PBS NewsHour; August 8, 2011 3:00pm-4:00pm PDT

Captioning sponsored by MacNEIL/LEHRER PRODUCTIONS

>> Ifill: STOCKS PLUMMETED ON WALL STREET AND AROUND THE WORLD TODAY AS PRESIDENT OBAMA TRIED TO REASSURE INVESTORS THAT THE UNITED STATES CONTINUES TO BE A AAA COUNTRY. GOOD EVENING. I'M GWEN IFILL.

>> Woodruff: AND I'M JUDY WOODRUFF. ON THE NEWSHOUR TONIGHT, WE ASSESS THE FIRST-EVER DOWNGRADE OF THE U.S. CREDIT RATING AND THE MARKET DROP WITH ECONOMISTS PAUL KRUGMAN AND KENNETH ROGOFF AND TERRY BELTON OF J.P. MORGAN.

>> Ifill: THEN MARGARET WARNER EXAMINES THE DEADLY HELICOPTER CRASH THAT CLAIMED THE LIVES OF 30 U.S. FORCES IN AFGHANISTAN OVER THE WEEKEND.

>> Woodruff: PLUS, WE HAVE TWO EDUCATION STORIES. SPECIAL CORRESPONDENT JOHN TULENKO REPORTS ON THE CHEATING SCANDAL THAT ROCKED ATLANTA'S SCHOOLS.

>> THE PRESSURE TO BOOST SCORES BY ANY MEANS NECESSARY IS SO GREAT THAT TEACHERS THINK THEY HAVE TO GET THOSE SCORES UP BY HOOK OR BY CROOK.

>> Ifill: AND THE PRESIDENT ISSUES A NEW EXECUTIVE ORDER TO CIRCUMVENT CONGRESS AND REVAMP THE "NO CHILD LEFT BEHIND" LAW.

>> WHERE THERE'S A HIGH BAR, THE FOLKS WHO ARE DOING THE RIGHT THICK FOR CHILDREN, WE WANT TO GIVE THEM A LOT MORE FLEXIBILITY, FRANKLY GET OUT OF THE WAY AND LET THEM HIT THAT HIGHER BAR.

>> Ifill: THAT'S ALL AHEAD ON TONIGHT'S NEWSHOUR. MAJOR FUNDING FOR THE PBS NEWSHOUR HAS BEEN PROVIDED BY:

>> OIL COMPANIES HAVE CHANGED MY COUNTRY.

>> OIL COMPANIES CAN MAKE A DIFFERENCE.

>> WE HAVE THE CHANCE TO BUILD THE ECONOMY.

>> CREATE JOBS, KEEP PEOPLE HEALTHY, AND IMPROVE SCHOOLS.

>> ...AND OUR COMMUNITIES.

>> IN ANGOLA CHEVRON HELPS TRAIN ENGINEERS, TEACHERS AND FARMERS, LAUNCH CHILD'S PROGRAMS. IT'S NOT JUST GOOD BUSINESS.

>> I'M HOPEFUL ABOUT MY COUNTRY'S FUTURE.

>> IT'S MY COUNTRY'S FUTURE.

>> and by bnsf railway.

>> AND BY THE BILL AND MELINDA GATES FOUNDATION. DEDICATED TO THE IDEA THAT ALL PEOPLE DESERVE THE CHANCE TO LIVE A HEALTHY, PRODUCTIVE LIFE. AND WITH THE ONGOING SUPPORT OF THESE INSTITUTIONS AND FOUNDATIONS. AND... THIS PROGRAM WAS MADE POSSIBLE BY THE CORPORATION FOR PUBLIC BROADCASTING. AND BY CONTRIBUTIONS TO YOUR PBS STATION FROM VIEWERS LIKE YOU. THANK YOU.

>> Woodruff: WALL STREET HAD ITS WORST DAY SINCE 2008, AS INVESTORS FLED STOCKS IN A GLOBAL ROUT. IT WAS FUELED BY THE DOWNGRADE OF U.S. DEBT, WORRIES ABOUT EUROPE'S DEBT LOAD, AND FEARS OF A NEW WORLD RECESSION. SWAMPED MARKETS AROUND THE WORLD, THE SELL-OFF, ROLLING ACROSS ASIA AND EUROPE AND ENGULFING WALL STREET. U.S. STOCKS PLUNGED WITH THE OPENING BELL AND NEVER RECOVERED. BY THE TIME IT WAS OVER, THE DOW JONES INDUSTRIAL AVERAGE HAD LOST NEARLY 635 POINTS TO CLOSE BELOW 10,810. THE NASDAQ GAVE UP 174 POINTS TO CLOSE AT 2357. THE PROSPECTS OF MORE LOSSES TO COME.

>> I WOULD ANTICIPATE THAT THIS THIS STS IS GOING TO GO ON FOR QUITE SOME TIME. LIKE I SAID I THINK WE NEED TO KNOW WHERE WE'RE GOING. AS LONG AS THERE'S UNCERTAINTY IN THE MARKETS THERE WILL BE VOLATILITY.

>> Lehrer: STANDARD AND POORS DECISION TO LOWER THE U.S. GOVERNMENT'S CREDIT RATING FROM TRIPLE-A TO DOUBLE-A-PLUS. THAT WAS FRIDAY NIGHT. BUT TODAY PRESIDENT OBAMA DISMISSED THE DOWNGRADE.

>> MARKETS WILL RISE AND FALL, BUT THIS IS THE UNITED STATES OF AMERICA. NO MATTER WHAT SOME AGENCY MAY SAY, WE ALWAYS HAVE BEEN AND ALWAYS WILL BE A TRIPLE-A COUNTRY.

>> Woodruff: AT THE SAME TIME, THE PRESIDENT ACKNOWLEDGED THE PROTRACTED FIGHT OVER CUTTING DEFICITS HAS HURT.

>> WE KNEW FROM THE OUTSET THAT A PROLONGED DEBATE OVER THE DEBT CEILING, A DEBATE WHERE THE THREAT OF DEFAULT WAS USED AS A BARGAINING CHIP, WOULD DO ENORMOUS DAMAGE TO OUR ECONOMY AND THE WORLD'S.

>> Woodruff: THE STANDARD AND POORS MOVE HAD ALREADY BECOME A POLITICAL FOOTBALL WITH BOTH PARTIES POINTING FINGERS OVER THE WEEKEND.

>> THERE IS DYSFUNCTION IN OUR SYSTEM AND A LOT OF IT HAS TO DO WITH THE FAILURE OF THE PRESIDENT OF THE UNITED STATES TO LEAD.

>> THIS IS ESSENTIALLY A TEA PARTY DOWNGRADE. THE TEA PARTY BROUGHT US TO THE BRINK OF A DEFAULT.

>> Woodruff: AND AT THE TREASURY DEPARTMENT SECRETARY TIMOTHY GEITHNER FOCUSED HIS IRE ON THE RATING AGENCY ITSELF.

>> S&P HAS SHOWN TERRIBLE JUDGMENT. THEY'VE SHOWN A STUNNING LACK OF KNOWLEDGE ABOUT BASIC U.S. FISCAL BUDGET MATH.

>> Woodruff: IN FACT WHITE HOUSE AND TREASURY OFFICIALS CHARGE THAT S&P FAILED TO FACTOR IN MORE THAN $2 TRILLION IN DEBT REDUCTION IN THE NEWLY ENACTED CONGRESSIONAL COMPROMISE. BUT THE HEAD OF S&P'S GOVERNMENT RATINGS UNIT, DAVID BEERS, MINIMIZED THE SIGNIFICANCE OF THAT CLAIM THIS MORNING ON ABC.

>> WELL, FIRST OF ALL WE JUST REJECT OUT OF HAND THE CHARACTERIZATION THAT THE TREASURY HAS MADE ABOUT AN ERROR.

>> Woodruff: HE ALSO REJECTED CRITICISM THAT S&P'S ASSESSMENT IS UNRELIABLE, GIVEN ITS FAILURES IN THE 2008 FINANCIAL CRISIS.

>> WE'RE TALKING TODAY ABOUT OUR GOVERNMENT RATINGS. THE GROUP THAT I HEAD UP. THAT TRACK RECORD REMAINS VERY STRONG.

>> Woodruff: IN A FURTHER STEP, S&P TODAY LOWERED THE CREDIT RATINGS OF MORTGAGE LENDERS FANNIE MAE AND FREDDIE MAC AND OTHER AGENCIES TIED TO U.S. GOVERNMENT DEBT. DESPITE THE DOWNGRADE AND THEN WARNINGS OF HIGHER INTEREST RATES, DEMAND FOR U.S. TREASURY BONDS ROSE TODAY, SENDING RATES DOWN. STILL FOR MAJOR CREDITORS IT WAS UNSETTLING. A CHINESE STATE NEWSPAPER CRITICIZED POLITICAL GRIDLOCK IN THE U.S. AND IN EUROPE, THE DOWNGRADE OF U.S. DEBT, COUPLED WITH RISING DOUBTS ABOUT THE SOLVENCY OF SPAIN AND ITALY, HELPED TO FUEL FEARS OF A NEW GLOBAL RECESSION.

>> WHAT WE REALLY NEED AT THIS POINT IS IS A COORDINATED MOVEMENT, A CLEAR SIGNAL THAT IS SENT TO THE MARKETS THAT EUROPEANS ARE NOT LETTING DOWN ANY COUNTRY MEMBER, ANY MEMBER- COUNTRY OF A YEAR AGO. THIS IS WHAT REALLY MARKETS ARE... NEED AT THIS POINT.

>> Woodruff: IN A BID TO BEAT BACK PANIC, THE EUROPEAN CENTRAL BANK BOUGHT AN ESTIMATED SEVERAL BILLION DOLLARS IN IT ITALIAN AND SPANISH BONDS TO RESTORE CONFIDENCE. IN THE MEANTIME OIL PRICES SLIPPED AGAIN TO A LITTLE OVER $83 A BARREL. ON CONCERNS THAT A WEAKER GLOBAL ECONOMY WOULD REDUCE DEMAND. INSTEAD, INVESTORS POURED MONEY INTO THE RELATIVE SAFETY OF GOLD PUSHING THE PRICE OVER $1700 AN OUNCE FOR THE FIRST TIME. WE TAKE A CLOSER LOOK NOW AT TODAY'S HISTORIC DROP IN THE STOCK MARKET AND THE ECONOMIC WINDS THAT ARE SWIRLING HERE AND ABROAD. PAUL KRUGMAN IS A NOBEL PRIZE- WINNING ECONOMIST FROM PRINCETON UNIVERSITY. HE'S ALSO A COLUMNIST FOR THE "NEW YORK TIMES." KEN ROGOFF IS A FORMER CHIEF ECONOMIST FOR THE INTERNATIONAL MONETARY FUND. HE'S A CO-AUTHOR OF A BOOK ABOUT FINANCIAL CRISES CALLED "THIS TIME IS DIFFERENT." HE'S A PROFESSOR OF ECONOMICS AT HARVARD. AND TERRY BELTON WORKS FOR JP MORGAN CHASE. WE THANK YOU ALL THREE FOR BEING WITH US. TERRY BELTON, I WANT TO START WITH YOU SINCE YOU'RE CLOSEST TO THE MARKETS. WHAT WAS BEHIND TODAY'S MASSIVE SELL-OFF?

>> WELL, JUDY, THE DOWNGRADE WAS A CATALYST FOR IT BUT IT'S A LOT MORE... IT'S ABOUT A LOT MORE THAN THAT. I THINK WHAT THE DOWNGRADE IS HIGHLIGHTING TO INVESTORS IS THAT ON THE FISCAL POLICY SIDE, THE U.S. IS RUNNING OUT OF BULLETS. WHAT WE REALLY NEED IS WE NEED NEAR-TERM MONETARY STIMULUS AND LONGER-TERM FISCAL AUSTERITY. I THINK WHAT THE MARKETS, INCLUDING NOW, IS THAT NEAR-TERM STIMULUS IS NOT COMING. WE'VE RUN OUT OF BULLETS ON THE MONETARY POLICY SIDE FOR SOME TIME NOW. WE'VE BEEN AT 0 INTEREST RATES. IT NOW LOOKS LIKE WE'RE THERE AS WELL. ON THE FISCAL POLICY SIDE U.S. ECONOMIC GROWTH IS VERY WEAK. IT'S NOT CLEAR TO THE MARKETS HOW IT'S GOING TO BE REVIVED.

>> Woodruff: SO YOU'RE SAYING THE S&P DOWNGRADE WAS THE CATALYST BUT IN ADDITION TO THAT, YOU MENTIONED U.S.... THE U.S. ECONOMY. WHAT ABOUT THE GLOBAL ECONOMY?

>> WELL, IN THE GLOBAL ECONOMY, WE HAVE A GLOBAL DEBT ISSUE. IN A WAY THE EUROPEAN SITUATION IS A BIGGER WORRY TO GLOBAL MACRO ECONOMIC GROWTH AND EVEN THE WEAK GROWTH IN THE U.S. THEY HAVE A LIQUIDITY CRISIS. EUROPEAN GOVERNMENTS ARE BEHIND THE CURVE. THEY BEGAN AS A PROBLEM IN THE MUCH SMALLER PERIPHERAL GOVERNMENTS BUT IT'S NOW SPREAD TO ITALY AND SPAIN. ITALY IS THE THIRD LARGEST BOND MARKET IN THE WORLD. AND THERE ARE FUNDING PRESSURES SHOWING UP THERE. THAT'S A HUGE NEGATIVE FOR THE LOCAL GROWTH. THE MARKET IS VERY WORRIED ABOUT THAT.

>> Woodruff:.

>> Woodruff: PAUL KRUGMAN I WANT TO GET TO THE S&P DOWNGRADE IN JUST A MOMENT. FIRST WE'RE TALKING ABOUT THE WORRIES OF THE STRENGTH OF THE U.S. ECONOMY, WORRIES INTERNATIONALLY. HOW DO YOU SIZE UP HOW MUCH THAT IS WEIGHING DOWN THE U.S. MARKETS?

>> I MEAN, THIS IS A... EVERYONE IS LOOKING AT SEEING A STRONG POSSIBILITY OF A GLOBAL RECESSION RIGHT NOW. I JUST WANT TO FOLLOW UP ON WHAT TERRY SAID. LET ME TRANSLATE IT INTO MY TERMS. THE REASON THAT THE S&P DOWNGRADE MATTERED, IF IT DID AT ALL, IS NOT THAT IT MADE PEOPLE THINK THAT U.S. DEBT WAS UNSAFE. IN FACT, PEOPLE HAVE PILED INTO U.S. DEBT. INTEREST RATES ON U.S. GOVERNMENT DEBT ARE AT THEIR LOWEST POINT SINCE JANUARY 2009. WHAT THE DOWNGRADE DID IS IT MADE PEOPLE THINK THAT THE U.S. GOVERNMENT IS NOW GOING TO BE HAM STRUNG, NOT ABLE TO TAKE ACTION, TO PROP UP THE ECONOMY NOT BECAUSE IT CAN'T ACTUALLY FINANCE THE DEBT, THE SPENDING, NOT BECAUSE IT'S IN REAL FISCAL TROUBLE BUT BECAUSE SOME GUYS AT S&P BY CALLING THAT DOWNGRADE HAVE BULLIED THE U.S. ECONOMY, HAVE BULLIED U.S. GOVERNMENT INTO TAKING ACTIONS THAT ARE GOING TO BE THE WRONG THING TO DO. SO THIS IS IS NOT, YOU KNOW, THE NARRATIVE WHICH SAYS THAT WE HAVE IS A FISCAL PROBLEM AND THAT'S THE SOURCE THAT SOURCE OF DIFFICULTIES IS NOT AT ALL RIGHT. WHAT'S HAPPENED IS THE SAME PEOPLE WHO HAVE BEEN URGING US TO TAKE THE WRONG POLICY HAVE NOW UPPED THE ANE. THAT'S MAKING THE ECONOMY LOOK WORSE. SIMILAR THINGS ARE HAPPENING IN EUROPE SO WE HAVE A GLOBAL DOWNTURN BASED NOT ON-- AGAIN NOT ON REAL FISCAL CONSTRAINTS BUT ON BAD IDEAS BEING ENFORCED BY BAD AGENCIES LIKE S&P.

>> Woodruff: AS LONG AS WE'RE GOING TO TALK ABOUT THIS DOWNGRADE, LET'S TALK ABOUT IT. IS THAT HOW YOU READ THE DOWNGRADE AND ITS EFFECT AND HOW IT'S THE INTER-PLAY WITH WHAT'S GOING ON IN THE REST OF THE WORLD?

>> I THINK THE DOWNGRADE HAS HAD A BIG EFFECT. I BEG TO DISAGREE WITH PAUL. I THINK THEY CALLED A SPADE A SPADE. IF YOU LOOK AT THE ACRIMONY, THE DEBT DEFICIT DEBACLE AND IT REALLY HURT OUR INSTITUTIONS. I DON'T SEE HOW THEY COULD HAVE CALLED IT ANY OTHER WAY. CERTAINLY MARBTS ARE LOOKING AND SEEING NOBODY HOME. MONETARY POLICY ACTUALLY HAS BEEN GETTING TIGHTER. AND AS PAUL AND TERRY NOTED, FISCAL POLICY LOOKS LIKE IT'S GETTING TIGHTER. BUT MORE BROADLY I THINK PEOPLE SEE THAT THEY'VE CONTINUOUSLY MISDIAGNOSED THIS AS A NORMAL RECESSION WHEN IT'S NOT. IT'S A LONG-TERM CONTRACTION. THEY'VE TRIED CONVENTIONAL TOOLS. THEY NEED TO DO THINGS TO BRING DOWN THIS DEBT OVERHANG OF PRIVATE DEBT NOT JUST PUBLIC DEBT.

>> Woodruff: PAUL KRUGMAN, HOW DO YOU RESPOND?

>> I THINK WE HAVE THE SAME MODEL GOING ON. PART OF WHAT YOU NEED TO DO WHILE YOU DO THIS-- KEN AND I BOTH THINK THAT THE FED NEEDS TO BE DOING MORE, THAT WE NEED MORE INFLATION, NOT TO BE ALL WORRIED ABOUT INFLATION THE WAY THE POLICY MAKERS HAVE BEEN. BUT WE ALSO NEED SOME PORT WHILE THIS IS HAPPENING FROM THE FEDERAL GOVERNMENT, FROM FEDERAL SPENDING. WE'RE ACTUALLY MOVING IN THE WRONG DIRECTION. AS FOR THE DOWNGRADE THERE WAS NO NEW INFORMATION. THERE WAS NOTHING. S&P CLAIMED TO HAVE DONE MATH AND IT TURNED OUT THAT WAS WRONG. SO THEY ENDED UP JUST DOING, YOU KNOW, SAYING, THE U.S. POLITICAL SYSTEM IS A MESS. ANY GUY AT THE BAR CAN TELL YOU THAT. NOTHING NEW THERE. THIS WAS NOT APPROPRIATE FOR THEM TO ACT IN THE WAY THEY DID. I WOULD SAY WE HAVE A LOT OF FAILING INSTITUTIONS. I'M AFRAID THE RATING AGENCIES ARE AMONG THE FAILING INSTITUTIONS.

>> IF I COULD JUMP IN, JUDY, I WOULD SAY THAT THE FISCAL METRIC TODAY WE LOOK MORE LIKE A TRIPLE-A THAN DOUBLE-A. OUR GAP IS LOWER THAN FRANCE AND GREAT BRITAIN BUT WHERE I WOULD DISAGREE WITH PAUL IS THAT OUR TRAJECTORY IS MUCH WORSE. WITHOUT A CHANGE IN POLICY IT'S ONLY A MATTER OF A FEW YEARS WHERE THOSE METRICS WILL ABSOLUTELY LOOK LIKE A DOUBLE-A. OUR GAPD-TO-DEBT RATIO IS IN THE MID 70s. IT'S HEADED UP TO THE MID 80s EVEN AFTER LAST WEEK'S DECISION BY CONGRESS ON THE BUDGET CONTROL ACT.

>> Woodruff: KEN, WHETHER ONE BELIEVES THIS DOWNGRADE WAS JUSTIFIED OR NOT, WHAT ARE THE CONSEQUENCES IN THE SHORT TERM AND IN THE LONG TERM?

>> WELL I THINK IN THE SHORT TERM, THE CONSEQUENCES ARE HARD TO PREDICT BECAUSE IT'S A VERY VOLATILE AND EMOTIONAL MARKET. PEOPLE ARE SCARED ABOUT GROWTH SLOWING, BUT THEY'RE LOOKING FOR DIRECTION. THEY'RE LOOKING FOR LEADERSHIP. AND THE CREDIBILITY IS JUST SHOT IN EUROPE. THEY'VE HAD ONE PLAN AFTER ANOTHER WHICH HAS FALLEN SHORT. I THINK THE UNITED STATES IS INDEED IN A MUCH STRONGER POSITION. BUT IT WAS VERY UGLY WHAT HAPPENED. I THINK IT REALLY CUT INTO OUR INSTITUTIONS. WE SHOULDN'T HAVE THIS DEBT CEILING. THEY SHOULD HAVE RAISED IT UNCONDITIONALLY. I THINK PRESIDENT OBAMA SHOULDN'T HAVE GIVEN IN SO MUCH TO THE TEA PARTY. THAT I THINK WEAKENED HIS LONG- TERM HAND IN THE PRESIDENCY.

>> JUDY, CAN I WEIGH IN? ALL OF THIS... THERE'S A LOT OF TRUTH IN ALL OF THIS BUT WHAT ACTUALLY HAPPENED IN THE MARKETS TODAY LOOKED LIKE A GROWTH PANIC. IT LOOKED LIKE THE MARKETS, INVESTORS ARE AFRAID THAT THIS GLOBAL ECONOMY IS GOING BACK INTO THE DITCH AND NOBODY IS PREPARED TO ACT. IN A WAY WHAT THE MARKETS WERE TELLING US WAS YOU GUYS HAVE BEEN OBSESSING ON THE WRONG THINGS. SURE, WE HAVE A LONG-RUN FISCAL PROBLEM BUT RIGHT NOW WE NEED TO BE GETTING THE ECONOMY MOVING. THAT'S THE THING THAT NOBODY HAS BEEN TALKING ABOUT.

>> Woodruff: IF THAT'S THE CASE, TERRY BELTON, WHAT CAN BE DONE TO STOP THIS? OR IS THERE JUST NO STOPPING IT IN THE NEAR TERM?

>> RIGHT. WELL, AS I SAID, WE'RE ALMOST OUT OF BULLETS. IT'S LIKE, YOU KNOW, THE EPISODE DRAWING THE GUN. I THINK WE'LL SEE THE FED DO THAT TOMORROW.

>> Woodruff: WHAT DO YOU MEAN?

>> WELL, I THINK THROW THE GUN. I MEAN YOU'RE OUT OF BULLETS. THE ONLY THING LEFT TO TRY TO DEAL WITH IT IS WHATEVER YOU CAN. TOMORROW I THINK WHAT WE'RE GOING TO SEE FROM THE FED IS NOT AN ANNOUNCEMENT BUT IN ALL LIKELIHOOD IT'S GOING TO CHANGE ITS REINVESTMENT PROGRAM TO REALLY EXTEND AND LENGTHEN THE CURVE IN THE TREASURY MARKET. THAT WILL KEEP RATES LOWER. I THINK ON THE FISCAL SIDE, WHAT WE NEED AND WE SORT OF MISSED THE BOAT HERE, A LITTLE BIT OF THE OPPOSITE OF WHAT WE GOT. WE NEED LONG-TERM REFORMMENT WE NEED TO DEAL WITH ENTITLEMENTS REFORM AND TAX REFORM. THAT LOWERS DEFICIT IN THE LONG RUN. WE ACTUALLY NEED STIMULUS NOW. WE'RE ALMOST GETTING THE OPPOSITE COMING IN TO NEXT YEAR, WE'RE GOING TO HAVE QUITE A FISCAL DRAG KICK IN AS THE 2011 TAX CUTS RUN OFF. THAT'S GOING TO HURT GROWTH A LOT NEXT YEAR.

>> Woodruff: KEN ROGOFF, HOW DO YOU SEE WHAT NEEDS TO HAPPEN IN THE SHORT TERM TO TURN THIS AROUND OR DO WE JUST FASTEN OUR SEAT BELTS?

>> I THINK DEFINITELY WE NEED TO SEE HIGHER INFLATION. WE DON'T NEED TO SEE THE FED JUST TALK ABOUT QE-3, MORE BOND BUYING BUT QE-3, THEY SHOULD ANNOUNCE THEY'RE TRYING TO HIT SIGNIFICANTLY HIGHER INFLATION. THEY REALLY HAVE TO MOVE DECISIVELY. IT WAS REALLY HALF BAKED AND TIMID THE FIRST TIME THEY DID IT. I DON'T THINK THEY'RE OUT OF BULLETS AT ALL. I THINK IT CAN BE EFFECTIVE. BUT THEY NEED TO DO SOMETHING. THEY NEED TO DO SOMETHING ABOUT THE MORTGAGE DEBTS. WE HAVE TO FIND A PLAN. THERE ARE PLANS OUT THERE FOR WRITING DOWN THE MORTGAGE DEBT. FINALLY, OF COURSE, THERE ARE LOTS OF AREAS WE COULD HAVE SO- CALLED STRUCTURAL REFORMS BUT LET'S START WITH GETTING RID OF THE DEBT CEILING WHICH IS PRETTY DEPRESSING FOR GLOBAL MARKETS. THINKING ABOUT THAT YEAR AFTER YEAR.

>> Woodruff: PAUL KRUGMAN, FOR ORDINARY AMERICANS, WHAT DO THEY THINK ABOUT, HOW WORRIED SHOULD THEY BE AS THEY GO TO SLEEP TONIGHT?

>> I DON'T THINK WE'RE ABOUT TO SEE A GREAT DEPRESSION 2. BUT I DO THINK WE ARE REALLY LOOKING AT A LONG PERIOD OF WEAK PERFORMANCE. THERE'S A PRETTY GOOD CHANCE OF A SECOND LEG TO THE RECESSION, A DOUBLE-DIP. THERE'S A VERY GOOD CHANCE THAT UNEMPLOYMENT IS STILL GOING TO BE 9% OR HIGH ERA YEAR FROM NOW, TWO YEARS FROM NOW. SO WHAT WE'RE SEEING NOW IS THE, YOU KNOW, I'VE BEEN CALLING IT THE LESSER DEPRESSION, A REALLY LONG PERIOD OF REALLY POOR PERFORMANCE. IF YOU'RE UNEMPLOYED NOW I REALLY FEEL FOR YOU BECAUSE YOUR CHANCE OF GETTING REEMPLOYED IS VERY LOW. SO THIS IS DEPRESSING. WE NEED SOMEBODY TO STAND UP IN A WAY THAT THE PRESIDENT DID NOT BY THE WAY THIS AFTERNOON AND SAY, WE ARE ON THE WRONG TRACK. WE ARE NOT... WE ARE NOT DEALING WITH THE PROBLEM AT HAND. AT LEAST TO CALL OUT THE PEOPLE WHO ARE STANDING IN THE WAY OF DOING THE RIGHT THINGS.

>> Woodruff: TERRY BELTON, JUST QUICKLY. WHAT SHOULD AMERICANS, ORDINARY AMERICANS BE THINKING AT THIS POINT? ABOUT THE....

>> I MEAN IT'S NOT ALL DOOM AND GLOOM. I THINK THERE ARE SOME GOOD SIGNS. WE'RE SEEING A LITTLE BIT OF SIGNS OF RECOVERY IN THE LABOR MARKET. THE UNEMPLOYMENT RATE IS STILL OBVIOUSLY VERY HIGH. ABOVE 9%. BUT WE ARE SEEING SORT... FOR THE FIRST TIME THIS SUMMER THE LABOR MARKET GAINS. WE HAVE THE JOBLESS CLAIMS IS DOWN AT THE LOWEST LEVEL SINCE APRIL. LAST MONTH'S PAYROLL NUMBER WAS DOUBLE WHAT WE BEEN GETTING THE PREVIOUS THREE MONTHS. WE ACTUALLY THINK WE'RE THROUGH THE WORST. WE HAD A DISMAL GROWTH IN THE FIRST HALF. LIT BE A LITTLE BIT BETTER IN THE SECOND HALF. BUT STILL IT'S JUST NOT ENOUGH.

>> Woodruff: VERY QUICKLY, KEN ROGOFF, A WORD ON WHAT SHOULD PEOPLE THINK TONIGHT?

>> WELL, THERE'S NO TWO WAYS ABOUT IT. IT'S A SCARY MOMENT. I THINK AGAIN THAT ABSENT THE CREDIBILITY, NO ONE TO STAND UP AND TAKE CHARGE, I WOULD LIKE TO SEE IT START WITH THE CENTRAL BANK BOTH IN EUROPE AND IN THE UNITED STATES MOVING DECISIVELY TO MAKE MONETARY CONDITIONS EASIER. THAT MAY SOUND LIKE HER SEE BUT I REALLY THINK THAT IT'S A TIME FOR OUTSIDE THE BOX THINKING.

>> Woodruff: KEN ROGOFF, PAUL KRUGMAN, TERRY BELTON, GENTLEMEN, WE THANK YOU ALL THREE FOR JOINING US.

>> THANK YOU.

>> THANK YOU.

>> THANKS.

>> Ifill: STILL TO COME ON THE NEWSHOUR, THE DEADLY HELICOPTER CRASH IN AFGHANISTAN; ATLANTA'S CHEATING SCANDAL; AND CHANGES TO "NO CHILD LEFT BEHIND." BUT FIRST, WITH THE OTHER NEWS OF THE DAY, HERE'S HARI SREENIVASAN.

>> Sreenivasan: THE GOVERNMENT OF SYRIA PRESSED A NEW ASSAULT TODAY IN ITS RAMADAN OFFENSIVE AGAINST DISSIDENTS. TANKS AND TROOPS POURED INTO THE CITY OF DEIR EL-ZOUR IN THE EAST, AFTER KILLING SCORES OF PEOPLE IN HAMA AND ARRESTING HUNDREDS MORE. WE HAVE A REPORT NARRATED BY JONATHAN MILLER OF INDEPENDENT TELEVISION NEWS.

>> Reporter: A CROUCHING HIDDEN WITNESS COWERS BEHIND A WALL TO RECORD THE DAWN ASSAULT ON THE EASTERN OIL TOWN. A COLUMN OF TANKS ROLLS IN. LOCKED IN AN ESCALATING WAR WITH HIS OWN PEOPLE. HIS DEFIANCE HAS GROWN AS THE BRUTALITY OF THE CRACKDOWN HAS INCREASED. BUT HOW LONG CAN SYRIA'S DICTATOR DESPISE GROWING OUTRAGE? THIS IS DOWNTOWN RIYADH LATE LAST NIGHT. SAUDIS CALLING FOR THE OVERTHROW OF THE SYRIAN REGIME. KING AND DULL A HAS RELEASED A STATEMENT READ ON SATELLITE TV, A FIRST REBUKE FOR MR. ASSAD. "THE KINGDOM DOES NOT ACCEPT THE SITUATION," THE STATEMENT SAID. THE KING DEMANDED WHAT HE CALLED THE STOPPAGE OF THE KILLING MACHINE AND BLOODSHED. IT'S IMMORAL AND AGAINST ISLAM, HE SAID. IT SEEMS REPUGNANT AND ALARM OVER AL ASSAD'S VIOLENCE RAM DAN OFFENSIVE MAY BE WHAT PUSHED FIRST THE GULF COOPERATION COUNCIL AND THEN THE ARAB LEAGUE AND THEN THE SAUDI KING TO BREAK THE DEAFENING ARAB SILENCE.

>> WE ARE ALARMED BY THE SITUATION IN SYRIA. AN ARAB COUNTRY WITH A BIG ROLE IN THE REGION.

>> Reporter: ANCIENT SOUTHERN CITY AND CRADLE OF THE SYRIAN REVOLUTION WHERE TODAY THE ARMY GUNS BLAZED ON. THE SYRIAN LEADER, DEAF TO THE TONGUE-LASHING HE'S NOW HAD FROM FELLOW ARABS, NEIGHBORING TURKEY AND THE WEST. AND AS HIS ISOLATION GROWS SO SYRIA DRIFTS TOWARDS THE ABYSS OF CHAOS AS KING ABDULLAH WARNED.

>> Sreenivasan: STREET VIOLENCE SPREAD TO MORE OF LONDON AND BEYOND TODAY, AS BRITISH POLICE REPORTED MORE THAN 215 ARRESTS. THE TROUBLE BROKE OUT SATURDAY NIGHT WHEN SEVERAL HUNDRED YOUTHS ATTACKED POLICE, BROKE INTO SHOPS, AND BURNED VEHICLES. IT CAME ON THE HEELS OF THE FATAL SHOOTING OF A MAN BY POLICE LAST THURSDAY. THIS EVENING, LOOTING ALSO BROKE OUT IN THE CITY OF BIRMINGHAM, 120 MILES TO THE NORTH. THE U.S. GOVERNMENT HAS PLEDGED TO PROVIDE $105 MILLION IN NEW FAMINE RELIEF FOR THE HORN OF AFRICA. AMERICAN OFFICIALS WARNED TODAY THAT MANY THOUSANDS OF SOMALIS COULD DIE IF HELP DOES NOT COME SOON. AND JILL BIDEN, THE VICE PRESIDENT'S WIFE, VISITED A REFUGEE CAMP IN EASTERN KENYA, WHERE THOUSANDS OF SOMALIS HAVE FLED. SHE SAID THE SITUATION IS "DIRE."

>> ONE OF THE REASONS TO BE HERE IS JUST TO ASK AMERICANS AND PEOPLE WORLDWIDE, THE GLOBAL COMMUNITY, THE HUMAN FAMILY, IF THEY COULD JUST REACH A LITTLE BIT DEEPER INTO THEIR POCKETS AND GIVE MONEY TO HELP THESE POOR PEOPLE, THESE POOR MOTHERS AND CHILDREN.

>> Sreenivasan: IN A RELATED DEVELOPMENT, THE ISLAMIST REBEL GROUP AL-SHABAB WITHDREW FROM THE SOMALI CAPITAL OVER THE WEEKEND. THE MOVE OPENED THE WAY FOR U.N. RELIEF FLIGHTS INTO CITY. NEARLY HALF OF THE WORKERS IN VERIZON'S LANDLINE DIVISION ARE NOW ON STRIKE ACROSS THE EASTERN U.S. 45,000 WORKERS FROM MASSACHUSETTS TO VIRGINIA WALKED OFF THE JOB ON SUNDAY AFTER THEIR OLD CONTRACT EXPIRED AND NEGOTIATORS FAILED TO AGREE ON A NEW ONE. THE KEY ISSUES WERE HEALTH CARE COSTS AND PENSIONS. THE STRIKE COULD CREATE DELAYS IN REPAIRING AND INSTALLING LANDLINE PHONES, AS WELL AS VERIZON'S FIOS TELEVISION AND INTERNET SERVICE. TWO LEADING POLITICIANS FROM ANOTHER ERA WERE REMEMBERED TODAY. IN OREGON, FORMER REPUBLICAN SENATOR MARK HATFIELD DIED LAST NIGHT AT 89. HE WAS AN OUTSPOKEN VIETNAM WAR CRITIC WHO SERVED FIVE TERMS, BEGINNING IN 1966. AND FORMER DEMOCRATIC GOVERNOR HUGH CAREY OF NEW YORK PASSED AWAY SUNDAY EVENING. HE HELPED RESCUE NEW YORK CITY FROM THE BRINK OF BANKRUPTCY DURING ITS 1975 FINANCIAL CRISIS. THOSE ARE SOME OF THE DAY'S MAJOR STORIES. NOW, BACK TO GWEN.

>> Ifill: NEXT TONIGHT, A HELICOPTER IS SHOT DOWN IN AFGHANISTAN, RESULTING IN THE WORST DAY OF U.S. CASUALTIES IN TEN YEARS. MARGARET WARNER HAS THE STORY.

>> Warner: ATTACK HELICOPTERS PATROLED THE SKIES TODAY AS U.S. TROOPS ON THE GROUND CORDONED OFF THE CRASH SITE SOUTH OF KABUL. 30 AMERICANS, INCLUDING 22 NAVY SEALS PLUS SEVEN AFGHAN TROOPS AND AN INTERPRETER DIED EARLY SATURDAY IN THE VALLEY WHEN THEIR CHINOOK HELICOPTER WAS SHOT DOWN APPARENTLY BY A ROCKET-PROPELLED GRENADE. THE TALIBAN CLAIMED RESPONSIBILITY. U.S. COMMANDERS IN KABUL SAID THE SEAL FORCE WAS SENT TO ASSIST ARMY RANGERS WHO HAD COME UNDER FIRE BY INSURGENTS DURING AN OPERATION TO NAB A TALIBAN LEADER. THE VALLEY LIES IN MOUNTAINOUS WARDAK PROVINCE JUST 50 MILES SOUTHWEST OF KABUL. U.S. FORCES TURNED OVER THE VALLEY'S SOLE AMERICAN OUTPOST TO AFGHAN FORCES LAST SPRING. AT THE WHITE HOUSE THIS AFTERNOON, PRESIDENT OBAMA SAID THE WORK OF THE MEN AND THEIR MISSION GOES ON.

>> I KNOW THAT OUR TROOPS WILL CONTINUE THE HARD WORK OF TRANSITIONING TO A STRONGER AFGHAN GOVERNMENT AND ENSURING THAT AFGHANISTAN IS NOT A SAFE HAVEN FOR TERRORISTS.

>> Warner: THE FALLEN MEN WERE MEMBERS OF THE NAVY'S VAUNTED SEAL TEAM 6, THE SAME SPECIAL FORCES UNIT THAT KILLED OSAMA BIN LADEN IN PAKISTAN. THOUGH NONE OF THE SAME TROOPS WERE INVOLVED. IN TAMPA TODAY, ADMIRAL WILLIAM McRAIN WHO RAN THE BIN LADEN MISSION WAS INSTALLED AS CHIEF OF THE ENTIRE SPECIAL OPERATIONS COMMAND. DEFENSE SECRETARY LEON PANETTA LAUDED THE CONTRIBUTIONS OF SPECIAL OPS FORCES TO THE DECADE-LONG WAR.

>> WE KNOW THAT THESE SUCCESSES ARE DRIVEN BY THE WILLINGNESS OF THESE BRAVE WARRIORS TO SHOULDER HEAVY BURDENS, TO TAKE ON GREAT RISKS, AND AS WE ALL KNOW, THAT COMES OFTEN TIMES AT A VERY HIGH COST.

>> Warner: THIS WAS THE SECOND U.S. HELICOPTER SHOT DOWN IN AFGHANISTAN IN THE PAST TWO WEEKS.

>> Warner: FOR MORE WE GO TO MARK THOMPSON MILITARY CORRESPONDENT FOR "TIME" MAGAZINE. WELCOME BACK, MARK. BASEDED ON WHAT HAS BEEN DISCLOSED ON FAR-- AND I REALIZE IT'S INCOMPLETE-- BUT WHAT WAS IT-- AND WE KNOW ABOUT THE ORIGINAL RANGER RAID AND THEN THE SEALS BEING BROUGHT IN. WHAT DO YOUR SOURCES THINK WENT WRONG?

>> IT'S IMPORTANT TO REALIZE, MARGARET, THAT MILITARY HELICOPTER FLYING IS A LOT LIKE COMMERCIAL AVIATION. YOU'RE IN TROUBLE WHEN YOU TAKE OFF AND YOU'RE IN TROUBLE WHEN YOU LAND. IN THE MIDDLE IT'S GENERALLY OKAY ESPECIALLY IN AFGHANISTAN. I'VE BEEN THERE. I'VE BEEN IN A CH-47 FLYING OVER THE EARTH. WE'RE LIKE AN AIRBORNE TOE BAG ONGOING UP AND DOWN OVER THE HILLS THROUGH THE VALLEYS. WHAT HAPPENED HERE APPARENTLY IS THAT THE CH-47, AS IT WAS NEARING ITS LANDING ZONE, HOT LZ WHERE THE BAD GUYS WERE HANGING OUT ALREADY ENGAGEDED IN A FIRE FIGHT WITH THE RANGERS HAD TO SLOW DOWN BEFORE IT COULD LAND. AND ALMOST WHEN IT CAME TO A STOP PREPARING TO ENTER THE HOVER, A LUCKY SHOT RANG OUT FROM APPARENTLY AN RPG, A ROCKET-PROPELLED GRENADE, THAT EITHER HIT A FUEL BLADDER OR A ROTE OR BLADE OR SOME KEY MECHANICAL PART THAT QUICKLY CONSUMED THE AIRCRAFT AND PLANE... IN FLAMES AND BROUGHT IT DOWN.

>> Warner: WAS THERE ANYTHING UNUSUAL ABOUT THIS OPERATION, FOR INSTANCE BRINGING IN A BIG LUMBERING SLOW-MOVING HELICOPTER LIKE THE CHINOOK INTO THE VALLEY LIKE THIS OR IS FACT THAT THERE WERE 22 SEALS ON ONE HELICOPTER.

>> I THINK THE KEY THING WAS THIS WAS A QUICK-REACTION FORCE. THEY WERE EITHER ON THE GROUND READY TO GO ON A MOMENT'S NOTICE OR ACTUALLY MAY HAVE BEEN AIRBORNE AT THE TIME THEY WERE SUMMONED BECAUSE YOU CANNOT SEND YOUR RANGERS INTO HARM'S WAY WITHOUT ANYONE THERE TO RESCUE THEM IF THEY GET INTO TROUBLE. THE RANGERS GOT INTO TROUBLE. THE ORDER WENT OUT. THE SEALS CAME IN. THERE ARE 10,000 SPECIAL OPERATIONS FORCES IN AFGHANISTAN. ON ANY GIVEN NIGHT WHEN NIGHT RAIDS ARE BEING CONDUCTED, YOU HAVE THESE UNITS NOT ALL THESE SEALS NOT ALL THESE SPECIAL FORCES BUT QUICK REACTION FORCES READY TO COME TO THEIR AID IF THEY GET IN TROUBLE.

>> Warner: TELL US ABOUT WARDAK PROVINCE. THIS IS A PLACE OF CONFLICT FOR AT LEAST TWO IF NOT THREE YEARS. WHAT'S SPECIAL ABOUT IT? WHAT'S IMPORTANT ABOUT IT?

>> THE KEY THING IS THE FOLLOWING: NUMBER ONE THE TANKY VALLEY IS A CORRIDOR THROUGH THE PROVINCE INTO KABUL. THE PROVINCE IS BASICALLY ON THE SOUTHWESTERN DOORSTEP OF THE NATION'S CAPITAL. AND AMERICANS FOR THE PAST COUPLE OF YEARS HAVE PAID A LOT OF ATTENTION TO HELMAND AND KANDAHAR PROVINCE. FURTHER TO THE SOUTH. YOU KNOW, CLOSER TO PAKISTAN. THIS IS ON THE OTHER SIDE OF THE CAPITAL. IT'S RIGHT NEXT TO THE CAPITAL. APPARENTLY YOU GET THIS FROM MILITARY OFFICIALS THAT, YOU KNOW, THEY'RE TRYING... THEY HAVE THEIR SO-CALLED RING AROUND AFGHANISTAN. YOU GET THE SENSE THE TALIBAN ARE DOING MUCH THE SAME THING. THEY ARE SORT OF GATHERING AROUND THE CAPITAL. KARZAI FOR A LONG TIME HAS BEEN CALLED THE MAYOR OF KABUL. IT'S LOOKING LIKE THAT'S THE TALIBAN STRATEGY RIGHT NOW.

>> Warner: WHY DID THE U.S. GROUND FORCES LEAVE THE ONE OPERATING BASE THEY HAD IN THIS TANGY VALLEY AND WHAT HAPPENED?

>> BASICALLY THEY PULLED OUT IN THE SPRING BECAUSE WE'RE PREPARING TO BUILD DOWN. AND OUR TICKET OUT OF AFGHANISTAN IS TO TURN OVER PROVINCES TO THE AFGHAN NATIONAL ARMY. THIS WAS A KEY TEST OF THAT. AS SOON AS THE AMERICANS LEFT AND THE AFGHANS CAME IN, BY ALL ACCOUNTS THE AFGHANS WERE NOT UP TO THE TASK. THE TALIBAN, YOU KNOW, JUST LIKE A DROP OF OIL, SEEPED IN AND BEGAN SPREADING AROUND. THEY'RE RUNNING COURTS. THEY'RE CONDUCTING ROADBLOCKS, CHECK POINTS, YOU KNOW, EXTORTING STUFF FROM TRAVELERS. SO IT'S NOT A GREAT REPORT CARD IN TERMS OF THE WAY FORWARD.

>> Warner: DO ANY OF THE PEOPLE YOU WERE TALKING TO AT THE PENTAGON THINK THAT THIS IS IS SORT OF A WARNING ABOUT WHAT MAY HAPPEN MORE OFTEN WHEN U.S. FORCES GET SPREAD MORE THINLY?

>> WELL, I THINK A COUPLE OF THINGS. NUMBER ONE IT'S IMPORTANT TO REALIZE THIS WAS THE SO-CALLED GOLDEN B-B. IT WAS A VERY LUCKY SHOT. THIS HAPPENS VERY RARELY. THERE HAVE BEEN $120 HELICOPTER CRASHES IN AFGHANISTAN IN TEN YEARS THERE. ONLY 20 OF THEM HAVE BEEN DUE TO HOSTILE FIRE. MOST OF THEM ARE JUST RUN OF THE MILL ACCIDENTS BUT THE KEY THING HERE IS THAT THE U.S. CAN HOLD TERRITORY IN AFGHANISTAN BUT WHEN IT PULLS OUT AND TURNS IT OVER TO OUR AFGHAN PARTNERS, IN SOME AREAS PLAINLY THEY ARE NOT YET UP TO THE TASK.

>> Warner: BRIEFLY BEFORE WE GO AS THE U.S. STARTS BUILDING DOWN, WE'RE SUPPOSED TO HAVE 0,000 TROOPS OUT BY NEXT SEPTEMBER. WILL THE WHOLE INTERNATIONAL OPERATION BECOME MORE RELIANT ON SPECIAL FORCES?

>> WELL, NUMBER ONE, THE TRIGGER PULLERS ARE STAYING. THE PEOPLE WHO ARE COMING OUT THIS YEAR AND MOST OF NEXT YEAR ARE MORE OF THE ENABLERS. THE SUPPORT FORCES. THEY WANT TO DO THE MATH AND THE NUMBERS DON'T MATTER. WHAT MATTERS IS WHAT RESIDUAL FORCE YOU HAVE LEFT BEHIND. IT'S GOING TO BE VERY GUN-HEAVY. SO THERE WILL BE A LOT OF SPECIAL FORCES AND ESPECIALLY IF THE U.S., YOU KNOW, RELIES MORE ON THE SORT OF COUNTERTERRORISM THING OF GOING AFTER BAD GUYS AS OPPOSED TO SECURING THE POPULATION. WE ARE GOING TO BE RELYING MORE AND MORE ON SPECIAL OPERATORS.

>> Warner: THEREFORE THE SPECIAL OPERATORS MAY BE VULNERABLE TO THIS VERY UNLUCKY SHOT FOR THEM.

>> YOU FIRE ENOUGH BULLETS IN THE AIR ONE OF THEM IS GOING TO HIT SOMETHING IMPORTANT ON YOUR HELICOPTER.

>> Warner: MARK THOMPSON, "TIME" MAGAZINE, THANKS.

>> Woodruff: NOW, THE FIRST OF TWO STORIES ABOUT THE NATION'S SCHOOLS. STUDENTS RETURNED TO ATLANTA CLASSROOMS FOR THE START OF A NEW SCHOOL YEAR TODAY. BUT STUDENTS AND TEACHERS WILL BE LABORING UNDER THE CLOUD OF A MAJOR CHEATING SCANDAL THAT'S RAISING BIG QUESTIONS IN ATLANTA AND IN DISTRICTS ACROSS THE COUNTRY. SPECIAL CORRESPONDENT JOHN TULENKO OF LEARNING MATTERS TELEVISION HAS OUR REPORT.

>> Reporter: PARKS MIDDLE SCHOOL IN ATLANTA GEORGIA WAS A BEACON OF HOPE, LOCATED IN ONE OF THE POOREST NEIGHBORHOODS IN THE CITY. IT HAD BUILT A REPUTATION AS A HIGH-ACHIEVING SCHOOL. CHANDRA FELT LUCKY TO SEND HER CHILDREN TO PARKS.

>> THIS WAS THE COLLEGE-PREP SCHOOL. I'VE SEEN THE CHANGE GOING ON OVER THERE. I WAS REALLY IMPRESSED WITH THAT. THAT'S WHAT MADE ME WANT MY DAUGHTER TO GO THERE MORE SO THAN EVER.

>> Reporter: PARKS HAD MADE SOME OF THE LARGEST GAINS ANYWHERE IN GEORGIA. PASS RATES ON THE STATE TESTS CLIMBED FROM 35% TO 78% IN READING. FROM 24% TO 86% IN MATH. AND THEN THIS SUMMER CAME SHOCKING NEWS.

>> THE REPORTS' FINDINGS ARE TROUBLING. WE DETERMINED THAT 178 TEACHERS AND PRINCIPALS IN THE ATLANTA PUBLIC SCHOOL SYSTEM CHEATED.

>> Reporter: THE GEORGIA BUREAU OF INVESTIGATION RELEASED AN 800-PAGE REPORT DETAILING DISTRICTWIDE CHEATING ON THE STATE TESTS GOING BACK TO AT LEAST 2006. IN SOME COOLS TEACHERS WOULD POINT OR USE VOICE INFLECTION TO GUIDE STUDENTS TO THE RIGHT ANSWERS. BUT AT PARKS MIDDLE SCHOOL, THEY TOOK CHEATING TO A WHOLE OTHER LEVEL. BEFORE THE STATE EXAM INVESTIGATORS WROTE PARKS PRINCIPAL CHRISTOPHER WALLER WILL GIVE A TEACHER THE KEY TO THE ROOM WHERE THE TESTS WERE KEPT. THEN THE TEACHER, QUOTE, USED A RAZOR BLADE TO OPEN THE PLASTIC WRAPPING AROUND THE TEST BOOKLETS, COPIED TESTS FOR EACH GRADE AND RESEALED THE WRAPPING USING A LIGHTER TO MELT THE PLASTIC. AFTER STUDENTS HAD FINISHED TESTING, PRINCIPAL WALLER TOLD TEACHERS IT WAS, QUOTE, TIME TO GO. MEANING GO TO THE ROOM WHERE THE TESTS WERE KEPT AND CHANGE THE ANSWERS. IN ALL, 12 TEACHERS AND THE PRINCIPAL AT MARKS WERE IMPLICATED. SEVEN CONFESSED TO CHEATING. CHANDRA'S DAUGHTER'S TEACHER WAS AMONG THEM.

>> I WAS REALLY MAD. THESE CHILDREN TAKE A TEST. YOU KNOW WHAT IT'S CALLED? IT'S CALLED A DRUG DEALER THEY HAVE TO WALK PAST, THE PRONS ST. LOUIS THEY HAVE TO WALK PAST. WE EITHER GET IN THE DOOR. WHAT ARE WE DOING WHEN WE'RE INSIDE? ALL THE STUFF THAT'S GOING ON, TAKING THEM KIDS RIGHT BACK TO WHERE THEY CAME FROM. SOMEBODY DIDN'T GIVE A CRAP ABOUT MY CHILD.

>> Reporter: THE STATE INVESTIGATION UNCOVERED CHEATING IN 44 SCHOOLS. ALMOST HALF THE DISTRICT'S TOTAL. RECENT REPORTS OF CHEATING HAVE COME UP ELSEWHERE TOO. IN LOS ANGELES, HOUSTON, PHILADELPHIA, AND WASHINGTON D.C. BUT THE CASE IN ATLANTA IS BY FAR THE LARGEST. AND IT'S LEFT MANY PEOPLE WONDERING WHY IT HAPPENED. AND HOW IT CAN BE PREVENTED FROM HAPPENING AGAIN. IT'S TEMPTING TO BLAME PRINCIPALS AND TEACHERS FOR WHAT THEY DID BECAUSE WHAT THEY DID IS CLEARLY WRONG. IT'S UNETHICAL. IN MANY CASES IT'S ILLEGAL.

>> Reporter: ROBERT SCHAEFFER TRACKS CHEATING FOR FAIR TESTS, A NATIONAL GROUP OPPOSED TO THE HIGH STEAKS FILL IN THE BUBBLE TESTS USED BY MOST STATES.

>> YOU NEED TO UNDERSTAND THE CONTEXT IN WHICH THESE ACTIONS TOOK PLACE. THE PRESSURE TO BOOST SCORES BY ANY MEANS NECESSARY IS SO GREAT THAT TEACHERS THINK THEY HAVE TO GET THOSE SCORES UP BY HOOK OR BY CROOK.

>> Reporter: IN ATLANTA, ACCORDING TO THE STATE'S INVESTIGATION, PRESSURE CAME FROM THE TOP. SUPERINTENDENT BEVERLY HALL, WHO LED THE DISTRICT FOR 12 YEARS AND WAS 2009 NATIONAL SUPERINTENDENT OF THE YEAR, SET TARGETS FOR TEST SCORE IMPROVEMENTS AT EVERY SCHOOL AND TOLD PRINCIPALS THAT IF THEY FAILED TO MEET THEM, SHE'D FIND SOMEONE WHO WILL. PRINCIPALS PASSED THE MESSAGE ALONG. HOW WERE TEACHERS TREATED IN ATLANTA PUBLIC SCHOOLS?

>> TEACHERS GET ABUSED. IN THESE DIFFICULT, CHALLENGED SCHOOLS YOU HAVE ADMINISTRATORS WHO ARE TELLING TEACHERS, "DO IT OR ELSE."

>> Reporter: GRAHAM TAUGHT IN ATLANTA FOR FOUR YEARS AND KNEW ABOUT THE PRESSURE TO MEET TEST SCORE TARGETS.

>> IN THESE LOWER-INCOME NEIGHBORHOODS, A STUDENT MIGHT NEED TO MAKE 50 POINTS OF GAINS TO REACH THE SAME ABSOLUTE SCORE THAT A STUDENT IN A HIGH-INCOME NEIGHBORHOOD MIGHT ONLY NEED TO MAKE TWO POINTS TO REACH THAT GOAL. 50 POINTS IS A LOT OF GAINS PERHAPS UNREALISTIC TO MAKE IN ONE YEAR. IN THAT KIND OF SITUATION, SOME PEOPLE CRACK. MORE AND MORE APPARENTLY EACH YEAR. THERE ISN'T MUCH MORE REPORTED CHEATING NOW THAN AT ANY TIME IN THE PAST.

>> Reporter: SCHAEFFER SAYS THE INCREASE BEGAN NEARLY A DECADE AGO WITH THE FEDERAL EDUCATION LAW KNOWN AS NO CHILD LEFT BEHIND. IT REQUIRED STATES TO SET ANNUAL TARGETS FOR PASS RATES ON STATE TESTS AND GAVE THEM UNTIL 2014 TO BRING ALL STUDENTS UP TO GRADE LEVEL OR FACE SANCTIONS.

>> WHEN NO CHILD LEFT BEHIND FIRST BECAME LAW WE SAW MANIPULATING SCORES. THAT'S EXACTLY WHAT HAS HAPPENED.

>> I THINK THERE'S NOT REASON TO THINK THAT THIS IS A BROAD NATIONAL PHENOMENON WHICH IS ONE OF THE REASONS I WOULDN'T NECESSARILY PUT IT AT THE DOORSTEP OF NO CHILD LEFT BEHIND.

>> Reporter: TO MICHAEL OF THE COUNCIL OF GREAT CITY SCHOOLS ATLANTA IS AN ISOLATED CASE. IN SUPPORT OF THAT, GEORGIA INVESTIGATORS FOUND NO EVIDENCE OF CHEATING IN 80% OF ALL SCHOOLS STATEWIDE. BUT WHEN CHEATING HAPPENS, HE SAYS, THE SOLUTION IS CLEAR.

>> IT'S UNACCEPTABLE. IT NEEDS TO BE STOPPED. PEOPLE NEED TO BE PUNISHED. AND WHERE THERE ARE HAND HANGINGS THEY NEED TO BE PUBLIC AND HIGH.

>> Reporter: WITH CHILDREN EXPECTED TO PASS STATE TESTS BY 2014, THE PRESSURE IS MOUNTING. SO FAR 38% OF SCHOOLS NATIONWIDE HAVE FAILED TO MEET TEST SCORE TARGETS SET BY NO CHILD LEFT BEHIND. U.S. SECRETARY OF EDUCATION ARNE DUNCAN TESTIFIED RECENTLY THAT 8% MAY FAIL IN THE YEAR AHEAD. HOWEVER, SCHOOLS MAY GET A REPRIEVE. THE LAW IS UP FOR REAUTHORIZATION AND TARGETS AND DEADLINES COULD CHANGE. BACK IN ATLANTA, SCHOOL OFFICIALS ARE REPAIRING THE DAMAGE. SUPERINTENDENT BEVERLY HALL, WHO HAS DENIED ANY ROLE IN CHEATING, RESIGNED IN JUNE. HER REPLACEMENT HAROLD DAVIS PROMISES SWIFT ACTION.

>> WE WILL FIND THOSE STUDENTS WHO WERE CHEATING. WE WILL DO ASSESSMENTS. WE WILL LOOK AT STUDENTS WHO ARE NOT WHERE THEY'RE SUPPOSED TO BE AND WE WILL PROVIDE AVENUES OF REMEDIATION.

>> Reporter: HE SAYS THEY'LL GO AFTER THOSE WHO CHEATED TOO.

>> I DO NOT BELIEVE THAT ANYONE WHO IS IMPLICATED SHOULD APPEAR IN FRONT OF OUR CHILDREN.

>> Reporter: SOME TEACHERS WILL LOSE THEIR LICENSES. OTHERS MAY FACE CRIMINAL CHARGES. FORMER SUPERINTENDENT HALL, WHO RECEIVED SOME 600,000 DOLLARS IN BONUSES, HAS BEEN ASKED TO RETURN A PORTION OF THAT TIED TO FRAUDULENT TEST SCORES. AS FOR SCHOOLS, FROM NOW ON, ANY UNUSUAL GAINS WILL TRIGGER AUTOMATIC INVESTIGATIONS. BUT WHAT ABOUT THE HIGH EXPECTATIONS AND TOUGH CONSEQUENCES FOR FAILING TO MEET THEM THAT ARE SAID TO HAVE LED TO THE CHEATING IN THE FIRST PLACE?

>> I'M CERTAINLY GOING TO REVIEW THE TARGETS AND TARGET- SETTING PROCESS, BUT I DON'T THINK THAT WE SHOULD ABANDON HIGH EXPECTATIONS. I DON'T THINK WE SHOULD ABANDON PUTTING PRESSURE ON PEOPLE TO MEET HIGH EXPECTATIONS. WHAT WE HAVE TO DO, HOWEVER, IS MAKE SURE THAT THEY HAVE THE CAPABILITY AND THE TRAINING AND THE RESOURCES TO MEET THOSE EXPECTATIONS. WHAT WE HAVE NOT DONE AS A NATION OR A SCHOOL SYSTEM IS THINK WHAT DOES IT LOOK LIKE TO HELP A STUDENT WHO IS STARTING AT A LOWER LEVEL MAKE THE BIG GAINS YEAR AFTER YEAR TO GET TO THIS HIGH GOAL?

>> Reporter: HE ALSO BELIEVES PRESSURE ALONE IS NOT ENOUGH.

>> LET'S THINK ABOUT HOW TO SUPPORT TEACHERS RATHER THAN CONTROL TEACHERS. LET'S THINK ABOUT WHAT DOES THE CLASS SIZE LOOK LIKE? WHAT DO THE LAB SUPPLIES LOOK LIKE? ALL WE'VE CHANGED IS WHAT WE EXPECT. BUT WHAT WE'VE NOT DONE IS CHANGED THE WAY WE DO EDUCATION.

>> Reporter: THERE'S A REAL OPPORTUNITY FOR CHANGE. BOTH IN ATLANTA AND IN THE REAUTHORIZATION OF NO CHILD LEFT BEHIND. THE QUESTION IS, WHAT WILL THE CHANGES BE?

>> Ifill: SECRETARY OF EDUCATION ARNE DUNCAN PROPOSED ONE ANSWER TODAY, ANNOUNCING NEW WAIVERS FOR STATES THAT CAN'T MEET THE LAW'S DEADLINES. WE'LL BE BACK SHORTLY WITH MORE ON THE DETAILS OF THAT EXECUTIVE ORDER. BUT FIRST, THIS IS PLEDGE WEEK ON PBS. THIS BREAK ALLOWS YOUR PUBLIC TELEVISION STATION TO ASK FOR YOUR SUPPORT, AND THAT SUPPORT HELPS KEEP PROGRAMS LIKE OURS ON THE AIR.

>> Woodruff: FOR THOSE STATIONS NOT TAKING A PLEDGE BREAK, WE TAKE A SECOND LOOK AT A BOOK ABOUT CANCER AND THE SEARCH FOR BREAKTHROUGHS TO TREAT IT. THE AUTHOR, ONCOLOGIST AND COLUMBIA PROFESSOR SIDDARTHA MUKHERJEE, WON A PULITZER PRIZE THIS YEAR FOR "THE EMPEROR OF ALL MALADIES: A BIOGRAPHY OF CANCER." NEWSHOUR HEALTH CORRESPONDENT BETTY ANN BOWSER HAS OUR CONVERSATION.

>> LAST YEAR MORE THAN HALF A MILLION AMERICANS WERE DIAGNOSED WITH CANCER. AND ALTHOUGH IT IS NO LONGER AN AUTOMATIC DEATH SENTENCE, CANCER IS STILL THE SECOND LEADING CAUSE OF DEATH IN THE UNITED STATES. DR. SIDDARTHA MUKHERJEE KNOWS THAT REALITY WELL. HE'S AN ONCOLOGIST IN CANCER RESEARCHER AT THE COLUMBIA UNIVERSITY MEDICAL CENTER IN NEW YORK CITY. IN HIS BOOK, THE EMPEROR OF ALL MALADIES, MUKHERJEE WRITES A HISTORY OF CANCER. HE TELLS THE STORIES OF PEOPLE HE'S TREATED AND THOSE OF LEADING RESEARCHERS WHO DEDICATED THEIR LIVES TO A DISEASE FOR WHICH THE DOCTOR THINKS MAY NEVER HAVE A COMPLETE CURE. FIRST OF ALL, THANKS VERY MUCH FOR BEING WITH US TODAY.

>> THANKS FOR HAVING ME.

>> SO, WHY DID YOU DECIDE TO WRITE A BOOK ABOUT THE HISTORY OF CANCER?

>> WELL, I REALLY DECIDED TO WRITE THE BOOK, I STARTED WRITING THE BOOK WHEN I WAS IN TRAINING IN CANCER MEDICINE. I WROTE THE BOOK REALLY IN RESPONSE TO A QUESTION THAT WAS RAISED BY A PATIENT. THIS WAS A WOMAN I WAS TREATING FOR ABDOMINAL CANCER. AT ONE POINT IN TIME DURING THE THERAPY SHE SAID I'M WILLING TO GO ON WITH WHAT I'M BATTLING BUT I NEED TO KNOW WHAT IT IS. I NEED TO KNOW ITS HISTORY. SHE WAS NOT THE ONLY PERSON THAT QUESTIONED IT. THIS QUESTION KEPT ON COMING OVER AND OVER AGAIN IN DIFFERENT FORMS. THE BOOK IS AN ATTEMPT TO ANSWER THAT VERY BASIC QUESTION: WHAT IS CANCER? IT'S A DISEASE THAT CLEARLY AFFECTS ALL OF OUR LIVES. WHAT ITS HISTORY? WHAT IS ITS PAST? I PUT IT ALTOGETHER IN A BOOK.

>> YOU MAKE IT ALMOST A BIOGRAPHY LIKE CANCER IS AN INDIVIDUAL. A PERSON. AND YOU USE TERMINOLOGY LIKE IT'S IMMORTAL. WHEREAS HUMAN BEINGS AREN'T.

>> CANCER IS NOT ONE DISEASE BUT A WHOLE FAMILY OF DISEASES BUT ALL THESE DISEASES ARE LINKEDED AT A VERY FUNDAMENTAL LEVEL AND THEY ARE ABNORMAL UNCONTROLLABLE GROWTH OF CELLS. IT'S THIS VERY FEATURE, THE FACT THAT THE CELLS KEEP DIVIDING THAT GIVES THEM WHAT I CALL THEIR IMMORTALITY. IF THERE'S ONE REALLY CHILLING REALIZATION AT THE BOTTOM THF BOOK IS THAT ALTHOUGH CANCER CAN BE UNLEASHED BY CHEMICALS AND VARIOUS THINGS FROM THE ENVIRONMENT, THE FUNDAMENTAL GENE THAT CONTROLS CANCER CELLS ARE VERY MUCH PART OF THE HUMAN GENOME.

>> YOU START THE BOOK BY TALKING ABOUT A PATIENT WHOSE NAME IS CARLA. YOU COME BACK TO HER THROUGHOUT THE WHOLE BOOK. YOU MORE OR LESS END THE BOOK WITH HER. WHAT WAS IT ABOUT THIS PARTICULAR PATIENT THAT CAUSED YOU TO DO THAT?

>> SHE WAS AN EMBLEM TO ME OF EVERYTHING THAT GOES INTO MAKING OR INTO FACING CANCER. SHE WAS RESILIENT. SHE WAS BRILLIANT. SHE WAS INVENTIVE. SHE WAS... SHE BROUGHT EVERY BIT OF HER RESOURCEFULNESS TO THIS MOMENT IN HER LIFE.

>> SHE HAD LEUKEMIA. AND A VERY DREADFUL FORM OF LEUKEMIA.

>> ABSOLUTELY. A VERY DRAMATIC DREADFUL FORM. THE ONE OTHER PIECE OF IT OF COURSE IS IS THAT HER HISTORY WHICH STARTED HAPPENING IN 2005 WAS LINKED TO THE OTHER MAJOR CHARACTER IN THE BOOK WHO EVENTUALLY BIT BY BIT BY BIT BY BIT FINDS A CURE FOR A PARTICULAR FORM OF LEUKEMIA, THE SAME KIND OF LEUKEMIA SHE HAD. CARLA WAS VERY REMINISCENT TO ME OF THE CONNECTION TO SO MANY HISTORIC YEARS BETWEEN A TIME PRESENT AND A TIME PAST. THAT'S WHY I THOUGHT SHE WOULD CONNECT THE BOOK TOGETHER.

>> WHEN YOU WERE DOING YOUR RESEARCH, IT WAS INTERESTING. A LOT OF THE THINGS THAT PEOPLE LEARNED THAT LED TO BREAK THROUGHS IN CANCER WERE UNUNEXPECTED. THEY WEREN'T AHA MOMENTS.

>> YES. ONE SURGEON WAS WALKING THROUGH THE HIGHLANDS IN ENGLAND. HE HEARD SOME SHEPHERDS SAYING, OH, YOU KNOW, WHEN WE REMOVE THE OVARIES OF COWS AND GOATS, THEIR PATTERN OR THE BREAST OF THESE ANIMALS CHANGEDS, THE PATTERN OF MILK PRODUCTION CHANGES. THIS WAS A TIME WHEN NO ONE KNEW WHAT ESTROGEN. HE BEGAN TO WONDER WHAT THE CONNECTION WAS BETWEEN OVARIES AND BREASTS. HE SAID IF THEY'RE CONNECTED MAYBE THEY'RE CONNECTED WITH BREAST CANCER. HE TOOK OUT THREE OR FOUR OVARIES AND HAD THESE AMAZING REMISSIONS. THIS IS THE BASIS FOR THE DRUG THAT ACTUALLY BLOCKS ESTROGEN AND AFFECTS BREAST CANCER. WHO WOULD HAVE THOUGHT THAT TALK TO GO A SHEPHERD IN SCOTTLAND WOULD AFFECT A MILLION DOLLAR DRUG WHICH IS VERY, VERY POWERFUL AGAINST BREAST CANCER TODAY.

>> WHERE ARE THINGS TODAY WITH CANCER IN THE UNITED STATES OF AMERICA?

>> I THINK THERE HAVE BEEN REMARKABLY IMPORTANT RECORD OF PROGRESS. THAT'S NOT TO SAY EVERY FORM OF CANCER. THERE ARE SOME FORMS OF CANCER WHICH ARE STILL LAGGING IN TERMS OF THE ATTENTION PAID TO THEM. BUT OVERALL THERE'S REALLY A RECORD OF PROGRESS.

>> WHAT ARE SOME OF THE MOST DISTURBING THINGS WHERE THERE HAVE NOT BEEN A LOT OF PROGRESS.

>> PANCREATIC CANCER IS A GREAT EXAMPLE. WE STILL DON'T KNOW VERY WELL WHY IT IS THAT PANCREATIC CANCERS... WE KNOW A LITTLE BIT ABOUT IT BUT NOT ENOUGH ABOUT IT. THE CANCER OF THE ESOPHAGUS. WE STILL DON'T KNOW VERY MUCH ABOUT EXACTLY WHY THAT CANCER IS SO HARD TO TREAT. ONE LAST EXAMPLE IS LUNG CANCER. IT WAS A BIG DISEASE. THE LUNG WAS ONE BIG, YOU KNOW, CONSIDERED ONE BIG ENTITY. WE NOW KNOW THAT EVEN THAT CANCER CAN BE SUBDIVIDED UP. SOME PORTIONS OF LUNG CANCER RESPOND VERY, VERY WELL TO THIS ONE MEDICINE. THAT GIVES YOU A DIRECTION AS TO WHERE WE'RE GOING. EVEN A SINGLE CANCER WILL BE BROKEN UP INTO SMALLER ENTITIES AND SPECIFIC MEDICINES WILL BE DESIGNED AS PREVENTION MECHANISMS TO THOSE ENTITIES.

>> YOU THINK WRITING THIS BOOK HAS BEEN THE KIND OF EXPERIENCE THAT MAKES YOU A BETTER DOCTOR?

>> I THINK SO. I THINK, YOU KNOW, I THINK ONE OF THE MOST IMPORTANT THINGS THAT THE BOOK MADE ME REALIZE IS THE NARRATIVE AS ASPECT OF MEDICINE. MEDICINE IS ABOUT STORY TELLING.

>> DOCTOR, THANK YOU SO MUCH FOR BEING WITH US.

>> THANK YOU FOR HAVING ME.

>> Ifill: AND TO OUR SECOND EDUCATION STORY ABOUT CHANGES TO THE LAW KNOWN AS "NO CHILD LEFT BEHIND." NEARLY A DECADE AFTER IT WAS ENACTED, A GROWING NUMBER OF SCHOOLS ARE HAVING TROUBLE MEETING THE LAW'S BENCHMARKS. STATES HAD BEEN REQUIRED TO ACHIEVE 100% PROFICIENCY IN READING AND MATH BY 2014. BUT TODAY, EDUCATION SECRETARY ARNE DUNCAN SAID THE PRESIDENT WOULD SIGN AN EXECUTIVE ORDER TO ALLOW SCHOOLS WHO ARE STILL FALLING SHORT TO CIRCUMVENT THE LAW.

>> THE LAW NO CHILD LEFT BEHIND AS IT CURRENTLY STANDS IS FOUR YEARS OVERDUE FOR BEING REWRITTEN. IT IS FAR TOO PUNITIVE. IT'S FAR TOO PRESCRIPTIVE. LED TO A DUMBING-DOWN OF STANDARDS, LED TO A NARROWING OF THE CURRICULUM. AT A TIME WHEN WE HAVE TO GET BETTER FASTER EDUCATION THAN WE HAD EVER, WE CAN'T AFFORD TO HAVE THE LAW OF THE LAND BE ONE THAT HAS SO MANY DISINCENTIVES TO THE KIND OF PROGRESS WE WANT TO SEE.

>> Ifill: FOR MORE, WE ARE JOINED BY JUSTIN SNIDER. HE'S A CONTRIBUTING EDITOR AT THE "HECHINGER REPORT," A NONPROFIT NEWS ORGANIZATION THAT FOCUSES ON EDUCATION. WE HEARD ARNE DUNCAN SAY TODAY THAT WE SHOULD BE TIGHT ON GOALS BUT LOOSE ON THE MEANS OF ACHIEVING THEM. WHY IS AN EXECUTIVE ORDER NEEDED TO ACHIEVE THESE GOALS?

>> WELL, I WOULD SAY IT'S BECAUSE WE'VE TRY THE OTHER WAY AROUND. WE'VE TRIED TO BE TIGHT ON HOW TO DO IT. IT HASN'T WORKED. WE'VE BEEN UNDER NCLB FOR NINE YEARS NOW. THE PROGRESS EVERYBODY WANTED TO SEE, EVERYBODY EXPECTED TO SEE, REALISTS PROBABLY REALIZED WE'RE NOT GOING TO SEE IT, HASN'T HAPPENED. SO WE'VE GOT TO TRY SOMETHING DIFFERENT.

>> Ifill: WHEN YOU SAY THE PROGRESS THAT REALISTS WANTED TO SEE YOU MEAN CONGRESS WANTED TO ACT. EXPLAIN TO ME EXACTLY WHAT THIS WAIVER WOULD MEAN. WHO GETS IT? WHO DECIDES WHO GETS IT AND WHAT DO YOU HAVE TO DO TO GET A WAIVER?

>> WELL, DUNCAN HAS MADE IT CLEAR THAT ALL 50 STATES ARE ELIGIBLE TO AREPLY FOR A WAIVER. UNLIKE REACH FOR THE TOP WHERE IT WAS CLEAR FROM THE BEGINNING ONLY SOME STATES WOULD ACTUALLY SUCCEED. ALL 50 COULD SUCCEED. BUT IT IS AN APPLICATION PROCESS. SO A STATE WILL APPLY. AND THERE WILL BE AN OUTSIDE NOT JUST A DEPARTMENT OF EDUCATION COMMITTEE JUDGING THE STATE'S APPLICATION AND DECIDING WHETHER TO ISSUE THE WAIVER. WHETHER IT'S ISSUED OR NOT WILL DEPEND ON ONE WHERE WHETHER THE STATE HAS ADOPTED STANDARDS THAT MAKE IT LOOK LIKE STUDENTS WILL GRADUATE FROM HIGH SCHOOL, COLLEGE AND CAREER READY. AND, TWO, WHETHER STATES ARE DOING ANYTHING TO EVALUATE THE TEACHER'S EFFECTIVENESS. THREE, WHETHER THEY'RE TRYING TO TURN AROUND FAILING SCHOOLS. AND FOUR, WHETHER THEY'RE DOING ANYTHING OR WHETHER THEY HAVE ANY PLANS TO IMPLEMENT NEW ACCOUNTABILITY PROVISIONS INSTEAD OF THE TOP-DOWN WAY THAT IS CURRENTLY IN PLACE. THEY NEED TO COME UP WITH LOCAL METHODS TO ENFORCE ACCOUNTABILITY.

>> Ifill: LET'S TALK ABOUT ACCOUNTABILITY. WE JUST HEARD JOHN TULENKO'S REPORT THAT TALKS ABOUT THE CHEATING STANDAL IN THE ATLANTA SCHOOLS AND HOW SOME PEOPLE FEEL THAT THAT WAS BECAUSE OF THE PRESSURE TO TEACH TO THE TEST, THAT YOU HAD TO RAISE TEST SCORES IN ORDER TO KEEP YOUR JOB. DID THE ADMINISTRATION CITE THOSE OR THOSE INCIDENTS AT ALL AS A REASON FOR TRYING TO MOVE ON THIS NOW?

>> WELL, I THINK OBAMA AND DUNCAN AND OTHER PEOPLE HAVE BEEN SAYING OVER AND OVER AGAIN THAT WHAT WE HAVE IN ATLANTA AND ELSEWHERE IS A CASE OF A FEW BAD APPLES. BUT I THINK MORE AND MORE THERE'S REASON TO QUESTION THAT. WE'VE SEEN SIMILAR SCANDALS IN PHILADELPHIA, IN D.C. AND ELSEWHERE THAT HAVE BEEN NOTED. IT'S INTERESTING WHO IS DISCOVERING THOSE SCANDALS. IN MANY CASES IT'S JOURNALISTS. IN ATLANTA IT WAS A VERY, VERY DEEP INVESTIGATION, UNLIKE IN WASHINGTON D.C., SO THE CLOSER YOU LOOK IT APPEARS THE MORE WIDESPREAD CHEATING IS. THAT'S NOT SOMETHING THAT WE'RE HEARING FROM THE TOP.

>> Ifill: ARNE DUNCAN SAID TODAY THERE WAS A UNIVERSAL CLAMOR FOR SOMETHING TO BE DONE EVEN IF CONGRESS DIDN'T ACT. IS THAT SO? IS EVERY STATE IN THE UNION SAYING I WANT TO DO SOMETHING ABOUT THIS NOW OR ARE THERE PEOPLE WHO ARE FAIRLY HAPPY WITH THE WAY THE SITUATION IS NOW?

>> I WOULD SAY MOST STATES ARE, IN FACT, CLAMORING. IT'S BECAUSE THEY REALIZE 2014 IS NO LONGER FAR AWAY. WHEN NCLB WAS FIRST PASSED UNDER BUSH IN 2002, IT WAS EASY TO THINK, WELL, WHO REALLY CARES? IT'S 12 YEARS AWAY. WE DON'T HAVE TO WORRY ABOUT THAT NOW. IN FACT WERE STATES WERE ALLOWED TO SET THE GOALS YEAR BY YEAR, HOW MANY... WHAT PERCENTAGE OF PROFICIENCY THEY'LL HAVE EVERY GIVEN YEAR THEY BASICALLY PUSHED OFF INTO THE DISTANT FUTURE WHEN THEY WOULD GET ANYWHERE NEAR 100% PROFICIENCY. NOW WE'RE IN 2011. 2014 IS NOT FAR AWAY ANYMORE. SO THE REALIZATION IS, YEAH, THAT'S A COMPLETELY UNREALISTIC GOAL. WE NEED TO DO SOMETHING ABOUT THAT OR ELSE WHAT WE'LL HAVE IS WE WON'T HAVE HIGH STANDARDS.

>> Ifill: BUT THE GOAL....

>> AND THE SENSE....

>> Ifill: THE GOAL WAS TO INCREASE HIGH STANDARDS AND TO INCREASE ACCOUNTABILITY. SECRETARY DUNCAN SAID TODAY THERE WOULD STILL BE ACCOUNTABILITY. HOW DO YOU KNOW THAT IF YOU'RE BASICALLY LETTING PEOPLE OFF THE HOOK WITH THESE WAIVERS?

>> WELL, ONE THANK THE WAIVER WILL REQUIRE STATES TO DO IS TO HAVE HIGH STANDARDS AND HAVE ASSESSMENTS THAT MEASURE WHETHER STUDENTS ARE ACTUALLY MEETING THOSE STANDARDS. FOR INSTANCE LAST YEAR THERE WAS AN ATTEMPT AND A SUCCESSFUL ATTEMPT TO INTRODUCE SOMETHING CALLED THE COMMON CORE STANDARDS. OVER 40 STATES IN WASHINGTON D.C. HAVE NOW ADOPTED THEM. AND THEY'RE THOUGHT TO BE A LOT HIGHER THAN MOST PREVIOUSLY HAD. TAKE A STATE LIKE TENNESSEE. IN THE PAST WHEN TENNESSEE WAS DEFINING ITS OWN STANDARDS AND SAYING WHAT PERCENTAGE OF THEIR STUDENTS WERE PROFICIENT, THEY WERE REPORTING BACK IN MATHEMATICS THAT 91% OF THEIR STUDENTS WERE PROFICIENT. WELL, YOU INTRODUCE HIGHER STANDARDS AND SUDDENLY THAT PERCENTAGE DROPS TO 4%. SO IT REALLY MAKES YOU THINK THE STUDENTS AREN'T REALLY ANY DIFFERENT. THE SAME STUDENTS. AND THEY'RE PERFORMING THE SAME. IT'S JUST HOW YOU'RE DEFINING PROFICIENCY. SO WE SEE ONCE WE RAISE THE BAR, PROFICIENCY LEVELS DROP. AND THEREFORE THE STATE SUPERINTENDENTS OF INSTRUCTION ARE ALL VERY CONCERNED ABOUT THIS.

>> Ifill: THANK YOU SO MUCH.

>> THANK YOU.

>> Woodruff: AGAIN, THE OTHER MAJOR DEVELOPMENTS OF THE DAY. INVESTORS FLED STOCKS IN A GLOBAL ROUT FUELED BY THE DOWNGRADE OF U.S. DEBT, AND WORRIES ABOUT EUROPE'S DEBT. THE DOW JONES INDUSTRIAL AVERAGE LOST NEARLY 635 POINTS. AND THE SYRIAN MILITARY PRESSED A RAMADAN OFFENSIVE, SENDING TANKS AND TROOPS INTO AN EASTERN CITY. ON OUR WEB SITE, FIND MORE ABOUT THE ECONOMIC WOES. HARI SREENIVASAN HAS THE DETAILS.

>> Sreenivasan: POSE YOUR QUESTIONS ABOUT THE MARKET DIVE AND MORE TO OUR ECONOMICS CORRESPONDENT PAUL SOLMAN ON HIS MAKING SENSE PAGE. DAVID CHALIAN AND JUDY ASSESS THE POLITICAL BLAME GAME AFTER THE DOWNGRADE OF THE U.S. CREDIT RATING, AND THEY PREVIEW THE IOWA REPUBLICAN STRAW POLL ON THIS WEEK'S POLITICAL CHECKLIST. PLUS OUR GLOBAL HEALTH UNIT REPORTS ON A NEW SOLUTION FOR WATER SHORTAGES, A TECHNOLOGY THAT CONVERTS SEAWATER INTO DRINKING WATER. THAT'S ON THE RUNDOWN BLOG. ALL THAT AND MORE IS ON OUR WEB SITE, newshour.pbs.org. GWEN?

>> Ifill: AND THAT'S THE NEWSHOUR FOR TONIGHT. ON TUESDAY, WE'LL LOOK AT WHAT THE FEDERAL RESERVE CAN DO TO BOOST THE SAGGING ECONOMY. I'M GWEN IFILL.

>> Woodruff: AND I'M JUDY WOODRUFF. WE'LL SEE YOU ONLINE, AND AGAIN HERE TOMORROW EVENING. THANK YOU, AND GOOD NIGHT. MAJOR FUNDING FOR THE PBS NEWSHOUR HAS BEEN PROVIDED BY: CHEVRON. WE MAY HAVE MORE IN COMMON THAN YOU THINK.

>> AND BY BNSF RAILWAY. AND BY THE ALFRED P. SLOAN FOUNDATION. SUPPORTING SCIENCE, TECHNOLOGY, AND IMPROVED ECONOMIC PERFORMANCE AND FINANCIAL LITERACY IN THE 21st CENTURY. AND WITH THE ONGOING SUPPORT OF THESE INSTITUTIONS AND FOUNDATIONS. AND... THIS PROGRAM WAS MADE POSSIBLE BY THE CORPORATION FOR PUBLIC BROADCASTING. AND BY CONTRIBUTIONS TO YOUR PBS STATION FROM VIEWERS LIKE YOU. THANK YOU. Captioning sponsored by MacNEIL/LEHRER PRODUCTIONS Captioned by Media Access Group at WGBH access.wgbh.org

>> THIS IS "BBC WORLD NEWS AMERICA." FUNDING FOR THIS PRESENTATION IS MADE POSSIBLE BY THE FREEMAN FOUNDATION OF NEW YORK, STOWE, VERMONT, AND HONOLULU. NEWMAN'S OWN FOUNDATION. AND UNION BANK. ♪

>> UNION BANK HAS PUT ITS GLOBAL EXPERTISE TO WORK FOR A WIDE RANGE OF COMPANIES. WHAT CAN WE DO FOR YOU?

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