The MacNeil/Lehrer NewsHour

Intro

ROBERT MacNEIL: Good evening. Here are today's top news headlines. Secretary of State Shultz formally rejected Jordan King Hussein's call for an international conference on the Middle East. Seven people, but no baseball players, were indicted in an investigation of drug abuse in big-league baseball. The federal government banned a drug called Ecstasy because of widespread abuse. President Reagan said his tax reform plan would help the U.S. outproduce and outcompete any country in the world. Jim?

JIM LEHRER: We have three focus segments tonight after the news of the day. We look at the Hussein proposal for an international conference on the Middle East. Judy Woodrufjf reports on how tax reform and President Reagan played yesterday in Oshkosh. And finally, why has everyone turned pessimistic over the Geneva arms control talks? News Summary

LEHRER: Secretary of State Shultz today formally rejected King Hussein's call for an international conference on the Middle East. Shultz, at a news conference, said the United States did not believe such a gathering would be productive. But he praised the Jordanian leader's efjforts toward peace, particularly reporting the Palestine Liberation Organization's willingness to acknowledge Israel's right to exist.

GEORGE SHULTZ, Secretary of State: We continue to believe that the proposed international conference will not contribute to the peace process, but we will continue to seek ways in which international support for direct negotiations can be made evident. There are obstacles between here and the time when King Hussein and his delegation can sit down at the table with Israel, but there is motion today. The King's visit has given us -- has given impetus to the process of peacemaking. As His Majesty said today, time is essential and success imperative.

LEHRER: The Shultz news conference followed one by King Hussein, who is in Washington on a six-day visit. The King said the PLO decision on Israel was historic and the next step was up to the United States.

King HUSSEIN, Jordan: This is an historic breakthrough. It is the first time in the 39-year history of this conflict that Palestinian leaders with the support of their people have been willing to accept a negotiated peaceful settlement. I also believe the next step should be a dialogue between the United States and Jordanian Palestinian representatives to complete the understandings which must be reached in order to advance the process. Finally, the role of the United States is essential to the success of our peace efforts.

LEHRER: We will have more on Shultz, Hussein and the Middle East in our lead focus segment tonight. Robin?

MacNEIL: In Pittsburgh, a federal grand jury indicted seven men on drug charges following an investigation of drug use in major-league baseball. However, none of the accused are baseball players and baseball was not mentioned in the indictment. Several of the accused were seen this morning when they were taken from the FBI office in Pittsburgh to a courthouse across the street. At least 11 baseball players testified before the grand jury, some of them under guarantees that they themselves would not be prosecuted. The charges against the accused include 165 counts of narcotics violations, mostly involving distribution of cocaine. Some of them are reported to involve alleged transactions in the parking lot at Three Rivers Stadium, where the Pittsburgh Pirates play their games. All but one of the accused were released on bail of $50,000 each. One man, who is accused of 111 violations, was held without bail.

LEHRER: Britain today withdrew its soccer team from European play, shortly after the Belgian government banned British teams from playing in Belgium. They were the latest developments to flow from the riot in Brussels Wednesday that killed 38 people and injured 454. Meanwhile, friends and relatives of the 31 dead and some of the injured Italians arrived in Brussels. Here's a report from Chris Morris of the BBC.

CHRIS MORRIS, BBC [voice-over]: They arrived from Italy to identify the dead, to comfort or take home the injured. The relatives and friends came from Rome on board two mercy flights of the Italian air force. More than 50 Italians altogether -- the wives, fathers and mothers, sons and daughters of the victims of Wednesday's football stadium tragedy, all of them trying hard to hide emotions. This father was unable to suppress any longer his hatred of the English supporters he blames for his son's death. Outside they boarded two Italian military buses, one bound for the hospital and reunions with those who survived, the second for the mortuary and the tragic task of identifying loved ones.

LEHRER: There was also a soccer violence story out of China today. The Chinese national soccer team was withdrawn from an upcoming tournament and the players told to return to their hometown teams to learn lessons and sum up their performance. The team's May 19th loss to Hong Kong sparked a riot and charges of unsportsmanlike conduct by the Chinese players.

MacNEIL: President Reagan was on the road again today boosting his tax reform proposal. Today his audience was 5,000 employees of high-tech industry in what's sometimes called the Silicon Valley of the East, the Great Valley Corporate Center in Malverne, Pennsylvania. The President told them his tax plan would feed the fires of technological invention.

Pres. RONALD REAGAN: We call it America's tax plan because it'll mean tax relief for American families, individuals and businesses. It'll mean less red tape and lower rates for the majority of Americans. It will not be a tax increase, it will not expand the deficit; it will increase incentives to work, save and invest, and it will mean that American technology can shoot ahead and it will help America outproduce and outcompete anybody anywhere in the world.

MacNEIL: Later in the program Judy Woodrufjf reports from Oshkosh, Wisconsin, on how the President's tax reform road show went over there.

LEHRER: Two new economic numbers were out today. The foreign trade deficit for the United States increased $11.9 billion in April, the third highest monthly increase on record. And orders to U.S. factories fell for the third month in a row. The April decrease was 0.5%. Also today, the Federal Communications Commission ordered local phone companies to assign long-distance customers to both AT&T and its competitors. The assigning applies to customers who fail to choose a long-distance company on their own. The other companies had complained that all were being automatically given to AT&T.

MacNEIL: The Drug Enforcement Administration today placed an emergency ban on a drug called Ecstasy, claiming there was nationwide abuse. The ban puts the drug, officially known as MDMA, on the same list as heroin, cocaine and LSD. Possession of a trace of Ecstasy could mean a 15-year prison sentence and a fine of $125,000. The DEA was empowered to issue emergency bans under the Comprehensive Crime Control Act of last year. MDMA is chemically related to the hallucinogen mescaline, one of a group called "designer drugs" because their chemical contents are designed to evade existing legal controls. Acting DEA administrator John Lawn said, "All of the evidence DEA has received shows that MDMA abuse has become a nationwide problem and that it poses a serious health risk."

JOHN LAWN, Drug Enforcement Agency: This is one of the designer drugs which, unlike others that we have dealt with, has actually spread across the country. We have documented its availability in at least 21 states as well as Canada. It is being promoted in much the same fashion that other hallucinogenic drugs were promoted in the past, and it is the subject of clandestine manufacture and street abuse and traffic. I'd like to point out further that there are no legitimate uses for this drug. There is no legitimate use that is being jeopardized in this control action.

MacNEIL: W.A., or "Tony" Boyle, former United Mine Workers president, died today in a hospital in Wilkes-Barre, Pennsylvania. Boyle was serving three consecutive life terms for ordering the murder of his union rival, Joseph Yablonski, his wife and daughter in 1969. He'd been ill for most of the past decade and was in the hospital's coronary care unit when he died. Mideast Peace Initiative

LEHRER: We look first tonight at the something new King Hussein of Jordan started this week on the Middle East. In Washington, first in private with President Reagan, and then in public he suggested an international peace conference on the Middle East, one that would include the Soviet Union and a joint Palestinian-Jordanian delegation. He said the proposal had the full backing of the Palestine Liberation Organization, which was now prepared to accept Israel's right to exist within secure borders. The King laid it out in full at a news conference today, prompting Secretary of State Shultz to call one of his own to respond, to say, as nicely as possible, the U.S. rejects the idea of an international peace conference out of hand.

Sec. SHULTZ: We continue to believe that the proposed international conference will not contribute to the peace process, but we will continue to seek ways in which international support for direct negotiations can be made evident. We can understand King Hussein's desire to proceed somehow within the framework of broad international support. And so at least as we look at it, we should seek ways to find that. We've discussed it at great length, and I fully respect the King's view, and I think I understand what he is proposing. We are not convinced, or we are very skeptical, as I said, that it would achieve the results that we're seeking. After all, it's not a conference that we want; it is negotiations that we want. And the negotiations, as the King said, are between the Arab side, a Jordanian-Palestinian delegation, with Israel on the other side. That's the object.

REPORTER: Yesterday the State Department seemed to set some harsh or hard conditions for Soviet participation in Middle East talks. Or did it? What's your feeling about that?

Sec. SHULTZ: Well, first of all, as I said, the objective is to have the parties directly involved discuss the issues and try to resolve them. And the less preliminaries there are to that, the better. Those who should be involved, of course, should be ones who want to see this process go forward. I believe the evidence is quite clear, at least from things that I have seen, that the Soviet Union, for example, is opposed to the accord that the King worked out with the PLO, just to take an example. So if that's their view, I don't know quite how they are going to make a contribution to what we're trying to achieve. I don't have anything against the Soviet Union as such with respect to the negotiation, but their attitude toward this has not been a constructive one.

LEHRER: We hear now from Michael Hudson, a Middle East expert who closely follows Jordan and the Arab world. He is director of the Center for Contemporary Arab Studies at Georgetown University, which gave King Hussein an honorary degree yesterday.

Mr. Hudson, does the Shultz "no" to the conference mean the Hussein efjfort is already over?

MICHAEL HUDSON: I think that it is largely a failure. It seems to me that the United States, with an eyedropper, has given a little bit of encouragement to a process, but on the whole I think not enough. It seemed to me that when Secretary Shultz said that the United States in some ways would bless some kind of a meeting with Palestinian, proper Palestinian and Jordanian negotiators, that was a step forward. And I think that his comments, speaking of the significance of the PLO's reported agreement with U.N. 242 and 338, that's another little bit of a step forward. But I don't think that the Jordanians will be going home feeling very happy. And I have the strong feeling that the Jordanians, as indeed the Palestinians, are extremely worried that a window of opportunity for relative moderates in Jordan, in the Palestinian movement and in the Arab world as a whole is beginning to close.

LEHRER: Well, the King certainly was aware of the fact that -- what the United States position was on an international conference before he came here. He must have expected this, did he not, the response to be what it was?

Mr. HUDSON: I think he had to give it the best shot he could. It is simply vital that the appearance of movement on this issue be kept up. It was a risky venture. I think --

LEHRER: Why, what did he risk?

Mr. HUDSON: It's a risk to come to the United States and go home without very much. And he's going to have to accept now the fact that he has not apparently gotten very much. The problem I think is that in Jordan and indeed throughout that part of the Arab world there is increasing disillusion, disillusionment, with the Arab regimes that have, in a sense, had this special relationship with Washington and who have said to their people, "Well, you know, the only way to any kind of a decent solution to the Palestinian tragedy is through Washington." So we've had a succession of Arab leaders in the last few months coming to Washington, supplicating, as it were, before the United States. And the United States on the whole has taken a rather aloof position. The Americans have said to their Arab friends, "Well, we understand that you're upset, but we don't think that your problems and your worries about future instability, if paralysis continues, are really all that important." I think that this is probably a miscalculation on our part of the rather volatile situation out there.

LEHRER: Would you think King Hussein would find it unreasonable that Secretary Shultz would demand, as he did today, that the PLO say publicly what he says they believe about Israel?

Mr. HUDSON: I think that the King has personal assurances from Mr. Arafat that the PLO, that the Arafat-dominant wing of the PLO, is firmly committed to this. The PLO's central committee was meeting Wednesday in Tunis, and they reafjfirmed Arafat's deal last February with King Hussein. And from what I've heard from Jordanian and Palestinian sources, the PLO leadership is very committed within itself to this. The ultimate step, the going forward, the being very public about it, is of course still extremely difjficult for Arafat. He's had a very tough time holding the Palestinian movement together. We've seen very serious defections, which the Syrians and the Soviets behind them have encouraged. There's a real risk, I think, that by pushing Arafat farther to the wall, they may succeed in pushing him there, but if they make him look like he's caved in completely, then he loses what credibility he has left.

LEHRER: Is it your feeling then that the U.S. attitude toward this has helped matters -- has hurt matters toward that end, toward getting the PLO to do in fact what Washington wants them to do?

Mr. HUDSON: I think the American attitude is dangerously complacent on this. The Middle East is just not up at the forefront of foreign policy or indeed general political concerns. And when we look from a kind of a geopolitical, abstract point of view at the balance of power, it looks in general as if Israel is okay, the Arabs are weak, the PLO is weakened, and so what's the problem? But in fact there really is a problem, and Israel has its internal difjficulties, the Arab regimes certainly have theirs. And it seems to me that the main point of Hussein's plea is to try to set up an international setting in which the Syrians and the Soviets can at least be included to the extent that they won't be able to veto further movement. If you don't have that, given the geopolitics of the region and the ideological and the moral kind of feelings that are so intense out there, Hussein simply can't go it alone, and he won't.

LEHRER: Mr. Hudson, thank you. Robin?

MacNEIL: Now an Israeli view. Nephtali Lavie is Israel's consul general in New York and a close advisor to Prime Minister Shimon Peres. Ambassador Lavie took part in the Camp David talks and has been an advisor to Israeli ministers of defense since 1970.

Ambassador Lavie, what is Israel's position on this proposed international conference?

Amb. NEPHTALI LAVIE: We have made it clear many times that such a conference cannot be constructive. It cannot be constructive, it cannot bring any positive results. Therefore we can't favor such a conference.

MacNEIL: What about the argument we just heard that King Hussein, if he's to negotiate with you, needs the support and protection, or at least complicity, of Syria and the Soviet Union, otherwise they're just going to undermine or veto any result from such a meeting?

Amb. LAVIE: We understand that King Hussein is an independent, I would say, king of his independent country, and he knows what the interests of Jordan are. And the interests of Jordan are to have peace and stability in the area with Israel, with its neighbor. Now, for many years we opened a wide door for King Hussein to join peace talks. Not a window but a wide door, and he did not need to come to Washington to make his appeals; he could just cross the Jordan River -- both of us are sitting on both banks of the river -- or to take a call and ask some of the Israelis whom he knows that he would like to negotiate. Now, I don't think that the only reason why King Hussein doesn't enter peace is because he's intimidated by the Syrians or afraid of the Soviet Union. We should remember that September 1970, 15 years ago, King Hussein was not scared to smash the PLO in Jordan in spite of the Syrian invasion to Jordan and Soviet threats, because he knew that his regime, his country is in danger. Now, if he considers to be in some sort of danger, as he says, this is a last opportunity to solve this issue, then he should jump into the cold water and try to negotiate with us directly.

MacNEIL: Without the PLO or --

Amb. LAVIE: Certainly, without the PLO. The PLO can be only a destructive element in such a process.

MacNEIL: Now, do you agree that the window of opportunity for King Hussein is closing? Do you agree with that thesis?

Amb. LAVIE: We heard it several times in the last 15 years, that the window is closing -- and I find it's still being open. Of course he comes and repeats coming to Washington and bringing the same message.

MacNEIL: Is it significant to Israel what Yasir Arafat, reinforced by the Palestinian National Council, has said about resolutions 242 and 338, about the willingness to recognize Israel? That message that he brings now and which he attaches great importance to, is that significant to Israel?

Amb. LAVIE: We have heard many voices coming out of that organization, a dispute, this kind of, let's say, acceptance by Arafat or by one of his other people. I would say one of his closest aides, or maybe the closest one, Aboriyat, who keeps I would say the gun of the PLO -- he disputes it, he does not recognize it. So which one should we consider -- whom should we consider the partner if PLO is about to be a partner?

MacNEIL: Right. Now, what does Israel think is going to happen now?

Amb. LAVIE: We believe that the only way the King could proceed towards negotiations -- and we believe that we need negotiations with results and not conferences, just as Secretary Shultz said -- so the only way is to accept our invitation to come to Jerusalem or to invite our prime minister to Jordan and start talking. And there's many things that we could solve. After all, we must remember one thing. The King may ignore Israel but the King lives with Israel on a daily basis. Both of us are facilitating trafjfic across the bridges over the Jordan in both directions, there is some commerce going on and tourism, and there is a way to negotiate and to talk to the point.

MacNEIL: Why can't King Hussein do that, Mr. Hudson?

Mr. HUDSON: I think that the ambassador speaks as if the Middle East were just a little garden party, and people can walk down and have a swim in the Jordan River and have a picnic. It's not that way. The Israelis are making ofjfers that they know full well that the Jordanians simply cannot accept, and they don't want them to accept it. The Israelis are perfectly happy with the situation the way it is. Maybe they shouldn't be in the long run, but of course politics takes place in the short run. I think it's the United States that ought to be a little bit worried, because American embassies are now being guarded, as they should be, American diplomats are being killed, and in general the American position and America's friends throughout this vital region are being eroded because of the impasse on this issue.

MacNEIL: Is he right, Israel doesn't care or doesn't mind the situation the way it is now?

Amb. LAVIE: Israel cares very much. And I think the only initiative that was undertaken in this direction, the positive direction of establishing peace or any sort of an agreement, has been made by Israel. And the fact is that due to the Israeli initiatives President Sadat came to Israel and peace was achieved.

MacNEIL: What kind of conference could Israel have now with King Hussein involving Palestinians? For instance, there's been a lot of discussion when Secretary Shultz was out there about the kinds of Palestinians who could qualify. Israel is prepared for such a conference now with King Hussein, with people you regard as qualified Palestinians?

Amb. LAVIE: We stated many times that there are Palestinian leaders in the area with whom we have an ongoing dialogue on a daily basis.

MacNEIL: Secretary Shultz said today the United States would agree to, at such a conference, Palestinians who were members of the Palestinian National Council if they were not members of the PLO -- if they were people of good faith who believed in peace.

Amb. LAVIE: It's very hard to say who has this good faith. If he's a member of that organization which we identify as the PLO, and these people will be appointed by the leadership of the PLO, so it is very clear that we cannot negotiate with these people.

Mr. HUDSON: You know, I think it's not a question of good faith; I think it's a question of finding people to negotiate with from whom you can get results. That means you have to deal with the top Palestinian leadership. Now, it may be that for the obvious domestic constraints on American policy, we can't deal, as we certainly should, directly with the PLO leadership. Maybe Mr. Shultz is trying to give America a little bit of leeway and say, "Okay, we'll use the PNC membership." It's a fine and essentially meaningless distinction. The important thing is, you've got to have Palestinians who have political clout and credibility, otherwise the whole game is just a charade.

MacNEIL: Is Israel hoping that the Palestinian -- the PLO, who are getting beaten up now in the refugee camps in Beirut, are just going to get weaker and weaker and ultimately will have only Jordan to deal with?

Mr. HUDSON: I think --

Amb. LAVIE: I think --

MacNEIL: Let me ask the ambassador first.

Amb. LAVIE: I don't know theyare going to get weaker, but the fact remains that they are very much split, and there's no one PLO to whom you can refer. You can talk about strong leadership with the credibility of Arafat; tomorrow you will find someone else, and the day after this, someone else will be again out of business. So with whom are you going to establish any contacts?

MacNEIL: Mr. Hudson?

Mr. HUDSON: Well, that's a real problem. I think that, you know, in 1981, when the PLO was coherent and organized, the PLO was able to keep discipline and to keep a truce in Lebanon, which the United States had arranged. Now, when Israel went into Lebanon and everything fell apart, tremendous tragedy occurred. The PLO did split. And now we find that indeed there are radical challenges to the PLO from all sorts of places, some directed by Syria, some even more insidious from kind of Islamic militants that are welling up within the Palestinian movement as they are elsewhere in the Arab world. And it is more difjficult now. But I don't think the time is lost, and that's why I said that I thought that King Hussein is coming with a stopwatch in his hand, saying, "Look, if you don't do something, we're all going to be in real trouble."

Amb. LAVIE: May I correct the distinguished scholar about a split in the PLO that took place, according to his analysis, after the Israeli attacks on Lebanon? The split in the PLO took place almost at the beginning, at the outset of its existence, and it came to its sharpest dimension during the September 1970 crushing of the PLO by King Hussein. Since then there are seven and sometimes nine various splinter organizations, some more radical, some are, so to say, less moderate, as one calls it. But all of them are fighting each other. If you agree with one, you will have to confront the other. They will not accept what you ofjfer them.

MacNEIL: So how can Israel confront that or agree to negotiate with that, Mr. Hudson?

Mr. HUDSON: Well, I think first of all that it was 1983, a year after the invasion of Lebanon, that the serious split really took place in the PLO. You have right now an ofjficial PLO that has accepted these agreements. It is ready to move. It is ready to move in conjunction with Jordan. It is ready to have a Jordanian-Palestinian confederation, which meets some -- or many of the American objections. And given the fact that this is such a murderous and insidious conflict, the passions -- we may get tired of it, but the people over there, especially the poor Palestinians on the West Bank, they don't forget about it -- I think it is more difjficult. The ambassador's right: it is more difjficult than it was. But the PLO is there, and Jordan's there, and there is a very strong general Arab-state consensus behind this. When you look at Iraq, Egypt, Saudi Arabia, Morocco, most of the main Arab actors with the important exception of Syria are behind it. If you can get Syria and the Soviets in at the beginning of an international process of some sort, then it seems to me that's where you've really made the breakthrough.

MacNEIL: Yeah, but Mr. Shultz has just rejected that and Israel rejects that.

Amb. LAVIE: One correct thing what I heard just now. There is a consensus among all the Arab leaders or countries when it comes to one particular point: to push Israel out where Israel is. But afterwards you will not find unity among those Arab leaders to decide about one particular goal.

Mr. HUDSON: This is not true. The consensus is on U.N. 242, that's what the consensus, the Arab consensus is on.

MacNEIL: Mr. Hudson, thank you for joining us; Ambassador Lavie, thank you. Jim?

LEHRER: Still to come on the NewsHour tonight, Judy Woodrufjf reports from Oshkosh, Wisconsin, on the President and tax reform, and we look at the prospects for an agreement at Geneva on nuclear arms. Tax Reform: Successful Pitch?

MacNEIL: The story of the week has been President Reagan's tax reform plan and the publicity blitz he's unleashed to sell it. In a moment we look at how the selling effort is going over. First here are some observations on the plan by the nation's political cartoonists.

Pres. REAGAN [Wright cartoon, Miami News]: Now, this is my new tax reform pie. It's simple, it's quick, it's --

DEFICITS: Schlomp! [plan is eaten]

SPECIAL INTERESTS CUSTOMER, to mechanic [ S. Kelly cartoon, San Diego Union, Copley News Service]: Okay, you can overhaul it [car representing current tax system].

Just don't touch the convertible top or the gold-wing doors or the hood ornament or [TEXT OMITTED FROM SOURCE]

Pres. REAGAN [Wasserman cartoon, Los Angeles Times Syndicate]: The aim of our tax reform plan is simplicity and fairness. [draws complicated diagram] Now for the fairness part.

NARRATOR [Gamble cartoon, Florida Times Union]: Some famous scenes from the Second American Revolution. Reagan crossing the Potomac.

Pres. REAGAN: All together now.

NARRATOR: Paul "Congressman" Revere.

PAUL REVERE: The lobbyists are coming!

NARRATOR: Patrick "Oil Industry" Henry.

PATRICK HENRY: Give me oil and gas depletion allowances or give me death!

NARRATOR: Thomas "Businessman" Paine.

THOMAS PAINE [reading headline "3-Martini Lunch Cutdown"]: These are the times that try men's souls!

MacNEIL: Today, as we reported, President Reagan continued in Malvern, Pennsylvania, the tax reform campaign swing he began yesterday in Virginia and Wisconsin. Judy Woodruff reports from Oshkosh, Wisconsin, on what people think about the President's proposal and about the present tax system.

EDITH COLLINS, teacher: It's my impression that it's quite complicated.

CHARLES HULSEBOSCH, business executive: I just think that general tax rates are too high.

STEPHANIE GREGORY, factory worker: It's a mess, is the only way I can describe it. It's not fair, I don't think.

JUDY WOODRUFF [voice-over]: It's hard to find someone these days who says nice things about the American tax system. And the folks who live in Oshkosh, Wisconsin, are no difjferent.

STEVE LABUS, construction worker: I think it could be a little more fair. And the greater your income, the better chance you have of getting involved in some of the shelters available.

WOODRUFF [voice-over]: Situated in the eastern lake country region of Wisconsin, Oshkosh is a town whose population has remained at about 50,000 for some time. It's also largely Republican, probably one reason President Reagan chose to fly here this week.

[on camera] We came to this heavily blue-collar community the day before the President's brief visit here, and found that for all the criticisms people have of the current tax code, there's disagreement about whether Mr. Reagan's proposal for reform is a good idea.

CHUCK RAMSAY, WBAY-TV: As Tim Mulinger reports tonight, the governor says that eliminating the federal income tax deduction for state and local taxes would cost each Wisconsin family hundreds of dollars.

WOODRUFF [voice-over]: This area, like the rest of the country, has been saturated all week with news of the President's plan. One of those who's paid attention is 33-year-old Stephanie Gregory, who works at a plant that manufactures electrical transformers. She earned about $12,000 last year, and as a big fan of Ronald Reagan is enthusiastic about what his proposal will mean.

Ms. GREGORY: Oh yeah, I welcome it with open arms, I really do.

WOODRUFF [voice-over]: Gregory's husband is a craftsman just starting his own business. And with three children to raise, she sees the plan as a plus.

Ms. GREGORY: Well, we heard the speech last night on TV, and your general deduction is going up -- so right there, that would take a lot off, right off the top. And we -- with what we earn, say, you know, taking our earnings from last year, we would probably wind up not paying any.

WOODRUFF [voice-over]: The fact that people with the highest incomes are also getting a big rate reduction doesn't bother her.

Ms. GREGORY: We're not rich right now, but someday we could be -- you never know. And I sure -- like I said to John last night, I said, "If I made a million dollars one year, I sure wouldn't want to pay $500,000 in taxes." So I think that 35% ceiling is nice. The only thing maybe that I don't like to see is the oil companies being sheltered as far as, you know, their drilling. But there's not a whole lot you can do.

WOODRUFF [voice-over]: But Gregory doesn't blame the President for any favorable treatment for the oil companies. In fact, for him to have proposed a plan which lowers tax rates for the poor is something she finds consistent with his past record of appealing to working people like her.

Ms. GREGORY: Well, here I am, a Republican, I'm not rich. So it doesn't surprise me, because I've always thought the President was a fair man. And a lot of his advisors might be pro -- you know, pro-big business or pro-big corporation, but I really don't think he is.

WOODRUFF [voice-over]: Steve Labus has a different view.

Mr. LABUS: If his package was just as sweet and simple as he delivered it on the TV, it'd be great. It certainly would bear some looking into, but after reading in the newspaper, which allows you a little more time and energy to delve into it, they covered a few things he happened to miss. He forgot to tell me that some of my insurance benefits would be taxed and considered that -- my employer makes for me would be considered part of my wage.

WOODRUFF [voice-over]: Labus, who is a construction worker, says his annual wages have jumped from $17,000 to $27,000 over the past couple of years. It's the only income for him, his wife and 12-year-old son, and he's looking carefully at the Reagan plan.

Mr. LABUS: I'll be hurt a little bit. I probably won't be able to ever itemize again because they're taking away my personal income tax for the state as a writeoff, and property tax, if that were to be taken off it would cut in half my usual deductions.

WOODRUFF [voice-over]: Labus agrees with Gregory that the lowest-income people get a break from the plan. But he's skeptical about the notion that individuals would mostly pay less while business would have to pay a lot more.

Mr. LABUS: All my connection is more or less blue collar, and we love to sit around and think that, gee, if only business would pay their fair share, things would be a lot easier. But eventually it's going to come back, either in a reduction in dividends to people who own part of that company or whether it's going to be an increase in cost on their product, or -- you know, so if they do wind up paying more tax, somehow or another they aren't going to bear the whole burden of it.

WOODRUFF [voice-over]: High school teacher Edith Collins lives in another part of Oshkosh, but agrees with much of what Labus says. Together, she and her husband, who is a university chaplain, pull in about $35,000 a year. But with three children in school, they are concerned.

Ms. COLLINS: We probably would pay about the same amount of tax or maybe a little more because we -- right now, because I'm employed part time and my husband is employed, have the benefit of the deduction for two family earners, two incomes, which, I understand, would be eliminated.

WOODRUFF [voice-over]: Collins is also concerned about losing the deduction for state income taxes, for more reasons than one.

Ms. COLLINS: In Wisconsin we are trying to bring more of the responsibility for education through the state tax system rather than the local property tax. And if that deduction were not allowed for state and local taxes, and specifically for the state income tax, there would be a great deal of pressure on the state to lower the state income tax. Wisconsin has a high income tax. And I think that would be very detrimental to education. And since I'm a teacher I'm interested in the quality of education.

WOODRUFF [voice-over]: As for the overall benefits of the tax reform proposal, Collins is skeptical.

Ms. COLLINS: I'm quite concerned about what it does for people at the other end of the salary range, the high brackets, because when Ronald Reagan took office they were paying at about 70%. The President said the top would be 35%. Thirty-five percent as compared to 70% when he took office is a 50% decrease for people at the top brackets of earnings. Who are the people who will end up paying most of the tax? Those of us in middle income who have always paid most of the tax.

WOODRUFF [voice-over]: Business executive Charles Hulsebosch, however, interprets the Reagan plan more favorably.

Mr. HULSEBOSCH: Well, I think that it's going to put more money in the hands of consumers, and that could be good for consumer-oriented businesses.

WOODRUFF [voice-over]: As a vice president of the biggest private employer in town, Oshkosh Truck, Hulsebosch makes well over $100,000 a year. With a wife, four children still in school, and few tax shelters, he says he would save money under the Reagan plan. So would his corporation.

Mr. HULSEBOSCH: Well, if they dropped the rates to 33%, that means that we'll have more profit here and we can employ more people, because we're not -- we're people who reinvest our profits and expand our business that way.

WOODRUFF [voice-over]: But Hulsebosch is under no illusions that the results of the Reagan proposal would be completely fair.

Mr. HULSEBOSCH: Every time that there's a law made in Washington, there are other people out there figuring out ways of using the law legally to their own advantage. It takes some tax people and some lawyers, it'll take them a little while to read the legislation, and there'll be some new ideas coming up.

WOODRUFF [voice-over]: Even so, and even with the changes he expects the Congress to make, Hulsebosch believes the Reagan plan is on the right track.

Mr. HULSEBOSCH: I'm convinced that what comes out of the program ultimately is going to be better than what we have now.

WOODRUFF [voice-over]: Despite the positive reaction of people like Hulsebosch, the President's advisors back in Washington say they know they have a selling job to do, and they decided Oshkosh was a good place to begin.

PAT BUCHANAN, White House: Oshkosh represents the middle-America component of the program, the American family. It could have been St. Louis, it could have been Green Bay, it could have been another town like that; but Oshkosh I think hits it just perfectly.

WOODRUFF [voice-over]: White House communications director Pat Buchanan says the President will never get his tax plan through Congress if he doesn't take it on the road.

Mr. BUCHANAN: It's those Americans, middle Americans, working-class Americans out in the country whose support and energy are going to help us get this through and going to help us go over the special interests, if you will. And if we can't get that kind of support, we're going to have the devil's time of it trying to win this battle right here in Washington.

WOODRUFF [voice-over]: Sure enough, this middle American family town turned out to see Mr. Reagan, just as his advisors hoped it would. Thousands came to the county courthouse here to hear the President's 15-minute speech during a stay in town of just one hour.

Pres. REAGAN [May 29]: Our system of taxation has turned into something completely foreign to our nature, something complicated, unfair and in a fundamental sense un-American. Well, my friends, the time has come for a second American revolution.

WOODRUFF [voice-over]: Schoolteacher Edith Collins went to hear the President in person and watched news coverage of him later. She says her reaction afterward was just as negative as it had been before.

Ms. COLLINS: I felt the President made a very emotional speech. It wasn't a speech which fostered any kind of thinking. And I also felt he talked down to us, and that bothered me, because he made it sound so very simple when it is a complex matter. He told us he had talked to fourth- and fifth-graders at the airport -- he talked to us like we were fourth- and fifth-graders also.

WOODRUFF [voice-over]: Businessman Charles Hulsebosch also went to see Mr. Reagan speak and said his sales pitch was impressive.

Mr. HULSEBOSCH: If he continues to manage this issue with the same enthusiasm and gets as responsive result from other audiences, as I believe that he got today in Oshkosh, he can surprise a lot of people with this program.

WOODRUFF [voice-over]: But for all his approval of the Reagan plan, Hulsebosch rejects one claim about it the President makes.

Mr. HULSEBOSCH: I don't think with the diversity of constituents that we have in the United States you can have, as I read recently, something that is both fair and simple.

WOODRUFF [voice-over]: Steve Labus listened to the President's speech on the radio and says he heard nothing new. He says it's what he reads about the plan in the newspapers that disturbs him.

Mr. LABUS: I have a 12-year-old boy who I'm hoping will get a scholarship to go to the university, and I see that scholarships are going to be taxable now as my income, when -- if he happens to be fortunate enough to win one. It's getting a little scary watching some of these things come out. They're reducing our tax percentage on one hand and they're adding our tax liability income on the other hand. I think that by and large we're going to wind up coming out even.

WOODRUFF [voice-over]: Stephanie Gregory couldn't disagree more. She watched Mr. Reagan's speech on television and says appearances like the one in Oshkosh can only help sell tax reform.

Ms. GREGORY: It makes people -- like in this town, it makes them sit up and listen, and it kind of motivates them a little bit to write to their, you know, to their congressmen, senators, and let them know what they think. So I really think it helps. It's a lot better than just sitting behind his desk and letting someone else do it. It helps for him to do it. Geneva Arms Talks: Gloomy Prospects?

LEHRER: Our final focus segment tonight is on Geneva, where U.S. and Soviet negotiators are trying again for agreement on arms control. The second round of the new round opened yesterday after a five-week break, and the word going in is anything but optimistic. Both Soviet leader Mikhail Gorbachev and White House spokesmen used the word "fruitless" to describe round one, and there is no one on either side predicting anything much difjferent for round two. Why the new pessimism is what we're going to talk about now with Robert Dean, deputy assistant secretary of state for political-military afjfairs -- he heads an interagency task force on arms control -- and Robert Legvold, associate director of Columbia University's Harriman Institute for Advanced Study of the Soviet Union -- he is also director of the Soviet Studies Project at the Council on Foreign Relations. He joins us tonight from Boston.

Mr. Legvold, do you share the pessimism?

ROBERT LEGVOLD: Very much so. I think the prospects for any significant progress in these arms control negotiations are very limited.

LEHRER: Well, what happened? When these things opened on the first round, everybody was very upbeat; it looked like big things were going to happen. What's gone wrong?

Mr. LEGVOLD: I think that was an illusion in the first instance. I think the prospects were probably rather bleak even at the outset, in large part because the negotiating positions of the two sides are really unbridgeable, despite the fact that Shultz and Gromyko arranged the communique that opened the framework for these tricameral negotiations. But in fact the Soviets are asking of us something we're unwilling to grant, and we're asking of the Soviets something that they're unwilling to grant. And in those circumstances the prospects are very limited.

LEHRER: Secretary Dean, you agree?

ROBERT DEAN: Well, I think --

LEHRER: With all of the above?

Sec. DEAN: No, not all of the above. I think it's important that we take a longer-term view of the negotiation. We're, after all, just through the first round. Those talks were conducted in a businesslike fashion. I agree that they were unproductive to this point. But I think if you look at the history of arms control negotiations, nothing has been achieved overnight. We, for our part, are really in an optimal position to achieve progress. We have a bipartisan position. We have a strong delegation which has strong bipartisan support. And the delegation leadership has the broad authority to negotiate flexibly. We are not seeking to eviscerate the Soviet force posture; we're not seeking to dictate Soviet force posture. We're seeking to explore tradeofjfs with them to accommodate the strengths and weaknesses in both sides' force posture equitably.

LEHRER: Then what's gone -- what's not happening?

Sec. DEAN: I think it's probably premature to expect progress at this date. We have a new Soviet leadership in the process of consolidating itself politically, and I think we simply have to wait and see.

LEHRER: Do you think that's all it'll take, Mr. Legvold, is to wait and see?

Mr. LEGVOLD: No, I think there's something very basically wrong in the negotiating position of the two sides which creates a fundamental impediment on any real progress. The Soviets are unwilling to negotiate any significant reductions in their strategic ofjfensive forces until we are willing to negotiate the future of the Strategic Defense Initiative. We're unwilling to negotiate in any real terms the future of that Strategic Defense Initiative and are insisting that the Soviets reduce offensive weapons. Until one or the other side changes that fundamental position, there's no prospect of improvement. And the notion that it simply is going to take time is misleading, and we're misleading ourselves to believe that.

Sec. DEAN: I think if we were afflicted by this kind of pessimism we'd pack up our bags and go home. We're not. We know that in the past it's taken hard, long slogging with the Soviets to reach even the smallest of compromises. So I think patience is demanded of us, and I think eventually the Soviets will come around. The fact --

LEHRER: But isn't he right, though, about the two positions, the position on SDI, sometimes called Star Wars, and what we want the Soviets to do on their ofjfensive weapons?

Sec. DEAN: Well, I was about to say, the fact that the Soviets establish as a precondition that we give up the research on the President's Strategic Defense Initiative is an utterly unrealistic proposal, and they know that as well as we do. And we would expect in due time that they would come ofjf that.

LEHRER: Mr. Legvold?

Mr. LEGVOLD: I think that's right. I think the Soviet insistence that the Americans proscribe research is unrealistic, and I suspect that if the American side were prepared to talk about limits on actual testing and deployment of the systems involved with strategic defense, the Soviets might show some flexibility on the issue of research. The real question is whether we're prepared to negotiate with the Soviets now, assure the Soviets now that we are prepared to talk about limits on testing and deployment of the Strategic Defense Initiative.

LEHRER: Are we?

Sec. DEAN: Well, I might say that we have -- in the third group in Geneva we have sought nothing less than to engage the Soviets in a substantive dialogue on the role of strategic defenses and the orderly transition to a strategic defense on both sides if in fact the research that we're doing proves feasible. I should all the research that both sides are doing, for they have had a longstanding SDI-type program just as we have.

LEHRER: Are you suggesting, then, Mr. Secretary, that the Soviets really don't want to cut a deal on SDI?

Sec. DEAN: I'm suggesting that the Soviets know it's a red herring at this point to keep -- to focus on SDI and limits on SDI research as an obstacle to negotiations.

LEHRER: What would be their motivation for throwing a red herring and sticking with it?

Sec. DEAN: Well, it's possible that they foresee generating political pressure both here and in Europe on the administration to give on SDI, that is to say, holding out the carrot of an agreement on ofjfensive forces, in exchange for some give on SDI position. I mean, that's how I would see --

LEHRER: If you were advising the other side.

Sec. DEAN: -- advising the other position.

LEHRER: I see. I see. You agree with that, Mr. Legvold, that that's what may be afoot here?

Mr. LEGVOLD: No, I don't think so. I think the Soviets are genuinely determined to, if there's to be any kind of arms control agreement, to include the efjfort in strategic defense. And short of that, I don't think they're interested in reducing ofjfensive forces. On the contrary, and this is the -- there's an irony here. In a real sense the administration's interest in strategic defense has served to bring the Soviets to the negotiating table. I think the Soviets are now more amenable to an agreement on strategic arms than they have been for a long time, but only if we are then serious about negotiating strategic defense. If not, then rather than creating an inducement to reduce offensive forces, our holding open the future option of going forward with strategic defense only gives them more incentive to cling to their offensive force posture. Hence the irony. And I don't think that it's merely tactical maneuvering on their part or an attempt to play to the Europeans. There's no question that the Soviets do intend to play to the Europeans, but beneath that there is a serious concern about strategic defense.

LEHRER: A serious concern about having to fight a war in space, which is what their rhetoric is all about?

Mr. LEGVOLD: I think their concern is about the structure of the two sides' force postures if we open an ofjfense-defense race, which is what we're about to do. And I think that it's something that they don't welcome; they're not interested in doing it in the present circumstances for a variety of reasons. And therefore it's really the character of the arms race from here on in that is motivating them as much as it is any vision of what a war would actually look like.

LEHRER: You don't buy that?

Sec. DEAN: No, not at all. I think it's important to keep in mind that the Soviets have had, as I pointed out before, a strategic defense program of their own for some 10 years and the most exotic of technologies, space-based technologies. We estimate that they've devoted almost as much to this defensive work as they have to their offensive forces. So for them it's a case of the pot calling the kettle black now, it seems to me. If they insist that we give up our research program, an unmonitorable position in the first place, and you know, they don't give on that account themselves -- one doesn't hear anything about the Soviet program.

LEHRER: You said be patient, and we must wait and things might happen here. How long? I mean, is there some kind of unspoken or unwritten rule -- okay, we'll sit and we'll talk for a certain period of time and then we'll go to round three? Or how long does this go on before something has to be -- some kind of agreement has to be reached, even if it's on a little thing?

Sec. DEAN: Well, their approach to the first round is completely political. They surfaced moratoria proposals in each of the three sets of talks. These are really dusted-off Brezhnev proposals that we'd seen before. When we queried them on it, it was clear that they hadn't thought through the proposals themselves. It was clear to us, in other words, that these were meant for public consumption as opposed to being genuine negotiating positions. It's difjficult for me to answer your question, because we haven't had a chance to assess their position in this round yet; it just began this week, as you know. I think two or three weeks from now we'll know more.

LEHRER: Is it of value, Mr. Legvold, even though you think the prospects are bleak, to stay there in Geneva and at least keep talking?

Mr. LEGVOLD: Well, I think it is important for us to stay in touch with the Soviets and negotiate in some form of this kind. But I think there is a danger. I think we will delude ourselves into assuming that on the present basis we may in fact achieve arms control when in fact that's -- that prospect is very limited. In response to what Bob Dean has just said, I think it's important to review the last several years. First of all, we've not had an arms control agreement with the Soviet Union of any kind since 1979. That is the longest period without an arms control agreement of any particular -- of any importance since 1963. This administration's been unable to negotiate arms control with the Soviet Union, unlike previous Republican and Democratic administrations. Secondly, the administration, spokesmen for the administration have told us how the Soviets are going to react if we only stick with our position and then let time pass and the Soviets adjust. For example, under INF we were told that it's a standard Soviet practice not to negotiate until the 11th hour when they see that we're serious about actually deploying those missiles in Europe and then they'll come around. The Soviets didn't come around, they walked out. We were told that having walked out, it would now require some period of time for the Soviets to see the actual deployment and then they would know that we were serious about it, and then they would come around. In the case of START we were told that when the President was reelected they would know they had four more years of the Reagan administration and then they would become serious about the negotiations. We're being told again to wait some more to see whether the Soviets don't become serious. That's not borne out by the past.

Sec. DEAN: Well, I can only say that I think impatience is the real enemy of arms control. And it is, after all, American firmness following the Soe accepted a moratorium proposal, which they demanded in November of 1983, one can hardly argue that we would now have an arms control agreement in hand. So I think patience and firmness is the order of the day. We're not going to sacrifice American security for a signing ceremony.

LEHRER: All right. Mr. Secretary, Mr. Legvold, thank you both very much. Robin?

MacNEIL: Once again the main stories of the day. Secretary of State Shultz formally rejected King Hussein's call for an international peace conference on the Middle East. Seven people but no baseball players were indicted in an investigation of drug abuse in big-league baseball. The federal government banned a drug called Ecstasy because of widespread abuse. President Reagan said his tax reform plan would help the U.S. outproduce and outcompete any country in the world. Good night, Jim.

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