INTRO
JIM LEHRER: Good evening. An unveiling by Walter Mondale was the main story of this Monday. The Democratic presidential candidate presented his way to reduce the federal budget deficit, by raising taxes and cutting spending his way. Also today a hurricane named Diana is threatening the Southeastern Atlantic coast from Florida north through the Carolinas, and the Pope met with racial minorities on the second day of his visit to Canada. Robert MacNeil is away tonight; Charlayne Hunter-Gault is in New York. Charlayne?
CHARLAYNE HUNTER-GAULT: The stories we'll be covering in the NewsHour tonight begin with that bound-to-be-controversial Mondale deficit-reducing plan. It is our major issue debate seen from a number of different angles. One of Mondale's top economic advisers tells us first why they think the plan will work. We'll hear why the Republicans think it won't work from one of their key players. From Wall Street we get two different views about what impact the plan is likely to have in the business community. And our regular political analysts, Alan Baron and David Gergen, will tell us how they expect the plan to play on the political stage. Then, on a different note, we'll learn about a campaign to protect young people by banning radio and television ads for booze.Mondale's Plan: Deficit Buster?
LEHRER: Walter Mondale rolled some big dice today, gambling that a deficit-reduction plan is important and dramatic enough to help catch Ronald Reagan, the going-away leader in their race for the presidency. The Mondale plan is a mixture of spending cuts and tax increases, which Mondale says will reduce the federal deficit $175 billion by 1989. That's the magic two-thirds he promised in his nomination acceptance speech in San Francisco. The spending cuts include $25 billion in defense, and the individual tax increases would come almost entirely from the wealthy, defined as families with incomes of $60,000 or more. Corporate America would pay much of the rest through a 15% minimum corporate income tax. The special wrinkles in the plan include the formation of a trust fund into which all new tax revenues would go. They would be earmarked for reducing the deficit and could not be spent for anything else.In addition, no new federal program could be started unless there were funds available. It's all considered a gamble for Mondale on two counts: do the voters care enough about the deficit to pay attention to his plan, and will they agree with his approach if they do? Charlayne?
HUNTER-GAULT: As Walter Mondale unveiled his own deficit-reducing plan, he also used the occasion to unleash a scathing indictment of President Reagan's economic policies, calling them an unbelievable assault on the future of the United States. Speaking at a press conference in Philadelphia, Mondale predicted that Reagan's deficits have brought him a temporary unbalanced election-year recovery, and added that, "The price will be a post-election catastrophe for us and our children." He called the Reagan deficits the hydrogen bomb issue for domestic programs. Mondale painted his own budget proposals in stark contrast.
WALTER MONDALE, Democratic presidential candidate: This budget reflects my view of our democratic system. It is obviously Mr. Reagan's strategy to save all the bad news until after the election. We will find out after the election that he's going to go after Social Security and Medicare and student loans and the environment and the rest. We will find out after the election that he's proposing a national sales tax or its equivalent. And he wants to go to the American people, even though they know we confront this largest of all domestic problems, with no answers whatsoever. I'm offering this, the most specific and detailed plan any candidate for president has ever advanced. And I'm offering it now, before the election so that the American people can see it. I believe the American people have a right to know how I plan to lead our country, and I trust the American people. I challenge Mr. Reagan to stop avoiding the deficit issue and start telling us what he intends to do about it right now. Mr. Reagan, all of my cards are now on the table face up. Americans are now calling your hand. Let's see it. Let's debate it. You can't hide your red ink with any more blue smoke and mirrors. Let's go before the American people, both of us, and tell them the truth, and then let them make the choice as to their future.
LEHRER: For every major candidate's speech or proposal like this one today there is a major briefer of the press. For Mondale today he was Bowman Cutter, an economic policy adviser to the Mondale campaign. He is a managing partner in the accounting firm of Coopers and Lybrand, and was the assistant director of the Office of Management and Budget in the Carter administration. Let's go through these proposals in as much detail as we can, and let's begin with the tax thing. And $30,000 or less, how would those folks be affected by this proposal?
BOWMAN CUTTER: At $25,000 or less they will not be affected by the proposal. They're held harmless. Beginning at the upper 20s and into 30, they'll begin to pay approximately $95 a year, and that then increases in a progressive and fair manner up through the income levels.
LEHRER: What's the vehicle for that? The tax vehicle?
Mr. CUTTER: The vehicle is the combination of the change in entitlements -- I'm sorry, the change in indexation as incomes increase.
LEHRER: And then there is a surcharge that begins --
Mr. CUTTER: There is a surcharge above $60,000. Well, there are two other mechanisms. There is a cap on the third year of the Reagan program, of the Reagan tax cuts, which will go into effect for families that earn above $60,000, so that their tax cut will be capped at what they would have gotten at $60,000. And then finally there is a surcharge of 10% on the tax on income earned above $100,000.
LEHRER: Well, I'm not sure I understand that. Where do you add the 10%?
Mr. CUTTER: The 10% is earned on the tax on income earned above $100,000. Let's say, for example, that there is someone whose taxable income is $110,000. They would pay the surcharge on the tax on that last $10,000.
LEHRER: I see. But it's the 10% of the tax, not of the income?
Mr. CUTTER: Absolutely. Absolutely.
LEHRER: Now, corporations. They're hit across the board on this, right?
Mr. CUTTER: They're hit across the board, principally through the mechanism of a 15% corporate minimum tax. It is a tax that was actually proposed by the Reagan administration a couple of years ago. Our version is slightly stronger. But it is essentially a 15% minimum tax on corporations.
LEHRER: So, in effect, it is the old-fashioned soak-rich and business, right?
Mr. CUTTER: No, I don't think that's what it is. I think what it is a fair and progressive tax system that begins to reverse some of the inequities of the Reagan tax program of the last four years.
LEHRER: Why was this approach decided upon, rather than to do across-the-board increases in taxes?
Mr. CUTTER: Because it's not regarded as fair. Because Walter Mondale believes in a progressive tax system; Ronald Reagan does not. Walter Mondale believes that it is important in our society and it is generally agreed in our society that those who are fortunate enough to have substantially higher incomes should also be willing to pay the costs of the society. And I think most people in those income groups do in fact agree with that notion.
LEHRER: Okay. Moving quickly to the spending cuts. The $25 billion on defense. Can that be accomplished over a period of four years without affecting the quality of the defense?
Mr. CUTTER: I think not only can it be accomplished without affecting the quality of defense, it is absolutely essential to do it in order to keep the quality of defense.
LEHRER: Explain that.
Mr. CUTTER: One of the difficulties of the Reagan program of the last several years are these vast defense increases. They are not supportable. They are not sustainable. And what that therefore means, in my judgment, is two things. One is somewhat psychological, the other is quite real. The psychological point is that my own view is that the Reagan administration has gone far toward eroding the defense consensus that began to build in the United States in the late '70s. Second point, more importantly, I suspect, in actual substantive terms, is that one simply cannot sustain the rates of growth in the defense program that we've seen in the last three to four years. That what has happened is a bow wave is building up with respect to the procurement of defense items which will create large block obsolescence into the future which we simply won't be able -- where we simply won't be able to renew defense programs. In my judgment this is not only -- and in many others' judgment, this is not only the right defense policy in terms of the budget, it is, more importantly, the right defense policy in terms of defense.
LEHRER: All right. The domestic cuts. Where will they come?
Mr. CUTTER: The domestic cuts will come essentially from three areas. One, Walter Mondale will hold the rate of growth of the increase of costs in our health programs -- principally our Medicare program -- to 10% a year. They are currently budgeted at or assumed at increases of between 12 and 15 percent a year.
LEHRER: How will he do that?
Mr. CUTTER: He will do it by proposing prospective payment schedules. The system has now been changed, was changed a year and a half ago, so that there is now in effect a prospective payment system. And he will change those prospective payment schedules so that they reflect a 10% increase a year.
LEHRER: Okay. What else?
Mr. CUTTER: A second item is a change in the farm program such that reductions in the farm program of approximately $4 billion can be accomplished. This will be accomplished in basically two ways. The first way is that as the economy improves and as interest rates begin to fall marginally, exports will increase from the farm sector. Our overall ability to export will enhance that possibility. Second point is that the crop diversion programs will be better managed and more sharply managed.
LEHRER: All right, and number three?
Mr. CUTTER: The third one is that across the entire area of the domestic discretionary programs, which is a large clump of programs, approximately 14% of the budget, and in the range of 5,000 to 7,000 programs, which are currently now in the OMB budget and in the CBO budget -- the Congressional Budget Office and the Office of Management and Budget -- slated for 5% increases a year. They will be held to a rate of increase of approximately 3% per year. Now, I should say in the interests of accuracy that Mondale has also indicated that he will add to that program area, that he will keep his original $30 billion commitment to enhance programs in the areas of fairness and competitiveness.
LEHRER: And that's in education, right?
Mr. CUTTER: It's education, some increases in the Ex-Im Bank, the Export-Import Bank, increases in training programs, some increases in environmental programs.
LEHRER: Mr. Cutter, thank you. Don't go away. Charlayne?
HUNTER-GAULT: President Reagan's reaction to the Mondale proposal was pretty low-keyed. "It's nothing new," the President told reporters while greeting a delegation of black Baptist ministers at the White House. Added the President, "He told us several weeks ago he was going to raise the people's taxes, and now he's repeating it." Less low-keyed was Vice President Bush, campaigning in Raleigh, North Carolina, with Senator Jesse Helms. "You pay as you go," the Vice President said, adding, "If he can sell the American people on the fact that he's going to cut spending, the leopard is really changing his spots." The most vocal member of the Reagan administration was Treasury Secretary Donald Regan, who said that the Mondale scheme would result in the highest rate of taxation in the nation's history.
DONALD REGAN, Secretary of the Treasury: It's a set of budget gimmickry in that it has an awful lot in it that is unspecified, uses broad descriptive words, things of that nature, relies on very heavily on taxes and through taxes it also infers we're going to get growth. In my judgment, increasing taxes is not the way to get growth in the economy. If he doesn't achieve all the blue smoke that's in there, that is, the management initiatives, the compliance initiatives, the closing-the-loophole initiatives. If he's not able to lean on the Fed to pump up the money supply in order to get more growth, then -- and he cut the deficit -- would then have to cut the deficit to get to his promises strictly by raising taxes, that's be over $1,800. The tried-and-true Carter-Mondale principle. That is, spend more, tax more, get the Fed to -- lean on the Fed to put in more money supply, inflate the economy, and gain more taxes thay way.
HUNTER-GAULT: But Regan's was not the last Republican word on the subject. From Capitol Hill Senator Robert Dole, head of the Senate Finance Committee, had some pretty strong words of condemnation for the Mondale plan as well.
Sen ROBERT DOLE, (R) Kansas: The Mondale deficit plan is not a credible response to the federal budget deficit problem. As I look at his outline, the spending cuts are either too little or too unreal, while the tax increases I think reverse momentum we have tried to establish insofar as middle-imcome taxpayers are concerned. If you look at any part of that Mondale package, he's going after middle-imcome taxpayers. He claims that his plan makes significant spending cuts, but I just don't think that's accurate. He would cut spending by $54 billion, increase it by $30 billion, and that's a net reduction of only about $24 billion. Again on the tax side, we think it makes the wrong choices. Nearly about 30 million taxpayers, or about one-third of all taxpayers, will face higher taxes from his proposal to limit indexing, which protects taxpayers from automatic tax increases in every year. If he can find someone to introduce this legislation, maybe someone like Ms. Ferraro, we'd be very happy to have a hearing on it in this committee. But I just really believe, and I say it as seriously as I can, that I doubt many Democrats will touch the Mondale plan with a 10-foot pole. Will It Work?
LEHRER: Some in-person Republican reaction now to the Mondale plan from Congressman Trent Lott of Mississippi, the House Minority Whip. And what do you think of it, Congressman?
Rep. TRENT LOTT: Well, first of all, I think it's a mistake to try to write a line-by-line item budget during a campaign. It's obviously going to be political, although from what I've seen here, I doubt the political wisdom of what's being proposed.Also you're talking about writing a budget for the economic situation that will exist in January of 1985 or January of 1989. As I understand what he's proposing, it's a three- to four-year plan. Plus you also have to deal with Congress, and I've watched the Congress just get hopelessly tangled up over the past four years dealing with budgets, and have actually passed one through the whole process only once. But there really was no surprise here. He's confirmed once again -- Walter Mondale has confirmed once again that he is all for massive tax increases, and the surprise here is that he may actually have to come back later and ask for more tax increases.
LEHRER: In what way? Why would he have to do that?
Rep. LOTT: Because he's talked here about, I think, $30 billion in spending increases. That's not nearly enough to cover the various promises that he's made to a lot of special interest groups all across the country. You might argue about those numbers. I've heard numbers down in the $60-billion range, or up to as much as $160 billion. I don't know, but it's my impression that he's proposed a lot more spending increases than he has referred to here in this budget proposal. They would have to be paid for somehow, and it wouldn't be covered by the tax increases he's talked about here because there is some indication he'd put that in a trust fund to apply to the deficit.
LEHRER: What do you think of the trust fund idea? I didn't ask Mr. Cutter about it. We'll go back to him in a moment.
Rep. LOTT: No, that idea I think is not a bad one. The Congress time and time again has, particularly in the House of Representatives, which is controlled by Walter Mondale's party, we have had tax increases -- by the way, we've had two in the last 2 1/2 years. We had the TEFRA tax increase of 1982 that was $142 billion, and just this year we had the so-called deficit reduction package, which Walter Mondale's, by the way, really will not be in the final analysis. I think that, you know, our track record of applying tax increases against the deficit is not very good. Congress has been very adept, including Walter Mondale, at spending those tax increases. So if he's serious, I think that's one proposal I'd like to see the Congress latch onto. If we are going to raise taxes in the future, and I mean somewhere way down the line -- not in 1984, in 1985, because I think it would stop economic recovery. As a matter of fact, it would probably wind up contributing to inflation and the loss of jobs. But if it ever occurs, I think it should be only after we have reduced spending a lot more than we have done, because the truth is we haven't reduced spending over the past 3 1/2 to four years. And then I'd like to make sure that it is applied to the deficit.
LEHRER: Okay.Let's go back to your basic point, though, which is you say this plan will not in fact reduce the budget deficit.
Rep. LOTT: I don't really think it will.
LEHRER: Now, why not?
Rep. LOTT: Because you're talking about spending increases and some of the spending reductions are really, as he would say in his own words, blue smoke and mirrors.
LEHRER: For example.
Rep. LOTT: For instance, in agriculture. Let's take agriculture. I was interested in that because I come from an agriculture state, Mississippi, and there are a lot of other agriculture states having a hard time now, like in Iowa and Nebraska, and I'm sure they noticed that he proposed to reduce the budget requirements in agriculture. But when you look at what he says let's do, he says, well, we'll have some savings when interest rates come down, and let's export more. Well, great! But now I don't know if that's going to produce four or five billions of dollars. The same is true in Medicare, when he said let's make some savings in Medicare or health costs. I get nervous about that because --
LEHRER: Why?
Rep. LOTT: Because. I mean, after all, he's the one that says, "Oh my goodness, you know, I would never touch Social Security and Medicare. Reagan would do that." And he turns right around and says, "I'm going to save $12 billion in the health area." I think that's the right figure, yeah. Twelve billion in health. And yet when you look at what he's talking about, he's talking about extending some of the things that Congress and this administration has already done, like hospital costs, voluntary containments and physicians' fees freeze, things of that nature. When you look at it, it really is not going to produce the types of savings that he maintains -- and he talks about management savings. Better management of agriculture programs. Now, come on! We deal with budget figures all the time, and when all else fails you can always throw in an extra billion or two and say, "We'll get that through management." I so many areas it's really not legitimate.
LEHRER: What do you think of the basic tax approach? Mr. Cutter said that it's a progressive system unlike the system that President Reagan and the Republicans support.
Rep. LOTT: Well, let me speak to that. He says, and I think you said in your opening remarks, that this is really directed at the rich. But in their own proposal, which I have here before me, it says that in the indexing area that if you made over $25,000 for families, that you would not get the full benefit of indexing, which Congress passed in 1981. Now, in my area, if you've got two members of a family working, a wife and a man working in a shipyard or a paper mill or running a service station, they're probably making $26-, $27,000 a year. They would get -- they wouldn't get the benefit of indexing. And so what I'm saying is that as a matter of fact, where most people around this country would, say, $26-, $27-, $28,000, that's moderate income. Even Jim Johnson, Mondale's campaign manager, admitted this morning in the newspaper that their plan does include a slight increase in the tax burden on middle-income taxpayers.Now, it does or it doesn't.
LEHRER: Mr. Cutter, does it or doesn't it?
Mr. CUTTER: Those earning below $25,000 are held harmless. The median income of the United States today is about $24,200. In that respect it holds them harmless.Those earning over $25,000 pay a slight amount. If you earn $27,500, you probably pay something under the Mondale tax program of about $45. If in exchange for that you get a point and a half reduction in the interest rates, and you have a car loan or you have a mortgage, you will by multiples receive that tax benefit back.
LEHRER: Well, how does the point that --
Mr. CUTTER: Let me add one more point.
LEHRER: Sure.
Mr. CUTTER: The distribution, essentially, is that 70% -- between approximately 68 to 70 percent, as best we can determine it, of the revenue gained from that will come from the top 15% of the tax returns.
LEHRER: That was my question.
Rep. LOTT: Jim, any way you slice it, it's tax increase at a time when we've just had one, in the so-called deficit reduction package, over the next three years, and at a time when the Congress has not faced up to legitimate spending reductions. You're talking about raising taxes on Americans again. You know, here in Washington, in this rarefied air that we breathe up here, we talk about tax increases as if it's a theory, a generic thing up there in the sky, but when you're out there working behind that camera, or you're working out in some plant -- a steel mill or whatever it might be -- you don't want more tax increases. And you -- in fact, I ask my constituents regularly. And, you know, we're I guess a cross-section of the country, maybe poorer than a lot of people. And I say, "Now, which do you want? Do you want more or continued federal spending programs, or would you prefer to pay more taxes to pay for those?" And they tell me every time, "Look, don't be raising my taxes anymore. I've got all the burden I can stand, especially when you couple it with state and local taxes. You people find a way to reduce your spending hunger up there."
Mr. CUTTER: Nobody wants more tax increases. One of the great poets in America, Senator Russell Long, has said, "Don't tax you, don't tax me, tax the fellow behind the tree." The difficulty is that the Reagan tax cuts of '81 went way beyond the measure of prudence and safety for our economy. The Congress has been slowly acknowledging that and taking it back. There are very few people in Washington, in the economic world, in the financial world or in the business world that believe that we can get through the next two years without increased taxes.
LEHRER: What about Congressman Lott's basic point, that this is not a legitimate deficit-reduction plan anyhow?
Mr. CUTTER: If I go through the pieces that Congressman Lott emphasized and I take each one of them, I simply don't agree with him. First, with respect to other pledges that Vice President Mondale has made, he has in this program committed to a specific amount that he'll increase, and he's said that beyond that, in using a mechanism that Congressman Lott agrees with, that he will pay as you go. That seems to me to be a pretty strong and affirmative agreement.
LEHRER: What's wrong with that, Congressman?
Rep. LOTT: Well, I think then he is reversing, or would have to reverse some of his earlier promises, but he is still talking about spending increases at a time when the Congress or, forever, has been raising spending every year. But he wants to add another $30 billion on top of that. But it's news. He's now saying, "Well, I will spend less and I want to tax even more," because his earlier proposals, as I understood it, called for less tax increases than he's now proposing in this proposal.
Mr. CUTTER: Yes, they did, because it is now clear that the deficit problem is and will be a crisis for our economy. We are looking at real deficits and four years of $263 billion -- not the fake $140 billion that the Reagan administration has proposed.
LEHRER: Fake?
Mr. CUTTER: Fake.
LEHRER: You mean they just made them up?
Mr. CUTTER: They made the assumptions up, yes, sir.
Rep. LOTT: Well, you know, anybody can take these numbers, and I guess doctor them. I think there's a lot of disagreement about what the situation will be in 1989, and I maintain there's no economist in Washington, D.C., or in America, that can tell you for sure what the situation is going to be one year from now, let alone in 1989. As a matter of fact, we have had economic growth that's produced about $20 to $30 billion more in revenue into the Treasury this year than a lot of economists projected, even the optimistic projections at the Office of Management and Budget. They've missed on their economic presumptions like everybody else.
Mr. CUTTER: There used to be a great line in Washington, which is that a billion here, a billion there, sooner or later it adds up to real money.
LEHRER: Everett Dirkson's line.
Mr. CUTTER: In the Reagan projections, what we see is $10 billion here, $10 billion there; sooner or later it adds up to the $100-billion misunderstanding. They're $100 billion off anywhere near the right number in their projections.
Rep. LOTT: Without cooperation from the House of Representatives and the Senate, that could be right. But if the House of Representatives and the Senate would cooperate with the President, as they have not always done over the past 3 1/2 years, spending reductions could solve this problem of whatever it is, $50 billion or $100 billion, and I could start citing you examples right here on this program of where we could come up probably with a few hundred million. But with billions of savings that would not hurt the average worker in America.
Mr. CUTTER: If I could add -- if I could make a point. That really isn't the case. The real reason for the Reagan deficit problem is the preposterous economic assumptions, which no one outside the tame economists within the province of the Executive Office Building believes.
LEHRER: Mr. Cutter, Congressman Lott, thank you both very much.
Mr. CUTTER: Thank you.
LEHRER: Charlayne? Better for Business?
HUNTER-GAULT: No debate about deficits and what to do about them would be complete without hearing from one of the most anxious groups of deficit-watchers, the business community. But not all of them see it the same way, as we now find out from Jack Albertine, president of the American Business Conference, a bipartisan organization that represents high-growth firms, and Roger Altman, managing director of Lehman Brothers, a New York investment house. Mr. Altman served as assistant secretary of the Treasury for domestic finance during the Carter administration. Starting with you, Mr. Albertine, in Washington, is this Mondale plan good or bad for business?
JACK ALBERTINE: Oh, I think it would have a very negative effect, frankly, in terms of the rate of growth in the economy in the longterm.
HUNTER-GAULT: Why?
Mr. ALBERTINE: First of all, the spending reductions that Mr. Mondale has proposed are really very, very small.Seventy-five billion, I calculate, net spending reductions, but $51 of that billion are reductions in interests costs as a result of the passage of the program, not actually spending reductions. And I think if you read this program, a lot of the other spending reductions are quite vague. In fact, I would argue, having read this, that this is probably a net spending increase, and I think that's bad. Because I think we don't want to enlarge the size of the public sector. With respect to the tax side --
HUNTER-GAULT: Well, just on that point, though, why would business be upset about that?
Mr. ALBERTINE: Well, I think business people in general terms believe that the private sector utilizes resources more efficiently than the public sector does. And so the transference of wealth from the private sector to the public sector generally unsettles business people. I think business people worry that when you do that you don't get the kind of economic growth and job creation which are necessary for our people.
HUNTER-GAULT: All right, well, let me just get Mr. Altman's response to that. Do you think it's good or bad?
ROGER ALTMAN: Well, I think the program by and large is reassuring, and it will be reassuring in a lot of its parts to the business and financial communities. The most important part of it is that there is now from Mr. Mondale a plan which is highly detailed to reduce sharply the federal deficits. And there's no argument, I don't think, in any serious quarter, about whether or not the federal deficits are the number-one economic problem facing this country.
HUNTER-GAULT: But you just heard Mr. Albertine say that this isn't the way to cure it.
Mr. ALTMAN: Well, I understand Mr. Albertine's point of view. It strikes me, however, as essentially a balanced plan because I don't think there's much disagreement in serious quarters over whether any serious effort to really reduce the deficits, to get them truly down, has to involve a mix of revenue increases and of spending reductions. And this plan by and large is an equal amount of each of those. But I think the key point is that Mondale has taken the lead and put forth a highly specific plan, and that serves the public debate, and it reassures, I think, the public and the business and financial communities that if he's elected there really will be a reduction in the federal deficit, which is our overall, number-one problem.
HUNTER-GAULT: And you just don't think that's going to happen, Mr. Albertine?
Mr. ALBERTINE: Well, I don't think it's a balanced approach. I think Roger's absolutely wrong. I think if you read the program that Mr. Mondale put out, most of the spending reductions are in the area of interest rate declines.And many of the programs he's talking about cutting here, he's very vague about those. Again, I calculated this this afternoon, and my view is that this is a net spending increase. With respect to the tax side, he has, he says -- he will collect, he says, about $85 billion of new taxes by fiscal year 1989. I franklydon't think he'll collect those taxes under this program --
HUNTER-GAULT: Why not?
Mr. ALBERTINE: For example.Let me give you an example. He proposes a 10% surtax on all incomes above $100,000. That will not raise, in my view, a lot of income. Because those taxpayers at that high level will go out and hire the best accountants, the best lawyers. They'll find more shelters and the federal government will not begin to collect a lot of revenue from that kind of tax increase. It's the wrong kind of tax increase.
HUNTER-GAULT: Do you agree with that?
Mr. ALTMAN: I think the -- I don't agree with the general thrust of what Jack is saying because I think he's missing the overall point, which is that, while intelligent people, and Jack's certainly one of them, can quibble over various methods of reducing the deficit, this is a serious plan that's probably, as Mondale said, the most detailed plan ever put forward by a presidential candidate, and what's basically needed is for a comparable plan, which undoubtedly would be very different, from Mr. Reagan so that the public will know that the deficit, which is a sword of Damocles hanging over the economy and which Jack's constituency surely agrees on the seriousness of, will actually be reduced, and the most --
HUNTER-GAULT: But what about his specific plan, though, that what Mr. Mondale has put forward, specifically the taxes on the wealthier people, is just not going to amount to that much money because they're going to be able to shelter it and do other things with it? That's not going to be revenue-enhancing.
Mr. ALTMAN: Well, I think that the estimates in the plan are, by and large, carefully worked out, and I accept them. They strike me as reasonable. But what we need is for a comparable plan so we can have the right kind of public debate on this number-one problem from the other side, from Mr. Reagan. And this is one -- in other words, Charlayne, this is one serious plan. There can be others. And people in all quarters around this country differ on precisely the methods of getting the necessary revenues and getting the necessary spending cuts. But we need this debate to be moved forward, and I think Mondale's taken the lead in an intelligent way and provided a step forward.
HUNTER-GAULT: Mr. Albertine, what about the other part of the tax proposal, the 15% corporate minimum tax? How do you think business is going to respond to that?
Mr. ALBERTINE: Oh, I think that'll probably respond fairly negatively. You know, this is a business investment-led recovery since in the last 12 months business fixed investment is increasing at about 22%. But I noticed a trend recently that worries me a little bit, and that is that corporate cash flow is falling behind the ability of business to continue to invest. This, of course, would reduce corporate cash flow.Therefore, it would hamper investment and would hamper economic growth. I note that Roger has a very hard time defending the specifics of this tax proposal because the specifics really are not very good when it comes to savings and investment, and I know Roger's very concerned about that issue.
HUNTER-GAULT: What about that point?
Mr. ALTMAN: Well, I'm not having a hard time defending it, Jack. I would turn the question back to you and ask whether you think there's any serious question about whether a true deficit-reduction plan has to or doesn't have to include substantial revenue increases. I'll answer it in advance, as I have, and say that I don't think there's any debate on that. Myself I think this program does speak to the progressivity points, which I myself think are crucial. And in terms of the minimum corporate tax and the personal tax surcharges, I think they are as sensible as any other revenue-raising proposals that can be put forward, but I'd like to know from Jack what he thinks the revenue components ought to be or whether he somehow feels there shouldn't be any?
Mr. ALBERTINE: Well, what I would do, Roger, and this may surprise you, I think this economy is doing so well -- we have inflation down, 6 1/2 million jobs have been created since November, 1982. Business fixed investment is booming. I think we ought to take a look. I think we ought to take six to nine months, perhaps, and let's look through the spring of 1985, and then I think we ought to make some judgments with respect to this. I think we have to remember that the Carter administration proposed a strong anti-inflationary program which included credit controls in March of 1980, as you recall. The Carter administration was unaware that the recession was underway. That made the recession worse and probably contributed to Mr. Carter's defeat --
Mr. ALTMAN: Well, Jack, I was hoping --
Mr. ALBERTINE: I think we ought to wait -- I think we ought to wait six or nine months. The other reason I think we ought to wait --
HUNTER-GAULT: Wait, wait. Let's just get him to respond.
Mr. ALTMAN: Jack, I was suspecting that you would say that because what you're basically saying is that deficits aren't really that important and that we ought to take more time to develop a proposal for dealing with them. And I think that's irresponsible in terms of public policy, and I really challenge you on that because in all quarters, and particularly, let me emphasize, in the business and financial communities, it's clear in terms of its being acknowledged, that the overriding economic problem facing this country, facing every business in this country, is the deficit and the pernicious effects that the deficit is having, and particularly, as this recovery matures and the next downturn looms a little closer and closer -- it's just a matter of when, not if -- the effects that the deficits will then have. And to argue that we ought to postpone a solution seems to me to be not leadership.
HUNTER-GAULT: In one word, do you think that this Mondale program could actually stop the recovery?
Mr. ALTMAN: No, I don't. I think it's going to promote a more durable and longer-lasting recovery.
HUNTER-GAULT: Okay, thank you, Mr. Altman, Mr. Albertine --
Mr. ALBERTINE: I think it might very well stop the recovery, and that's what worries me about this program.
HUNTER-GAULT: All right, thank you now, and we have to leave it there. Jim? Pundits: Will it Sell?
LEHRER: Now to the pure politics of what Walter Mondale did today, his gamble that the majority of voters will care enough and agree enough to get his catch-up campaign really off the ground. Judy Woodruff pursues that now. Judy?
JUDY WOODRUFF: Jim, the gamble has a lot to do with that and with whether Mr. Mondale's throwing all his cards on the table will force President Reagan to do the same. Here to talk about that and other fallout from the Mondale move are our two regular political analysts, Democrat Alan Baron, editor of the biweekly political newsletter, The Baron Report, and Republican David Gergen, former communications director in the Reagan White House, now associated with the American Enterprise Institute. First of all, David, obviously what Mr. Mondale was trying to do was put the President onthe defensive. Do you think he's done that?
DAVID GERGEN: No. I tell you, Judy, I think that you're right. It was a gamble, and he deserves credit for tried to come to grips with the problem. I think he's trying to come up with a responsible program, and the gentleman that was here on the show earlier, Bowman Cutter, is highly regarded here in Washington as someone who understands the budgetary issues and as taking a responsible view in the Carter years.But I think when you come down to the pure politics of it, Mondale's playing with some pretty low cards right now.
WOODRUFF: What do you mean?
Mr. GERGEN: Well, I think that in terms of the way the public is reacting to the whole idea of raising taxes, the Reagan people are finding in their polls that that issue is now hurting Mondale badly. It's one of the things that's accounting for this widening gap between Reagan and Mondale. And I think, frankly, there's another problem which is even larger for Mondale right now, and that is the -- I'm not sure the country is listening very seriously to him. I've been out of the country for a couple of weeks, and when I came back today Ben Wattenberg called my attention to an editorial cartoon that appeared in the last few days, which I think captures it well. It's two panels. In one panel there's a cabinet meeting in which Reagan is sitting there and you see some ZZZs over Reagan, Reagan asleep, and the other panel is Mondale sitting in the cabinet meeting; Mondale's talking and everybody else is asleep.
WOODRUFF: Alan, do you think this puts the President on the defensive? Do you think it in any way causes him or forces him to show his cards?
ALAN BARON: I think it's going to be dubious whether that happens. And so tactically I'm not sure of the results of it. But, you know, we keep saying -- editorial writers, people like me, David -- all of us keep saying, "When is a politician going to tell the truth?" Here Walter Mondale has said what he's going to do, with numbers, and he has said that if we're going to have the defense that he thinks is essential -- President Reagan wants much more defense and so forth -- the people are going to have to pay for it. And President Reagan is promising people everything for nothing. Maybe it'll work. Listen, he promised it four years ago, and the economy's in good shape. Maybe four years from now we can spend all this money and not tax and have incredible deficits and maybe it'll all work out. Most economists don't think so, but I suppose a lot of people are willing to gamble.
WOODRUFF: But David is saying that people don't want to hear about raising taxes.
Mr. BARON: Well, I think of course, Mondale violated obvious rules. You never tell people you're going to raise their taxes. The deficit is not a good issue because it doesn't hurt anybody until it produces symptoms that hurt people -- inflation or interest rate hikes --
WOODRUFF: You're saying it was a mistake for him in the first place for him to step up at the convention?
Mr. BARON: No, I'm saying I think -- I don't know how much good it'll do him now. I think that if Mondale had started with this last January he might be in a very strong position right now because it would have given him time to explain the argument -- that if we're going to provide education, if we're going to do what we need in the military, if we're going to do this and that, we are going to have to pay for it. I'm not sure that having run one campaign until July and then coming up with this new approach now, I think, as David said, he may havelost the attention of a lot of people.
Mr. GERGEN: Because, beyond that, I question whether many people will find this to be a new approach. For a lot of people this sounds like the old approach --
WOODRUFF: But he's being --
Mr. GERGEN: The old approach --
WOODRUFF: -- specific for the first time.
Mr. GERGEN: Yes, but the plan bears strong resemblance to the kind of old policies that we saw with the Carter administration, and this is going to give the opening to the Republicans to come back and say it's Carterism all over again, it's higher interest rates, it's more inflation and it's going to stop the recovery.
WOODRUFF: Well now, wait a minute. He's saying he's going to earmark any tax increase to decrease the deficit; it wouldn't be used for new spending. He's saying if we're going to have --
Mr. GERGEN: He has a trust fund. He has a trust fund.
WOODRUFF: That's right.
Mr. GERGEN: As Lyn Nofziger called it today, it's a "trust me fund," And that's going to open him to the question, there are a lot of people, including Democrats, who in the primaries who said Walter Mondale is not giving us all the facts on what he plans to do about raising spending. That's what -- that's still not fully spelled out.
Mr. BARON: Now, now, David. What about the other side? First of all, the Republicans in their platform advocated tax cuts -- tuition tax credits, a whole series of things -- that would cut the federal revenue by 20 to 25 percent. Second, we heard Congressman Lott on earlier tonight, and he said we can easily cut $100 billion from this budget. And then he went down and said that each of the cuts that Walter Mondale proposes, virtually all of them -- military, agriculture -- are unacceptable. Now, Reagan -- you know, he could propose a balanced budget tomorrow, Ronald Reagan. He keeps talking about constitutional amendment. If I were Tip O'Neill, I'd call the House into session and keep them there 24 hours a day waiting for Ronald Reagan to write up a balanced budget and sent it over. That's all he's got to do.
WOODRUFF: All right, but, David, what about Alan's point? The President has not revealed what he's going to do to bring down the deficit. Can he get away with between now and Election Day not saying anything more specific than he already has about what he's going to do about the deficit?
Mr. GERGEN: To be honest with you, I think he probably can.But there is a point that the Reaganites have to make on this, and that is for the last four years, after all, they have submitted very detailed plans of what they would like to do with the economy. And it's not been Republican votes, but it's been the lack of Democratic votes that has prevented the country from lowering some of these spending programs. And for the Democrats to come charging in now and say, "Well, you know, we're more responsible than they are," I think, frankly --
Mr. BARON: The President could have submitted a balanced budget.
Mr. GERGEN: -- is not a very credible point.
Mr. BARON: Why couldn't he submit a balanced budget, Ronald Reagan?
Mr. GERGEN: Walter Mondale hasn't submitted a balanced budget, either.
Mr. BARON: No, no. He's the President. He could have submitted a balanced budget and let the Democrats react accordingly, just as if he had his amendment.
Mr. GERGEN: Alan, you take this process one step at a time. He has asked for additional spending cuts, and they haven't gone along with it.
Mr. BARON: He could veto them then.
Mr. GERGEN: And Walter Mondale has not --
Mr. GERGEN: No, that's very much more difficult. He's asked for a line-item veto. Why don't the Democrats give him that authority?
WOODRUFF: But who believes that additional spending cuts alone are going to be enough to bring the deficit down any significant amount?
Mr. GERGEN: Well, I think what you're hearing from the Reagan administration increasingly is that by attacking spending first, that's the primary problem, and if that isn't sufficient, then we'll look at taxes. But let's not go at taxes first.
WOODRUFF: Okay. We'll continue this clearly at least one more time between now and the election. Alan Baron, David Gergen, thank you for being with us. Jim?
LEHRER: One last political story tonight about a kind of conversion. Last week the head of the seven-million-member National Baptist Convention had some harsh words for President Reagan. In a speech to his church's convention in Washington, the Reverend T. J. Jemison of Baton Rouge, Louisiana, said, "The Reagan administration does not feel the heartbeat, the desires, the concerns of black people. And the Republican Party does not have the best interests of all the citizens of America at heart." Well, today Reverend Jemison went to see Mr. Reagan at the White House, and afterward he had this to say.
Rev. T. J. JEMISON, National Baptist Convention: I think that perhaps his views on blacks have been distorted some.
REPORTER: In what way?
REPORTER: Was he specific?
REPORTER: In what ways had his views been distorted?
Rev. JEMISON: It's that he doesn't have sympathy for blacks, and I believe that he does. Once you see a man personally and talk with him personally, views that you have when you don't know him personally you do have different points of view. But after you get to know a man you have to recognize him a little better.
LEHRER: Reverend Jemison said he now thinks the President will take action on the problems facing the black community, especially the economic problems faced by small businesses. Charlayne?
HUNTER-GAULT: There's more ahead in the NewHour tonight, including a special documentary report on a campaign to help protect young people by ridding the airwaves of ads for alcoholic beverages.
[Video postcard -- Wachusett Reservoir, Massachusetts]
LEHRER: Diana, the first Atlantic Coast hurricane of the season, is threatening the Southeastern coast tonight. The storm was upgraded to hurricane status this morning. It now has winds of more than 90 miles an hour. It is some 120 miles southeast of Charleston, South Carolina, and moving slowly north-northeast. Coastal areas have been evacuated as emergency officials brace for extra high tides and a pounding if and when Diana veers inland. Forecasters at Miami's National Hurricane Center say the storm's steering currents are weak, and it could shift towards the shore within a few hours. Charlayne?
HUNTER-GAULT: In the Persian Gulf war, Iraq said its warplanes hit a large vessel near the main Iranian oil terminal at Kharg Island. Presumably that meant an oil tanker was attacked, but there was no independent confirmation of the Iraqi report.
In Lebanon, a Palestinian guerrilla base on Mount Lebanon was attacked by Israeli warplanes. The Lebanese army said at least one person was killed and one was wounded. A large building and an ammunition depot were destroyed.
And in Israel, the central committee of the Labor Party agreed to join the Likud bloc, which now governs the country, in forming a new coalition government. The Likud bloc is expected to give its approval tomorrow, and if so, the new government maybe installed on Wednesday with Labor Party leader Shimon Peres as prime minister.
Jim?
LEHRER: I other foreign news, there was talk of a meeting between President Reagan and Soviet Foreign Minister Andrei Gromyko. A senior Soviet official told the NBC Today program Gromyko would be willing to meet Mr. Reagan when the Russian diplomat goes to New York for the start of the U.N. General Assembly. But White House spokesman Larry Speakes in Washington said such a meeting is not on the President's schedule, and noted Secretary of State Shultz will be talking with Gromyko at the U.N.
And in Canada Pope John Paul II spent day two of his 12-day trip meeting with minority groups and visiting with the handicapped and sick. John Darby of Global Television reports.
JOHN DARBY, Global Television [voice-over]: This morning the Pope began his day on time, looking rested and happy.Accompanying him in the Popemobile, Archbishop Vachon of Quebec as well as the Pope's Polish private secretary. And at the rear, at least one of the Vatican's security officers.As the Popemobile moved through the streets, the crowds thinned out. In some places surprisingly few people, though they had the benefit of a special wave from the Vicar of Christ. First stop of the day, the Museum of Quebec, the Pope the first visitor to an exhibition of religious art.This again underlines the link between faith and culture. The display included four works of art from Poland, the Pope's native land. The exhibition will open to the public following the Pope's visit. His next stop this morning, a center for the handicapped. Visits by the Pope to the handicapped are always among the most emotional events in any papal tour. The residents have been up since early this morning to prepare for the Holy Father's arrival. While here, the Pope commented on the spiritual dimension of the center, an essential element in rehabilitation.
LEHRER: Back in this country, the House of Representatives voted today to change the warning label on cigarette packages. The current warning, "The Surgeon General has determined cigarette smoking is dangerous to your health," will be replaced by four new labels.They will be more prominently displayed, and will list specific diseases linked to smoking. Each will appear every three months. Today's vote followed behind-the-scenes negotiation between the tobacco industry and health organizations. As a result, the debate was brief and without much disagreement.
Rep. HENRY WAXMAN, (D) California: The principal purpose of this legislation is to make the public more aware of the adverse health risks from smoking. The legislation combines strengthening the Surgeon General's required health warning with an expanded program of public ecucation. If Americans are to make an informed decision about whether or not to smoke, it is critical they recognize the serious risks to their health before they light up.
Rep. ALBERT GORE, (D) Tennessee: This bill represents a progressive and courageous step by the tobacco industry, a step that caught many by surprise. This has been a bitter pill in some ways, but in doing so, in swallowing it, they have made stiffer punitive legislation far less likely in the years ahead. The industry has been the target of intense criticism over the past decade, in part because of a perceived unwillingness to compromise and recognize current health research data and public opinion. This bill today, however, shows that the industry is willing to take a courageous stand. Coupled with similar compromises in other areas, this represents a dramatic new era for the tobacco industry. I applaud them for their efforts and their vision. Mr. Speaker, this bill is a victory for both sides.
LEHRER: The new label law now goes to the Senate. A vote there is expected later in the week. Charlayne? Banning Booze Ads
HUNTER-GAULT: The current cigarette warning label went into effect in 1970, the same year the Congress banned the advertising of cigarettes on radio and television. Today, 14 years later, there's a growing consumer campaign to purge the airwaves of advertising for another product linked with health problems, alcohol. Activists say they are concerned the ads are designed to appeal to the most vulnerable segment of the population, teenagers. Across the country groups are forming to press for legislation banning the broadcasting of alcohol ads. California is one of the battlegrounds, as we see in this report from public station KQED of San Francisco. Spencer Michels is the reporter.
SPENCER MICHELS, KQED [voice-over]: It was just 50 years ago that the great American experiment prohibiting the sale of alcohol ended. Since then alcohol has become an established, even comfortable, part of American life.And we have embraced it with a passion. In 1983 we drank over 24 gallons of beer per person. The alcohol industry, which includes beer, wine and distilled spirits, enjoyed sales of over $60 billion last year, and its advertising has become a staple of American mass media. In 1983 the industry spent $550 million to advertise its products. As advertising budgets have risen, so have concerns about the social costs of abuse.
The litany has become familiar: 100,000 yearly traffic deaths caused by drunk drivers; one million alcoholics; billions of dollars in economic loss due to treatment, crime and lost productivity.And once again the alcohol industry is coming under fire. Public interest groups have charged that the alcohol industry's hard sell on television is increasing consumption and targeting young potential drinkers.
There is little doubt that drinking is increasingly popular among young people, especially beer. It's cheap, easy to get, and far and away the drink of choice of American youth. Alcohol is twice as popular as marijuana among teens. It's estimated that over American kids have tried alcohol by their senior year in high school.
1st YOUTH: Just come down here to enjoy the sunshine, drink our beers, get together with all the girls.
2nd YOUTH: Have a good time.
MICHELS: What grade are you in?
2nd YOUTH: Seventh.
MICHELS: What about in seventh grade? Any kids drink there?
2nd YOUTH: Hell, yeah!
MICHELS: Really? What do they drink?
2nd YOUTH: Mostly beer.
MICHELS: And how do you get it?
2nd YOUTH: Some people buy it for us.
MICHELS [voice-over]: There's another chilling statistic about teenaged drinkers. More than half of fatal accidents involving 15- to 24-year-old drivers are alcohol-related. That accounts for 5,000 deaths a year.
1st YOUTH: A friend of mine died like two weeks -- about a month ago.
MICHELS: Of what?
1st YOUTH: Drinking and driving. Hurt a lot of people in the car, too. I don't know, it's a pretty wild thing to see all your friends dying from booze, drinking and driving.
ACTOR [anti-drinking ad]: Just get in, we'll talk about it.
ACTRESS: I've got to go home.
ACTRESS: Aw, come on, Carrie.
MICHELS [voice-over]: The alcohol industry has funded ads like this one to help educate teens about the perils of drinking and driving.
ACTOR: Youokay to drive?
ACTOR: Yeah, I'm fine.
ACTOR: You sure?
ACTRESS: Relax!
ACTOR: What's a few beers?
NARRATOR [voice-over]: If you don't stop your friend from drinking and driving, you're as good as dead.
MICHELS [voice-over]: But that is not enough, say some critics. They've created Project SMART, a petition drive that will call for the elimination of alcohol ads from radio and TV.
JAMES MOSHER, West Coast coordinator, Project SMART: Well, Project SMART, the acronym actually stands for Stop Marketing Alcohol on Radio and Television. It's campaign that was, I'd say, instigated by the Center for Science in the Public Interest in Washington to get petitions to be sent to the President to ban alcohol in radio advertising and television and radio. Or, in the alternative, to put counter-advertising on that would balance the message that is going to the public about alcohol and the problems that alcohol can cause.
ANDY MIKASHUS, U.S. Brewers Association: Alcohol products have always had the problem of being singled out as a sinful product by some groups. We feel a little bit with the SMART effort that it's somewhat misguided, that it's not as simple as they see; it's not as black and white as they see. The problems of alcohol abuse and alcoholism are much more complex than they have laid out simply in the advertising question that they have approached. Most of the ads are positive in nature. There is positive role models in them. You don't see abusive drinking in those commercials.You don't see overindulgence in those commercials.
L. C. GREENWOOD, ex-defensive end [beer ad]: I've crushed a lot of quarterbacks in my day, and I'm real sorry. So I wrote this letter.
LAVERN WALLACK, assistant professor, University of California at Berkeley Public Health: I think it's pretty that the bulk of beer advertising on TV, with the use of sports figures, although they're recently retired, they're still greatly in the public eye. And I think that these are figures that serve as positive role models for youth and that youth strongly identify with. So it's clear to me that the use of these people is a direct effort to capture a market that is at risk for having all kinds of problems by virtue of their being young and growing up.
Mr. MIKASHUS: There has been a number of scholarly reviews of the literature in the last two to three years, and they have just not turned up anything to show that there is a cause relationship, that viewing these advertisements promotes younger people to drink or not.
ARTHUR ASA BERGER, media critic, Annenberg School of Communication: You can't advertise with the notion that it's shaping people's behavior and getting them to do things and then say that it doesn't. The whole advertising industry is based on the notion that somehow or another when people are exposed to these things they're going to be affected by them. And if they're not being affected by them, what are all these people doing? Why do we have a $50-billion advertising industry?
PATRICIA SCHNEIDER, Wine Institute: What we know about advertising is that it really has to do with brand selection. It really can influence whether you drink one chardonnay or another chardonnay, but it's very unlikely to really increase anyone's consumption.
MICHELS [voice-over]: Project SMART, the move to ban alcohol ads on TV, has garnered the support of the National PTA, the National Council on Alcoholism and other groups.
Mr. MOSHER: The people who are raising questions about their marketing and advertising practices are not saying that this should be an illegal drug, and I don't know of any of the major actors in this who have ever said that. Prohibition didn't work. The effort is to make the industry more responsible in how it handles what is a very dangerous drug in the society, so that we can minimize the problems that it creates.
HUNTER-GAULT: That report was by Spencer Michels of public station KQED in San Francisco. Jim?
LEHRER: Again the main stories of this Monday. Walter Mondale laid out a plan to reduce the federal budget deficit by two-thirds in four years. The plan includes budget cuts, cuts of $25 billion in defense and $85 billion in new tax revenue, most to come from the wealthy and corporations.
And hurricane Diana, with 90-mile-an-hour winds, continues to threaten property and life along the Georgia and North and South Carolina coasts.
Good night, Charlayne.
HUNTER-GAULT: Good night, Jim. That's our NewsHour for tonight. We'll be back tomorrow night. I'm Charlayne Hunter-Gault. Good night.
