The NewsHour with Jim Lehrer

MR. LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, the governors make a deal on Medicaid and welfare, Margaret Warner talks to Governors Thompson and Miller; President Clinton's subpoena, Elizabeth Farnsworth, Stuart Taylor, and reporter Rex Nelson look at the case and the precedents; our stump speeches continued with Sen. Richard Lugar; memoirs of a former neo-Nazi, David Gergen talks to author Ingo Hasselbach; and an Anonymous update by essayist Roger Rosenblatt. It all follows our summary of the news this Tuesday. NEWS SUMMARY

MR. LEHRER: The nation's governors announced bipartisan agreements today on Medicaid and welfare reform. They said at their annual meeting in Washington that changes should be acceptable to President Clinton and the Republican Congress. Mr. Clinton and Senate Majority Leader Bob Dole both addressed the governors and praised their efforts.

SEN. ROBERT DOLE, Majority Leader: If you give us welfare reform and Medicaid, you've gone a long way to getting this agreement back together, getting the President back together with the leaders in Congress, because these are the two, two of the main problems we've had. The other two are Medicare and the Earned Income Tax Credit. If we can resolve those four issues my view is an agreement is out there to be made.

PRESIDENT CLINTON: I was very encouraged by what Sen. Dole said today. That is exactly my impression of where things are, and I believe we will get an agreement, and I look forward to continuing our efforts there. I think you've had a pretty good meeting here. I think you have contributed to the climate that will help us to balance the budget. You have contributed immeasurably to helping us to resolve the impasse over Medicaid. You have contributed to the impulse to move to genuine welfare reform. We can do all these things if we do them together.

MR. LEHRER: Governors from both parties said they were pleased. Gov. Tommy Thompson, chairman of the National Governors Association, spoke to reporters after today's closing session.

GOV. TOMMY THOMPSON, [R] Wisconsin: We have moved the dialogue so that Congress and the President are going to be focusing on what the governors have passed. That's what we had originally set out to accomplish. We've accomplished more than I ever thought that we could, and the dialogue and the debate is going to be on this proposal and I'm confident this is the proposal that will be the vehicle that will start going through Capitol Hill.

MR. LEHRER: House Speaker Newt Gingrich said Congress would give serious and prompt consideration to the governor's proposals. We'll have more on this story right after the News Summary. At the White House today, Spokesman Mike McCurry said the President would not challenge a subpoena to testify in a Whitewater trial. A federal judge in Little Rock approved the subpoena yesterday, ruling Mr. Clinton's testimony was vital to two of his former business partners getting a fair trial. McCurry said it was most likely the President would testify on videotape. We'll have more on this story later in the program. Also in Washington today, the U.S. Supreme Court refused to reinstate three majority black congressional districts in Georgia. The court left intact a plan that provides only one majority black district in the state for the 1996 elections. That map was drawn up by a Georgia-based federal court. Opponents have filed an emergency request with the court asking that the new plan be set aside. And on the floor of the Senate today, Ron Wyden was sworn in as the new Senator from Oregon. The former Democratic House member replaces Republican Bob Packwood, who resigned. Wyden's election last week was the first to be conducted solely by mail. In other political news today, Republican caucuses are being held this evening in Louisiana. Twenty-one presidential convention delegates will be chosen. It has been played as a major contest between Sen. Phil Gramm and Pat Buchanan. All other candidates, except Alan Keyes, chose not to participate. Another nine Louisiana delegates will be chosen in the state's presidential primary in March. In Bosnia today, Bosnian Serbs objected to the arrest of two Serb officers on suspicion of war crimes. They said it violated the Dayton Peace Accords. The men were among five taken into custody recently by government security forces. In Northwest Bosnia, NATO commander Adm. Leighton Smith and Assistant Secretary of State John Shattuck visited two sites which are part of the war crimes investigations. We have more in this report from Robert Moore of Independent Television News.

ROBERT MOORE, ITN: NATO's top commander had come to this most inaccessible corner of Bosnia. Adm. Leighton Smith was visiting what is believed to be the site of Europe's worst atrocities since the Nazi Holocaust. In these bleak and frozen fields, around the open mine near the camp of Omaska, survivors say the Bosnian Serbs slaughtered and buried thousands of Muslim civilians. America's Assistant Secretary of State was also present and passed his own chilling judgment.

JOHN SHATTUCK, Assistant Secretary of State: this is the site of the--some of the worst atrocities that occurred during the conflict of Bosnia. It's a terrible testament to the clear statements made by eyewitnesses who, hundreds of whom have been interviewed and who gave accounts that match almost precisely what we have seen here today.

ROBERT MOORE: They moved on to another huge mining site, a suspected mass burial ground at Lubija. NATO officials, so keen to maintain Bosnian Serb support for the peace plan, have been accused of not pursuing the major war criminals.

MR. LEHRER: In the Mideast today, Sec. of State Christopher said Israel and Syria will resume peace talks February 26th. They will be held at the same place as the earlier rounds on the Eastern shore of Maryland. Sec. Christopher spoke in Damascus. Back in this country today, the National Cable Television Association released a study on TV violence. It said psychologically harmful violence is pervasive on both broadcast and cable TV programs. A spokesman said the study concluded the message from these programs is that people can get away with wrongdoing. Ronald Reagan turned 85 today. The former President celebrated his birthday working in his Los Angeles office and playing golf. He is suffering from Alzheimer's Disease and did not plan to attend a party in his honor tonight. And that's it for the News Summary tonight. Now it's on to the governors make a deal, the President as a witness, a Lugar stump speech, a Gergen dialogue, and a Rosenblatt update. FOCUS - GOVERNORS' DEAL

MR. LEHRER: First tonight, to the governors, the deal, and to Margaret Warner.

MS. WARNER: With the budget debate deadlock at the federal level, the nation's governors forged a bipartisan consensus this week on how to restructure two expensive social programs, Medicaid and welfare. Kwame Holman begins our report.

KWAME HOLMAN: The National Governors Association wrapped up four days of meetings in Washington feeling particularly accomplished about its work toward overhauling Medicaid, the $155 billion health care program for the poor. Association chairman Wisconsin Republican Tommy Thompson praised the bipartisan work of his fellow governors.

GOV. TOMMY THOMPSON, [R] Wisconsin: They forgot for a time that they were "R's" or "D's." They came here with the, with the understanding they had to some real heaving lifting, a job had to be done, and they did it.

MR. HOLMAN: Changing the Medicaid program, along with welfare reform, have been key obstacles to a balanced budget agreement between the White House and Congress. Medicaid costs alone consume about 20 percent of a state's budget, and are rising fast, facts that put pressure on the governors to come up with their own plan to restructure the system, and that's what they did.

GOV. ROY ROEMER, Colorado: I truly believe that Medicaid is the Gourdion knot of this budget dilemma, and I think you know we now have a frame work, a statement of principle, a guideline, a policy.

MR. HOLMAN: Under the governors' Medicaid plan, health coverage would be guaranteed to poor pregnant women, children under 12, the elderly, and the disabled. But beyond that, states would have the flexibility to design their own Medicaid programs. Federal Medicaid funding to each state would be based on its need. But states would be able to tap into a separate pot of federal money in cases of emergency or during a downturn in the economy. President Clinton, who met with the governors several times during the course of their discussions, welcomed the governors' recommendations.

PRESIDENT CLINTON: We have known for a long time that you shouldn't have to ask the federal government every time you want to change your payment schedule to providers and every time you want to put in a new managed care program or make some other change. You have come up with a proposal that enables you to have that kind of flexibility and still preserves the nation's ability to guarantee medical care for poor children, for pregnant women, for people with disabilities and older Americans. This is a huge step in the right direction.

MR. HOLMAN: The governors also approved recommendations for welfare reform, including $4 billion more for child care than the most recent congressional plan to help parents move from welfare to work. Senate Majority Leader Robert Dole told the governors their work this week may well lead to a balanced budget agreement.

SEN. ROBERT DOLE, Majority Leader: If you give us welfare reform and Medicaid, you've gone a long way to getting this agreement back together. I know with the President at the White House and with each other, Democrats and Republicans sitting down together, and they are the ones that will face Congress and the President in the months ahead, and on the way down I called Speaker Gingrich, who's in Georgia, and I think he had a conference call to some of the governors this morning. And we're prepared. If you want to be the honest brokers, we're prepared to act. And we believe the President willbe prepared to act too.

MR. HOLMAN: This afternoon, several governors traveled up to Capitol Hill in hopes their set of recommendations on welfare reform and Medicaid soon will be transformed into viable legislation.

MS. WARNER: With us now are the two current leaders of the National Governors Association, the chairman, Republican Tommy Thompson of Wisconsin, and the vice chairman, Democrat Bob Miller of Nevada. Welcome, governors. Congratulations.

GOV. TOMMY THOMPSON, [R] Wisconsin: Hi, Margaret. How are you? Well, thank you very much. It was a wonderful weekend.

MS. WARNER: Let's start with Medicaid first of all, the program for health care for the poor and disabled and the elderly. Gov. Thompson, this new proposal of yours no longer talks about a federal entitlement to Medicaid, yet it talks about guarantees. What's the difference?

GOV. THOMPSON: Well, basically, we had to get by this, these sort of buzz words that were really polarizing both political parties on Capitol Hill and with the White House. When you started talking about individual entitlements and block grants, everybody's eyes started glossing over and they--and they just decided that you couldn't do that, so Bob and I decided that we would call it program Y and plan X, and when we did that, we were able to make a lot of progress. We really decided, you know, let's develop a plan in which the President could win, Congress could win, and that the plans that states could administer and be able to really develop the best Medicaid program possible, and we did that, and so basically the money is going to follow the individual. And there is going to be a lot of things in there to guarantee for the minority groups and for the poverty stricken, disabled, and the elderly, the people who really need help, and at the same time given us as governors a great deal of flexibility.

MS. WARNER: All right. Flesh this out, Governor Miller, for us. Who is currently now covered as an entitlement? Who will no longer be guaranteed coverage? I mean, you might choose to give them coverage but would no longer be guaranteed by the federal government?

GOV. BOB MILLER, [D] Nevada: Absolutely nobody. The plan provides that everyone is covered in a mandatory sense will remain covered in that exact sense. There are, however, great populations that are in categories that are in categories that are either mandatory populations with optional benefits or optional populations with optional benefits. One of the largest of those categories is the elderly; another is the disabled; and what we have done is provide that where those programs exist that they will continue to exist and the state will then have discretion to, if they can save money in certain areas, either displace it into another area or create a new area to take people off of welfare and put 'em in there, be able to work with the pot, and then the succeeding year have the money. But the bottom line is that if you have a person who is entitled, and that's a bad word, but who is a person who is eligible, then they are guaranteed to receive the benefit by either the base and the growth or the umbrella.

MS. WARNER: So are you saying, Governor Thompson, that the same number of people will be covered?

GOV. THOMPSON: Yes, just about. There's only one little correction that I'd like to make on Bob. That is the young between the ages of 13 and 18, which under current law are going to be put in one year at a time, that's going--that's mandatory now under the law, and it's going to be phased in, and under our proposal, it will be an optional thing. I think most states will pick it up. So basically, the coverage is the same coverage that people will get under the current law, but the amount of flexibility and the way we administer the program, deliver the services, gives us a great deal of flexibility at the state level, which we don't have right now. So it really has the makings of, I think, a very positive deal, that both sides can, can buy into, the President can say I'm guaranteeing protection for certain vulnerable groups, and the Republicans can say we're giving governors a great deal of flexibility to set up their program, so it has a--the beauty of this plan is, there's a lot in it that both sides can like.

GOV. MILLER: Can I just--I don't want any groups out there to panic, and it's something that's being phased in. It was in a lobbying phase, and nobody was actually receiving it now--

MS. WARNER: You're talking about the teenagers.

GOV. THOMPSON: Yeah.

GOV. MILLER: It hasn't come into law, portions of it, because it was calibrated year to year. So it just becomes more flexible.

MS. WARNER: Explain this to me and to our viewers. How, if you're going to cover the same number of people and with similar benefits, how can you save much money and how much money can you save? What kind of savings are we talking about over seven years?

GOV. THOMPSON: Well, we can save a lot of money just by, by being more efficient. We can have more people going to managed care, more people in HMO's. We can have the flexibility for using the money to set up optional programs, have the states set the scope and the duration and the payment, which we don't have right now. These are things that give states and governors, especially, with legislators, the opportunity to structure a program in Wisconsin- -in Wisconsin, in Nevada, in California, that's more efficient, and, therefore, we can save money.

GOV. MILLER: And you have--

MS. WARNER: Is the savings--

GOV. MILLER: --there's two factors--

MS. WARNER: --really that large, though?

GOV. MILLER: They can be, yes, because there's two factors past your base, and your base is either last year, we allowed some flexibility there, but in any case, each year you estimate growth, and the growth is in a duplicative factor. One is the number of people eligible under sub-categories they're in. The second is essentially an inflationary factor based upon medical costing, and you can adjust that based upon the savings that we estimate we'd be able to make.

MS. WARNER: All right. Let me try to put this into a context that people can follow in this debate. I hope can follow. The Republicans originally wanted to reduce the rate of savings--the rate of growth in Medicaid, which was anticipated to grow at 10 percent a year down to 4 percent. The President said that was too much. Where--what kind of savings--what will be the rate of growth in Medicaid if your proposal were adopted?

GOV. THOMPSON: We don't know exactly but we think it's somewhere around 6 percent, 6, 7, but there is not a percentage on it, because it hasn't been scored, but we have calculated out what we think the estimate is going to be, the growth is for seven years, and under that growth, we have a great deal of flexibility. We think we're going to be able to come in with the efficiencies to meet the budgetary targets, the Republicans were talking about saving $85 billion over seven years, the President was talking about $60 billion, 59 or $60 billion. We think we're somewhere in- between.

GOV. MILLER: We agreed besides creating a new language that we're not even sure what that language is ourself now, that the other thing is we wouldn't try and put a dollar amount to it, because the dollar amount is also part of a much bigger argument between the Congress and the President and we're not in a position to resolve all those issues.

MS. WARNER: Okay. Let's turn to welfare proposal. Again, there the argument was between the Republicans who wanted to block grant welfare to the states and give the states pretty much untrammeled freedom to design the programs, and the Democrats who wanted to retain it as a federal entitlement. Where does this plan come down on that key question?

GOV. THOMPSON: Once again we were able to make a high--

MS. WARNER: Finesse it.

GOV. THOMPSON: Finesse it, but this is more of a block grant on the welfare, with a lot of flexibility for governors like Bob Miller and John Engler and Pete Wilson and Roy Roemer and myself to set up programs that are innovative, and that's what people really want. We can change welfare now as we know it and make a much more effective program, allow people to have the opportunity to work, and it's a great deal of flexibility, and it still saves some federal dollars.

MS. WARNER: Would you say--

GOV. MILLER: There is an entitlement component, especially in the school lunch and others, so it's a mixture, and I think the President and as well as Democrats in the Congress have ever been totally opposed to the block grant concept when it came in this component factor as long as the programs were there for people in need.

MS. WARNER: But you did sweeten the deal a little bit in terms of adding or suggesting more money for child care.

GOV. THOMPSON: $4 billion for child care, because according to even CBO, they said that the states would be behind as far as dollars necessary to put people to work, and they figured it would be out about $4 billion, so we took the $4 billion, put it into the, into the mix, and we said that if we get more money for child support would have the larger flexibility, a little bit more of a block grant to develop an innovative program, and that's how we-- how we were able to accomplish once again a bipartisan agreement. I want to point out, Margaret, that all the governors, Republican, Democrats, conservative, moderates, and liberals, all voted for both of these packages, which I think is just, just amazing.

MS. WARNER: I want to get to that, but let me ask one more welfare question. The Republican plan did have a few strings, even though it block granted it to the states.

GOV. THOMPSON: Sure.

MS. WARNER: And it said, for instance, that individuals had to have a two-year cap on how long they could have welfare in a consecutive manner, and then five-year, lifetime cap. There were also some options for denying welfare assistance to teenage unwed mothers. Are those kinds of, of federal restrictions still in your proposal?

GOV. MILLER: Yes and no. Some are some are not. Anytime you work into a mixture, as we tried to do, you know, you make trades, adjustments, however you want to characterize it, and so the answer is part of that's there, I believe the five years is still there, and part of it's not there, and it's designed to provide sufficient flexibility for individual states to make those decisions because we don't operate in a vacuum, and we're a lot closer to the people that receive the program than there are here.

GOV. THOMPSON: The five-year cap is there, but the states are not forced to make teenagers not be allowed to give 'em a cash grant. That's--in the family caps, that's left up to the states, so there's a lot more left up to the states, Margaret.

MS. WARNER: Well, Gov. Thompson, this seems like quite a rollback from what certainly the House Republican freshmen wanted--

GOV. THOMPSON: Sure.

MS. WARNER: --and a lot of the more conservative House and Senate Republicans wanted. Do you think this can fly?

GOV. THOMPSON: Yes, I do.

MS. WARNER: With the Republican majority?

GOV. THOMPSON: Very much so.

MS. WARNER: Tell us a little bit about the meeting today that you had.

GOV. THOMPSON: We had a--I thought--a very constructive meeting, with I think approximately 15 U.S. Senators, Democrats and Republicans alike, liberals, moderates, and conservatives, I thought coming out of that, and I will be listening to what Bob says, but I was very, very encouraged by it. Everybody except for Sen. Kennedy, who it was obvious was opposed to any changes in the current law, but basically most, most of the U.S. Senators in there gave us a thumbs up and said right on, then I had a chance to talk Newt Gingrich afterwards.

MS. WARNER: Okay. But what are the politics of this? I mean, why would now, do you think, House Republicans, even those who really wanted--

GOV. THOMPSON: No, these are Senators who we know.

MS. WARNER: I know. But you also talked to--

GOV. THOMPSON: Yes.

MS. WARNER: --Speaker Gingrich, and there, I think you would agree, that's the difficult part, selling it to them.

GOV. THOMPSON: That's difficult, but--

MS. WARNER: Why would they now go for this?

GOV. THOMPSON: I think they would go for it because it is changed. It makes, I think, a quantum leap towards changing the current programs. It doesn't go as far as they would like, doesn't save us much money as they would like, but it gives a lot more power and authority back to the states to develop innovative programs. That's a plus for them. It also saves some money. It changes the way the federal government regulates these programs. All of these are positives, and I think that Newt Gingrich and most of the Republicans in the House that are in the leadership will find, you know, this is a very much of a step forward, not as much as we would have liked, not as fast as we would like, but it's certainly going in the right direction.

MS. WARNER: And, Gov. Miller, how do you assess the White House's calculation in all this? The President, of course, has vetoed one welfare reform plan. Do you think this is enough for him? Do you have any indication from him it's enough for him?

GOV. MILLER: He has indicated that he feels this is a good outline, that he is initially comfortable, but that he's got to look at it, and I think that's true of Speaker Gingrich, Sen. Dole, and any other member of Congress; they've got to look at it and see the details. And frankly, we did not provide a bill. We provided an outline in both instances, but that outline is neutral territory in both instances, and it gives both sides an opportunity to come to the neutral territory, to re-think where they're at, and to refine it, and in Medicaid, I described it as a piece of art. It's--it's up to them to decide whether it's fine art or not, but it's definitely fragile.

MS. WARNER: Okay. Well, now, what if they can't come to an agreement? What does this do for the two of you--to the two of you and other governors who are trying to put their budgets together?

GOV. THOMPSON: It puts us way behind the eight-ball because the three programs that we were working on at the governors' organization meeting this past weekend was basically welfare, Medicaid, and employment and trading. Those three programs comprise about 43 percent of our total budgets, and what's going to happen if Congress and the President do not get their act together and reconcile their differences and pass an appropriation bill on these subjects, state governors, legislators, are going to have to live under the same rules and regulations, the same dictates from Congress in Washington with less money, and it's a recipe for disaster, Margaret. We can't really comply with the law.

MS. WARNER: Let me ask you this, Gov. Miller. You all came here, and I know the two of you have been here a week and I know your staff and aides have been working on it and so on, but still, you were able to sit down and come up with a bipartisan deal where the President and the Congress were not. Why do you think that is?

GOV. MILLER: Well, first of all--

MS. WARNER: Why do you think they couldn't?

GOV. MILLER: We haven't just been here a week. Tommy and I and four other governors, two on each side, have been here once a week for a lot of weeks, so we didn't immediately come to a solution. We've reached some real crossroads and had to iron out difficulties. I think part of it is that the circumstances overall changed. The discrepancy between the $180 billion and $30 billion has now moved to--

MS. WARNER: That's where they started at.

GOV. MILLER: --59 and 85, which is a $36 billion differential, which allows a little more latitude. The circumstances have changed, and the President has vetoed a bill, and that caused everybody to rethink their position. It was obvious you need both sides to reach a conclusion. I think that the impact on the states is more critical than it is on the federal government and that we have a time line of Tuesday noon, and maybe we get along better. I don't know.

GOV. THOMPSON: We worked extremely hard, and there was a lot of trust and cooperation between, between the three Democratic governors and three Republican governors.

MS. WARNER: And would you say that's what's missing between the White House and the Republican leadership?

GOV. THOMPSON: I think a lot of it is.

MS. WARNER: Before we go, quick question, because you both were there, I know, to see the President and Sen. Dole give almost back- to-back speeches. Was this kind of a preview of the campaign to come, do you think, Governor?

GOV. THOMPSON: I hope so. You know, I hope that Bob Dole is the nominee, and I hope that it is a preview. I think they both did very well. I think, you know, they were received very warmly by the body, and I thought that they were--they did a nice job. Bob Dole was his witty self, and his self-deprecating wit was well received, and President Clinton did the same.

MS. WARNER: Gov. Miller, a quick comment.

GOV. MILLER: Sure. Sen. Dole is witty. The President is warm. I hope it's a preview of the campaign to come, because it was all positive, and that would be a nice change.

MS. WARNER: On that positive note, we'll leave it. Thanks, gentlemen.

MR. LEHRER: Still to come on the NewsHour tonight, the President as a trial witness, a Lugar stump speech, a Gergen dialogue, and Rosenblatt follows up. FOCUS - PRESIDENTIAL SUBPOENA

MR. LEHRER: Now, the Presidential testimony story and to Elizabeth Farnsworth.

MS. FARNSWORTH: A federal court in Little Rock, Arkansas, has ordered President Clinton to testify for the defense in the criminal trial early next month of the Clintons' former Whitewater partners. Here to explain what this is all about are Stuart Taylor, a reporter for the "American Lawyer" and the "Legal Times," and Rex Nelson of the "Arkansas Democrat-Gazette." Thank you both for being with us. Rex Nelson, this trial is set to begin March 4th. Refresh our memory about the trial. What's--who's being charged with what?

REX NELSON, Arkansas Democrat-Gazette: [Little Rock] Well, of course, we have a Whitewater grand jury which has been meeting for quite some time here in Little Rock. An indictment came down from that grand jury on August 17th of last year charging Jill McDougal, Susan McDougal, and Bill Clinton's successor as governor of Arkansas, Jim "Guy" Tucker. They are being tried together on charges that are not directly related to the Whitewater Development Corporation, which, of course, was the President's partnership with Jim McDougal.

MS. FARNSWORTH: Now, they have, what, 17 charges in total? They've been indicted on 17 charges, or at least Susan McDougal has, right?

MR. NELSON: There are actually nineteen charges against Jim McDougal, eleven charges against Gov. Tucker, and eight charges against Susan McDougal.

MS. FARNSWORTH: And what--how was President Clinton related to this? Why would the McDougals want him to testify on their behalf?

MR. NELSON: Really, if the linchpin of the prosecution case is a former municipal judge here in Little Rock named David Hale. David Hale claims that a lot of Arkansas political figures back in the '80's put pressure on him to make unwise loans. One of those political figures was then Gov. Bill Clinton, and he says that Clinton put pressure on him to make a $300,000 loan to Susan McDougal, and so Susan McDougal says I need the President's testimony in order to clear me.

MS. FARNSWORTH: And we should make it clear that the President is not being accused of any wrongdoing here.

MR. NELSON: Absolutely, no wrongdoing whatsoever. Susan McDougal and now James McDougal now, though, say the President can clear us and the federal judge says I am going to give them that latitude, the President needs to testify.

MS. FARNSWORTH: And yet this charge by Mr. Hale is the most serious charge made involving the President in all of this Whitewater matter, am I right about that?

MR. NELSON: Yes, you are correct about this. I mean, I still see nothing in any of this that would create a legal problem for either President Clinton or First Lady Hillary Rodham Clinton. Obviously, it's a big political problem right now.

MS. FARNSWORTH: Stuart Taylor, what are the President's options here?

STUART TAYLOR, The American Lawyer: Well, I think he's already made one decision which he's not going to fight the subpoena. He's said through his lawyer that he intends to cooperate in the appropriate fashion. What's the appropriate fashion involves a number of possibilities, going down to Arkansas, showing up at the courthouse. I think that's unlikely, or at least unlikely that he would volunteer to do that. Most recent Presidents who have given testimony in criminal trials have done so on videotape as sort of, as a matter of convenience to the President, to protect the dignity of the office, and I think that's what the White House clearly wants here. Whether that will be acceptable to the two McDougals who want his testimony and who might think he's a more effective witness for them live and in person than having the jurors watch him on television remains to be seen.

MS. FARNSWORTH: But he could be cross-examined on videotape. There would be a phone hook-up, right?

MR. TAYLOR: Very definitely, and the cross-examination would be the interesting part, I think, because in a way, this puts the prosecutor, Kenneth Starr, or whoever prosecutes this case for him, on the spot more than the President because he's going to be in a situation where the President presumably will get up and testify for the defense, the David witness, the star witness--David Hale, I'm sorry, the star witness in this case, is a liar, and what's he's said is a bunch of bull, to use words the President has already used.

MS. FARNSWORTH: In other words, the President didn't pressure him to make a loan to Susan McDougal?

MR. TAYLOR: Exactly. And the prosecution at that point has a star witness who's just been called a liar by the President of the United States. They have to decide and this bears on the overall Whitewater investigation whether at that point they're just going to swallow that, or whether they're going to go on the attack against the President and try and sell the idea that it is the President who's lying, not David Hale.

MS. FARNSWORTH: So in some ways, this trial is sort of pivotal in this investigation right now because it tips--will it tip Mr. Starr's hand?

MR. TAYLOR: I think he may have to, to some extent, at least on this David Hale, $300,000 pressured-loan front. Now, the--as the case was brought, as was just said, the charges against the McDougals and Gov. Tucker really don't depend on whether President Clinton did what David Hale said or didn't do. But the defense will bring it up if the prosecution doesn't for the purpose of discrediting Mr. Hale, and that throws, throws the fat into the fire as far as whether what the President's relationship with the prosecution is.

MS. FARNSWORTH: Rex Nelson, do you have anything to add to that?

MR. NELSON: Umm, just that again David Hale is the key to all of this. If the defense can say this man is a liar, he was a drowning man and as he drowned he was trying to pull others down with him, they have a very good chance, I think, of being cleared.

MS. FARNSWORTH: Now, Stuart, back on the question of the President, this is not the first time a President has been asked to testify in a trial while he was in office, am I right about that?

MR. TAYLOR: There have been quite a few Presidents. This one is a first in perhaps a very narrow sense as far as I can tell. I'm not aware of a previous case where a sitting President was asked- -testified in a criminal trial conducted by a prosecutor who at that very time is investigating that very President. Prior cases have been a little bit more benign. For example, President Reagan, after he left office, gave testimony for the defense in the trial of his former national security adviser, John Poindexter. President Carter, while he was in office, gave testimony in a couple of cases in which nobody was accusing him of any wrongdoing. Similarly, President Ford, while in office, gave videotaped testimony in a case where a woman had tried to shoot him, and he testified about what he remembered and what he saw. But this cuts a little bit closer to the bone for the President than any of those cases do.

MS. FARNSWORTH: And Rex Nelson, is this a really big story in Little Rock right now, or is this just one more step in this very long investigation?

MR. NELSON: Well, I think Arkansas people obviously are a bit more interested in it than other people across the country because there are so many Arkansans involved. But like other Americans, they're very confused. There are so many angles to Whitewater, it's so complex, you have the legal end that's based here in Little Rock, but you also have the political end that's based in Washington with Sen. D'Amato's hearings there.

MS. FARNSWORTH: But this step of calling the President is a major move in the whole investigation, is it not?

MR. NELSON: Oh, absolutely. We've seen stories every day for almost two years now, but this of course is one of the biggest, and the question now is: Will you have a live satellite hook-up, will you just have videotape, or will you actually have a President here testifying? I don't think you'll see the latter.

MS. FARNSWORTH: Stuart, is, is Mr. Starr likely to come out with some conclusions this year about this long investigation? What are you hearing about that? I mean, this is the year when the campaigning will--you know, the elections, campaigning will begin.

MR. TAYLOR: Starr has apparently made a statement--I didn't see it but somebody at the White House told me about it--on C-Span, I believe, that the public would get some answers probably before the election, but I don't think he's been more clear than that. It's hard to see all of these matters running their way to their conclusion before the election. For example, even if people are convicted in this upcoming trial, their appeals will go on and on, and so there will still be some evidence out there that possibly could have some bearing on things. But I would think Starr will feel a lot of pressure and already people in the Clinton camp are putting on pressure for him to put up or shut up, in essence, this year. You know, don't leave this cloud hanging over the President. It didn't take your predecessor, Bob Fiske, very long to reach some conclusions. What are you waiting for?

MS. FARNSWORTH: Okay. Well, gentlemen, thank you very much for being with us. SERIES - ON THE STUMP

MR. LEHRER: Now, another in our series of stump speeches from the Republican Presidential candidates. Tonight, Richard Lugar of Indiana. He spoke yesterday morning to the Rotary Club in Bedford, New Hampshire.

SEN. RICHARD LUGAR, Republican Presidential Candidate: My campaign for President is about three things: prosperity, security, integrity, prosperity in the sense that we have to have in addition to a balanced budget and I feel very very strongly we have to keep pursuing that as we are doing in the Senate and the House, and working with the President, something beyond that. We have to have economic growth. We have to have 3 1/2 to 4 percent growth in the country or the country doesn't work very well. And, in essence, the one reason why we have great family anxiety, why average family income has not changed much in 20 years, is that we've had very low growth, low productivity, flat wages. That will not change, in my judgment, without both balancing the budget and a vital change in the tax system. A subject of big debate during the primaries here, the system that I advocated, is the elimination of all income taxes, individual, corporate, capital gains, state, gift, and the Internal Revenue Service, and in essence, a tax on expenditures, on consumption, what amounts to a national sales tax to be collected by the states, and you pay it only when you spend money, but the basic virtue of what I'm talking about is you control your own destiny, you control your money. It is not withheld. You can save it, invest it, make money on it, give it away to your family at any point in your lifetime, or in your estate. These are powerful incentives to save and invest. It is the best system for increasing saving and investment without which there will not be economic growth at the levels that I'm describing. All of these systems are complex when you make basic changes in the American tax system. If you're going through the agony of doing so, you ought to do it the right way the first time. And to leave the income tax system with the flat tax or with some non-diminishing modification with various other things that are suggested is to leave the possibilities for more rates, more deductions. We've been down the flat tax road before in 1986, we wound up after congressional debate with three rates, and with fewer deductions and exemptions but still a lot, and we have been adding on ever since. That is the nature of the income tax system. If you do not eliminate the entirety of it and proceed on to a different incidence of taxation, you will be back to that point again. So this is at least my plan, it's one I think that has some very good chance of working due to the fact that I will work with the members of the House and the Senate who are my colleagues now, and none of these plans are going to occur without a sophisticated President who understands the Congress, who understands politics. The idea that this is a referendum not a tax plan that will suddenly happen, that the President knows nothing about politics in America, is simply nonsense. I've talked about security for our country. I've made the claim that I know more about foreign policy and national security than any of the other candidates, including the incumbent President. That has really not been challenged, but what the other candidates have said it's irrelevant, no one's interested in foreign policy, or national security. Well, I am, and I hope that you are. That is a basic requisite for being President of the United States, the unique role the President plays. As mayor, as legislator, various other capacities, I've been involved in taxes, in welfare reform, in fighting crime, and fighting family disintegration, but we do this at various levels, and I'll try to do a good job as President in those areas too. But let me just say there's only one President, only one person, at least, that is responsible for putting together a national security team to protect all of us from outsiders who may not wish us well, or more affirmatively to promote American interests, to do well in our trade negotiations, to organize our allies, so that they are best able to take care of their own problems on their own continents. These things do not happen by chance. I would simply say from word go I will try to organize Europe, Asia, this hemisphere, with the United States playing the role as the catalyst who brings the parties to the table, who tries to bring about assigned roles for each one of us to look for security in the world. Now thirdly, I've talked about integrity. Obviously, integrity in the office of the President, a President you can trust, a President who's a straight shooter, who tells the truth, who has a track record of delivering on promises, as I do. I would say beyond that, we really have to talk in this campaign, I think, about the integrity of the whole process, and by that, I mean I believe that a candidate for President of the United States ought to be campaigning positively and constructively on ideas that he or she believes are important for the American people, as opposed to what has amounted already to a demolition derby in this campaign in New Hampshire and in Iowa. I would, I would simply say I was struck two or three weeks ago by the sheer number of negative ads that I saw. I saw in the press this morning that Mr. Forbes over the weekend on Boston television had 516 ads. The next closest competitor and the next most wealthy campaign, Bob Dole's campaign, had 71. It gives you some idea of the order of magnitude. A majority of both of these candidates appear to be giving negative ads, supplementing whatever they're saying positively. If there is mistrust of the American political system and all of the polls that are being done in Derry, New Hampshire by the Boston Globe, as well as Derry media, indicate a very strong disconnect with many people, and politicians and politics generally. This really pushes it over the edge. Now let me just say I'm not going to run a negative ad. I have never done so in my political career. It is very possible to win public office, affirming the things you believe in as important, positive and constructively, and for the sake of the presidency, we'd better have a President who campaigns and wins on that basis. We--in order to promote big ideas, you have to have at least some basic consensus in this country. One vote more than the next is not enough to reform the tax system, to re-arm the country, to make a positive difference, whether you're talking about crime, welfare, or anything else. What is needed is a consensus builder as President and who understands how to bridge gaps, how to unify the American people, and really how to forge ahead with a sense of goodwill, and the promise that comes with that. So that I promise to do. I believe these are good reasons why I should be elected President, and I seek your vote on February the 20th.

MR. LEHRER: Sen. Richard Lugar speaking yesterday before the Rotary Club in Bedford, New Hampshire. DIALOGUE

MR. LEHRER: Finally tonight, a Gergen dialogue. David Gergen, editor-at-large of "U.S. News & World Report," engages Ingo Hasselbach, author of Fuhrer-Ex: Memoirs of a Former Neo-Nazi.

DAVID GERGEN, U.S. News & World Report: Your book really describes a life of rebellion. You were born in East Germany to two parents who were both supporters of the Communist government there. And then as a teenager, you began to rebel. You were first a hippie, and then you became a punk.

INGO HASSELBACH, Author, Fuhrer-Ex: Yeah.

MR. GERGEN: With a mohawk haircut, and lots of fights, and then in 1990, I guess you were 22-years-old, after you'd been in jail, there'd been lots of alcohol, lots of hard times.

INGO HASSELBACH: Yeah.

MR. GERGEN: You became a Neo-Nazi and the founder of the first Neo-Nazi party in East Germany. In fact, you became its fuhrer.

INGO HASSELBACH: Yeah.

MR. GERGEN: Why did you become a Neo-Nazi?

INGO HASSELBACH: Yeah, basically my time in prison was very important for me to become a Neo-Nazi. I met in the prison time old war criminals like the Gestapo chief from Dresden, and as people used my hate in this time against the anti-fascist Communist system, and yeah, he told me a lot about his experience in the Third Reich and after I came out of prison, I thought that that's my way for my hate for this extremist opposition against the East German government.

MR. GERGEN: And that was in the late 1980's, but when you formed this Neo-Nazi Party from an American viewpoint--

INGO HASSELBACH: Yeah.

MR. GERGEN: --the party sounded almost like a gang.

INGO HASSELBACH: Yeah. That's basically correct. Yeah. We have a lot of members in this movement, and sometimes we lose every control about the people in this movement.

MR. GERGEN: And you were on the right in this gang called the Neo-Nazis and there were others, young people on the left.

INGO HASSELBACH: Yeah.

MR. GERGEN: And the anarchists.

INGO HASSELBACH: Yeah.

MR. GERGEN: And you just had continual street fights.

INGO HASSELBACH: Yeah. And Berlin is a very strange city for extremism groups, and you have in Berlin a lot of anarchists and also a lot of right wing groups, and the city--there's a big contradiction between these groups basically, and you have a lot of fights.

MR. GERGEN: Now, it's hard to understand a couple of things about your, your hatred, as you first hated the state--

INGO HASSELBACH: Yeah.

MR. GERGEN: --the East German government, and gradually you came to hate Jews. Now you'd never met a Jew.

INGO HASSELBACH: No. That's right.

MR. GERGEN: And yet you came to hate them. What was that conversion process like for you and for your friends, your comrades?

INGO HASSELBACH: One very big influence was Gestapo chief of Dresden. Another point is more important basically, I learned in the East German government, the East German school nothing about the concentration camps of the Third Reich. The only thing was in the concentration camps was killed anti-fascists and Communists and some gypsies, and the first thing that I hear about the Holocaust was, umm, from the old Gestapo chief from Dresden. He say he hates the Jews and he killed, he cleaned up Dresden, that's his words.

MR. GERGEN: But in school, when you were going to schools in Germany, you were not taught about the Holocaust.

INGO HASSELBACH: No, nothing, no.

MR. GERGEN: Yeah, so--

INGO HASSELBACH: That's basically only anti-fascists and Communists.

MR. GERGEN: Right. And then you--and then you came to believe that somehow the Jews had not been killed in the Holocaust.

INGO HASSELBACH: No. One point was what this guy in prison to me say, he say, okay, we sent a lot of Jewish people from Dresden to Auschwitz, but in Auschwitz you have a good life, it's very important, things like this, you have no problems. I never hear about the killing from Jewish people in Auschwitz, and, umm, yeah, I began to think, okay, the Holocaust has never happened.

MR. GERGEN: So people were denying the Holocaust, but I could not understand then if people, you and your comrades, did not believe the Holocaust happened, why then you played these games? Like I say, you had a board game in which you sent a Jew to a--

INGO HASSELBACH: To a gas chamber.

MR. GERGEN: To a gas chamber.

INGO HASSELBACH: Yeah.

MR. GERGEN: Or why there's an underground band which is named after the gas used in the gas chambers.

INGO HASSELBACH: Zyklon-B.

MR. GERGEN: Zyklon-B. Why could you believe both at the same time?

INGO HASSELBACH: Basically, it's a very historical hate against Jewish people, and this contradiction was for me a way out of the movement in--in '92, for example, I met movie maker, Eric Bruning, and he said to me look for your contradictions. For example, you make interviews with other Neo-Nazi leaders and one of those guys told a joke about Jewish people in the gas chamber, and the end for the joke, and the Jewish people have died, and he make this body into soap, and we'd say after this, it's a crazy thing, basically. You say the Holocaust has never happened, but also you want the Holocaust, you have no problem with this. And this is the point, I understand my contradictions, but I began thinking about it.

MR. GERGEN: And that's when you began to think about leaving the movement.

INGO HASSELBACH: Yes.

MR. GERGEN: Now, what drove you away finally? Why did you finally quit?

INGO HASSELBACH: One thing is this. I understand my contradictions, and the other point is, umm, in the end of '92, we have a lot of firebombings in Germany, and I saw in this time the first time killed people in the firebombings, I saw.

MR. GERGEN: Were these Molotov cocktails?

INGO HASSELBACH: Yeah. Yeah. And burned was, three Turkish people was burned and was killed after this, and this time I saw my own responsibility for this. I thought, I am a leader, I give young people a lot of hate. Before I say always I have nothing to do with this. This is the other city. It's not my group. But in this time I saw, okay, you are a leader, you give these people hate for killing.

MR. GERGEN: Right. And let me relate that to the firebombs and the propaganda, and that sort of thing to an American named Gary Louk. You describe him in your book as a leader, a kingpin, really, of the Neo-Nazi movement. He sent you many materials apparently.

INGO HASSELBACH: Yeah. He is one of the important guys, leader figures in the movement. He is responsible for a lot of hate for young peoples. He sent propaganda like, yeah, kill Jewish, foreign people out, and terror hunt books, and he's a very important person in the right wing groups in Europe.

MR. GERGEN: And he sent that material from Lincoln, Nebraska?

INGO HASSELBACH: Yeah. Because the American people have the possibility for freedom of speech. We have a special law against people like Louk.

MR. GERGEN: Right. But he was able to send it to you either through the mail or through the Internet. It was interesting, bombing--he had a bombing mail that he sent to you through the Internet.

INGO HASSELBACH: Yeah. My time was more the way with the mail but after I quit the movement, there's a very new thing in the right wing groups, the Internet. It's more simpler to send because you have no control through the government in Germany. The Internet I think today is very important for the Neo-Nazis.

MR. GERGEN: The Internet, the computer system, is very important.

INGO HASSELBACH: Yeah. You can send a lot of hate through this, more simpler than with the mail.

MR. GERGEN: So it's a sewer.

INGO HASSELBACH: Yeah.

MR. GERGEN: Right through the Internet. Now, I'd like to ask you about that. Did you say, in effect, that you were not responsible for the firebombs, legally responsible, but you felt a moral responsibility?

INGO HASSELBACH: Yes, exactly, that's the point.

MR. GERGEN: After the Oklahoma City bombings in this country, you wrote a piece, an article in the "New York Times."

INGO HASSELBACH: Yeah.

MR. GERGEN: In which you said the militia groups in this country may not legally responsible for Oklahoma City, but they bear a moral responsibility.

INGO HASSELBACH: Yeah, sure.

MR. GERGEN: Because--

INGO HASSELBACH: This is the same thing like my feeling in this time I get after the firebombing. Look at this guy, Timothy McVeigh, the--he works always with the Internet. He had directly contacted groups like the militias, and I think this hate--the Michigan militia sent through the Internet or the propaganda material. It's a weapon basically and through this you have the moral responsibility for things and for guys like Timothy McVeigh.

MR. GERGEN: Now, you got out of the Neo-Nazi movement. Your life was threatened, and your mother's life. They sent a bomb to your mother.

INGO HASSELBACH: Yeah.

MR. GERGEN: They tried to blow her up, your former comrades.

INGO HASSELBACH: Yeah.

MR. GERGEN: After your experience now, what, how would you, what would you tell young people who were growing up in Germany, young people who were growing up in the militia movement in the United States? What should our message be to them?

INGO HASSELBACH: I worked for the last three years in Germany with young teenagers, and I make a lot of different experiences with young people, but I say always one point, and I think it's very important. These groups, you're not helped by your problems. You make your problems deeper, much more deeper, and you kill your emotions again, the society against human people, and this--I think that's one important point to understand this.

MR. GERGEN: And to dissuade them from the gangs. If they were to teach the Holocaust in the schools, would that also help?

INGO HASSELBACH: I think, yeah. You must more openly speak about this topic.

MR. GERGEN: So people accept and embrace their history, their own history.

INGO HASSELBACH: Yeah, sure.

MR. GERGEN: Accept it for what it is.

INGO HASSELBACH: That's exactly the point. In Germany, young people became very often in the situation to justify this history, and this is a very difficult situation for young people.

MR. GERGEN: Well, good luck to you, and thank you. RECAP

MR. LEHRER: Again, the major stories of this Tuesday, the nation's governors announced bipartisan agreements on reforming Medicaid and welfare programs. White House Spokesman Mike McCurry said the President would not challenge a subpoena to testify in a Whitewater trial in Little Rock, and Republican caucuses are being held this evening in Louisiana to choose 21 Presidential convention delegates. FOLLOW UP - PRIMARY COLORS

MR. LEHRER: And a brief follow-up before we go tonight. Last night, essayist Roger Rosenblatt spoke about Primary Colors, the political novel by an author who has chosen to remain very anonymous. The book has leapt onto best-seller lists and gossip agendas everywhere, but most particularly in Washington. Last night Rosenblatt weighed in on who he thought the author was, and Roger has returned tonight with an update and it's so good to see you again, Roger.

ROGER ROSENBLATT: It's very good to see you again, Jim, but this is a very embarrassing moment.

MR. LEHRER: Last night you said you nominated Lisa Grunwald.

MR. ROSENBLATT: I did, and she called me right after the broadcast to say it wasn't she. She may be lying, of course, but there's nothing I can do about that. I just apologize to you, to PBS, to television in general.

MR. LEHRER: I--

MR. ROSENBLATT: But I have other candidates.

MR. LEHRER: I know, and I'll get to that in a minute, but first of all, to remind people, or those few people who may be watching tonight who were not watching last night, Lisa Grunwald is the sister of Mandy Grunwald, who was a--who's a political consultant and very much involved in the '92 Clinton campaign. What did Lisa Grunwald say to you? What were her denial words?

MR. ROSENBLATT: Well, it was the usual mealy-mouthed stuff that you get from writers and it was the denial and the non-denial, but I had to accept her word for it, although I did tell her that since I had said no on the NewsHour that it was as good as true. She didn't seem to accept this, so I went back to the book and looked at the material again and made another analysis on exactly the same evidence and came to an entirely different conclusion.

MR. LEHRER: What conclusion?

MR. ROSENBLATT: That the author is clearly now--I should have seen this before--either William Styron or Ward Just--exactly on the same evidence that I used last night. Both know Washington, both know politics, and both have homes in Martha's Vineyard. As you may remember, last night, I used the Martha's Vineyard passage as the crux of my analysis.

MR. LEHRER: Because Lisa Grunwald has spent some time in Martha's Vineyard.

MR. ROSENBLATT: Yes, that's true.

MR. LEHRER: Let me ask you this, though. Why--we could understand why Lisa Grunwald, because of her sister Mandy Grunwald, would choose to publish this book anonymously. Why would--what would be the motivation for William Styron or Ward Just, both of whom, very accomplished novelists, et cetera, why would they want to do it anonymously?

MR. ROSENBLATT: Money. I think they'd want the money from it. It's clearly a marketing ply in order to get more money by calling themselves anonymous, and the second book either one will get as a result of this, they'll double or triple the advance because of the success of this one. I called Random House today. There are 300,000 copies of this book in print.

MR. LEHRER: Three hundred thousand--the original printing I understand was sixty thousand.

MR. ROSENBLATT: That is correct. Now they're in their eighth printing.

MR. LEHRER: Well, now back to our conversation last night, I--I had made the point in fact about the marketing, that this was more a marketing thing, but, but you still believe that whoever did this seriously chose anonymous as a way to sell the book, not to protect themselves.

MR. ROSENBLATT: Well, it could have been. It's an old tradition, 17th and 18th century satirists in the court in England used to write under pseudonyms to protect themselves from political retribution, but I don't know how you can deny the marketing success of this book with 300,000 in print.

MR. LEHRER: Yeah. But how would anybody have known that, Roger? That's my point?

MR. ROSENBLATT: Well, Anonymous would have know it, but of course we don't know about Anonymous.

MR. LEHRER: Right. Well, look, we're not going to ever talk about this again.

MR. ROSENBLATT: Why is that?

MR. LEHRER: Well, I mean, I think we've pretty well done this, so when was the last time you read--when did you read the book?

MR. ROSENBLATT: I haven't seen it in a long time. I actually, Jim, haven't seen the book since they sent me the galleys to correct.

MR. LEHRER: I see. Well, Roger, thank you very much. Nice to see you again.

MR. ROSENBLATT: And you.

MR. LEHRER: And we'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.