The MacNeil/Lehrer NewsHour

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

MR. MAC NEIL: And I'm Robert MacNeil in New York. After our summary of the day's top stories, we focus on the G-7 summit in Naples with a report by Business Correspondent Paul Solman and analysis by Felix Rohatyn and Robert Zoellick, our regular analysts Mark Shields and Paul Gigot discuss the week's political developments, Jeffrey Kaye reports on the aftermath of the Colorado forest fire, and we take a second look at a story about farming without pesticides. NEWS SUMMARY

MR. MAC NEIL: The principal business of President Clinton's trip to Europe began today. Leaders of the Group of 7 industrialized nations met in Naples for the start of their 20th annual economic summit. They'll focus on several issues during the three-day meeting, including the peace plan for Bosnia and an estimated $5 billion aid package for the Ukraine. Before the actual summit got underway, Mr. Clinton met with Japan's new prime minister who assured him that Japan would continue to work towards opening its markets to U.S. products. The two leaders also voiced concerns about the sliding U.S. dollar, but Mr. Clinton said he believed the situation would correct itself.

PRESIDENT CLINTON: Look at what's happened in the last year. We have had growth in the G-7, and we have had growth without inflation. If we continue to pursue growth without inflation and to work on generating new jobs out of that growth then eventually the macroeconomic realities will assert themselves, and the currencies will be routed according to market conditions. I think that is what will happen.

MR. MAC NEIL: Following Mr. Clinton's remarks, the dollar fell sharply on international markets. It hit a 20-monthlow against the German mark and fell close to its 50-year low against the Japanese yen. We'll have more on the summit right after this News Summary. The U.S. unemployment rate held steady at 6 percent last month. The Labor Department reported that 379,000 non-farm jobs were created in June. Many of the new jobs were in the lower paying service sector such as restaurant workers. Jim.

MR. LEHRER: President Clinton refused again today to rule out an invasion of Haiti. He said any military action would be determined by the behavior of Haiti's leaders, and he said their conduct has not been good. The President also said the exodus of Haitians has increased dramatically in recent days because it increased human rights violations by Haiti's military leaders. As a result, he said the United States was revising its policy on repatriating Haitians. At a news conference in Naples, Mr. Clinton was asked if the United States was seriously considering an invasion.

PRESIDENT CLINTON: It would be fair to say that my position has not changed since I first commented on that a few months ago. I do not believe that we should rule out any option. I believe we should continue to pursue the aggressive use of sanctions. I believe we should continue to call on the leaders of Haiti to leave now. They've promised to leave. They continue to violate the international community's sense of decency and to violate human rights, and they're in there illegally and they ought to go.

MR. LEHRER: Mr. Clinton said he was disappointed that Panama reversed its decision to accept Haitian refugees. He said Antigua, Dominica, and Grenada have agreed in principle to set up camps for the Haitians. He said he hoped to find other countries in the hemisphere to do the same thing. The U.S. Coast Guard is reported picking up more than 10,000 Haitian boat people from Monday to Thursday of this week, the most ever in a four-day period. The Clinton Haiti policy was criticized again today by the Congressional Black Caucus. Chairman Kweisi Mfume, Democrat of Maryland, had this to say at a Capitol Hill news conference.

REP. KWEISI MFUME, Chairman, Congressional Black Caucus: The President may not believe that this is the most important foreign policy issue facing the United States, but it has quickly become the most embarrassing. It is tragic that our policy has come to this point where all options appear to be running out. It also appears that with each new failure we move closer to direct military intervention. The Congressional Black Caucus believes that our policy on Haiti is a policy of anarchy.

MR. LEHRER: The Congressman said the policy was eroding among American prestige abroad.

MR. MAC NEIL: The U.S. and North Korea today resumed talks in Geneva on the nuclear issue. It was the first high level meeting between representatives of the two countries in a year. Afterwards, a statement was released which called the discussions very useful and productive but gave no concrete details. The Clinton administration is pushing for inspection at North Korea's nuclear facilities and has threatened economic sanctions if the North Koreans fail to comply. Today in Naples, Japan's new prime minister told President Clinton that he would back any U.S. actions against North Korea.

MR. LEHRER: The French-created safe zone is slowing the fighting in Rwanda United Nations officials said today. French troops created the zone this week in Western Rwanda, while the U.N. works on a cease-fire between the government and rebel troops. An estimated 500,000 Rwandans have been killed in the civil war which began three months ago. France and the United Nations have asked for increased humanitarian aid to prevent wide scale famine among the more than 2 million Rwandans displaced by the fighting.

MR. MAC NEIL: The fire near Glenwood Springs, Colorado, continued to burn out of control today. It's claimed the lives of at least 12 firefighters. Two others are still missing. Officials said it will be at least one more day before it can be contained. Sixteen major fires are still burning today in five western states, and we'll have more on the Colorado story later in the program. In Georgia, rising floodwaters are being blamed for the deaths of four more people, including two young children. That brings the death toll to at least twenty-two and four others are still missing. The Flint River in Albany, Georgia, topped at 42 feet today, 22 feet above flood stage. More than 15,000 residents have been evacuated. Rain continued to fall in the Florida Panhandle where rivers overflowed their banks and some highways were closed. One man has died from flooding in Alabama.

MR. LEHRER: The space shuttle Columbia went off on a 14-day science mission in space today. The seven-member crew includes Japan's first female astronaut. They will study the behavior and development of aquatic animals, including fish, newts, and sea urchins. It will also conduct some drug research. Today's launch from Cape Canaveral, Florida, was the 17th for Columbia, NASA's oldest shuttle vehicle.

MR. MAC NEIL: The U.S. International Trade Commission today recommended quotas or tariffs on the import of Canadian wheat. After a six-month investigation, the Commissioner said the wheat imports from Canada were hurting U.S. farmers. President Clinton must now rule on the recommendation. The Canadian government has said it will retaliate against any trade sanctions. That's it for the News Summary tonight. Now it's on to the G-7, Shields & Gigot, the Colorado fire, and pesticide free farming. FOCUS - GLOBAL VIEW

MR. MAC NEIL: Our main focus tonight is the meeting of the world's leading industrial nations in Naples, Italy. As always, a wide range of economic and political issues are on the table for President Clinton and the other members of the so-called G-7 to discuss. This year, however, the meeting takes place against a backdrop of uncertain financial markets, particularly the currency markets. Business Correspondent Paul Solman of WGBH-Boston sets the scene.

MR. SOLMAN: All the countries meeting here in Naples have economic problems back in their home country that make global coordination a pretty tall order. In France, England, Italy, and Canada, the problem has been unemployment. In Germany, they are more worried about inflation. Japan is struggling with political chaos and its usual trade surplus, the U.S. with its usual trade deficit. So the countries come with different economic problems and sometimes conflicting agendas, making the summit a kind of balancing act to jointly spur global growth. And recently, it's begun to work, said President Clinton before leaving for Naples.

PRESIDENT CLINTON: We've closed the deal on the world trade talks that was stalled for years, and with our help, the once crippled Russian economy is struggling to its feet. We have shown together that bit by bit and year by year the decisions made at the G-7 meetings really can make a difference.

MR. SOLMAN: Now one of the decisions the G-7 faces this year has been a hot topic in the U.S. lately, how to deal with the declining dollar. Here is the problem. The dollar is still the world's leading currency, and when it moves too far too fast, it can have disruptive effects worldwide. So what's a G-7 to do? Well, a first option would be to actually coordinate policy, trade, interest rates, and the like, trying to bring national economic policy into global balance. The second option, do nothing, at most, talking up the dollar. And finally a third option, to try to genuinely manipulate the currency market through intervention, buying and selling, and speaking of the currency market, here it is. This is Chemical Bank of New York, one of the world's two or three largest foreign exchange operations, in a trillion dollar a day marketplace. Unfortunately perhaps, to understand the dollar problem, you have to understand what goes on here. It's on trading floors like this one that the value of the dollar is determined in response to the slightest shifts in supply, demand, and expectations. Hooked up by phone worldwide, Chemical Bank exchanges currencies for customers as a bank does for you if you travel abroad. Bigger customers need foreign currency too, it turns out, only more of it, U.S. mutual and pension funds, for instance, who are now investing for you and me in foreign equity markets, stocks and bonds. Chemical's David Puth.

DAVID PUTH, Manager, Foreign Exchange, Chemical Bank: An international equity manager needs to go out in the market to invest in a country. You can invest in Turkey; you can invest in Italy; you can invest in Germany. In order to invest in those countries, he needs to actually purchase foreign currencies, so he changes dollars into Deutsche marks to buy a stock on the German Stock Exchange. That results in an outflow of U.S. dollars and could, ultimately, if enough people do that, result in a decline of the dollar.

MR. SOLMAN: The same thing happens when we buy goods from say Japan. Importers ultimately have to exchange dollars for yen to buy the goods. This greater demand for yen raises its value against the dollar. Meanwhile, if the Japanese buy less from the U.S., they need fewer dollars, and the dollar declines further against the yen. Money's like anything else, in other words, its value depending on supply and demand. So far this is the gospel according to the currency traders, that fundamental imbalances in trade and foreign investment are driving down the dollar, not the traders, themselves. Besides, says David Puth --

DAVID PUTH: While the world's perception is that the dollar has been falling to record lows, that is factually not true. Against Europe, the dollar has been remarkably steady for the last two years. Against the Japanese yen, the dollar has been falling steadily, but the pace of that fall of the dollar has not increased at all.

MR. SOLMAN: Meanwhile, however, back among the policy makers, the dollar's fall, if only against the yen and lately the mark, is still a headache.

LLOYD BENTSEN, Secretary of the Treasury: In the past week, there's been a lot of concern about the dollar. And I'm concerned too. We've been in close consultation with our G-7 colleagues. We believe a stronger dollar is better for economy and better for the world's economy.

MR. SOLMAN: Lloyd Bentsen used to dream of a weaker dollar, it was thought, especially against the yen, since it would make U.S. exports cheaper in Japan. Export sales were expected to help balance our trade, but a dollar as weak as this one creates something of a nightmare, that Americans now won't be able to afford products from Japan or Germany either, for that matter. If that hampers the already struggling German and Japanese economies, it would hurt world growth and ultimately the United States. In addition, a weaker dollar can have unpleasant effects right here in the U.S., foreigners taking their money out of U.S. stocks and bonds, thus driving down our stock and bond markets, the specter of inflation more expensive trips to Japan. For numerous reasons then, the G-7 would like the dollar to rise against the yen and mark. But talk about a delicate balancing act, especially if it can only be done by making domestic policy changes in trade, interest rates, and so on that could be politically painful if not downright impossible back home. So what the G-7 might prefer is the second option, doing nothing, save perhaps talking up the dollar, as Lloyd Bentsen was doing at that policy dinner, or possibly the third option, to actually manipulate the currency market by convincing traders to buy dollars and boost its value. Now is the perfect time for that says economist Kathryn Dominguez, who's been studying this issue for years, because many people think that traders have driven the dollar below its fundamental value.

KATHRYN DOMINGUEZ, Harvard University: History would suggest that this would be a perfect moment for the G-7 to agree as a group to in a coordinated fashion intervene over a fairly long period of time in order to convince the market that the dollar need not go any farther down to stabilize the dollar. In the last four or five years, we've seen fewer of these international agreements. Countries have been less willing to agree to certain kinds of intervention activities, but you would expect under the circumstances, where all countries could benefit from a rise in the dollar or stabilization of the dollar, that, in fact, some sort of agreement will be come to.

MR. SOLMAN: But would intervention in the market, short-term or sustained, really work? We put that question to the market, itself, in the person of Chemical Bank economist Charles Lieberman.

CHARLES LIEBERMAN, Economist, Chemical Bank: About a week ago, the central banks all bought dollars in concert. The same afternoon, we sold the dollar off to record low levels against the yen. Talk is cheap, and we just don't believe them until we see the policy changes.

MR. SOLMAN: Given such problems and probabilities, the word from Naples on the eve of the summit seemed to be, keep talking but don't mess with the markets. And in the end, the declining dollar is only one of the issues facing the G-7 anyway. But it is indicative of a central problem, that the nations around the table represent national interests that often stop at their own borders, while the global economy is operating with a financial marketplace that knows no borders, has a mind of its own, and can make life very difficult for heads of state to ignore.

MR. MAC NEIL: In fact, once President Clinton and the other G-7 leaders made it clear today they would not intervene in the currency markets, the dollar fell further against the yen and most major European currencies. Now two perspectives on the Naples meeting and the world economy under discussion there. Felix Rohatyn is a senior partner at Lazard, Freres & Company, a New York investment firm. Robert Zoellick played a leading role in several economic summits as undersecretary of state in the Bush administration. Mr. Rohatyn, should the G-7 have done something about the dollar today?

MR. ROHATYN: Well, I think they should have. I mean, I think they -- first of all, they should recognize publicly what everybody knows privately, that the dollar is a very important issue. Secondly, they should recognize that a speculatively weak dollar, which is where we are today, is against their interest as it against our interest. And it would seem to me that, that the arguments aren't exactly just the alternatives that were mentioned earlier. There is something other than doing nothing or simply speculatively here and there intervening in the markets. I mean, there are things that can be done if we determine that a speculatively weak dollar is against our national interest. The first thing to do is say so. The second thing to do is to see what we can do to make it unprofitable for speculators to keep selling the dollar short because they know that we're not going to do anything like that.

MR. MAC NEIL: How do we do that?

MR. ROHATYN: I think we should have a concerted policy of intervention in the market at these levels or at levels lower than these because it is against our interest to have this happen. We should do it with or without the other countries because it's so important to us. There are other things we can do here, such as the President continuing his commitment to reduce the deficit by a variety of actions, because that contributes to the problem with the dollar. The third thing is mostly to recognize that our economy is fundamentally in very strong position, that inflation is only in the eye of some demented economists here, and that we have growth, growing employment, very low inflation, if any, and that we are the strongest economy in the world today. And that should certainly be a fundamental reason for people not to sell the dollar short.

MR. MAC NEIL: Robert Zoellick, should Mr. Clinton and the others have done something about the dollar today?

MR. ZOELLICK: Well, I think you're right in focusing on President Clinton, because I think that this problem really does link to the U.S.-Japanese relationship, and I think the real difficulty here is that the markets feel that the administration is of two minds on the dollar issue. On the one hand, they hinted at various times that they want a lower dollar so as to try and put pressure on the Japanese dealing with the Japanese trade surplus. On the other hand, you have the sort of statements that Sec. Bentsen made. And now, unfortunately, the administration has got itself in a bind, because it doesn't want to try to take the serious action, which might, for example, involve increasing interest rates, to try to steady the dollar. On the other hand, it's created a problem that - - of market perceptions. I think what you've seen internationally now is, is that unless you're willing to take some sort of coordinated action on the fundamentals of policy, for example, trying to press the Japanese to cut taxes and stimulate their growth, that a simple market intervention is probably not likely to carry the day. So you really need a couple of your points on your chart there to work together.

MR. MAC NEIL: Because when they tried it ten days or so ago, and they bought some billions' worth, there 17 countries got together and bought some billions' worth of dollars, it was regarded as just a drop in the bucket of the trillion dollars or so that are traded every day, hour by hour, on the international markets.

MR. ZOELLICK: That's right. What you really have here is a situation where the market is adapting to a psychology and that psychology has tremendous, tremendous capital flows to bet on these decisions. And frankly, while the central banks can try to counter that to a degree, it's going to be very hard unless there's a sense that it's going to be backed by underlying fundamentals, and that's likely where the markets are confused. They really don't know for sure what the Clinton administration wants on this because of some earlier signals that they were willing to use a declining dollar to pressure the Japanese.

MR. MAC NEIL: Well, speaking of fundamentals, Mr. Rohatyn, President Clinton said today that by growing our economy and shrinking our deficit gives us the authority to speak and the credibility to be heard in the G-7 now. Is he right about that?

MR. ROHATYN: Absolutely. I think that one of the things that kind of amazes me is how little credit this administration is given for a spectacularly performing economy, an economy where, as I said earlier, we have growth, we have job creation, and we have absolutely no inflation, and we have a declining deficit. Now these are very, very strong fundamentals.

MR. MAC NEIL: Can I interrupt you a moment just to -- he used some figures today which were rather startling, that with 45 percent of the G-7's Gross Domestic Product the U.S. had had 75 percent of the growth and about 100 percent of the job creation among the G-7.

MR. ROHATYN: Well, I think that speaks for itself. I think we're making too little of this. You see, we also keep talking about markets as if markets were the sort of sensible living things that, that function on some kind of scientific basis. Part of the market action is because the fundamentals, as Bob Zoellick says, part of it, and at least half of it is purely speculative, and when you appear to be disinterested about the value of the dollar, it gives people who are speculating against the dollar kind of a free ride because their perception at this point, because of various positions that were taken by the administration, at this point is that we're not terribly interested, despite what we're saying, because the intervention that took place a couple of weeks ago was very limited, very weak. The Germans didn't participate, and we almost signaled in advance that we didn't believe in it. But it seems to me that we ought to recognize the fundamentals of this country's economic status at this point which are very strong. I think the President can do more with respect to reducing the deficit by dealing with the commission that he created to deal with entitlements. I don't think there is any need to raise interest rates but I think people who are speculating -- and a lot of these markets are speculative -- ought to know that at some point they're going to be punished, that there's going to be a cost for driving the dollar down.

MR. MAC NEIL: Do you think the administration is getting too little and the President is getting too little credit for the state of the U.S. economy today, Mr. Zoellick?

MR. ZOELLICK: Well, I think the U.S. economy is very strong, and it is definitely in much better shape than the economies of the other people at the economic summit. I, frankly, think a lot of that started in 1992, where you had about 3 percent growth, in '93, where you had the same. So I don't necessarily attribute it all to the President. But, nevertheless, I think the fact is there that he does bring a good economy to the table. What you see here, however, though is that some of the troubles that he's had in other areas, you see it in Haiti in newspapers today, you see it in our policies with Somalia, North Korea, have created a problem forum that affects his dealings with leaders on a variety of issues. And that's, I think, one of the ripple effects that is - - that undermines sort of the leadership that he can bring to the table.

MR. MAC NEIL: Well, if this gives the U.S. more credibility, as he claimed, and gives him personal credibility with these nations, Mr. Zoellick, how can he use that on the world stage at this moment, on the world economic stage at this moment?

MR. ZOELLICK: Well, I think given the fact that he's pretty much taken the currency issue off the table, I think for the next couple of days the key issue to watch is what's going to happen on the trade agenda. The United States still has to get through the Uruguay Round of the GATT Agreement through its own Congress. It'll be interesting to see if he commits to do that this year.

MR. MAC NEIL: And that's a big fight here.

MR. ZOELLICK: That is still going to be a very big fight particularly with the other things he's got on the plate. But more than that, the question is: What are we going to do in the future? He, frankly, had a golden opportunity in Poland to try and talk about say free trade agreements for the Poles, the Czechs, the Hungarians. He didn't do that. He does have another initiative that could -- that's very general -- but I think it's a good idea to try to keep putting some momentum on liberalization. So I think that issue is going to be very important. And frankly, this promotion of an aid package for Ukraine could be very significant because the Ukrainian Russian issue, the security relationship between those two countries, is really fundamental to Eurasia, and it's going to depend very much on what the Ukrainians do at home. So what I think the G-7 was trying to do with that was to send a signal to the Ukrainians that if they take the reform steps, that there will be money right off the bat to back them. And I think that's a good step.

MR. MAC NEIL: Mr. Rohatyn, how can -- how do you think the President should use this new credibility the U.S. economic situation gives him, a new voice?

MR. ROHATYN: Well, I think that there are two things that he could be doing. One is to continue to push the Europeans to continue their drive towards a European union, economic union, including the Eastern and Central European countries, and especially the issue of a European currency. I think a European currency would be a big stabilizing factor in these world currency movements because you would have a large enough mass to counterbalance the dollar. Secondly, to at least bring up the fact that there are countries that are much more important to the future of the G-7 and some of the G-7 countries there, such as China, India, Mexico, and I think his initiative to open up markets, especially to do something about investments, about global investments, which are going to be necessary to get these countries to continue helping us grow in the West, I think would be very important. I think a seat at the table at some point for China, India, and some of these large growing economies is terribly important and is very relevant to the future of the G-7.

MR. MAC NEIL: Do you agree with that, Mr. Zoellick?

MR. ZOELLICK: I think that those countries and those economies are going to be very important. I think as a first step going back to your earlier points you have to figure out how to make the G-7 work better with the countries that are in it, and one tricky point about the monetary union that Felix mentioned is that the way it's step up right now, it would actually be harder for the Europeans to coordinate with the United States and Japan on some of these macroeconomic issues, including currency matters, than was the case in the late 80's, where we actually did some of this. So one of the issues that he frankly should put on the table is that if you want to try and deal with this issue in the future, not just at this summit, we've got to make sure that monetary union has a place for the rest of us to work with.

MR. MAC NEIL: The -- the G-7 in its meetings used to coordinate or attempt to coordinate much more the economies and direction of the economies of these countries agreeing on interest rates and things like that, thinking of the meeting at the Plaza back in the early 80's, was it, or late 70's, I'd forgotten.

MR. ZOELLICK: It was 1985.

MR. MAC NEIL: 1985. Should the G-7 go back to that sort of much closer coordination of economies, or is that impossible now?

MR. ZOELLICK: Well, it's definitely very difficult because it really forces countries to try to adapt their domestic economic programs to an overall international benefit. My own view is, is that the sort of coordination that we, we pursued in the late 80's was actually very useful. It sort of came apart, then in the early 90's, and frankly I do believe that the Clinton administration should do more to try to put it together again, however, I don't want to oversell it because you're fundamentally still trying to reconcile the fact that domestic politicians -- and that's what all these leaders are -- are going to be very reluctant to make a decision at home for the good of some other country.

MR. MAC NEIL: Is that a possibility of going back to the closer coordination there used to be?

MR. ROHATYN: Well, I think it would be good if we could do what happened when Bob was in government. There was much closer coordination. On the other hand, I do believe that most of these economies actually are beginning to converge because the principle of free markets is pretty well accepted. You have open markets. You have a lot of competition. You have more flexibility and some of these things. So as a practical matter, these forces are beginning to converge. I do think there is one point that we shouldn't sort of pass by as we talk about this. The reason the dollar is so important to us is that between '80 and -- between 1980 and 1990 or '92, we've borrowed about $3 trillion. Some of that is coming due over the next few years. A lot of that $3 trillion is going to have to be refinanced. So there are going to be hundreds of billions, if not trillions, of dollars that are going to have to be borrowed again, in addition to the trillion dollars of deficits that are still going to be created over the next few years. Now 30 percent of these financings had been subscribed to by foreign capital. Now if we destroy the value of the dollar or if foreign capital thinks that the dollar is simply going to drift off in value, we're going to have more and more trouble doing these huge amounts of financings, and it will cost us a tremendous amount of money.

MR. MAC NEIL: Mr. Rohatyn, Mr. Zoellick, thank you both. Jim.

MR. LEHRER: Still to come on the NewsHour tonight, Shields and Gigot, a Colorado fires update, and farming without pesticides. FOCUS - POLITICAL WRAP

MR. LEHRER: Now the time has, indeed, come again for Shields and Gigot, our regular analysis team of syndicated columnist Mark Shields, Wall Street Journal columnist Paul Gigot. First, on the summit, Paul, how important is this meeting for President Clinton back home, to the folks back home?

MR. GIGOT: Well, I don't think it's as important as some of the G-7's were for presidents during the Cold War. I think the American people are in a mood to -- to quote one of Mark's favorite presidents, Warren G. Harding -- return to normalcy. They're very domestic focused. They want to know what it is that the President doing overseas can do for them, so if this can be applied to show that somehow it will increase jobs, somehow it will help their lives, affect their lives, then it can help them. Otherwise, I think that it's going to just go right over the top.

MR. LEHRER: Do you agree, kind a tune out unless there's something specific? And it doesn't look like there is going to be.

MR. SHIELDS: I don't think there is the kind of attention or interest that there was in the past and obviously the Simpson case here at home has eclipsed a good part of the kind of coverage that might -- the President might have gotten by leading news stories and news round-ups. However, I think it's a terribly important time for the administration, Jim. As the previous discussion, particularly Felix Rohatyn, pointed, the Clinton economic story remains essentially untold, and --

MR. LEHRER: Why is that?

MR. SHIELDS: Well, it's fascinating to me, because this is an administration that came to power having mastered the art of communication and especially non-traditional communication, reaching the American people.

MR. LEHRER: And particularly on this issue.

MR. SHIELDS: This issue. So much better than its predecessors, and just -- I just -- in preparation for tonight -- reviewed some of the things. I mean, there are 3.8 million Americans, fathers, daughters, sisters, husbands, brothers, who will have jobs -- who had jobs to go to this morning that didn't have jobs to go to on January 20, 1993. That's an amazing, amazing success story. And when they've cut unemployment by 14 percent, 1/3 of the American families now owning homes pay an interest rate of less than 7.4 percent on their mortgage. I mean, it's just an amazing story of economic success. And at the same time, you look at that and the United States leaves that G-7 group in reducing the deficit, in economic growth, in cutting unemployment.

MR. LEHRER: You have the figure. Robin just quoted the President as saying --

MR. SHIELDS: It's remarkable. It's remarkable, and yet, the story remains untold. I think the reason is that they've been playing defense to a large degree, that they have not shown the kind -- the administration has not shown the kind of discipline necessary to drive that point home, and to tell that story in an interesting and important way.

MR. LEHRER: What's your analysis of that, Paul? First of all, do you agree that it's as good as everybody seems to say, and, if so, why have they not been able to sell that message?

MR. GIGOT: For about a year now, the economy has been doing quite well. There's no question about it. Today's unemployment report was good by any, by any measure. But I was struck in reading the focus group results, interviews with voters by Peter Hart, the Democratic pollster, he asked, well, do you give the administration credit, they said no.

MR. LEHRER: This is a poll for your newspaper and NBC News, right?

MR. GIGOT: That's right. And he asked why, and he said, and a lot of them told them, well, it had started in 1992. So they had already seen the momentum build, so they're not giving this -- the Democrats the credit. I think another thing that's happened is economic growth is about more -- as a political issue -- is about more than Gross Domestic Product. It's about how confident you feel, what about your job prospects, how's your future look? And there's been a lot of reasons in the last six months or so for anxiety to build. For example, interest rates are now higher than they were when Bill Clinton was elected. You've had the dollar fall out the last couple of months. You've had the stock market jitters. A lot of people have mutual funds. Millions of Americans now put their money in mutual funds and stocks. They don't feel as confident about that. I think that's affecting --

MR. LEHRER: Rather than in the past they would have them in savings accounts --

MR. GIGOT: That's right.

MR. LEHRER: -- but the interest is so low on that it doesn't make sense to put 'em in that.

MR. GIGOT: Exactly right. And so people follow the stock market now in a way politically they didn't before.

MR. LEHRER: Yeah.

MR. SHIELDS: I have to take exception. First of all, I disagree on Paul's interpretation of the hard focus groups. Bill Clinton won in 1992 because of the economy.

MR. GIGOT: Sure.

MR. SHIELDS: I mean, the economy was bad. That was the reason, I mean, if you look back into why he won. And the same voters, you're right, do not see a great sense of achievement or accomplishment. They don't see that there's a single achievement that's been made. And I think that's their failure, I mean, because --

MR. LEHRER: Whose failure?

MR. SHIELDS: The Clinton administration's failure, not --

MR. LEHRER: Okay. Not the --

MR. SHIELDS: The Clinton administration's failure because the reality is this one. A President who presides over good times gets credit for good times. A President who presides over bad times doesn't, and it's as simple and straightforward -- that's the rules of the road -- that's the rules of the game. Bill Clinton -- just point out one thing -- 1992, the deficit in the country is 290 billion dollars, 290 billion dollars, one year! Now, this year it's going to go under, probably under 200 billion, cut by one-third. Next year it'll be 165. That's a remarkable achievement. They haven't done a good job of telling the story.

MR. LEHRER: Do you think it's that simple, that they haven't done a good job selling the story, or do you think they deserve the credit? You said they're not getting the credit. Do they deserve the credit? Are the American people short changing the Clinton folks? Are the Clinton people not doing well?

MR. GIGOT: I don't. I don't think they deserve that much credit because I don't think they've done that much, frankly. I mean, I think they've made some stab on the deficit but they did it all with a big tax increase. They didn't do it on the spending side. You see pressure on the Hill from Democrats now to pare back spending because they didn't think they voted for enough last year, and they're worried about going to the election in November without any spending cuts that they voted for. So I think some of that and the partisanship and the criticism of the economic debate last year has really hurt. I think the way that the health care package has been framed, when you're going to put an employer mandate, a big tax on employers, that's going to cost jobs, that creates a lot of anxiety. So I'm not so sure that the voters aren't really sensible.

MR. LEHRER: You think they have read it properly, in fact?

MR. GIGOT: Yeah. There's a lot of nervousness out there.

MR. SHIELDS: I do -- I mean, the confidence level by Paul's own newspaper reported this week is the highest it's been in four years, so I miss the anxiety of the jitters that he's describing here. As far as employer mandates, I admire the Republican Party - - the Republican Party is standing up against employer mandates when a big majority -- three out of four Americans -- want employer mandates and a health plan. Three out of four Americans want cost control. Republicans have the guts to stand up and say we don't care what the people want; we're going to stick with the status quo.

MR. LEHRER: Is that how do you read that, Paul?

MR. GIGOT: No, I don't. I mean, people would prefer to have their employer pay for health care as opposed to them. But if you tell them it's going to cost jobs, it's going to put small business out of work, it becomes a pretty different polling issue.

MR. LEHRER: Look. How would you describe the state of U.S. policy on Haiti tonight?

MR. GIGOT: Confused, chaotic, ad hoc, reactive, not very good. I'm not sure where they're going to move next. We seem to be inexorably moving into an invasion but without much of a justification from the President, without a great definition of what the national interest is, almost by -- as a way to defend himself against the failure of the current policy. It's really confusing.

MR. SHIELDS: I hate to hear gloom and doom on the economic -- domestic thing -- doom and gloom -- but I have to admit that the Haiti policy has been stops and starts. We've got our fourth policy I think this week, and Panama let us down. Jim, I can remember Panama agreed earlier this week to 10,000 -- they'd take 10,000 Haitian refugees. I can remember when a client state was a client state and a state -- you know, they gave you a word, and that was the Cold War, and boy, now, things are different. I mean, they just backed off that pledge.

MR. LEHRER: Because of some domestic reaction.

MR. SHIELDS: Domestic reaction.

MR. LEHRER: Well, as someone said -- well, I think Paul Solman said it in the setup piece that no matter who -- you're sitting down -- everybody's a politician, and everybody sits down to -- to -- they have to keep their own domestic situation --

MR. SHIELDS: Exactly.

MR. LEHRER: And that's what's happened, you think, in Panama.

MR. SHIELDS: That's exactly what's happened in Panama, and I think it limits the United States' options even more, and I think that the military option becomes more likely.

MR. LEHRER: Do you think it really -- how likely? I mean, do you think it's going to happen?

MR. SHIELDS: I would not bet against it. I really wouldn't. I think there's a great reluctance on the part of the President and the administration, but I think that -- I don't know, Jim, how many -- how many other options there are. We've been trying to enlist other countries to join us in this effort even though we know it will be ours, and it'll be our mission, and it'll be our casualties. But I -- I think there's a domestic pressure building up in this country as well, in a number of key places for action.

MR. LEHRER: Do you feel that too?

MR. GIGOT: Well, there's certainly domestic pressure within the Congress, particularly the Black Caucus.

MR. SHIELDS: And Florida.

MR. GIGOT: And some in Florida, that's right. But there's also a lot of skepticism and opposition. I mean, there were 34 Senators who went on record last week -- most of them Republicans -- against the President's Haiti policy. I mean, I think it could easily be more. But the problem is the President's got himself into a boxed canyon here, because he either has a choice now of lifting the embargo, which would upset some of those constituencies, or invading.

MR. LEHRER: I only have one choice, and that is to say good night to both of you, and thank you both very much. FOCUS - FIRE FIGHT

MR. MAC NEIL: Next, the aftermath of the tragic forest fire in Colorado, where at least twelve firefighters, eight men and four women, died on a burning hillside Wednesday. Two men are still missing. Jeffrey Kaye of public station KCET-Los Angeles visited the fire scene and filed this report.

MR. KAYE: It began as just another summer lightning fire in a western forest, and even after it grew rapidly, it still would have remained just one of the barely reported thirty or so major fires now burning throughout the West. But when it took the lives of at least a dozen firefighters called to battle the flames, the Colorado fire turned into one of the worst firefighting disasters in U.S. history. Yesterday, Colorado Gov. Roy Romer called for an investigation into the tragedy.

GOV. ROY ROMER, (D) Colorado: What we need to do now is to learn all we can from the past, try to prevent that from happening in the future, and, you know, go from there.

MR. KAYE: As Romer spoke, hundreds of firefighters arrived in the Glenwood Springs area of the Rocky Mountains, 120 miles west of Denver. They came from all over the West to fight a fire which began on Sunday. At first, firefighters thought they had it contained, but Wednesday afternoon high winds whipped the flames into an inferno, killing the firefighters who were trapped against the ridge. Yesterday U.S. Interior Sec. Bruce Babbitt expressed sympathy but he suggested deaths of firefighters are inevitable, despite advances in tactics and training.

BRUCE BABBITT, Secretary of the Interior: It's been so effective over the last forty or fifty years that we've almost come to think of this kind of occupation as risk free, and, of course, it isn't. Accidents are inevitable. This business of firefighting is -- as professionalized as it has become -- is still a very dangerous basic encounter between an exposed individual and a tremendous force which can get out of control at any moment. Although by Thursday, the fires seemed to be more under control, firefighters took precautions by hosing down homes and clearing vegetation. Mobile home resident Jeff Jensen and his family had been abruptly evacuated from their trailer park Wednesday night when the blaze flared up. Yesterday they were told they could stay home but Jensen said he was afraid.

JEFF JENSEN, Resident: We're still uncertain, and the Sheriff's Department said they may evacuate us again anyway, so we're not going to come back at least till tomorrow, until we know it's out for sure.

MR. KAYE: Last evening, a flag flew at half staff in honor of the dead firefighters and tanker planes dropped fire retardant, attacking the same pine-covered mountain ridge where the firefighters became fire victims

JACK LEE, U.S. Forest Service: (addressing strategy session) We realize we're in an inherently dangerous job and that happens, but safety is our No. 1 issue.

MR. KAYE: This morning, supervisors met at dawn to plan their firefighting strategy.

SUPERVISOR: A spot (pointing at map) down here on "D" is on a real steep slope.

MR. KAYE: Although the stress was on safety, with the fire only 30 percent contained, part of the objective was to get the upper hand over burn areas outside the main region of the fire before they too flared out of control. Supervisors headed for their assignment, and field crews prepared to hit the line. Incident Commander Jack Lee of the U.S. Forest Service said the main goal of firefighters was to protect buildings and people.

JACK LEE, U.S. Forest Service: You've got your dangers to structures, to people, and your resource values, you know, when you have a fire go through steep areas like this, then come the winter rains, and down into the river it goes, and you end up with your watershed affected, and those are some of the basic reasons that, that you put a fire out like this.

MR. KAYE: The job of these U.S. Forest Service officials was to scope out the No. 1 hot spot and to find the least dangerous route for firefighters to reach it and to escape quickly, if necessary. They are grateful for the additional resources that have been allocated to this fire. They believe Wednesday's deaths were caused, in part, because equipment and personnel were spread thin.

JAMES YEARWOOD, U.S. Forest Service: Everything in the western half of the United States is ready to go right now. It's unusually early, the entire West is burning, and when you have this many fires over such a large area, you run short of resources. And part of the problem is, is you're moving resources from one fire to another fire, and it takes a while for the resources to catch up with the incidences.

MR. KAYE: A helicopter scooped water from the Colorado River, and dumped it on the fire's major hot spot. The pilot relayed information to safety officer Bill Kight. Kight was to be the first one in on the ground to assess the danger. As Kight focused on his mission, investigators began to examine the circumstances surrounding Wednesday's deaths. The tragedy also prompted a more fundamental question, and that is: Should development in fire prone areas like this be limited?

BILL KIGHT, U.S. Forest Service: There certainly should be, because when you have valleys that you build in, you only have so many home building sites, and when you allow people to build in the wild land setting where the trees and the animals live, you need to have restrictions on what kind of a building site you can have. So there should be restrictions. I'm not saying you shouldn't tell people they can't build there. But there certainly has to be some restrictions.

MR. KAYE: But shopping center owner Tom Graham, a former Glenwood Springs city councilman, feels the growth has been handled responsibly.

TOM GRAHAM, Shopping Center Owner: When I moved here in '77, most of the development you see here today did not exist. The population is -- I think it's probably tripled since '77, and right now, we're going through an area of mass expansion again. I think it's a concern, but I think the city's staff has handled it fairly well. The development costs today have gone up in order to provide adequate fire protection in certain areas, and I think the city has done a real job in managing it.

MR. KAYE: As Kight headed off to scout out the hot spots, he anticipated making similar walks many more times this summer as forest fires continue to threaten populated areas. SECOND LOOK - BALANCING ACT

MR. LEHRER: Finally tonight, the effort to cut down on pesticides in farming. It's a project that involves a number of federal agencies and was reported on in September by Spencer Michels. Here's a second look at this report.

MR. MICHELS: At 6:30 on a summer morning, a bi-plane sprays a California tomato field with pesticides. A majority of American farmers use pesticides to control insects and weeds and to fertilize crops. Pesticides are part of doing business for Steve Borchard, who farms on 1800 acres near Sacramento. Tomatoes are the key cash crop of him and his father, Jim, who started this operation 30 years ago.

JIM BORCHARD: We're very thankful that we have pesticides, because otherwise I know the ordinary housewife wouldn't like to have a worm in her tomato sauce, or anything like this.

STEVE BORCHARD: It's so easy to have the chemicals, and if they're safe, why not use them?

MR. MICHELS: Growers like the Borchards, known as conventional farmers, have been under pressure from environmentalists for years to cut back on pesticide use. The pressure intensified this summer when three federal agencies and the Clinton administration decided that to protect the health of children and the environment, they would move to reduce the use of pesticides. Many farmers, processors, and even researchers are not convinced that pesticides pose much of a health problem for consumers. Nevertheless, they do know that pesticides can harm farm workers and harm the environment, and they are well aware of the public relations problem that pesticides cause.

CARL WINTER: I like to think that we're doing a lot of the right things for the wrong reasons.

MR. MICHELS: Chemist Carl Winter heads the food safe program at the University of California at Davis. Like many scientists, he doesn't think pesticide residues make fresh fruits and vegetables harmful to eat, yet, he strongly wants to lessen pesticide use.

CARL WINTER, Chemist: We're looking into much better ways to produce our crops with less environmental damage, less worker damage, and in the long-term probably a much more economical way of doing things as well.

MR. MICHELS: But what are the alternatives to chemicals for farmers like the Borchards? The most publicized is organic farming, without any pesticides at all. In fact, Steve Borchard's mother raises a small vegetable garden organically, but her son says that's not a viable option for the rest of the farm.

STEVE BORCHARD: We're not like my mom's garden over, i.e., my mom hasn't sprayed anything. Our machinery is all structured for the kind of production we have, large scale. We really can't buy $80,000 worth of beneficial insects to spray on 120 acres when a chemical may cost for the acreage a total of $20,000.

MR. MICHELS: In fact, organic produce makes up only about 1 percent of California's total, and less elsewhere, a highly specialized market. But Jill Auburn of the University of California believes that conventional and organic are not the only choices, that there are other options to reduce chemical use while maintaining economic viability.

JILL AUBURN, Project Manager: You can't have an agriculture that meets the environmental goals but is unprofitable so a farmer can't stay in business. But there are many farmers in this state and across the nation. We have found systems that work for them, and some of those systems use chemicals. Some of those systems do not.

MR. MICHELS: These systems fall under the umbrella known as sustainable agriculture, and they are the focus of research at the university's campus at Davis. One method researchers are promoting begun two decades ago is integrated pest management, or IPM. Frank Zalom directs the IPM project.

FRANK ZALOM, Director, IPM Project: What we're doing is looking at the crop production and the biologies of individual pests and their natural enemies. And we're trying to produce the crop by creating an ontological balance within the, the orchard.

MR. MICHELS: Using insects as part of a program is something the Borchards can support. In fact, they use rented bees to pollinate their sunflowers. Zalom says farmers can also be trained to use biological control to destroy pests. In this peach orchard, a mating confusion technique is being used to get rid of the oriental fruit month. Plastic straws contain synthetic female insect scent.

FRANK ZALOM: You have four ofthese per tree. There's enough of a chemical then that the male cannot find the female that's calling with the same chemical in the tree, and so they don't get together, mate, and produce a subsequent generation that's going to result in the flagging of the kids of feeding on the fruit. In the case of oriental fruit moth, it's working very well here in California, and a lot of farmers are using it.

MR. MICHELS: Farmers can also introduce insects into their fields which eat other pests like this green lace wing larvae attacking an aphid. Spider mites are a big problem with many crops. Zalom encourages the use of predatory mites shown on the late in this Davis footage.

FRANK ZALOM: The predatory mites have little sucking type of mouth parts, and they'll bite into the spider mites, and they'll suck the contents of the spider mites out and kill the spider mites.

MR. MICHELS: Biological control.

FRANK ZALOM: Yes.

MR. MICHELS: Is that an effective method for, for many, many insects, or is it only very specific?

FRANK ZALOM: Biological control, when it works, is very, very efficient. Most of us believe that for every pest, there's a natural enemy somewhere in the world, and we have not found it yet.

RALPH HOLSCLAW, Growers Air: I've been in this business for 30 years, and I haven't seen integrated pest management work yet.

MR. MICHELS: Ralph Holsclaw owns Growers Air and six bi-planes used for spraying near Davis. He says spraying has declined recently but will always be needed, despite the government's push to reduce chemicals.

RALPH HOLSCLAW: The administration are like college professors. You know it's one thing to talk about it in the university, and it's another thing to make it work in the field. I think that the use of pesticides has already been reduced to the level where if they're reduced any further, it'll start affecting production agriculture and crop yields.

MR. MICHELS: But that's not the attitude on the Davis campus. They have a lot of other methods up their sleeves, including an old standby, crop rotation. Steve Temple is a farmer and a researcher on the Sustainable Agriculture Project.

STEVE TEMPLE, Researcher: The rotation of tomatoes with safflower, corn, beans, and wheat gives, has advantages in terms of managing pests such as soil pathogens, insects, weed populations, et cetera.

MR. MICHELS: Farmers flock to Davis on field days to learn new growing techniques. University researchers like Temple know that they must compete with hard economics.

STEVE TEMPLE: There are some disincentives for crop rotations that are very important. In this case, processing tomato is such a high value field crop that there is a lot of pressure from lenders and bankers to put it into the system as many years consecutively as possible.

STEVE BORCHARD: Introducing these new ideas are more costly, and right now, the way the price is now, it's not cost effective. It's not economically feasible.

MR. MICHELS: Although Borchard has cut down a little on pesticide use, he doesn't feel that he's yet found an alternative he can live with. But other nearby farmers say new methods can work. Tony Turkovich, one of the most innovative, large growers in California, successfully uses portions of sustainable agriculture and integrated pest management.

TONY TURKOVICH: Those techniques can be used, many of them can be used on a large scale. Some have limitations at this point. In the future, I think they can, many of them, more can be used.

MR. MICHELS: He tests varieties of tomatoes for resistance to pests. He plants special ground covering orchards to encourage predator pests. And he uses a program developed by U.C. Davis to sample his crop and find out if there are enough worms to justify spraying.

TONY TURKOVICH: For three years prior to 1984 we sprayed 32 percent of our tomato fields for worms over a three-year period. The last three years we've sprayed 7 percent, a reduction of almost 80 percent in chemical use. A third of that was using a biological not a synthetic pesticide.

MR. MICHELS: Many farmers today use small parts of IPM or sustainable agriculture, but complete techniques to protect most crops have yet to be developed. Those working in the field hope that new incentives and regulations from the federal government will lead to the development of more alternatives for more crops, effective substitutes for chemicals that farmers like the Borchards will feel comfortable using. RECAP

MR. MAC NEIL: Again, the main stories of this Friday, leaders of the Group of 7 industrialized nations began their annual economic summit. Japan's new prime minister told President Clinton that Japan would work towards opening its markets to U.S. products. The nation's unemployment rate held steady at 6 percent in June. Late this afternoon, a Los Angeles judge ruled that O.J. Simpson would stand trial for the murders of his ex-wife and a friend. She ordered him held without bail. The ruling came after a six-day hearing where prosecutors presented their case and defense attorneys argued that the evidence was insufficient to link Simpson to the crime. Simpson has pleaded "not guilty." Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you on Monday night. Have a nice weekend. I'm Jim Lehrer. Thank you, and good night.