The MacNeil/Lehrer NewsHour

INTRO

JIM LEHRER: Good evening. The major headlines today are these. One thousand people are now feared dead from that poisonous gas leak in India. The U.S. said no thanks to new condition for a Reagan-Chernenko summit meeting. And a pro-American moderate was named prime minister of Grenada. Robin?

ROBERT MacNEIL: This is what you'll find on our NewsHour tonight. First, a summary of the news of the day.Then, in our first focus section, we discuss the nature of the poison gas accident in India and the safety and health questions it raises. Then U.S. policy in South Africa. Assistant Secretary of State Chester Crocker debates a critic, District of Columbia Delegate Walter Fauntroy. Finally, a newsmaker interview about taxes and budget cuts with Treasury Secretary Donald Regan. News Summary

MacNEIL: All day long the death toll has been rising from the ghastly accident in the Indian city of Bhopal. Doctors said more than 1,000 had died from the leaking poison gas. United News of India put the figure at 1,200. Hundreds of Muslim victims were buried in mass graves as hundreds of Hindus were cremated on pyres whose smoke filled the streets. Police searching houses found more and more bodies, many of children or older people. Indian Prime Minister Rajiv Gandhi toured the scene and said the Union Carbide pesticide plant where the leak occurred on Monday would never reopen.

[voice-over] Hundreds of bodies littered makeshift morgues. The dead and near-dead kept arriving at overtaxed medical facilities in the central Indian town. The sick and injured were treated for a multitude of symptoms. Those who had inhaled the poison gas were given respiratory therapy. Doctors said the gas makes the lungs produce so much fluid that a victim may actually drown. It can be a slow, painful process of weeks or months. Many were treated for burning eyes, serious enough to cause blindness. Women of child-bearing age could become sterile as a result of the exposure to methyl isocyanate. The utter frustration of trying to save dying children was reflected in the anguish of a young doctor.

DOCTOR, Bhopal, India: The children are dying in front of me and I can't do anything, anything much, regarding whatever we are doing here is just symptomatic. We are just trying to reduce our toll, but we can't help it.

MacNEIL: Doctors said as many as 200,000 people were affected by the gas, which covered a 25-square-mile area, and 20,000 people may suffer serious aftereffects. Jim?

LEHRER: Union Carbide, builder of the Indian plant and others like it, said they did not yet know what happened. The company's chairman spoke at a Danbury, Connecticut, news conference this afternoon.

WARREN ANDERSON, chairman, Union Carbide: While we work with toxic materials, the chemical industry has an outstanding safety record, and we in Carbide are right at the top of that list. And this tragedy is something that we want to get to the bottom of. The information we have to date is sketchy. We have a technical team leaving later today to go to India, and I want to go with them. We have, as you know, stopped all activity here in the States and elsewhere. We've notified everybody that in fact uses is methyl isocyanate around the world that we are going to conduct an investigation. What we are expecting is that this investigation will probably take two to three weeks before you can actually find out what in fact did occur and then come out with precautionary measures that may make sure that it doesn't happen again. [audio interruption]

LEHRER: -- precaution. William White, the local county's director of emergency services, said there was a plan in case of an accident.

WILLIAM WHITE, Kanawha County Emergency Services Director: We have a general emergency plan and we have a traffic diversion plan that's recognized nationwide.But when you talk about a large blowout, where you have a lot of people affected in just a few minutes, then there isn't a plan in the world that's going to cover that exactly, okay?It's just that simple. Now, we're concerned with safety, we're concerned -- deeply concerned about evacuations, how we'll take care of the people. And we have addressed these problems. But this county is full of chemical plants, so we're not scared. The people in the business are concerned.

LEHRER: We will have more on this story in a focus segment later in the program.

MacNEIL: In other overseas news, American industrialist Armand Hammer talked with Soviet President Konstantin Chernenko in the Kremlin today. Afterwards Hammer said the Soviet leader would accept a summit meeting with President Reagan if Washington joined Moscow in pledging not to be the first to use nuclear weapons. The White House immediately responded that the U.S. would not use nuclear weapons first, but reserved the right to meet any attack with nuclear arms.

In Grenada, the party preferred by Washington won yesterday's general election. The results give the New National Party 13 or 14 of the 15 seats in Parliament and make its leader, Herbert Blaize, prime minister. The party was formed from three moderate groups at the urging of the U.S. and Caribbean nations, which supported the U.S.-led intervention last year.

LEHRER: Bishop Tutu lashed out again at U.S. policy towards South Africa. The winner of the 1984 Nobel Peace Prize did his talking at a congressional hearing.

Bishop DESMOND TUTU, Nobel Peace Prize winner: Mr. Chairman, we're talking about a moral issue. You are either for or against apartheid and not by rhetoric. You are either in favor of evil or you are in favor of good. You are either on the side of the oppressed or on the side of the oppressor. You can't be neutral. Apartheid is evil, is immoral, is unChristian without remainder. And in my view the Reagan administration's support and collaboration with it is equally immoral, evil and totally unChristian without remainder.Will you please, for a change, listen to the victims of oppression? We shall be free. And we will remember who helped us to become free. That is not a threat. It is just a statement of fact, and we want so desperately, so eagerly, to be friends with the United States after South Africa is liberated for all its people, black and white, as it shall. Thank you.

LEHRER: U.S. policy towards South Africa is the subject of a major focus segment later in the program. Robin?

MacNEIL: In Washington today two legal leftovers from the presidential campaign. Walter Mondale's campaign has agreed to pay the Treasury $379,000 for accepting excess donations from political action committees and individuals. In the settlement with the Federal Election Committee the campaign also agreed to pay a civil fine of $18,500. And the House Ethics Committee has ruled that his running mate, Geraldine Ferraro, did violate the Ethics in Government Act in her financial disclosure statements as a congresswoman, but since Ms. Ferraro will not be returning to Congress in January, the committee agreed to take no further action. Ms. Ferraro said she felt vindicated because the report cited only technical violations. There was nothing in it, she said, that would interfere with her future political ambitions. Poison Gas: Unanswered Questions

MacNEIL: For our first focus story tonight we look further at the accident that has caused hundreds, perhaps 1,000 people in India to die from a poison gas leak. Charlayne Hunter-Gault has more. Charlayne?

CHARLAYNE HUNTER-GAULT: Robin, as we saw earlier, Union Carbide attempted today to answer some of the many questions being raised about their Indian plant accident. Here is a more extended excerpt of the company's news conference, starting with the chairman's answers to the question of whether the same kind of accident could happen in their West Virginia plant.

JACKSON BROWNING, Director Health and Safety, Union Carbide Corporation: We do not know what happened in India. That's a bit of information we don't have. We do know that the plant in West Virginia is safe, as evidenced by its history, and certainly that plant in West Virginia, as well as the one in India, is equipped to handle leaks of any magnitude that we might imagine. Until we do know exactly what happened in India we will have difficulty answering that question to our own satisfaction and to yours. The question has been raised in some of the news accounts about the reason for our being in India with this process, and the implications have been that we are there because it is cheaper to operate there, or that we are able to operate with less concern for safety and environmental matters than would be the case in this country. I would like to disabuse you of that notion, if you do in fact hold it. The facts are that we have operated this process in this country in an environmentally safe manner for over 20 years. We do it more cheaply than we do in India, observing the same environmental and safety requirements.

HUNTER-GAULT: That was actually Mr. Browning, who is chairman of Union Carbide's health and safety division. Browning said that the reason the company is making gas in India is to provide jobs in that part of the world. He was then asked about the long-term health implications of the accident.

Mr. BROWNING: We have not experienced exposures of the kind we're talking about here to human beings in this country or anywhere else in the world. And I could not completely rule out some long-term effects. On the other hand, I will say that all of the experience we have with animals, and those have involved some rather long-term effects, do not lead us to believe that there will be serious long-term impairments, but we do have a reservation on that answer.

HUNTER-GAULT: Union Carbide decline to send a representative to appear on our program tonight; however, for some further insight into some of the questions arising from the accident, we have Karim Ahmed, a biochemist, senior staff scientist and research director for the New York office of the Natural Resources Defense Council, a prominent environmental group. Mr. Ahmed is an expert in the export of hazardous industries and products to Third World countries. He has written a book on the subject called Pills, Pesticides and Profits.

Mr. Ahmed, we've heard what Union Carbide has had to say about their lack of knowledge right now about what caused the accident, but do you have any kind of educated guess as to what might have happened?

A. KARIM AHMED: Well, what we can best infer from all the reports coming from India is that a storage tank in the plant in Bhopal had a deficiency maybe in the valves which led to this large amounts of the liquid to vaporize into the atmosphere where the conventional scrubbers that could have reduced the concentration of this in the atmosphere could not take care of it under normal circumstances would have been applicable. So consequently much of this gas escaped during the night, and only many hours later that they were familiar enough to know that there was a problem. The problem was not with the workers in the plant. It occurred in the community.

HUNTER-GAULT: What do you mean, familiar enough to know --

Mr. AHMED: To know that the gas had leaked out and that people in the community were suffering from it, so that they could not take immediate steps to remedy the situation. If it happened in the plant and the workers were affected, perhaps they could have taken more immediate steps.

HUNTER-GAULT: And this could have been prevented perhaps?

Mr. AHMED: The massive tragedy that we have seen could have been prevented if they had had an early warning of the problem. Apparently it did not happen, but I can best conjecture that was what happened.

HUNTER-GAULT: Does it look to you like there might have been a human error here or a mechanical failure?

Mr. AHMED: Well, I don't know about that. The one thing I might say about Union Carbide, that of all the chemical companies we have been dealing with over the last four or five years, and we have been active in this question about the American companies doing business in Third World countries, Union Carbide really does have one of the best records. It is one of the most progressive companies that do business abroad, both in marketing of the product and in the way that they handle their various different manufacturing processes. So it would appear to me as if it could have been something significantly different than what they would have done in this country.

HUNTER-GAULT: All right, aside from, I'm sure, all Americans' concern about what is happening to the people in India in that particular area, there is also the concern of whether or not it could happen here, especially in the plant Jim referred to in West Virginia, where residents are reported today as being very nervous. What's your assessment of whether or not it could happen here?

Mr. AHMED: Well, my assessment is that Union Carbide officials have given us assurance that the plant that was in India met the same standards there would have been in this country. So one would have to assume that they were state-of-the-art technology. If that is the case, then if an accident could occur with a modern plant in India, one would then surmise that certain of the same kinds of problems could occur in a plant in this country. The only difference may be that in this country we do have a much better system of controls -- regulatory controls; we have plant managers who are more aware of the problems and there perhaps are more safeguards here. So that in principle, if the state of technology were the same between the two plants, potential problems can exist in this country, not only with Union Carbide plants but other chemical plants where they store toxic and hazardous materials in the plant. The question is to go out and examine the issue, to do a nationwide inventory of where these problems may be, and develop a program to deal with it if an emergency of this kind occurs in this country.

HUNTER-GAULT: You heard what Mr. Browning said they'd done. They've closed down the plant in West Virginia and they're looking at all the possible problems. Is that the right thing, in your view, to do at this time?

Mr. AHMED: I think so. I think that the company is wise in closing down the plants, to reappraise the engineering aspect, the safety aspect. Also I think the company should really look at the question about the long-term impact of this substance. There is very little toxicological data on the chronic effects of this substance.It's never been -- it's a chemical intermediate used in the processing of these pesticides, so there may have never been an occasion to do the kind of long-term tests because people were never exposed to chronic doses of the substance. So I think that they should really go back, take stock and reexamine the issue, do both, say, to reexamine the safety questions and do toxicological studies on this particular compound.

HUNTER-GAULT: The company today denied that inhaling the air now could be carcinogenic or could cause cancer, and yet there was some suggestion that this is a possibility for the people in India. What's your assessment of that?

Mr. AHMED: Well, methyl isocyanate is a very reactive compound, so in principle if people are exposed to it in large amounts and do not die and they may end up with chronic respiratory disorder. It could also interract with other parts of the body, and so it's very important that they have a medical surveillance program in India to follow through the individuals that were exposed to this high concentration. There's no way to know from the present toxicological data what the chronic effects would be.

HUNTER-GAULT: What's your sense right now of the people we just saw suffering the immediate aftereffects? I mean, are more of these people who have survived so far likely not to make it?

Mr. AHMED: Well, as you know, the acute symptoms are that you get a lot of fluid built up in the lungs and you get effects on the various mucus membranes. There might be people who might get, you know, visual impairment. There might be people who might get chronic respiratory diseases and all, even if they survive this episode. It's a big unknown, really, but in principle I would think that it may occur and it may be a recurring problem for those who survive the episode.

HUNTER-GAULT: What about the unborn? Robin reported that there was concern about sterility in women. Is it possible that there will be genetic problems?

Mr. AHMED: That, again, as I said earlier, we don't really have a basis to know whether this compound could cause sterility. I think they should go back and check the properties of this compound in a systematic way with animals and other model studies.

HUNTER-GAULT: The wire service reports I read today, although the death toll is quite high, seemed to indicate that most of the victims were children. Is there any reason why they would be more affected than adults in the population?

Mr. AHMED: As you know, many toxic compounds are very much more toxic to children and the elderly, and so they are the first victims because they have small body weight, their particular defense mechanisms are not as well developed as adults are -- healthy adults. So consequently it's not surprising that children were the first victims.

HUNTER-GAULT: All right, for people like those living in places like Institute, West Virginia, where there are these plants, albeit this one is shut down -- it may reopen, -- is there any precaution that they can take, anything that they should be doing to safeguard on their own against this possibility?

Mr. AHMED: Well, I think the first thing they should do is get the local authorities and state government officials to come down and look at the plant, see what kind of facilities they have there. Not only look at methyl isocyanate but other poisonous compounds that may on store on the plant, and do a complete inventory of what the problems may be, what kind of leakages may be occurring, if there were any leakages. There is in this country, as you know, a lot of leakages from storage facilities of chemicals, but mostly in the ground water problem. But there could be a potential problem that could be of the same kind that happened in Bhopal. Next, I think the local authorities should develop an emergency program to evacuate the population, as the gentleman mentioned earlier, to take care of quick exodus of individuals, to provide the proper kind of medical and first aid treatment necessary if an episode were to occur in that company.

HUNTER-GAULT: Well, let's hope it never happens again. Thank you very much, Mr. Ahmed, for being with us.

Mr. AHMED: Thank you very much.

HUNTER-GAULT: Jim? South Africa: U.S. Policy Under Fire

LEHRER: Our next focus segment tonight is on South Africa and the growing protest in this country against its apartheid racial policy. The protest began the day before Thanksgiving, when a member of Congress and two others were arrested at the South African Embassy in Washington. Since then 16 other civil rights and political leaders, mostly blacks, have also been arrested for crossing police lines. There have been similar demonstrations now in New York, Boston and Los Angeles. While the main target has been South Africa, the Reagan administration has also come under strong attack.

CORETTA SCOTT KING: Our government must take a position against the killings, the brutal treatment, the lack of representation and disrespect by that government for citizens who belong to that great nation.

LEHRER: Those and other charges brought a strong response yesterday from Assistant Secretary of State Chester Crocker.He said it was rubbish. Why is it rubbish, Mr. Secretary?

Sec. CHESTER CROCKER: I said it's rubbish because there is a misunderstanding or an impression created that somehow our government, our administration and our country are supporting or are identified with or are propping up a status quo in South Africa which I think all Americans would reject. Our policy is very clearly one of stating that the system of apartheid is repugnant. There is no debate about the objectives that we all would seek, to move away from a system of legally-entrenched racism and get toward a system of government in South Africa that's based on the consent of the governed. That's been this administration's position. I think it's consistent with previous administrations' positions. So if there's a debate it's over the question of how do you get there, and that's where the discussion, the debate should be rightfully focused.

LEHRER: Well, even today, as we reported earlier, Bishop Tutu said that that policy followed by the administration now is "evil, immoral and unChristian."

Sec. CROCKER: Bishop Tutu I think was describing the system in South Africa and saying that it's simply a moral question. Obviously it is a moral question, but it's also a question of foreign policy, and I think what Americans must come to appreciate and to understand is that it's one thing to have sentiments of very strong indignation and anger and objection to a system, as I have said, which is based on racisim. It's something else to bring about change. It's something else to encourage change in a distant country well beyond our borders, a sovereign country, a member of the international community. We have to consider very carefully what is the basis for influence, what works, what doesn't work, what might be counterproductive.

LEHRER: Do you believe that the policy that the administration is now following is productive?

Sec. CROCKER: I have no hesitation in saying that. We have been on a consistent course, a very activist course of policy in southern Africa in the past four years. We intend to stick with it. We're working both for regional peace and for negotiated change in the region as a whole, including such objectives as reducing cross-border violence, bringing about Namibia's independence and reducing opportunities for Soviet gain in the region. But also, and very importantly, to try and create a climate in which peaceful change can occur, constructive change in South Africa toward a system in which all South Africans, regardless of race, have an equal opportunity to participate in the economy and the political system of that country.

LEHRER: Then you reject out of hand the charge that U.S. policy is encouraging the South African government to oppress blacks.

Sec. CROCKER: We reject it totally and out of hand and, furthermore, we have had a very consistent record of speaking out when we felt the occasion warranted it, as it often has, particularly in recent months with, for example, the bannings of a number of UDF leaders in the months since August.

LEHRER: What's UDF?

Sec. CROCKER: The United Democratic Front, which is a moderate and internally based political movement. The bannings of some of those leaders and the detentions without trial of a significant number of important labor leaders in South Africa. We think that the free trade union movement in South Africa is a very important element of constructive change and a building block for such change. We have said so publicly and privately. We have been the strongest voice of all foreign embassies in South Africa in making that clear to audiences in South Africa as well.

LEHRER: Thank you, Mr. Secretary. Robin?

MacNEIL: Among those arrested in the demonstrations in Washington was District of Columbia Delegate to the House of Representatives, the Reverend Walter Fauntroy. Reverend Fauntroy, you heard what the secretary says. He says the administration's policy is working.

Rep. WALTER FAUNTROY: Well, that will be news, of course, to Bishop Tutu, who testified before our Foreign Affairs Committee of the House just this morning, and it will certainly be news to those of us who have been following our country's policy towards South Africa in recent years. The fact is that this so-called "constructive engagement" policy was launched promising that it would bring about a settlement in Namibia and then to the illegal occupation by the South African government of that country. It has not. It promised that there would be internal changes in the system of rigid segregation that is an affront to human decency, a system of political domination that is antithetical to everything that we believe in this country, and all for the purpose of economic exploitation of the cheapest labor market in the world, which economic exploitation is a threat not only to the people who work there but the people who work here. And what have we gotten? We've got a constitutional change that recommended or instituted a parliament for the mixed-race people there and the Asians, but not for the 73% of the population that is black and blatantly exploited.

MacNEIL: The secretary also says that there's a big misunderstanding, that this administration does not support apartheid, that it's repugnant to it, that it speaks out against it often.

Rep. FAUNTROY: Well, we certainly would like to see the administration not only speak out against arrests generally, but the arrests specifically of the Asian and mixed-race leaders who were successful in getting 80% of their respective communities not to participate in the sham of an election that would exclude 73% of the people of the country from involvement in elections, and certainly when the black labor leaders and the students and those who have been working in the townships organize in protest a nonviolent demonstration of a work stoppage that keeps a million black exploited workers away from their mines and their factories and their farms, to have those arrested without charge and detained without trial is an affront to what we represent, and this administration ought to be on the vanguard of challenging that.

MacNEIL: So you believe that this administration is supporting apartheid in some way?

Rep. FAUNTROY: We think that by having a policy of all carrot and no stick, they have encouraged the kind of increase in military activity on the part of the South African government that has bombed Mozambique into almost economic disaster, so much so that they had to sign a treaty to prevent freedom fighters from organizing there; and then to turn on the nonviolent demonstrators, students who were protesting a system of education that educates only 7% of the blacks of that nation, to have them gunned down in February, 134 killed; to have all the Asian and mixed-race leaders arrested because they protested this sham of an new system of government; and then to lock up all of those leaders is an outrage.

MacNEIL: What is your reaction when you hear Mr. Crocker call your criticisms rubbish?

Rep. FAUNTROY: Well, I think that's trivializing a very serious question. The people whose release we are demanding have been arrested under laws that over the past 20 years have had 64 black leaders killed while under detention. It's a very serious matter. It is not rubbish. The fact is, for example, that this very day leaders of the AFL-CIO, the International Steelworkers, joined in this march. We had 1,000 or more of them outside the embassy. Why? Because they are beginning to recognize that it's not just a matter of racial segregation of blacks, but in the last 10 years we have lost 50% of our steel production in this country. Over that same period, South Africa, marketing its cheap labor source, has increased its exports to America by 5,000%.

MacNEIL: Well, thank you. Jim?

LEHRER: Mr. Secretary, is it all carrot and no stick, your policy?

Sec. CROCKER: It most certainly is not. We have made it abundantly clear that constructive engagement is a policy based on certain assumptions and certain conditions, if you will. There is no doubt in our minds that the leadership, the current leadership in South Africa is one which is committed to a reformist program in which there have been some very limited steps taken. The congressman has referred to the constitutional changes. We have said about those changes, for example, that while they're an important step forward because they end the principle, for the first time in South Africa's history, of a white monopoly of political power, they are limited in that they don't offer anything to the black majority, which is 73% of the population. So they are clearly a step, but that's all they are. We have said repeatedly that the homeland policy, the policy of denationalizing, exporting citizens, if you will, cannot be endorsed or condoned or accepted by any Americans, and we insist that all South Africans are citizens of South Africa. So we have stated very clearly our views on these issues. I must say the notion that somehow our policy is motivated by economic interests, I think, is to totally misread the situation. Our investments in South Africa are less than 1% of total foreign direct investment, a tiny fraction of our interests. In fact, our trade -- the same figures would apply. We're not motivated by economic considerations, and there's no way one could make that case stand up. If one wanted to look for cheap labor, one would be putting investment and trade into the nations to the north, where wage rates and benefits and housing and all the rest offered by firms there would be vastly lower than they are in South Africa.

LEHRER: Specifically, Mr. Fauntroy, what do you want Mr. Crocker and the Reagan administration -- specifically what do you want them to do?

Rep. FAUNTROY: First of all, I want them to ask the Republic of South Africa right now why they have arrested people, if they're moving forward on these matters, why they have arrested people who opposed --

LEHRER: Okay.

Rep. FAUNTROY: -- and release them.

LEHRER: You want them -- why do you not do that, Mr. Secretary?

Sec. CROCKER: Of course we have.

LEHRER: You have done that?

Sec. CROCKER: We have been doing it ever since this wave of repressive moves began. It began in the context of the boycott effort last August and September. We have been doing so more and more regularly as the recent labor leaders were arrested in the past month or six weeks --

Rep. FAUNTROY: Let me assure you that the American people will be surprised at this statement. The African leaders will be surprised at this statement, and the leaders of the AFL-CIO, who today took an unprecedented step and joined the Free South Africa movement --

LEHRER: Well, you say the United States asked those questions. In what form? Forum and form?

Sec. CROCKER: Public and private, at very high levels. We have made it clear that we cannot condone or support a move that would shut down what is one of the most important internal developments in South Africa, which is the trade union movement --

LEHRER: Trade union movement. And you're saying you didn't know that, that the Reagan administration had done that?

Rep. FAUNTROY: I didn't know it. We have just left a --

LEHRER: Well, what's going on here? I mean, why, if the Reagan administration has done this rublicly, does Fauntroy say he doesn't know you did it? What's the problem?

Sec. CROCKER: I'm glad you asked the problem. I think it suggests that perhaps there is a motivation not always to read and to look and to see what the record shows. We have a consistent and a strong record. I'm not saying that there would be tactical agreement between the congressman and us on every issue, but I think the record has not been looked at and it's not clearly understood, and that's something that we can't do that much about. It's there.

LEHRER: Is there a chance he's right there, Mr. Fauntroy?

Rep. FAUNTROY: No, the administration is very skilled at doing the moonwalk --

LEHRER: Doing the what?

Rep. FAUNTROY: The moonwalk.

LEHRER: Moonwalk.

Rep. FAUNTROY: The children of the nation would understand this. That's when you look like --

LEHRER: Explain that for us.

Rep. FAUNTROY: That's when you look like you're going forward when you're actually going backwards. The fact is that we are further away from a settlement of Namibia today than we were four years ago when we had a human rights policy.

LEHRER: But what are you suggesting?What are you suggesting motivates the Reagan administration to do the moonwalk?

Rep. FAUNTROY: I don'twant to ascribe to them any motives. I only suggest that the American people are having their basic principles compromised in terms of democratic government, in terms of the repugnancy of racial segregation and their economic interests compromised.

LEHRER: And you're saying that Crocker and Company are encouraging that on behalf of the United States government and the American people?

Rep. FAUNTROY: That's the well-considered view of many of us, and it is for that reason that we advocated vigorously that we have no new investments by American firms in South Africa. Moreover, let me just say this also. I am chairman of the subcommittee on domestic monetary policy of the Banking, Finance and Urban Affairs Committee of the House, and I met this morning with Mr. Volcker, who was sharing with me his concern and all of our concern that in spite of our so-called recovery we have an enormous $130-billion balance-of-trade deficit --

LEHRER: Okay, but let me get back to the secretary. This is a very serious charge. You obviously have not gotten through to Mr. Fauntroy tonight. What happens next? I mean, the protests are going to continue, clearly. Are they having any effect?

Sec. CROCKER: The protests will no doubt indicate to those who are witness to them that the feelings in our country about apartheid, about institutionally-entrenched racism are deeply felt. I don't think anyone can argue with that sentiment being expressed. I would go beyond it, however, and make very clear that indignation is not foreign policy. Foreign policy is the effort to change, to influence events beyond one's borders, and that calls for a careful calculation of what works, as I said, and what does not work. We have been seeking to encourage a climate in which the South African leadership recognizes, as it must recognize, that reforms cannot simply be dictated. They must be negotiated. The dialogue must be opened up within South Africa between the different racial groups, but there must be a continuous open-ended process of change in that country.

Rep. FAUNTROY: Mr. Crocker sounds like he's ready to join the movement, and I think you ought to join us on the line as well.

LEHRER: All right.

Sec. CROCKER: Congressman, I've been saying it for four years. President Reagan's been saying it. I think our record needs to be read.

Rep. FAUNTROY: Saying it and doing it are two different things.

LEHRER: Gentlemen, thank you very much. Robin?

MacNEIL: Still to come on the NewsHour tonight, a newsmaker interview with Secretary of the Treasury Donald Regan about taxes, budget cuts and other delights of the season. Jim?

LEHRER: The NewsHour is providing a brief break now so that your public television station can seek your support. Your pledges make it possible to broadcast programs like the MacNeil-Lehrer NewsHour. We will be back shortly.

[fundraising intermission] Donald Regan: Talking Taxes

MacNEIL: For our final focus section tonight we turn to the topic that has had Congressmen, tax lawyers and lobbyists as well as ordinary taxpayers buzzing for a week -- the Treasury Department's proposal to simplify the tax system. And with us to discuss the impact of his plan and other matters is the secretary of the Treasury, Donald Regan. Mr. Secretary, have you found anybody who really likes your plan yet?

DONALD REGAN: Oh, yeah, lots of people, particularly those that are going to get a tax cut under it, and that's about 57% of all Americans will get a tax cut under this new plan.

MacNEIL: Does Mr. Reagan really like it?

Sec. REGAN: He hasn't commented. I've asked that he not comment until such time as we can meet with these various groups to find out is there anything wrong with our system before he adopts it.

MacNEIL: When do you think he's likely to sign off on it?

Sec. REGAN: Well, he literally doesn't have to do it until probably the State of the Union messge, which comes about the third week in January.

MacNEIL: From the kind of feeling you get now after a week's reading, do you think he'd be likely to buy the whole thing or just buy some parts of it or what?

Sec. REGAN: Well, in all frankness, Robin, we've had a lot of blatant assertion during this week that it's going to hurt this one or that one. We have received no proof as yet, and we're waiting for proof before we agree that some parts of it may hurt an industry or a particular group of taxpayers.

MacNEIL: How would you get such proof?

Sec. REGAN: Well, obviously what'll have to be done, the software'll have to be written to reprogram a company's tax return. They'd go through it in their machines --

MacNEIL: They'd have to kind of do a simulation, you mean?

Sec. REGAN: Yeah, exactly.

MacNEIL: I see. And until they do that you're not going to take all these "blatant assertions" at face value, is that it?

Sec. REGAN: Absolutely not. Why should I? Just because someone says they're hurting, I want to see proof that they are really being hurt and not just being squeezed.

MacNEIL: Coming to some of those in a moment, I just wonder, after all you've heard, whether they're blatant assertions or not, this week, are you still as confident as you were a week ago that this is a really fair, good, sound plan, or have you begun to think maybe it should be modified a bit? You did say it was done on a word processor and could be changed easily.

Sec. REGAN: Well, if I didn't think that this was a better plan than the current one and a fairer plan and a simpler one, and that it would aid economic growth, I would not have sent it to the President. I do believe that and I still believe it.

MacNEIL: Okay, let's look at some of the assertions. The New York Times in an editorial said today "It's plain the big losers will be poor people in high-tax states like New York, California and Massachusetts, who can't write off state and local income taxes." What's your comment on that?

Sec. REGAN: That's incorrect because those people, if they're at the low and of the income scale, actually 2 1/2 million of them in the low-income taxpayer brackets now will go off the tax rolls. They'll not have to pay any taxes under our proposal. Secondly, if they are itemizing, and let's take the New York state thing, since that has become quite a thing with the New York Times and the governor of New York state. What they're overlooking, Robin, is this. If you have a marginal rate, as we do currently, of 50% and New York state has a 10% tax bracket, the effective rate, the effective marginal rate, since the 10% is deductible against the 50, is a 55% marginal rate. That's the current plan. Now, under our proposal, rates go down to 35% in the top bracket, and even if you can't deduct your state taxes, you're still at a marginal rate of 45 on a combined basis. Now, which is better -- 45 or 55? New York state taxpayers, as a group, will be better off.

MacNEIL: Let's take another thing the same newspaper said on Saturday, that a family living in New York City with an annual income of $25,000 would actually be paying 23% more in taxes.

Sec. REGAN: Well, I'm not sure how they arrivedat that arithmetic, because that person will no longer be in a -- well, I don't know. The $23,000 income would probably be somewhere in a 25 to 28 percent bracket under the current code. They'll be only paying at a 15% rate under our plan. So a 15% rate, I would think, would bring them down in taxes, not up.

MacNEIL: Talking in terms of individuals, not corporations, now, whose taxes actually would go up? What group of taxpayers would find that their taxes would go up?

Sec. REGAN: The taxpayers like I used to be, Robin, those that have a lot of tax shelters, that kept the amount of taxes that they paid very low because they were using legitimate tax shelters.We're doing away with those tax shelters under our proposal.

MacNEIL: In saying a moment ago that you wanted to see proof of the assertions that the plan would hurt certain businesses, for instance, David Broderick, the head of U.S. Steel, said that the plan would have a substantially adverse effect on capital spending and business planning in the basic industries.Are you beginning to be at all sympathetic to this, this chorus of voices? Do you think there is some smoke there? I mean, some fire there and not just smoke?

Sec. REGAN: I think there's more smoke than fire. I have asked for proof, Robin, and I keep coming back to that. We've only had six days. As a matter of fact --

MacNEIL: If you get proof would you modify the plan?

Sec. REGAN: Well, that's why I said it was written on a word processor. Obviously if we are wrong we'll correct this thing before we send it up to Congress. But if it's just that a few people are being hurt or are not going to enjoy some privileges that they used to have, well, I think the overall effect is what would guide us then, and the overall effect is that this is a better plan than the current one.

MacNEIL: Well, thank you. Jim?

LEHRER: Mr. Secretary, do you agree with those who say this think isn't going anywhere without the full and enthusiastic support of President Reagan?

Sec. REGAN: Well, I think you'll find the President will be behind it. After all, he's the one that asked for this study. He's the one that campaigned for years saying that our income tax system was not fair and certainly not simple and it should be made -- we should have a better system. We've presented him with one. We think that this is probably the greatest study of the tax system, oh, in decades. And as a result I think he'll get behind it.

LEHRER: You're not feeling lonely, out there on a limb?

Sec. REGAN: Well, as you know as a former Marine being out on the point, you know, it's something you get used to.

LEHRER: Sure

Sec. REGAN: But we're finding a lot of support as well as a lot of brickbats.

LEHRER: Senator Dole said on this program last week that it's an interesting plan, but on his list of priorities reducing the budget deficit was way ahead of tax reform. Do you agree?

Sec. REGAN: Very definitely. I agree with Bob Dole on that. We have to get this deficit down. The third year of recovery we shouldn't be spending 24% of our gross national product. We've got to cut this federal spending. That's the right way to cut that deficit. And that has to come as the first item between the administration and the Congress early on, January, February, March.

LEHRER: What about the idea -- of the freeze idea -- freezing federal spending across the board? Do you support that?

Sec. REGAN: Well, I'm not sure people know exactly what freeze means and just how thick that ice may be, whether it's frozen. First of all, there are items in the budget that are going to rise. Interest on the debt is one, because we're racking up these deficits; that has to go up next year. The next thing that has to rise is Social Security. After all, more people are retiring, and therefore drawing down. So if you're going to have some things rising, you can't just have a freeze and expect to keep the same level. You've got to cut other programs. So some programs will be frozen -- that is, no additional funds given to them over and above what they got in fiscal '85 -- but some programs are actually going to have to be cut.

LEHRER: It's been suggested that no freeze is going to go through the Congress unless it also includes a little piece of the Defense Department. Do you agree?

Sec. REGAN: I'm one of the ones in the administration that does agree with that. I think we've got to include defense as part of this in order to make it credible. I don't think that it would be believable, either to the American people or to anyone else, to say defense should go untouched, but touch every other program in the federal budget.

LEHRER: Does President Reagan agree with you?

Sec. REGAN: We'll find out. That's one of the things we will be discussing with him next week. Unfortunately Cap Weinberger was out of the country this week. We didn't get around to defense, but we will touch it next week.

LEHRER: Secretary Weinberger doesn't agree with you.

Sec. REGAN: Oh, I know he doesn't, but Cap and I agree on most things as far as a strong defense establishment, but in this one I think the economy and the deficit has to take precedence.

LEHRER: If President Reagan were to agree to a freeze across the board that included something for defense, would that be inconsistent with what he said in the campaign?

Sec. REGAN: Oh, no. After all, the level of spending last year was $284 billion.That's hardly a drop in the bucket, and that kind of money would buy next year approximately the same as it would have bought this year, and accordingly we'll still have a strong defense establishment adding to their weaponry as they go along.

LEHRER: Mr. Secretary, are you going to be here for the second Reagan term?

Sec. REGAN: Well, I don't know how long in the second Reagan term, but the President and I did have a discussion last week. It was during a phone call on another subject. And he asked that I stay around, so I agreed to, at least through this tax simplification and the like.

LEHRER: But not for the four years?

Sec. REGAN: Well, I don't know. Tax simplification, some people tell me, might take 10 years.

LEHRER: Yeah, exactly.

Sec. REGAN: Who knows?

LEHRER: Do you enjoy being secretary of the Treasury?

Sec. REGAN: Well, let's put it this way. I've always enjoyed ruffling feathers and getting things stirred up, and, frankly, doing things better. And right now I think getting this budget under control and then getting tax simplification are two things that this nation deserves and I'd like to be part of it.

LEHRER: Is the tax simplification thing just a kind of a neat idea that you floated because the President said go away and come back with one, or is this a big deal to you personally?

Sec. REGAN: Oh, this is a big deal because it's a fair deal. Look what we tried to do. What we're trying to do is two people with the same income living on the same block we think should pay approximately the same amount of taxes. We think that two corporations having approximately the same income should pay the same kind of taxes. But we don't do that. We do things now for social reasons, we've built that into the tax code. We've built industrial policy into the tax code. We've done a lot of things with the tax code except raise revenue. Now, I'd like to go back.

LEHRER: You've convinced me it's a big deal to you. Mr. Secretary, thank you very much. Robin?

MacNEIL: Recapping the top stories of this Tuesday, the death toll soared past 1,000 in the poisonous cyanide gas leak in central India. The American company responsible, Union Carbide, has stopped its worldwide production and shipment of the deadly chemical involved.

The Reagan administration says no to Soviet terms for an early round of summit talks.

Grenada's elections have brought a pro-U.S. moderate government to power.

And Geraldine Ferraro says she feels vindicated by a House Ethics Committee that found her in technical violation of campaign disclosure rules.

Good night, Jim.

LEHRER: Good night, Robin. And we'll see you tomorrow night. I'm Jim Lehrer; thank you and good night.