The MacNeil/Lehrer NewsHour

MacNeil/LEHRER NEWSHOUR SHOW #4285 FRIDAY, MARCH 6, 1992

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

MS. HUNTER-GAULT: And I'm Charlayne Hunter-Gault in New York. After our summary of the news this Friday, Business Correspondent Paul Solman looks at the confusion over economic forecasting. We have a NewsMaker interview with Democratic Presidential candidate Bill Clinton, followed by our weekly political analysis from Gergen & Shields. Finally, we have a report on the devastating ethnic fighting in the former Soviet Union.NEWS SUMMARY

MR. LEHRER: The nation's unemployment rate rose 7.3 percent in February, the highest it's been in more than six years. The Labor Department said 9.2 million Americans were out of work. The rate had been 7.1 percent in January. A separate report showed employers added more than 164,000 jobs to their payrolls in February, the largest such increase in nearly two years. Some economists said that was evidence the recession was over. Paul Solman will have more on what these and other economic numbers mean right after this News Summary. Charlayne.

MS. HUNTER-GAULT: Most personal computer systems managed to escape the destructiveness of the Michelangelo Computer Virus today. The virus can destroy all data in IBM or compatible computers. Many companies and individuals took preventive measures like not turning on their computers or using anti-viral software. The virus was designed to activate itself today, the birthday of Renaissance artist Michelangelo. There were scattered reports of cases worldwide. The most serious occurred in South Africa, where 300 pharmacists lost their data.

MR. LEHRER: The former Communist President of Azerbaijan stepped down today. He did so over criticism of his handling of fighting in the disputed region of Nagorno-Karabakh. There was an overnight report that 27 people were killed in a new offensive by Azerbaijani troops against an Armenian village. We have a report on the conflict narrated by Vera Frankel of Worldwide Television News.

MS. FRANKEL: Outside and inside Azerbaijan's parliament, they demanded more Armenian blood. President Musalibof replied by resigning. He's opposed to escalating the war over Nagorno- Karabakh. Without Musalibof's restraining influence, parliament is likely to create a national Azare army and intensify the conflict. His opponents say he reacted too slowly, allowing Armenian militants to capture minority Azare villages in the disputed enclave. Musalibof told parliament he was resigning because he didn't want to shed more Azare blood. Over a thousand people have died in four years of the bloodiest ethnic conflict in the former Soviet Union. Undeterred, his opponents say these fresh Azare graves demand a forceful response. It's a savage war. Armenians beat up these two Azares who allegedly killed two Armenians while trying to blow up a weapon depot. They were later exchanged for Armenian prisoners. The burials continued too. Armenians killed in the raid were laid to rest in a sky run, their families also victims of this war.

MS. HUNTER-GAULT: We'll have more on the conflict later in the program. More than a hundred Russian nuclear scientists have gone to work for the U.S. government. A Department of Energy spokesman said they are doing research on using nuclear fusion to produce energy. All are working in Moscow under a one year contract that pays the equivalent of $65 a month. That's about seven times the average monthly wage in Russia. Five U.S. Senators went to Moscow today for talks on converting the former Soviet nuclear arsenal to civilian uses. The delegation, led by Sam Nunn of Georgia, will meet with officials from Russia, Ukraine, and Belarus.

MR. LEHRER: And that's it for the New Summary tonight. Now, it's on to the economic numbers game, Bill Clinton, Gergen & Shields, and an update on the war between the Armenians and the Azerbaijanis. FOCUS - GUESSING GAME

MS. HUNTER-GAULT: First tonight we focus on the economy. Today's unemployment figures have only added to the confusion of whether we are on our way out of the recession or still stuck at the bottom. So how and when will we know for sure? Business Correspondent Paul Solman of public station WGBH-Boston explains.

MR. SOLMAN: Monday morning at the unemployment office.

WORKER: The last day you worked was what, 8-31-90?

UNEMPLOYED PERSON: 8-31-90.

MR. SOLMAN: These lines represent economic data in its rawest form. Friday morning at the Bureau of Labor Statistics, another line, this time of reporters awaiting the grand total. In moments, the latest unemployment figures will flash across the country to financial markets and newsrooms, spreading gloom or a glimmer of hope for our listless economy. As it turned out, this morning the results were emphatically mixed. The official unemployment figure rose to 7.3 percent, the highest in more than six years. But at the same time, the official payroll figures suggested just the opposite, reporting that the number of Americans working actually rose in February. Okay. Those are the unemployment statistics, but do they really make the economic crystal ball any clearer? Consider this. The latest Index of Leading Economic Indicators was up. That's good, but the consumer confidence rating was way down. That's bad, which leaves us all wondering what's become or how we'd even know a recovery if we began to see one. Now, professional economists have long since tossed aside old fashion forecasting technology in favor of a more high-tech medium. But still for forecasters these are exceedingly trying times.

SPOKESMAN: I have time to consider the data that's come in from our customers and from government to --

MR. SOLMAN: We're at the weekly forecasting meeting at DRI/McGraw-Hill, a Massachusetts outfit that's paid by businesses, investors, and policy makers to look into the economic future.

SPOKESPERSON: So I think you're going to see auto sales drop back to around 6 million units.

MR. SOLMAN: At DRI, they depend on a classic computerized model of the economy, with 800 separate equations into which they plug everything from auto sales to interest rates, widget production to the weather.

SPOKESPERSON: And the last couple of months of weak winter weather, which most of us considered good, has really hurt the oil producers and the oil market.

MR. SOLMAN: There are two key consumer confidence numbers and one of them has just arrived. It's a hell of a way to start the day.

SPOKESMAN: Okay, this morning the Conference Board data for February shows a decline to 46.3 from a revised 50.2 in February, disappointing number.

MR. SOLMAN: Disappointing is an understatement, considering this is the Conference Board's lowest confidence rating in 17 years. Consumers feel lousy and they're not likely to feel any better if they continue to be besieged with bad news, like the highly publicized layoffs at GM recently.

SPOKESMAN: It was very disappointing. Everybody in there was really surprised because all indications pointed that we would stay open.

MR. SOLMAN: A forecaster like David Wyss tries to factor the news into his formula.

DAVID WYSS, DRI/McGraw-Hill: Economics is a confidence game. If people are scared, if they don't spend, the economy is damaged. It's amazing. People would put off things that you wouldn't think they'd want to put off, even the sort of things you would think of as a necessity. One thing that's interesting in this recession, it's the first extended recession when actual food sales have dropped. They're usually pretty much recession- proof. This time around people are actually even eating less.

MR. SOLMAN: In fact, they were eating at the nearby Burlington Mall, only they were eating cheaper.

DAVID WYSS: It's pretty busy here, but this is people eating $1.99 hamburgers.

MR. SOLMAN: Wyss comes here from time to time to check out the people behind the numbers.

MR. SOLMAN: There are a lot of people right out here now and a lot of people in there.

DAVID WYSS: Yeah, well, this is the food part though. Buying hamburgers is not what counts in moving the economy. We want to know what's happening at stores like Fileen's and Jordan Marsh where they're buying bigger and more expensive items.

MR. SOLMAN: You actually come to this place to find evidence for your forecast?

DAVID WYSS: Yeah, I actually do. I come to the Burlington Mall, especially like at Christmastime, just to see how many people are shopping. Is there a recovery in consumer spending, or are the stores empty?

MR. SOLMAN: This store is empty.

DAVID WYSS: This store is empty, no question.

MR. SOLMAN: A handful of stores, just one mall, not what you'd call a statistically significant sample. In fact, the most recent government report was that retail sales rose in January, which just goes to show why the journalist's approach to reality, what you might call "anecdata," may be the flimsiest form of forecasting. Okay. Here's another forecasting approach. This is the trading pit at New York's Commodities Exchange. In the eyes of some forecasters it's a gold mine of prognostication. In fact, it is a gold mine of sorts since gold contracts are actually traded here. We asked Tim Murphy to explain what goes on. Unfortunately, you can't hear him and we don't have time to explain his strategy. But the point is that to some forecasters gold tells you an awful lot about the economic future and helps keep things simple.

DAVID RANSON, Market Forecaster: We don't try to collect as many factors as we can. We try to collect as few as we can. We try to filter out as many factors as possible that don't seem to be very important. We know that everyone has some influence, but we want to focus on the ones that have the most.

MR. SOLMAN: Here, instead of an elaborate computer model, they put their faith in markets, two above all. First, there's the short-term government bond market, where Uncle Sam's short-term IOU's are trade, so-called Treasury bills and Treasury notes. When Ranson sees low interest rates here, he takes it to mean that money is cheap, businesses are about to start borrowing, the economy is about to recover. Then there's the gold market. The lower the gold price they figure, the lower inflation, an omen that the economy is prime for recovery. And the gold price here is assumed to be reliable. The best collective guess of a lot of highly motivated people, they're willing to put their money where they're mouths. David Ranson is a guy who swears by markets. The day we talked to him he was checking the latest odds on a somewhat unusual market in London. When we came in, you were on the phone to the Wall Street Journal. What were you telling the guy?

DAVID RANSON: Yeah. I was just telling him there was a change in the betting odds and we're watching markets to gauge the Presidential election. Unfortunately, it seems to be illegal to place bets on the general election here, believe it or not.

MR. SOLMAN: And for those of you who believe in markets as the ultimate crystal ball, the latest odds in London are for Bush, Clinton, Tsongas, Brown, Buchanan, Harkin. But couldn't this betting just reflect irrational speculation? And couldn't that be true for the markets Ranson relies on for his economic predictions as well?

MR. RANSON: Well, I don't know if it's irrational. We can't tell the difference between rational and irrational improvements in prices, but we feel that the market is the, probably the most objective place to get a reading.

MR. SOLMAN: Okay. That's why we have two conflicting approaches to economic predictions, the simple market method, the complex mathematical model, and it turns out we have two different economic predictions here. VRI's model sees continuing weakness. Ranson & Company are betting on a robust recovery.

PAUL ANDREASSEN, Jerome Levy Institute: Well, there's an old joke in forecasting which is I can predict perfectly what's going to happen as long as you don't make me tell you when. And I can predict perfectly when something's going to happen as long as I can be pretty fuzzy about what it is. The difficulty is trying to forecast people. We're very complicated. And that's not going to change.

MR. SOLMAN: If you're talking about predicting human behavior, why not ask a psychologist. So we did.

PAUL ANDREASSEN, Jerome Levy Institute: The nice thing about being a psychologist is you don't have to take the economic theory quite so seriously and you can look at what all economists are doing and look to see across what tends to work best.

MR. SOLMAN: To the psychologist what foils the forecasts of computer models like DRI's is the fickleness of their data, all those folks at places like the local mall going about their individual business. And the markets to which David is so devoted are also made up of impulsive human beings who actually pride themselves on their unpredictability. The problem is that just when you finally think you've got people figured out, they change, today's lack of consumer confidence, for example, that keeps dragging down the economy. Experts say that this recession, at least in terms of the traditional numbers like unemployment and industrial output is mild. So then why do a disproportionate number of us feel so bad?

PAUL ANDREASSEN: People don't compare themselves to an absolute standard. They compare themselves to where they think they ought to be. And one of the things that they think they ought to be is improving every single year. And that's slowed down in the United States. They compare themselves to the very rich. And there's more very rich and they receive a lot of publicity. So if you now know that your, the head of your corporation makes a million times as much as you do -- I'm exaggerating there -- it's very dispiriting. And these income disparities over the last few years have grown tremendously. And I think that's very hard on the psyche of the average person.

MR. SOLMAN: Now all these forecastingsystems are based on history, patterns of economic behavior that have held true in the past. But if Americans have begun to look at their future prospects in a new and more pessimistic light, then all bets are off. In any case, when it comes to economic forecasting, we're traditionalists and leave the final word to John Kenneth Galbraith, who said long ago that there are only two kinds of economists, those who don't know the economic future and those who don't know they don't know. NEWSMAKER - '92 ELECTION

MR. LEHRER: Now to a NewsMaker interview with Bill Clinton, the Governor of Arkansas and a leading candidate for the 1992 Democratic Presidential nomination. I spoke with him earlier this evening from Tampa, Florida. Gov. Clinton, welcome.

GOV. CLINTON: Thank you.

MR. LEHRER: Mario Cuomo said today in the New York Daily News "Bill Clinton will be the nominee in two weeks." Is he right about that?

GOV. CLINTON: Well, I hope he's right, but frankly, I think it's mathematically impossible that I could be the nominee in two weeks. I hope we have a good day on Tuesday, on Super Tuesday, have a good day Saturday in South Carolina, and then I hope that in Illinois and Michigan I can do well, but this race is going to go on a while longer. You've got the big states, Pennsylvania, Ohio coming up, New Jersey, California, Gov. Cuomo's own New York. There are lots of delegates out there still to be fought over. I think we're moving in the right direction. And I think in the last week or so my message is finally beginning to be heard. I think that people are finally realizing that the choice is not yet another Democratic choice between a liberal and a conservative, but a choice between the '80s and the '90s, between what works and what doesn't. And if I can get that message across, I think we'll be okay.

MR. LEHRER: You mean now what Paul Tsongas is offering is politics of the '80s and you're offering the politics of the '90s?

GOV. CLINTON: I believe so. I think that he basically represents, as he candidly says, a very socially liberal agenda, that is, the liberal Democratic agenda of the '80s socially, and a more pro business position economically. I've always thought of myself as pro business, and as you know, I've often been criticized in the campaign for not being enough of a Democrat, for being too pro business. But I am opposed to giving anybody something for nothing. We tried across-the-board capital gains cuts in the '80s. It helped the stock market. But even when the capital gains was repealed, the stock market continued to go up. But manufacturing went down, agriculture went down, energy went down, small business went down, working wages went down. What we need is a people-based economics designed to produce high skills, the ability to change, and the ability to give targeted investments for people who will invest in this country. So I think we're both pro business. I think the question is whose program is more relative to the '90s and the way the world works. I believe mine is.

MR. LEHRER: Governor, some would suggest that what you just outlined is the same position that Democratic nominees for President have had for the last three or four elections, all of whom have lost. How do you --

MR. LEHRER: That's not at all true. That's not at all true. None of those Democratic nominees had the image of being pro business. They -- I look at the investment incentives I've outlined. I'm for an investment tax credit. I'm for the venture capital gains, the new business tax credit. I'm for changes in the '86 tax law to get people back into commercial housing. I'm for all kinds of incentives that are targeted. The business community in my state has supported me overwhelmingly. People who voted Republican in the Presidential elections have voted for me because we've created manufacturing jobs, we've outdistanced all the states around us in generating jobs, but I'm not for giving anybody something for nothing. Let me just say that that's the other big difference between me and Sen. Tsongas. Whether you're talking about people on welfare or people running corporations, I say create opportunity and impose responsibility. You've got to do both.

MR. LEHRER: In other words, you're both pro business. He's just more pro business than you are?

GOV. CLINTON: No. My ideas are better. He's got the same ideas we tried in the '80s that didn't work. My idea of targeted incentives and spending much, much more educating and training the work force, doing it for a lifetime and then focusing on things like how do you convert from the defense to a domestic economy, what are the new technologies of the future that we should target and invest in, those are the things that other countries are doing that work. You can't just say let's lower the cost of capital and get out of the way and growth will occur, and then we'll worry about fairness later. We did try that in the '80s and as was reported this week, the top 1 percent of our country got 60 percent of the economic gains, the bottom 60 percent fell behind. We don't need to do that gain. It doesn't work. You have to have an economic policy that is, it squares with the global realities. Look at the countries that are succeeding. Meet the competition. Japan does more with people. germany does more with people. They are better adjusted for a change. Those are things we should be focusing on.

MR. LEHRER: Are you suggesting then that if Paul Tsongas was the Democratic nominee it would just be a continuation of Bush-Reagan?

GOV. CLINTON: No. He's much more liberal on the social agenda, and he has some ideas that we agree with, he and I, about developing small business. And I'm suggesting to you that he has focused far too much on the importance of lowering the capital gains for stock traded on the stock exchanges, and far too little on the importance of developing our people, on education and training. He also talks about opportunity and never talks about responsibility for anybody but the poor middle class folks who've been murdered in the '80s, that is, I would give more tax incentives to business for investing in our country. But I don't see why we should be the only major country that will give tax incentives for a company to shut a plant down here and open it overseas. The Germans don't do that. I think we ought to meet the competition. So I think that while he gives more across-the-board incentives than I do, mine are more targeted and I expect responsibility in return for opportunity.

MR. LEHRER: Tsongas's strength at this point seems to be that he comes across as a real person, a man who talks straight. He's not a packaged candidate and all of that. Do you see those kinds of comments about him as an attack on you?

GOV. CLINTON: Well, I think that he's tried to position himself in that way. But, you know, it's interesting, we just did several different debates and when we were in New England, he had an energy position that modified itself when he got to Colorado, because they were more anti-nuclear power, and then when we got to Texas, his energy position recreated itself again in the form of being pro natural gas.So he's changed a lot of his positions and modified them in this election in a very clever way. I don't want to criticize that. People should be free to change and grow, but I think for him to say that he's the only truth teller in this race and to imply that my positions are based on polls and then to turn around and run an ad saying that I'm trying to increase the deficit with the middle class tax cut, which he knows is not true, sort of puts him in the heavy duty politician category. I like Sen. Tsongas. I admire him in many ways. But he's going to have to answer for his record, his positions, and his straddles now, just like the rest of us.

MR. LEHRER: How do you, how do you combat this impression that you're compared to him at least, you're a slick politician who's been running for President since you were a teenager and all of that?

GOV. CLINTON: Well, I would answer that in two ways. No. 1, it was Sen. Tsongas, not me, who was asked in 1981, 11 years ago, when he started thinking about running for President, and he said, when did I not think about running for President. This is a very well thought out plan by a man who's planned to do this for a very long time. Now, I don't criticize that. I think public service is honorable, but I think that we have to look at what the facts are based on what Sen. Tsongas has said. The second thing I would say is look, I come from one of the poorest states in the country, I went home, I'm a fourth generation Arkansan. I've given 11 years of my life to making the tough decisions that other people talk about. I had to balance budgets. I had to get more money for education. I had to try to create jobs with no help from Washington. Look at my record. I'm a "hands on," sleeves rolled up, practical public servant who's actually done things to try to help children get preschool opportunities, generate manufacturing jobs, solve social problems that others are talking about. My record is not that of a slick politician. It's that of somebody's who actually done things. That's why the Republican and the Democratic Governor said they thought I was the most effective governor. I don't think they would have been in the mood to fall for slick Willie. I think it's just all slogans and rhetoric. People look at my record, the fact that I haven't had a very easy life either, and I've been pretty candid with the American people about that, and I've got the most modern specific, progressive plan for the future of this country. And I think I'll be okay.

MR. LEHRER: It strikes me, Governor, that you can smell it now, you can smell the nomination. Do you feel it out there now, you're pretty close?

GOV. CLINTON: Oh, I wouldn't say that. This is going to be a long, long nomination. What I can smell and feel again is that people are beginning to open their ears and their eyes and their hearts to what I'm trying to say and to what I've done and to my concern for them and our common future. That's what happened in Georgia. I finally got a fair hearing. And when the ideas were measured, the records were measured, the emphasis was measured, a very sophisticated, even though a Southern state, the state with the largest number of foreign companies headquartered of any state in America, 57 percent of 'em voted for me. If I can get that kind of hearing everywhere I believe I'll be nominated.

MR. LEHRER: Bob Kerrey, before he left the race said though that if you are the nominee, the Republicans and George Bush will peal you apart like a soft peanut over the draft issue and other personal character things. Is he wrongabout that?

GOV. CLINTON: You bet he is. People have been saying that about me ever since I got in politics. I've been in 17 elections in 17 years. Almost all of them have been brutal and rough. I've always had opponents that thought the best way to be elected was to destroy their opponent and they've always underestimated my ability to fight back. I think the American people have seen that I can take a hit, that I don't quit, and that if anything, that's one thing you want in a President, not a perfect person, someone who admits his mistakes, tries to learn from them, and keeps coming back. I think this country needs to do that. We need to learn from our mistakes and start coming back again. I'm plenty tough enough to handle this election in the fall and by far the most experienced politician in the field when it comes to suffering the slings and arrows and the kind of hate-dominated Republican politics that have divided this country for too long.

MR. LEHRER: President Bush told David Frost told in an interview recently he would do whatever it took to get reelected. And that doesn't scare you?

GOV. CLINTON: No. I'm not scared. I know that he'll do whatever it takes to get reelected. President Bush also said in New Hampshire that he thought the draft and the personal attacks on me were unfair. We'll see whether they honor that as time goes on. I trust the American people. I trust them to look into my eyes and to look into my heart to take the measure of me and anyone else running. And I care about the people in this country. I can take a few licks in this election, because they're nothing compared to the licks the American people are taking day in and day out, because people are not being permitted to live up to their God given potential because we're under-educated, under-organized, under-led. We're refusing to do what it takes to compete and win in the '90s. That's what I want to run on.

MR. LEHRER: How important is it to you to be President of the United States personally?

GOV. CLINTON: Well, personally, I was having the most fun in my life before I got in this race with my family, with my job, with my friends. I got into this race because I couldn't stand to see what was happening to the country, all the wasted potential, the promise that my daughter might grow up into a world to be the first American to do worse than their parents. I just didn't want to see that happen. So it's important to me to win this election because of what I want to do, not because of how I want to live. If I had my choice of lifestyle, it would be a different one. I want to change this country and change the future for all these children. I want to restore the middle class and mostly I want to restore the leadership of America. And we need a relevant, modern, common sense economic policy and some President who's willing to say I'm tired of putting the blame on everybody else, I'm going to roll up my sleeves and take responsibility for the future.

MR. LEHRER: And you believe you could defeat George Bush?

GOV. CLINTON: I sure do. If you look at my races at home, I've always had strong opposition. In the last election, I had a very powerful Republican opponent. We carried every major Republican county in my state because I stood for economic growth and opportunity and education and accountability. Accountability is the key, not bigger bureaucracy in government, but more effective government. I think that's what the American people want.

MR. LEHRER: Finally just a simple political question, what are your expectations for Tuesday specifically,Super Tuesday?

GOV. CLINTON: I think we'll do well and I've worked hard so that we could do well. But I haven't been able to campaign in every state that is voting on Super Tuesday. I wish I could have. And I've never -- I'm superstitious -- even at home in Arkansas I've never once predicted the percentage of outcome. I can tell you this. I was shocked by the percentage we got in Georgia. I never dreamed we'd get 57 percent. We closed half the gap in Maryland in 10 days. We got more votes than Sen. Tsongas in Colorado, and we were ten or twelve points behind there a week before the election. I think the message is coming out to the voters and if it does, I think we'll do well.

MR. LEHRER: All right. Governor, thank you very much.

GOV. CLINTON: Thank you. FOCUS - '92 - GERGEN & SHIELDS

MS. HUNTER-GAULT: Next, our regular Friday look at the political events of the week. We get that from Gergen & Shields. That's David Gergen, editor at large at U.S. News & World Report, and syndicated columnist Mark Shields. Mark, you and David just heard the interview Jim did with Bill Clinton. Has Clinton shifted into another gear, Mark?

MR. SHIELDS: Well, he certainly sounded confident. He is not nearly the defensive candidate we saw earlier in February, Charlayne. I think it's interesting. Bill Clinton has emerged as the front-runner in the Democratic race at a time when his own personal ratings among American voters have plummeted. In January, his favorable/unfavorable rating was 28 favorable and 11 unfavorable. And that went to 35 favorable to 44 unfavorable in March in the Gallup Poll. So he's emerging as the front-runner at a time when he's picking up an awful lot of baggage.

MS. HUNTER-GAULT: Do you think he smells victory, David?

MR. GERGEN: He does. He's shifted into high gear I think, Charlayne. He's moved into the South where he's much more comfortable as a person. He's around a lot of voters who are very adoring and his message is getting through now. For the first time I think he's absolutely right about that. The people around him are highly confident they're going to sweep here on South Carolina tomorrow and go on to Super Tuesday, they'll win all the Southern states, with the possible exception of Florida, which is very hotly contested by Sen. Tsongas. And they're, frankly, they're quite confident about Illinois and Michigan. The Clinton forces have always looked upon Illinois as being a pivotal state in this race and they've been prepared for it as a long time. As you know, he went and found a campaign manager from the Daily Organization in Chicago. He has other people in his campaign from Illinois. This is a campaign now that does smell victory. They think they're closing in on it.

MS. HUNTER-GAULT: So that he doesn't have to win -- I mean, is Super Tuesday going to be definitive for him?

MR. GERGEN: Not at all, but the reason they're pointing to the Georgia race as well as the Colorado race is that they think it's a springboard into tomorrow in South Carolina that in turn a big victory in South Carolina will give big, big victories in places like Texas and his own home -- in Louisiana and Oklahoma, where Tsongas is not on the ballot, and given those big victories if they get a good night on the press and the media on Tuesday night, that in turn they hope will influence the voters in Illinois and Michigan to believe that he's almost a presumptive nominee of the party.

MS. HUNTER-GAULT: Mark, you mentioned the baggage and Clinton says he's demonstrated he can take a hit and get back up and keep fighting. Are all the hits behind him now?

MR. SHIELDS: No. He certainly has demonstrated that. He took some big hits. He did get back up. But they're not behind him. They're basically, and as David described a scenario where his campaign after next Tuesday, if it works out the way David thinks it will or has described it, and I think most people would agree with him - -

MS. HUNTER-GAULT: And you do too?

MR. SHIELDS: Well, I do. I think Florida could be interesting, but I think beyond that there's no question in South Carolina. South Carolina, Paul Tsongas's constituency, the upper educated and the money people have all become Republicans by now. None of them has taken the Democratic Party. So as far as his winning next Tuesday and winning big, Charlayne, I think his chances are good. But those, those issues don't go away. They're a little bit like heroin in the bloodstream. I mean, they remain there. Whether they be latent, activated later, I mean, this is a candidate now a plurality of voters believe according to the Newsweek poll that he's not honest, he's not personally honest. Now, I mean, that's a problem. Now, you know, how do you demonstrate -- there's a couple of knocks that are put on a politician that are very tough to shake. One is that he's liked, that he isn't too heavy between the ears, and two is that he's got his fingers in the till. Neither of those is knocked about Bill Clinton in any way. The third one is questions about honesty and that's, that's something that Bill Clinton will have to deal with and knows damn well that the Republicans are going to be coming at him hammer and tongs in the fall.

MS. HUNTER-GAULT: David, you heard Clinton say that he didn't think or that he heard Bush say that he wasn't going to come after him on those issues that have already been -- but do you think they'll -- what was the phrase -- peel him off like a boiled peanut or something?

MR. GERGEN: Soft peanut. I think Mark is absolutely right. The truth is in the Southern primaries that Paul Tsongas has almost no presence in many of these states. These issues are not being raised front and center. Bill Clinton did very, very well in Georgia, in a state where he was not being challenged on these issues about the draft or the questions of fidelity. When we get -- and Paul Tsongas is the kind of candidate who by his very nature hangs back. I mean, he'll take an occasional jab or two, but he's running an entirely different kind of campaign.

MS. HUNTER-GAULT: But do you think --

MR. GERGEN: We know from the past, and I think the record is abundantly clear that in the fall campaign against the Republicans it may not be George Bush personally, but we can all bet and know for an absolute certainty that others in his campaign are salivating about the prospect. I mean, I've had Republican strategists come to me and say you have no idea how we're going to go after him with a Southern Baptist. We're going to take him apart on some of these questions. I think, yes, of course, he knows it's coming. He did survive very well out of New Hampshire. He has proved to be a resilient candidate. Give him credit for that, but more is coming.

MS. HUNTER-GAULT: What about Tsongas? He said Tsongas has proved to be a really heavy duty politician in the last few days. I mean, what's your assessment of that and your assessment of Tsongas at this point?

MR. GERGEN: I'm sorry, are you asking me?

MS. HUNTER-GAULT: Yeah.

MR. GERGEN: My assessment of Paul Tsongas is that he is a much better politician than I think Bill Clinton just described and I think, indeed,if Paul Tsongas were on the air with Bill Clinton, he'd say, you're misdescribing my program. You know, and so he'll have his opportunity, his day, and various debates and that sort of thing to make that argument. But Paul Tsongas came from nowhere. I mean, as he said this week, you know, a funny thing happened on the way to oblivion. The message will begin to take hold. His message is taking hold. I think there are many people around the country, many as Mark identifies, the people who are upper income, better educated, but he's reaching out to some others, so Paul Tsongas has done better than expected all the way along here in the campaign. He's not going to go easily. There's still a lot of drama in this race.

MS. HUNTER-GAULT: Mark, you mentioned Florida a couple of times and that's where Tsongas is really, isn't he trying to, to contest very hard there against Clinton --

MR. SHIELDS: I think he'd like to come out of Florida at least with a split decision, Charlayne, I mean, so that it isn't just a sweep that night. Four out of five people in Florida, voters in Florida, were born someplace else. It's the one place of all the states on Super Tuesday where Bill Clinton's Arkansas accent doesn't help. It is not an immediate identifying bridge to the electorate. So I think that's where Tsongas, Tsongas also expects that we should give him credit for this, or at least acknowledge it, that he will win the other Super Tuesday states up North, in the native state of Massachusetts and Rhode Island, although Clinton is trying a little bit of a flanking movement in Rhode Island.

MS. HUNTER-GAULT: What about Brown, after winning the Colorado primary, how viable is he?

MR. SHIELDS: I think Jerry Brown has the potential of being the real wild card in this campaign. I mean, it is, I think it's rather revealing. We have five candidates left for President, really five active candidates, with all respect to Sen. Harkin, two Republicans, three Democrats. Four of the candidates are running against Washington. I mean, Bill Clinton is yes, the favorite of the Washington establishment, but he is an outsider. He's from Arkansas. He's a governor of a state. Certainly Paul Tsongas is the outsider making the Democratic leadership in this town uncomfortable. Nobody makes him more uncomfortable than Jerry Brown. Jerry Brown is running against what people understand is a corrosively corrupt political financing system.

MS. HUNTER-GAULT: Do you see it that way?

MR. SHIELDS: And he is being heard. His message is being heeded.

MS. HUNTER-GAULT: Do you see it that way, David? I mean, and can he pick up another state or so along the way?

MR. GERGEN: I think he can pick up some Western states. The interesting question to me -- I'm not sure how Mark feels about this -- but is who he's drawing from. I think that the nomination is down at the moment to Clinton vs. Tsongas. My gut tells me that Brown probably takes more votes away from Tsongas than he does from Clinton. I say that because Brown draws very well among the young. Tsongas tends to do reasonably well among the young. Bill Clinton tends to do very, very well among the elderly population.

MS. HUNTER-GAULT: Did Kerrey getting out help or hurt either one of these guys?

MR. SHIELDS: I think it helps Clinton, not that Kerrey was leaving with 35 percent of the vote or anything of the sort, but Bob Kerrey, if electability was a determinant this year, he was the one that sent the most flutters into Democratic hearts initially and most tremors into Republican ranks. And he stands I think as the most, he stood as the most likely beneficiary of any further questions about Bill Clinton on character, especially, any subsequent revelations that may come about the draft or whether Bill Clinton, in fact, advocated national service and spent some time artfully avoiding it for himself.

MS. HUNTER-GAULT: Right. Speaking of Republicans you must mentioned, what about the Republicans? I mean, anything happening with them? I've got a couple of questions about them, but the South Carolina primary first, any upsets there this weekend?

MR. SHIELDS: Bush Big, Bush Big.

MS. HUNTER-GAULT: David, have you got a headline for me, David?

MR. GERGEN: I think Bush wins big in South Carolina because Gov. Campbell is the governor of the state, delivered South Carolina last time, and George Bush and South Carolina Republicans get along just like catnip. It's a very strong Bush state. I think the President's going to do well on Super Tuesday. The interesting thing today was there are indications from Pat Buchanan that, indeed, if he does not win on Super Tuesday, does not win Illinois and Michigan, he may well get out of the race after that. That would certainly be a relief to the Bush campaign, which very much wants to get off the road.

MS. HUNTER-GAULT: Well, that's right. I mean, there were reports all afternoon of all kinds of things going on in the Bush campaign, that he's upset, that this trip was a panic, panicky scheduled trip and he's cancelled two of the six days to go back to the White House and then this afternoon Marlin Fitzwater got into it with the press, calling them a bunch of lazy bastards, because they didn't want to go and watch a speech that the President was going -- and for the first time I think Fitzwater shut off the PA system that went back to the pool where the reporters were listening. What is going on?

MR. GERGEN: George Bush is a very disgruntled candidate. He's an unhappy warrior out there. He has been forced into a campaign he doesn't think he should be running in against a candidate he does not think should be running. And he really wants to get out of this. You know, they weren't prepared for this kind of campaign. They weren't organized for it. They had postponed even putting together an organization. They had no idea Pat Buchanan would come out then this hard. Now they've got very short fuses. Marlin Fitzwater on the way home in the campaign plane went around to the press and didn't quite apologize for what he said, but he certainly tried to soften it a great deal.

MS. HUNTER-GAULT: Mark, how are you reading this?

MR. SHIELDS: Well, Charlayne, I agree with David. When you're in trouble politically, you try and go after somebody with no constituency. They don't want to criticize Pat Buchanan because he has a constituency. So they go after the press. And we have no constituency. We're kind of, we're a very convenient cushion to be kicked. George Bush is in a problem and his anger ought to be directed, quite frankly, to his own Presidency. George Bush is letting the campaign define him, rather than his defining the campaign. He's reacting. He is fighting for a very thin sliver of the conservative agenda and the irony I think is this, that the Republicans with Pat Buchanan in this race are going through what has plagued the Democrats for years, and that is appearing to cater, pander to an exotic constituency with a bizarre set of demands on an extreme of the party and then having to clamor back in a very unsightly fashion toward the middle in the fall. The Democrats haven't been able to make it. If Pat Buchanan stays in this race, the Republicans might not be able to make it.

MS. HUNTER-GAULT: If Pat Buchanan stays in this race even long enough to keep Bush and his people off guard, are they going to be able to peel Clinton in the fall like a boiled peanut, or Tsongas, for that matter? I mean, is it a real contest?

MR. SHIELDS: We've got to come up with a vegetable for Tsongas. What will we peel him like? I don't know.

MR. GERGEN: What was it, an anchovy? What did Dukakis grow back there? Listen, Dave --

MS. HUNTER-GAULT: I think we're going to have to get to that discussion later. Thank you very much, David and Mark. FOCUS - BLOOD FEUD

MR. LEHRER: Finally tonight, more on a four year old war in the old Soviet Union. It's the one in the territory of Nagorno-Karabakh and the republic of Azerbaijan between Azerbaijanis and Armenians. At least a thousand people have already died. The Soviet army used to help keep the two sides apart. Now those troops are trying to leave. Correspondent Mark Urban of the BBC was there two weeks ago. He filed reports from two towns. One was the capital, Stepanakert, the other was a town close enough to be an artillery range [Shusha].

MR. URBAN: Shusha, a town of 30,000, dominates the main valley of Karabakh. Below it likes Stepanakert, the enclave's capital and center of Armenian resistance. Once there were enough Armenians in Shusha to crowd is main church. They've disappeared and now the communities correspond almost entirely by means of gunfire and artillery. Azare forward positions are not much more than a mile from Shusha, but are within small arms range of the Armenians. In this war neither side gives or expects mercy. Prisoners are rarely taken and Chinges keeps one grenade in reserve.

SOLDIER: [Speaking through Interpreter] I carry it so that I can blow myself up if I am taken prisoner.

MR. URBAN: What has happened to the other Azare soldiers who have been taken prisoner?

SOLDIER: [Speaking through Interpreter] They cut off their hands, their noses, and their ears while they're still alive. And they gouge out their eyes.

MR. URBAN: When the thirst for vengeance proves greater than the protagonists' military competence, civilians are shelled indiscriminately. Armenian settlements have definitely taken worse punishment, but shells have also fallen in Shusha. Dozens of rockets landed around this mosque last month. One sliced into a block of flats. Alma Smidilieva and her three children were in their flat when it hit.

ALMA SMIDILIEVA: [Speaking through Interpreter] On the 29th at 8:30 I was making tea in the kitchen. The children also were at home. Then the explosion occurred.

MR. URBAN: The end of the day brings little respite from the violence. Whereas Armenian infantry has proven better, the Azares have exploited an advantage in fire power. The so-called Alazan rocket launcher was until recently their standard weapon against Stepanakert. Now, heavier ordinance is also being used. With nightfall, Mrs. Smidilieva prepares to go to the basement shelter beneath her flat. Like others in the town, she's adamant that she won't leave. There she joins the other residents of the block. Underground, the inhabitants of the shelter wait with resignation for the inevitable barrage.

WOMAN IN SHELTER: [Speaking through Interpreter] Our houses are in a bad way and we have no peace. We are here all day and unable to go to work and our children live in fear. Our infants sleep in underground shelters. On our own native soil we're living in war conditions.

MR. URBAN: By 10, there were few people on the streets. The town authorities say nearly 100 residents of Shusha have been killed since December. Mansur Mahmedov is the top man in Shusha. He holds sweeping military and civil powers. The locals call him Hakim, the doctor. It was the middle of the night and it was apparent that things were not going well.

MANSUR MAHMEDOV, Chairman, Shusha Regional Council: [Speaking through Interpreter] Has the question of a helicopter to Malibeli been arranged yet? Has the helicopter been arranged?

MR. URBAN: It was on this evening earlier this month that Hakim realized Malibeli, one of the two remaining Azare villages close to Stepanakert, was slipping out of his hands. Hakim and his government aim to force the Armenians into accepting that they're part of Azerbaijan. But earlier this month it appeared that maintaining any kind of Azare presence within the enclave was the limit of his ambitions. Throughout the night, Azare artillery poured shells onto the Armenians below. Around Malibeli, heavy machine guns spewed tracer across the sky. It was a struggle in vain. As morning came, Malibeli could still be seen smoldering from the night before's fighting. Hakim did his best to explain how the enemy had got the better of him.

MANSUR MAHMEDOV: [Speaking through Interpreter] Now, despite all this, we were unable to defend Malibeli with its population of 5,000. The Armenians burned down nearly a hundred houses in the village. A considerable number of the population was killed, but I do not have precise information on the numbers of dead and injured.

MR. URBAN: The burning down of the village of 5,000 and the killing of its population and the way they were driven out is the latest example of the policy they've been following since 1988 of driving out the Azares from Nagorno-Karabakh. Armenian gunners or possibly those from the Soviet regiments still in Stepanakert retaliated at breakfast time. We went to the source of the blast, a few hundred yards away. About 45 minutes ago this group of buildings in Shusha was blown apart by a series of explosions. On further examination, we've established that it was incoming shell fire and, indeed, the Armenians seemed to have light artillery trained on the town. Several houses were destroyed, but no lives lost. This week, Kojali, the only remaining Azare village in this valley, was also lost. What we didn't know as we left Shusha was that the humiliations of early February would prompt a deadly retaliation from the Azares involving the virtual destruction of Stepanakert, events that we would witness on the Armenian side of this bitter war. Early last week, Azare forces began the destruction of Stepanakert, capital of Karabakh, and the center of Armenian resistance to Azare rule. Embarrassed by the loss of several of their villages within Karabakh, the Azares were using powerful Grad multiple rocket launchers for the first time. Last Wednesday, more than 260 Grad rockets and Howitzer shells fell on the city. One landed less than 200 yards from where we were filming. In all last week, more than 1,000 shells and rockets fell. Virtually every building in this city was damaged in some way. The parliament had been hit by five rockets. The seat of the rebel Armenians of Karabakh all but destroyed. Their President met us at the town's KGB headquarters, where now he contemplates the survival prospects of his republic.

PRESIDENT ARTUR MKRTYCHAN, Nagorno-Karabakh: [Speaking through Interpreter] Stepanakert has not been attacked by the Azare infantry so far. So we can't talk about hand to handfighting. But the town has been shelled, causing suffering to the civilian population. There are two possible solutions. One is to eliminate Azares' artillery and to stop the bombardments. The other is to evacuate the town's population.

MR. URBAN: Stepanakert's hospital has already been hit by Azare fire several times. With the intensification of fighting, its staff doubt their ability to cope.

SPOKESMAN: [Speaking through Interpreter] Virtually there is no hospital at it is now. If they are granted a basement somewhere, they just can go on with treating people, but so far they can't.

MR. URBAN: Inside the operating theater, surgeons fought to save the life of a man struck by pieces of shrapnel. The whole agonizing procedure was conducted without general anesthetic. Seriously ill patients were shaken as the 40 rocket load of a Grad landed not far away. This 17 year-old-girl refused to leave her mother's side as the shelling went on. Watched over by her brother and aunt, Arovik Petrosian's spinal injuries proved too serious for treatment at this hospital. Her hatred for the Azares, once her neighbors, burned with disquieting force.

INTERPRETER: She says that they are not people; they're just beasts and how can a man just drive another person to a position like this, no water, no bread, no energy.

MR. URBAN: Others didn't survive. Seventeen people were killed on this day and one by one, their families came to collect the bodies. Dozens more have died since, victims of indiscriminate artillery fire into the town. The night sky was illuminated by burning homes. Families salvaged what they could, piecing together the remnants of their domestic lives on the freezing pavements outside. Morning in Stepanakert's housing blocks is marked by falling glass and the quest for water. All public utilities have been cut off by the surrounding Azares. A procession of containers awaits the trickle from a municipal water found fed by an Artesian well. Trapped in the city is a Soviet army regiment. Under strain, it's begun to disintegrate. Rogue officers frequently lead their men on retaliatory raids against the Azares. On the day we filmed this patrol, the defense ministry in Moscow was claiming that the soldiers were playing no part in operations. Today Moscow has announced that these troops are to be pulled out. Dozens have deserted the regiment. Nikolai Valsinko went across to the Armenians because he was told that he might have to stay in Stepanakert indefinitely. Supposedly neutral, regimental officers ended up siding with the Armenians. Throughout last week thousands of citizens left Stepanakert, seeking refuge in surrounding villages. We joined a Red Cross team and refugees crowded in an open lorry leaving the city. In the village of Kolatak, the population increased fivefold because of refugees. Although they quit their capital, they're determined not to leave Karabakh.

SPOKESMAN: [Speaking through Interpreter] Under no circumstances, never. Karabakh is ours, our ancestral land. The Azares can claim it all they want but it's ours. It's a question of justice. Our young people will never give up. In any case, we will stay put.

MR. URBAN: Separated from Armenia by an Azare blockade, Karabakh's food is slowly running out. When, after five days, a helicopter arrived, casualties went first. Arovik Petrosian, who had endured her spinal injuries without painkillers, was carried on board. There was desperation among those who'd waited. A mother and her young children were the last to be put on board. The helicopter pulled away into the sky and soon above the clouds it skirted the peaks of Karabakh, leaving behind the war in which suffering and killing grow worse by the day. RECAP

MS. HUNTER-GAULT: Again, the main stories of this Friday, the nation's jobless rate jumped to 7.3 percent, its highest level in more than six years. But a separate report showed employers added more than 160,000 jobs to payrolls. And the much feared Michelangelo Computer Virus struck, but inflicted relatively little damage. Most computer users apparently took precautions against it. Good night, Jim.

MR. LEHRER: Good night, Charlayne. We'll see you on Monday night with previews of the crucial Super Tuesday primaries. Have a nice weekend. I'm Jim Lehrer. Thank you and good night.