The MacNeil/Lehrer NewsHour

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

MS. WOODRUFF: And I'm Judy Woodruff in New York. The prospect the Clinton administration might use Social Security to help cut the deficit is our first focus tonight. We hear from a reporter and get two sides of the growing debate. Next, we look at the budget cutting options facing the Pentagon after the Cold War, and then a discussion of Israel's decision to let some of the Palestinians deported to Lebanon return home. NEWS SUMMARY

MR. LEHRER: President Clinton today eased federal regulations on state Medicaid programs. The action was designed to make it easier for states to get regulations waived. States typically apply for such waivers when experimenting with new programs. Mr. Clinton met with the nation's governors at the White House this morning. He explained the action this way.

PRESIDENT CLINTON: The federal government requires the states to provide a certain number of health services in a certain way to people who are poor enough to qualify for Medicaid. The states very often believe that they can provide more services at lower cost if we don't impose our rules and regulations on them. For years and years and years governors have been screaming for relief from a cumbersome process by which the federal government has micromanaged the health care system affecting poor Americans. We are going to try to give them that relief so that for lower costs we can do more good for more people. This will be one big step on the long road to giving this country the kind of health care system it needs.

MR. LEHRER: Both Democratic and Republican governors said they were pleased with the President's action. Colorado Gov. Roy Romer, chairman of the National Governors Association, and South Carolina Governor Carroll Campbell, co-chairmen of that group, spoke to reporters after the meeting.

GOV. ROY ROMER, [D] Colorado: These waivers will enable us to run a more efficient program. I mean, many of the states have said, look, there are too many bureaucratic rules in the way in which you administer this program and if you can give us more flexibility, we think we can deliver a better program at less cost. Now most of us are really running over budget on Medicaid, and we simply need some flexibility to hold costs down.

GOV. CARROLL CAMPBELL, [R] South Carolina: Well, one of the most significant things about it is that it allows us to innovate and it takes the best, gives us the opportunity to take the best of the state programs and have a universal waiver that other states can apply for. And that lets the states then become really truly the laboratories that can find answers. And we think that's extremely important and President Clinton does also, and I think that's a very positive aspect of what he has proposed.

MR. LEHRER: White House Spokesman George Stephanopoulos said the administration is considering a federally funded program to provide free immunizations for all children. He said the goal was to give America's kids a healthy start in life. Drug company officials have said it wouldmake vaccines unprofitable and could force them to cut spending for research. Judy.

MS. WOODRUFF: Israeli Prime Minister Rabin offered a compromise today on the Palestinian deportee issue. He said one hundred deportees could be returned to Israel immediately and the rest would be repatriated within a year. The nearly 400 Palestinians have been stranded between the borders of Israel and Lebanon since they were expelled six weeks ago. Israel accused them of involvement in a militant Islamic group accused of terrorism against Israeli soldiers. Rabin spoke with reporters in Jerusalem.

YITZHAK RABIN, Prime Minister, Israel: Realizing that peace can be achieved by compromises on both sides, Israel was, is ready to make the compromises that will bring about peace with security.

MS. WOODRUFF: Rabin said the arrangement was worked out in negotiations with the United States. Palestinian Spokeswoman Hanan Ashrawi rejected the Israeli offer, saying it falls short of U.N. Security Council Resolution 799, which demands immediate return of all the exiles. Sec. of State Warren Christopher gave the U.S. view during a news conference in New York.

WARREN CHRISTOPHER, Secretary of State: The United States believes that this process which is being announced by Israel today is consistent with United Nations Resolution 799 on the deportees. As a consequence of these steps that Israel will take, we believe that further action by the Security Council is unnecessary and could even undercut the process which is already underway.

MS. WOODRUFF: Christopher was in New York for meetings at the United Nations. He said one of the top priorities of the new administration was finding a solution to the civil war in Bosnia. Renewed fighting erupted in neighboring Croatia today, shattering a three-day lull. It was centered in the Serbian enclave of Krajina. The Croatian army and Serbian militia fought with heavy artillery and blamed each other for the new clashes. Meanwhile, refugees continued to flee the fighting. The Croatian army launched the offensive aimed at recapturing the Serbian-controlled region 11 days ago.

MR. LEHRER: The U.S. Trade Representative announced a ban on federal government purchases of certain European products today. It takes effect March 22nd and covers such things as telecommunications, energy and transportation equipment. The announcement said it was retaliation for restrictions on U.S.-made products in European markets. The Commerce Department reported construction spending hit a six-year high last year, up 6.2 percent over 1991. All of the gain was in residential construction, mainly in single family homes. Non-residential construction spending was down.

MS. WOODRUFF: Sen. John Danforth, the three-term Republican Senator from Missouri, announced today that he would not seek re- election in 1994. He said he wanted to return to St. Louis and fulfill a commitment to the Episcopal Church. Danforth, an ordained minister, came to national prominence in 1991 when he was the Senate sponsor for Supreme Court Justice Clarence Thomas. That's it for the News Summary. Just ahead on the NewsHour, federal budget cutting talk turns to Social Security, the shape of the U.S. military after the Cold War, and Israel's move to de-fuse the Palestinian deportee crisis. FOCUS - SOCIAL SECURITY - SACRED TRUST?

MR. LEHRER: We go first tonight to Social Security, the issue described as the third rail of American politics. Touch it and you die. It was touched first last week by a spokesman for President Clinton. He said freezing this year's cost of living increase of Social Security benefits known as COLAs was under consideration as a deficit cutting measure. It set of these kinds of Washington comments.

DONNA SHALALA, Secretary, Health & Human Services: [NBC, "Today" January 29] What's going on now is that everything is on the table. No final decisions have been made, and as you know, if you want to make serious moves on the deficit, you have to look at entitlement programs. Whether or not a COLA will be part of it, no one knows yet, but certainly the administration has made it clear that everything's on the table.

SEN. DANIEL PATRICK MOYNIHAN, [D] New York: [ABC, "This Week With David Brinkley" January 31] If the President just won't step on the land mines, as his cabinet kept doing all week, by proposing to take away cost of living allowances from retired persons, that's, that's a real blow. You want to know how many more million people you want in poverty doing something like that.

DAVID BRINKLEY: Is it a death wish, political death wish?

SEN. MOYNIHAN: That's a death wish, and let's get it out of the way and forget it right now.

SEN. ROBERT DOLE, [R] Kansas: [NBC, "Meet The Press" January 31] We did in 1985 freeze Social Security COLAs and other COLAs. I might recall at that time there was only one Democrat that supported that package out of fifty. But certainly I think we have -- you have to have entitlements on the table. It's a tough call, but if you don't have too many new taxes involved, or if you have zero taxes involved, it would be better, then you'll have a lot of Republican support I think.

MR. LEHRER: For a reading of what all of this back and forth signifies we go first to Alan Murray, the deputy Washington Bureau Chief of the Wall Street Journal. First, Alan, what are the Social Security options now on the budget table of the administration?

MR. MURRAY: There are basically two options. The first is to increase the taxation of Social Security benefits. Under current law, if you make more than $32,000 a year, you pay taxes on 50 percent of your benefit.

MR. LEHRER: Straight income taxes?

MR. MURRAY: That's right, straight income taxes on those benefits.

MR. LEHRER: Right.

MR. MURRAY: The proposal would be to increase that to 85 percent, which would make it more on a par with the way private pensions are taxed. The second proposal -- the virtue of that, by the way, is that it only hits people who are relatively affluent, who can afford to pay, can afford to take the hit.

MR. LEHRER: And it follows that magic word "progressive" in that respect.

MR. MURRAY: Or fairness.

MR. LEHRER: Fairness, right. How much money would that raise?

MR. MURRAY: You could raise five years down the road $8 billion a year, $8 1/2 billion a year. So it's a pretty good chunk of money. The other alternative is to cut back the cost of living adjustment, the inflation adjustment that all Social Security recipients receive. One proposal that's on the table is just eliminate that adjustment one time only, one year, don't give it. Again, you raise about the same amount of money, $8 billion a year five years from now, but instead of only hitting the affluent, you hit everybody with a smaller hit.

MR. LEHRER: What is your, what's the reporting show as to what's behind all of this? I mean, this wasn't a casual trial balloon, was it? This was something that somebody thought through and decided to float it.

MR. MURRAY: Oh, absolutely. There are a couple of things going on. First of all, it is very difficult to put together a deficit reduction package thatmeets the goal that President Clinton has laid out, which is to cut $145 billion in 1997 without hitting Social Security. Social Security costs $250 billion a year. It's a huge chunk of the budget. It's hard to leave it untouched. The people who favor taxing benefits are the people who say, look, this is a man who said during the election, President Clinton, that he didn't want to hurt the middle class, that the middle class had gotten a raw deal during the 1980s, and we should stay away from them, only hit people who are relatively affluent. The people who favor the COLA benefits say, wait a minute, this could be, this could be a way to do something bigger. If we take away the inflation adjustment for Social Security recipients for one year, we could also take inflation adjustments for government retirees, maybe take away pay increases for federal employees for one year, maybe even do away with the indexing of the tax system for one year, and then all of a sudden you're starting to talk about a lot of money, maybe $20 billion a year.

MR. LEHRER: And on those grounds then, on that argument, look, if we can do it to Social Security, then we've set the ground work to do it for all these others across-the-board.

MR. MURRAY: That's right, equality of sacrifice.

MR. LEHRER: Are there any authors of these proposals within the administration, or is just kind of out there and let's see what happens?

MR. MURRAY: Well, the budget director, Leon Panetta, has long been an advocate of cutting cost of living adjustments and of having this sort of equality of sacrifice, where everybody for one year makes a contribution to deficit reduction, and then it's over. You get a bunch of money and then you get your cost of living adjustments in future years.

MR. LEHRER: And the, the third rail analogy that I used, the administration has decided to deal with that, is that right, as a result of the election results and the Ross Perot, and everybody was willing to sacrifice, is that it?

MR. MURRAY: I think there's a big fight still going on with this administration between those people who say you have to deal with it, you have to put forward a credible, big deficit reduction package, and those people who are worried that this could do in President Clinton politically. I mean, he really did make a big thing about protecting the middle class, about not raising taxes on the middle class, about not hitting the middle class, and of course this is going to be going back on a lot of those promises.

MR. LEHRER: And politically, of course, Sen. Pat Moynihan, the new chairman of the Senate Finance Committee, whose clip we just saw from David Brinkley's program on Sunday, he said it's a death wish to do this.

MR. MURRAY: He's going to be out there protecting Social Security. And let me point out another reason why this is very difficult. Interest rates are very low right now. For a lot of people who borrow money, who want to borrow money to build businesses and buy houses, that's a good thing, but for a lot of elderly people on fixed incomes, low interest rates already means that their income is greatly reduced and if they're going to have to take a hit on Social Security on top of that, they're certain to scream and yell.

MR. LEHRER: Okay. Alan, don't go away. Now a debate on the specific issue of using Social Security to reduce the deficit. It is between Carol Cox Wait, president of the Committee for a Responsible Federal Budget, a bipartisan group in Washington, D.C., that studies budget issues, she's former legislative director of the Senate BudgetCommittee, and John Rother, legislative director of the American Association of Retired Persons, which has a membership of 34 million Americans over the age of 50. Mr. Rother, what is the argument against using Social Security to help the budget deficit problem?

MR. ROTHER: Well, the basic concern is that Social Security is a self-funded, contributory social insurance program. The funds raised through that go to a payroll -- through the payroll tax go to a trust fund which cannot by law be used to pay any other government requirement, other than benefits and costs of the program. That fund is doing very well right now, running a substantial surplus, not contributing one penny to the deficit. So if it's not part of the problem, why should it be part of the solution when there are so many other things that are contributing to the deficit that need attention?

MR. LEHRER: But is it your argument then that it should just not even be considered part of the, of the federal government, the Social Security program?

MR. ROTHER: It's clearly part of the federal government, but it's not part of the deficit problem that we do face in the operating budget. It's not anything like the problem of health care costs, the erosion of our tax base, the other things that have gotten us to where we are. The hard choices that were necessary with regard to the future of Social Security have been made and by and large, the program is in good shape for the foreseeable future.

MR. LEHRER: Ms. Cox Wait, how do you respond to that?

MS. COX WAIT: Well, first off, it is part of the problem. There - - we refer to the program as self-funded, but that's because we have a dedicated tax that we call FICA taxes that goes to pay for Social Security. The fact is that we have been willing to raise FICA taxes to pay for higher benefits in Social Security. They now take 4 percent more of Gross Domestic Product, the total output of the economy, than they did in 1960. But we haven't been willing to raise total federal taxes by that amount. When President Reagan and President Bush used to say federal revenues are about the same as they've always been, they haven't been cut, what they meant was that as a percent of GDP, as a percent of the whole economy, the revenues were about the same. But that's like saying if you have your head in the oven and your feet in the freezer on average you're okay. All of the money is going to pay for Social Security and there's nothing left over to pay for anything else. As a consequence, we have to look at this, the biggest program on the domestic side of the budget, soon to be the biggest program in the whole budget overall, including defense. We have to be willing in the jargon of Washington to put everything on the table or we're never going to solve this problem.

MR. LEHRER: Well, though let's for discussion purposes, Ms. Cox Wait and Mr. Rother, for discussion purposes,j let's say it's on the table. Whether you want it on the table or not, Mr. Rother, it's there.

MR. MURRAY: It is.

MR. LEHRER: You agree, Alan. Right. Okay. Why should -- what's the argument -- forget your other argument. Now that it's on the table, what's your argument, for instance, for not freezing COLAs or for not doing the other alternative that Alan outlined, which is to -- of taxing the upper income people on Social Security?

MR. ROTHER: I think the argument against freezing COLAs is fairly easy to make. It's quite regressive. It hits hardest those people who are most reliant on the program, and it's the cut that keeps on cutting. It's not just a one-year loss. It's a permanent, lifetime loss.

MR. LEHRER: In what way is it that?

MR. ROTHER: Well, because it's the reverse of compound interest. The base in the subsequent year is that much lower, and in terms of --

MR. LEHRER: Let's make sure everybody understands that. If you don't raise the, the adjustment at all one year, then when you raise it the next year, the base is smaller, so it'll always be lower than it would have been if you'd raised it this next year, this year?

MR. ROTHER: Exactly right.

MR. LEHRER: I really explained that, didn't I?

MR. ROTHER: I think most listeners will understand.

MR. LEHRER: Okay, great.

MR. ROTHER: Because it's not a trivial amount of money is the main point for say a widow or two children on average. We're talking about $3500 over five years that would be lost in expected benefits from a one-year COLA freeze.

MR. LEHRER: Why should those folks take that hit, Ms. Cox Wait?

MS. COX WAIT: Why should anybody take any hit to reduce the federal budget deficit? You know, we all have a tendency to focus on sacrifice and pain in this debate. It's kind of like going to the spa and going on a diet. It may not be real pleasant but you don't do it just because you want the unpleasant. You do it because of what lies at the other end, the better life, the healthier life, in this case a growing economy. Everybody is going to have to give up a little bit to solve this budget deficit problem, every single, solitary human being, including the AARP members and you and I as taxpayers are going to have to chip in a little bit.

MR. LEHRER: How do you respond to that? Why shouldn't the Social Security benefits, the elderly people of America, share in the sacrifice, if everybody else is going to have to do it?

MR. ROTHER: I do believe that everyone should share in sacrifice, and I think that the older generation today, the generation that grew up in the depression and fought World War II, is probably the most sensitive on this issue of anyone. But I think that they would like to share in that sacrifice the same way that you and I would share in that sacrifice, through purely broad-based sacrifice, not just singling out one program. And there I think we're talking about things like a broad energy tax or income taxes, whatever hits everyone who can afford it, not those people who are in no position to make an additional sacrifice.

MS. COX WAIT: Can I say something to that? I think it's fine to shift the debate always away from your program and your constituency, but broad in this debate means every program, every part of the country, every group in society is going to have to share. We're all going to have to give a little, and all of us always want to do the Russell Long thing, don't tax me, don't tax me, tax that person behind the tree. Let's don't talk about Social Security, let's talk about a broad-based energy tax. You had the people on your program last week who didn't want to talk about that. We are all going to have to do a little bit or we're never going to get this problem solved.

MR. ROTHER: If I could --

MR. LEHRER: Sure.

MR. ROTHER: -- I don't think I've said anything like don't ask us to sacrifice. I think what we're saying is there are appropriate ways to do it; there are inappropriate ways to do it. There are fair ways to do it and are ways that are not fair. There are plenty of ways to ask older people to participate in the kind of sacrifice necessary. I mean, we do have a Medicare program that really does need to be part of comprehensive health reform, and that is part of theproblem in terms of the deficit, and clearly there's going to have to be some changes there. Let's look at that, not at the program that is in good shape and is serving a very important purpose.

MR. LEHRER: If you had, if you had to choose between these two evils, the ones that are on the table, according to Alan Murray, which would you choose?

MR. ROTHER: Well, I've already said that I think a COLA adjustment is completely inappropriate in this situation. I also think that the case for taxing benefits is a lot stronger in the other context, for instance, health reform, something like that, rather than deficit where again Social Security is not really contributing to the problem. And you'd have to compare this to whatever other taxes are on the table. Are these other taxes going to exempt older people so that that's their contribution alone? Are they going to be part of these broader solutions? It's hard to tell at this point?

MR. MURRAY: I think that was none of the above.

MR. MacNeil: Is that right? In other words, they're not going to be exempt from any of the other taxes?

MR. MURRAY: Well, yes.

MR. LEHRER: Right.

MS. COX WAIT: Let me say one thing about the tax side suggestion that Alan made. The fact is to date that we have an inequity in the tax system with regard to old people. Old people who get more money from Social Security have more after tax income than old people who get more money from private pensions and from interest on savings. If you have two families side by side, each of which makes $35,000 a year before taxes, one gets $14,000 from Social Security, the other gets all of their retirement income from other sources, the family that gets $14,000 a year from Social Security has $1100 a month -- $1100 a year more after tax income.

MR. LEHRER: That's because only half their income --

MS. COX WAIT: That's right.

MR. LEHRER: -- from Social Security is taxed.

MS. COX WAIT: It's silly to have a tax system that gives you more after tax income because you get more money from the government.

MR. ROTHER: Well, Congress made that decision knowing full well. It was really an alternative to raising Social Security taxes even more in order to tax them back. It's an alternative to raising the level of benefits to provide some level of tax preference. In 1983, when half of the taxes were made -- half of the benefits were made subject to federal taxes, the idea was that that was -- represented the employer's contribution that had not been subject to income taxes when you earned those money and paid in.

MR. LEHRER: Alan, Mr. Rother and Ms. Cox Wait represent two huge interests in this town, two lobbying interests, the elderly folks of this country and now a relatively new one, which is to cut the budget deficit no matter what. What are the politics of weighing these two particular interests against each other when it comes down to "the" table -- not this one, but the other one where this is going to finally be resolved?

MR. MURRAY: Well, I think it's going to be extraordinarily difficult. And the clips you showed at the beginning of the program illustrate that. When you have a Democratic President, his people suggesting that he make -- cut COLAs, and the Democratic chairman of the Senate Finance Committee says no way, don't do that, but the Republican Minority Leader of the Senate says, well, maybe that's a good idea, it's going to be a very complicated issue. My guess is in the end -- and this is purely a guess because the administration is deeply divided on this and not close to a decision -- my guess isin the end that President Clinton will decide that taxing benefits is the best way to go because he made such an issue of fairness during his presidential campaign.

MR. LEHRER: Is this a "all hands on deck" issue for the AARP, Mr. Rother?

MR. ROTHER: Health care reform is our "all hands on deck" issue.

MR. LEHRER: Is that right?

MR. ROTHER: Yeah. And I think, as I said before --

MR. LEHRER: Why? Why is that? Because if you -- you tell me.

MR. ROTHER: Because health care reform is literally life or death. It is the difference between economic security and not in retirement. It is what our members are mostly concerned about today. I think Social Security in most people's eyes is not an issue. It's a program that's in good shape. They understand it. They support it, not just older people, but people of all ages.

MR. LEHRER: You mean, it's not an issue meaning that they don't expect any President or any Congress to come along and take any piece of what they're getting? That's what you mean, that it's a secure thing, secure personally. Forget the system itself. It's secure for them individually.

MR. ROTHER: I think younger people may not feel that way, but as you get older and as you have more experience with the system, it's the most lively supported program we have in this country, regardless of the age of the person you ask.

MR. LEHRER: Ms. Cox Wait, how do you look at this thing politically in terms of getting this done and knowing what has happened before -- here again, the third rail analogy -- any time anybody has talked about Social Security they do disappear, or the issue does fairly quickly.

MS. COX WAIT: Well, I look at it two ways. One, the problem is bad and getting worse. The deficit curve now looks like a hockey stick with the curved end going straight up at the end of this decade. It looks like that again in the year 2010 and beyond, with Social Security beginning to behave the way that health care does today. Younger people don't believe they're going to get Social Security benefits. I think it's time we fixed the budget deficit problem.

MR. LEHRER: What do you mean they don't believe they're going to get benefits?

MS. COX WAIT: Talk to anybody under 40 and they just believe there isn't going to be any money there left for them. They look at the deficit problem. They look at the Social Security system. They think we're spending it all today. And they're right. We need to solve these problems so that we can grow the economy, so that we can afford the retirement of the baby boom generation, so that our children and our grandchildren can live a good life, and I believe John Rother's constituents, as well as Alan's readers, as well as your viewers, will support that if the package is big enough, if it's fair enough, if everybody gets in this together and everybody gives a little.

MR. LEHRER: Is that the key there, Mr. Rother, the specifics of this one, of your particular issue aside, that it has to be part of a package so when every person, just to use Ms. Cox Wait's example, when everybody hears it for the first time they, oh, they got me, they got me, but they got him, her, him, her, him, her, it at least increases the chances of withstanding all the political heat that each individual part of this overall package might generate?

MR. ROTHER: Right. I think that shared sacrifice is the key to success in deficit reduction. But it's not a shared sacrifice among different programs. It's a shared sacrifice among people. And when you ask people who are just making it today to be a disproportionate partof that sacrifice, they're going to look around and say, hey, what has everybody else got that's equivalent to this? And I think that Social Security is very -- it's very tough to compare what we're asking other people to do to the kind of sacrifice that we're asking people in no position to adapt, the kind of sacrifice that they would be asked to make.

MR. LEHRER: All right. Well, thank you all three very much.

MS. COX WAIT: Thank you.

MS. WOODRUFF: Still ahead on the NewsHour, roles and missions in the U.S. military after the Cold War, and Israel's compromise move on the Palestinian deportees. FOCUS - ROLES & MISSIONS

MS. WOODRUFF: We turn next to an issue that could put President Clinton into another big showdown with the Pentagon just days after he managed no more than a delay on the question of admitting gays to the military. This time the question is: What services will perform which military missions? At the moment, say critics in Congress and elsewhere, there is much costly overlapping. At the orders of Congress, Gen. Colin Powell, chairman of the Joint Chiefs of Staff, has completed a report on military roles and missions. The unreleased study is already generating much controversy. Time Magazine's senior correspondent for national security, Bruce Van Voorst, has our report.

MR. VAN VOORST: At Ft. Chaffee in Arkansas, Army Chief of Staff Gen. Gordon Sullivan observes his army soldiers in live fire training.

GEN. GORDON SULLIVAN, Army Chief of Staff: What you just saw was the best soldiers in the world training to fight, training to standard and training to accomplish whatever mission it is that the American people ask them to do and win. This is the best army in the world, bar none.

MR. VAN VOORST: At Quantico Marine Base in Virginia, Gen. Charles Krulak inspects Marine officers, rehearsing basic squad and platoon operations.

GEN. CHARLES KRULAK, Marine Corps: What you just saw there was leaders of Marines, young second lieutenants undergoing training. Those are the leaders of the finest Marine Corps that this country has ever seen.

MR. VAN VOORST: The best Army, the best Marine Corps. Both claims may be justified but why in times of steep defense cuts does the United States need what appears to be two armies? The apparent duplication between the Army and the Marines is an example o the broader issue of redefining Pentagon roles and missions facing Les Aspin, the new Secretary of Defense. Which service does what in the new world order? And by extension, which service gets the money? This is not theology. It's turf, and it's big bucks in a $280 billion defense budget facing severe cuts. Robert Gaskin, a former Air Force officer, now works with a private organization which monitors defense spending. ROBERT GASKIN: Roles and missions drive the defense budget. Every single weapons system in existence is justified by a role or a mission.

MR. VAN VOORST: And if you get a change of roles and missions?

ROBERT GASKIN: Then you pull power away. You pull budget authority away from that service, and they'll fight to the death to keep that from happening.

MR. VAN VOORST: In the old days, things were simpler. Armies fought on the ground. Navies did battle at sea. Then came airplanes, creating an entirely new battlefield overhead and new weapons and new technologies, blurring the differences among the services. When the Department of Defense was established in 1947, for example, Congress set up an entirely new Air Force and assigned to it the task of delivering nuclear warheads to the Soviet Union. The Navy promptly rushed to build its own super carriers and aircraft to get its share of the nuclear pie. At the same time, important inter-service military missions were ignored. The Air Force concentrated on the glamorous, long range bombing and fighter plane missions, neglecting its responsibility to provide air cover for Army soldiers on the battlefield. In an effort to address problems such as these, Sen. Sam Nunn, chairman of the Senate Armed Services Committee, last June called for a new debate on roles and missions. As one of the Pentagon's major supporters in Congress, Nunn's initiative had to be taken seriously.

SEN. SAM NUNN, Chairman, Armed Services Committee: We're the only military in the world with four Air Forces. We have a Marine Corps and an Army with light infantry divisions. Both the Navy and the Air Force design, build and test and field Cruise Missiles. Both the Navy and the Air Force build and operate satellites. Each of the military departments has its own, huge infrastructure of schools, laboratories, industrial facilities, testing organizations, and training ranges.

MR. VAN VOORST: During the campaign, Gov. Clinton endorsed Nunn's initiative and said as President he would order a major Pentagon review of roles and missions.

BILL CLINTON: I agree with Sen. Nunn that it is time to take a fresh look at the basic organization of armed forces. While respecting the uniqueness of each service and its capabilities, we can reduce redundancy, save billions of dollars, and get better team work.

MR. VAN VOORST: Sen. Nunn proposed to begin saving dollars by taking a close look at America's so-called "two armies," the Marines, originally a small force based on board ships to repel boarding parties, have swollen to three divisions and three air wings totalling more than 184,000 persons, a third as big as the Army. Conceived as an amphibious force to take beachheads, the Marines, in fact, had two divisions in Desert Storm which fought on land just like regular Army soldiers. At the same time, the Army has trained and deployed five so-called "light divisions," highly mobile units stripped of tanks and artillery and designed for the same sort of rapid contingency response as the Marines. Marine Brigadier General Thomas Wilkerson, nevertheless, insists there's a difference between a Marine and an Army soldier.

GEN. THOMAS WILKERSON, Marine Brigadier General: A Marine has always been talked about as a soldier from the sea. There's some similarities in that we both are trained for combat ashore. The differences are we are soldiers of the sea. We are maritime in nature. We have a combined arms focus at a small level that includes air power, that includes land forces, both mechanized, motorized, and walking infantry, and the four service support, the logistics that makes this all entity stay together.

MR. VAN VOORST: Army Chief of Staff Gen. Sullivan admits that the difference between soldier and Marine is not great at the small unit level.

GEN. GORDON SULLIVAN: At the platoon, at this level here, which is ground combat at its basic level, it's essentially the same.

MR. VAN VOORST: To Gen. Wilkerson, the Marines' performance in the Somalia amphibious landing operation demonstrates the Marines' special capability.

GEN. THOMAS WILKERSON: They were sitting offshore. When you take a map and look at it, you can see that beforehand we were postured, we were prepared to move in, then the time came to move. You saw on the news light, L-CATS, cushion vehicles, helicopters, aircraft, surface means, all of these methods to move combatpower ashore, quickly establish control and begin to bring some sense of order to what had been a very chaotic situation.

MR. VAN VOORST: But the Army's Gen. Sullivan points out that the Somalia operation could have been carried out by the Army's light divisions ferried by air from the United States.

GEN. SULLIVAN: We, as you know, have the capability to go in, airborne assault. We have the capability to go in and sustain ground combat for long periods of time.

MR. VAN VOORST: So while the Marines and Army do overlap, Defense Department officials insist that they differ enough to justify keeping some level of both. The critical question then: Is how many? Does the nation need three divisions of Marines of five of Army soldiers as a rapid deployment force? Sen. Nunn points out that cutting two divisions would save $3 1/2 billion a year. Congressman John Murtha, a former Marine and now powerful chairman of the House Appropriations Subcommittee on Defense, would strip these divisions from the Army.

REP. JOHN MURTHA, [D] Pennsylvania: I think that the, the Marine divisions are so light it just makes sense to me to use the Marine Corps for the light. You get rid of the light divisions in the Army, you keep the nucleus of the heavy divisions in case we have to go into say the Middle East, and yeah, I see the Army being the one losing out in this whole restructuring.

MR. VAN VOORST: Congressman Murtha's subcommittee is also looking at another high stakes debate, whether the U.S. has four Air Forces. Of course, there's the U.S. Air Force, flying strategic and tactical missions, but there's also the Army, with a mass of helicopter force, and the Navy and Marines both operating aircraft and helicopters at sea off carriers. This is Seymour Johnson Air Force Base in North Carolina, home of two wings of F-15 fighter and attack bombers. On a recent visit here, Air Force General Buster Glossen, the architect of the Desert Storm air campaign, denied that the U.S. has four Air Forces.

GEN. BUSTER GLOSSEN, Air Force: The United States Air Force is the only Air Force. Each of the services have an aviation element that will help them in their primary mission, but there's only one Air Force that has the mission of exploiting and controlling air in space.

MR. VAN VOORST: Sen. Nunn and others find a major duplication between the Air Force and the Navy in carrying out long range bombing. The Air Force has a massively expensive fleet of B-2 Stealth bombers plus B-1s and the B-52s, more than enough to do the post Cold War job. Yet, the Navy proposes building another nuclear aircraft carrier and an $80 billion medium range bomber program to do the same mission. Navy Vice Admiral Layton Smith gives the Navy's justification.

ADM. LAYTON SMITH, Navy: Well, I think we need to understand that there's going to be room forth both. I mean, the Navy needs to be able to reach out and touch someone with long range strike capability. Does it have to have the exact same capability as the B-2? No, not even close. But I think this country needs the ability to project power from the sea. We're not in competition. We want to complement.

MR. VAN VOORST: Part of the roles and missions problems is that the services scratch each other's back, both within the Pentagon and when asking Congress for funds. You support my airplane and I'll back your carrier. Accordingly, Air Force Gen. Glossen is not about to contradict the admiral.

GEN. GLOSSEN: Certainly the Air Force bomber has more capability to go a longer range and bring a nation state's targets into risks that the carrier battle group cannot do. Conversely, the carrier battle group, if properly located, can respond in the littoral region faster than any other capability that we have if it's pre- positioned. But taken in the aggregate, they are very complimentary. Inter-service back scratching helps explain how the nation got 26 wings of aircraft in the Air Force, 13 in the Navy, and 4 in the Marines. Sen. Nunn says the U.S. military simply has too many aircraft and too many different kinds. He calculates that eliminating five wings would save $1 1/2 billion annually, roughly the cost of funding a Head Start preschool program for children for six months.

SEN. SAM NUNN: The service now have planned over 350 billion dollars worth of new combat aircraft that are on the drawing boards. Most of that in terms of starts begins in the budget this year, with only limited efforts to achieve commonality among those systems. We must find ways to save billions of dollars, with streamlining and eliminating the duplication in this area.

MR. VAN VOORST: Where else is the incoming Secretary of Defense going to achieve big savings in roles and missions? Military space operations, where the Navy still has a piece of the action, could be transferred entirely to the Air Force. Ground-based strategic missiles could be eliminated, relying, instead, on Air Force bombers and the Navy nuclear missile submarines. Logistics and maintenance duplication could be reduced through mergers and streamlining. Almost everyone involved in the debate concedes that major savings are possible through streamlining roles and missions, by one authoritative estimate, as much as $60 billion in a year. That, say experts, would fund for a year all current programs for housing, feeding, medical care, and education for the nation's poor and low income citizens. Congressman Murtha emphasizes the relationship between the deficit and roles and missions.

REP. MURTHA: The deficit overrides every single decision we make, so when we make a deployment, we're going to have to think about what that means to this country and the deficit. You're going to see a dramatically different Defense Department ten years from now.

MR. VAN VOORST: JSC Chairman Colin Powell's report on the future roles and missions now becomes a central focus of the defense debate. Powell pledged to eliminate redundancies, inefficiencies, and, above all, Cold War thinking. But Powell is not recommending the sort of far ranging and dramatic changes that Sen. Nunn has called for and that President Clinton has endorsed. And even his modest proposals are already extraordinarily controversial. The stage is thus set for a continuing and bitter debate over the military's roles and missions.

MR. LEHRER: Gen. Powell is expected to issue his report by the end of the week. We will cover it in full when he does. FOCUS - BREAKTHROUGH

MS. WOODRUFF: Now to the story of the Palestinian deportees. Israeli Prime Minister Yitzhak Rabin said tonight Israel will take back right away 100 of the 415 Palestinians who were deported to a no-man's land on the Lebanese border last December. The others will be brought back later. Israel has claimed that the deportees are terrorists, associated with the Islamic Group Hamas. The U.N. Security Council was considering a draft resolution sanctioning Israel for the deportation. This afternoon, Sec. of State Warren Christopher said there was no need for a Security Council debate. At a New York news conference he talked about the Israeli concessions.

WARREN CHRISTOPHER, Secretary of State: Under the terms of the process that Israel has announced today, Israel will permit a significant number of the deportees to return either to Israel or to the occupied territories within the next several days. Israel will also reduce the sentences of all other deportees, and as a matter of arithmetic, this means that all the deportees will be able to return before the end of this calendar year. Israel will also maintain an appeals and review process for the deportees, which means that some of them may be returned even before the end of the calendar year. And finally, and this is important to us, the process that Israel is announcing assures the delivery of humanitarian assistance to the deportees where they are at the present time.

MS. WOODRUFF: We get three views on these latest developments from Raghida Dergham, who is senior correspondent for Al-Hayat, a London-based Arabic daily newspaper. David Makovsky is diplomatic correspondent for the Jerusalem Post. He joins us from St. Louis. Jef McAllister covers the State Department for Time Magazine. Mr. Makovsky, let me begin with you. How did this deal come about? What was the impetus for it?

MR. MAKOVSKY: Well, I think after the High Court ruled, which validated the legality of the deportations, Prime Minister Yitzhak Rabin was on the phone with Sec. of State Warren Christopher, and that started on Friday and went on throughout the weekend, and the compromise was announced today both by the Prime Minister in Jerusalem and by the Secretary of State in New York.

MS. WOODRUFF: So are you saying it was pressure from the United States, or what?

MR. MAKOVSKY: Yeah. Well, I think that in a certain way for Rabin this was almost a grand slam compromise. By de-fusing the diplomatic momentum for Security Council sanctions, he's made it much more likely that the Middle East peace talks will get on track. Second, by opening communication directly with the new Clinton administration, he's getting off on the right foot. And that communications is extremely important. As we know, it wasn't there during the Bush-Shamir period, and if the peace talks are going to succeed, the Israeli prime minister, Mr. Rabin, believes that there first has to be coordination between Washington and Jerusalem, and then Israeli-Arab talks can proceed. And I think we saw that it worked today, that the two of them can talk and resolve issues. And like I said, he felt probably bolstered that the High Court ruled in his favor so he kind of dealt from a position of strength domestically and fourth, and this maybe is too soon to tell, but it seems that the Hamas militants are saying that even the hundred that they won't even come back, so he might have all the benefits of a compromise, even possibly without incurring any of the risks.

MS. WOODRUFF: Jef McAllister, give us the U.S. perspective or take on this. How did this all come about from your reporting at the State Department?

MR. McALLISTER: Well, the great objective of the United States was to avoid a train wreck, a big altercation between it and Israel and the Arabs at the Security Council. The worst possible outcome for the United States' point of view was to have to veto a resolution before the Security Council that would condemn Israel. There is already a condemnation of Israel in 799 asking them to return the deportees, but actual sanctions would be a very difficult thing for the United States to let go. At the same time - -

MS. WOODRUFF: Why?

MR. McALLISTER: Well, by --

MS. WOODRUFF: Why would it be so hard for the United States to let the sanctions pass?

MR. McALLISTER: Well, it's been Israel's long-term supporter. It wants to show itself to be even-handed in the peace process. It's just very difficult also domestically politically for President Clinton to say to supporters of Israel in this country, I am going to let a sanctions resolution forward on Israel for the first time in the history of the United Nations.

MS. WOODRUFF: And you were saying, and you were going on to say and there was another --

MR. McALLISTER: On the other side, if the United States did nothing and vetoed this resolution the Arabs would say, of course, this is a double standard, you are protecting Israel from U.N. wrath, whereas you're taking the U.N. wrath to Saddam Hussein. You're also letting Muslims be killed in Bosnia in violation of all sorts of international law without doing enough effectively to stop it. It would peel apart perhaps the anti-Saddam coalition and make the peace process very difficult. A compromise is the right solution for the United States.

MS. WOODRUFF: So David Makovsky just described this as a success from the Israeli point of view. Is it a success for the Clinton administration as well, Jef?

MR. McALLISTER: So far it seems to be. They're certainly painting the most optimistic picture possible. As your clip showed, Sec. Christopher is portraying this as the end of the crisis, and that now all sides will move forward. I don't know that the Palestinians are going to agree. They have so far rejected the compromise as far as -- news reports so far today. Whether in the end there will be a sanctions resolution at the United Nations and if the United States vetoes it, if it were to happen, the other Arab countries would be particularly upset with the United States. Now that this compromise is in place, is it different question?

MS. WOODRUFF: Raghida Dergham, what was the reaction at the United Nations today when this was announced?

MS. DERGHAM: Most of the Arab states and the Arab members of the United Nations considered this a political deal that compromised the legality of the issue of the deportees. And that is rather disturbing to quite a number of the Palestinians, of course, above all and a number of the Arab countries. So they officially still have the draft resolution on the trouble. They feel that there is no reason to divide Security Council Resolution 799 into phases and allow this deal to stand. However, there are two different views within the Arab camp. One says let us stick to the legality of the fine and push through with it, and another view says, no, it's time to really find out how else can we deal with it and build on whatever has been accomplished.

MS. WOODRUFF: Who's taking the harder view, and who's prepared to compromise?

MS. DERGHAM: The Palestinians, of course, both on the level of the leadership and on the level of the deportees have pronounced their position and they said clearly that they reject this compromise and they feel that 799, that resolution, calls for the immediate return of all the refugees -- all the deportees, excuse me, and therefore, they feel that they will insist on their position vis-a-vis the Security Council and call for sanctions against Israel. Now there are some other Arabs who feel that the Israelis retreated, in fact, and that argument that this is a legal action has been defeated, and that there is no longer this automatic observing of Israel. It's no longer the case that -- that people can speak of sanctions against Israel under Chapter 7 of the charter, so this is more productive than a veto by the United States.

MS. WOODRUFF: Can you say who those Arabs are, what Arab nations are willing to take another look at this?

MS. DERGHAM: These are people who speak on background, on the issue are all still endorsing the draft resolution that draft resolution that proposes limited sanctions against Israel.

MS. WOODRUFF: What happens next? Do there have to be more meetings and discussions? Is the timetable, at least, slowed down for considering a sanctions vote?

MS. DERGHAM: It pretty much depends on what the deportees, themselves, and the leadership, the Palestinian leadership, will do if they persist in that position, that this is unacceptable, and reject it, then I think the Arabs will have a difficult time saying we'll depart away from you. I believe there will be quite a bit of give and take and discussion within the Arab group and the Islamic group, by the way, which endorsed this evening the draft resolution, the Arab draft resolution in the Council, so I think they will be trying to find a way to make the best out of this, though they will try to insist on the legality of the fine of the deportees, that is, as far as it is a violation of international right, and that Israel must also be brought about, just like Iraq, to fulfill resolutions in their totality without negotiating them as happened.

MS. WOODRUFF: Back to you, David Makovsky. If there is some backing off in terms of unified Arab support for a sanctions vote, what is Israel's position? Obviously, Israel was against -- you were saying a minute ago Israel might feel it succeeded if the deportees refuse to return to Israel.

MR. MAKOVSKY: Yeah. I think if the U.N. Security Council feels despite the U.S. efforts that it wants to impose sanctions, which I think is highly unlikely after the Secretary of State's announcement, if it would proceed anyway, I think then Israel will really, will kind of retreat into a shell, because Rabin's appeal to Israelis is that he is Mr. Security. And if someone's trying to shove something down his throat, my sense would be that he would just say, do you think this is going to be the pattern when we get to the peace talks as well, that ultimately the Security Council's going to vote, well, we're out of this game, and so I really don't see it. And frankly, I believe the Arab states have a very strong interest to come back to the table. [A] You heard what the Syrian foreign minister said in the Arab foreign ministers meeting in Cairo, that he wants these talks to go on in any event. And I think that's the view of most Arabs; and secondly, I don't think they have a real interest in pressing the Islamic fundamentalist case. Look at the problems the Egyptians have with their own fundamentalists. Look at Algeria. Look at Lebanon. Look at Hezbollah. The one country that doesn't seem to have a problem with fundamentalists in the Arab world is Syria, which every regrettably took the awful position of mowing down 20,000, killing 20,000 Islamic fundamentalists a decade ago.

MS. WOODRUFF: Is what David Makovsky said about the Arab position, that it's not, the resolution is not likely to go forward and that if it does, Israel will take a completely different view, is that an accurate reading of --

MS. DERGHAM: It is true that the Arabs want to go back to the negotiating table and that they do want the peace talks, however, the trouble is that dividing that resolution into stages of implementation, it would fall right into the hands of the fundamentalists that my colleague is referring to, and the fact of the matter is then it will become much harder tohandle them. That is why we find the deportees criticizing what the Palestinian delegation did in New York. They said it didn't go far enough. So the Israeli action is promoting more fundamentalism and is strengthening their hand, rather than the moderates, the Arab moderates who are trying to really stay at the negotiating table.

MS. WOODRUFF: Jef McAllister, at this point, from the U.S. view, is it safe to say that the parties involved in the Middle East peace talks are any closer to coming back to the table?

MR. McALLISTER: Well, it's certainly the hope of the United States Government that this is the case. Certainly the alternative of a big public confrontation at the United Nations and a veto would have set the process back. I think that the State Department and the administration is convinced that this is one more step on the messy road towards some kind of settlement.

MS. WOODRUFF: Would you agree with that?

MS. DERGHAM: Well, I agree that it was important not to start the veto practice in the Security Council, but, on the other hand, it's quite a dangerous precedent to allow countries to take a resolution that has been adopted by consensus and start to dictate how it's going to be implemented, how it's going to be phased, and then succeed and win to a certain extent, so then the Iraqis or any other country for that matter later could come back with the same argument. I believe it weakens the authority of the Security Council and the United States within and in fact, what happened is that we saw the administration coming to the rescue of Israel away from a Security Council action. And that would have, again, an argument that will fall right into the hands of these fundamentalists or others who say this is double standard. I think it's a little dangerous, if not put in action and if not, for example, the Palestinians are given something completely enticed for them to come back on.

MS. WOODRUFF: Just quickly, David Makovsky, what about that point?

MR. MAKOVSKY: I think everyone who's put the double standard argument across knows I think that it's a red herring. We're clearly equating apples and oranges here. Saddam Hussein was punished by the Security Council because he vanquished militarily another Arab state, and everyone knows that is a very heinous crime. The issue of Israel is of 400 people being deported for a year is not on that level, and if we want to get into that, we've got 300,000 Palestinians who were deported from Kuwait and 500,000 Yemenis out of Saudi Arabia without the Security Council ever even convening.

MS. WOODRUFF: All right. We're going to have to leave it at that. Raghida Dergham, Jef McAllister, Dave Makovsky, thank you all for being with us. RECAP

MR. LEHRER: Again, the other major stories of this Monday, President Clinton eased federal regulations giving states more flexibility and running Medicaid programs. The nation's governors applauded the action. And White House Spokesman George Stephanopoulos said the administration was considering a federally funded program to provide free immunizations for all children. Good night, Judy.

MS. WOODRUFF: Good night, Jim. That's our NewsHour for tonight. We'll be back tomorrow night. I'm Judy Woodruff. Thank you and good night.