The NewsHour with Jim Lehrer

TJIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, an update of the American Airlines shutdown story, a look at why the stock market keeps going up and up, a report on the move to abolish Miami, political analysis by Mark Shields and Paul Gigot, and a Roger Rosenblatt Valentine's essay about love. It all follows our summary of the news this Friday. NEWS SUMMARY

JIM LEHRER: American Airlines remained headed for a midnight shutdown tonight. Its pilots said they will walk off the job unless they reach an agreement with the company. The separating issues are wages and the kind and pay of pilots who will fly new commuter jets. At an afternoon news conference a pilots union spokesman said this.

JAMES SOVICH, President, Allied Pilots Association: I very much hope that management chooses the prudent course, rather than forcing our pilots to strike. Taking a strike of 30 days or more makes no financial sense to us. Job security and cost of living adjustments are a modest proposal. Take the deal.

JIM LEHRER: A spokesman for American Airlines declined to comment, but the federal mediator overseeing the negotiations added this.

KENNETH HIPP, Chairman, National Mediation Board: After 30 hours of continuous bargaining, I can say that from the mediator's perspective, the next several hours are in a very critical phase, and we just came out of meetings, and I am going right back in to those meetings right now. I can tell you that within the last hour, I have received assurances, and I have no reason to believe that a presidential emergency board has been arranged.

JIM LEHRER: Under federal law President Clinton may convene an emergency board to try to arbitrate the dispute. It would do so over a 60-day cooling off period during which airline operations would continue. Mr. Clinton said today he would be updated on the situation later this evening. We'll have more on this story right after the News Summary. The Hubble telescope got an updating today. Astronauts on the space shuttle "Discovery" replaced two outdated pieces of equipment with new, more powerful instruments to provide a clearer view of the universe. Two astronauts space-walked for nearly seven hours to accomplish the first stage of the mission to refurbish the telescope. Three more nights of space walks are scheduled before the shuttle returns to Earth next week. Wall Street calmed down today. The Dow Jones Industrial Average closed at 6989, 33 points below yesterday's record close of 7022. It was the first time the stock index had risen above 7000 just four months after advancing through 6000. We'll have more on the stock market later in the program. Overseas in Bosnia today a U.S. arbitrator decided not to decide who should control a disputed northern town. That issue was set aside when the Dayton peace agreement was signed more than one year ago. We have a report from Gaby Rado of Independent Television News.

GABY RADO, ITN: A large crowd of Muslims gathered this morning in a village just South of Brcko to hear the decision of the arbitration panel over the future of the most contested town in Bosnia. The location was just the other side of the former front line from the town in which most of those present used to live but from which they'd been driven by the Bosnian Serb victories at the start of the war. NATO's stabilization force, SFOR, has the job of keeping the old front line peaceful. The problem is that there's been hardly any freedom of movement between the Serbs on one side and the Muslims and Croats on the other. The continuing hostility between the former enemies is the main reason the American diplomats who have to decide the fate of the town opted to play for time instead.

ROBERTS OWEN, U.S. Arbiter: Well, no winner is being announced today, but at the same time today's decision firmly rejects the status quo in favor of a major initial effort to reduce the underlying tension in the area. The first step will be to establish a new international presence in the Brcko area.

GABY RADO: The significance of the town is that it lies on the narrowest part of Serb-held territory. Bosnian Serbs have threatened to go to war if it was awarded to the Muslims.

JIM LEHRER: In Washington, State Department Spokesman Nicholas Burns said the United States welcomed the ruling. He called on Muslims and Serbs to accept the decision to put the town under international supervision. The Chinese government urged calm today in the North Korean defectors' situation. The high-ranking North Korean Hwang Yang-Jop sought refuge in South Korea's consulate in Beijing two days ago. He reportedly wants to be taken to South Korea. North Koreans have stood vigil outside the embassy and demanded Hwang be turned over to their custody. A Chinese mediator urged the two Koreas to work it out peaceably. And that's it for the News Summary tonight. Now it's on to American Airlines, the stock market, abolishing Miami, Shields & Gigot, and a Roger Rosenblatt essay. UPDATE - AIR STRIKE?

JIM LEHRER: The American Airlines strike deadline is again our lead story tonight. Airline and union officials have been negotiating all day in a Washington hotel. Scott McCartney of the "Wall Street Journal" was there, and he's now here with us. Scott, welcome.

SCOTT McCARTNEY, Wall Street Journal: Good evening.

JIM LEHRER: And where do matters stand as we speak?

SCOTT McCARTNEY: Well, we're coming down to the final six hours. The White House has told Donald Cardy, the president of American Airlines that President Clinton won't be intervening. That essentially pushes the company and the union even further, puts more pressure on them to making a settlement tonight.

JIM LEHRER: Is there any way to calculate the possibilities of their making that settlement before midnight?

SCOTT McCARTNEY: Well, somebody has to give, and it's just--it's almost up to the company whether they're going to decide it's cheaper to settle, pay the pilots essentially what they want, rather than taking the cost of a strike.

JIM LEHRER: And is the pay the crucial issue in this thing now?

SCOTT McCARTNEY: The tougher issue is really the regional jet. That's a more black and white issue. It's a very emotional issue.

JIM LEHRER: Explain that very quickly.

SCOTT McCARTNEY: Well, the company wants to buy new 50 passenger planes. Other carriers have flown them with commuter pilots who receive much lower wages. At American the commuter pilots are also represented by a different union. So you have that issue.

JIM LEHRER: And it's a separate company, in fact, American Eagle.

SCOTT McCARTNEY: It's a separate unit of the parent company, AMR Corp. American's pilots have seen some of their routes go over to the Eagle--Dallas-Houston, Dallas-Austin--things like that. They think the company will take the new small jet and take away even more of their routes, so they see it as an out-sourcing issue, a job security issue. Even though the contract that they turned down guaranteed them all jobs for the length of the contract, they still fear that the company will eliminate some of their jobs.

JIM LEHRER: And the argument the company makes is what, for not doing that?

SCOTT McCARTNEY: The company says we have to have this airplane. It's become very popular. It brings in a lot of passengers to the larger airplanes through the hubs that the Allied Pilots Association flies, and they have to be able to do it at competitive costs. Everybody else in the industry is flying it under the commuter airline banner, and so American says if we did it under the big airline, it would just cost too much, and we couldn't compete.

JIM LEHRER: Does--they always say when there's a negotiation of any kind about anything you always have to try to figure out who's got the most to gain or lose by there being a strike. Does either side have anything to gain with this strike?

SCOTT McCARTNEY: I think everybody loses. There's a fundamental control issue here of who really runs an airline. Pilots have enormous clout through strikes because they can shut a company down. Unlike the auto industry, you can't stockpile inventory or anything like that. In the airline business a strike is devastating, so, you know, who's really in charge? We may find out tonight.

JIM LEHRER: Do you go along with those folks who have been saying the last 24 hours that if this strike goes 90 days there will be no more American Airlines?

SCOTT McCARTNEY: I think they can certainly survive 90 days. They've assembled an enormous war chest, at least $3 billion.

JIM LEHRER: Who has assembled the war chest?

SCOTT McCARTNEY: American.

JIM LEHRER: The airline has.

SCOTT McCARTNEY: The airline has, yes. So the number that floats around is $1 billion a month. It looks like they're prepared for a 90-day strike. The chairman, Robert Crandall, yesterday, said 90 days and the company would be killed. You know, we've seen it before in this industry. It's a very different time right now. American is enjoying enormous success. It's totally unlike Eastern Airlines. But yet, you have this super-charged emotional battle going on.

JIM LEHRER: And it is--it is emotional between the union and the company, in this particular case, in American Airlines, correct?

SCOTT McCARTNEY: It really is. Some of these issues go back to 1983. There's a lot of animosity toward Mr. Crandall. It's a very difficult situation.

JIM LEHRER: As a practical matter, if there is a strike tonight, what happens, what suggestions does anybody have for people who have American Airlines tickets, and what happens?

SCOTT McCARTNEY: Most other major airlines will honor the tickets. They've made arrangements with American where even if you have a deeply discounted ticket, they'll take that, and American will pay them--pay the other airline difference. So if you can find a seat--and that's the big question--then they'll take your ticket.

JIM LEHRER: Is there any evidence yet that the other airlines are preparing to take up the slack by putting on extra planes, extra flights, et cetera?

SCOTT McCARTNEY: Yeah. There's an enormous amount of activity going on in the industry. Some airlines--Continental and Northwest- -may even bring in a 747 or two from the Pacific and use them on Transcontinental routes. They're trying to find ways to get a little more flying each day out of some of their planes, put bigger planes on key American routes.

JIM LEHRER: Is there any way to calculate the ripple effect of thisoutside the airline industry in terms of who could get hurt and what kind of money gets lost?

SCOTT McCARTNEY: Well, I think--just, you start at the airport and sort of work outward. You know, the caterers, the fuel suppliers, the sky caps, newsstands inside, everybody will be devastated, and then you just take it past their families and all. A lot of American employees have both spouses working for the company. So you may have families that have lost their income totally.

JIM LEHRER: And back just to American, itself, it is what-- depending on how you calculate--either the largest or the second largest airline in the world, is it not?

SCOTT McCARTNEY: It's the second largest in the world. It's the largest domestic airline. United is a larger company but smaller domestically in the United States.

JIM LEHRER: All right. Well, Scott, thank you very much for being with us.

SCOTT McCARTNEY: Thank you. FOCUS - WALL ST. - HOW HIGH?

JIM LEHRER: Now to the never-ending ups of the stock market and to economics correspondent Paul Solman of WGBH-Boston.

PAUL SOLMAN: On Wall Street it's been the running of the bulls, stock market style. Yesterday the Dow Jones Industrial Average, which values 30 Blue Chip companies like IBM and General Motors, passed the 7,000 mark for the first time in its history. Today the Dow dipped just below 7,000 to 6989, with a loss of 33 points by the closing bell. By historical standards the bull run had been pretty remarkable. In 1972 the Dow climbed over the thousand mark for the first time. It then took 15 years for it to double. Four years later, by 1991, the Dow had reached 3000. Four more years, and it was up to 4000. But since February of 1995, the pace has quickened. The Dow has stampeded to a 75 percent increase in just two years. The most recent 1,000 point rise was the fastest in history, a mere 82 days. But not everyone is thrilled with this accelerating pace.

ALAN GREENSPAN, Chairman, Federal Reserve Board: How do we know when irrational exuberance has unduly escalated asset values which then become subject to unexpected and prolonged contractions, as they have in Japan over the past decade?

PAUL SOLMAN: Last December, Federal Reserve Board Chairman Alan Greenspan seemed to be sending a message that stock prices were higher than corporate earnings or prospects warranted. Markets backed up right after his remarks, but not even the Fed chairman could slow down this market for long. The bulls picked up right where they left off. When the 7,000 barrier was broken yesterday, even President Clinton was brought into the discussion.

PRESIDENT CLINTON: What I need to do is try to work on keeping the economy healthy. Let's go on and balance the budget. Let's invest in our future, and let's try to create a better worldwide trading system. Let's follow our strategy and then let the market take care of itself, as long as there's no destructive element in it. That's what I think we should do.

PAUL SOLMAN: So why is the stock market so high, and how high is too high? We discuss that now with Abby Joseph Cohen, a managing director at Goldman Sachs, a Wall Street investment bank, and with James Grant, editor of "Grant's Interest Rate Observer," a financial markets newsletter. Welcome to you both. Now, Ms. Cohen, why do you think the market is going up so high so fast?

ABBY JOSEPH COHEN, Goldman Sachs: [New York] I think the stock market is doing as well as it is because the economy itself is doing so well. Since 1991 there have been any number of key structural improvements in the U.S. economy and the stock market is reflecting it.

PAUL SOLMAN: What about low inflation, is that part of the reason?

ABBY JOSEPH COHEN: Low inflation is very important, as is the decline in the budget deficit, as is the rise in the savings rate on the part of individuals, and let's not forget that U.S. corporations are much better managed now than they were five or ten years ago.

PAUL SOLMAN: Well, one last kind of personal question: Baby boomers like the three of us, we hope, we have to put our money somewhere. Is that part of the story?

ABBY JOSEPH COHEN: It is, indeed, because baby boomers, the largest single group of people in the U.S. economy, have reached that magical age where we are saving and investing more, buying life insurance, and when we have an extra dollar of income, we're less likely to be spending it.

PAUL SOLMAN: Okay. So, Mr. Grant, to you. Do you disagree with what Ms. Cohen said, and, if so, what's your explanation for this rather remarkable rise?

JAMES GRANT, Financial Writer: [New York] Well, it's remarkable, and by way of preface, I should say that Abby is always right and I'm always wrong on these things, but I thank you for having me just the same. I would go beyond what Abby has noted and point out that every--almost every single anxiety that occupied the front page of the papers in the Carter term has vanished. I mean, there's no more inflation to speak of; there's no more Soviet Union. There apparently is no more menace, even crime in the city of New York is in a bear market. It, you know, is an age of wonder, so the question is: How can such a thing be priced in the financial markets, and is any price too high? And my answer to that is an emphatic yes. And I think the price people are paying now is way too high.

PAUL SOLMAN: All right. So, Ms. Cohen, why do you think that Mr. Greenspan warned of irrational exuberance back in December? I mean, what's he worried about, and we'll get to Mr. Grant and what he's worried about in a second.

ABBY JOSEPH COHEN: Many years ago when I was a junior economist at the Fed, we learned that it was the job of the Federal Reserve to worry. And I think that Mr. Greenspan is concerned that there is, in fact, great willingness on the part Americans to own equities. And he wants to be sure that they are also aware of some of the risks involved.

PAUL SOLMAN: But is he, himself, then being irrational by making these pronouncements?

ABBY JOSEPH COHEN: Mr. Greenspan did not say the U.S. market was irrationally priced. What he said was how will we know when it is? And, by the way, he did specifically say that when inflation is low, stock prices do rise. And that happens because the quality of earnings is good. And when inflation is low, there are reasons to believe that economic expansion will continue. So there is rationality behind stock prices rising when the economy's doing well.

PAUL SOLMAN: Okay. So Mr. Grant, how rational, how irrational is the stock market right now? You've said for a long time you think it's headed for a tumble, right?

JAMES GRANT: It's a truism of every great market top that things are compellingly rationale. Otherwise, people wouldn't buy. It's- -the chairman's--Chairman Greenspan's job to worry, but you know, I think he feels properly that the Federal Reserve is complicit in what has become a financial mania. Never before has a dollar of dividend income, a dollar of corporate earnings, or a dollar of corporate net worth been quite so pricey by almost any measure.

PAUL SOLMAN: Could you explain what you mean by that, because those arethe kinds of terms--

JAMES GRANT: No. It's--these are very simple terms. If people walk into Bloomingdale's, they look for low prices. People walking into financial markets paradoxically seem to prefer high prices. And the way you measure price in terms of stocks is what do you pay for a dollar of what corporations can offer, and what corporations can offer is their own net worth, what the stockholders own, what they pay out in income to stockholders called dividends, and what their profits are, called earnings. So these are--people oddly enough seem to prefer higher prices in stocks to lower. They certainly don't prefer those when shopping in a grocery store. So I think Chairman Greenspan is, you know, being a student of financial history, understands that there are moments in which people drive prices up and up simply because they are going up. And you note today that one of the most sought after kinds of investment is a kind of a non-investment is a kind of a non- investment in equities. People want index funds. That is to say, they want a basket of stocks comprising an index, and they want these stocks because they want to be in the market. They are not choosing businesses that strike them as being compellingly valued or businesses that are offering products they use every day. They are wanting to be in the market, and wanting to be, they are in, and the act of investing has driven prices up to what I think everyone must concede are extreme.

PAUL SOLMAN: Do you concede that, Ms. Cohen, are they an extreme? Have they been driven up to what everyone he says would consider an extreme?

JAMES GRANT: I said almost everyone.

PAUL SOLMAN: You said everyone, I think, but anyway, we'll allow you to amend that.

ABBY JOSEPH COHEN: No, I will not concede that point. While it is true that prices, themselves, are at record levels, so too are the underlying fundamentals. And what we like to look at is how those stocks are priced, relative to the earnings being generated by the companies and so on.

PAUL SOLMAN: Now, Mr. Grant was just talking about fundamentals, wasn't he? So your version of the fundamentals is different?

ABBY JOSEPH COHEN: It is somewhat different. Let me also point out, though, the following, and that is when this bull market began, stocks were selling very cheaply relative to the fundamentals of earnings and cash flow and dividends. And now they are not. We think, however, that stocks are now reasonably priced based upon those fundamentals. Our conclusion is that this has been a bull market thus far with abnormally strong returns and going forward, it will be a bull market with normally good returns; that is, returns that rise as improvements in the economy occur, as improvements in corporations occur, but we no longer have that gap because stocks are no longer "too cheap."

PAUL SOLMAN: Mr. Grant, would you actually urge members of our audience to take their money out of stocks? I mean, you have been pessimistic for a while now, and as you pointed out earlier, you were wrong about it?

JAMES GRANT: By way of penance, I'm not going to advise anyone to do anything, but I would like to point out that if stocks merely do okay, that is to say if they go a little bit up but mostly sideways, you're not going to get much out of them to eat. You're not going to have much to live on. If you were to come in to a $5 million inheritance and keep it all and invest that inheritance in the Standard & Poor's 500 Index--that is the most closely watched Blue Chip Index--you would take home about $90,000 a year before tax, and itwould be $50,000 after. Now, $5 million is a lot of money. Is that the kind of income that you really expect to get from that sum of money? Well, stocks aren't the only thing to do in finance. I think an orphaned and neglected corner of the financial markets is the tax-exempt bond market, so humble, so sexless, you can get without stretching 5 + or 6 or 6 + percent, depending on the vehicle, that is tax exempt. People conspicuously do not want fixed income securities because they don't go up 5 points every day, but it's the thing that people don't want that so often turns out to be the better investment.

PAUL SOLMAN: And possibly the safer one, I take it, from what you're saying?

JAMES GRANT: I think so.

PAUL SOLMAN: Ms. Cohen, you've been quoted to the effect saying that Wall Street is moving to a new era. It reminded me of the famous economist Irving Fisher's legendary pronouncement, "Stock prices have reached what looks like a permanently high plateau." And he was a very famous economist. And that was just weeks before the 1929 crash. I'm sure people have reminded you of this before. Do you worry that you're kind of--do you view yourself as being euphoric here?

ABBY JOSEPH COHEN: Well, first of all, I was not the one who said we have moved into a new era. But let me quote another economist, and that was John Maynard Keynes, who said, "When the facts change, I change my mind. What do you do?". And what has happened over the last five years is that this economy is moving very differently than it had been moving in the preceding ten and twenty years. Inflation is not galloping upward. And the budget deficit is not galloping upward, and corporate profit margins are not collapsing the way they had been. And I think that there are many things which are quite different about the economic expansion of the 1990's.

PAUL SOLMAN: That's true, isn't it, Mr. Grant? I mean, we've had--

JAMES GRANT: Sure.

PAUL SOLMAN: --a discussion about the--

JAMES GRANT: It is--

PAUL SOLMAN: --rate of employment, for example.

JAMES GRANT: Yes. It is, you know, the backdrop could not be more perfect, but I would--I would offer this as a way of interpreting the news. If you go back and look at major lows, despairing, give- up bottoms in the history of the U.S. stock market, what you find is the mirror image of today. 1942, perhaps the defining bottom of the 20th century, totalitarianism was ascending, the very physical survival of the United States was in debt, owing to the early stages, the setbacks in the early stages of war. Taxes were confiscatory. Capitalism was apparently dead. People had written off the possibility of demographic improvements, and there was to be no baby boom. So at that moment stocks were literally being given away. No one wanted them. They were priced for liquidating value, and today the news couldn't be better, and stock prices, I think, by many measures have never been higher. So, you know, you have to ask wouldn't you have been better off buying and being bullish and being committed to this, you know, this completely hopeless idea of capitalism in 1942, and yes, you would have been. Doesn't it follow that in millennial moments, such as this one, you are advised to at least look skeptically at the millennium and to wonder wouldn't I be better off with some safety in my portfolio, as well as some risk, and I think it's at this moment that risk is least visible, least apparent, it is most dangerous.

PAUL SOLMAN: One very last, quick question. Okay. If there were a drop or a correction, crash, how serious would it be? What would happen, Ms. Cohen, I know you don't believe it's going to happen, but what would happen to our viewers if that occurred?

ABBY JOSEPH COHEN: I don't expect it within my forecast arising which, of course, would be this year and next. I believe that what will ultimately cause the next bear market is a very significant problem in the U.S. economy. Normally, the preconditions for a bear market are significant degeneration; inflation begins to rise dramatically; Fed policy begins to push interest rates not just modestly higher but poisonously higher, and we move into an economic recession. Profits don't just slow, but they actually collapse. And this is something I don't see within 1997 or 1998. But let me make one point, and that is earlier in this decade we were more enthusiastic about equities than we are right now. In portfolios we were recommending 75 percent waiting in equities. We're down to a 60 percent waiting, so we have adjusted, if you will, the risk level in those portfolios.

PAUL SOLMAN: And, Mr. Grant, the consequences for people, just very briefly, who are watching this program if a crash were to occur.

JAMES GRANT: They would lose a lot of money.

PAUL SOLMAN: Well, let's leave it, I guess, at that. Thank you both very much for joining us.

JIM LEHRER: Still to come on the NewsHour tonight, abolishing Miami, Shields & Gigot, and Rosenblatt on love. FOCUS - ABOLISH MIAMI?

JIM LEHRER: Now that move to abolish the city of Miami. Tom Bearden reports.

TOM BEARDEN: Just another gorgeous sunset over downtown Miami. Superficially, nothing's changed. The seductive glamour that much of the world finds in this part of South Florida is still here. To look at these scenes, you'd never suspect that Miami, itself, is in the midst of a huge financial and political crisis and may not survive at all. It began last summer when a federal corruption probe snared the city's finance director in a kickback scheme. Two weeks later his boss, city manager Cesar Odeo, was indicted for embezzlement and fraud. The city manager is Miami government's most powerful position, and Odeo had been on the job for a long time, seeing the city through riots, hurricanes, and waves of immigrants. Outside the federal courthouse, Odeo's lawyer protested his innocence.

LAWYER: Cesar Odeo has never ever violated the public trust. He has never--

TOM BEARDEN: The city quickly hired a temporary manager, Merrett Stierheim, a respected local figure. He soon found that Miami's books were a mess, $68 million in the hole for this year alone.

MERRETT STIERHEIM, Former City Manager: You know what was amazing; every time you'd open the door, you'd find something else. For example, they took 30 some odd million from a storm water trust fund which came from the county's collection of water and sewer fees that was to build storm water facilities, capital facilities in the city, and they used that to subsidize the garbage. That's how the garbage collection fee was subsidized.

TOM BEARDEN: By early December Gov. Lawton Chiles declared the city to be in a state of financial emergency. He put Lt. Gov. Buddy McKay in charge of the newly created Financial Control Board to guide the city's recovery process. If that wasn't enough, a petition drive to completely abolish the city government suddenly surfaced, and it gathered enough signatures to force a vote later this year. If it passes, the Miami government would be disbanded, and the city's territory would be absorbed by the surrounding Dade County government. The man looking on as the Board of Elections verified the signatures was Gene Stearns, a local lawyer and one of the movement's leaders.

TOM BEARDEN: Why should the city of Miami be abolished?

EUGENE STEARNS, Abolition Leader: I think the more fundamental question is: Why should it continue to exist in its present state? Most people don't realize, but the city of Miami represents a relatively small part of what is now known as Dade County. The larger government in this region is clearly Dade County. It is the government that provides the airport, the seaport, water and sewer system, the public health system, and all of our major transportation facilities. The city of Miami really once provided those services but gave them up decades ago and now is essentially what's left of the core city without a tax base to allow it to continue to proceed.

TOM BEARDEN: Miami's vast Hispanic community doesn't buy that line of thought. The feelings come out often on Spanish Language Talk Radio, which is an influential force here.

PERSON: [speaking through interpreter] It's the first time in the history of the United States that an ethic group speaking Spanish, or a language different from English, has come to a place, become concentrated there, and converted it into the capital of the Americas.

AGUSTIN ACOSTA, WQBA: We have conducted informal telephone surveys in our audience, and I would say close to 75/80 percent of the calls of people who live inside the city limits opposed the dissolution of the city.

TOM BEARDEN: Michelle Zubizarreta understands the feelings behind the numbers. She's executive vice president of the advertising agency her parents founded after leaving Cuba.

MICHELLE A. ZUBIZARRETA, Zubi Advertising: The Cuban exile community feels a pride, feels an ownership of what Miami has become. They started working, and they started, you know, advancing and progressing, and so did the city of Miami. So if you, you know, if you ask my mom, what was Miami like when you got here? Well, after 57th Avenue, there was nothing. And now you can go to 100 and whatever Avenue. Miami is sort of our second homeland, if you will, because we can't have our first one. And it's just 90 miles away. So I think it's very emotional.

TOM BEARDEN: The abolitionists have tried to build their case with unemotional arguments. They point out the city wouldn't disappear, just the municipal government. They note that the affluent, famous parts of town are being overtaxed to support the huge poor neighborhoods that make Miami one of the poorest cities in the country. They say it's unfair and illogical when people on one side of the street pay higher taxes than people on the other city who live just outside the city limits.

EUGENE STEARNS: As tax rates are higher in the city of Miami than in surrounding areas, investment then moves to the surrounding areas. As investment moves to the surrounding areas, then property values fall. And so that erosion of value then, of course, requires higher tax rates. And the cycle continues, and we continue to see the disparity in the quality of investment in the city of Miami's compared to its surrounding areas.

TOM BEARDEN: The King Mango Parade, a yearly satire, featured a death of Miami theme this year. This is a good place to get a sense of the emotions that also drive the abolitionists.

PERSON LEADING GROUP: [singing] We can dance and we can stomp.

GROUP: [singing] We can dance and we can stomp.

PERSON LEADING GROUP: [singing] We get paid by Workman's Comp.

GROUP: [singing] We get paid by Workman's Comp.

TOM BEARDEN: There's a certain note of gloating in the pranks, and parodies and put-ons. The parade originated in the part of town known as Coconut Grove, and it's no coincidence that the Grove is considered an abolitionist's stronghold. Several years back Grove residents tried and failed to secede from Miami and form a government of their own.

W. TUCKER GIBBS, Coconut Grove Activist: I wouldn't live anywhere in the world. It's--Coconut Grove--

TOM BEARDEN: We toured the more affluent parts of the Grove with Tucker Gibbs, former president of the Coconut Grove Civic Club. Driving along the shady, laid-backed streets, Gibbs described the people who live here and their attitudes.

W. TUCKER GIBBS: You've got, you know, a beautiful day like today. You've got the most incredible kind of plants and trees. And the people are interesting people, a lot of artists in this neighborhood, a lot of young professionals, in addition to the retirees who've lived here for a long time. To me, this neighborhood embodies what Coconut Grove was and what it's all about in terms of that eclectic mix that makes our little community pretty special.

TOM BEARDEN: Why is there such a sense of wanting to be separate?

W. TUCKER GIBBS: Coconut Grove was a separate community. It was a separate city until the city of Miami annexed it and along with several other neighboring communities in the 1920's. There's always been a resentment of that by the people of Coconut Grove.

TOM BEARDEN: Does a sense of separateness also mean a sense of superiority?

W. TUCKER GIBBS: I think in some people it does. I think there's a great deal of feeling in Coconut Grove that is something akin to snobbism about other neighborhoods. Coconut Grove revels in its being so different and unique, and I hate to use the word unique because it's been overused, but it's true about Coconut Grove. We're different. We're different, and we're unique.

TOM BEARDEN: Sylvester Stallone has a house on one of the Grove's posher streets. He hasn't gone on record about the financial crisis. Neither has Madonna, who has a house down the street. Lou Wechsler has. It's easy to see why Wechsler founded the South Grove Homeowners Association. He's spent the last 23 years perfecting his lush garden and his art-filled home, and he wants to live under a government that cares as much about his neighborhood as he does.

LOUIS G. WECHSLER, Homeowners Association: I think the reason that people support this is because they're tired of spending and not getting services, spending for taxes, not getting someone to answer their call when they want police, not having the services provided, and seeing the wastefulness, the wastefulness that's coming forward today that is being published in the paper daily, weekly, another report, another department found out to have money just squandered away, and graft and payoffs.

TOM BEARDEN: You've lived here a long time. Do you have any pride in Miami?

LOUIS G. WECHSLER: I certainly do. That's why I'm here. That's why I'm talking to you. That's why I serve--

TOM BEARDEN: But you want to get rid of it.

LOUIS G. WECHSLER: That's why I serve--I only was talking about the form of government.

TOM BEARDEN: At the core of this controversy is a paradox. The 100-year-old city's most passionate defenders are its most recent arrivals, the Cuban community.

MICHELLE A. ZUBIZARRETA: That's where I can walk into the street and speak English but speak Spanish, and then if I want to, I can speak Spanglish, which is very talked here, and I can see "Seinfeld," but, you want to know what, I can also see the television in Spanish, and it's just--it's such a hybrid of so many communities, cultures, people. It's a great city.

TOM BEARDEN: Where do you live?

MICHELLE A. ZUBIZARRETA: Coral Gables. [laughing]

TOM BEARDEN: Where's your office?

MICHELLE A. ZUBIZARRETA: Coral Gables.

TOM BEARDEN: Why is that?

MICHELLE A. ZUBIZARRETA: Why did I know he was going to ask that question? [laughing]

TOM BEARDEN: A passionate defender of Miami who doesn't even live there. It's easy to smile at the irony but Tucker Gibbs says neither side has a monopoly on irrational emotions in this battle.

W. TUCKER GIBBS: The city of Miami has dumped on Coconut Grove for years. We've been in many ways the cash cow that powers the city of Miami, and the people in Coconut Grove feel the city of Miami hasn't been responsive. And the question is: Do you radically go out--the mayor's home--that's the mayor's house.

TOM BEARDEN: That's another irony. Mayor Joe Carollo, himself, lives in Coconut Grove. But there's no stronger believer that Miami is worth saving. He blames the abolition movement mostly on wealthy downtown real estate interests that want to reduce their taxes. He thinks the first step in saving the city is to get its financial house in order.

MAYOR JOE CAROLLO, Miami: I can only try to save those that want to save themselves.

TOM BEARDEN: It hasn't been easy. Temporary Manager Stierheim recommended a series of revenue increases and painful budget cuts. And he persuaded city workers, police, firemen, and civil servants, to postpone scheduled raises, but they showed up en masse at a meeting to demand the rest of the city do its part too. That meant a hike in the fees for garbage collection, a sore point to many residents. When city commissioners refused, the state-controlled board rejected their first recovery plans.

SPOKESMAN: We have no choice but to reject the plan.

TOM BEARDEN: Carollo wouldn't back down on the politically sensitive garbage fees, but he has worked hard to squeeze more productivity from sanitation workers. And the city is finally getting serious about collecting delinquent fees. Inspectors are prowling neighborhoods like Alapata, looking for houses that maintain a second apartment off the record.

SPOKESMAN: Should have two garbage bills?

RESIDENT: How come the city don't tell me that? They send me the bill. I'm ready to pay. No problem, but how come I pay, they no told me, and they--

TOM BEARDEN: The strategy may be working. Recent reports say the city and the control board are close to agreement on how to close the $68 million gap without raising garbage fees.

TOM BEARDEN: How tough was it to come up with the additional revenue to cover the deficit?

MAYOR JOE CAROLLO: Extremely tough. You know, when people here manage the dollars, they really can't appreciate the work that we've had to do. We had to come up with finding new revenues or cutting a total 25 percent of our total budget.

SPOKESMAN: If we're going to save $900,000, and not impose--

TOM BEARDEN: But even when this year's budget problems are solved, the city still has to work out a five-year plan by spring. The mayor is also planning to run for re-election this year. Even if he wins, he still has to face the abolition vote. There is no organized campaign so far, and leaders of both sides are keeping to low key arguments. But many, like Prof. Milan Dluhy of Florida International University, think that won't last.

PROF. MILAN J. DLUHY, Florida International University: I don't think people are going to say, is it better to merge the two fire departments, is it better to make Miami's police department just patrolling and not specialize services in homicide and so on. I don't think that's way the campaign will be run. I think the campaign will be run on this is--this is either a pro Miami vote, that is you have a history with Miami, an emotional attachment, kill it, versus, those are we don't like the people who are in power; let's dissolve it, and we'll reconfigure it as a city. So, no, I don't think--it will be very emotional, and it will be based on ethnicity and race, and income.

TOM BEARDEN: But a nasty campaign may still be avoidable. City officials recently persuaded one of the abolition movement's biggest financial backers to abandon the fight. The abolition movement could wither on the vine if it should have trouble raising money in the months to come. And Miami might still be around to celebrate its 102nd year. FOCUS - POLITICAL WRAP

JIM LEHRER: Now, to Shields & Gigot and to Margaret Warner.

MARGARET WARNER: We get end-of-the-week political analysis now from syndicated columnist Mark Shields and "Wall Street Journal" columnist Paul Gigot. Good evening, gentlemen.

MARK SHIELDS, Syndicated Columnist: Margaret. Happy Valentine's Day.

MARGARET WARNER: Happy Valentine's Day to you both. The news of the day first. The President faces a choice here on whether to intervene in the American Airlines strike. What are the risks for him, Mark, in one course or another?

MARK SHIELDS: Well, I would hope the President would acknowledge that we have a free market in this country, that people do strike occasionally. We haven't had many for a long time. It's an absolutely legitimate economic activity in a free market exercised by free people. And I don't see that there's any compelling urgency. It's not the only--it's not the only airline by any means. And I'd just as soon watch 'em try and work it out.

PAUL GIGOT, Wall Street Journal: Whenever Mark embraces the free market, I'm right there with him. I think the interesting twist in this case is that the unions, the pilot union wants him to stay out because they believe the strike, as it is, is a very powerful weapon. And I think that you'll see the President agree with them because he didn't give them the labor secretary they wanted. They wanted somebody else, other than his nominee, Alexis Herman. They fought hard for him in the campaign.

MARK SHIELDS: Labor.

PAUL GIGOT: Labor fought very hard for him in the campaign. And I think that you'll see him giving back here to labor and stay out.

MARGARET WARNER: All right, Mark. Let's turn to the news of the week, the political news of the week now, and the President going to Capitol Hill, having this meeting with House and Senate leaders, coming up with a list of priorities. What did you make of this meeting? I mean, do you think it's the beginning of serious consensus building, or not?

MARK SHIELDS: Margaret, when you talk about welfare to work and education being the lead items, those are not issues for which there's great dissent. Those aren't cutting edge issues. You don't get a lot of really broken moods and explosive tempers in the room. What we have--we've got the end of the revolution. The Republican Revolution is essentially over. The Republicans kind of like the status quo. They kind--it worked very well cooperating with Bill Clinton last summer, and it worked well for them in November. It worked well for Bill Clinton. So there just doesn't seem to be that, that sense of urgency, that sense of change, and I think it was a status quo meeting going in and a status quo agenda coming out.

MARGARET WARNER: I mean, do you think it means that they are going to agree but only on issues that there is no passion behind, or do you think it means they're going to really--I mean, the Republicans are going to give on a lot of other issues--because there are a lot of things not on that list?

MARK SHIELDS: There are things not on that list. I do not see the kind of intensity, loyalty, unanimity that we saw on the Republicans' part in the last two years, that we saw on the Democrats' part in the first two years of the Clinton administration when they passed his economic package by--with no Republican votes. No, I don't--I really don't. I think there's a skittishness, a nervousness. I've never seen a time when each party lacked self-confidence the way it does right now.

MARGARET WARNER: What did you make of that meeting?

PAUL GIGOT: Well, the--in 1994, the Republicans yanked Bill Clinton over in their direction. In 1996, Bill Clinton yanked back and pulled them back. There isn't a lot of ideological drive. I mean, in a way, both sides, the liberals and the conservatives, the ones who have the ideas in the party over time, they're both looking at these people in the middle and saying, wow, they're going to agree on stuff, but we've got to think about what comes next because this is almost a kind of compromise document. It's almost an end game. Both parties collapsed after the election across the finish line and said, okay, we each control half the government. We're fated to deal with one another for at least two, maybe four years, so we'd better get something done in this first year. And that's what I think they are seeing, is they are going to get some things done on education and taxes. There will be center left coalitions marginally and center right coalitions, depending upon the issue.

MARGARET WARNER: Do you think that dynamic was at work already this week? For instance, there were a couple of big votes that the House Republican leadership loss like the funding for population control overseas, for instance, or term limits.

PAUL GIGOT: There's something like that on the funding one. I mean, you had--when the issue was framed as funding financing for abortion, Republicans won, and that was defeated. When it's family planning money for population control, or for family planning, then the Democrats managed to win. Republicans lost. It's almost like a Congress where it's been Clintonized in a way, every man for himself. Party loyalty is a lot less important than my own district. And I'm going to play that district and try to work there and play my own political prospects more than I am going to try to march with Newt Gingrich like I did the last time.

MARGARET WARNER: Do you see that, Mark?

MARK SHIELDS: I see, Margaret, that neither party has accepted the role that history has given it. The Republicans are now the majority party. They're still acting like the minority party in many respects. The Democrats still are behaving like they think they're the majority and ought to be making policy, instead of enjoying the minority status which has been conferred upon them by the electorate in two successive elections. And by that I simply mean this: Term limits is a perfect example. Term limits are great- -1984--1986--1988--1990--three elections in the country--history, the most stable elections, the lowest turnover in the House of Representatives in the nation's history, and what happened was grew up a term limits movement, anger at Washington, all the rest of it, the imperial Congress,and the Republicans jumped on it, said, boy, this is our chance, wait till we get there, this will--we'll finally get rid of these Democrats, we can't beat 'em in the polls, we'll term limit 'em. All right. The Republicans won a majority in '94. The win, the zest, the zeal for term limits just dissipates because term limits are a minority issue. They've still kind of got lip service. They pay lip service to it, and that's what they were doing. They did the same thing with the line item veto. The line item veto was you strengthened the President's hand, even though conservatives have never meant to strengthen a President's hand. They wanted to strengthen the President's hand when the President was Ronald Reagan; understandably, George Bush, less understandably but still understandably. Now, they've got the term limits, the line item veto passed, and they've got Bill Clinton in the White House. So now they're trying to figure out a way how could we somehow neutralize the line item veto we've given him? The Democrats haven't figured out exactly what their role is. They're still kind of waiting for their white papers to come in, so they can offer their initiatives. And I just honestly think that it's a--it's a time--Paul's right--there is a real concern about my own skin, probably more so than most times. But I also think that it's a time where the Republicans haven't accepted the fact they are the majority party. They don't need a balanced budget amendment. They can pass a balanced budget. They are the majority party.

MARGARET WARNER: Why do you think the term limits went down again this week?

PAUL GIGOT: I think--first of all, let me disagree with Mark on the line item veto. I mean, the Republicans, give them credit, they ceded a lot of power by giving it to Bill Clinton. They followed through on that one. They gave him that power when they had the Congress the last time to begin January 1st after the election, but, well, it was a roll of the dice; they lost.

MARK SHIELDS: What do they try to do now?

PAUL GIGOT: They care too much about that. They're not going to water it down. That's not happened. The term limits lost because the term limits supporters can't agree. Both sides, some want six years; some want twelve years. Some of the Congress are a little cynical; they want to be able to vote for term limits; they just don't want 'em to pass. Some of the term limits movement outside want to--want something that the members probably can never take. Remember, it's hard to get incumbents to vote against incumbency. It's like asking chickens to vote for Col. Sanders. I mean, it doesn't happen very easily. But it's still a powerful issue. You know how many members of Congress voted for one of these term limits measures, 285--five short of the 2/3. Now any one bill didn't do that--didn't do nearly as well, and some of that reflects some of the members trying to cover themselves for the election. But it still can work politically. I mean, just ask Sheila Frahm, who was nominated to succeed Bob Dole as a Kansas Republican Senator and lost, in part, to Sam Brownback on that very populist issue of term limits.

MARGARET WARNER: So you don't think it's dead as an issue?

PAUL GIGOT: I don't think it's dead as an issue. I think it's still going to be very powerful in some elections.

MARK SHIELDS: Dead. Cleta Deathridge, director of the term limits movement, a former Democratic state representative from Oklahoma who's devoted time, effort, and energy, said it's gone. I mean, it really is. The six years, twelve years business is silly. Imean, it's--this is letting the perfect be enemy of the good. If you really--if you care about term limits, you vote--you vote for whatever can pass. I mean, it's like saying, gee, I'm for a seven- day waiting period on assault weapons before anybody can get one. Well, we've only got six days. No. No. I mean, my goodness, I won't vote for that because it's only six days. That's the rigidity. It's become a very narrow movement of a United States term limit group, and they're suicidal and kamikaze. They're going after every single Republican who didn't tow their line.

MARGARET WARNER: All right. Let's talk briefly about Tony Lake, the nominee to become head of the CIA. Again, the Senate, Paul, this week put off the votes at a committee on his nomination. The President defended him yesterday. Where do you think this is heading? Why is he having so much trouble?

PAUL GIGOT: He's in real trouble. I don't think it's fatal yet, but there's an awful lot of doubts on the Republican side, and they say it's because in a post which requires trust, intelligence service, they don't trust him. And they don't trust him because of the problems. They believe his lack of candor in talking to in talking to him about the arming, winking at the Iranians who are arming the Bosnian Muslims for example, and now there's a question about--

MARGARET WARNER: Which he never shared with the Senate Intelligence Committee.

PAUL GIGOT: That's right.

MARGARET WARNER: At the time.

PAUL GIGOT: It's not that he was obliged to do it. I mean, he did not break any laws. He was not obliged to do that. But, you know, the prerogatives of Congress, what they care about more than ideology is being in on the action. I mean, they really want to be told. And so they feel that that's a problem. It's--there's also a little bit of Cold War payback here. They view Tony Lake as somebody who is on the wrong side in the post Vietnam era of the Cold War debate, said Alger Hiss might not have been guilty, and there's some of that involved here too.

MARK SHIELDS: I think that Tony Lake, he had a whole raft of questions which he answered that people I talked to on the Intelligence Committee thought the answers were complete, but I think that there's those undercurrents that Paul described. There's also the velocity of this campaign finance thing. It is starting to take off at a momentum that people I don't think anticipated in this town five weeks ago. Whoever would have thought that the Intelligence Committee would be caught up in this and in campaign finance? We had the story in the "Washington Post." Bob Woodward of the Chinese embassy discussing the Chinese government, making contributions to the Democratic National Committee, there are going to be all kinds of questions, Margaret, about if, in fact, this is verified, who knew, when did they know, they knew before election, whom did they tell, why didn't they act, and I just--I see this--

MARGARET WARNER: And Tony Lake in his job as NSC adviser--

MARK SHIELDS: National Security--I mean, he'll at least have to say he didn't know, wasn't told, didn't do anything, or whatever, but that's--that's why this story I think has a life of its own.

MARGARET WARNER: Okay. Well, thank you both very much. ESSAY - HEARTS & FLOWERS

JIM LEHRER: Finally tonight, a Valentine's greeting in the form of an essay about love by Roger Rosenblatt.

ROGER ROSENBLATT: [music in background] Valentine's Day is for kids, I've concluded, for people so young that love is as uncomplicated a mash note passed in a classroom, or roses sent withhardly mysterious cards, "From a secret admirer," "From one who loves you from afar," bashful, blushing, promising. It is probably the way love was always meant to be. What one dismisses on Valentine's Day is dismal commercialization, the candy grams and the flowers, could be the best of it. Love distilled to the pure harmless essence of a thumping heart. Kids cannot take it any further. They may not wish to out of fear. A side long glance at the movies, a beautifully stupid stare in the hallways, a question that has no strings and its own secret heart does not seek an answer. "Will you be my Valentine?" What happens in later life, as one learns, usually in distress, is that the more complicated love gets, the more real, the more adult, the less attractive it may become. It gets requited. That's the trouble. Unrequited love may feel more painful but it has the advantage of that sweet, perpetual longing that elevates the enterprise. The best love songs are the ones that heave with hope. You are the promised breath of springtime. In the still of the night as I gazed from my window, ancient love was childlike in this way. It did not always go unrequited but it was happiest and safest when it did. Romeo and Juliet would have panted on to ripe on to ripe old ages had they stood forever trembling on the brink. Troilus and Cressida, likewise. The medieval art of courtly love was based on what the French, who else, called "daunger," the thrilling danger of two star-crossed yet forbidden lovers merely thinking of sweating between the sheets. Anticipation was all. Words were deeds.

ACTOR: You know how I feel. I've written two or three times a day telling you, sheets and sheets.

ROGER ROSENBLATT: Of course there can be from time to time the unbearable tension that proceeds getting down to business.

ACTRESS: [singing] Words, words, I'm so sick of words.

ROGER ROSENBLATT: Eliza Doolittle sings that to Freddie, who stands solidly in the tradition of the yapping, inactive lover.

ACTRESS: [singing] Don't talk of stars, burning above. If you're in love, show me.

ROGER ROSENBLATT: Maybe this is a guy thing. Men are more childish than women. Generally, it's what makes us so adorable. Even at moments of naked lust men have written poems instead of lunging. "Had we both world enough and time," wrote Andrew Marvell to his coy mistress while killing time. "She was a phantom of delight," exulted Wordsworth, clearly preferring the spirit to the flesh. "Shall I compare thee to a summer's day?" asked Shakespeare. Yatta yatta yatta. Kid stuff, all of it. Yet, quite satisfying in its way. When it comes down to it, we claim to be for the life of the body, but the life of the dream may have more to recommend it. Look at him. Look at her. Standing on some evergreen hill in an evergreen time, forever in the distance, perfect as the heart can wish. Will you love me as I love you? Will you be the most astonishing, remarkable creature that ever was? Will you freeze this moment of our connected, yet unconnected lives, in a tableau like the lovers on Keats's Grecian Urn--they who touch by never touching. Will you be my Valentine? I'm Roger Rosenblatt. RECAP

JIM LEHRER: And again the major story of this Valentine's Day was the prospect of a strike against American Airlines by its pilots union. The pilots said they will walk off the job at midnight unless they reach an agreement with the company. President Clinton said he would review the situation and might decide whether to block a strike for 60 days while the issues are submitted for arbitration.We'll see you online and again here Monday evening. Have a nice Valentine's evening and a nice weekend. I'm Jim Lehrer. Thank you and good night.