credibility. And just look back as this election going back to 1960 certainly. The most memorable moments of the campaigns often came out of these debates, whether it was Michael Dukakis and the capital punishment question and how he handled it, or Ronald Reagan saying, there you go again, to Gov. Carter. You know, all these things are significant for the voters out there, and making a judgment, not just on issues, but also on how a person thinks on their feet.

MR. LEHRER: Erwin Knoll, Mark Shields, the distinguished commentator, said on this program the other night that if you're going to run for President of the United States and you're going to take federal matching funds, then you have to get out on your feet and you have to get up there and debate your opponents. Do you agree that that is really -- should be and is, for all practical purposes now -- a part of our electoral process?

MR. KNOLL: Well, I think it probably is, although I certainly feel that it's mostly a beauty contest. Unless somebody commits a horrendous gaff of the kind that Gerry Ford did, for example, in 1976, about Poland, or looks as ghastly as Nixon did in 1960 against Kennedy, this is mostly a matter of cosmetics. My hunch is that Perot will come out looking terrible to most people, and that the other two are pretty much going to repeat what they've been saying and whoever is more and more glib, more facile, managed to project the better image will get the advantage out of it. I agree that the single moderator format is better than the panel of journalists, but I still will be astonished if we really get deep into substantive issues, and not into a mere rehash of what has come before.

MR. LEHRER: Lee, do you agree it could be just all cosmetics, or are they important cosmetics, if so?

MS. CULLUM: Oh, it could be all cosmetics, Jim, but if you're going to have that many in such a compressed period of time, I don't see how something significant could fail to come out of it. I think they will matter when it's all told.

MR. LEHRER: David.

MR. GERGEN: I think they will matter an awful lot. Mark is right. Neither man, Bush nor Clinton -- one of those two, is going to win, not Perot -- neither man now has a mandate to govern, Jim. Each man needs to use these debates to get that mandate in order to be a successful President. It's not just a question of winning in November. It's a question of what you do after November. The second point I'd like to make is that with regard to Bill Clinton, I think these debates will be very revealing. This is a man who's 46-years-old, never been around this track before, comes from the small states. Remarkable he's gotten this far. We have not yet though seen Bill Clinton under the kind of pressure he is going to come under in the next couple of weeks. I think that's going to be -- the portrait of Clinton over the next two weeks we'll learn an awful lot more about it. I think we'll know whether he can take the pressures of the Oval Office. If he passes this test, I think the country will be much more ready to accept him as President.

MR. LEHRER: Well, then it seems to me, Mark, what David is saying is that it's still very possible for Bill Clinton to lose this as a result of these three debates.

MR. SHIELDS: No, it is. I mean, the debates can make an enormous difference. Clarence's point about the capital punishment in 1988, I mean, Michael Dukakis was frozen then with a perception of him as the ice man. I mean, the liberal answer to that question has always been, of course, if your wife were murdered, I'd want to kill him, but believing in her and her values, I wouldn't do that because I believe in law and all the rest. And Michael Dukakis froze. If that happened in that case, Bill Clinton has two things going for him in this campaign, George Bush. That's what he's got going for him. Now if he really is going to lead this country in the way I'm sure he wants to, that's why he says debates are important. They're important, Jim, because debates are wholesale. Most politics is retail. Most politics you're going in, you're talking to cosmetologists over here, you're talking to investment bankers over there, the school teachers over here. You got a little nudge and a wink and the right phrase for each one of them. But wholesale, everyone is watching at the same time. You're going to say the same thing at the same time.

MR. LEHRER: Quickly, David. Whatever happened to Jim Baker?

MR. GERGEN: That's the disappearing chief of staff, right?

MR. LEHRER: He has not been seen or heard of since he went to the White House. He hasn't done any of the interviews. What's going on?

MR. GERGEN: Well, the official answer is that, of course, he's too busy to do interviews. I think there are two unofficial reasons. One is I think that Jim Baker senses this may go down in defeat, and he never is very close to the scene of an accident when that happens, he's very shrewd about that. But secondly, Jim, I think there's something even more important here. I think Jim Baker wants to go back as Secretary of State. The more he is seen as a handler, the more he's in the debate negotiations - -

MR. LEHRER: He isn't involved in those at all?

MR. GERGEN: He's not in those at all --

MR. LEHRER: Not publicly at least.

MR. GERGEN: I think it detracts from the sense of who he is now, and he does not want to do that. He took this job reluctantly. I think he's staying out of sight for a reason.

MR. LEHRER: Mark.

MR. SHIELDS: He'd better get his resume over to Clinton headquarters. I mean, there have been more verified sightings of Amelia Earhart, Judge Crater and Howard Hughes in the last six weeks than there have been of this. This guy's the best negotiator in the world, all right, and he doesn't show up for the debate negotiations. I mean, you know, he is distancing himself from this car wreck.

MR. LEHRER: Okay. Well, Cynthia, Lee, gentlemen, thank you all very much. FINALLY - POSITIVE POLITICS

MR. MacNeil: The presidential race isn't the only place where the incumbent is having a difficult time. Among 35 U.S. Senate races to be decided next month is one in Wisconsin, where a new poll shows the two-term incumbent running way behind the first-time challenger. Congressional Correspondent Kwame Holman has our report.

MR. HOLMAN: At the annual fire up before the University of Wisconsin Badgers Homecoming Game, alumni from across Wisconsin got ready for an afternoon of big-time college football. As he does every year, two-term Republican Senator Robert Kasten worked the crowd on the campus in Madison. The 50-year-old Kasten is trying to shore up support for his flagging re-election bid. [KASTEN TALKING TO PEOPLE]

MR. HOLMAN: He's pulled out two tight Senate races over the last twelve years, but political observers say this time the moderately conservative Kasten is in for the fight of his Senate career. And onthis day, his opposition was making the same round. Russ Feingold is riding the crest of a widely unexpected victory in the Democratic primary.

RUSS FEINGOLD: And it looks like we actually won this thing.

MR. HOLMAN: His win was stunning to many here and has helped bounce Feingold to a 20-point lead over Kasten in the latest polls. The 39-year-old, who spent 10 years in the Wisconsin State Senate, now is taking a non-conformist campaign everywhere and predicts he'll win Kasten's Senate seat, but even when Feingold weighs in among Kasten's political base, their face-to-face encounter sounds more like two old friends than political rivals.

SEN. KASTEN: This is a lot of work. We'll have some fun in debate.

MR. HOLMAN: Humor, congeniality, and positive campaigning are watchwords in Wisconsin politics this year. Much of the political good fellowship can be traced to the way Feingold won the Democratic Primary. He catapulted from last place to first after his opponents, a Veteran Wisconsin Congressman, and a well-known businessman, wounded each other with political ads that everyone now calls patently negative.

COMMERCIAL ANNOUNCER: On a different occasion, Wisconsin had to issue a tax warrant to force Moody to pay. Jim Moody, he's been in Congress too long.

COMMERCIAL ANNOUNCER: Who is the real Joe Checota? His ads have been called contrived, and his record lawsuit after lawsuit.

MR. HOLMAN: Feingold took the advantage with ads of his own.

RUSS FEINGOLD: I refuse to stoop to this level.

COMMERCIAL ANNOUNCER: Vote Feingold on September 8th.

RUSS FEINGOLD: Oh, oh, I must be gaining on 'em.

MR. HOLMAN: Feingold, who was once at 10 percent in the polls, won with 70 percent of the primary vote.

RUSS FEINGOLD: You see not much has been written about Russ Feingold to attack, unlike my two opponents in the primary. So to run against me, the only option is to make something up. And you voters know better than to believe everything you read.

RONALD WEBER, University of Wisconsin: His campaign captured the imagination of the Wisconsin voters. His advertising was so different from all the other advertisers. He stood out as kind of a shining light.

MR. HOLMAN: Ronald Weber heads the political science department at the University of Wisconsin in Milwaukee.

RONALD WEBER: The message is very clear that the Wisconsin voters had never really been exposed to that degree of negative campaigning, even though it was relatively short-lived. And they rejected it very, very clearly. I think the message more generally is that Wisconsin may be saying something about how campaigns are conducted maybe in the nation as a whole.

RUSS FEINGOLD, Democratic Senate Candidate: We had to be credible enough so that when our opponents started blowing each other up, that people would feel comfortable turning to our campaign. So I believe you make your luck. We were going to win this thing by a very close margin, regardless of the negative campaign, because we had a grassroots campaign in all 72 counties, and because our advertisements were lighter and more oriented toward the average people in Wisconsin.

SEN. ROBERT KASTEN, [R] Wisconsin: The fact is two people in the ring knocked each other out, and someone in the audience, Russ Feingold, was able to come in at the last minute and win the campaign with an overwhelming majority. So I think you've got to take your hats off to the campaign organization, but we now need to be very direct. We need to show the difference between Bob Kasten and Russ Feingold, and our campaign will do that.

COMMERCIAL SPOKESMAN: [Kasten Campaign Ad] Russ has been in politics for a decade, and in that time, he's made quite a record. You know, Feingold's record on taxes has a little number that would raise our taxes over $300 billion. Well, the king would never support that.

SPOKESPERSON: Now the real business of campaign '92 is before us.

MR. HOLMAN: Both camps are still using more traditional forums, as well as humorous ads to stake out their differences, especially on economic issues.

SEN. ROBERT KASTEN: We've got to do a lot of things, particularly hold the line on increasing federal spending. But I support entrepreneurial kinds of job creating tax cuts.

RUSS FEINGOLD: The Senator's right. We disagree. I don't think we can afford it. In fact, I think it's an extremely awkward way to try to stimulate the economy, giving more tax breaks to upper income people, and as you've pointed out, giving a really non- progressive break to lower income or middle income people isn't the answer.

SEN. ROBERT KASTEN: Russ Feingold is talking about increasing taxes from 31 to 36 percent on every successful small business with an income over $150,000. If his tax increase --

RUSS FEINGOLD: Of course, that's false.

SEN. ROBERT KASTEN: There are not enough people, there are not enough people in the very top categories as individuals, but nine out of ten small businesses are paying those taxes, this is the tax increase on the backbone of Wisconsin, small businessmen and women.

SPOKESPERSON: Let's give him a chance to respond. Let's give him a chance to respond.

RUSS FEINGOLD: Senator, you don't need to be quite so emphatic, because you're telling the truth. I do support a higher tax bracket for those who make $150,000 than those who make $90,000.

RUSS FEINGOLD: [campaigning] Hi, Russ Feingold running for U.S. Senate.

MAN: You'll be like the rest of the incumbents when they get in there, are you?

MR. HOLMAN: In a year when incumbency is thought to be a liability, Feingold is running as an outsider. His worn 1984 van he campaigns in fits neatly wit his self-described status as the under dog.

RUSS FEINGOLD: I don't have any money and my campaign didn't have very much money so basically I've had to burn up my own personal car to run around the state of Wisconsin.

MR. HOLMAN: Feingold spent $250,000 in the primary. He now has a fraction of the five to six million dollars Sen. Kasten is expected to spend in the race. Observers say Feingold will be lucky to raise half that amount, in part because he has pledged to raise the majority of his campaign money inside the state. He is called smart, personable and committed. A lawyer, he quit a major Wisconsin law firm to be a $31,000 a year state Senator. Feingold says he's part of a decidedly Democratic coalition for national change that only begins with the Clinton/Gore ticket.

RUSS FEINGOLD: What we need is people like them, but also the many women that are being elected, the presence for the first time of an African American woman in the United States Senate, all of these things have to happen together for change.

MR. HOLMAN: Among the places Feingold expects to score big is around the University of Wisconsin in Madison, the state's bastion of liberalism.

MAN: I like the under dog, the little guy. It's kind of -- you know, like I said, it's kind of nice to see somebody like that come out of the primary.

MR. HOLMAN: Tom Rochard says Sen. Kasten's stated strategy to paint Feingold as too liberal for Wisconsin may not work.

TOM ROCHARD: I'm willing to look at new things. If there's something wrong with being liberal on that regard, then I think the whole state's guilty. That liberal word as a weapon won't work this time around.

MR. HOLMAN: Against such opposition, Sen. Kasten is able to throw the solid support of many of Wisconsin's small towns and prosperous suburbs.

JACK KUNDER: I just think we've got to keep Kasten in there if we're going to continue to have jobs in Wisconsin and support our business, both large and small.

SPOKESMAN: I think Kasten is doing a lot for the state. I think he has the interest of the state and the business of the state at heart.

LOIS ROBINS: I know I'm going to stick with Kasten.

MR. HOLMAN: What about on the presidential level? You voted for the President last time, and what about this time?

LOIS ROBINS: I, quite honestly, I'm not sure right now. I'm very disappointed in George Bush, and I've been a Republican all my life.

MR. HOLMAN: Though Kasten may get little bounce from having President Bush on the ticket, he is expected to benefit from the support of Tommy Thompson, the state's very popular Republican governor.

SEN. ROBERT KASTEN: What we need to do is to show the differences. The work that I've done as the ranking Republican on the Small Business Committee. And we need to show the work that I'm doing for jobs and particularly for small businessmen and women across Wisconsin. Feingold is going to hurt those people. Our message is going to be to family farms to small business, you can't afford to have some of the left of center ideas that Russ Feingold is promoting, particularly with regard to taxes, tax increases.

DAVID HELBACH, Majority Leader, State Senate: If "tax and spend" is the best cliche they have, then Russ Feingold won't have any problem.

MR. HOLMAN: David Helbach is the Democratic Majority Leader of the Wisconsin State Senate.

DAVID HELBACH: Bob Kasten has to do much more than just define somebody as a "tax and spend liberal." He obviously has the same textbook as Baker and the rest -- I mean, it's if they went to Houston and they all passed out the same textbook. They've got to do more than just talk about tax and spend.

MR. HOLMAN: But veteran Wisconsin Republican strategist, John MacIver, says there is a clear choice beyond labels, that Feingold's and Kasten's approaches to governing are fundamentally different.

JOHN MacIVER, Republican Strategist: The basic philosophy that I believe that Russ Feingold has is maybe even a little more extreme than Bill Clinton. I don't think Russ Feingold looks to government as a second option. I think he looks to it as a primary option in many, many areas, whereas, Bob Kasten and the President clearly look to government intervention and tax money being used as a back-up option if the system can't handle it itself.

MR. HOLMAN: But both MacIver and Helbach say despite those sharp differences between the two Senate candidates, they must be careful not to cross the line into negative campaigning. And they add, this year in Wisconsin, no one is really sure where that line is. RECAP

MR. LEHRER: Again, the major stories of this Friday, the U.S. unemployment rate fell .1 percent in September to 7.5 percent, President Bush hailed it as encouraging news. Gov. Clinton said the economy remained very much in trouble. President Bush said he favored a United Nations resolution banning unauthorized military flights over Bosnia, and this evening, the U.N. Security Council voted to seize Iraqi oil assets. The money is now in bank accounts outside Iraq. It will be used to compensate victims of Iraq's invasion of Kuwait, among other things. It is the first time the U.N. has seized a nation's assets. Good night, Robin.

MR. MacNeil: Good night, Jim. That's the NewsHour for tonight, and we'll see you again on Monday night. I'm Robert MacNeil. Good night.