The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Leading the news this Monday, in Moscow Soviet police beat up demonstrators commemorating Stalin's victims, East Germans staged more mass demonstrations demanding reform, the Supreme Court said mandatory AIDS testing for state employees was unconstitutional. We'll have details in our News Summary in a moment. Jim.

MR. LEHRER: After the News Summary we re-argue a Kansas City School taxes case the U.S. Supreme Court heard today with Attorneys Allen Snyder and Mark Bredemeier. Then come two Senators who disagree about lowering the capital gains tax, Democrat Lloyd Bentsen of Texas, Republican Robert Packwood of Oregon, and finally a Betty Ann Bowser report in the big city women mayors of Texas.NEWS SUMMARY

MR. MacNeil: In Moscow, scores of demonstrators were beaten, knocked to the ground and arrested by Soviet police. About a thousand people gathered outside the headquarters of the KGB for a candlelight vigil commemorating the victims of Stalin's terror. When about half of them marched to Pushkin Square, a favorite spot for human rights activists, they were attacked by police with truncheons. It was the harshest crackdown on peaceful demonstrators in Moscow for a year and a half. In East Germany, hundreds of thousands of people staged demonstrations in Leipzig and other cities demanding political reform, but the new Communist Party Leader, Egon Krentz, warned against destabilizing the country with what he called unrealistic demands. We have a report narrated by David Simmons of Worldwide Television News.

DAVID SIMMONS: A reception in East Berlin for military academy graduates was chosen by the new East German leader as the venue for his strong statement. Krentz said the Communist Party had been slow to react to problems. But he made it clear to opposition groups that the party will not give up its leading role in the government of East Germany. Monday evening again brought a rash of pro reform demonstrations right across East Germany. In the City of Schwerin, town counselors and Housing and Environment officials joined the marchers on the streets. They carried banners proclaiming the name of a new forum opposition group, and others demanding no more lies. Peace services were held in Leipzig. And the congregation in the Nikolai Church heard a report on the latest mediation talks between church and city leaders. Large crowds were out on the streets again in the capital, East Berlin; according to state television, as many as 300,000 people were crammed into Karl Marx Platz. Party and city officials mingled with the crowd expressing their willingness to discuss grievances with the demonstrators.

MR. MacNeil: Communist Party Leader Krentz goes to Moscow tomorrow to discuss the situation with Mikhail Gorbachev. Jim.

MR. LEHRER: The U.S. Supreme Court today resolved an AIDS testing issue. It let stand a ruling that killed a State of Nebraska agency's mandatory testing rule. The Nebraska Human Services agency had required the testing of employees who came in contact with some mentally retarded patients. A lower court had thrown it out on constitutional grounds. The Supreme Court agreed without comment. The court also heard arguments today on an important tax case. At issue was a federal judge's decision to raise property taxes in Kansas City, Missouri, to pay for school desegregation. The judge said deteriorating schools had caused white students to leave and led to de facto segregation. He imposed the taxes to remedy that situation. The arguing lawyers spoke to reporters after presenting their cases.

ALLEN SNYDER, Lawyer, Kansas City School Board: Based on the decades and decades of segregation and discrimination, Judge Clark found that the only way to remedy this series of constitutional violations was to cure the conditions to build the school buildings back up to where all other school districts have decent quality school buildings, that education can exist and to provide a magnet school program that would help to attract white students back to the district to desegregate it.

WILLIAM WEBSTER, Attorney General, Missouri: We believe that what the judges attempted to do in levying this tax unilaterally on the people of the district is something that he doesn't have the constitutional authority to do. We have argued today that the Constitution does not permit what has been characterized as taxation with representation and it's not a frivolous principle.

MR. LEHRER: We'll have more on that case right after the News Summary. A first public step was taken today toward testing the new federal law against burning the American flag. Four demonstrators set fire to three flags on the steps of the U.S. Capitol in Washington. They were arrested. The new law went into effect Friday night and followed the Supreme Court's decision last June which said flag desecration was protected by the Constitution. One of those arrested today was the same man who won that case. The demonstrators said the new law was fascist and said if convicted, they would appeal the issue right back to the High Court.

MR. MacNeil: South Africa's ruling Nationalist Party today condemned new calls by the African National Congress for continued guerrilla warfare against apartheid. The comments followed yesterday's mass rally at which a cheering, singing crowd of 70,000 packed a stadium near Johannesburg to hear speeches by recently freed leaders of the ANC. Under present law, the rally was illegal, and the ANC is an outlawed organization, but authorities permitted the gathering, the first ANC rally in almost 30 years. Today police said they were considering prosecuting some people for statements praising the ANC's guerrilla campaign.

MR. LEHRER: The next move is up to Pres. Daniel Ortega of Nicaragua said the United States today. The issue is the cease-fire in the war between the U.S. backed Contras and the Sandinista Government of Nicaragua. Ortega said at the Western Hemisphere summit in Costa Rica over the weekend the Contras were violating the cease-fire, so it was about to end. Pres. Bush and U.S. Congressional leaders criticized Ortega, who said later he was reconsidering that position. State Department Spokeswoman Margaret Tutwiler was asked about the situation at a briefing this afternoon.

MARGARET TUTWILER, State Department: The fundamental question is in our minds, is Mr. Ortega for the electoral process or a resumption of violence? We hope that the government of Nicaragua will not restart the war as an excuse to derail the electoral process. We note that Pres. Ortega appears to have qualified his original unilateral declaration that the Government of Nicaragua would end the cease-fire. We hope, as the President said in San Jose, that the Nicaraguan Government will not take this backwards step that would be so destructive to the democratization and peace process in Central America.

MR. LEHRER: Spain will continue to have a socialist government under Prime Minister Fillip Gonzales, but just barely. In yesterday's elections, Gonzales's social workers party needed 176 seats to retain its 7 year majority in parliament, and that is exactly what it got, 176 seats.

MR. MacNeil: An earthquake in Algeria has left at least 30 people dead and more than 200 injured. The quake hit last night in an area 40 miles west of Algiers. It measured 6 on the Richter Scale. Thousands of people camped outdoors overnight for fear of another quake. Several hundred people who live in the area held a protest today accusing the government of responding too slowly to the disaster and calling for tents, bread and water.

MR. LEHRER: A U.S. war plane accidentally dropped a 500 pound bomb on the missile carrier U.S.S. Reeves today. It happened during maneuvers in the Indian Ocean. The Navy said the bomb exploded when it hit the ship, setting off a small fire. Five sailors were slightly injured. No one was killed. The bomb left a five foot hole in the ship's main deck. The aircraft carrier U.S.S. Lexington sailed back to port in Pensacola, Florida, today. The pilot of a training jet making his first attempt to land on a carrier crashed into the Lexington yesterday. The pilot died as did four others on the carrier. Seventeen were also injured. The National Transportation Safety Board began its investigation today of a commuter airliner crash in Hawaii. The plane crashed into a heavily wooded valley. Twenty persons died in the Aloha Island Air two engine plane. Ten of them were members or connected to a high school volley ball team in Malokai, Hawaii, where the crash occurred Saturday. There have been no statements on a possible cause of the crash.

MR. MacNeil: Residents of Oakland, California, had something to cheer about today, Saturday night's World Series victory by their baseball team. More than 4000 people attended a rally to honor the world champion Oakland Athletics who beat the San Francisco Giants in four straight games. It was a subdued celebration which included a moment of silence for the victims of the October 17th earthquake. The A's decided against a parade, because the route would have passed several buildings damaged by the quake.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to an unusual taxation without representation argument, the Senate disagreement over the capital gains tax, and the big city women mayors of Texas. FOCUS - TAXING LESSON

MR. LEHRER: We go first tonight to an argument over taxation with representation. That at least is at one side said it's about in arguments today before the U.S. Supreme Court. At issue is a federal judge's decision to raise state and local taxes to pay for a desegregation plan in Kansas City, Missouri. Tom Bearden sets up our argument with this background report.

MR. BEARDEN: There was only one white student at Central High School in Kansas City in December of 1987 out of a student body of 900. There was only one white child in Mrs. Annie Fryer's 5th grade class. And he had just arrived the morning we visited Troost Elementary School. Two years ago 75 percent of the children in Kansas City classrooms were black. In other cities, courts have ordered mandatory bussing to achieve racial balance, sometimes across district lines. Kansas City has been bussing black children since the late '70s on a voluntary basis. But whites are not bussed in from the suburbs, because early on the federal district court ruled there was no evidence that the suburban districts had ever engaged in discrimination. While the courts searched for another way to achieve integration, the school system deteriorated, enrollment declined, teachers were laid off, music and art courses were dropped, many libraries were closed. Arthur Benson is the attorney for the children named in the original desegregation suit in 1977.

ARTHUR BENSON, Lawyer: When the school district became majority black was the last time it ever passed a levy increase. And ever since then, we've had a majority white voting population with a majority black school district. And that white voting population has simply written off the school district with a result that for 18 years tax bills have been extraordinarily low.

MR. BEARDEN: Benson says years of neglect left most school buildings in disastrous condition.

MR. BENSON: I would say that 1/4 of the elementary schools in the school district ought to be shut down immediately. Rooms with no entryway except through other school rooms, plaster falling off, the stench of urine from the boy's room just down the hall, no ventilation because the rooms were in the basement.

MR. BEARDEN: Mrs. Fryer says things got pretty bad at Troost Elementary.

ANNIE FRYER, Teacher: Water came in most all the classrooms. You had peeling walls, you had ceilings falling out in places. In fact, we had to move out of two rooms due to the ceiling collapsing.

MR. BEARDEN: After 10 years of trying to desegregate the system, Federal District Judge Russell Clark handed down a decision that had Kansas City in an uproar. The judge unilaterally ordered the property taxes doubled. On top of that, he directed that a 1 1/2 percent income tax surcharge be imposed on everyone who worked in Kansas City, a move many lawyers believe is without precedent, all of this to raise money to make city schools so attractive that white students will voluntarily transfer from suburban schools back into the inner city, the total cost of the plan more than $250 million over the next nine years. An appeals court later modified the ruling, but the practical effect was the same. Taxpayers staged a version of the Boston Tea Party in front of a suburban City Council with tea bags instead of crates and raised a cry of taxation without representation. But the judge ruled the constitutional rights of the children outweighed the rights of the taxpayers.

MR. BENSON: Taxation without representation was just a slogan. It never made it into the Constitution and it's something that judges have done at least, federal judges, since 1867 in this nation. We have a long history of federal judges ordering tax increases to enforce their judgments or pay judgments.

MR. BEARDEN: The judge's long-term solution was to order most of the buildings replaced and perhaps more important make what is taught there more attractive through the so-called "magnet school" concept. Central has become such a magnet. The idea is to still teach the basics, reading, writing, and arithmetic, but now the basics are surrounded by an overall computer science curriculum, a totally new building will replace the current facility in two years, 70 percent of the other planned magnet schools like Southeast Middle School are already open. They offer concentrated study in foreign languages, the arts, and science. More will be built. There are more teachers making more money. The court order allocated $7.1 million for salary increases. But this is fundamentally a desegregation plan, not a school improvement plan. What if it doesn't attract whites?

MR. BENSON: If we don't make significant progress towards that within the next few years, then the continued funding will be in jeopardy. So we won't end up with a good school system. We'll end up with, we'll revert back to this bombed out shell of school system that existed here in the late 1970s and early '80s.

MR. BEARDEN: School officials say the early signs are encouraging. Test scores are up and some 600 white students have returned to the system from private schools. But 600 black students have also returned from private schools. The racial percentages of the system are exactly where they were two years ago.

MR. LEHRER: We turn now to two different views of this Kansas City Case. Mark Bredemeier is General Counsel for the Landmark Legal Foundation, a public interest group that filed an Amnicos brief in the case on behalf of taxpayers and parents in the school district. Allen Snyder is a partner at the Washington law firm of Hogan & Hardson which represented the Kansas City School District in the case. Mr. Bredemeier first, did the judge do the right thing?

MR. BREDEMEIER: No, we don't believe he did the right thing when he went out and imposed his own property and income taxes back in September of 1987. The 8th Circuit agreed that at least the income tax surcharge was too much and unauthorized for a federal court. And they reversed that and allowed all of that money to be refunded but the property tax is still there.

MR. LEHRER: What were his options, if he had not taken the situation into his own hands and levied the tax, what would happen to the Kansas City Schools?

MARK BREDEMEIER, Landmark Legal Foundation: Basically we argued from the outset that federal courts are to abjudicate the laws and in this particular case they had the responsibility to determine the liability between both the Kansas City School District and the State of Missouri, as what's known as joint or several wrongdoers or tort feasters in the case. So they could have simply told those two parties to pay for desegregation funding and since the school district couldn't come up with their share, the State of Missouri just has to pick up the slack. And that's in fact, what was done. When the surcharge was reversed, the State of Missouri picked up the slack. And what we've argued is the property tax shouldn't be in effect and the state of Missouri should be financially responsible for that, and then our elected Governor and representatives will be the people making taxing decisions, and not unelected federal judges.

MR. LEHRER: So the judge went too far in your opinion?

MR. BREDEMEIER: He went too far on the funding mechanism. He certainly has the power to order a desegregation plan. He certainly has the power to make sure that that plan is fully funded. He had the option by simply imposing joint several liability on the state. But instead he decided to come up with his own funding mechanism.

MR. LEHRER: Mr. Snyder, you believe that the judge had the right to do that and he did the right thing, is that right?

ALLEN SNYDER, School District Lawyer: We do believe he did the right thing. The basic options in front of the judge, as we see it, were either to require the school district to pay a portion of the cost of the remedy or as Mr. Bredemeier said, to have the state pay the whole cost. The state actually has argued that there is a third option. Their argument is that the judge simply lacked the power to order this remedy into effect at all because in their view no one should be required to pay for it. We think that is not only wrong but is a dangerously wrong concept. We think federal courts have the power and indeed the duty to ensure that constitutionally required remedies are implemented and are funded.

MR. LEHRER: Even on the issue of taxing people?

MR. SNYDER: Well, the school district was held to be liable for this violation along with the state. And the judge felt that it was important for both of the governmental defendants to share in paying the cost. It's important to note that the state argued strenuously in the district court that it should not be required to pay the whole cost. And given the state's position on that issue and given that the school board was prepared to support paying some share of the costs of the remedy, we think the judge acted within his discretion under these circumstances.

MR. LEHRER: Meaning from your perspective, or at least looking at it from the judge's point of view, that if he had not ordered these taxes, then he was faced with a situation that the money was not going to be paid and the schools were not going to be improved, is that right, or the plan was not going to be implemented.

MR. SNYDER: That was the approach suggested by the State of Missouri. And we think that that would violate basic constitutional principles, would leave the schoolchildren without any remedy for the violation of their constitutional rights.

MR. LEHRER: What, Mr. Bredemeier, has been -- we saw Tom Bearden's update of a report that we had run some months ago, that at least in terms of numbers, two years later, there's been no change.

MR. BREDEMEIER: In fact, there has been a slight change. There are actually more minority students this year than there were two years ago by about a percentage point. So it's actually there's a higher minority composition and there are fewer students. We have gone from 37,000 to 35,000 students.

MR. LEHRER: Because they have to keep the ratio the same, is that right?

MR. BREDEMEIER: That's right.

MR. LEHRER: Your position is the judge was wrong on two counts then?

MR. BREDEMEIER: We have been sympathetic with some of the arguments raised by the State of Missouri as far as the plan, the magnitude. It's the largest magnet school program in the country. It's the largest quarter of a capital improvements program in the country. And we do think there are some problems with the implementation. But our No. 1 concern from the outset was no matter what your plan is, no matter what you're trying to remedy, whether it's a desegregation case, whether it's prisons and overcrowding, judges do not have unlimited powers. If a judge in Kansas City can order his own property tax to desegregate schools, a judge in Texas can order a cigarette or excise tax to build new prisons. Or a judge could do this to equalize government benefits. There are some things that the federal judiciary just simply cannot do.

MR. LEHRER: Why do you say that? What do you base that on?

MR. BREDEMEIER: We base it on Article 3 of the Constitution and the fact that federal courts have not been levying taxes.

MR. LEHRER: Never happened before?

MR. BREDEMEIER: No, it has not. And when Mr. Benson mentions in the update that courts, federal courts, have been doing this since 1867, those weren't courts levying taxes, those were courts imposing judgments based upon the contract clause. And in fact, no court in the history of the United States has ever directly levied a tax increase to fund any remedy.

MR. LEHRER: Mr. Snyder, do you read history in the law the same way?

MR. SNYDER: I think we're reading different history books. In fact, there are at least six or eight separate decisions from the United States Supreme Court which have upheld orders by lower courts that required local governments to levy taxes where it was necessary for them to meet their constitutional obligations. As Mr. Bredemeier says, in many of those instances they were constitutional requirements that the local governments meet their contract clause obligations to pay debts that had been held by the courts to be owing. But the Supreme Court has said that where a local government owes money and it's constitutionally required that it pay that money, a court can order the local government to levy the tax that the government has the power to levy. In fact, here the Kansas City School District Board voted to increase their taxes to meet this constitutional requirement. The only reason the court had to act was because the State of Missouri has a law that prevents the school board from implementing a tax even when the elected representatives vote to do that without going to a referendum of the citizens. And that law was preventing the school district from meeting its constitutional obligation. There have been more than a half a dozen Supreme Court decisions supporting exactly that relief.

MR. LEHRER: So your position is that the constitutional questions raised by the school desegregation plan in this case outweighed any other kind of considerations over taxation, is that right?

MR. SNYDER: We do believe that, but I would note that Mr. Bredemeier is correct that if the State of Missouri had been willing to pay the cost of this remedy, the district judge would not have been required to take the action he took.

MR. LEHRER: That's right.

MR. BREDEMEIER: That's true, and we're operating under an erroneous assumption here if we believe that had the court not imposed the taxes, somehow a fully funded desegregation plan in Kansas City would not have gone into effect. That's simply not true. The state has been paying a great deal of the desegregation costs. And as I said, once the surcharge was reversed and refunded, the state has picked up the slack and if this property tax is reversed in six months, then the state will again pick up the slack. So the funding is going to be there. The question is do federal courts have the power to impose this kind of a tax scheme, or do they simply have the power to order that the defendants come up with the money and then let the political processes --

MR. LEHRER: What's your reading of the court, of this particular court in this particular case, if you were stepping aside as a nonpartisan in this, what's the court's record on this, do you think? How do you think it's going to go?

MR. BREDEMEIER: I think the court is going to go in favor of reversing the tax and one might say well, that's because you've been so involved in it and you have to be optimistic but when we got involved --

MR. LEHRER: You have to predict victory.

MR. BREDEMEIER: We do, but I truly believe this because I disagree with Mr. Snyder's analysis of Supreme Court precedent. And I think doing what Judge Clark has done is something novel in this country and I don't think this particular Supreme Court is going to sanction it.

MR. LEHRER: How do you read this court, Mr. Snyder, on this issue?

MR. SNYDER: Well, I think I will defer to Mr. Bredemeier on predicting the Supreme Court's decisions. I find that always a very treacherous business and I think we'll just wait and see what they decide.

MR. LEHRER: Any clues from today's argument as to what the judges, any questions they asked or anything like that, any tea leaves there on the table to be read, Mr. Snyder?

MR. SNYDER: Well, Supreme Court Justices are well known for asking very difficult questions of both sides, sometimes hypothetical questions, that make it really very hard to predict how they'll rule based on their questions. There were good tough questions for both sides, and I'm not sure I read things exactly the way Mr. Bredemeier does, but we'll just wait and read the Supreme Court's decision.

MR. LEHRER: All right, Mr. Snyder and Mr. Bredemeier, thank you both for being with us.

MR. MacNeil: Still ahead, playing politics with capital gains, the women who run the big cities in Texas. FOCUS - CAPITOL GAMES

MR. MacNeil: Next tonight we return to the issue that has caused almost everything money related on Capitol Hill to grind to a halt. The issue is the capital gains tax. Cutting that tax was part of the President's campaign platform, and it has since moved from the realm of economic debate to political gamesmanship in Congress. Judy Woodruff has a brief background report.

SEN. BILL BRADLEY, [D] New Jersey: Mr. President, I think the capital gains amendment that is attached to the Polish Hungarian aid bill is the ultimate now nowism. The proponents of this amendment can't wait until there is a tax bill, a second tax bill, can't wait until there is a tariff or other revenue measure, and most assuredly they seem unable to wait until next year. They have to get it now, now.

SEN. ROBERT DOLE, Minority Leader: We'd like to have had a vehicle to put capital gains on. We think it's very important. We know a majority of this body supports capital gains reduction. We've been unable to get a vote. And I don't quarrel with the majority leader, as he's said many times, you use the rules.

MS. WOODRUFF: Although a majority of Senators appear to support a cut in the capital gains tax rate, that's not enough for Bob Dole. Senate rules state that 60 votes are needed to end a filibuster, to cut off a lengthy debate on any legislation, and Dole doesn't have 60 votes. As a result, Majority Leader George Mitchell and others who oppose the rate cut can filibuster in order to keep capital gains from coming to the Senate floor for a vote. Those same rules don't apply in the House of Representatives where last month a coalition of Republicans and conservative Democrats easily approved the capital gains rate cut much to the delight of Pres. Bush.

REP. BILL ARCHER, [R] Texas: [Talking to President Bush on Phone] Mr. President, it's good to hear from you.

PRES. BUSH: Well done. Well done. We just got out of, I walked out of a speech in the University of Virginia, and they gave me the results of the vote and I'm so proud of you and grateful to all your committee members and the others on the other side who helped so please tell everyone you see that I checked in.

REP. RICHARD GEPHARDT, Majority Leader: We believe very strongly in what we tried to do today. This was round one.

MS. WOODRUFF: Despite losing a round in the House, Democratic leaders hoped the capital gains rate cut would be blocked by their colleagues in the Senate.

SEN. JOHN ROCKEFELLER, [D] West Virginia: With all due respect, I think it is something of a rich versus poor matter, that is, capital gains.

MS. WOODRUFF: In the Senate so far, the Bush administration's plan for capital gains has met with resistance. The Senate Finance Committee refused to attach it to its version of the deficit reduction bill as the House had done. House and Senate conferees are now trying to work out differences in their respective versions of that bill. And it appears the House's language on capital gains will be eliminated.

SEN. PACKWOOD: And we actually think capital gains would be good for the Polish economy also.

MS. WOODRUFF: The capital gains tax rate cut has now become in a sense an orphan, an amendment in search of legislation to which it can be attached. Last Wednesday, Oregon's Bob Packwood took the first opportunity to find capital gains a home by trying to attach it to legislation providing aid to Poland and Hungary.

SEN. BOB PACKWOOD, [R] Oregon: I'll be very frank. I have used the filibuster on many occasions, frequently on the subject of abortion, when people were trying to put things in bills that I didn't like. I have no objection to it being used. I have no objection to the Majority Leader attempting to cut it off. But surely under the rules of the Senate, we have ample opportunity to offer again and again.

SEN. GEORGE MITCHELL, Majority Leader: I obviously can't prevent that, but I would just say to my colleague that that's going to make it very difficult for us to proceed to get any of the other business of the Senate being done if what you're saying is that you're going to proceed to try to offer this on the next vehicle that comes along and the next vehicle that comes along, no matter what the vote is, then I would encourage my colleague to think about the interests of the country and the interests of the Senate in achieving some kind of finality with respect to this issue.

MR. MacNeil: We go now to two Senate leaders of the capital gains fight. Sen. Lloyd Bentsen is a Texas Democrat and Chairman of the Senate Finance Committee. The Committee's ranking Republican is Sen. Bob Packwood of Oregon who we just saw on the floor. They join us from the Senate Gallery on Capitol Hill. Sen. Packwood, we just heard Sen. Mitchell say to you, ask you to think about the interest of the country. How is it in the interest of the country to tack your capital gains tax cut proposal onto an aid bill for Hungary and Poland, aid that many people say is vital to their progress towards democracy?

SEN. BOB PACKWOOD, [R] Oregon: If it's vital, all Sen. Mitchell has to do is give us a vote. We're not trying to hold up the bill. We'll be happy to settle for a very small time limit and give us an up and down vote so that we don't have 60 votes and a majority work their will and we won't hold up the legislation at all.

MR. MacNeil: Sen. Bentsen, why won't the Democrats give him the straight up and down vote? I mean, a majority of the House is for it, the President campaigned on it, you, yourself, have espoused capital gains tax cuts. Why won't the Democrats give them a straight vote?

SEN. LLOYD BENTSEN, [D] Texas: Let me say I was much more enthusiastic about a capital gains cut when the personal income tax rate was 70 and then 50 and then cut it back to 28 percent on the top personal income rate. And of course, Sen. Packwood was a leading proponent of that with the '86 tax bill and supported the idea of bringing capital gains up to 28 percent. I just think we have a lot higher priorities trying to get this deficit down, trying to get budget reconciliation finished, trying to get the debt limit passed than trying to do something on capital gains at this point.

SEN. PACKWOOD: I wonder if I might come back again though and have you ask the question again. We'll be happy to accept an hour's time limit. Just give us an up and down vote on it.

SEN. BENTSEN: See, what they're talking about, they're trying to use the rules to their own advantage when they work to that advantage, but then they want to set them aside at other times. Since 1987, you've seen the Republicans use those rules some 34 times to win a point of view without a majority vote.

MR. MacNeil: Well, let's just discuss those rules for a moment. Enough Democrats in the Senate feel strongly about this that you're threatening to make it the subject of a filibuster. To break the filibuster would require 50 votes instead of 60. Why is it so important to the Democrats to resist this idea when there is such support for it elsewhere and the Republicans claim a majority of 50 in the Senate, of more than 50 in the Senate?

SEN. BENTSEN: Frankly, I don't think it achieves the objective that they're seeking at this time. I don't think you're going to get a lot more investment capital just because you cut the rate by some 8 percent. And I look at what it does to the deficit in years to come and I think it's important that we make the major objective cutting back on that deficit, really getting it down. And the way they've structured this to try to get by the five year window, I think they've been very creative in it, but you have an explosion of debt that takes place, an explosion and loss of revenue to the Treasury. And I think that makes it such a priority that we have to use the procedural rules to stop it.

MR. MacNeil: Sen. Packwood.

SEN. PACKWOOD: And I might add that the Treasury says that our bill raises money, doesn't lose money, over the five years. Treasury even says over 10 years it makes money. But even though Treasury says that, I'm always suspect of any revenue figures that go much beyond five years because we're so notoriously inaccurate at our estimates.

SEN. BENTSEN: I could understand his saying that, because they've structured it very carefully to take care of them through the five years. But after that you see really enormous loss in revenue to Treasury. We see what they call a back end IRA that is again structured to accomplish that. But CBO tells us there's no assurance that that back end IRA won't lose more money to Treasury than it actually increases in savings.

MR. MacNeil: I'll come back to the IRA in a moment. That's a complicating factor here. Sen. Packwood, why is cutting the capital gains so important? If the Democrats have stymied you with the threat of a filibuster and you've used the filibuster, you've said on the floor yourself, on occasion, why not just let it go and come back another time and try it? Why is it more important than all these other issues?

SEN. PACKWOOD: Because Sen. Mitchell, the Democratic leader, said they're just going to try to stymie us now, if we try to put it on the next bill that comes along, they'll try to stymie us, if we try to put it on another tax bill, they'll try to stymie us. They're not going to give us a vote on this at all, not this week, not this month, not this year.

MR. MacNeil: When are you going to get tired, you Republicans, and simply say okay we won't get it this year?

SEN. PACKWOOD: We're reasonably young and reasonably healthy. I think our endurance will last quite a while.

MR. MacNeil: Are you going to attach it to the debt ceiling bill, the bill to raise the ceiling so that the government won't run out of money by the end of this week?

SEN. PACKWOOD: I am prepared, if necessary, to attach it to every possible bill that comes along that is a tax bill. As you're well aware, tax bills have to originate in the House of Representatives so there is a limit to what we can attach it to, but to any tax bill.

MR. MacNeil: What would you feel about their attaching it, you had some rather strong things to say about that on Friday, Sen. Bentsen, about attaching it to a bill to raise the debt ceiling?

SEN. BENTSEN: I think it's a serious mistake on their part if they do it and I think that they finally decided so too, because they were concerned that it might spill over and delay some deliverance of Social Security checks and they didn't want to be charged with that one. So what they did, they then went out and said we're going to borrow some $7 billion of additional revenue to extend it for another seven or eight days and spent some $20 million of the taxpayers' money to go through that kind of gimmickry.

MR. MacNeil: Kind of gimmickry, Mr. Packwood?

SEN. PACKWOOD: I don't think it's gimmickry. What the Treasury Secretary did before the expiration of the debt ceiling was to legally borrow money that he could borrow, and that means that while we're trying to add the capital gains tax to the debt ceiling, the Social Security checks will go out and the Social Security checks can be paid. I don't really think that's gimmickry.

MR. MacNeil: But if you, if Sen. Packwood attaches this tothis debt ceiling bill, Sen. Bentsen, and you want to block it, that means you Democrats have got to filibuster on raising the debt ceiling which would stop the Social Security checks going out.

SEN. BENTSEN: Well, let me say that we have never yet failed to take care of that situation and we wouldn't in the future. And I have total confidence in that. So what you saw the administration do was an unprecedented thing. To borrow right up to the limit, to get some cash on hand, to extend that period of time in which you had to raise the debt limit, that is an unprecedented thing for them to have done.

MR. MacNeil: Sen. Packwood, is he right that the Treasury and the administration is going to cost the taxpayer $20 million in additional interest for the borrowing a week early just to do an additional maneuver on this capital gains cut bill?

SEN. PACKWOOD: It cost them $20 million because they're borrowing it now but had they borrowed it after the debt ceiling, let's say we extended the debt ceiling and then they borrowed the money then, they'd still pay the $20 million. It's just the question they're going to pay the $20 million now instead of a week from now or two weeks from now.

SEN. BENTSEN: I'd have to differ on that. I had that number given to me by the Secretary of the Treasury. And it's because of the means by which they do it, and it would not have been repeated at a later date.

MR. MacNeil: So, Sen. Packwood, back to you, is Pres. Bush fully with you in this attaching the capital gains tax cut to every bill that's a tax bill? Is he fully with you in your maneuvers and your strategy?

SEN. PACKWOOD: Yes, he is, and I think he's got a legitimate case. President Bush when he was candidate Bush, Vice Pres. Bush, made this a major issue in the campaign. This wasn't some off the cuff speech in Houston that he said once. It was one of "the" major issues. And he emphasized it over and over and over and he won a substantial victory. And when you are elected with that kind of a margin, and one of the issues being capital gains, isn't he at a minimum entitled to at least a vote in the Senate? No guarantee he wins it but at least a vote.

MR. MacNeil: Sen. Bentsen.

SEN. BENTSEN: Well, you have to remember that in 1986 that Chairman Packwood brought up the capital gains rate to 28 percent and was a strong supporter of trying to get more uniformity in the tax system. And the Senate backed him up and I backed him up in that regard, and I think that carries some weight too.

MR. MacNeil: Sen. Packwood.

SEN. PACKWOOD: He's absolutely right, although the rate initially was 27 percent and Sen. Bentsen may recall --

MR. MacNeil: But you've both reversed your positions, haven't you? I mean, at that time you were raising the rate, Sen. Packwood, and you were in favor of lowering it, you used to be in favor of lowering it, Sen. Bentsen, now you no longer think that, correct?

SEN. BENTSEN: No, I have stated from the very beginning that I was much more enthusiastic about lowering the capital gains rate when it was 49.125, when personal income tax rates were 70 percent, and then we cut them to 50, and then we cut them to 28 percent. So it loses a lot of its leverage in trying to help investment capital.

MR. MacNeil: Let me ask you both about the IRA proposal. Sen. Bentsen, you were the first one I believe to raise this partly I think to take the political sting out of the appearance of giving a tax cut to the risk at a time when there's so much other stringency in the budget. And you've expanded the deductibility, you propose expanding the deductibility of the Individual Retirement Accounts.

SEN. BENTSEN: Well, I felt strongly if we were going to change the tax system, that we ought to do those things that would encourage savings in this country to get interest rates down so we can be more competitive, and that we expand the IRAS so that people, average folks, could achieve some of their very major objectives trying to help educate their children, trying to buy that first home for young couples and, of course, providing for their own personal retirement, and that's what the Bentsen IRA did.

MR. MacNeil: You've seen the political sense of that, Sen. Packwood, and you've adopted a form of that, correct?

SEN. PACKWOOD: It's a form. Sen. Roth deserves the bulk of the credit on that. It's a form of it, but whereas Sen. Bentsen's IRA provision loses money from the first day we adopt it, Sen. Roth's does not. It actually in the first five years makes about 11 1/2 to 12 billion dollars, whereas, Sen. Bentsen's loses just about that in the same period of time.

MR. MacNeil: How does it make money?

SEN. PACKWOOD: You take your present IRAs, the ones that you now have, and you convert them over into what is called an IRA plus or a super IRA. And when you convert them, you pay a tax on part of the money that you convert now. So the Treasury collects money when you make the conversion.

SEN. BENTSEN: Let me say on that point, one of the criticisms of the IRA in the past has been that question as to whether it increased new savings. Now what the Roth proposal does it talks about a shift in savings and now he's talking about that they would make some revenue off of that. So instead of increasing savings, the shift in savings, and the CBO says the serious question in mind is where they would actually have a net increase in savings above revenues lost in the out years.

MR. MacNeil: So where do you think this is going? Has the IRA thing, either of the forms, not been successful in removing enough of the political sting, the word I used, in appearing to give -- you heard even Sen. Rockefeller, whose name would give him some credibility in this area, saying that it was a rich and poor issue. Why isn't it flying in a bigger way, Sen. Packwood?

SEN. PACKWOOD: You mean the IRA issue itself?

MR. MacNeil: Yes. Why isn't that making this more attractive to more of your colleagues?

SEN. PACKWOOD: It makes it attractive to some. Frankly it causes some not to like it. I think it's about a wash. We pick up two or three votes by having the IRAs in there. We lose two or three that would support a straight capital gains vote. But the up shot of it is if we could have an up-down vote now on the bill that I've introduced which has IRAs in it and capital gains, I have, if I count right, 56 votes for the capital gains and the IRAS together in one package. I don't have 60. I can't break the filibuster. But if I could have a straight up and down vote just on the merits, we could win it.

MR. MacNeil: And you're not going to give him a straight up and down vote, is that right, because you want to block this?

SEN. BENTSEN: Well, let me first get to the point you were making earlier about the popularity of the IRA and the capital gains. The polls show that the Bentsen IRA, the support is 3 to 1 over a cut in capital gains. So I think that should be given a priority. Now we're going to stay within the rules of the Senate just as the Republicans have when they were in control of that Senate. They can't just pick and choose when those rules are going to be applied.

MR. MacNeil: Butthe answer is the Democrats are not going to give them a straight up and down vote on this.

SEN. BENTSEN: The answer is we'll provide the rules of the Senate and we'll comply with them.

MR. MacNeil: Which means you will use, you will continue to threaten to filibuster?

SEN. BENTSEN: If they can get themselves a cloture, well, then they'll finally get themselves a vote.

SEN. PACKWOOD: But you've got it right, which means we will not get an up and down vote.

MR. MacNeil: So it means either 60 votes, or you don't get the capital gains tax cut. And you haven't got the 60 votes, is that right, Senator?

SEN. PACKWOOD: We haven't got it on this particular bill. We may or may not have it on the debt ceiling. I'm inclined to think that we will get a capital gains bill. I hope we get it this year. We're going to get it sooner or later.

MR. MacNeil: But maybe not this year?

SEN. PACKWOOD: I've got my fingers crossed. I hope this year but I'm not sure.

SEN. BENTSEN: I must say if we could look at it in an overall package and address it, with all the concerns they're talking about, I listened to Sen. Dole talking about an increase in the gasoline tax, but an overall package from the administration, and probably next year, we'll take a serious look at it.

MR. MacNeil: Okay. Senators, both thank you. We have to leave it. Jim. FOCUS - POLITICAL SORORITY

MR. LEHRER: Finally tonight a women in politics story. It comes from Texas, which has more women mayors than any other state, including those in its six largest cities. There's also a woman with a good shot at being the next governor of Texas. Betty Ann Bowser of Public Station KUHT-Houston reports.

ANN RICHARDS: [July 18, 1988, Democratic National Convention] Poor George. He can't help it. He was born with a silver foot in his mouth.

MS. BOWSER: She can poke fun at George Bush in a New York minute, and while the President claims to be a Texan, Ann Richards is the real thing -- born in Texas, raised in Texas, schooled in Texas politics, and a serious candidate to be the next governor of the state. She was elected State Treasurer in 1982, getting more votes than anyone who ran for state office that year. Since then she has made $1 1/2 billion for the state by using innovative techniques to manage the taxpayers' money. Ma Ferguson was elected governor twice, first in 1924 after her husband became the one and only governor ever to be impeached for embezzlement. The polls show Richards ahead of her two Democratic opponents by a sizable margin and she thinks being a woman is an advantage.

ANN RICHARDS, Gubernatorial Candidate: I will show you that Texas is wide open to anyone of merit who can prove their worth and who can say that I have a record of public service that is a good one. Thus far women have had a very very good record as public officials. We are perceived by the public as being more honest, thrifty, pinching that penny.

MS. BOWSER: Richard Murray is a poll taker and a political science professor at the University of Houston.

RICHARD MURRAY, University of Houston: I think that despite the image of the Southwestern culture as being a real macho cowboy, beer cans flying out the window type thing that actually in contrast to the Deep South, that the frontier culture has been more accepting of strong women and more willing to consider them in leadership rules.

MS. BOWSER: Ann Richards in her quest for governor has enlisted the help of members of one of the most elite clubs in politics, the women mayors of Texas. [RICHARD WITH MAYOR COGESHALL]

MS. BOWSER: On a recent campaign swing, Richards spent a day on aboard a yacht with Mayor Cogeshall being briefed about the problems of Galveston Bay. And the next day she visited with the Mayor of nearby Houston on the inaugural voyage of a new train service linking Houston with Galveston. Four-term Mayor Kathy Whitmire was elected in 1981. That makes her the most long serving member of the Mayors Club.

MAYOR KATHY WHITMIRE, Houston: Most of the voters are so accustomed to me being Mayor that they no longer think that much about the question of me being a woman. But I remember when I was running for Mayor the first time, my opponent in the runoff election was the sheriff. And he was 63 years old and over 6 feet tall and he consistently referred to me as "that little lady".

MS. BOWSER: The little lady managed to do what no male politician had ever done in Houston. She got the support of large numbers of blacks, Hispanics, and women, and beat the establishment candidate for the first time. [CAMPAIGN COMMERCIAL]

MS. BOWSER: And Strauss is a 66 year old grandmother who listed affiliations with 70 civic organizations and fund-raising committees when she ran for Mayor of Dallas in 1987. Like Whitmire, Strauss put together a broad-based coalition of blacks, Hispanics, and women. She had her picture put on boxes of Wheaties and campaigned as the city's future champion. Last year she easily won re-election. Lila Cockrell shares age and grandchildren in common with Strauss. But she is also the dean of the Mayors Club. Cockrell was first elected Mayor of San Antonio in the 1970s when tensions between whites, blacks and Hispanics were running high. She established a reputation for keeping tempers calm back then, building a lot of support for those groups, which recently returned her to office when Henry Sisnaros decided not to seek re-election. Corpus Christi Betty Turner loves to clown for the cameras. She was elected in 1987 after serving three terms on City Council and working on more community committees than she says she'd care to remember. And although Turner, who runs a consulting firm, had the support of the business community, it was her support with minorities that put her over the top. Five hundred miles away in El Paso is the newest member of the Mayors Club, 43 year old Susie Azar. [MAYOR BY PLANE]

MS. BOWSER: Azar is a licensed pilot and flight instructor who had been a member of City Council for two terms. She was elected in May after promising to bring prosperity back to yet another Texas city with major economic problems. And like her mayoral colleagues, Azar sought and got the support of large numbers of Hispanics, blacks and women. Azar portrayed herself as a cheerleader, one who would generate enthusiasm for El Paso. Her opponent, Councilman Ed Elsey, fired back saying he was a coach and coaches win the game.

ED ELSEY: After you had heard for weeks that we want to be a cheerleader, well, I'll give you that. I'll be the coach, because I'd rather be in the game.

MAYOR SUZIE AZAR, El Paso: Well, that slightly sexist remark really really aggravated a lot of folks in this community, both men and women, that this man was just outrageous and how could he talk that way, I mean, we're adults here.

ED ELSEY, Mayoral Candidate: Men have a very difficult time against a good woman politician, because one, you can't attack them, but we can go attack each other, men can attack each other, women can attack each other. But it's very difficult for a man to lay it on the line.

MS. BOWSER: Why?

MR. ELSEY: Because the voters don't accept that.

MAYOR AZAR: It was one of those turning points that really made people say, you know, this guy's not nice. And I did beat him 2 to 1 so I guess that's the proof.

MR. SHIPLEY: Well, we've been involved with Mayor Sisnaros and we've been involved with Mayor Cockrell in San Antonio after Henry and also most famously with Mayor Strauss in Dallas.

MS. BOWSER: George Shipley is a political candidate who's been involved in about 15 races featuring women candidates. He says female candidates pose special problems for their male opponents.

GEORGE SHIPLEY, Political Consultant: Male candidates generally in Texas enter the arena at kind of a natural disadvantage because they don't really know how to deal with their opponent and so they resort to a gender based innuendo and gender based arguments. It's not uncommon to see Mayoral candidates talk about we need a tough Mayor, a chairman of the board, and other things which are completely inflammatory to women, and which actually serve to the advantage of women candidates.

MS. BOWSER: One male candidate determined not to make that mistake is former Houston Mayor Fred Hofheinz, who is opposing Kathy Whitmire for re-election in November.

FRED HOFHEINZ, Mayoral Candidate: In Houston, it's now time for a change. The sex of my opponent makes no difference. She has been there 8 years. She has run her course. She has done everything that she can do for Houston, in my opinion for Kathryn Whitmire. It's now time to change our leadership in Houston and to address some new issues and to get some new life.

MS. BOWSER: But polling shows Whitmire hanging on to her coalition with more than 50 percent of both the black and Hispanic votes. Perhaps more than anything else, it is the change in the population that has opened the door for women in Texas politics.

MR. SHIPLEY: The mythology is that the good old boy system of Texas discriminates women. I think the reverse is true. I think that what happens is that women candidates enter the political arena with a very strong political base, a natural political base, that's gender based. In Texas today, a majority of the voters are women, and in the Democratic Primary, 54 percent of those who actually vote in the primary are women. Of that half or 54 percent about 1 in 5 are single head of household women.

RICHARD MURRAY: These cities have all become diverse. A lot of Yankees have moved in. We've got more younger, well educated voters, more minorities participating. A lot of these growing voter elements don't have any particular affinity for the older establishment male dominated politics of ten or twenty years ago. So they're a lot more open to new type candidates, younger candidates, or women candidates, and the coalitions of voters that have supported women candidates have clearly drawn from these elements, blacks, Hispanics, younger voters, better educated voters.

MS. BOWSER: Prof. Murray says the days when white conservative businessmen made all the policy decisions in Texas are gone forever.

PROF. MURRAY: These people, a dozen or so folks, were enormously powerful behind-the-scenes operators. They made the big decisions for Houston. That can't be the case anymore. There's no group of people that can meet behind closed doors in these big cities of Texas and decide public policy. The process has been opened up and will remain opened up in the future.

MS. BOWSER: Perhaps the ultimate test of how wide the doors have been opened will come next year when Richards has to win two elections, the Democratic Primary and the general election tobecome Governor. It's going to take a tremendous war chest which she currently lacks. Raising money remains her biggest problem, especially when a lot of her support comes from rank and file Democrats.

MS. RICHARDS: I think it's very difficult for a woman to break through what is the toughest core to politics and that is raising money. You have to be able to get into the boardrooms and the back rooms and talk to those contributors who believe enough in you to invest money in you. And we don't have the access.

MS. BOWSER: George Shipley is Richards' political consultant.

MR. SHIPLEY: There are many who argue that a woman could never be elected Governor, that the Governor's office is such that Ann is not in some way qualified by means of the fact that she is a woman.

MS. BOWSER: And with the Texas Governor's race being one of the most important in the nation next year, Ann Richards will have more than the eyes of Texas upon her. RECAP

MR. MacNeil: Again today's main stories, police in Moscow charged and beat demonstrators commemorating the victims of Stalinist terror, authorities in East Germany permitted more mass rallies for reform. The Supreme Court ruled that mandatory AIDS testing for state employees is unconstitutional. Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.