The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight: A summary of today's news; the latest on reaction to President Bush's way to peace between Israelis and Palestinians; a report on whether bigger means better for media companies; a debate about the future of Amtrak, America's passenger train service; and a "How We Live" conversation with an architect about shopping in America.

NEWS SUMMARY

JIM LEHRER: President Bush's new Middle East policy brought reaction from around the world today. The focus was largely on the fate of Yasser Arafat. The President called Monday for a Palestinian state within three years, but with new leadership. Today, Arafat said he did not believe Mr. Bush had singled him out for removal. In Brussels, the incoming President of the European Union said that body will not demand Arafat's ouster. And at the United Nations, Secretary-General Annan warned new Palestinian leaders could cause new problems.

KOFI ANNAN, Secretary-General, United Nations: You could find yourself in a situation that the radicals are the one's who get elected and it would be the result of a democratic process and we have to accept that. And as I indicated yesterday, with regards to who leads the Palestinians it is up to them to make that decision. They elected Chairman Yasser Arafat. They are planning a new election and let them elect their new leaders.

JIM LEHRER: Secretary of State Powell was asked today what would happen if the Palestinians hold elections and reelect Arafat. In an interview with National Public Radio, he said, "The United States will respect whatever they say as a people... we will deal with the circumstances as we find them." Israel made new military moves today. Israeli forces stormed the Palestinian headquarters in Hebron. Palestinian officials said four policemen died in the assault. Hebron was the seventh major West Bank city to be occupied in the past week. At least 700,000 Palestinians are now confined to their homes by army curfews. In eastern Arizona today, fire crews got a bit of a reprieve, and a Presidential visit, as they battled a monstrous wildfire. Kwame Holman narrates our report.

KWAME HOLMAN: Firefighters worked through last night setting backfires, hoping to create a buffer zone that will protect at least part of Show Low, Arizona. The evacuated town today was a half-mile from the leading edge of state's record wildfire. Workers were aided by slightly cooler temperatures and calmer winds.

JIM PAXON, U.S. Forest Service: We're back to what we're doing best. We're back to fighting fire. It's been beating us up for a week, and we're back to where we're battling this monster. So we feel real good about that.

KWAME HOLMAN: President Bush took an aerial tour of eastern Arizona this morning, having declared the charred region a federal disaster area.

SPOKESMAN: We're trying to cut it off on a canyon over here.

KWAME HOLMAN: He was briefed by fire officials, and then comforted some of the 30,000 people who've been required to leave their homes.

PRESIDENT GEORGE W. BUSH: A lot of people in our country are pulling for you. They understand that a lot of you are living in tents when you'd rather be in your own bed. They cry for you and they hurt with you, and I'm here to say on behalf of the American people, God bless you.

KWAME HOLMAN: The fire has consumed close to 600 square miles and still is growing. At least 400 displaced residents no longer have homes to return to. More firefighters are on their way to Arizona to bring the firefighting force to some 6,000 soon.

JIM LEHRER: Transportation Secretary Mineta said today an answer to Amtrak's money trouble is now "very, very close." The passenger rail service has said it needs $200 million to avoid shutting down this week. House and Senate members sent letters to President Bush today, appealing for the aid. We'll have more on this story later in the program. Consumer confidence waned in June to a four-month low. The Conference Board, a private research group, reported that today. It blamed a weak labor market and doubts about business accounting practices. Consumer confidence powers consumer spending, which accounts for two-thirds of U.S. economic activity. And that's it for the News Summary tonight. Now it's on to day two of the Bush Middle East peace proposal, bigger media companies, the Amtrak crisis, and how we live.

FOCUS - NEW PUSH FOR PEACE

JIM LEHRER: Middle East reaction to President Bush's proposal. We start with this report from Gaby Rado of Independent Television News. ( Gunshots )

GABY RADO: Hebron this morning, and Israeli forces bore heavy machine gun fire into the Palestinian Authority headquarters. Two policemen are killed, and two other people die elsewhere in the city. A reported 150 suspects are rounded up. (Explosion) The house blown up was allegedly used for making bombs in Hebron by the extremists of Hamas, whose terrorism has indirectly weakened the Palestinian Authority itself. The Israeli government hopes President Bush's speech has likewise exploded the belief that only Yasser Arafat can speak for Palestinians.

MEIR SHETREET, Justice Minister, Israel: We believe that yesterday the President had pulled out ared card to President... Chairman Arafat to leave the leadership of the Palestinian people and put a challenge to the Palestinian people to change their leadership, to change their attitude, and really to go to a different way, if they want really to fulfill their own aspiration to be a Palestinian state.

GABY RADO: Just in time, Yasser Arafat received a diplomatic helping hand from the French, whose new Foreign Minister, Dominique de Villepin, visited the Palestinian leader in his battered, besieged compound. It enabled Mr. Arafat to make a statesmanlike stand.

YASSER ARAFAT, Palestinian Leader (Translated): We consider our state will be democratic with the coming elections, and the last elections that took place here in this land were under leading international supervision.

GABY RADO: In the shadow of Israeli's tank turrets, Mr. Arafat yesterday signed a decree ordering Palestinian elections at the beginning of next year. But at the French minister's next port of call: This from one of Mr. Arafat's inner circle, a man regarded by some as a potential leader himself.

AHMED QURIE, Speaker, Palestinian Legislature: I feel somehow disappointed. I were expecting to receive from President Bush, who is a very serious man, that he will come with a solution to the people. The Palestinian people are not happy about this speech.

GABY RADO: When he returned from exile in 1994, the adulation given to Yasser Arafat appeared to confirm him as the Palestinians' past, present, and future leader. But today his record is questioned in the cafes by ordinary Palestinians.

OMAR ABDUL SHAFI, Surgeon: The conduct of the authority during the past years wasn't really wasn't... wasn't really the way we had hoped for. And I think changes have to happen, you know. We need, you know, proper people to be put in the proper place, and a better administration.

ADNAN AWEIDAH, Businessman: We need a new leader. Sure, we need a new leader, and everywhere they change. But here they don't change, like Arab... present Arab government. They never change.

GABY RADO: Despite that, there's no real challenger to Yasser Arafat, and no one has any doubt that he would easily win elections.

JIM LEHRER: For more on the Arab and Israeli reactions Hisham Melhem, Washington correspondent for the Beirut newspaper "As-Safir," and Nathan Guttman, the Washington correspondent for the Israeli newspaper, Ha'aretz.

Nathan, how do you read the Israeli reaction to what President Bush said 24 hours later?

NATHAN GUTTMAN, Ha'aretz Newspaper: Israelis are very pleased with the speech of President Bush, and I think they have good reasons to be pleased. The notion in Israel is that the message was finally received in Washington. After Sharon was saying for months that Yasser Arafat is not a partner for any kind of negotiations finally the President understands that and the Israelis are pleased with that. And they think that's the way to oust of Arafat and move on forward.

JIM LEHRER: So they essentially -- Israelis see this as an adoption of the Sharon attitude toward Arafat, right?

NATHAN GUTTMAN: Indeed. Not only that -- they feel also the fact that President Bush didn't say anything about Israeli incursions into the territories. While he's speaking, Israeli tanks are surrounding Arafat's headquarters in Ramallah. That's the sort of a green light for Israelis to continue their military actions in the West Bank.

JIM LEHRER: Now, Hisham, in the Arab world, at least at the governmental level, it's been, it's been very quiet. How should we read the silence from the Arab world?

HISHAM MELHEM: Reaction on the official level?

JIM LEHRER: That's what I mean the governmental level?

HISHAM MELHEM: It covers also the whole spectrum of views and feelings and emotions. People were puzzled; people were angry; people were surprised and shocked and others are facing us with deafening silence. The Syrians and the Saudis for right reasons have been silenced. The Saudis were miffed because Crown Prince Abdullah's peace initiative was ignored by the President. The Syrians were miffed and angry because the President essentially challenged him to deal with the question of the Palestinians who are being harbored in Damascus. The Jordanians were very vociferous, almost explicit that they were becoming the most welcoming country among the Arabs. The Egyptians were a bit cautious, sitting on the fence, some have been saying, the speech has been balanced but we need more clarifications. So the reaction on the Arab official level has been on the whole a bit surprised and a bit disappointed; but they are not going to react quickly. They will consult among each other and they will consult with Colin Powell before they come up with a broader Arab reaction.

JIM LEHRER: Is the reaction going to be words only? I mean, do they see this - at least based on your reporting today - do they see this as something new and dramatic and potentially good -- whatever the words are - or do they see this as something they can just react to and move on?

HISHAM MELHEM: With the exception of Jordanians who are claiming or maybe hoping that this may be the beginning of the end of the Arab/Israeli conflict, I did not see that kind of enthusiastic reaction on the part of any Arab government, including those like the Egyptians and the Saudis, who are likely to focus on the positive elements on the speech that is a Palestinian state, end occupation and end the settlement, but they need... if this is essentially a road map towards a peaceful solution, they need to know exactly what is going to be on the road there. What are the mechanisms that will lead us there? They were very disappointed because there was no reference to an international conference as Colin Powell wanted to at one time. And they see it as American correspondents -- commentators and Israeli commentators that the issue was settled at the expense of Colin Powell and that the hard liners in the Bush administration have won the day.

JIM LEHRER: Do the Israelis see this ass a road map -- to use Hisham's term -- or does Israel have to do anything or wait for... does Arafat go first and then if Arafat doesn't go, then Israel doesn't have to do anything, or how do they read this as far as what happens next and all of that?

NATHAN GUTTMAN: I think Israelis understand this more as a permission to sit down and relax and look at what is going on, on the other side right now. The Israeli government would like to continue what it's doing -- fighting terrorism as they understand -- in the West Bank and the Gaza Strip, while the Americans pressure the Palestinians to change their institutions, to change their government. And Israel would like to see this as a road map, but as a very long-term road map, which means that right now Israel doesn't have to do anything and maybe further on if the violence really calms down, and if there are reforms in the Palestinian government, then Israel can start debating about doing something on its own side.

JIM LEHRER: Well, as you know, Air Fleischer, the White House Press Secretary, issued a kind of clarification today, saying there are things Israel should do before or could do before there are elections in the Palestinian territories if things calm down, whatever. But it's not read that way in Israel?

NATHAN GUTTMAN: Not at all. And it reminds us of the time we were talking about seven days of quiet before you get into negotiations. How will Israel know that things are calmed down and that Israel has to do its own part to stop incursions or to stop settlements? Who will declare that things are quieted enough so Israel should start working on that? And I guess that will be the next big debate.

JIM LEHRER: Now, on the issue of Arafat, Hisham, is it likely that under whatever... now today as I just reported... we just reported there's going to be elections in the Palestinian Authority -- in the Palestinian territories some time after the first of the year -- is it likely that the Palestinian people would replace Yasser Arafat? What is your reading of that now?

HISHAM MELHEM: I don't see it right now. But who knows what happens six months from now down the road. Obviously I would expect Arafat to run. Arafat is not going retire.

JIM LEHRER: Why not? Why would he not?

HISHAM MELHEM: Unfortunately the political culture that is prevailing in the Arab world, Arab rulers either die naturally or die by violent overthrow but not necessarily through the election process, which is really one of the biggest disappointments in the current political culture throughout the Arab world. But that's a long story. I expect Arafat to run and Arafat as a very well practiced autocrat will probably win. I don't see an alternative leadership right now. The problem is that most Palestinians are squeezed between essentially failed leadership represented by Arafat today and extremists and the hard liners -- on the other hand - the Hamas and the Jihad and the others, who do not have a political and social solution to the problems of the Palestinians. I think the majority of the Palestinians believed at one time that the Oslo process could lead to a gradual political process and change and that if they had their own state, probably they would elect Arafat to retirement, to early retirement. I would expect them to grab to Arafat if the President of the United States appears to them as he appears to a lot of Arabs is in engaged in huge political and economic social engineering from the outside. One ambassador told me today that what the President of the United States expects from the Palestinians is to bank on sweeping fundamental radical change creating Plato's Republic, or as the Arab philosopher in medieval times would call it, the "Virtuous City," after 35/36 years of brutal, paralyzing pulverizing occupation in an area that does not have these kinds of democratic cultures. One ambassador told me today, how come did they not ask the Egyptians to embark on such reforms before they signed the peace treaty with the Israelis, how come they did not ask the Jordanians to embark on such a sweeping economic reform, political reform before they signed an agreement with the Israelis? So there would be many people who with argue, as I heard today from my anecdotal contacts with people, that the President of the United States cannot deal with the Palestinian people as if they would be on probation for three years and that he will be the judge for their performance in conjunction with his friend, Ariel Sharon.

JIM LEHRER: How do you see this?

NATHAN GUTTMAN: I think the main question now is if there will be any government in the Israel, which will be dealing to deal with Arafat if he stays President of the Palestinian Authority. Sharon himself already declared that he is not going do that and I think that Bush's speech from yesterday just encourages Sharon to keep on and hold that view. So I don't think there will be any on the Israeli side right now at least who would be willing to deal with Arafat.

JIM LEHRER: Even if he were reelected in a free and open election?

NATHAN GUTTMAN: I think that can only change if the United States will change its view concerning Arafat. If the President of the United States will say, well, he was elected in free elections and we accept him as a leader, I guess Israel will have no choice but accepting him as well.

JIM LEHRER: What kind of scenario do most Israelis... or do you see, you don't have to spoke for most Israelis, you can just speak for yourself as a reporter - in terms of looking at it from the Israeli point of view -- what kind of scenario do you see that would lead to the removal of Arafat in a way that would make it then... that would move the process along from the Israeli point of view and of course now I guess from the U.S. point of view of and President Bush?

NATHAN GUTTMAN: I think what Israelis are waiting to see is pressure mounting from the United States on the Palestinian, pressure also to remove Arafat and also to show the Palestinians the gains that they can achieve by removing Arafat, the economic gains, the political gains, and while that will start moving, I think Israelis expect the Palestinian people somehow to change Arafat, to understand that Arafat isn't leading them anywhere. That's what Israelis would expect.

JIM LEHRER: I read today, Hisham, that some people believe that this outside pressure could make Arafat even stronger rather than weaker within the Palestinian people, do you agree?

HISHAM MELHEM: Absolutely. Remember when he was under siege in Ramallah a few weeks ago? Many Palestinians supported him, including those who criticized him, because they did not want Sharon to change him or to exile him or kill him or to make him irrelevant. They would like to have that right themselves. I think the President was correct on one fundamental issue yesterday when he said that the Palestinians are talented and educated and politicized. I do believe that. And I think if you allow the Palestinians to deal with the question of reform. they have been asking for reform, Jim, since the early 1990s.

JIM LEHRER: Within the Authority you mean?

HISHAM MELHEM: Exactly. We were criticizing Arafat because his administration was marred by corruption and graffe and violation of human rights. Jim, my colleagues and friends, the journalists -- there were no protests from Washington and Israel at the time.

And many Palestinians will tell you this is really hypocrisy.

JIM LEHRER: Next step up to the United States and Secretary of State Powell?

NATHAN GUTTMAN: Well, the next step is a difficult one of really materializing this program into a plan all around and I think the devil is in the details. How do you sequence this plan now? Who starts doing what? When does Israel have to take it next move? How many things have to happen on the ground before Israel has to show something on its own side? If it's opening territories, if it's retreating its forces from around the cities, the question will be now and I think that's the great task that the Secretary of State will have is to get the details worked out and get both sides to agree on certain sequence for this process even if the sequence isn't all the way....

JIM LEHRER: All the way to the end?

NATHAN GUTTMAN: All the way to the end and the goal they wanted.

JIM LEHRER: Thank you both very much.

FOCUS - MEDIA MERGERS

JIM LEHRER: Now to the question for media companies: Does bigger mean better? Media correspondent Terence Smith reports.

TERENCE SMITH: Big media companies are big business, combining broadcasting, publishing, movies, and the web. They reach millions of people and generate billions in revenues. And now, the big are likely to get bigger. The urge to merge is stronger than ever. Why? A series of federal court decisions challenging the longstanding rules of the Federal Communications Commission on what broadcasters may own. An appeals court struck down a rule that said that one company could not own a television station and a cable system in the same market. It also questioned another rule that says that a company may not own television stations that reach more than 35% of the nation's TV households.

RICHARD BILOTTI, Morgan Stanley: We are going to see a very changed landscape in five years.

TERENCE SMITH: Richard Bilotti analyzes the cable and entertainment industries for Morgan Stanley. He foresees a media buying frenzy if the FCC's rules are, as expected, rolled back.

RICHARD BILOTTI: The big four networks will buy up most of their affiliates. I think a second wave will be that the major metropolitan newspapers will end up being purchased by those same companies.

TERENCE SMITH: The result? Fewer companies controlling more of the major sources of information in broadcast, cable, and print. As it is, the reach of today's media empires is staggering. AOL Time Warner, for example, owns America Online, CNN, HBO, Warner Brothers Studios, Time Inc.'s 140 magazines, and Time Warner cable. Altogether it is worth some $100 billion-- sharply down from what it was worth at the time of the merger two years ago, but still huge. Now, Bilotti says, the companies that own the big four television networks will also want to expand.

RICHARD BILOTTI: Where they get the most leverage, the most opportunity for cost cutting, the most opportunity for creating dominant positions in local advertising markets, is to buy up stations; next, radio, and finally the newspaper industry. Ten years from today, there may be four or five media giants in total, but only one or two will truly be dominant in each major market.

TERENCE SMITH: Television executives argue that in a multi-channel universe, with the audience fragmented by cable, the Internet, and DVD's, the current broadcast ownership rules are obsolete.

TERENCE SMITH: Should television be held to a different standard?

BOB WRIGHT, Chairman & CEO, NBC: Well, it is now. It's got this odd standard that doesn't have any real applicability to reality. You'll always have to have some kind of regulatory posturing, so I am not opposed to that, but it should make sense. It has to be against some standards of scale and size and appropriateness.

TERENCE SMITH: Bob Wright is chairman and CEO of NBC, and vice chairman of its parent company, General Electric. He says that antitrust and laws that ensure competition in other industries will remain on the books to protect the viewing public.

BOB WRIGHT: If people are acting in a manner that are foreclosing other people from competing in an unfair way, then you have... that's what antitrust laws are all about. And I think over time, that will be a concern. It will be a concern of cable operators owning too many programs because they are the distributor and the... they also own a lot of advertising time. There are underlying rules that are historic-- fair trade, antitrust-- that will have applicability and govern the ownership outside of these historical artifacts.

TERENCE SMITH: Perhaps, but critics question whether what's good for media conglomerates is necessarily good for Americans. What impact will further consolidation in the industry have on the flow of news and information?

KEN AULETTA, "New Yorker:" Well, what it does is it pushes news further down on the totem pole within organizations. It used to be that news was a primary focus of many of these companies, or certainly a large focus.

TERENCE SMITH: Ken Auletta covers the media for the "New Yorker" Magazine.

KEN AULETTA: What happens is the profit- driven parts of the company are cable and software and syndication, and not news. And news then is expected to compete and contribute comparable profit margins to some of these other divisions, and it can't and still do good news. And so the public pays a price for that because ultimately the news will be cheapened and homogenized.

TERENCE SMITH: And as the conglomerates grow, so does the potential for conflicts of interest. ABC News, owned by Disney, once quashed an investigative story on Disney theme parks. Can NBC News, to choose another example, report on problems with aircraft engines made by its parent, GE?

BOB WRIGHT: The answer is yes, and does quite often-- probably more so than our competitors. There is a feeling that we should take a lead in that sort of reporting, or at least we should never be second, if we could be first. The perception of conflict in news reporting is... can damage your reputation, can damage our credibility; we don't need that.

TERENCE SMITH: But as ownership becomes more entangled, the public may be less aware of who owns what. How critically will corporations cover the movies they produce or the sports teams they own?

KEN AULETTA: The "New York Times" not only owns the "Boston Globe," they now own a piece of the Boston Red Sox. The Atlanta Braves are owned by AOL Time Warner. "Chicago Tribune" owns the Chicago Cubs. Comcast owns Philadelphia sports teams. The reader or viewer has a real reason to say, "hey, am I going to get the truth? Am I going to get an independent sportscaster or writer tell me what's really going on?"

TERENCE SMITH: What is the answer?

KEN AULETTA: I don't know, but I think in some cases the answer is that these guys are going to shill, and other cases they're going to tell the truth.

TERENCE SMITH: But the point is, you don't know.

KEN AULETTA: You don't know, and that is worrisome.

TERENCE SMITH: Consolidation is having an impact on the creative side as well. Media companies have already begun producing more of the shows that appear on the channels they own.

LARRY GELBART, Writer: I think you need only look at what is on television today, to see how much hamburger helper there is on... in broadcasting.

TERENCE SMITH: Veteran writer Larry Gelbart, whose credits include the TV hit "MASH" and the film "Tootsie," says conglomerate production companies are already affecting viewers' entertainment choices.

LARRY GELBART: They are doing it more or less by the numbers. A real showman, whether that's a writer or a producer or a director, deals first with the idea, not fulfilling a need, except perhaps a creative itch, whereas a company is really looking for a product, and a certain kind of product, very often. Maybe they even have a timeslot in mind. Maybe they have... they have a completely different set of priorities. "What does it take to knock such-and-such off at 9:30 on Thursday? Let's get us a showlike that."

TERENCE SMITH: They are, he says, more likely to develop safe programs than to go out on a creative limb.

LARRY GELBART: The clich goes, "Organization is the death of fun." It can also be the death of drama. It can also be the death of creativity.

TERENCE SMITH: But digital technology is changing everything. Richard Bilotti argues that broadband and Internet access offer an endless array of choices showcasing different views and perspectives.

RICHARD BILOTTI: Broadband has made it possible for a household to have 120 channels. You can go out today and access news or information on any topic you wish from an unlimited number of sources. And there is no way, for the "company that controls the pipe" to stop you from doing that.

TERENCE SMITH: The Chairman of the Federal Communications Commission, Michael Powell, is sympathetic to the business point of view. He says it's reasonable for the courts to ask the FCC to justify rules that were made when the major networks had the airwaves virtually to themselves.

MICHAEL POWELL, Chairman, FCC: I think that's a fair question to the commission. Why is it that you are making a limitation on ownership based on the preservation of viewpoints, but you have conveniently ignored the viewpoints that might come to consumers through cable or through DBS or through radio or through newspapers or through magazines? And the court said, "You need to offer us some explanation of why you haven't included them, or include them."

TERENCE SMITH: Senator Byron Dorgan, chairman of the Democratic Policy Committee, says consolidation of media threatens two important public interest considerations: Localism and diversity in radio and television.

SEN. BYRON DORGAN: If it is purchased and controlled out of New York or Texas or Los Angeles, it is a different flavor and a different type of responsibility to the community and region than having local ownership. And so many of us have felt that the ownership caps and the rules that we have had about local ownership are not at all old- fashioned.

TERENCE SMITH: Despite this threat, Dorgan says the Congress is unlikely to step in, given the power of the conglomerates involved.

SEN. BYRON DORGAN: Congress could do something about that. But you are aware, I am sure, that these big companies have enormous clout here in Congress. I mean, I have taken them on, and lost.

TERENCE SMITH: He says further consolidation will occur before Congress, or the public, catches on.

SEN. BYRON DORGAN: The big companies are really accumulating, very quickly, TV stations, radio stations, and buying a lot of different kinds of properties in broadcast. And I think, you know, this is a case where it is going to be done, and the dust will have settled, before Congress gets around to caring much about it, unfortunately.

TERENCE SMITH: And the public? Will they care much about it? That is not clear. But if another wave of media mergers takes place as expected, there may be more choices on the dial, but fewer voices behind them.

FOCUS - STAYING ON TRACK?

JIM LEHRER: Still to come on the NewsHour tonight: The Amtrak crisis, and how we live and shop.

Margaret Warner has the Amtrak story.

MARGARET WARNER: Amtrak trains are rolling today, but no one knows for how long. The nation's passenger railroad is running a big deficit this year, as it always does, and its new President, David Gunn, said last week the situation's so dire that he'd have to start shutting down service if Amtrak didn't get a $200 million infusion of federal aid this week.

DAVID GUNN, President, Amtrak: My checking account, in layman's terms, will be overdrawn. And when I get my phone bill, I won't be able to write a check.

MARGARET WARNER: A shutdown would mean turning away the 65,000 passengers who ride Amtrak-owned trains every day, particularly in the New York-to-Washington corridor.

RODERIC WILSON: The northeast corridor is essential to the business community. I use it often. I go to Philadelphia and New York regularly, and I always ride on the Amtrak.

MARGARET WARNER: Also affected would be some 600,000 commuters in the Northeast, Chicago and California, who ride trains that use Amtrak-owned facilities, like tracks, tunnels, and signals. Amtrak hasn't turned a profit in its 31 years. Last year it lost $1.1 billion, the most ever.

SPOKESPERSON: Five, six, seven, eight is $40.

MARGARET WARNER: The reasons are many: High infrastructure costs, unprofitable long-distance routes mandated by Congress, poor management, and competition from highways and airlines, which both enjoy government subsidies. The immediate issue on the table now is whether to get Amtrak the quick $200 million bailout it needs this year through either a congressional appropriation or federal loan guarantees. The longer-term issue is how to restructure the railroad to operate more profitably. Last week, Transportation Secretary Norm Mineta laid out his principles for restructuring Amtrak. They include: Privatize some routes; take tracks and other infrastructure away from Amtrak, leaving it to run only trains; make states pay more for intercity rail service. Mineta took no position on the $200 million bailout, but said last night, after meeting with Gunn and the Amtrak board, that he was confident a shutdown would be averted.

NORMAN MINETA, Secretary of Transportation: First, Amtrak must continue to search for ways to cut expenses and to build on David Gunn's initial efforts to get control of its finances. At the same time, the federal government will continue to identify the best mix of options available to stabilize Amtrak and its short-term finances.

MARGARET WARNER: This morning, Senate Democrats took issue with Mineta's restructuring approach, and called on President Bush to move quickly on the short-term bailout.

SEN. ROBERT TORRICELLI, (D) New Jersey: It is genuinely an economic crisis. It is a loss of jobs and will severely impact an entire region of the country economically.

MARGARET WARNER: Later today, Mineta said a short-term fix is in sight.

NORMAN MINETA: No one wants to see Amtrak die. We're coming along very well. We're very, very close to coming to a solution to help Amtrak.

MARGARET WARNER: To explore Amtrak's immediate crisis and longer-term future, I'm joined by two people involved in it. Sylvia de Leon is a member of the Amtrak board of directors, chairwoman of its Corporate Affairs Committee, and a senior partner in a Washington law firm. Tom Till is executive director of the Amtrak Reform Council, an independent commission established by Congress to monitor Amtrak's financial performance. Earlier this year, the Council made its own recommendations to Congress on how to restructure the country's passenger rail system. Welcome to you both.

Ms. De Leon, is Amtrak going stop running this week?

SYLIVA DE LEON: No, I am confident that there won't about a shut down. I don't think we're out of the woods. We have uncertainty and that's really what this problem is all about. Amtrak every year borrows money and this year because of the uncertainty our banks have said we're a risk. We need to know what the government is going to do. The other thing that is different this year is our auditors have said unless we're certain the banks will loan money they won't give us a clean opinion. It's a chicken and egg situation and we definition and decision from the government.

MARGARET WARNER: Do you agree, Tom Till, that the government is going to step in here and at least in the short-term crisis avert it?

TOM TILL: I think both - all parties involved -- the Congress, the Administration, certainly Amtrak, will work together to make that happen.

MARGARET WARNER: Does it matter whether it's in the form of a direct appropriation or a loan guarantee?

TOM TILL: If it's a loan guarantee, that will mean that Amtrak will have to pay it back when it gets it's appropriation for fiscal year 2003, which will be later on this fall. If it's a direct grant, of course, they won't.

MARGARET WARNER: And do you think this bailout should happen?

TOM TILL: I think the Council in general would - although not all members perhaps - but in general would support the notion that Amtrak ought to keep running.

MARGARET WARNER: Ms. De Leon, five years ago Congress said Amtrak should be at least self supporting by the end of this year and Mr. Till's own council this year said ain't gonna happen. Why is that? And should that even be a goal to be able to operate Amtrak without a subsidy?

SYLIVA DE LEON: There isn't a rail passenger system in this world that doesn't rely on government investment. There's not even a domestic transportation system that doesn't rely heavily on government investment. We have the air traffic control system paid for by the government. We have an aviation trust fund. We have an airport development program. Those are in effect subsidies to the aviation industry. We have a $30 billion plus highway trust fund. Those are subsidies to passengers in their cars. We don't have anything comparable like that. Federal investment is critical in public transportation.

MARGARET WARNER: What is your view about why it's not going happen and whether it's the right goal to have in the first place?

TOM TILL: Well, I think the important thing to know is that even if you don't believe that trains can be profitable -- perhaps some can but it's unlikely that the whole system would -- there are much more efficient ways to run rail operations than the way we have organized Amtrak. It's built on a model that was developed years and years ago and a model that is now obsolete; Americans love European trains. And when they go to Europe, they're riding on trains that are now going through an institutional evolution, very much like the recommendations that the Council made and the kinds of recommendations the Bush Administration has made. Things have to change. People have to look at financing the infrastructure that Sylvia talked about, but they have to do it in a way that is going to put the money directly into the infrastructure. And that's why the European Union has declared that all their railroads have to keep separate books on their the infrastructure and a number of railroads are moving to separate that infrastructure so they can see the kind of investment that goes into the track and get the benefits they are after.

MARGARET WARNER: Is he right that even if you can't get to a no subsidy point that Amtrak is poorly run -- poorly managed from a financial point of view?

SYLIVA DE LEON: Whichever way you cut it you need to deal with the financing first. You can rearrange the deck chairs any way you want. If you don't have capital investment in a highly capital intensiveindustry, it doesn't matter how you structure it. You have got to take care of the fundamentals first.

MARGARET WARNER: And so how do you do that?

SYLIVA DE LEON: I think there are plenty of ways to come up with capital. We do it in all kinds of industries. I mean we have an 18-cent gasoline tax. Give Amtrak a penny of that and previously we've asked for half a cent of that. There's an excise tax on diesel fuel for trains. That doesn't go back to the trains. That goes to the general revenue. There's bonding authority to have high-speed trains. We have a really strong high-speed train system on the northeast corridor. California, Chicago, Milwaukee, the Pacific Northwest are crying for that. We can fund through bonding. The basic decision is the Congress has got to decide what does it want passenger rail to be? Right now they want a national route system, and that is the law, but they don't give us the money. So the reason Amtrak is in trouble year after year and by about July has to go borrow money year after year, is because Amtrak itself is subsidizing the national route structure.

MARGARET WARNER: What do you think the answer is if you have to sum it up? And I know it's a very complicated issue, but in terms of restructuring Amtrak in a way that it operates at least as profitably as it can and as effectively as it can --

TOM TILL: Well, let's talk about the model that we just talked about, all the things Sylvia was talking about, with regard to all the funding that goes into infrastructure for aviation and for highways. We do that much differently than we do Amtrak. With Amtrak, any infrastructure it owns and needs to maintain, we put the money into an operating company. We don't ask trucking companies and bus lines to build a highway and we don't ask the airlines to build the airports and the air traffic control system. So let's get a solid federal-state partnership to put that infrastructure in place. And that includes on the Northeast Corridor.

MARGARET WARNER: So, in other words, let me just interrupt -- are you talking about essentially split Amtrak? Is there a consensus developing in which let Amtrak run the trains just as the airlines run their airplanes and let some other entity be responsible for the infrastructure?

TOM TILL: That's correct. Absolutely. The states want to control their own infrastructure improvements for all these corridors that they're looking to expand. In California, California is driving that; it's not Amtrak. And they need a good, solid federal-state partnership that will provide them the funding they need to expand. In Washington State, in Oregon, and the Midwest - it's happening all over the country - in Florida, in the Southeast, this kind of a program, which has already been proposed in Congress by - in the House of Representatives will provide billions of dollars under bonding authority as Sylvia mentions to do that. But Amtrak doesn't need be in the middle of that, they need to be running the trains that will serve the people and eventually under our proposal there could be competition for the right to run those trains.

MARGARET WARNER: Is there a consensus developing on at least this idea?

SYLIVA DE LEON: The consensus that is clearly there is that the mayors of this country are really strongly behind Amtrak. The governors are really strongly by Amtrak. There are lots of new ideas and some of them need to be studied very carefully. But Amtrak has been partnership with the states for several years now; 38 states have some kind of relationship with Amtrak now.

MARGARET WARNER: Butas you yourself said it's not working financially. I mean, does the board support essentially getting out of infrastructure business, getting out of the tunnel and track maintenance business and just running the trains?

SYLIVA DE LEON: My fiduciary duty as a board member is to be sure that there is passenger rail and that the corporation is strong. I think, as you've seen in Washington, it takes a lot of time to change and to have big changes in legislation and elsewhere. I think right now we have a major problem on our hands. The public has spoken; they want passenger rail. Ridership is incredible. I want to take care of the financing problems first. I want the Congress to decide what it wants to be. And if we want to change the organization, we can talk about that. But organization doesn't fix economics, and this is a problem about economics.

MARGARET WARNER: Last quick question to you both: We keep reading and we understand that the Northeast Corridor, the heavily traveled corridor, Chicago, California, as you said, are profitable or close to, and it's these big long haul passenger routes, a lot of them put in by Congress, that drag it all down, at least part of it. Do you think that Amtrak should stop servicing the vast areas of the country where, in fact, there isn't a huge, huge demand for it?

TOM TILL: The '97 Act gave them some authority to negotiate with their labor force and determine whether or not they could get the right to discontinue some of those trains. They have not done any of that and they had initially the authority under the law. I think there's an element of political reality that says you're going to have to deal with Congress on that but I disagree totally with Sylvia on the issue of whether or not you need to change the structure. If the trucking companies and the bus lines own the highways, funding that would be a much different problem than simply having the states and the federal government have a gas tax to build those roads.

MARGARET WARNER: Quick final comment on the idea of just jettisoning the roots that that don't pay?

SYLIVA DE LEON: There's a lot of middle America that that has been jettisoned already. The airlines are not having a easy time. They've had to pull back on a lot of their routes. There's a lot of transportation that has left middle America. I think they want rail but that is not an issue for me to decide; that's for the Congress to decide.

MARGARET WARNER: All right. And more later. Thanks Sylvia de Leon.

SYLIVA DE LEON: Thank you.

MARGARET WARNER: Tom Till.

SERIES - HOW WE LIVE

JIM LEHRER: Finally tonight, "How We Live": Our ongoing look at how and where Americans live their lives. In our first report, Ray Suarez examined the sprawl in and around Atlanta. Tonight, he talks to a major architect about a new approach to shopping.

RAY SUAREZ: How many times today did you shop? You may have been picking up something for dinner or grabbing a quick something to get you between meals. Maybe you were searching for something pretty or something practical. Browsing...

SPOKESPERSON: 25...

RAY SUAREZ: Or buying. Whether out of necessity or desire, it's all shopping, and when you add up the numbers-- $3.5 trillion spent last year-- shopping is something we all do, a lot. Just as shopping takes up our time, it also takes up our space. We're surrounded by stores, malls, street vendors, signs. In fact, in America there's well over five and a half billion square feet of retail space. At the same time, shopping space hasn't always been at the forefront of architectural innovation in the same way museums and residences, churches and offices have been for centuries. Enter Rem Koolhaas, the Dutch architect, a Pritzker Prize winner, has been teaching and writing about shopping and retail space at Harvard. He's also the architect behind the new Prada Store in Manhattan's Soho District. The store is the first of three U.S. flagships he'll do for the luxury clothing line. The lower Manhattan location opened to much ballyhoo in fashion and architecture late last year. Recently, we sat down with Rem Koolhaas to discuss shopping and his work as a designer.

REM KOOLHAAS, Architect/Designer: Official architects have kind of curiously and ironically almost never been involved in the design of commercial spaces, and so that you can really count the number where so-called important architects have been kind of responsible for commercial space, almost on one or two hands. If you look at architectural magazines, and that's what we did, shopping is the 20th subject in terms of articles written on churches, education, et cetera, et cetera. So it was a territory at the same time pervasive and dominating in terms of quantities, but under explored in terms of its implications.

RAY SUAREZ: When Koolhaas looks at the city, he doesn't just see a home for marketplaces, but a place that's becoming one big market, where more and more space is commercialized and less and less space is designed to belong to the public.

REM KOOLHAAS: The city used to be something that you get for free. It's been a public space, and it enables the citizens to assemble in a kind of collective sense, but basically through the process of... well, through the effects of the market economy and through the kind of withdrawal of the kind of public sector and the kind of complimentary invasion of the private sector, which is kind of really expressed through shopping. The nature of the city has changed from something that is fundamentally free to something that you have to pay for. So that even in educational establishments, even in religious establishments, certainly in cultural establishments, there is always this kind of commercial presence and...

RAY SUAREZ: So the Museum Store or the Cathedral Store.

REM KOOLHAAS: And the Cathedral Store and even, to a large extent, the economies of these institutions is dependent on shopping. And so, therefore, there is a continuous encroachment in each different atmosphere -- each different sphere of our lives has the pressure to buy.

RAY SUAREZ: And when you design a place to be shopped in, what do you have to keep in mind as the designer?

REM KOOLHAAS: Well, what you have to keep in mind is, of course, that it's about display, and it means that there are almost demands similar to a gallery or even museum in a sense, that whatever is in the store has to look in a particular way, and that you also have to be able to kind of re-contextualize it, to give it a degree of theatricality, but we also simply made an inventory of all the things that are really annoying when you shop.

RAY SUAREZ: Koolhaas stressed the theatrical and the practical throughout the store. Flat screens amidst the clothing displays show evocative, interesting graphics and video art and show items in the display cases actually being worn. The architect says he paid special attention to the dressing room, a place he says fears and insecurities collide with what should be an optimistic vision of yourself. The bright, open, airy room has plenty of space for hanging clothes, then a "gee whiz" moment when the glass walls become opaque and private. Cameras in the walls show the buyer herself in the clothes from every angle. And tags on the clothing ring up the items being tried on on video screens, showing combinations of, for instance, the skirt you've chosen with coordinated shoes or blouses.

REM KOOLHAAS: So it's kind of both trying to be generous in terms of the environment, but precise in terms of the information of what you need to know, whether you want to buy this.

RAY SUAREZ: And Koolhaas made a conscious decision with Prada not to pack the store, not to make every square foot make money.

REM KOOLHAAS: We tried to define "luxury," because it's a luxury brand, so what's luxury, and then we decided that part of luxury could be not to exploit every square foot of the store-- because that would then give the client or the visitor a sense of deliberate waste-- that would translate as a kind of form of generosity of the company in terms of how it receives its visitors.

RAY SUAREZ: So included public space that's almost straightforwardly like an amphitheater in the design. Talk a little bit about that.

REM KOOLHAAS: Well, so what is really the key of the design, there was one fundamental difficulty is that it's on two levels, so we had to find a way to bring the public to the lower level in a way which was not going to be strictly utilitarian and which was in itself a kind of good experience. And so we made a kind of sweeping gesture of a wave that casually brings people down and also takes them up again. And then we exploited that necessity to create a stage and a theater, and so therefore, the steps are either seating or used for the display.

RAY SUAREZ: The location of this store is kind of interesting, too, because you're in an intensely commercial place that was once factories, once a wholesale district, then an artist colony, and is now becoming a shopping neighborhood again.

REM KOOLHAAS: Well, in that sense, it's been a very straightforward demonstration of our thesis that basically the city is under the influence of shopping kind of radically changing everywhere. And without any nostalgia, it was also an attempt to work, on one hand, within the logic of the kind of commercial environment, but also against it, and to simply try to see whether in a relentlessly commercial environment, whether it is also possible to stretch that envelope.

RAY SUAREZ: Is there a difference in shopping in Madrid as opposed to Los Angeles...

REM KOOLHAAS: Oh, yeah, sure.

RAY SUAREZ: Or is there a sense in which sort of everything is pushing for it to someday be the same?

REM KOOLHAAS: That's a very hard thing to say, because it is all part of globalization, of course, but within globalization there are huge differences. And, for instance, what you see here is that in America, that the first shopping pulled out of the city and kind of started to kind of create the huge shopping centers, and now in America, and particularly in New York, it's kind of all back into the city. In Europe on the whole, there's more resistance to the idea of kind of putting shopping at this scale in the center cities, so you know, there are different levels of surrender and resistance there.

RAY SUAREZ: In the clothing business, fashion trends and innovations often start with the couture lines now being sold out of Koolhaas' creation by Prada. Then a new kind of shoe or dress style or fabric heads down in price to the mass market. Could Koolhaas' design innovations behave the same way as new fashions? Imagine plasma screens in your local Sears, or going to a dance or lecture at the Macy's in a nearby mall. Koolhaas won't predict whether his ideas will spread, but his innovations are moving West. Another Prada Store is under construction in Beverly Hills.

RECAP

JIM LEHRER: Again, the major developments of this day. President Bush's call for a Palestinian state under new leaders brought international reaction. But Yasser Arafat said he did not believe Mr. Bush had singled him out for removal. And fire crews got a bit of a reprieve and a Presidential visit as they battled a monstrous wildfire in eastern Arizona. We'll see you online, and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.