The Nightly Business Report; 1993 Compilation of Unedited Daily Program Segments

<v Cassie Siefert>After weeks of wrangling, Senate Democrats tax writers finally reached an agreement today on a compromise budget plan. Dennis Moore has been watching almost every step of the process, and he joins us now live from Washington. Dennis? <v Dennis Moore>Well, Cassie, the wrangling isn't over yet. The entire Senate Democratic caucus is meeting at this hour to get its first look at the tentative compromise worked out by the Finance Committee Democrats. The caucus reaction could change things, but get out your pencil and paper, these are the important details as we've been able to gather them up to now from sources. First, there will be $19 billion in additional Medicare cuts and a 4.3 cents per gallon tax on transportation fuels. There will be a 35 percent top corporate rate, but a delay in the higher rates for corporations and wealthy individuals until July 1st. The extension of the capital gains- uh there will be an extension of the 10 percent surcharge on earned income to capital gains as well for higher income individuals. And there'll be elimination of the targeted capital gains tax cut for long term investment in small business, and the extension of a small businesses first year write offs could also disappear from the Senate package. Still, overall, it does appear it's the kind of deficit reduction package that President Clinton has been saying he could live with. <v Dennis Moore>President Clinton was pointing to the economic progress he wants credit for so far.

<v Bill Clinton>That's the direction we want. We want a steady recovery. And we have got to pass this economic plan and do it in the near future. Be sure that that goes on. <v Dennis Moore>But it was the headline below that better described the president's Democratic neighbors on Capitol Hill. All day, Finance Committee Democrats battled and compromised behind closed doors over the details of deficit reduction as lobbyists and reporters waited. <v Kent Conrad>You've got 11 people that represent different interests and different constituencies, and trying to come together around a set of moving targets. Uh there have been some real acts of statesmanship. <v Dennis Moore>Statesmanship, maybe. But it's also been compared to sausage making. Well, there was general agreement on approximately 19 billion dollars in Medicare cuts beyond the House-passed deficit plan. And on replacing the BTU tax with a transportation fuels tax of approximately 4 cents a gallon. With those approximatelies, the deficit reduction package wasn't big enough. So committee members worked through options, including a 36 percent top corporate rate, reduced breaks from the alternative minimum tax, and a scaling back of the president's small business investment and enterprise zone tax breaks. <v Computer Man>And the computers are whirring in here, trying to come up with numbers [fade out].

<v Dennis Moore>After their lunch with the president, the corporate CEOs reactions ranged from disappointment with him. <v Roman Boruta>I don't think we're getting what we expected to get from the administration. <v Dennis Moore>With Congress. <v Warren Buffett>I think maybe it's lost sight of the ultimate goal, which is uh is major deficit reduction. <v Dennis Moore>Tempered by a bit of fatalism. <v Lodwrick Cook>Well, it's not a matter of whether it's acceptable to me, as about or what can be worked out between the administration and the Congress that will lead towards that kind of objective. <v Dennis Moore>Well, the president himself has been sounding fatalistic lately. Though Treasury Secretary Lloyd Bentsen in particular has been heavily involved in the lobbying in the Senate, the president has been staying above the fray. After early criticism for caving too soon, the White House decided it was better to keep him at some distance from the bargaining. He's been saying he thinks an acceptable package will emerge finally from the House-Senate conference committee. He's going to have focus his attention there to see what emerges. Cassie. <v Cassie Siefert>Dennis, what are the president's chances of getting any changes that he'd like in the package uh approved in the conference committee? <v Dennis Moore>Well, there's that 1 columnist who's referred to him as Clinton the cloutless, which was apparently true on the Finance Committee, where any 1 Democrat wanted to hold off had more clout than the president at that point. In the conference, it won't be that way because the- the House is essentially on his side. Normally, uh conference committees split the difference, which would mean that the Medicare cuts will probably reduce, some of the energy tax will probably go back up again, and some of the investment incentives might go back in, but as I said before, there's gonna be a lot of sausage making going on all summer long.

<v Cassie Siefert>And what about Republicans and what role are they playing here, if any? <v Dennis Moore>Well, the short answer to now has been not much, because they've all decided they're not going to vote for the Democratic plan no matter what's in it. But since the recess and since some of the people have been hearing from back home, there is now some doubt among Republicans that some of their House Democratic colleagues, enough of them to block passage in the House, would- would keep the president's plan from passing there. And so they think they'll least be in some kind of bargaining position to influence the final outcome. <v Cassie Siefert>OK. Thank you very much, Dennis Moore in Washington. Joining us now from public television station K.E.R.A. in Dallas is the chairman, CEO, and president of American Airlines, Robert Crandall. Mr. Crandall, there've been some conflicting statements on whether or not all of the flight attendants who went out on strike will get their jobs back. Can you clarify that for us? <v Robert Crandall>I sure can, Cassie. They're all- they're all coming back to work.

<v Cassie Siefert>You're not planning any permanent job cuts at all? <v Robert Crandall>Well, there will be- over a period of time, there may very well be some- some uh reductions as a consequence of changing the size of the airline and/or changing the work rules. But within the flight attendant workforce, we have a lot of ways of adjusting that with leaves and part-time and so forth. So the fact matter is that everybody is coming back to work. <v Cassie Siefert>Last night on this program, Bear Stearns analyst Tom Longman predicted that you'll have to scale back at American, that American will have to become a smaller airline now to continue to compete with some of the low-cost carriers. Do you agree with that? <v Robert Crandall>Well, Cassie, the- the best way for an airline to raise its costs is to get smaller, because as you get smaller, for the most part, you raise your unit costs, you don't cut them. I think the- the bottom line, the solution that our whole industry is struggling with, we and United and Delta, all the big airlines, is to find ways to be more productive so that we can fly all the airplanes we've got and thus be more competitive with the low cost and low price carriers. <v Cassie Siefert>What about your relations now with the labor unions at American? Will you be able to be more competitive now that you have somewhat of a tense situation with them there?

<v Robert Crandall>Cassie, I- I hope uh- you know, we always have arguments. Arguments, I suppose, conflicts are inevitable to some extent. We hope to minimize them. A strike such as the one we've just had is always a mistake and error in effect that they make with respect to our determination and we make with respect to theirs. The point is that an airline is a very team-oriented business. All we've got to sell are our people. They're out there very largely unsupervised. We need to have and we want to have good relationships with all of our people and with the unions that represent them. <v Cassie Siefert>What about your relationship with the government, Mr. Crandall? There's been some suggestion that the president pressured you into binding arbitration to improve his political position with labor unions after NAFTA. What are your thoughts on that? <v Robert Crandall>Well, I suppose I- maybe I'm a little bit naive, Cassie, but I think the president's decision to intervene to- to urge me to accept arbitration was not so much an attempt to- to do himself political good, although it may have done him some political good. The fact is there were a lot of people that wouldn't have been able to get home to their families or to family gatherings over Thanksgiving. There are a lot of jobs involved in the airline business and in the businesses related to the airline business. And those are the things the president said to me. And he simply said, I'd like you to agree to arbitration and it's uh. We certainly don't want to appear to be intransigent to the president [fade out].

<v Cassie Siefert>Did you- did you have the impression that the president would have forced you into arbitration if you hadn't agreed? <v Robert Crandall>I decided I wouldn't give him that option. <v Cassie Siefert>OK. We only have a couple of seconds left here. But I did want to ask you about your stock, though. See if you care to comment. Down significantly today, 3 and a half points to 65 and an eighth. You concerned about that? <v Robert Crandall>Well, uh obviously I- I'm concerned for our shareholders. What I think- what the market's saying is that maybe this will make it harder for us to be cost and price competitive. I hope we can come up with some plans to make those things happen.

<v Cassie Siefert>OK. Last question. The L.A. Times is reporting that you may resign as a result of all this. Any truth to that? <v Robert Crandall>None whatever. The fellow that gave them that story, a young man by the name of Bob Mann, or uh who has done a good deal of work for uh labor unions, including some of ours, and apparently doesn't like me very much. But it's not- not it's really not a true story at all. <v Cassie Siefert>OK. I thank you very much for joining us. Robert Crandall of American Airlines. <v Robert Crandall>You're welcome, Cassie. <v Paul Kangas>Yesterday's late rally on Wall Street, which lifted the Dow Industrial Average to a 17-point closing gain to within 2 and a quarter points of a record high, extended into early trading this morning, getting some extra boost from the fabled reports on November durable goods orders along with personal income and spending figures. By 11:00 a.m., the Dow is up almost 9 points and 10 stocks were higher for every 7 lower. The support of a firm bond market helped stock prices hold their gains during mid-session, with some short covering purchases providing a bit of buoyancy too. At 2:30 p.m. the industrial average was up 10 points, well on the record high ground. As volume dried up ahead of the long weekend, so did buying enthusiasm, however. And the Dow Jones Industrial Average steadily slipped to close with a loss of 4.47 at 3757.72, but for the week, a 4-day week, it did manage to rise a little over 6 points. Today we ended 16 and a half points below the best level achieved during the session, and we closed right at the low of the day. Trading volume today down 50 million and then some from yesterday's. Everybody making an early exit, apparently, but quite a bit more up volume and down volume. The Dow Transport Index fell just over 4 points. Utilities fell .53. The closing ticks slightly bullish, plus 293. Standard and Poor's 500 up .06. The 100 was down .81. The mid-cap 400 however gained 1.20. Secondary stocks doing all right in today's market. Commodity Research Bureau Index was up .36. The New York Stock Exchange Index up .34, more broadly based average, and the value line gained just over a point and a very broadly based Wilshire 5000 gained just a little over 6 points. After the market closed, the Federal Reserve reported in the week ending December 13th, the M2 money supply fell 200 million dollars. Well, bond prices came under some mild selling pressure in reaction to those reports showing increases in November, durable goods orders, personal incomes spending. But with most dealers operating with skeleton crews ahead of the long weekend and with the markets shutting down early at 1:00 p.m., there was really no indicative trend. Tax-free and corporate issues ended unchanged. Long-termgovernments rebounded from early losses to close with tiny fractional gains like the long treasury up to 30 seconds. The Lehman Brothers long bond index of 3.18 and Fed funds down just a bit from yesterday at 3 and 1/16 percent. Later, I'll show you where the action was on Wall Street today. Exxon stock was unchanged in trading today. Mobile was down 3/8s of a point. Texaco fell 1 half a point. And the Dow Jones Industrial Average, which was in record territory a good part of the day, up over 10 points, well it kind of fizzled out. And so much for the Santa Claus rally; we ended with a loss of almost 4 and a half points. But for the week overall, the 4-day week, we're up a little over 6 points. 1239 issues closed higher on the big board, 827 lower. You can see the broader market did a lot better than the Dow, 108 new highs for the ?urge? against only 45 new lows, topping the active lists on 3 and a half million shares merry go round up, another half struggling back after a sharp recent losses when the company did admit that it missed payments from some suppliers and was considering possible bankruptcy. RJR Nabisco in there with a quarter-point gain. Merck edged up an eighth, while Sears fell 1/8 and then fifth in volume, American Telephone up 1/8. Narrow movement in those blue chips. Borden was down a half, instead of being bought out, apparently the company is going to restructure. Telmex hitting a record high, up 5/8s of a point. The Mexican Bolsa Index was up 2 percent today at a new record. Disney edging up another eighth had a good gain yesterday when PaineWebber upgraded the stock. Chrysler was down 1 half. And then Paramount down- Paramount down 1 full point, tenth in volume. Parent company of American Airlines, A.M.R. up a full point. Oil prices were down today and then the big Chilean telephone company was up a 2 and 1 half points today. Smith Barney upgraded it from outperform to buy. This company owns 95 percent of Chile's telephone lines. Join- right here. This is the 1, ?inaudible? Then Georgia-Pacific down 1 and 1/8 points. The company is gonna have a fourth quarter loss of around 30 to 50 million dollars due to weak pulp and paper prices. The stock traded as low today as 66 and a half. But then Smith Barney said buy the stock on weakness, and that seemed to help it. General Dynamics down 2 and 7/8. Yesterday it gained 4 points on news Martin Marietta will buy the company's space systems division. But the price, 208 million dollars, uh was a little bit light, according to some Wall Street analysts, little disappointment. Minnesota Mining, the only stock in the Dow Industrial Average that moved more than a point, unfortunately, was down. And then Pfizer moved up one half a point. The company has filed for FDA approval of its ?10 adapt? drug, which is for the treatment of arthritis. CML group, which has been hard hit in recent sessions after a C.J. Lawrence brokerage downgrading, snapping back mostly on a technical basis apparently up 2 and 7/8, saw no fundamental news today. ICN Pharmaceutical gained 1 full point. The company says that its SPI pharmaceutical division, which- of which it owns 53 percent, is going to have record 93 earnings. Banco de- uh Frances del Rio, that's the fourth largest Argentine bank, up 2 and 3/8s. The uh Buenes Aires uh Stock Index today hit a 93 high and Singapore Fund up 1 and a quarter. The Singapore market hit a record high today. So that's a closed-end fund benefiting. Fund America Enterprise down 16 points. Now, this is not as bad as it looks. The stock today was trading ex-distribution, the White River Corporation. That is a spin off to shareholders. That's an investment uh advisory company, and apparently the wall- wa- Wall Street's valuing it had about 16 dollars a share. Rodman & Renshaw, which is a brokerage, down 1 and 3 eighths. The story here is that Abaco Casa de Bolsa, Mexican brokerage, has completed its tender offer at 1050 for control of Rodman & Renshaw, first time that we know of that uh an American brokerage has been taken control of by a Mexican brokerage. The Nasdaq trading gained a 2.63 in the index today, but for the week it fell .53, volume well down from yesterday. 1584, up 1379 down. The 100 index up 3.83. Intel topped the actives list moving up 3/8. Cisco Systems up 1 and 3/8. That stock will be added to the Standard and Poor's 500 index at the close of trading a week from today, so index funds are buying it. Oracle System down a half. Microsoft lost a quarter. MCI down three-eighths of a point. Newbridge Network was up 1/8. Reuters Holdings doing well, up 2 and a half points, but then Broderbund down 6 full points here for first-quarter earnings, up 62 cents, up from 49 cents. But Alex Brown downgraded the stock, nevertheless. Apple Computer was down 3 quarters and uh no change in telecommunications. Enhanced imaging technologies did well, up 2 and a quarter. Prudential Securities upgraded it from whole to an outright buy. Molten metal technology up 2 and a quarter points. Alex Brown upgraded this from buy to a strong buy and then Teledata Communications Limited down 1 in 5 H. Lehman Brothers downgraded the stock from outperform to just neutral. The American Exchange Index up 2.49 today, but for the week, it was up only 1.12. Trading volume down a bit from yesterday, about 3 stocks up for every 2 down. Amdahl topped top the active list, losing 5/8 on 841,000 shares. Amdahl says it sees a fourth-quarter loss of more than 35 cents a share. Starret Housing up 1 and 5/8. No one was available to take our calls today, but the National Association of Home Builders had a very cheery outlook for the housing business. That might've help the stock. Datametrics down a half-point on news the company plans to file for an offering of 2 million shares of common stock. That's our Wall Street wrap up, Cassie. <v Host 1>Even though Paul Kangas isn't with us tonight, he did tape his weekly market monitor segment earlier today.

<v Paul Kangas>My guest market monitor this week is Jim Stack, the president and publisher of the very popular market letter InvesTech, which is based in Whitefish, Montana. But, Jim, it's a great pleasure to have you right here in our studios. Welcome back. <v Jim Stack>It's great to be here again, Paul. <v Paul Kangas>Strange market. It's uh kind of a bear market for anybody that's owned IBM or Dell Computer or Philip Morris, Apple Computer. And yet, for those fortunate enough to have hot new issues like perhaps Mr. Foley and the Congress, it's a bull market. Um have we ever seen a market quite like this before? <v Jim Stack>Well, actually, Paul, yes. In fact, many of the symptoms that we're seeing are the same symptoms that typically appear in the latter stages of a bull market. For example, on Wednesday, when the Dow hit a new all-time high, we only had 80 stocks hit new yearly highs. That's 1 quarter of the number that we saw back in February. So we are seeing some internal deterioration. The- the uh air pocket stocks are pushing people into mutual funds, believing that this mutual fund frenzy will protect them somehow from a declining market. <v Paul Kangas>But all that money coming into funds isn't really pushing the market up that much. Is that a danger side?

<v Jim Stack>It is. We've had over 60 billion dollars flow into mutual funds in the past 6 months and the S&P 500 index is up only 3 percent. It's estimated today that 1 in 4 families now on mutual funds. And the danger in this lies in a study that was released back in the early 70s after the wash out of the last mutual fund mania. It was done by the Wharton Institute and it concluded that the mutual fund industry or institutional money managers exacerbate market swings. That means it could turn the next bear market into a bigger bear market. <v Paul Kangas>You know, last time you were with us, December 11th of last year, all the other major markets- market averages, except for the Dow Industrials made new highs that week. This past week, the Dow is the only major average. Does that have some meaning? <v Jim Stack>Well, it- it again, draws uh some of the divergence that we're seeing. It means that we're entering a higher-risk market. As for win a bear market will start, I think that lies in the Federal Reserve's ball court. <v Paul Kangas>And that's a tough one to call. Mr. Greenspan's comments this weeks and sooner or later, interest rates are going up. That could be the trigger for the bear market.

<v Jim Stack>I think it certainly could be. Our MEP, that's our monetary model that we've often talked about, has been in the favorable region for a record 31 months throughout this bull market. It still suggests that the federal reserve is on the side of the bulls. But the Fed has changed policy in theory. The Open Market Committee voted 11 to 1 to lean toward higher interest rates. As for when we'll see the first uptick in interest rates, I think that will depend on how soon we see consumer confidence rebound. And some strong news on the economic front. <v Paul Kangas>You said the last time beware if Fed funds stay at 3 and 3 quarters percent very long and they haven't, we're nowhere near it now, 3 percent. But that's still a warning sign for you? <v Jim Stack>I would- as soon as federal funds cross the 3 and a half percent level and stay there, especially if the 90 day T-bill rate claims above 3 and a half percent, I think it'll signal that we're past uh past the peak in this bull market. <v Paul Kangas>All right, now, the last time you were with us in December, you were 60 percent in stocks. I've been reading your letter; you're down now to about 40 percent? <v Jim Stack>40 percent in growth or blue-chip stocks. That's about 1 half of our exposure that we had 2 years ago in this bull market was young. Investors have to keep in mind that this is not a young bull market anymore. The Nasdaq index is up 117 percent and the S&P 500 index has gone for 33 months, almost 3 years without a 10 percent correction.

<v Paul Kangas>So you're not buying any more blue chips, growth stocks or just sitting back getting the last- <v Jim Stack>Well, that's right- <v Paul Kangas>Wrung out of them, so to speak. <v Jim Stack>That's right. I think an investor also has to look at alternative investments. <v Paul Kangas>Okay. <v Jim Stack>For example- <v Paul Kangas>30 seconds we have left. <v Jim Stack>The 2 strongest areas in our portfolio have been the Scudder Japan Fund, the precious metals area. I think there's still upside potential there. But the last strategy for an investor to focus on is cash. Cash is not a 4-letter word. There is a time to treat a money market fund as a safe haven. And right now, we're leaning more and more toward a higher cash position, not only for stock, but also for bond investors. <v Paul Kangas>But sil- gold has a little way to go with some of the stocks. <v Jim Stack>That's exactly right. <v Paul Kangas>You like Placer Dome, I know that. <v Jim Stack>Placer Dome, American Barrick. It's a time to walk softly and carry a bigger cash reserve. <v Paul Kangas>Jim, thanks very much for being with us again.

<v Jim Stack>Always my pleasure. <v Paul Kangas>We'll look forward to your next visit. My guest, Jim Stack of InvesTech. <v Cassie Siefert>Supporters of the North American Free Trade Agreement believe that the trade pact will create U.S. jobs in the long run. But tonight's guest commentator, Owen Bieber, president of the United Auto Workers Union, says the agreement will have the opposite effect. <v Owen Bieber>Now that Lee Iacocca has signed on to help sell NAFTA, it's clearer than ever that big business is the main force behind NAFTA. That's hardly surprising since it's been obvious from the beginning that NAFTA is anything but a free trade agreement. Rather, it's a free investment deal. In the UAW, we know the difference. We understand the value of the expanding trade. And we understand as well that we live and work in a global economy. We're convinced that a carefully structured, closer economic relationship between Mexico, Canada, and the U.S. can benefit working men and women in all 3 countries. But a deal that brings us more of what we already have won't do that, not by a long shot. Over the last decade, a half-million U.S. manufacturing jobs have been exported south of the border by employers seeking to exploit Mexico's pathetically low wages and lax enforcement of health and safety and environmental laws. And many, many companies have used the threat of relocating to Mexico to take away hard-won wage, health care, and pension benefits. That's already driving down our standard of living while doing nothing to improve anyone else's. Anyone that is, except the already very rich. That's why NAFTA remains a deal that's bad for America. And that's why Congress should just say no to NAFTA. I'm Owen Bieber. <v Cassie Siefert>President Clinton is focusing most of his efforts on health care reform this week. But guest commentator Carla Anderson Hills, former U.S. trade representative under President Bush, says Mr. Clinton also needs to keep lobbying for bipartisan support of NAFTA.

<v Carla Anderson Hills>Last Tuesday at the White House, President Clinton, with former Presidents Bush, Carter, and Ford at his side, signed side agreements and launched a bipartisan campaign to win approval of the North American Free Trade Agreement, the NAFTA. The NAFTA deserves strong bipartisan support. And in a bipartisan spirit, I have messages for my fellow Republicans and for the president. To Republicans in Congress, NAFTA is a controversial issue. It requires you to educate your constituents. Opponents of NAFTA have done great damage through misstatements and fear-mongering. You may wonder why you should work so hard to help a Democrat president. The reason is simple. The NAFTA is the right thing to do for our country. To President Clinton, your statement at the White House with strong, eloquent, and unequivocal about NAFTA's importance to the United States and your commitment to see it approved. To win, you will have to fight hard. Members of Congress will not be persuaded by 1 ceremony or 1 speech. You must lead the campaign you launched so well every day until victory is at hand. You have rightly said we must compete, not retreat, in today's tough, competitive world. NAFTA is the key to opening the rapidly growing markets throughout this hemisphere, increasing our exports, and creating good jobs for our workers. Its defeat would destroy future U.S. efforts to persuade our trading partners around the world to open their markets. Mr. President, you must maintain the offensive and meet NAFTA's opponents head-on. This fight is yours to win. The facts are on your side. I'm Carla Anderson Hills. <v Cassie Siefert>The North American Free Trade Agreement has stirred the emotions of people on both sides of the issue. But tonight's guest commentator Paul Krugman, professor of economics at M.I.T., suggests it's all a lot of wasted breath.

<v Paul Krugman>Both sides in the debate over NAFTA are playing fast and loose with the facts. NAFTA's opponents are much more dishonest than its supporters. The opponents are telling malicious whoppers, while the supporters are only telling little white lies. Still, neither side has been willing to face the uncomfortable truth, which is that NAFTA will have virtually no effect on the U.S. economy, good or bad. How many people know that the average U.S. tariff on imports from Mexico is already only 4 percent? In other words, any U.S. firm that wants to move production to Mexico can already do so while paying what amounts to only a nominal fee to ship its output home. Do you really believe that a 4 percent tariff is all that stands between us and the great sucking sound that Ross Perot tells us we will hear as all our jobs drain away? On the other hand, claims that NAFTA will create hundreds of thousands of jobs are also far-fetched. Mexico's economy is only 1/20 as big as ours, and its markets are already pretty open to our products. Sure, NAFTA will help our exports, but don't expect anything dramatic. All serious studies of the effects of NAFTA, by which I mean studies whose authors weren't paid to come up with predetermined conclusions, find that the benefits will be larger than the costs. But these net benefits are no more than a few tenths of one percent of income, less than the U.S. economy spends on health care every week. So let's cut out the hype and see NAFTA as it really is: an agreement that will have almost no visible effect on the US economy. I'm Paul Krugman. <v Cassie Siefert>The lack of campaign finance reform legislation and the push for health care reform have combined to make this an especially active time for lobbyists. Tonight, we begin a special 3-part series, The Washington Money Go Round on campaign finance reform, a subject that was very much on the mind of candidate Bill Clinton when we did our first series last fall. Today, however, those reforms seem no closer to realization than they were last year when the Democratic Congress passed a reform bill they knew in advance would be vetoed by George Bush without the possibility of an override. John Palmer joins us again to bring us up to date on what's happened with campaign finance reform in our first Money Go Round. John?

<v John Palmer>Well, Cassie, it is true that Bill Clinton certainly made campaign finance reform, which meant, of course, taming those big money interests in Washington, a principle commitment when he was out on the campaign trail and he reaffirmed that commitment almost as soon as he became president. [music plays] <v Bill Clinton>I am asking the United States Congress to pass a real campaign finance reform bill this year. [applause]. <v John Palmer>And the president has been very reluctant to alienate those whose support he needs for his other legislative priorities, NAFTA and health care reform.

<v Edwin Rothschild>I think there's no doubt that the president has a set of priorities. And if you look at the set of priorities, health care is up there as number 1, the NAFTA's number 2. And campaign finance reform falls lower and lower. We've linked the 2. We're going to show the close relationship between the need for health care reform and campaign finance reform, because really it's very difficult to get health care reform unless you get the special interests out of the process in terms of their huge campaign war chests. <v John Palmer>In fact, in the first six months of 1993, health care industry PACs gave almost 2 million dollars to members of Congress, not to mention the millions being spent by corporations, unions, and other groups with an interest in the health care debate. And the money doesn't just go to Washington. These groups have taken to the airwaves in an attempt to get grassroots support for their point of view. <v TV Commercial Wife>Having choices we don't like is no choice at all. <v John Palmer>Money could also keep something off the agenda as it has with health care reform since 1949.

<v Ellen Miller>There's no question that the health care industry, which has given over 100 million dollars in the last 10 years, has brought something in Washington, just like every other interest groups buy something in Washington. But what's interesting about the health care industry is they have bought keeping something off the agenda. They bought something not happening. And that, while maybe not unique, is a clear, important feature to understand about health care giving. <v John Palmer>Going into 1993, these were the top 10 members of Congress who were recipients of health care PAC money. In the Senate, the list was topped by the embattled Bob Packwood of Oregon, who received almost 200000 dollars. In the House, it was Representative Henry Waxman, the chairman of the Health and Environmental Subcommittee, one of the many committees and subcommittees which will consider any health care legislation. Special correspondent Sara Fritz of the Los Angeles Times interviewed Waxman for the Money Go Round. <v Henry Waxman>And so if we have a fundraiser, all the groups know that there's a fundraiser for the- for the uh chairman of the Health and Environment Subcommittee. And uh even if I didn't solicit the money in a fundraising event, many of them give at election time because they have a list of people to give to: those who are important to them, those who- whose views they so often support.

<v Ellen Miller>We can track the money going directly to members who make these life and death decisions over the insurance and health care industries. <v John Palmer>The other big money involved in the process, of course, is lobbying. The American Hospital Association has given more than 150 thousand dollars to members of Congress this year alone, putting it in the top 5 among 1993 PAC donors. In 1991 and 1992, the HCA gave an additional half-million dollars in PAC money to members of Congress. <v Political Representative>I have never seen situations where anybody uh gives political contributions with a precise expectation that something is going to happen in return. And that, of course, is not the way it ought to happen. And I think it's silly to think that many people would say that 5000 dollars is a- is a sum that is worthy of doing something of that proportion that's wrong. And we don't ever engage in that. <v Ellen Miller>PACs have given PACs, so 1 5000 dollar contribution may not buy anything, including a seat at the table. But when you have 370 political action committees giving from the health care insurance industry, that buys a lot, even if each is only giving 5000 dollars.

<v Edwin Rothschild>All of this money in political campaigns shifts the balance of power away from each individual citizen to a group of special interests who have a vested interest in the outcome of a particular piece of legislation. <v John Palmer>There is a certain kind of irony here. This huge amount of money, which is being used to woo congressmen on the health care issue, well, that is the very thing that campaign finance reform was designed to eliminate. <v Cassie Siefert>It certainly is. Thank you, John. <v Cassie Siefert>Tonight, we begin a special series on business and health care reform as the self-imposed deadline for the Clinton administration to unveil its proposals rapidly approaches, business executives say they favor price controls on health care, but they're split down the middle on the concept of managed competition. The latest NBR Reuters survey of executives conducted by Yankelovich Partners shows that on at least 1 issue, businesses agree with government, with 96 percent of those we asked saying that the cost of health care is hurting the economy either a great deal or somewhat. That concern was voiced in spite of the fact that when asked about specific costs to their own companies, more than 80 percent of the business leaders pegged the cost of health care coverage at under 10 percent of their firm's operating expenses. Joining me now to discuss these and other findings of our poll is Watts Wacker, managing partner of Yankelovich Partners. Watts, welcome. <v Watts Wacker>Thank you, Cassie.

<v Cassie Siefert>If businesses are spending so little on health care, then why are they so concerned about reform? <v Watts Wacker>Well, a couple issues. 1 is there's not a lot of satisfaction with the level. 58 percent of executives saying that they're not really satisfied with the health care system as it is today. 2 is they're seeing it is a growing area of expense. And for small companies, particularly the administrative side of it, that is- is a growing area of concern. <v Cassie Siefert>These low percentages of money being spent on health care reform, they seem to fly in the face of some of the anecdotal evidence we've heard. Ford Motor Company has been very vocal in saying that they spend more on health care reform than they do on steel. <v Watts Wacker>Well, what- what's happening now is they're raising the deductible. They're also making the employees pay more upfront. And then the third thing is starting to set in, which is that they're going to have to cut benefits and that doesn't sit well with the workforce. <v Cassie Siefert>Okay. Going on now, when asked who is responsible for rising health care costs, 95 percent of business executives identified malpractise lawyers as being the leading culprits, followed by hospitals, doctors, health insurers, and drugmakers. Watts, there's a lot of blame being cast here. <v Watts Wacker>Plenty of blame. Lawyers really take it. But the hospitals, the doctors, even the pharmaceutical companies, and the remedies are interesting. Large companies would love to see their employees have to pay extra money to see doctors of their choice. Small companies would interestingly like to see doctors and hospitals fees set a limit.

<v Cassie Siefert>I'm amazed anytime that I hear that businesses are in favor of government set price controls. <v Watts Wacker>This is an area where it looks like maybe drastic steps are appropriate. <v Cassie Siefert>Okay. When it comes to fixing the system, the executives in our poll were split right down the middle on the concept of managed competition, which is likely to be the cornerstone of any Clinton health plan. Watts, could this be because people don't understand the concept of managed competition yet? <v Watts Wacker>Yeah, I think they're looking, Cassie, it as a negotiating tool where they can pool their resources almost like they're going to a club price store or something like that. I'm not so sure they're viewing it as the government being involved in executing. <v Cassie Siefert>That goes right in line with what we're seeing in the next idea for reform. Uh taxing companies to pay for government health insurance for people who don't get medical coverage at work. This was opposed by 65 percent of executives, but the opposition to that, compared to federal insurance for all Americans, was even greater. 82 percent of the people in our poll were against that idea, while only 15 percent favored a government-run health system. The message seems to be clear. They just don't trust the government to do the job right. <v Watts Wacker>You know, it's so clear that when we asked 1 question as to whether or not if the government tried to cut costs, would they actually go up or go down? And a third of the executives said if the government tried to cut costs, the costs would actually go up.

<v Cassie Siefert>Amazing. Let's mention a little bit about the methodology of the poll here now. <v Watts Wacker>We talked to 360 executives of companies that range in size from 1 million in revenue to 100 million dollars in revenue, plus stratified to be representative of the country regionally by ASIC code and like it's a probability sample of senior executives. <v Cassie Siefert>Finally, let's talk about the person who's heading up health care reform. She's getting mixed reviews. Only 14 percent of executives have a great deal of confidence in Hillary Rodham Clinton, as opposed to 33 percent who say they're not at all confident in her. Why the skepticism? <v Watts Wacker>Well, they're not so sure that anybody is really right for the job. It's not like there is a overwhelming sentiment. As a matter of fact, those numbers that you mentioned are- are really indicative the fact that 50 percent of the people didn't think that she was appropriate. 75 percent of the largest companies executives didn't think that she was appropriate for the job. <v Cassie Siefert>It's such a big job that uh who could- 1 person couldn't possibly handle at all?

<v Watts Wacker>Really. <v Cassie Siefert>OK. Thank you very much. Our guest, Watts Wacker of Yankelovich Partners. <v Cassie Siefert>A brighter story for GM has been its Saturn division. Last week, president and CEO Richard "Skip" LeFauve was among the corporate leaders attending the Business Week Presidents Forum on restructuring for global competitiveness. NBR's Linda O'Bryon was there, too, and talked with several top officials. Tonight, she begins her series of interviews with the man behind Saturn's success. <v Linda O'Bryon>How does Saturn operate differently from other automakers? <v Skip LeFauve>We're a partnership with UAW, and the UAW has a full partnership relationship and is involved in every management decisions it's made. <v Linda O'Bryon>It sounds sort of like worker utopia, but in reality, does it work? <v Skip LeFauve>It's management utopia.

<v Linda O'Bryon>Don't you have conflict? <v Skip LeFauve>It's management utopia. It really is terrific. We've learned, and again, we've tried a lot of different ways to doing this, but we've learned that if you can involve people in decisions that affect them, not only will you get better decisions, but you'll get people supporting the decision. And uh when it's incorporated, it happens so fast, so successfully that uh it's a better decision. <v Linda O'Bryon>But if you have a number of people who don't get their decision through, don't you create some hard feelings there? <v Skip LeFauve>No, it seems to take longer to make a decision. The reason it takes longer is we're taught to go until you do reach consensus. And there's certain rules around consensus. You can't just block a decision because you don't like it. 1 of the rules is if you don't like this idea, you can't come up with a better one and convince the team that your idea is right. <v Linda O'Bryon>This conference is dealing with issues of global competitiveness, this Business Week conference. And if it takes longer to make a decision, doesn't that ultimately hurt the company in terms of a global arena where things are changing very quickly? <v Skip LeFauve>It takes longer to get to the decision, but it takes a shorter time to implement it. And if you measure the time from the point you have to make a decision until it's implemented, it takes less time. So it's more competitive if you use consensus as a decision process.

<v Linda O'Bryon>How has this process worked in terms of Saturn and your financial picture? What sort of profits do you expect this year? <v Skip LeFauve>Well, we're a startup company, obviously, and we've stated this year should be a breakeven here. If you look at our business plan over a 10 year period, we had projected to break even in 1993, and that's where we're looking at right now is break even in 93. <v Linda O'Bryon>And then in 94? <v Skip LeFauve>Start making money. Start paying the- paying the bills back. <v Linda O'Bryon>As a division of General Motors, which has had lost money in recent in the recent year, does that make it difficult for your expansion plans? <v Skip LeFauve>Well, I think everybody in General Motors is held to the same standards that Saturn is, that we've got to prove that we can earn the return for the investors, the stockholders. And so I think we're in there with everybody else going for the capital required if in fact, we do want to go for a second module. We haven't made that formal decision at this point. <v Linda O'Bryon>What kinds of expansion plans would you like to see for Saturn?

<v Skip LeFauve>Well, we'd like to be a world company so that we can actually build enough cars to be an internationally based product, which we've done. Now it's a case of capacity. It's an interesting problem because we didn't dream we'd have the kind of success we're having in the US market. So we've been talking international without really thinking as big as you'd really have to think today, but we're actually selling more cars at retail level than we ever dreamed we would do. Matter of fact, we were number 2 in the country last year in retail sales. We've only been in the business for just a short period of time. <v Linda O'Bryon>With the new administration, we're hearing that the automotive industry may be asking for broad tariffs on imported cars in order to protect the domestic industry. Do you support those sorts of measures? <v Skip LeFauve>I think tariffs is a whole different- that's a corporate issue, not necessarily a division or a subsidiary issue. Our whole objective is to compete, take anybody on anywhere in the world and just show Americans and not only design and manufacture cars where we can sell them anywhere in the world and be competitive. <v Linda O'Bryon>You think you can do that with existing legislation?

<v Skip LeFauve>Oh, absolutely. <v Linda O'Bryon>Thank you very much. <v Cassie Siefert>Although the calendar says November, it's not too soon to be thinking about doing your taxes, especially because Congress made several changes to the tax code earlier this year. Tonight, we begin a special 3 part money file series with Terry Savage, author of New Money Strategies for the 90s. She looks at some of the changes in the tax code and has some tips on coping with them. <v Terry Savage>How to avoid tax shock next spring? Start planning now before year end. Step 1: meet with your accountant right away to find out just how much your tax bill might increase next April 15th. If you're filing a single return with taxable income over 115 thousand dollars or a joint return with taxable income over 140 thousand, you've just moved into the new 36 percent tax bracket. Make over 250000 dollars and you are in the millionaires tax bracket, 39.6 Percent. Your effective bracket could be as high as 43 percent as deductions phase out, and that's before state income taxes. Hardest hit by the tax increase? Small business owners who file as subchapter S corporations, putting business income on their own tax returns. Hit even harder? Senior citizen retirees who had the foresight to set aside savings for retirement. Even ordinarily tax-free municipal bond income is considered when calculating the new tax on up to 85 percent of Social Security benefits. Other tax planning tips: business entertainment deductions lose value in 1994, only 50 percent down from 80 percent can be deducted. So do all your business entertaining before the new year rings its bell. Same thing with business travel. Spouse travel is a no-no for write-offs after a year end. Also, the new tax law reduces the amount that can be used to calculate retirement plan contributions, so you may want to maximize your deductible plan contribution before year end. Finally, highly paid workers will pay more Medicare taxes next year. The Medicare tax is 1.45 percent, paid by the employee and matched by the employer. In 1993, that tax is paid only on wages up to 135 thousand dollars. In 1994, you'll pay that tax on all earnings, so you might want to ask the boss to pay your bonus before your end, saving taxes for both you and the company. These are but a few of the tips your tax advisor may suggest. Act now while you still have the time and the money to make an effective plan. I'm Terry Savage.