The NewsHour with Jim Lehrer

MR. LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, the White House Travel Office affair, Kwame Holman and two House members update the investigation; running public schools for profit, Betty Ann Bowser reports; the debate over Medical Savings Accounts, Elizabeth Farnsworth gets two opinions; and religion and politics part two, David Gergen talks to author Ralph Reed. It all follows our summary of the news this Thursday.NEWS SUMMARY

MR. LEHRER: A man, a woman, and two children left the Freemen compound in Eastern Montana today. Officials said they were members of the same family. They are the first of the anti-government group to leave the besieged ranch since April. The FBI has isolated the rural area around it since late March, when federal agents arrested two Freemen leaders. They are charged with taking part in a $1.8 million check fraud scheme, threatening government officials, and armed robbery. Defense Secretary Perry said today the pilots were partly to blame for the crash of Ron Brown's planein Croatia. The Commerce Secretary and 34 others were killed in that accident in early April. Perry said a report on the crash will be released tomorrow. He said the crew's decision to land in bad weather at the Dubrovnik Airport was one of several factors that led to the crash. The Senate today rejected a constitutional amendment requiring a balanced federal budget. The vote was 64 to 35, two votes short of the 2/3 majority needed. All but one of the no votes were cast by Democrats. Senate Majority Leader Bob Dole brought the amendment to the floor as one of his last actions before retiring to run full-time for President.

SEN. ROBERT DOLE, Majority Leader: We will have this vote and we will lose, but we will have made the statement. That's the important thing. It's not whether you win or lose. You made the statement, and we'll be back next year, and we're not going to change any votes because this is an election year and I happen to be the Republican candidate for President, and I respect those on the other side who feel they must reflect the views of the occupant of the White House, the present occupant. I'm hopeful that if it doesn't happen today, it'll happen maybe later this year. Maybe next year the White House will not lobby against it. Maybe somebody will be there to lobby for it.

MR. LEHRER: Sen. Dole's last day in the Senate will be next Tuesday. On the Medicare story today the trustees of the Medicare trust funds testified before the House Ways & Means Committee. They were questioned about their report yesterday which said the Medicare hospital fund will be bankrupt by 2001. Committee Chairman Archer said Medicare was in crisis and called for a bipartisan solution.

REP. WILLIAM ARCHER, [R] Texas: I hope President Clinton will update his existing Medicare proposal to reflect the deepening Medicare crisis. What was proposed last year is not good today. The conditions are different today. The base line is different. The projections are different. And the crisis is deepening.

MR. LEHRER: The ranking Democrat on the subcommittee said Republicans were proposing policy changes that radically threaten Medicare.

REP. PETE STARK, [D] California: The Republican proposal shifts tens of billions of dollars in costs on to the seniors by allowing doctors and hospitals to charge extra for the basic Medicare package. Republican proposals weaken the anti-fraud laws. They spend extra billions on Medical Savings Accounts for the wealthiest and healthiest seniors. They make life-threatening cuts in the safety net and academic research hospitals. Your proposals cap total spending on Medicare regardless of inflation or oil crises or epidemics. It's a mindless cap that could destroy the program.

MR. LEHRER: Treasury Sec. Rubin and HHS Sec. Shalala both urged quick action to make Medicare solvent into the future. Rubin said he was also concerned about excessive reductions in the program. Also in Washington today, President Clinton announced a $200 reduction in Federal Housing Administration closing costs. He said the money would be covered by savings in other FHA operations. Mr. Clinton spoke at a housing conference. He said the government- backed loans were well justified. PRESIDENT CLINTON: You can call it a subsidy, as the critics do. I say it's a pretty good subsidy. It's a pretty good investment by the American people as a whole to get 2/3 of us into our own homes. I think it's a pretty good investment for people like me who could afford to pay market mortgage rates to help young people get started and raise their kids, afforda home, be good citizens, and build a future.

MR. LEHRER: An administration report said the new discount will help about 100,000 first-time buyers finance a home. On the White House Travel Office story, Attorney General Janet Reno today ordered a review of the request for Billy Dale's FBI background files. Dale was fired from his job as head of the White House Travel Office in 1993. Seven months later, the FBI received a request from the White House for the agency's background files on Dale. We'll have more on this news story after the News Summary. At the Energy Department, an internal investigation concluded there was financial mismanagement of four overseas trade missions headed by Energy Secretary Hazel O'Leary. In a written statement, O'Leary accepted responsibility for the accounting and administrative problems. The mismanagement findings were those of the Department's inspector general. $3.42 million were spent on the trips to India, Pakistan, China, and South Africa. The draft report was released yesterday. A final report is expected later. The commander of NATO forces in Bosnia is leaving. A Pentagon spokesman said Admiral Leighton Smith will be succeeded by vice admiral Joseph Lopez. Smith's two-year tour ended in April, but he was asked to stay on. Adm. Smith will retire from the Navy once Adm. Lopez takes over. In South Central Alaska, the battle against an out of control forest fire continued today. Eleven hundred fire fighters are on the scene. The fire began Sunday and has destroyed more than 41,000 acres of forest and more than 500 homes. Strong winds caused it to triple in size yesterday. Fireworks are suspected to have started the blaze. And that's it for the News Summary tonight. Now it's on to a Travel Office update, schools for profit, Medical Savings Accounts, and a David Gergen dialogue. FOCUS - TRAVEL OFFICE

MR. LEHRER: The White House Travel Office story is first tonight. Our update begins with this backgrounder by Kwame Holman.

MR. HOLMAN: Yesterday Rep. William Clinger disclosed that the White House requested and got FBI background material on Billy Dale, the man ousted as head of the White House Travel Office in the early days of the Clinton administration. The disclosure was the latest in the ongoing political controversy known as Travelgate. In May of 1993, Dale and six other Travel Office staff members were fired by the White House, charged with incompetence and possible criminal activity. Office Director Dale later was tried on embezzlement charges but was found "not guilty" by a jury. The six other employees were exonerated and were offered jobs in other agencies of the government. But congressional Republicans accused the White House of pushing out those long-time staffers so that friends of the Clintons could take over the Travel Office, and they said White House officials asked the FBI to investigate criminal charges against the seven in order to justify the firings. As the ranking minority member of the House Government Reform and Oversight Committee, Clinger called for an investigation into the matter in 1993. It wasn't undertaken but five other investigations were conducted by government agencies, including the Justice Department and the General Accounting Office. Those inquiries did not substantiate any wrongdoing by the White House but did reveal a memorandum by former White House aide David Watkins that suggested First Lady Hillary Clinton called for the firings, a charge Mrs. Clinton has denied. Kenneth Starr, the independent counsel looking into the Whitewater matter, has said he'll also examine whether administration officials tried to block or mislead any of the Travel Office investigation. Last year, Rep. Clinger became head of the Oversight Committee and requested thousands of pages of White House documents related to the Travel Office. In May of this year, the White House Counsel's Office wrote a letter to Clinger invoking executive privilege over some of those documents, refusing to hand them over. Clinger's committee then voted to push for contempt of Congress charges against White House Counsel Jack Quinn and two former White House aides. That citation carries a $1,000 fine and up to a year in prison. But last Thursday, a few hours before the contempt charge was to be brought up on the floor of the House, the White House relented and delivered 1,000 pages of documents to Congress. But the administration did invoke executive privilege in refusing to send over other documents that had been requesting, providing only an index of that material. At his press conference yesterday, Clinger said that among the papers the White House released was a letter to the FBI sent seven months after Dale was fired. The letter had the name of former White House Counsel Bernard Nussbaum printed on it and requested background reports on Dale because it said the administration was considering whether to give Dale access to the executive mansion. Yesterday Bernard Nussbaum denied sending the letter, saying he never even knew of its existence. The White House said the request may have been made by mistake by junior officials trying to clear a backlog of security clearances.

MR. LEHRER: Now two key members of the House Government Reform and Oversight Committee, the chairman, New York Republican William Clinger and Virginia Democrat James Moran. Congressman Clinger, on the request to the FBI on the Billy Dale matter, what do you believe the White House people were up to?

REP. WILLIAM CLINGER, Chair, Government Reform and Oversight Committee: [Capitol Hill] Well, that's hard to figure out. I mean, this request, as you noted, came seven months after Billy Dale had been summarily fired and was no longer a member of the White House staff. The request indicated that it was being made because access to the White House was being considered for Billy Dale. He had not asked for access. Clearly the White House didn't want him to have access, so you have to assume that there was some other reason why this request was being made at that stage of the game, which was in December of 1993, after he'd been fired in May of 1993. And it also, I think, raises some Privacy Act considerations as well.

MR. LEHRER: What kind of Privacy Act considerations?

REP. CLINGER: Well, the Privacy Act would say that you cannot just sort of start rooting around in people's confidential personnel files, private citizens. It's considered a crime.

MR. LEHRER: Yeah. Do you consider this a serious matter, this Dale request?

REP. CLINGER: Well, I think it is, and I think it's not--I can tell you that it's not, it's not unique. In other words, we, Inspector--or Director Freeh has told me that there was another request for another one of the White House Travel Office people, Barney Purcell, which also came in at about the same time, actually a little earlier than the one for Billy Dale. But I think it does raise questions. And all we're suggesting is these have to be answered. Thus far I really do not feel that the White House has given us a really credible answer, and I would hope that they'll be more forthcoming in the days ahead.

MR. LEHRER: Congressman Moran, what do you think of this, this Billy Dale request?

REP. JAMES MORAN, [D] Virginia: [Capitol Hill] I just can't find the beef in this burger, Bill. I don't--I think it's much ado about nothing. You know, there were hundreds of people that were held over from the Bush administration, uh, to the Clinton administration, and Billy Ray Dale was one of them. The Bush administration had cleared out virtually of the personnel files, and it took months for the Clinton administration to gets it act in gear and to have adequate back-up information so that they could give permanent security clearance, in other words, access to the White House. And so it was routine to be asking for these people in a long list of, of personnel, and, uh, it was a clerk that did it. Nussbaum wasn't aware of it, but there had been an article in the "Washington Post," I think it was in the summer of '93, that these security clearances had been delayed. And so Mack McLarty, who was the chief of staff at the time, sent out an order, get this stuff cleared up, I want this back-up information so that they can get their security clearances in time. And some security--some clerk in the General Counsel's Office went ahead one by one and Billy Ray Dale's name came up at the end of the year. Now this clerk should have known, should have been reading the papers, but, you know, they were just going through the pro forma exercise of listing the people on a form and, and as Director Freeh of the FBI says, this was a routine matter handled in a routine way. They sent the information. It was immediately put into a vault. Nobody asked to look at it, and, in fact, until Chairman Clinger released it to the public, nobody had seen these files. So if it's a privacy issue, then I'm afraid that the chairman of the committee is the one who violated the privacy.

REP. CLINGER: Well, let me say I have not released these files to the public and don't intend to release the files to the public, but I do think, Jim, that there really is more here than you would suggest. This was 30 years' worth of documentation. If we were just talking about filling in the gaps or supplementing an existing file, that was one thing, but in this case, we had the request-- the material that came over--about 30 years of very confidential, very sensitive material. Uh, when I talked to Director Freeh about this a day or so ago, he said, yeah, there was a routine request but it is not routine for them to release very sensitive material. And I guess the other question I would raise is: Mr. Nussbaum says he knows nothing about this, and he hadn't seen anything, didn't request and so forth, but that raises the question in my mind, who has authority to make these kinds of requests for extremely sensitive information coming across the Privacy Act if Nussbaum doesn't approve of it?

MR. LEHRER: Congressman Moran.

REP. MORAN: I don't think that, that this is extremely sensitive. Everyone has their personnel files. In fact, if you want to work in the White House, you have to subject yourself to an FBI investigation, even the lowliest level people, and they keep that information. As long as they keep it confidential, I don't see what the problem is. It was put into a vault. It was never released. In fact, the White House objected to releasing any of this information. That's why they had a subpoena subjected upon them because they wouldn't release this information until the committee demanded it.

MR. LEHRER: Congressman Clinger, in a more general way, what, what is the purpose of your investigation now? Whatare you trying to find out about the Travel Office affair that you do not now know?

REP. CLINGER: We're really trying to just come to closure, and I guess one of the items that we were exploring and I think which this most recent thing has raised is: Was the FBI in any way inappropriately used in the whole episode surrounding the Travelgate situation? The other agency of government we are looking into and would like to get to conclusion was with the IRS. There's some implication that the IRS had some involvement in this matter. And the final issue is: What role did Harry Thomasen, who was not a government employee, although he may have been what we call a special government employee, what role did he play, and was he the one who triggered this--

MR. LEHRER: He's a friend of the Clintons who--

REP. CLINGER: A very close friend of the Clintons.

MR. LEHRER: Right.

REP. CLINGER: And then again, you know, we, I think we've already established, although the First Lady would deny that she had any direct role in this, that she was certainly very deeply interested in this whole question.

MR. LEHRER: What's the bottom line, Congressman Clinger, as to what, what, what evils were committed and by whom here?

REP. CLINGER: Well, I think that, you know, we, we would say that from my point of view, the overriding issue is: How can the Congress affect oversight of an administration that really has been stonewalling us for literally three years? I mean, when were in the minority three years ago and I tried to get into this matter, they would not give us any information. They've personally denied it-- still are, even though we now have the subpoena power. But I would say to Jim, that you know, it's hard for me to understand how you can claim executive privilege over a document that was sent to the FBI requesting this information. It doesn't seem to me that that rises to the level of executive privilege.

MR. LEHRER: Congressman Moran, where's the bottom line on this for you?

REP. MORAN: The bottom line is we ought to get back to the business that the public wants us to be working on, welfare and Medicare and getting our appropriation bill passed so we don't shut down the government again. We've had six investigations into the Travel Office firings. Forty thousand documents have been supplied to this committee. I don't know what more they can do. The reality is we have far more important things to be working on, and that's where we should be putting our attention.

MR. LEHRER: Congressman Moran, do you see anything from your perspective that was done improperly or illegally by people at the White House involving this Travel Office matter?

REP. MORAN: You know, Jim, I don't. Billy Ray Dale lives in my district. He can vote for me. The President can't vote for me. If I saw something improper, I'd like to be defending Billy Ray Dale. But, you know, the Republican majority fired hundreds of people that have no political connection last Christmas so they didn't have to pay them overtime in January since we passed this law saying that laws that apply in the private sector ought to apply to the Congress as well. You know, we ought to do an investigation of that. It seems to me that's far more egregious. This is one of those things. These people in the Travel Office serve at the pleasure of the President, and unfortunately, that's the way politics work, and I'm sorry Billy Ray Dale lost his job. They offered him another one. Let's see if we can find him a better one that'll make him happy.

REP. CLINGER: May I just respond to that very briefly?

MR. LEHRER: Yes, sir.

REP. CLINGER: And that is the difference between the firing up here in the Congress was that there was a change in the majority, and obviously I think Jim would agree there's going to be a change of the guard. The same thing applied in the White House. But the difference here was that the White House attempted to invent a cover story to give them sort of a cover for the fact that they were firing these people. They tried to invent, and the result was that they engaged in kind of a political persecution of Billy Dale and the rest of them for over nine years. That is a significant difference, and I think that is where this administration could be faulted.

REP. MORAN: Well, you're right. They went immediately on the defensive, and the Republican majority didn't bother them at all, so they didn't feel defensive about it.

REP. CLINGER: At least we were honest. We were honest about it.

REP. MORAN: Well, you fired all your staff when you took over the committee. Those things happen.

MR. LEHRER: But Congressman Clinger, is there anything more than, in your opinion, based on what you know about this, other than just faulting them for doing, doing some--for mishandling this or was there--were there laws violated, do you think?

REP. CLINGER: Well, I think there's been one criminal referral out of this matter so far. That's with Mr. David Watkins, who was the head of administration who gave one story to the GAO and another story to my committee, and that has been Mr. Starr is looking into that matter. Mr. Starr is exploring other possible mis-statements and perhaps perjury charges, but, you know, that's going to be in his charge. This is not our role. Our role is not to explore criminal activity. Our role is to determine how do we conduct effective oversight with an administration that's very secretive and has been very secretive not just about this matter but about a whole range of matters that we've been trying to look into?

MR. LEHRER: Congressman Moran.

REP. MORAN: I think Bill's been charged by the speaker to keep this story on the front page, and he's managed to do that, but I don't think it amounts to anything more than that.

MR. LEHRER: Do you think that's what this is all about, Congressman Moran?

REP. MORAN: I think that's what this is all about. You know, there was a front page story today, "Nussbaum Required Files on Billy Ray Dale," front page. This is nothing. There is nothing here, but, but what it is, it's an attempt as part of a larger effort to keep pressure on the White House to embarrass them, to- -if they can't find anything, they're going to invent something, and unfortunately, a good man like Bill Clinger is put in the role of having to dig this stuff up and keep it on the front page every day.

MR. LEHRER: That's what you're doing, Congressman Clinger?

REP. CLINGER: This is my voice [getting hoarse]--

MR. LEHRER: What's he doing to you up there?

REP. CLINGER: --defending my position. [laughter among group] I would hope not. I mean, I think Jim knows, we are the principal oversight committee, and we really have a responsibility. We are looking into the other issues that he mentioned--welfare, Medicare, and so forth--but I think this an issue that deserves to be explored.

MR. LEHRER: All right. Before you lose your voice completely, I'm going to put you out of your misery, and thank you both very much.

MR. LEHRER: By the way, Congressman Clinger is from Pennsylvania, not New York, as I said he was when I introduced him. UPDATE - SCHOOLS FOR PROFIT

MR. LEHRER: Now an update of a story we've been covering for several years--private companies running public schools for profit. Betty Ann Bowser reports.

BETTY ANN BOWSER: Wappingers Falls is an affluent school district within commuting distance of New York City. But even in an area where the median income is over 50,000 dollars, budget cutting is a priority.

CHILDREN SINGING "GOD BLESS AMERICA": God bless America, land that I love. Stand beside her and guide her--

MS. BOWSER: This year, the school board turned to EAI, an educational consulting firm from Minneapolis, to tell it how to reduce its $99 million budget. Peter Donnelly is Wappingers' school board president.

PETER DONNELLY, Wappingers School Board President: We hired them simply because of their experience, as it were in the area. We now we've got a mess here.

MS. BOWSER: But Wappingers Falls school superintendent is concerned what EAI might do.

JOHN MARMILLO, Wappingers School Superintendent: For them to make a profit, we have to cut on transportation, or we have to cut on education. We have to cut on instruction. We have to cut teachers. Or we have to cut administrators, or we have to cut supervisors. These are all things that are directly related to the instruction of children.

MS. BOWSER: In fact, those are precisely some of the key areas EAI has recommended to cut in order to save $8 million in the first year. A final school board vote on that proposal won't be taken until later this month. But no matter what the outcome, EAI's involvement in Wappingers Falls comes at a period of crisis for the company and a reassessment of the scope of its mission.

[CHILDREN SINGING]

MS. BOWSER: In 1986, EAI came on the scene with dazzling visions of transforming America's public school system. At a time when politicians and educators were complaining loudly about the nation's public schools, EAI made news as a success story--running or providing services in 47 public schools around the country. In 1993, Baltimore school officials hired the company to rescue their nine worst public schools. The inner city school system was known for its low test scores and high drop-out rates.

WOMAN: [in school gym] Boys and girls, I feel super today. How do you feel?

CHILDREN: [responding] Super!

MS. BOWSER: EAI was to be paid $75 million over three years to repair the decaying schools and raise the academic level. It spent thousands on repairs, clean-up, security equipment. It hired 171 college-educated, non-union interns to assist in classrooms, introduced its own curriculum, and installed new computers. In fact, EAI's chief operating officer, John Golle, confidently predicted student test scores would improve dramatically after the first year.

JOHN GOLLE, CEO, Education Alternatives, Inc.: [1993] They've made unprecedented gains in every school that's under our management, and when they take the standardized test given by the state this spring we have great confidence that those types of gains will be manifested in that testing mechanism.

MS. BOWSER: But when the school year ended, test scores were down. Despite that setback, school officials in Hartford, Connecticut, another area with falling test scores and escalating drop-out rates, began negotiations with EAI. A deal was made to turn over the entire Hartford school district to EAI. It was to be the largest privatization of public education ever.

DEMONSTRATORS: [shouting] Parents unite--

MS. BOWSER: But protests by the Teachers Union and others skeptical of EAI's promises stopped the company in its tracks. And after a year or less in both Baltimore and Hartford, EAI was asked to leave.

PHIL GEIGER, President, Education Alternatives, Inc.: We were only there a short time.

MS. BOWSER: EAI president, Phil Geiger, says his company never had a fighting chance to prove it could do the job it promised.

PHIL GEIGER: Educationally we didn't even scratch the surface of what needed to be done because we were focusing on getting their finances in shape and their staffing in shape. You need to have a literal army at this point in time to change things.

MS. BOWSER: But EAI's reputation had been damaged. Privatization no longer looked as promising. And Wappingers Falls School Superintendent John Marmillo remained skeptical.

JOHN MARMILLO: My concern with EAI is that I'm not overly impressed with their track record at this point in time. There's this misconception that the private sector runs their businesses more efficiently than the public schools do. That is a myth that is not true. It doesn't work. The public schools in general run very, very lean, very efficient schools for a very little amount of money.

MS. BOWSER: School Board President Donnelly argues that EAI is what Wappingers Falls needs.

PETER DONNELLY: It was my original opinion that they would do a much better job of running the schools than the way they're being done right now. They have expertise in facility and operations. They have accounting. They also know how schools operate because most of them are superintendents or former superintendents, and they have some people, they have masters degrees in business administration.

MS. BOWSER: Jeanne Allen, president of the Center for Education Reform in Washington, thinks the expectations for EAI were too high in the beginning.

JEANNE ALLEN, President, Center for Education Reform: The core of EAI's program is management and efficiency. It is running the trains. It is not necessarily producing a better train or a faster train. And so it's very difficult to look at EAI situation say in Baltimore and suggest it would have been possible for them to take over and turn everything around.

MS. BOWSER: Still, advocates of privatization say for-profit companies can succeed, mainly by tackling individual schools, rather than entire districts. The Edison Project has been a pioneer in this approach. It originally planned to build 100 for-profit schools. Now it has scaled back its plans and is operating four public schools in partnerships with districts in Michigan, Massachusetts, Texas, and Kansas. Benno Schmidt, a former president of Yale University, is president and CEO of Edison.

BENNO SCHMIDT, President & CEO, The Edison Project: We think that public education is a field where the benefits of innovation and competition and greater accountability are particularly ripe, the people really want that more in public education than they have in the past. And so that's why we believe that private companies can play a very, very constructive role.

ELLIOTT SCHLAR, Columbia University: There's no inherent reason why the private sector is going to give you a better deal than the public sector on education.

MS. BOWSER: Elliott Schlar is a professor of urban planning at Columbia University.

ELLIOTT SCHLAR: The American culture is full of snake oil salesmen who will sell you an elixir for anything. Umm, the schools, urban public schools are in terrible shape, and they have no money, so imagine if somebody comes to town and tells you they can run the school for less money than it's being run for now, they can make a profit to satisfy their investors on Wall Street, and educate your children good enough to get them into Harvard and Yale. Umm, why not? Umm, would that it were true.

MS. BOWSER: Again, Jeanne Allen.

JEANNE ALLEN: Businesses are rightly looking for opportunities because there's a lot of money having been spent unproductively in most cases, and they want to turn that around not only because they do have a concern for education but because they are businesses and they do want to make a profit. I don't think those two goals are mutually exclusive.

ELLIOTT SCHLAR: I think there are niches where things might work. I think they really depend on how they work. I think the Edison Project, you know, remember, started out finding places where they can do some thoughtful, small, small project, and obviously there may be niches where that works.

JEANNE ALLEN: There is no one-size-fits-all solution in education. So why have we been trying to create a one-size-fits- all system?

MS. BOWSER: Benno Schmidt agrees and says that the trend of private contracting with public schools will not be limited to a single approach.

BENNO SCHMIDT: I can imagine in a decade systems that would have a high number of schools in the hands of different private entities. I think there will be some non-profit entities. I think you'll see some universities offering to operate public schools under contract. And I think the idea of, of competitive models of schools being provided by private companies and others is one that is likely to catch on and move pretty quickly. So I do think in 10 years there will be a number of systems that have lots of schools in the hands of, of outside providers and managers.

MS. BOWSER: Schmidt could be right, but given the experience in Baltimore and Hartford, it seems doubtful that any big city school system will ever look to just one company to solve all its problems.

MR. LEHRER: Still to come on the NewsHour tonight, Medical Savings Accounts and a David Gergen dialogue. UPDATE - SAVING UP?

MR. LEHRER: Now that fight over something called Medical Savings Accounts. Elizabeth Farnsworth has the story.

ELIZABETH FARNSWORTH: This spring the House of Representatives and the Senate passed different versions of health insurance reform legislation. Both versions aimed broadly to limit the ability of insurance companies to deny coverage to workers with preexisting conditions or to workers laid off of their jobs. But both Houses also added other provisions to their bills. One of those provisions, Medical Savings Accounts, which was added in the House, has become a major point of contention. Under a Medical Savings Account or MSA plan, an individual's employer would pay for a catastrophic care policy covering all or most costs above a specified amount each year, $1500 per individual in the House's bill and $3,000 per family. Medical Savings Accounts would be used to pay for those expenses. Under the House plan, the employer or individual could place up to $2,000 a year in a private tax-free health account or $4,000 per family. Routine medical costs such as check-ups would be paid from that account. Individuals and families could spend the money as they wish as long as it's for medical expenses. The House version of the Health Insurance Reform Bill contains this MSA provision; the Senate's does not. Now we debate the issue with Dr. Daniel Johnson, Jr., the president-elect of the American Medical Association, and Gail Shearer, the director of health policy analysis for Consumers Union, a consumer advocacy group. Thank you both for being with us. Dr. Johnson, the American Medical Association is in favor of MSA's. Why?

DR. DANIEL JOHNSON, JR., American Medical Association: [New Orleans] Elizabeth, we think that the issue is not whether or not to have Medical Savings Accounts. They exist now. The issue is whether or not to remove the discrimination against the person who chooses a Medical Savings Account. So we support legislation that will treat that option the same as other options are treated under the tax law by the federal government.

MS. FARNSWORTH: What do you mean?

DR. JOHNSON: Well, currently if someone picks, for example, a traditional insurance policy or an HMO, the premium that is paid for that individual by his or her employer is tax free to the individual. But if someone chooses a plan such as the one you described where part of the money goes into a catastrophic insurance policy and the balance goes into the savings account, that part that goes into the savings account is taxable income for that individual. In other words, it's not treated the same way. So one of the two major reasons to enact legislation is to fix that discrimination, the other reason being to allow the money to accumulate so that it can be used for future medical expenses.

MS. FARNSWORTH: Well, and you think MSA's are a good approach to insurance, right?

DR. JOHNSON: We do, but it's--I want to emphasize that from the American Medical Association's point of view, this should be an option. It should only be an option, and it shouldn't be the only option, but we think it's time to give the little guy a break and allow him or her to have that option without being discriminated against for taking the option.

MS. FARNSWORTH: Ms. Shearer, time to give the little guy a break?

GAIL SHEARER, Consumers Union: Well, we disagree. We think that Medical Savings Accounts turn the whole notion of insurance on its head. Most people, they pay in their premiums for insurance, or their employer pays in their premiums each month, and they can count then on coverage when they get sick. What Medical Savings Accounts do is they let people who are healthy build up money in accounts and not necessarily use the money, and what it does is it, it drains money from the pot of money available to take care of people when they are sick, and the end result could be premiums that are much higher for people who want to stick with health insurance that pays after $250 has been spent.

MS. FARNSWORTH: How would that work? Why would--I mean, wouldn't somebody who has adequate money in the bank and is also, also has problems, wouldn't they like these programs? How can you be sure that it will upset the balance in the--between, you know, in the way you just described it?

MS. SHEARER: Right, right. Well, the one thing--the key to all this is that the premium for the high deductible policy will be lower but not much lower than what the employer would be paying today, so what that means is it leaves the employer only a little bit of money to fund a Medical Savings Account, leaving consumers at risk of having costs that are not covered by either the MSA or the high deductible policy. So what that means is it'll sound good to healthy people because they will not face terrible out-of-pocket costs, but it will not sound so good to people who have chronic illnesses and can expect to have costs in the range of $2,000 per year. So what it does is it drives healthy people into Medical Savings Accounts, leaving the unhealthy people behind and leaving premiums increasing as much as 60 percent, even more, for people who want to have the traditional type of coverage that they're used to.

MS. FARNSWORTH: Dr. Johnson, what about that? It is true, isn't it, that healthy people might want these savings accounts because they can roll them over, they can use them with a small penalty for anything they want if they haven't used them at the end of a year?

DR. JOHNSON: Let me give you the example of the United Mine Workers. The United Mine Workers have a plan that says that they have a $1,000 deductible plan and the employer puts in $1,000 to cover that deductible. So it is fully covered, not that that is an ideal plan design, but those mine workers who are hardly among the healthiest and wealthiest of our society are discriminated against by the federal law for the tax program that they--I'm sorry, for the insurance program that they have. They're discriminated against by the tax laws. Now what, what Ms. Shearer points out is in terms of trying to, to alter the insurance pool simply is not the case. If one looks at the savings, they are substantial from buying the high deductible insurance, and then one doesn't have to fully fund the deductible in one year. One can allow that balance to build up if the law is passed to enable it to build up, so that over time, first dollar coverage is available. But the reason it works is that the person is spending his or her own money. The advantage to the little guy is that if the cost- effective use of the system results from the patient being careful about how he or she uses the system, it is the patient who realizes the benefits and not the insurance company.

MS. FARNSWORTH: Are you saying, Dr. Johnson, that healthy people won't use these and that premiums won't be driven up for people who are not healthy?

DR. JOHNSON: There's a study in the current issue of the "Journal of the American Medical Association," the June 5th issue, which discusses these very issues. It's done by the Rand Institute, and they've demonstrated that, in fact, these issues are not of great concern, that plans can be designed in such a way that they do not benefit either healthy or unhealthy or wealthy or unwealthy, that there can be balance in the plans and that these can be effective choices.

MS. FARNSWORTH: What about that?

MS. SHEARER: Well, it's more complicated than that because what the study actually showed is that depending on what assumptions you make about what the catastrophic plan looks like, there could actually be a problem of attracting the unhealthy. And not only that, several other studies are out there that show, show very clearly that there's a very real risk of healthy people being attracted in a Medical Savings Account. One of these studies estimates that if an employer wants to keep its contribution the same and not spend more or less on health care that that employer would contribute about $250 to a Medical Savings Account for an individual. Well, as you know, that does not go very far in terms of paying the bills of a chronically ill person, and just in terms of, of being able to build up money over the years, if somebody has $2,000 of health expenses year in and year out because of a chronic illness, that approach is not going to be very healthy for that person.

MS. FARNSWORTH: Let's say that I have this program, and I get sick, and I use the $2,000 deductible. Then if I--I have to pay for everything, all the medical expenses I have after that. Will I also have co-pays? Has that been decided?

MS. SHEARER: Once you meet the deductible in the high deductible policy, which could be $2,000, $4,000, $6,000, then we really don't know what the situation will be because the bill offers no consumer protections. There's no limit on the co-insurance that you might have to pay once you meet that deductible.

MS. FARNSWORTH: I meant to say insurance will kick in, and will I also have a co-pay?

MS. SHEARER: Yes, yes, you could well have a co-pay. The policy would be free to cap your benefits, so if you should have a catastrophic illness, such as the one recently suffered by Christopher Reeve, you could find that your benefits run out. There's nothing building any consumer protections into this bill, and so the consumers could be the net loser.

MS. FARNSWORTH: Do you think that this is so important that the health reform, the healthy insurance reform bill that's currently in the House and Senate, should be defeated, rather than have a provision allowing for MSA's in them?

MS. SHEARER: Well, we have reluctantly reached that, that position, and the reason is as initially drafted, the Kassebaum- Kennedy Bill would have been a modest step in the right direction and would have helped people keep their insurance. The whole thrust of it was to help make the insurance pool bigger and to help people keep their insurance when they changed jobs and keep their insurance if they have a preexisting condition. Well, this Medical Savings Account provision moves in exactly the opposite direction. It divides up the insurance pool into pots of healthy and sick people. So we, we would oppose the bill if it includes, includes Medical Savings Accounts.

MS. FARNSWORTH: Dr. Johnson, will the AMA oppose the bill if it does not include Medical Savings Accounts?

DR. JOHNSON: The time has come to enable Medical Savings Accounts to remove the discrimination against the, the individual who chooses a Medical Savings Account. It's important to realize that the--under the American Medical Association's view of health system reform, that the protection for the consumer comes from giving that individual both the opportunity and the responsibility to make choices. And those choices have to compete with one another to see which one can do the best job for the patient. And the person making that choice should be the patient. We believe that Medical Savings Accounts are a good fit in the Kassebaum-Kennedy Bill. They belong in there; they facilitate the issues dealing with the issue of portability. They are a very important adjunct, and we want to see them enabled, and we believe the time has come to do so.

MS. FARNSWORTH: So if the MSA's aren't in it, you would not be for the bill?

DR. JOHNSON: We have not made that determination. We don't believe that that really is the issue at the moment. We think the time has come to give the little guy a break, give the little guy an expanded array of choices which will make the system more cost- effective, will put the patient in the driver's seat, which is what we think should happen.

MS. FARNSWORTH: How about a demonstration project, Doctor? One of the suggestions for a compromise has been to have a large demonstration project that would last a certain number of years.

DR. JOHNSON: There are some 2,000 or more businesses. There are several municipalities that have Medical Savings Accounts to date which are functioning satisfactorily, despite the discrimination against the people who use them. It's time to remove the discrimination, enable these accounts to be used in the way in which they are designed, and let them function and--but only as a choice. We don't think anyone should be required to pick one.

MS. FARNSWORTH: Do you think that a compromise that would involve demonstration projects would be a good idea?

MS. SHEARER: Not at all. There's actually a proposal on the table today that would basically--they call it a demonstration but in reality, it's opening the door to Medical Savings Accounts for individuals and for small employers. What that would be is the beginning of walking down the plank, and it would be very difficult to turn back. And we fear it would actually lead to Medical Savings Accounts on a larger scale. So we don't think a demonstration works. On the other hand, there is--Medical Savings Accounts--we would like to see the Congress move in the direction of studying what's out there. This is very dangerous for consumers. Really what is at stake here is the whole nature of our health insurance system, and Dr. Johnson talks about increasing choice for consumers, but what we think that Medical Savings Accounts could do is decrease choice for consumers by driving the traditional type of insurance that many people value just out of the market altogether.

MS. FARNSWORTH: At this point what is your--what do you think will happen? How does it look?

MS. SHEARER: Well, it's, it's very difficult to call. What we hope will happen is that the Senate will return to the position it, it considered a month ago when it voted unanimously to support a bill that did not have Medical Savings Accounts.

MS. FARNSWORTH: The Kassebaum-Kennedy Bill.

MS. SHEARER: That's right.

DR. JOHNSON: The Kennedy-Kassebaum Bill.

MS. SHEARER: That's right. And, uh, we really hope the debate will move in that direction, possibly with a study of what's going on out there and simulations through computer models but not through draining money from the federal treasury to create a new tax break.

MS. FARNSWORTH: And Doctor, what's your prognosis at this point? What do you think will happen?

DR. JOHNSON: We believe that Medical Savings Accounts make sense. And we believe that the politicians are going to recognize that the time has come again to stop the discrimination, to give the little guy a break. Let the little guy benefit from using the system in a cost-effective way. Let those benefits flow to the individual, as opposed to their insurance company or their employer or the government or anyone else.

MS. FARNSWORTH: Well, Dr. Johnson and Ms. Shearer, thank you for being with us.

MS. SHEARER: Thank you. DIALOGUE

MR. LEHRER: Finally tonight, a Gergen dialogue, religion and politics part two. Last night, David Gergen, editor at large of "U.S. News & World Report talked with Michael Lerner. Tonight, he engages Ralph Reed, executive director of the Christian Coalition, author of Active Faith.

MR. GERGEN: Do you think we're seeing a new religious revival in this country, what some would call a religious awakening?

RALPH REED, Author, Active Faith: I do. I think that it is on a scale that is almost without precedent. You see it in the recent sort of flowering of the black church after a period of retreat after the civil rights movement, the black church is reasserting itself as, as a base of nurture and protection and love in the African-American community and especially in the inner-city. I think you see it in movements of racial reconciliation. I think you see it in the Promise Keepers movement which is filling football stadiums all over this country with men of both races in many faiths who are being called back to being husbands and fathers first and wage earners second. I think you can see it in the kinds of things that Notre Dame Professor David Leggett was talking about in a paper he wrote after the '92 elections in which he pointed out that the percentage of the electorate that was main line Protestant, Presbyterian, Methodist, Episcopal, had declined from about 40 percent in 1960 to about 20 percent today, whereas, the percentage of the electorate that was self-identified evangelical or fundamentalists, had doubled to 25 to 30 percent of the electorate. That's a critical moment in the American history where the evangelical vote becomes more important than the main line Protestant vote. It's more energetic, it turns out in larger numbers, and of course the critical hard political fact is that it used to be an overwhelmingly Democratic constituency. And, of course, today it's overwhelmingly Republican.

MR. GERGEN: You write about the Great Awakenings in America's past--one in the 1740's, another in the 1830's, then again in the 1890's--and what you point out is that in each instance those Great Awakenings are religious revivals, were joined to movements for social reform. Could you talk about that link and how religious people--what sort of roles they have played in our history, especially on social reform?

RALPH REED: In each case, David, throughout American history, those kinds of big issues have been resolved by religiously inspired social protest movements that were birthed in the cradle of the church and nurtured by the fires of revivalism. The first Great Awakening, of course, gave rise to the revolutionary struggle. The second Great Awakening, led by Charles Grandis- Infinny, some of the most uproarious revivals that have ever been seen in Western Civilization, led to the formation of the American anti-slavery society. Then, of course, the third Great Awakening of the 1890's leading to the social gospel movement and the progressivism of Woodrow Wilson and Theodore Roosevelt, and today historian Robert W. Fogel has argued a fourth Great Awakening that began, he believes, in the late 50's or early 60's with rising church attendance among baby boomers, and this shift to evangelicalism and fundamentalism of which the electronic church was such an important part. Of course, the rise of television after 1960, making it possible to reach millions of people with the gospel, has now given rise to a new political movement.

MR. GERGEN: As best I understand your argument, there are two stimulants for people coming back into politics who are religious. One is a series of decisions here in Washington, decisions by the Supreme Court on abortion, on school prayer, an effort by the IRS to crack down essentially on Christian schools, as you explained, and secondly, you and Michael Lerner, who was recently on this program and who was trying to spark a counter movement to the Christian Coalition coming from the progressive tradition, both you agree that the left in the 1960s occupied the moral high ground, especially over civil rights, but after the civil rights marches, the left moved away, and almost moved in and said, in effect, religion has no role in our politics, religious values have no role in our politics, and left a vacuum for the religious right to fill and to address the spiritual needs of the American people. Are those basically the two stimulants that you think helped to bring the religious right to such power?

RALPH REED: Yes. And I sort of go further in the book and argue that really the heyday of liberalism that stretched from Franklin Delano Roosevelt's elections in 1932 until Lyndon Baines Johnson's collapse in Vietnam and the quagmire of Vietnam in the late 1960s was because it was first and foremost liberalism was at its dominant moment, at its apex, was a religious and moral movement. It was not in the end about redistributing wealth. And then what happened, of course, was with Roe Vs. Wade and the movement of conservative people, and the left reacted harshly to religious involvement from the right and overreacted, in fact, and suggested and created what I believe to be an historical fallacy which is that religious people shouldn't be involved in politics because it violates the separation of church and state. If that's true, and I don't believe it is, then the entire glory stage of liberalism was built on that same principle.

MR. GERGEN: That's interesting. Let's talk about the conservative Christian Coalition and how it's moved now. Pat Robertson created this back in 1989. It's only such a short time ago, it's grown so rapidly. You became the executive director. You changed from what Jerry Falwell was doing, what the electronic churches were doing back in the 70's and 80's. You adopted a very different strategy from what they had. What were the changes?

RALPH REED: Well, I think when Jerry Falwell founded the Moral Majority, he was literally leading a people out of the wilderness. I mean, they had been in self-imposed cultural isolation for three generations, and he got up and said, let's all get involved in the political process. So he was the trail blazer, and it was, in effect, a media strategy and a direct mail strategy, and a rally strategy where he would fly around the country holding rallies and they would pass buckets down the aisle and take up money and of course they had a huge mailing list.

MR. GERGEN: Right.

RALPH REED: What they did not have was they did not have sophisticated, well trained lay grassroots leadership

MR. GERGEN: Right.

RALPH REED: --that knew how to raise money and identify voters and conduct voter registrations drives and turn 'em out to the polls. I believe every one of the state chairmen in the Moral Majority was a Baptist or a fundamentalist preacher or a conservative evangelical preacher. By contrast, of the 50 state chairmen of the Christian Coalition, only one is an ordained minister. It's grassroots politics that has been practiced by the left for decades but it's new for conservative--the conservative faith community. I would rather have a thousand school board members than one president and no school board members. I'd rather have people affecting lives at the local level and changing America one neighborhood and one city and one state at a time than trying to make one person and one office the sole repository of all of our hopes and aspirations for a better America.

MR. GERGEN: All right. Michael Lerner argues in The Politics of Meaning that the religious right pays a great deal of attention to personal morality but it does not pay attention to the morality of the marketplace.

RALPH REED: Mm-hmm.

MR. GERGEN: Do you agree with that assessment?

RALPH REED: Well, I think we do, and I do agree that corporations are citizens and they have to be responsible citizens and respectful of the rights of others just as anybody else does. And I think you see some of that sentiment in the religious conservative community very different from a Wall Street or Chamber of Commerce style Republican in the Buchanan candidacy of 1996 where he really made an issue out of the treatment of workers and how we had to take care of those who are being left behind. You know, again, you can debate and Republicans do debate whether he is right or wrong on the merits of trade policy and immigration policy, but there's no doubt about the fact that the rhetoric and the political style of a Buchanan, who is a religious conservative candidate, is very different from a Wall Street style candidate in the model of say a Tom Dewey or Wendell Willkie of thirty or forty years ago. We, for example, agree that the plight of the poor is something that we as a faith community must address. We're not convinced that a large welfare bureaucracy operating out of Washington is the solution. So it's not a question of a lack of commitment to those issues of equity and fairness and justice. It's a question of what we think the most effective remedy is. Where government can do something, it ought. For example, Dan Quayle recently--and I found this to be fascinating--as someone who I think would have been viewed by background and temperament as a fairly typical main street, good for business Republican, came out and issued a fairly controversial call to study the idea of a family wage, the idea that if you're a wage earner who's supporting a wife and children or spouse and children, in the case of a woman, that you have a right to a wage that can support that family. Now the left--the left comes out in favor of a minimum wage but, of course, a minimum wage, 80 percent of the people who earn it don't support a family. What about looking at the possibility of a family wage? I don't know what the outcome of that will be, but I think there's a possibility for some very interesting common ground there.

MR. GERGEN: I understand. So there are moral issues in the marketplace.

RALPH REED: Yes. Of course.

MR. GERGEN: I wish we could go on. Thank you very much.

RALPH REED: Thank you, David. RECAP

MR. LEHRER: Again, the major stories of this Thursday, a family of four left the Freemen compound in Eastern Montana. They're the first of the anti-government group to leave the ranch in nearly two months. Defense Sec. Perry said the pilots were partly to blame for the crash of Commerce Sec. Ron Brown's plane in Croatia, and the Senate rejected a constitutional amendment requiring a balanced federal budget. We'll see you tomorrow night with Shields & Gigot, among other things. I'm Jim Lehrer. Thank you and good night.