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Six Months of the Bush Administration 7/89 [9]
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Six Months of the Bush Administration 7/89 [9]
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Speech Draft Files
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FOIA Number:
S
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
Series:
Speech File Draft Files
Subseries:
Chron File, 1989-1993
OA/ID Number:
13497
Folder ID Number:
13497-003
Folder Title:
Six Months of the Bush Administration 7/89 [9]
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25
6
4
3
OMB
43
-- Deferral of tax liability when an individual is
required by his or her agency to divest assets in order
to avoid conflicts of interest.
-- Strengthened rules against abusing the revolving door
for private gain at the expense of the public trust.
These rules would also apply for the first time to the
legislative branch.
--
A 25 separate percent pay raise for federal judges was proposed
7
Sweeney 7362
?
in the legislation submitted April 12. On July 7, the
President also submitted separate legislation calling for
pay increases for certain specialized professionals and
other senior officials in the executive branch.
--
Congressional Honoraria Ban: On July 7, the President
also sent to Congress legislation that calls for the
elimination of Congressional honoraria by 1991, making
the next Congress honoraria-free. This proposal is
linked to the enactment by Congress of a pay increase
for its Members, and the President will work with
Congress toward this end.
--
The extension of the federal statute that prohibits
employees from taking actions that enhance their own
financial interest to cover legislative and judicial
branch employees (but not Members of Congress).
--
The extension of the Independent Counsel statute to
cover the Congress and the creation of an independent,
non-partisan Congressional Ethics Office.
U.S. Department of
Assistant Secretary
400 Seventh St., S.W.
for Budget and Programs
Washington, D.C. 20590
Transportation
Office of the Secretary
of Transportation
July 26, 1989
#
NOTE TO: John Gaughan
Kate L. Moore kpm
P. P.7 1
FROM:
SUBJECT: Response to BBA: 6 Months
Denise, please include
With respect to the 6-month review, I propose adding the following kind of
sandy
paragraph under the section "Keeping the Economy Strong:"
of Add This
Air Transportation Security. and Investment:
The Administration has taken several measures to enhance safety,
security, and efficiency in the air transportation system. These
efforts include a proposed 17% increase in the budget for the
Federal Aviation Administration, new requirements for the
installation of explosive detection devices in high-risk airports,
seletine.
new safety requirements for older aircraft, and intense international
w -
negotiations to enhance security abroad.
If you need any resistance to the inclusion of this paragraph, you-might
remind the White House that this subject was included in the original
Building A Better America document of February 1989. They seem to be
tracking this document.
Move rd x for. head righty.
I believe the Civil Rights sections need beef ing up (but I don't have the
facts to do so).
I have proposed one edit to page 17 which is attached.
Attachment
C: Ken Quinn
Betty Monro
PO2
NOILVLHOSSNVSL ISO* M49S:10 68 29. '20
SENT BY:Xerox Telecopier 7021 ; 7-26-89 ; 7:53PM ;
4566218;# 1
OFFICE OF NATIONAL DRUG CONTROL POLICY
EXECUTIVE OFFICE OF THE PRESIDENT
Washington, D.C. 20500
July 26, 1989
FAX TRANSMISSION TO:
Chriss Winston
Office of Communications
FROM:
David Tell dt
Deputy Chief of Staff
SUBJECT:
"Six Months of the Bush Administration"
All of the drug material in this package is fine so far as
it goes. Two related missing things are a problem, though.
You've got to make some reference to the President's
upcoming (early September) release of his first National Drug
Control Strategy, and you've got to allow room in your rather
extensive and too-concrete drug budget discussion for what will
in all likelihood be -- simultaneous with that release -- a
Presidential call for significant additional FY90 drug funds.
Details of both strategy and budget are still under review
and not yet set in stone. You probably should not forecast
either; we want to save as much big bang as possible for the
President's announcement. I suggest you give youself wiggle room
merely by reminding your readers that the President will release
a new strategy in September, that it will contain some big and
important recommendations and initiatives for every front of the
drug war -- in addition to those discussed in "Six Months," and
that the Administration has "already" (a key word: without
winking and nodding, it doesn't rule out more FY90 spending)
requested X billion dollars for this and that drug thing.
Sorry not to have detailed line edits for you. It's all I
can do to keep up with my office's stuff.
Call me if you need to talk about this.
THE WHITE HOUSE
WASHINGTON
Other topics that may want to be added:
Adoption
Abortion
From USTR:
page 3 Summary
Steel VRA's: The Steel Trade liberalization program designed to
restore an open, equitable, and competititive global market for
steel.
Paper page 12
GATT: progress has been made towards the successful conclusion
of the Uruguay Round of multilateral trade negotiations by
December 1990. These negotiations are intended to strengthen the
multilateral system, improve the GATT as an institution, expand
market access for trade and goods, and extend GATT discipline to
new areas of trade, such as services and investment.
Suggested language from HUD:
Under Civil Rights: Fair Housing Law: The Congress with the
support of the Administration supported the passage of a new fair
housing law that broadly expanded the ability of the federal
goverment to enforce laws against discrimination in housing. The
law went into effect on March 12, 1989 and HUD and Justice are
working to vigorously enforce the new law.
THE WHITE HOUSE
WASHINGTON
July 26, 1989
MEMORANDUM TO CHRISS WINSTON
FROM:
JEREMY L. SHANE yy
Office of Issues Analysis (Breeden)
RE:
"SIX MONTHS OF A BUSH ADMINISTRATION"
I noticed on page 17 of the second document that your office
still needed information regarding the Administration's
comprehensive oil spill liability bill. Attached for your
reference is a statement of purpose and section-by-section
analysis of the Administration's proposal.
The original Administration bill included provisions which would
allow international oil spill treaties to preempt state laws.
This is a sensitive issue, and the briefing paper should not
refer to the state preemption provision.
Please call me at 2270 if you have any further questions or need
any additional information.
###
89 JUL26 26 P2: 39
STATEMENT OF PURPOSE AND NEED
This legislation will strengthen and consolidate oil spill
liability and compensation to provide better protection for our
environment and a faster system for compensating the victims of
oil pollution.
Currently, four Federal and several State statutes deal with oil
spill liability and compensation at the domestic level. These
statutes contain many inconsistent provisions. Each provides
different liability standards, legal defenses and monetary limits
for spillers and means for recovery of the costs of cleaning up a
spill. In addition to these statutory authorities, there are
international and voluntary programs which establish oil spill
liability and compensation regimes for their signatories or
members.
The purpose of this legislative proposal is threefold: one, to
strengthen the four existing vessel oil pollution liability and
compensation regimes under the Federal Water Pollution Control
Act, the Trans-Alaska Pipeline Authorization Act, the Deepwater
Port Act, and the Outer Continental Shelf Lands Act and merge them
into a unified and comprehensive program; two, to establish a
two-tier domestic liability and compensation system financed by
vessel and facility owners and the oil industry to compensate the
United States Government, the States and our citizens for removal
costs and damages associated with oil spills; and three, to
provide protection from foreign and domestic tanker oil spills by
implementing the 1984 Protocols to the 1969 Civil Liability and
1971 FUND Conventions.
As recently demonstrated by the Exxon Valdez oil spill in Prince
William Sound, oil spills can have catastrophic and long-term
effects on the environment and the livelihoods of our citizens.
While an existing patchwork of laws requires potential polluters
to maintain evidence of financial responsibility for certain
cleanup and removal costs and to contribute to funds to cover
excess costs, the liability and coverage provided is inadequate,
inconsistent and outdated. This bill would establish a strict
liability system with high liability limits to make certain that
those responsible for oil pollution will be held responsible for
the cost.
-2-
This amount is substantially in excess of the cost associated with
any previous oil spill, including the Exxon Valdez, Amoco Cadiz
and the Ashland oil spill in the Ohio River. However, if even
this is inadequate, the President may authorize waiving the $500
million Fund cap and recover the additional costs from the cargo
owner or consignee. This ensures that no oil spill will be too
large for a complete response. Under the two-tier domestic system
established in this bill, the individual polluter is primarily
responsible for removal costs and damages, up to his liability
limits ($75 million for facilities, $78 million for tankers and
$300 per ton for other vessels). Claims for clean-up and
restoration in excess of the polluter's liability limits would be
covered, up to $500 million, by a fund financed by a 1.3 cent per
barrel fee on oil. This two-tier system would shift the economic
burden to the potential polluters and the oil industry and
eliminate the need for appropriations from general revenues to the
311(k) fund established under the Federal Water Pollution Control
Act. The bill also authorizes a cause of action against the oil
companies, the cargo owner or consignee, under which claimants can
sue for economic damages in excess of the shipowner's liability
limit.
Seagoing tankers, in particular, pose a threat of oil pollution to
our waters and shoreline. This bill would implement the 1984
Protocols to the 1969 Civil Liability and 1971 FUND Conventions.
The legislation would preempt State oil pollution liability laws,
enabling U.S. participation in the 1969 Civil Liability
Convention. Compensation funds and other aspects of State
programs would not be preempted. The protection provided from
ratification and implementation of these treaties constitutes an
important Federal interest and far outweighs the uncertain
recovery of the preempted State laws.
SECTION-BY-SECTION ANALYSIS
TITLE 1--OIL POLLUTION LIABILITY AND COMPENSATION
Sec. 101. Definitions
Summary: This section defines the key terms used in the bill.
The definitions generally follow other pollution liability and
compensation statutes. Offshore and onshore facilities are
defined separately. Inland oil barges are treated as vessels and
not as tankers for liability limit purposes under the definitions.
Sec. 102. Liability
Summary: This section sets out the nature and scope of liability
of responsible parties (e.g. vessel owners and operators and
facility lessees or permittees), cargo owners and cargo consignees
and the Fund.
Subsection (a) (1) makes responsible parties jointly, severally and
strictly liable for section 102 damages.
Subsection (a) (2) creates a cause of action against the cargo
owner and cargo consignee for economic damages in excess of the
responsible party's liability limit.
Under this Act, the responsible party for the tanker, other
vessel, or facility is primarily responsible for the payment of
economic damages. As the responsible party for the operator under
whose control the safety of the vessel or facility is vested, it
is appropriate that it should bear the initial, and in most cases
all of, the cost associated with the payment of verified economic
damages. In the rare oil spill incident where economic damages
remain unsettled after the responsible party's liability limit has
been reached, it is appropriate that the cargo owner or cargo
consignee, who is differently situated from the responsible party,
bear the burden for the remainder of economic damages
compensation.
Subsection (a) (3) sets out the removal costs, restoration costs
and restoration assessment costs for which a responsible party
would be liable.
Subsection (a) (4) sets out the covered damages for economic loss:
real or personal property; subsistence use; revenues; and profits
and earnings capability.
- 2 -
Subsection (a) (5) excludes discharges permitted by Federal, State
or local law permits.
Subsection (a) (6) sets up a special system for mobile offshore
drilling units (MODU's). The owner of the MODU would be primarily
liable up to the maximum amount of liability for a tanker, for a
spill originating on or above the surface of the water. For
excess liability, the MODU would be treated as a facility.
Subsection (a) (7) sets out the liability of third parties. When
the discharge was caused solely by the act or omission of a third
party, or in the case of the U.S. Government, the negligence of
that government, then that third party is liable for costs up to
applicable limitations.
Subsections (b) (1) and (b) (2) set out the defenses to liability.
These are that the incident resulted from an act of God, war or a
third party. Also, if a claimant's willful misconduct caused the
incident, there is no liability to that claimant.
Subsection (c) (1) sets the maximum liability for a tanker (the
lesser of $500 per gross ton or $78 million with a minimum of
$5,000,000), other vessels (the greater of $500,000 or $300 per
gross ton) and for facilities ($75 million).
Subsection (c) (2) sets out the circumstances that could prevent a
responsible party from limiting its liability. These are when the
incident is caused (1) primarily by willful misconduct known by or
associated with the responsible party, (2) by a known violation of
a safety standard, or (3) when the responsible party does not
report the incident as required or fails to provide all reasonable
cooperation or assistance requested by responsible officials.
Subsection (c) (3) gives the Secretary of Transportation the
discretion to lower the liability limit of a facility from $75
million to as low as $8 million, taking into account size,
capacity and risk factors.
Subsection (d) sets out the responsible party's liability for
interest, stating that interest must be paid from the date on
which the claim is presented until the claim is paid, with certain
exceptions.
Subsection (e) concerns liability for injury to, destruction of or
loss of natural resources. The President, when the U.S. is the
trustee for the natural resource, or the representative of the
State, Indian tribe or foreign government, shall act on behalf of
the public and assess the damages and develop a plan to restore,
rehabilitate, replace or acquire the equivalent of the damaged
resource.
Subsection (e) (3) states that costs would be limited to the sums
necessary for the reasonable restoration, replacement or
acquisition.
- 3 -
Subsection (f) concerns recovery by foreign claimants. Foreign
governments may recover costs and damages allowable under this
subsection. This section is for the benefit of Mexico and Canada
and permits recovery for spills in U.S. waters that damage foreign
countries and spills from tankers traveling from the Trans-Alaska
Pipeline to U.S. ports.
Subsection (g) sets out how responsible parties may recover
removal and restoration costs from the Fund if entitled to a
defense to liability or limitation of liability.
Subsection (h) permits actions for contribution against other
potentially liable parties.
Subsection (1) concerns indemnification agreements, permitting
insurance agreements but not allowing agreements that would
transfer liability away from the responsible party.
Sec. 103. Uses of the Fund
The establishment of a domestic Oil Spill Liability Trust Fund to
be financed by a fee of 1.3 cents per barrel of oil was authorized
by earlier enacted legislation. This section provides that the
Fund may be used for immediate payment of government response
costs, the payment of uncompensated claims under section 102(a)(2)
of the bill, administrative and enforcement costs and payment of
the United States' annual contribution to the International Fund.
The section establishes a per incident cap of $500 million. It
authorizes States and Indian tribes a "direct draw" of up to
$50,000 against the Fund for emergency cleanup, with the
requirement that the official designated by the Governor to
exercise this authority notify the Secretary of Transportation
within 24 hours of any obligation of payment from the Fund. The
statute of limitations for claims against the Fund is three years
from the date of the injury necessitating the restoration. This
section also permits the Fund to be used to reimburse the
Inspector General for the costs of audits required by this
section.
Sec. 104. Claims Procedure
This section provides that except for certain responsible party
cleanup costs, claimants must make their claims against the
responsible party or guarantor before they may assert claims
against the cargo owner or cargo consignee or against the Fund.
Claims for removal and restoration costs not settled within 180
days of presentation to the responsible party may be presented to
the Fund. The fund may assert a claim against the cargo owner or
cargo consignee to recoup its removal and restoration costs.
- 4 -
Sec. 105. Designation and Advertisement
This section requires the Secretary, where possible and
appropriate, to designate the vessel or facility that is the
source of an oil pollution incident. The responsible party for
such a vessel or facility is then required to advertise the
designation and to set out procedures under which a claim may be
presented to the responsible party or to his guarantor. If the
responsible party and guarantor both deny a designation within
five days after receiving notification, if the source of the oil
pollution is a public vessel or the Secretary is unable to
designate the source, the Secretary is required to advertise and
notify potential claimants how to present removal and restoration
claims to the Fund.
Sec. 106. Subrogation
This section states that any person, including the Fund, who pays
compensation to claimants for costs, damages, or interest shall be
subrogated to all rights, claims and causes of action that the
claimant has under this Act.
Sec. 107. Financial Responsibility
Subsection (a) (1) imposes on the responsible parties of vessels
the requirement that they provide evidence of financial
responsibility to meet their potential maximum liability as
established by section 102. Inland barges that do not carry oil
as cargo or fuel (e.g. sand barges) are exempted from the
requirement. If a responsible party has more than one vessel,
evidence of financial responsibility need be established only to
meet the maximum liability limit of the largest of the vessels.
Subsections (a) (2), (3) and (4) direct the Secretary to take
certain actions if these certification requirements are not met:
withhold or revoke clearance of the vessel; or deny entry to the
facility or detain the vessel.
Subsection (b) requires evidence of financial responsibility by
responsible parties for offshore facilities. If a responsible
party has more than one offshore facility, evidence of financial
responsibility need be established only to meet the maximum
liability applicable to one facility.
Subsection (c) lists the acceptable methods of establishing
financial responsibility.
Subsection (d) permits claims directly against the guarantor,
known as "direct actions." The subsection also allows the
guarantor to invoke the defense of willful misconduct.
- 5 -
Subsection (f) establishes a civil penalty for violating the
financial responsibility provisions of the bill of up to $25,000
per day.
Subsection (g) is a technical subsection providing for the
continuation of regulations.
Subsection (h) allows the Secretary to issue one certificate of
financial responsibility, a unified certificate, for the purposes
of this Act and CERCLA.
Sec. 108. Litigation, Jurisdiction and Venue
This section provides that jurisdiction for all actions is in
Federal district courts. Venue exists where the injury occurred,
or the defendant resides, may be found, or has its principle place
of business. All claims for review of regulations promulgated
under the Act must be made within 90 days of promulgation to the
Circuit Court of Appeals of the United States for the District of
Columbia. The statute of limitations for claims is generally
three years.
Sec. 109. Relationship to other Law
Subsection (a) preempts actions under other laws in State or
Federal court against responsible parties for costs and damages
specified in the Act.
Subsection (b) preserves from preemption all State funds and
permits States to continue to require contributions to their
funds.
Subsection (c) preserves from preemption the authority of the
United States, all States and political subdivisions to impose
civil penalties for violating laws relating to an oil pollution
incident.
Subsection (d) preempts State financial liability regimes and
requires States to accept evidence of compliance with the
financial responsibility requirements of this title.
Sec. 110. Effective Date
The section does not permit retroactive payments and ties to the
payments from the Fund to the effective date specified in section
208.
- 6 -
TITLE II--CONFORMING AMENDMENTS
Sec. 201. Trans-Alaska Pipeline Fund
This section would preserve TAPS monies for claims for costs and
damages resulting from the grounding of the Exxon Valdez in Prince
William Sound on March 24, 1989.
Sec. 202. Intervention on the High Seas Act
This section makes a conforming amendment to the Intervention on
the High Seas Act.
Sec. 203. Federal Water Pollution Control Act
This section makes conforming amendments to the Federal Water
Pollution Control Act.
Sec. 204. Deepwater Port Act
This section makes conforming amendments to the Deepwater Port Act
and transfers the funds in the Deepwater Port Liability Fund to
the Oil Spill Liability Trust Fund.
Sec. 205. Outer Continental Shelf Lands Act Amendments
This section makes conforming amendments to the Outer Continental
Shelf Lands Act and transfers the funds in the Offshore Oil
Pollution Compensation Fund to the Oil Spill Liability Trust Fund.
Sec. 206. Enforcement of the Federal Water Pollution Control Act
includes several amendments to sections 308, 309, and 311 of the
Federal Water Pollution Control Act in order to encourage
compliance with the Act.
Sec. 207. Title 26, United States Code
This section contains conforming amendments to sections 4611 and
9509 of the Internal Revenue Code of 1986.
Sec. 208. Effective Date
This section makes this title effective on the later of the
commencement date in section 4611(f)(2) of the Internal Revenue
Code of 1986 or the effective date of the first Appropriations Act
enacted for the purposes of section 9509(c)(1)(A) of the Internal
Revenue Code of 1986.
TITLE III--IMPLEMENTATION OF INTERNATIONAL CONVENTIONS
Sec. 301. Definitions
This section defines terms used in conjunction with the two
international conventions, the International Convention on Civil
Liability for Oil Pollution Damage, 1984 (Civil Liability
Convention) and the International Convention on the Establishment
of an International Fund for Compensation for Oil Pollution
Damage, 1984 (Fund Convention).
Sec. 302. Applicability of Conventions
This section specifies the period during which the Civil Liability
and Fund Conventions apply. The Senate must consent to
ratification.
Sec. 303. Recognition of International Fund
This section recognizes the International Fund as a legal person
under the laws of the United States. It appoints the Secretary of
State as the Fund's agent for service of process.
Sec. 304. Action in United States Courts
This section specifies that the International Fund must be served
with copies of complaints and pleadings and that the Fund may
intervene as a party as a matter of right in any action brought
under the Civil Liability Convention.
Sec. 305. Contribution to International Fund
This section authorizes payments to the International Fund from
the domestic Oil Spill Liability Trust Fund. It also authorizes
the Secretary to require that certain receivers of oil make
certain information available.
Sec. 306. Recognition of Foreign Judgments
This section declares that a final judgment rendered in a court of
any country which is a party to the Civil Liability Convention or
the Fund Convention will be recognized by United States court
unless obtained by fraud or the defendant was not given reasonable
notice and a fair hearing.
- 8 -
Sec. 307. Financial Responsibility
This section requires the maintenance of evidence of financial
responsibility as required by Article VII of the Civil Liability
Convention, authorizes the Secretary of Transportation to issue
certificates of financial responsibility under the Civil Liability
Convention, authorizes the Secretary of the Treasury to withhold
or revoke clearances and the Secretary of the Department in which
the Coast Guard is operating to deny entry or detain vessels that
cannot produce a certificate demonstrating compliance with the
financial responsibility requirements. Civil penalties not to
exceed $25,000 per day may be assessed. The section also provides
for the waiver of United States rights to sovereign immunity with
respect to any controversy arising under the Civil Liability
Convention and relating to a ship owned by the United States and
used for commercial purposes.
Sec. 308. Regulations
The section provides the Secretary with authority to issue rules
and regulations necessary to implement the two international
conventions.
Document No. 056919 SS
WHITE HOUSE STAFFING MEMORANDUM
DATE: 7/25/89
ACTION/CONCURRENCE/COMMENT DUE BY:
12:00 NOON, 7/26/89
SUBJECT: SIX MONTHS OF THE BUSH ADMINISTRATION
ACTION FYI
ACTION FYI
VICE PRESIDENT
MCCLURE
SUNUNU
NEWMAN
SCOWCROFT
PORTER
DARMAN
STUDDERT
BATES
UNTERMEYER
BREEDEN
Bennett
CARD
Boskin
CICCONI
Petersmeyer
DEMAREST
Rogers
FITZWATER
Winston
GRAY
Pintarton
HAGIN
REMARKS:
89 JUL27
27
Please provide your comments/recommendations directly to Chriss Winston
(Rm. 122, Ext. 2930) with an info copy to my office no later than
12:00 NOON, WEDNESDAY, JULY 26, 1989. Please note that TWO DOCUMENTS
are attached. Thank you.
10
RESPONSE: See
SGA? SGA
Comments
James W. Cicconi
Assistant to the President
and Deputy to the Chief of Staff
Ext. 2702
1
( (Grant))
July 21, 1989
Draft two
A:sixmonth
BUILDING A BETTER AMERICA
SIX MONTHS OF THE BUSH ADMINISTRATION
SUMMARY
As the Bush Administration passes the six-month mark,
Americans know that the President has set the agenda on a number
of fronts domestically -- from the environment and education to
the fight against drugs and crime. The economy is strong, with
the current economic expansion continuing to set new records.
Meanwhile, America is standing tall in the international arena,
after President Bush's leadership at two multilateral summits
paved the way for greater understanding among the allies and
improved relations with the Soviet Union and the Eastern Bloc
nations.
KEEPING THE ECONOMY STRONG
Record expansion: During the current economic expansion --
now in its 79th month as of June -- nearly 20 million jobs
have been created and the unemployment rate has fallen to
levels not seen in 15 years. Income levels continue to set
records, and industrial output is nearly double that of
1
2
Europe. Consumer price inflation has remained under 5
percent for the past 7 years.
Budget agreement: The President has put forth a budget which
restrains overall growth of spending and meets the Gramm-
Rudman-Hollings targets -- with no new taxes in fiscal year
1990 The President and Congress announced on April 14 a
budget plan to reduce the estimated fiscal year 1990 deficit
by about $64 billion below fiscal year 1989.
Savings and Loans: The Administration's proposal to solve
the savings and loan crisis was passed by the House and
Senate and is currently in conference.
Third World debt: The Administration has taken the lead in
finding a way to reduce the debt burden of developing
countries. With the Administration's encouragement, the IMF
and World Bank have set aside funds to aid debt reduction.
Capital gains tax cut: The President has sent to the
Congress a proposal which would re-establish a capital gains
differential will encourage capital formation, saving, and
job formation.
Minimum wage: The President, by vetoing the across-the-board
70-ase
increase in the minimum wage proposed by Congress, preserved
3
job opportunities for the disadvantaged and blunted the
adverse economic impact such a move would have had.
International Trade: The Bush Administration successfully
broke a stalemate in international trade talks and advanced
its proposal to correct and prevent trade distortions in
agriculture. It is engaged in bilateral trade talks with
important trading partners to encourage them to open their
markets to our exports.
SEIZING INTERNATIONAL OPPORTUNITIES FOR PEACE
"Europe Whole and Free": In a series of major speeches in
April and May, the President outlined a vision of a new
Europe -- secure, prosperous, whole and free -- vindicating
four decades of Western policies.
Poland and Hungary: The President signalled his strong
support for the people of Hungary and Poland as they move
toward more democratic reforms -- by visiting those nations
and offering political and moral support as well as economic
and trade incentives.
Economic Summit: The unity of the industrial democracies was
demonstrated at the Paris Economic Summit, as President Bush
4
took the lead in encouraging our allies to support Polish
and Hungarian economic reforms.
"Beyond Containment": The President has responded to great
changes in the Soviet Union with his policy to move "beyond
containment" by integrating the Soviet Union into the world
order.
Arms Control/NATO Summit: In arms control, the pace of
negotiations with the Soviet Union has accelerated, with new
American initiatives on Conventional Forces in Europe (which
the President unveiled at the NATO Summit), on banning
chemical weapons, and on strategic arms reduction.
Soviet Relations: The US-Soviet dialogue on conflicts in
regions of the Third World has resumed intensively, and a
US-Soviet dialogue has begun on a new range of global
problems which require global cooperation, such as
terrorism, the environment, and narcotics.
China: In response to the suppression of the democratic
movement in China, the President signalled that we cannot
condone repression while he worked to preserve the basic
elements of a strategically important relationship.
McCLure
5
Central American accord: The President and Congressional
approach to
leaders agreed on March 24 on a bipartisan strategy for
peace for and democracy in Central America.
INVESTING IN OUR FUTURE
Education: The President proposed and sent to the Congress a
comprehensive education package, The Educational Excellence
Act of 1989, which includes seven initiatives on merit and
magnet schools, alternative certification of teachers,
excellence awards for teachers, emergency grants to help
urban schools to fight drugs, new funding for endowments at
Historically Black Colleges, and a National Science Scholars
program. The initiative has been reported - to
the Senate floor virtually intost.
Petu
Natural Gas Deregulation: On July 26, the President signed
into law the Wellhead Decontrol Act of 1989, which ends all
remaining price controls on natural gas. This will phase
out all federal price controls on natural gas.
Clean Air Act revisions: On July 21, President Bush
transmitted to the Congress the first revisions to the Clean
Air Act since 1977. His legislation is designed to
6
drastically reduce three major threats to the nation's
environment: acid rain, urban air pollution, and toxic air
emissions.
Hazardous waste: The President announced he will be seeking
new legislation to ban all exports of hazardous waste except
where an agreement already exists with the receiving country
to provide for its safe handling.
Ozone depletion: The President has called for a total
worldwide phaseout of CFCs by the year 2000 provided safe
substitutes are available, in order to prevent further
damage to the earth's protective ozone layer.
Clean water: The EPA has started a tracking system for
medical wastes and the Justice Department has started a task
force to prosecute these abuses -- the first step in a
comprehensive program to help keep our beaches clean. The
President is committed to end ocean dumping of sewage sludge
by 1991.
Wetlands: The President is committed to "no net loss of
wetlands" and is directing his agencies to work toward that
goal. He has also proposed $206 million in his budget to
expand our parks and wildlife refuges.
7
Combatting Violent Crime: President Bush transmitted to
Congress The Comprehensive Crime Control Act of 1989 to
combat violent crime. Measures will augment enforcement and
prosecution, strengthen current law, control certain semi-
automatic weapons, and expand prison capacity.
Fighting Drug Abuse: The Administration is requesting $6
billion in funding for FY 1990 to fight the drug war,
increasing outlays by nearly $1 billion for drug education,
treatment and enforcement.
Drug Czar: The Office of National Drug Control Policy has
responded to the drug emergency in the District of Columbia
by expanding the Metropolitan Area Task Force, working for
more prisons, providing support in enforcement, and
providing assistance to local treatment efforts.
Space: The President announced a three step commitment to
establish America's preeminence in space -- Space Station
Freedom, a permanent presence on the Moon, and a manned
mission to Mars.
Public Housing: The Bush and Administration is working to make
public housing drug free, to protect the rights of the vast
majority of decent, law-abiding public housing residents.
8
WORKING FOR A KINDER, GENTLER AMERICA
Child Care: The President has transmitted to the Congress a
child care package, the Working Family Child Care Assistance
Act of 1989 which provides a new refundable child care tax
credit of up to $1000 per child under four, for low and
moderate income working families. This legislation will
make the existing Child and Dependent Care Tax Credit
refundable, and does not discriminate against religious- and
family-based child care.
Head Start: The President has also transmitted legislation
to the Congress which would increase the FY 1990
Status?
authorization for Head Start by $250 million; this will pay
for enrollment of up to 95,000 more four-year-olds in the
program.
National Service: The President spearheaded a movement to
encourage national service, and announced the formation of a
foundation called the Points of Light Initiative to
?
identify, enlarge and recreate those community service
initiatives which are working.
Welfare Reform: The Administration issued proposed rules on
April 18 to implement the major provisions of the Family
9
Support Act of 1988, as a step toward welfare reform. The
Administration is proposing to spend $3.3 billion over the
next five years implementing the JOBS program. The changes
will help reduce the number of individuals on welfare.
Medicaid: On April 18, the Administration forwarded to
Congress proposed legislation to make federal Medicaid
programs better serve pregnant women, infants and children.
Homelessness: President Bush has called for fully funding
the McKinney Homeless Assistance Act and for a new $50
million matching grant program to promote public/private
partnerships to assist homeless families and the mentally
ill.
Enterprise Zones: President Bush asked Congress to enact
labor and capital-based incentives -- through urban
enterprise zones -- to create jobs and entrepreneurial
activity in our most distressed communities.
Campaign Finance Reform: The President's comprehensive
campaign finance proposal is designed to lessen the power of
special economic interests and restore competition to
American Congressional elections.
10
Ethics: President Bush sent comprehensive ethics legislation
to the Congress on April 12th, and he issued an Executive
Order announcing ethical principles for the conduct of
executive branch employees.
Whistleblower Protection: On April 10, the President signed
S. 20, the "Whistleblower Protection Act of 1989." This law
will strengthen the protections and procedural rights
available to those federal employees who report misdeeds and
mismanagement.
?
Civil Rights: The Administration has taken a number of
actions to protect the civil rights of all Americans,
including several court actions in key civil rights cases.
# # #
BUILDING A BETTER AMERICA
SIX MONTHS OF THE BUSH ADMINISTRATION
KEEPING THE ECONOMY STRONG
Maintaining the current expansion with low inflation is the
key to improving standards of living, increasing job
opportunities for all Americans, and increasing investment in
productive capacity. Economic performance during this expansion
has been very good, and the policies proposed by the Bush
Administration are designed to preserve this strong record.
Record peacetime expansion: The current expansion reached 79
months in June.
Job creation: Nearly 20 million new jobs have been created
during this expansion, and the unemployment rate fell to
levels not seen in 15 years. During this decade, America
has created more new jobs than Japan and the nations of
Western Europe combined.
Record income: Real per capita disposable personal income --
personal income after taxes and inflation -- has risen 19
percent during this expansion. Real median family income --
the level of income after inflation which splits the family
2
income distribution in half -- set a new record in 1987, the
last year for which data are available.
Industrial output: During this expansion, American
industrial output has grown almost 41 percent compared with
overall economic growth of 29 percent. This is almost
double Europe's growth rate in industrial output.
Higher national saving and investment: During the first
eight months of fiscal year 1989, the Federal Government
budget deficit is less than during the same period in the
previous fiscal year. Partly due to the discipline of GRH,
the Federal deficit has declined from 5.4 percent of GNP in
fiscal year 1985 to about 2.9 percent this fiscal year. The
personal saving rate has risen to 5.4 percent in the first
quarter of 1989 from its recent low of 2.2 percent in the
second quarter of 1987. Business fixed investment as a
percent of real GNP has risen from a recent low of 11.1
percent in the first quarter of 1987 to 12.3 percent in the
first quarter of 1989.
Inflation under control: Consumer price inflation has
remained under 5 percent for the past 7 years, and the
recent slowing in economic growth to a sustainable rate will
lessen price pressures in the near future. The
3
Administration and the Federal Reserve share the goal of
ultimately achieving price stability.
ACTION BY THE ADMINISTRATION:
Presenting a budget: The President put forth a budget which
addresses our fundamental obligations for the protection of
national security and support of the needy, while providing
sufficient funds to advance high-priority initiatives. The
President's budget restrains overall growth of spending and
meets the Gramm-Rudman-Hollings targets -- with no new taxes
in fiscal year 1990.
Reaching a budget agreement with Congress: The President
and Congress announced on April 14 a budget plan to reduce
the estimated fiscal year 1990 deficit by about $64 billion
below fiscal year 1989. The deficit will be reduced to
$99.4 billion, as required by the Gramm-Rudman-Hollings law.
this Decaded
This is the first budget agreement reached before the start
of the budget year and not framed in the context of crisis.
Savings and Loan reform: The Administration's proposal to
solve the savings and loan crisis was passed by the House
and Senate and is currently in conference. The proposal
included provisions to:
4
--
Assure the financial integrity of deposit insurance by
raising the annual premium rate for both commercial
banks and S&Ls.
-- Resolve the status of existing insolvent banks in an
orderly fashion.
-- Improve supervisory control by bringing S&Ls up to the
same standards applied to commercial banks.
-- Enhance the enforcement of bank fraud provisions.
Solution of the international debt problem: The
Administration has taken the lead in finding a way to reduce
the debt burden of developing countries. With the
Administration's encouragement, the IMF and World Bank have
set aside funds to aid debt reduction in conjunction with
their ongoing programs to promote investment, growth, and
the return of flight capital to these countries.
Capital gains tax rate cut: The re-establishment of a
capital gains differential will encourage capital formation,
saving, and job formation. The President has sent to the
Congress a proposal which includes:
-- A 45 percent capital gains exclusion for qualified
capital gains, making the maximum capital gains tax
rate 15 percent.
-- A phased-in increase in the qualifying holding period
from one year to three years.
5
--
An exemption from the capital gains tax for families
earning under $20,000.
Minimum wage proposal: The President believes in keeping job
opportunities available for youth and for those seeking to
enter the economic mainstream. The across-the-board
90-sege
increase in the minimum wage which was proposed by Congress
would have had an adverse economic impact and cut job
the President
opportunities drastically. Because of this he vetoed the
legislation, and that neto was sustained.
bill passed by Congress.
International Trade: The Administration is forcefully
promoting the opening of world markets. It successfully
broke a stalemate in international trade talks and advanced
its proposal to correct and prevent trade distortions in
agriculture. It is engaged in bilateral trade talks with
important trading partners to encourage them to open their
markets to our exports. Together these efforts should
greatly expand opportunities for U.S. exports.
Agricultural initiatives: The Administration has announced
additional advance deficiency payments of 10 percent
available to producers of wheat, feed grains, rice and
upland cotton. In addition, a top-level Working Group on
Rural Development was established by the President to focus
on an action-oriented agenda.
6
Clean Air: - The Administration transmitted to the Congress
on July 21 a, Clean Air Act which will harness the power of
overhaul of the
the marketplace in achieving the goals of the act in the
most cost-effective manner possible.
SEIZING INTERNATIONAL OPPORTUNITIES FOR PEACE
President Bush is committed to a strong American role of
world leadership and sees in present global trends an
unprecedented opportunity for strengthening both world peace and
the cause of freedom. He has taken the initiative to seize that
opportunity.
ACTION BY THE ADMINISTRATION:
O
"Europe Whole and Free": In a series of major speeches in
April and May, the President outlined a vision of a new
Europe -- secure, prosperous, whole and free -- vindicating
four decades of Western policies.
-- Western Europe: As the European Community heads toward
a single market in 1992, and also develops its
political institutions and a more coordinated approach
to foreign policy, the President has pledged his
support for close cooperation with the EC and its
member states. We see the resurgence of Western Europe
7
as a triumph of Western values and principles. We
welcome its success, confident that a mature
partnership will serve mutual interests.
:
Eastern Europe: As Poland and Hungary take
unprecedented steps of reform, permitting first steps
toward pluralism, democracy, and market economic
policies, the United States has signaled its strong
support. Offering political and moral support as well
as economic incentives, the President proposed:
--
Poland: Following up on the program the President
announced earlier this year in Hamtramck, Michigan, he
called for action to declare Poland a beneficiary
country under the U.S. Generalized System of
Preferences. OPIC will be authorized to operate in
Poland, and the US. is proposing a private business
agreement that will promote contacts between the
private sectors of both countries. The President will
ask Congress to provide a $100 million fund to help
capitalize the Polish private sector, and encourage the
World Bank to move ahead with new loans to help Polish
agriculture and industry. Finally, he will ask
Congress for $15 million in a cooperative venture with
Poland to help fight air and water pollution in Krakow.
He has encouraged our friends in the Paris Club to
provide more liberalized terms in rescheduling Polish
debt.
8
-- Hungary: The President will ask the Congress to
authorize a $25 million fund as a source of new capital
to invigorate the Hungarian private sector. Pending
the passage of new emigration legislation in the
Hungarian Parliament, the President will inform
Congress that Hungary has been released from the
restrictions of the Jackson-Vanik Amendments, allowing
more liberal access to the American market. The
President also offered access to the Generalized System
of Preferences. He called for OPIC to operate in
Hungary, and called for greater scientific, technical,
educational and cultural exchanges between the US. and
Hungary. The President said that the US will open an
American House in Budapest, and will seek to establish
an International Environmental Center for Central and
Eastern Europe, in Budapest as well. Finally, he
announced that the Peace Corps would operate in Hungary
-- the first time in a European country.
-- The Economic Summit in Paris: The mission of the
President's historic visit to Poland and Hungary in
early July, and of the President's successful effort at
the Paris Economic Summit was to promote concerted
actions in areas of mutual concern among the industrial
democracies. The unity of the industrial democracies
was demonstrated, as they dealt with a variety of
issues from the economy to East-West strategies to
9
global environmental issues. Similarly, the solidarity
of the democracies was demonstrated earlier at the NATO
summit, as the North Atlantic allies dealt with arms
control initiatives.
--
Throughout the trip, the President declared that we
face a historic opportunity to lower the barriers that
have kept Europe divided. The Cold War began over
Eastern Europe, and if it is to end, it must end there
as well.
"Beyond Containment": Seeing a historic process of change
also in the Soviet Union, the President has declared his
intention to move beyond the successful policy of
containment of Soviet power to a new policy whose goals is
integrating the Soviet Union into the world community as a
constructive partner. Constructive changes so far in Soviet
policies -- in human rights, economic reforms, and
settlement of some international conflicts -- need to be
encouraged and broadened. The United States will be ready
to respond to such further developments. Already:
--
The US-Soviet dialogue on conflicts in regions of the
Third World has resumed intensively, with regular
meetings at the level of Assistant Secretary of State.
--
A US-Soviet dialogue has begun on a new range of global
problems which require global cooperation, such as
terrorism, the environment, and narcotics.
10
--
In arms control, the pace of negotiations has
accelerated, with new American initiatives on
Conventional Forces in Europe (which the President
unveiled at the NATO Summit), on banning chemical
weapons, and on strategic arms reduction.
China: In response to the tragic suppression of the
democratic movement in China, the President ordered the
suspension of all government-to-government sales and
commercial exports of weapons, suspension of visits between
US and Chinese military leaders, sympathetic review of
requests by Chinese students in the United States to extend
their stay, and review of other aspects of US-PRC bilateral
relations. The President's policy is to signal that we
cannot condone repression, but also to preserve the basic
elements of a relationship that has itself played a major
part in China's recent policy of reform and openness as well
as being of enormous strategic importance.
Bipartisan Accord on Central America: The President and
to
Congress
agreed on March 24 on a bipartisan
.J
strategy for peace and democracy in Central America:
-- Regional peace: The President and Congress agreed that
the region's democracies deserve our support, that
Nicaragua's subversion of its neighbors must end, and
11
that Soviet support for violence and subversion in the
hemisphere must also end.
--
Humanitarian aid: Congress agreed to support the
Administration's request for continued humanitarian
assistance for the Nicaraguan Democratic Resistance at
current levels through the elections in Nicaragua
scheduled for February 1990.
--
Democracy: The Communist Sandinistas are being put to
the test next February -- to permit a real democratic
contest for political power, fulfilling the promises of
democratic pluralism that they have made (and broken)
so often before.
Middle East Peace Process: The Administration is supporting
the Middle East parties in efforts to launch a peace
process. Our approach is based on the concept of
Palestinian elections in the occupied territories, which we
believe can be a step toward a comprehensive peace
settlement that assures Israel's security and the legitimate
political rights of the Palestinians.
Initiative on Third World Debt: The President's initiative
to strengthen the international strategy on Third World debt
has already received broad support from both industrial and
developing countries. The approach is designed to promote
sustained growth in developing countries by:
12
--
Emphasizing sound market-oriented economic policies in
debtor countries, particularly measure to promote
investment and repatriation of flight capital;
--
Increasing the focus on debt and debt service reduction
to complement new lending by commercial banks;
--
Using resources from the World Bank and IMF to catalyze
voluntary debt and debt service reduction by the
commercial banks.
GATT: In the Uruguay Round of GATT trade negotiations,
progress has been made toward a multilateral agreement
reducing trade barriers to exports.
Bilateral Meetings: The President has met with a total of
XXX foreign leaders while in office, including 18 bilateral
meetings during the trip to Emperor Hirohito's funeral, XX
during the NATO Summit, and XX on the trip to Poland,
Hungary, the Netherlands, and the Economic Summit.
INVESTING IN OUR FUTURE
EDUCATION
The President's actions to improve education are guided by
four key principles: that excellence and success in education
should be recognized and rewarded; that federal funding should be
targeted to those who need it most; that choice and flexibility -
13
- for educators, parents and students -- are important to
educational reform and to achieving excellence; and finally, that
greater accountability is needed in the education system to
assure that students are actually receiving the highest quality
education.
ACTION BY THE ADMINISTRATION:
The President proposed and sent to the Congress a
comprehensive education package, The Educational Excellence
Act of 1989 which includes seven initiatives:
-- The Presidential Merit Schools program -- to reward
schools that have made substantial progress in raising
students' educational achievement, creating a safe and
drug-free school environment, and reducing the drop-out
rate.
-- A new Magnet Schools of Excellence program -- to
support the establishment, expansion or enhancement of
magnet schools, increasing parental choice and
improving quality education.
-- The Alternative Certification of Teachers and
Principals program -- to assist States interested in
broadening the pool of talent from which to recruit
teachers and principals.
14
--
President's Awards for Excellence in Education -- to be
awarded to public and private school teachers in every
state who meet the highest standards of excellence.
--
Drug-free Schools Urban Emergency Grants -- to provide
special assistance to selected urban school districts
that are disproportionately affected by drug
trafficking and abuse.
--
A National Science Scholars program -- to provide
college scholarships to high school seniors who have
excelled in the sciences and mathematics.
--
Additional Funding Authorization for Endowment Matching
Grants at Historically Black Colleges and Universities
to strengthen HBCUs by building endowments, an
especially effective way to create financial strength
and long-term security.
THE ENVIRONMENT
President Bush, a long-time environmentalist, has taken
strong action to protect the environment. He is working
shoulder-to-shoulder with Interior Secretary Lujan, Energy
Secretary Watkins, and EPA Administrator Reilly on a number of
fronts.
15
ACTION BY THE ADMINISTRATION:
Natural Gas Decontrol: On July 26, the President signed into
law the Wellhead Decontrol Act of 1989, which ends all
remaining price controls on natural gas. This will phase
out all federal price controls on natural gas
Clean Air legislation: President Bush transmitted to the
Congress a sweeping program to ensure clean air for all
Americans. The President's plan, transmitted to Congress on
July 21, 1989, calls for the first revisions to the Clean
Air Act since 1977 and is designed to curb three major
threats to the nation's environment: acid rain, urban air
pollution, and toxic air emissions.
-- Acid Rain: Sulfur dioxide emissions that cause acid
rain will be cut in half, by ten million tons, and
nitrogen oxide levels cut by two million tons -- by the
end of this century. Companies will be allowed to
trade credits among themselves for reductions they
make, so that they can decide how to bring aggregate
emissions down as cost-effectively as possible.
:
Urban Air Pollution: By employing a mix of federal
measures and state initiatives, this legislation will
sharply cut air pollution in our cities. The federal
measures alone will cut hydrocarbon emissions -- which
contribute to urban ozone -- virtually in half.
16
Currently, 81 cities don't meet Federal air
quality standards. This legislation will bring clean
air to all but 25 cities by 1995 -- and within 20
all citiss the standards
years, Los Angeles, Houston and New York.
In the nine urban areas with the greatest smog
problems, smog will be cut through alternative fuels
and clean-fueled vehicles. The President is calling
?
for the phased-in introduction of a half a million
clean-fueled vehicles in 1995, building up to a million
in 1997, through 2007.
To the maximum extent feasible, automobile and
fuel companies will be allowed to trade reduction
credits among themselves.
--
Toxic Air Emissions: All categories of airborne toxic
chemicals should be cut by 75 percent by the year 2000.
In its first phase, this initiative should eliminate
about three-quarters of the needless deaths from cancer
that are suspected to have been caused by toxic
industrial air emissions.
Until now, because of an unworkable law, the EPA
has been able to regulate only seven of the 280 known
air toxics. These reforms will allow EPA to do its job
better, and will apply the most advanced industrial
technology available to control these airborne poisons.
The legislation promises certifiable progress in
17
regulating sources of toxic air emissions on a set
schedule.
Alaskan oil spill: A Cabinet-level team was sent to assess
the Alaskan oil spill, and a joint federal-state resource
recovery team was convened. The National Transportation
Safety Board is investigating the accident itself. Exxon
has accepted responsibility for paying for the cleanup, and
for employing local civilian personnel necessary to control
further damage. EPA Administrator Reilly is coordinating the
long-range planning to restore the environment of Prince
William Sound, and the President has ordered a review of
existing contingency plans for accidents such as this.
-- The President has set up a special task force to
address environmental concerns about oil and gas
drilling off the coasts of California and Florida.
--
The Administration transmitted to the Congress a
comprehensive oil spill liability bill, to XXX (call
Transoportation)
Cleaning up hazardous wastes: The President announced he
will be seeking new legislation to give the United States
Government authority to ban all exports of hazardous waste
except where an agreement exists with the receiving country
providing for the safe handling and management of those
wastes.
18
Also, Secretary of Energy Watkins has put forth a plan of
action to identify and prioritize clean up of defense and
civilian radioactive waste.
Superfund: The President is reinvigorating the Superfund
hazardous waste clean-up program by directing EPA to take a
number of actions, including more aggressive action to force
private parties to clean up sites, stepped-up cost recovery,
and better use of existing emergency cleanup authorities.
EPA is also now finishing a priority review of Superfund to
improve its operation.
Ozone depletion: The President has called for a total
worldwide phaseout of CFCs by the year 2000, provided safe
substitutes are available, in order to prevent further
damage to the earth's protective ozone layer.
Clean water and coastlines: The EPA has started a tracking
system for medical wastes and the Justice Department has
started a task force to prosecute these abuses -- the first
step in a comprehensive program to help keep our beaches
clean. The President is committed to end ocean dumping of
sewage sludge by 1991.
19
Wetlands: The President is committed to "no net loss of
wetlands" and is directing his agencies to work toward that
goal. He has also proposed $206 million in his budget to
expand our parks and wildlife refuges.
COMBATTING VIOLENT CRIME
The President is working to strengthen the nation's criminal
justice system and the Federal, state, and local law enforcement
partnership.
Four principles underlie the goals of our criminal justice
system and the means for accomplishing them: First, to protect
citizens and their property; to hold those who commit violent
crimes accountable for their actions; to have as the objective of
our criminal justice system the swift and certain apprehension,
prosecution and incarceration of those who break the law; and
finally, to ensure a sustained, cooperative effort by Federal,
State and local law enforcement authorities.
ACTION BY THE ADMINISTRATION:
On May 15, 1989, President Bush transmitted to Congress The
Comprehensive Crime Control Act of 1989 to combat violent
crime. Elements of the legislation include:
20
-- Strengthening Current Laws: The President is calling
on Congress to double the mandatory minimum penalties
-- from five years to ten years in Federal prison --
for the use of semi-automatic weapons in violent crimes
or drug felonies.
In addition, the Attorney General has been
directed to advise America's prosecutors to end plea
bargaining for violent Federal firearms offenses.
President Bush called on Congress to enact the
steps necessary to implement the death penalty for the
most serious Federal crimes, and urged state Governors
to match these Federal initiatives -- new mandatory
sentencing, tougher rules on plea bargaining, and
implementing the death penalty -- in the States.
-- Controlling Certain Semi-Automatic Weapons: The
President also announced that the Administration has
made permanent the temporary suspension on the
importation of any semi-automatic weapons which fail to
meet the criteria specified in the Gun Control Act of
1968; he also called for the closing of loopholes which
allow access to such guns by certain classes of
criminals. The President introduced legislation
prohibiting the importation, manufacture, sale or
transfer of gun magazines of more than 15 rounds.
-- Augmenting Enforcement: The President has directed the
Attorney General and the Treasury Secretary, working
21
together with state and local authorities, to launch a
comprehensive, coordinated offensive against America's
most violent criminals.
President Bush requested funding for hiring 825
new Federal agents and staff -- 375 at the Bureau of
Alcohol, Tobacco and Firearms; 300 at the FBI; and 150
Deputy U.S. Marshals. This offensive, including State
and local enforcement authorities, will target violent
criminals and repeat offenders.
-- Enhancing Prosecution: The President proposed
increased funds for the U.S. Attorneys Offices to
support 1,600 new prosecutors and staff, and increased
funds for the Justice Department Criminal Division to
support 168 new positions, to handle drug cases,
weapons offenses and other priority matters.
--
Expanding Prison Capacity: The President proposed an
additional $1 billion for Federal prison construction,
bringing the total FY 1990 budget to over $1.5 billion.
This will add 24,000 new Federal prison beds to the
current 31,000 beds, an increase of nearly 80%.
FIGHTING DRUG ABUSE
We have begun a new war on drugs in this country. The
President believes a four-pronged approach is key: education,
rehabilitation, interdiction and enforcement. The policy of
22
this Administration is "zero tolerance." No amount of illegal
drug use is acceptable. This means dealing with both supply and
demand.
ACTION BY THE ADMINISTRATION:
Budget: The Administration is requesting $6 billion in
funding for FY 1990 to fight the drug war, increasing
outlays by nearly $1 billion for drug education, treatment
and enforcement.
Education: The Administration is requesting nearly $1.1
billion for education and prevention efforts. This is a 16
percent increase over 1989, and includes funding for ongoing
programs and new initiatives.
Rehabilitation: Funding for drug abuse treatment will be
increased 18 percent. The Administration is proposing over
$700 million to expand the nation's capacity to provide
treatment, particularly to the indigent, disadvantaged,
youth, and expectant mothers.
Interdiction and enforcement: The Administration is
proposing over $4.1 billion for law enforcement programs in
1990, a 10 percent increase over 1989. This constitutes
about 70 percent of President Bush's proposed drug budget.
23
Substantial increases are requested in funding to strengthen
inspection, interdiction, intelligence efforts and crop
eradication programs, such as Operation Polar Cap, a
federally led effort which broke up a $1.2 billion drug
money-laundering operation. The President strongly supports
the death penalty for drug kingpins who commit drug-related
murders, and will appoint judges who will strongly enforce
the drug penalty laws.
Public housing: The Bush Administration is working to make
public housing drug free, to protect the rights of the vast
majority of decent, law-abiding public housing residents.
The Department of Housing and Urban Development has acted:
-- To modify its lease and grievance procedures to
facilitate eviction of those involved in drug related
criminal activity;
-- To make drug use and trafficking a lease violation
subject to eviction proceedings;
--
To target federal assistance to anti-drug security
measures;
--
To revoke federal housing subsidies from those dealing
in drugs;
--
To involve the private and voluntary sectors in efforts
to rid public housing of drugs and give residents,
especially young people, a stake in their communities
and their futures.
24
In addition, the Office of National Drug Control Policy has
responded to the drug emergency in the District of Columbia
by expanding the Metropolitan Area Task Force, working for
more prisons, providing FBI support in enforcement, and
providing the assistance of the National Institute on Drug
Abuse to local treatment efforts. The Department of
Education will provide the District with 50 percent more
funds for drug prevention programs in city schools. The
Department of Labor will provide support for employee
assistance programs and work with the business community to
increase job training for youth.
WORKING FOR A KINDER, GENTLER AMERICA
CHILD CARE
The changing nature of American society heightens the need
for quality, affordable, accessible child care. President Bush
wants to put choice in the hands of parents so that they -- not
government -- have the power to select the best and safest
environment for their children.
25
ACTION BY THE ADMINISTRATION:
Child care: The President has transmitted to the Congress a
child care package, the Working Family Child Care Assistance
Act of 1989 which:
9
--
Provides a new refundable child care tax credit of up
to $1000 per child under four, for low and moderate
income working families.
--
Makes the existing Child and Dependent Care Tax Credit
refundable.
--
Does not discriminate against religious- and family-
based child care.
The President has directed Secretary of Labor Dole to study
the market for liability insurance to determine if liability
issues impair child care.
Head Start: The President has also transmitted legislation
to the Congress which would increase the FY 1990
authorization for Head Start by $250 million; this will pay
Statis
for enrollment of up to 95,000 more four-year-olds in the
program.
26
NATIONAL SERVICE
The President's strategy for overcoming the disintegration
of communities across America -- not through a federal government
program, but a nationwide service movement -- has three facets:
First, to issue a call to action; second, to identify, enlarge
and recreate what is working; and third, to discover and
encourage new leaders.
ACTION BY THE ADMINISTRATION:
The Call to Action:
--
President Bush called on all Americans and all American
institutions, large and small, to make service of
central value in their daily life and work;
-- All heads of business and professional firms to include
community service among the factors considered in
making hiring, compensation and promotion decisions;
--
Newspapers, magazines, radio and television stations,
cable systems, and other media institutions to identify
service opportunities, spotlight successful service
initiatives and profile outstanding community leaders
regularly;
--
All state and local education boards to uphold the
value of service and to encourage students, faculty and
personnel to serve others;
27
--
College and university presidents to recognize the
value of community service in considering applicants,
and to encourage and uphold the value of community
service;
--
and not-for-profit service organizations to build the
capacity to absorb increasing numbers of volunteers in
purposeful roles.
Identifying, Enlarging, and Recreating What is Working: The
President announced the formation of a foundation called the
Points of Light Initiative, of which he will serve as
Honorary Chairman. Formed to identify and build upon what
is working, the Foundation will be a magnet for the best
ideas and brightest programs in community service. The
Administration will ask Congress for $25 million annually to
support this Initiative, which will, in turn, seek matching
funds from the private sector. The President has also
encouraged all governors and mayors nationwide to join the
movement by forming State and local Points of Light working
groups composed of outstanding leaders.
-- Through a Foundation initiative called the ServNet
Project, professional firms, corporations, unions,
schools, religious, civic and not-for-profit groups
will be asked to donate the services of some of their
most talented and promising people for a period of
time. Peer-to-peer working groups will be formed to
28
bring examples of successful initiatives and providing
training, technical assistance and other support to
enable other institutions to devise similar
initiatives.
--
Another Foundation initiative, the ServLink Project,
will help improve existing methods of matching would-be
volunteers with purposeful service opportunities.
ServLink will stimulate the development through private
sector resources of "technology links" between those
who wish to serve and those needing service in the
inquirer's own community.
--
The Foundation will also recognize successful community
initiatives and outstanding leaders through two new
Presidential Awards:
--
The National Service Youth Leadership Awards will
be given each year to individuals.
-- The President's Build a Community Awards will
honor those people and institutions who have
worked together to rebuild families or to
revitalize communities.
29
WELFARE REFORM
The Administration has developed a major new education and
job training program to help recipients of Aid to Families with
Dependent Children move off welfare and become economically self-
sufficient.
ACTION BY THE ADMINISTRATION:
Welfare reform: The Administration issued proposed rules on
April 18 to implement the major provisions of the Family
Support Act of 1988. The proposed rules are designed to:
--
Target job training assistance to those who are most
likely to benefit and who are most at risk for long-
term welfare dependency.
--
Provide maximum level of flexibility to AFDC parents in
obtaining the type of child care that best suits their
needs, consistent with the Administration's legislative
proposals on child care.
JOBS Program: The Administration is proposing to spend $3.3
billion over the next five years implementing the JOBS
program. The changes will pay benefits in the future by
reducing the number of individuals on welfare. It is
estimated that 138,000 families will be able to leave
30
welfare rolls over the next five years as a result of this
program.
EXPANSION OF MEDICAID
The Administration is committed to health care for the
disadvantaged, calling for full funding of Medicaid, $37.6
billion for FY 1990, an increase of $3.3 billion, or 9.6 percent
over the FY 1989 level.
ACTION BY THE ADMINISTRATION:
Expanding Medicaid: On April 18, the Administration
forwarded to Congress proposed legislation to make federal
programs better serve pregnant women, infants and children.
The legislation would expand the population Medicaid serves,
making Medicaid available to 1.9 million more women when
they became pregnant. The legislation would:
-- Increase by 374,000 the number of pregnant women and
children eligible for Medicaid.
-- Foster greater participation in Medicaid by eligible
pregnant women by providing services to pregnant women
who are presumed eligible for Medicaid before a formal
eligibility determination is made; and by requiring
States to operate outreach programs in areas of high
infant mortality.
31
--
Entitle all children under age 6 who are receiving Food
Stamps to Medicaid coverage for immunizations.
--
Make the Federal match rate for State administration
expenses a uniform 50 percent by gradually reducing
special administrative match rates ranging from 75 to
100 percent. The savings that would result would allow
the legislative eligibility changes proposed by the
President to be implemented within the current
program's spending level.
HOUSING/HOMELESSNESS
President Bush has taken a number of steps to create an
"opportunity society" of jobs, growth, housing and hope for
Americans in need of a helping hand.
ACTION BY THE ADMINISTRATION:
Homelessness: ((In his FY 1990 budget)), the President has
proposed to provide over $1 billion in federal resources to
help end homelessness and pave the way to jobs, permanent
housing, health care and human dignity. President Bush's
proposal calls for fully funding the McKinney Homeless
Assistance Act and for a new $50 million matching grant
32
program to promote public/private partnerships to assist
homeless families and the mentally ill.
Enterprise zones: President Bush has called for enactment of
enterprise zone legislation, to give urban and rural areas
the opportunity for jobs and hope for the future. President
Bush asked Congress to enact labor and capital-based
incentives to create jobs and entrepreneurial activity in
our most distressed communities.
Affordable housing: President Bush is committed to making
housing more affordable for low-income families, and to
provide homeownership opportunities to the disadvantaged and
to young families. President Bush proposes to assist
109,000 new families in need of low-income housing, and has
pledged to maintain assistance to those families already
being helped. President Bush has also signalled his
commitment to helping poor residents in public housing to
become homeowners through resident management and ownership
programs.
ETHICS AND CIVIL RIGHTS
High ethical standards and civil rights for all Americans
are central to this Administration, and we will enforce them --
33
strictly, comprehensively, fairly, and to the letter and spirit
of the law.
ACTION BY THE ADMINISTRATION:
O
Campaign Finance Reform: The President's comprehensive
campaign finance proposal is designed to lessen the power of
special economic interests and restore competition to
American Congressional elections. The package, which seeks
to increase the role of individuals and political parties in
the electoral process, has four facets:
--
Eliminating political action committees (PACs)
supported by corporations, unions or trade
associations, and prohibiting such entities from paying
for the overhead or administrative costs of any
independent PAC.
--
Strengthening political parties by increasing the
amounts they can spend on behalf of congressional
candidates. This source of funds would permit
legislators to spend less time fundraising, would
ensure that challengers have greater resources with
which to challenge incumbents, and would further limit
the role of special economic interests in elections.
--
Addressing the problem of the "permanent Congress" by
reforms designed to reduce the unwarranted advantages
of incumbency. Specifically, the proposals would
34
prohibit the personal use of excess campaign funds,
drastically reduce Congressional mailings under the
frank, ban the rollover of campaign funds from one
election cycle to the next, and legislate fair neutral
criteria for the redistricting of Congressional and
legislative lines that will follow the 1990 census.
-- Fully disclosing all soft money spent by the political
parties and all labor unions, corporations and trade
associations to influence a federal election.
Ethics: The President issued an Executive Order creating
the President's Commission on Federal Ethics Law Reform. On
March 9, the Commission filed its report and its
recommendations to the President. Legislation was sent
April 12th to the Congress, and the President issued an
Executive Order announcing ethical principles for the
conduct of executive branch employees. The President's
proposals include:
-- A ban on outside earned income for non-career
Presidential appointees in the executive branch,
including all employees in the immediate White House
Office.
--
Expanded financial disclosure for all three branches of
government.
35
--
Prohibition of the conversion of political
contributions for personal or office use.
--
Deferral of tax liability when an individual is
required by his or her agency to divest assets in order
to avoid conflicts of interest.
:
Strengthened rules against abusing the revolving door
for private gain at the expense of the public trust.
These rules also apply to the legislative branch.
:
A 25 percent pay raise for federal judges was proposed
in separate legislation submitted April 12, while the
ethics reform legislation restricts their acceptance of
honoraria. President Bush believes that honoraria for
Members of Congress should be banned; however, the
President will not formalize that proposal until after
he consults with Congress on that issue and their pay
raise. He will include in that discussion the question
of a pay increase for certain executive branch
positions.
--
The extension of the Independent Counsel statute to
cover the Congress.
--
The extension of the federal statute that prohibits
employees from taking actions that enhance their own
financial interest to cover legislative and judicial
branch employees.
36
The establishment of an independent ethics office for
the Congress, to be headed by a clearly nonpartisan
official, confirmed by both houses.
--
The application of the existing one-year post-
employment "cooling-off" period for senior executive-
branch employees to the legislative and judicial
branches.
Whistleblower protection: The President supports public
servants who revere the trust placed in them by the American
people. On April 10, the President signed S. 20, the
"Whistleblower Protection Act of 1989." This law will
strengthen the protections and procedural rights available
to those federal employees who report misdeeds and
mismanagement.
--
This new law will enhance the authority of the Office
of Special Counsel, and whistleblowers will also now be
allowed to take their cases to the Merit Systems
Protection Board.
--
The statute alters the legal burdens of proof, making
it easier for employees to be vindicated when they are
wrongfully penalized by their supervisors for
whistleblowing activities.
37
civil rights: The Administration has taken a number of
actions to protect the civil rights of all Americans,
including several court actions in key civil rights cases.
--
On March 8, the Department of Justice endorsed the
objectives of the Hate Crimes Bill and voiced no
opposition to the bill's enactment. The Hate Crimes
Bill provides for the collection of data about crimes
motivated by race, religion, ethnicity or sexual
orientation.
--
On March 13, Attorney General Thornburgh announced the
filing of Federal housing discrimination lawsuits
seeking monetary damages and civil penalties under the
expanded enforcement authority of the Fair Housing
Amendments Act of 1988
?
# # #
THE STOCK MARKET: TIME TO GET OUT?
U.S.News
AUGUST 21, 1989
$1.95
SECRETS OF THE SEA
New light on the mysteries of the deep
Scientists VS. salvagers: The fight over shipwrecks
34
0
140066
Come to where the flavor is.
"It took all we had to buy this farm. Takes even more to keep it.
Dave Lollis, Central Appalachian People's Federal Credit Union.
"You look at our membership and you see an average income of maybe
$8000 a year."
Jimmy and Ina Taylor, Credit Union members.
"We raise tobacco, goats, some sorghum - even use Belgian horses to pull the plow.
And we both have outside jobs."
Dave: "The finance companies here can charge people 36%. And the banks
just aren't interested."
Ina: "The Credit Union made me a loan for an '81 Bonneville.
I need a car to get to work, but the banks wouldn't lend
on anything older than an '83."
Dave: "The average amount of our loans isn't too big. But they
come at crisis points."
Jimmy: "When our cash crop check didn't come on time,
the credit union helped us hold on. That's the credit union difference.
There's nobody else we could go to and get help like that."
Credit Union members like Jimmy and Ina Taylor are protected with
insurance from the CUNA Mutual Insurance Group.
CUNA MUTUAL INSURANCE GROUP
WE TAKE CARE OF OUR OWN.
ENGLAND
KNOWN FOR ITS TEE PARTIES.
GORDON'S
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ESTP
1769
AND ITS GIN.
DISTILLED
LONDONDRY
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100% NEUTRAL SPIRITS DISTILLED FROM GRAIN
THE GIN OF ENGLAND. AND THE WORLD.
GORDON'S ®
PRODUCED IN U.S.A. ACCORDING TO THE FORMULA OF ALEXANDER GORDON AND COMPANY, LONDON, ENGLAND
100% NEUTRAL SPIRITS DISTILLED FROM GRAIN 40% ALC/VOL (80 PROOF). THE DISTILLERS COMPANY, PLAINFIELD, ILL. AND UNION CITY, CA © 1989.
U.S.News
August 21, 1989 Vol. 107 No. 8
BUSINESS,
4 Letters to the Editor
40 Giant General Motors tries to reinvent
the wheel
CURRENTS
10 One Week
43 Ins and outs on America's trade list.
Made in U.S.A. finds new cachet
13 Embryos on trial
Who's a family?
overseas
Airline buyouts
The poets' war
Baby
Bell revolt
Why college costs so much
47 Economic Outlook: Can Marxist
economies make it to market?
20 Washington Whispers
STEVE McCRACKEN FOR USN&WR
HORIZONS
U.S.NEWS
COVER
22 The drug-money hunt. Narcotics
48 Using satellites, lasers and remote-
warriors target laundered cash
control subs, researchers are
22 Drug money: Halting
26 Two appointments affirm the color-blind,
its flow in America
penetrating the mysteries of the oceans.
gender-blind age in the U.S. military
Also, ocean pollution and the
controversy over salvaging wrecks
27 Commentary: Beware of bad deals at
the hostage-trading bazaar
56 John Leo on criminals who get the breaks
29 Another Chicago as the last city political
NEWS YOU CAN USE
machine in America
59 Eye on Wall Street: The Dorfman story
31 Tomorrow: Dueling commissions plot
health care into the next century
60 Investing: Is it time, once again, to bail
out of the market?
WORLD REPORT
63 Sports: A wardrobe of accessories for
32 The bright lights fade in China's big city
the fashionable cyclist
as Shanghai copes with the crackdown
36 Will the last one to go please turn out
the lights? Hong Kong looks for lifeboats
HIROJI KUBOTA-MAGNUM
64 Television: New kids' shows
66 Vital Statistics
38 Brother against brother: The internecine
32 Shopping for stability
war in the West Bank and Gaza
in Shanghai?
67 News You Can Use: Computers in
schools; cheaper hotel rates, and more
39 Worldgram: Kaifu's future; Honeymoon
with Mexico? A new New Zealand?
68 Editorial: The Lost Generation
BRUCE CORNUELLE SCRIPPS INSTITUTION OF OCEANOGRAPHY
KEVIN HORAN FOR USN&WR
ROBERT DEUTSCH-USA TODAY
40 Roger Smith retires
48
Probing the deep with technology
from GM's helm
59
Eye on Wall Street and Dan Dorfman
COVER: Photo by David Doubilet
Copyright © 1989, by U.S.News & World Report, Inc. All rights reserved. U.S.News & World Report (ISSN 0041-5537) is published weekly, except for one combined issue mailed in August and a second
combined issue mailed in December, $39.75 per year, by U.S.News & World Report, Inc., 2400 N Street, N.W., Washington, D.C. 20037-1196. Second Class postage paid at Washington, D.C., and at additional
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N
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
3
LETTERS
TO THE EDITOR
Nuclear hideaways: "Continuity of govern-
S
to provide for our own old age would pay for
ment" sounds more like "condos in the
everyone, regardless of whether we wanted,
ground" for our leaders ["America's
needed or even had medicare. Aside from
Doomsday Project," Cover, August 7]. The
that, any plan that would provide every-
billion-dollar project smacks of an expen-
thing to everyone regardless of effort is uto-
sive way for 1,000 military and political
pian, socialistic and contrary to the concepts
leaders to save themselves during a nuclear
upon which this country was built. If we
attack while the masses who paid for their
drift down that slope, I guarantee that, in
safekeeping get slaughtered. We citizens ex-
the end, no one will have anything.
pect our leaders to prevent a nuclear attack.
James L. Brewer
Should it occur, I doubt that many survivors
Grant, Ala.
will be looking kindly at those who couldn't
prevent such a catastrophe in the first place,
Suppose an insurance salesman presents
much less looking to them for continuity.
you with a policy and says you must buy it
Thomas A. Vaughan
whether you want to or not. Wouldn't you
Richmond, Va.
throw him out? Suppose he tells you that
your premium will be half again what the
I find it mind-boggling that we spend
policy is worth so he can give a policy free to
billions of taxpayers' dollars to provide
Greg LeMond. Success against all odds
a needy person. When you ask him why you
safe haven for those who will have just led
should be forced to pay someone else's pre-
us into a nuclear war. Maybe the prospect
mium, he says it's because that person is in-
of nuclear war would be much less likely if
laughable, except that it trivializes an as-
sured under the same policy but you have
these "key officials" had to sit it out with
tonishing demonstration of grit, determina-
more money. Would you feel ripped off?
the rest of us. As I see it, the Doomsday
tion and old-fashioned courage. You conve-
Now you know why I'm hopping mad about
Project is the ultimate in insulation from
niently ignore factors such as his intelligent
the Medicare Catastrophic Coverage Act.
the ultimate accountability. Unbelievable!
use of improved equipment that his com-
Don Holding
Jonathan Dyer
petitors disdained but which contributed to
Venice, Fla.
Napa, Calif.
his amazing 58-second winning margin in
the crucial last-day, 27-kilometer time trial.
Guerrilla traveling: Is it not irresponsible
As you pointed out, U.S. plans for assur-
LeMond is not just a lucky young man. He
for traveler George Brown to promote the
ing continuity of government in the event of
showed once again that you can succeed
kind of self-serving deceptions and lying he
a nuclear attack are dubious. In contrast, a
even when the odds are all against you.
resorts to in attaining his objectives ["Fly-
vast Soviet underground network of bun-
John Horst
ing Through Airline Loopholes," July 31]?
kers stands ready to protect about 175,000
Fayston, Vt.
Feigning a limp, lying to the taxi dispatch-
leaders. A large percentage of Soviet citizens
er, fooling the hotel doorman, etc., do little
also have access to shelters against blast, ra-
While chance certainly plays a role in our
to promote ethics in travel. His use of de-
diation, chemicals and biological weapons.
race through life, it is within our power to
ception illustrates the decay of morals and
Unfortunately, most Americans don't even
control how we accept the challenge of em-
ethics impacting our lifestyles.
know that their lives could be saved by inex-
bracing it. LeMond's performance in the
George H. Gustafson
pensive shelters. There's no way that "ev-
Tour de France was achieved through the
Desert Hot Springs, Calif.
erybody's going to make it." But don't
guts, faith and determination that awarded
Americans deserve a fighting chance? Our
him the chance to win. And for those who
I'll bet that Brown expects-nay, de-
neglect of population-protection measures
drew inspiration from his struggle back
mands-perfect ethics from congressmen,
(civil defense) is a national disgrace.
from severe physical hardship to the top of
business partners, competitors and people
Jane M. Orient, M.D.
his profession, LeMond clothed us all in a
with whom he might do business. Then he
Doctors for Disaster Preparedness
victor's yellow jersey that symbolizes the
throws his own ethics right out the window
Tucson
confidence to take a chance to succeed.
to get what he wants and suggests that the
Scott T. Leland
rest of us do the same. No wonder there are
I thought your story was going to be an
Chicago
so many surly taxi drivers and overbooked
exciting account of how well we are pre-
flights. Thanks for nothing, Mr. Brown.
pared for a nuclear attack. Instead, I am en-
Catastrophic coverage: "Congress's
George M. Gilkeson
lightened with terrifying facts of fraud, cov-
Health-Care Woes" [Economic Outlook,
Denton, Tex.
er-up and inadequate contract oversight. I
July 31] says that "retiree groups are lobby-
am appalled that the most important nation-
ing Congress to stick the working popula-
Gay rights: The only thing "obvious" about
al-security program is being compromised
tion with the bill by raising taxes." That is
John Leo's definition of family is that it's
and that once again there is no limit to greed
not true. I am the "working population,"
myopic. He states in "Let's Try Discrimina-
and incompetence in our government.
and I would pay through the nose under the
tion for Once" [August 7] that "a family is
David Romano
present plan while those who worked little
one or both parents living with one or more
New York City
or not at all would get a free ride. The 40 per-
minor children
an institution organized
cent of us over 65 who worked and sacrificed
around nurturance of the young." Would it
Controlling destiny: Using Greg LeMond's
follow that a family ceases to be a family
winning of the Tour de France to try to il-
Address letters for publication to Letters Editor,
when its children reach the age of majority?
lustrate the timeworn loser's excuse, "He
U.S.News & World Report, 2400 N Street, N.W.,
Once again, the "obvious" is oblivious to the
was luckier than I" ["What Remains Be-
Washington, D.C. 20037-1196. Send letters by fax
complexities of real-world situations that of-
yond Our Power to Control," One Week,
to (202) 955-2685. Include full name, address and
ten fail to conform to our best attempts at
August 7], is so far off the mark as to be
daytime phone number. Letters may be edited.
cookie-cutter definitions. But excuse me if I
4
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
2. Mercedes
3. Honda
4. Toyota
5. Cadillac
6. Nissan
7. Subaru
3
8. Mazda
3
8. BMW
32
10. Buick
33
11. Plymouth
34.
12. Audi
35
12. Volvo
14. Hyundai
15. Mercury
IF BMW IS THE ULTIMATE DRIVING MACHINE,
MERCEDES-BENZ IS ENGINEERED LIKE NO OTHE
CAR IN THE WORLD AND VOLVO IS A CAR YOU CAN
BELIEVE IN, WHAT DOES THAT MAKE ACURA?
These days, it seems that nearly every luxury automaker has some sort of catchy slogan. They're
all quite impressive. And yet, if Mercedes-Benz is engineered like no other car in the world, and
Lincoln is really what a luxury car should be, how can BMW be the ultimate driving machine? Or
Saabs be the most intelligent cars ever built?
Before you try to unravel all of these promises and claims, there's one more we'd like you to
consider. A claim that's considerably more meaningful than all the others. And one that Acura has
been able to make every year since it was introduced: number one in customer satisfaction.
For the third consecutive year, Acura owners have put their automobiles at the top of the list
THE MOST SATISFYING CAR ON
J.D.Powerd
19
CUST
SATISFACT
1. Acur
©1989 Acura Division of American Honda Motor Co., Inc., Acura, Legend and Integra are trademarks of Honda Motor Co., Ltd.
*1987, 1988 and 1989 J.D. Power and Associates Customer Satisfaction Index with product quality and dealer service.
in the prestigious J.D. Power and Associates Customer Satisfaction Index survey. Which means
that people who own an Acura are happier with the quality of their cars and the dealers who sell
and service them than the owners of any other car, import or domestic, at any other price.
When you put your customers ahead of everything else, they do the same for you. Acura isn't
just the most satisfying car in America; it's also the number one selling luxury import in America.
And those are the most eloquent statements we can make.
Call 1-800-TO-ACURA for more information about the Acura
ACURA
Legend and Integra and the name of the dealer nearest you.
Precision crafted performance.
IE ROAD, THREE YEARS IN ROW.
Associates
39
MER
ON INDEX
We call this a spade.
As much as AT&T would like you
US Sprint® guarantees you 'll save a
When AT&T says they're the right
to believe more and more people are
minimum of 24% versus AT&T dur-
choice, maybe they're thinking of a
coming back to them, they're not.
ing evening hours.* And get similar
time when there was no choice.
In fact, since 1983, AT&T's market
savings on WATS, 800, FONCARD
Those times have changed.
share dropped from 91% to under 75%.
and Dial 1 services.
1-800-877-2000.
And no matter what they say,
Maybe those are a few of the rea-
AT&T's rates are still higher than
sons why 2.3 million more people have
anyone else's. Up to 37% higher, in
switched to Sprint already this year.
US Sprint.
comparison to SPRINT PLUS.SM In fact,
So let's call a spade, a spade.
Talk With The Best.SM
©1989 US Sprint Communications Company Limited Partnership. O US Sprint is a registered trademark of US Sprint Communications Company Limited Partnership.
*Based on evening interstate rates in effect 8/1/89 for SPRINT PLUSSM and AT&T Reach Out® Hour option.
U.S.NEWS & WORLD REPORT®
LETTERS TO THE EDITOR
Founder: David Lawrence 1888-1973
Chairman and Editor-in-Chief
Mortimer B. Zuckerman
don't attend my next family reunion-I'm
high level of obscenity. The fact is that war is
Editor
going to a household reunion instead.
now obsolete. But the leaders of the great
Roger Rosenblatt
Craig M. Severns
Executive Editor Michael Ruby
powers just don't know that yet.
Managing Editors
Seattle
Albert H. Dickey
Peter W. Bernstein, Christopher Ma
Editor, Special Reports Mel Elfin
Jeffersonville, Ind.
Director of Editorial Administration Kathryn A. Bushkin
Leo's notions of what constitutes a family
Art Director Rob Covey
are as narrow as they are obsolete. Yes, feel-
Neither patriotism nor economics is
Photography Director Mark Godfrey
Assistant Managing Editors
ings, commitment, love and bonding are
served by building a machine whose one
Gerald Parshall, Currents; Harrison Rainie, U.S. News
what really make a family out of what he ar-
John Walcott, World Report; Mary Lord, Business
virtue begs to be wiped out by relentless
Stephen Budiansky, Horizons; Avery Comarow, News You Can Use
rogantly dares to demean as a mere "house-
technology. Our weapons must be effective,
Gloria Borger, Brian Duffy, Jack Egan, Lew Lord, Gerson Yalowitz
Senior Writers
hold." Two gays or lesbians-raising kids or
but not with a sky-is-the-limit budget. If
Michael Barone, John Leo, Merrill McLoughlin,
petunias-who have committed their lives
Thomas Moore, Steven V. Roberts, Lynn Rosellini
Uncle Sam were as responsible with his
Chief of Correspondents Carey W. English
to each other are more of a family unit than
wallet as many of his citizens are with
Senior Editors: William F. Allman, Donald Baer, Betsy Bauer, Beth Brophy, Jerry
Buckley, William J. Cook, Susan Dentzer, Steven Emerson, Andrea Gabor, Joseph
many "households" in America where there
theirs, the U.S. would be in better military
L. Galloway, Ted Gest, Monroe W. Karmin, Michael Kiernan, Anne McGrath, Alvin
P. Sanoff, Kenneth R. Sheets, Jeffery L. Sheler, Pamela Sherrid, James Wallace,
is no love or security for offspring. We de-
shape. The Stealth bomber is the Emperor's
Kenneth T. Walsh, David Whitman, Leonard Wiener, Clemens P. Work. Chief
mand, as citizens and taxpayers subsidizing
Economist: Robert J. Morse.
new clothes and deserves to be put away.
Associate Editors: Robert J. Ames, Don L. Boroughs, Shannon Brownlee, Joseph
the legal and governmental system of this
Michael Driver
Carey, Betsy Carpenter, Peter Cary, Charles Fenyvesi, Steven Findlay, Liz Galtney,
Erica E. Goode, Stephen J. Hedges, Miriam Horn, Jim Impoco, Robert Kaylor, Art
country, equal standing as human beings
San Francisco
Levine, Louise Lief, Francesca Lunzer Kritz, Lisa J. Moore, Alicia Mundy, Andy
Plattner, Eva Pomice, James Popkin, Peter Ross Range, Amy Saltzman, Michael
and recognition of our family units.
Satchell, Joseph P. Shapiro, Joanne Silberner, Marc Silver, Douglas Stanglin, Vic
Sussman, Ronald A. Taylor, Terri Thompson, Daniel P. Wiener, Gordon Witkin.
Richard Anthony Rivera
Gals, too: Though women are severely un-
Domestic Correspondents: New York, Scott Minerbrook, Jeannye Thornton;
Atlanta, Sandra R. Gregg; Chicago, Paul Glastris; San Francisco, Peter Dworkin.
Chicago
derrepresented, the 28 seats they do hold, or
Foreign Correspondents: London, Robin Knight, European Senior Editor; Middle
5.2 percent of the 535 seats over all, in the
East, Richard Z. Chesnoff, Senior Correspondent; Paris, David Lawday; Moscow,
Jeff Trimble; Tokyo, Mike Tharp; Beijing, Dusko Doder; Latin America, Carla Anne
March of technology: I disagree with the
101st Congress are a record. Given this, cer-
Robbins (Miami).
Special Correspondents: Nicaragua, Mary Speck; Israel, David Makovsky; South
commentator quoted in "Beauty and the
tainly a more gender-neutral title was war-
Africa, Jim Jones; Kenya, Eric Ransdell; Philippines, Margot Cohen; Hong Kong,
Simon Winchester; South Korea, Peter Maass; El Salvador, Douglas Farah; Brazil,
Beast" [One Week, July 31] that "no ma-
ranted for your article regarding congres-
Geri Smith; Tunisia, Jihan El-Tahri; Canada, Bernard Simon; Germany, Michael
Farr; West Coast, Pamela Ellis-Simons. News Bureau Coordinators: J. Daniel
chine that beautiful [the B-2 bomber] should
sional assistance for constituent problems
Fein, Bill Wallack, Lillian F. Daniel.
be allowed to die." Whatever else they are,
Contributing Editors: Fouad Ajami, Harold Evans, James Fallows, Hirsh Good-
than "Your Guy in Washington" [August
man, Josef Joffe, John Keegan, Emily MacFarquhar, Richard Perle, Edwin Taylor,
modern warplanes are not things of beauty.
7]. Though you did mention Representative
Henry Trewhitt, Ben J. Wattenberg.
RESEARCH
The B-2 is ugly. The old P-38 was a thing of
Helen Bentley and Senator Barbara Mikul-
Director: Elizabeth Mueller Gross. Senior Economist: Robert F. Black. Reporter-
beauty, on the ground and in flight. Nothing
Researchers: Bruce B. Auster, Amy Bernstein, Sarah Burke, Lynn Anderson
ski, I doubt they see themselves as guys.
Carle, Sharon F. Golden, Marianna I. Knight, Nancy Linnon, Joannie M. Schrof, Jo
since can match it. And at $532 million a
Ann Tooley. Graphics: Johanna V. Boublik.
Prof. Kathryn A. Lee
NEWS DESK
copy, the B-2 brings the cost of killing to a
Spokane
Chief: David E. Pollard. General Editor: Robert G. Smith. Senior News Editors:
Edwin Albaugh, AI Ryan. News Editors: Elizabeth B. Brooke, Kenneth Campbell,
Robert O. Grover, Susan Burlant Vavrick. Research: Kathleen Phillips, Chief.
Proof Desk: Judith A. Shapleigh, Chief; Rex Byron Bell.
OPERATIONS
Director: Karen S. Chevalier. Technology Manager: Janie S. Price. Production
Manager: Diane B. Snow. Makeup Editor: Harriet Westfall. Composition
Specialists: Tim Byers, Donald B. Gatling, Patti N. McCracken, Cynthia A. Phelps.
Special Projects Coordinator: Priscilla Totten. News Assistants: Myke Free-
man, Chief; Alexander S. Holt, Howard R. Sewell, Jr.
ART STAFF
Senior Art Directors: Nanette M. Bisher, Wayne N. Fitzpatrick. Graphics
Director: Jeff Glick. Section Designers: Socorro Q. González, Janice Olson, Joan
Strong. Designers: Richard Gage, Susan K. Langholz, David S. Merrill, Rebecca
Pajak, Sarah Shaw, Gary Visgaitis, Matt Zang. Art Production Coordinator:
Sherri Roberts Lumpkin. Production Assistant: Leslie A. García. Graphics Lab:
Tony Brown. Administrative Assistant: Patricia J. Lute.
PHOTO STAFF
Associate Director: Winston Townsend. Senior Editors: Cotton R. Coulson,
Cheryl A. Magazine. Editors: Richard Folkers, Carol McKay, Mary O'Grady.
Assistant Editors: Marilyn Davids, Alice Gabriner, Shawn O'Sullivan. Special
Photo Editor, Paris: Katherine Kay-Mouat. Administrator: Ann Roberts. Picture
Collection Editor: Elizabeth Mullen. Photo Librarian: Robin J. Cook. Research:
William V. Clark, Dianne M. Jacko, Alexandra Korab, Dolores Morrison, Lana
Pelaez, Jeanne M. Rhodes. Photographers: Chick Harrity, Chief; Eddie Adams,
Charlie Archambault, Anna Clopet, Linda L. Creighton, Darryl Heikes, Kevin Horan,
Bill Pierce, Scott Thode. Photo Lab: Bill Auth, Chief; Beth A. Haggerty, Charles
Moroney, Charlene M. Spicer.
NEWS SERVICES
Editorial Business Manager: Susan C. Riker. Systems Manager: Jane E.
Kuppinger. Administrative Editors: Marybel L. Patrick, Cathy Roberts Sweeney,
Mary Jean Hopkins, Lynne Edwards, Jane Meade, Ainsley A. Perrien, Leslie
Carper, Marjorie McCagney. Library: Kathleen L. Trimble, Director; Kate Forsyth,
Assistant; Jamie B. Russell, New York Manager, Rose M. Atkinson, Anne Bradley,
CAPITOL ASSETS.
David L. Dennie, Judith A. Katzung, Gerson Martin, Nancy E. Miles, Leland Neville,
Ernestine Pauley, William Rafferty, Yvette Reyes, Toni H. Ritucci, Karima Selehdar,
Brent Short. Interviews: Ronald Wilson, Administrator; Cheryl D'Amico Drum-
mond, Assistant. Reader Service: Susan J. LeClair, Yvonne Samuels, Nick
Merlino.
There's one news analysis program considered "can't miss" by Washington officials.
Editor at Large David R. Gergen
The McLaughlin Group.
President and Chief Executive Officer
Among its chief assets are the wit and intellect of John McLaughlin, Eleanor Clift,
Fred Drasner
Fred Barnes, Morton Kondracke, Pat Buchanan and Jack Germond.
William Harris, Executive Vice President
Alice Rogoff, Senior Vice President-Finance
They provide insightful, often prescient, political commentary on the most up-to-
Jake Winebaum, Senior Vice President-Marketing
the-minute developments. Often with heated exchanges.
David L. Helsel, Vice President-Administration
William E. Nussbaum, Vice President-Manufacturing
So tune in to The McLaughlin Group. It's comprehensive, contentious and
Hilleary C. Hoskinson, Circulation Director
contagious.
Michael P. Presto, Retail Marketing Director
Michael J. Armstrong, Manufacturing Planning Director
Made possible by a grant from GE.
Joseph G. NeCastro, Finance Director
Sharon R. Sullivan, Ad Make-up Director
THE McLAUGHLIN GROUP
Richard C. Thompson, Senior Vice President-Publisher
Walter Buchleitner, Vice President-Ad Sales Director
Check your local listing for station and time.
Thomas Evans, Vice President-Ad Sales
Gregory Osberg, Vice President-Ad Sales
Mark MacDonald, Vice President-Ad Sales
James McEwen, Vice President-Ad Sales
Martin S. Bounds, Promotion Director
Deborah B. Farnham, Research Director
Charles J. Barrett, Ad Planning Director
We bring good things to life.
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
9
CURRENTS
A nation of hostages
where memory is a curse
W
ho is left to die in Beirut? After 14 years of civil war, the city has become a
dark jungle of blasted buildings and failed hopes. More than a million peo-
ple, Moslems and Christians alike, have fled, many of them marching
dusty, dangerous roads to the Israeli-dominated security zone in southern Lebanon.
And yet the rival militias are still able to find victims-600 dead and 2,000 wound-
ed during the last five months.
Who are these people, who survived for so long, and then finally got too close to
a random artillery shell on a hot August night? Their names are lost, but their fate
is clear: They are hostages to terror, as surely as Joseph Cicippio and the other
Americans seized in Lebanon are hostages. We have become so numbed by the
endless warfare that we barely hear the words on the news reports any more. They
run together, a jumble of familiar but meaningless sounds: "There was shelling
overnight in Beirut
six civilians were killed
a car bomb exploded
"
We
might as well be listening to a weather or traffic report: "Forty percent chance of
rain
the interstate highway is backed up
"
Like AIDS, the virulent disease that has poi-
soned Lebanon's bloodstream defies all known
'In Lebanon,
cures. Politics can solve some problems, but only if
rival parties come to have faith in the political pro-
that frail
cess itself, and in each other, even after years of
fabric of
combat. Their motives might be mixed-exhaus-
trust and
tion, economic self-interest, outside pressure-but a
consent, which
measure of mutual confidence eventually is essen-
tial. In his book of memoirs, In My Father's Court,
makes law
novelist Isaac Bashevis Singer recalls how his fa-
and politics
ther, an orthodox rabbi in Warsaw, would preside
possible, has
over communal disputes. When a judgment had
been rendered, all sides would grip the edge of a
been ripped to
clean white handkerchief to signal their agreement.
pieces'
In Lebanon, that frail fabric of trust and consent,
which makes law and politics possible, has been
ripped to pieces. Rivals are defined not by political
disagreements but by ethnic and religious divisions. And those rivalries have been
deepened immeasurably by the great curse of the Middle East, memory. Everyone
remembers a past injustice and yearns for revenge. Lebanon was carved out of Syr-
ia during World War II, largely to provide a place where Christians could predom-
inate, and they did for 30 years. But now Christians and Moslems, and their many
subsects, fight not for a share of power, but for total power. American officials,
searching for a solution to the hostage crisis, say the bazaar is open, negotiations
are possible. But American negotiators are usually so inept in such situations be-
cause they expect others to be both rational and straightforward. As places like Cy-
prus and Northern Ireland demonstrate so painfully, normal ways of resolving con-
flicts are all but helpless in the face of tribal blood feuds.
And yet elsewhere, the political process shows signs of revival. Ronald Reagan
was a modern-day Crusader, bent on ridding Nicaragua of the infidels. But neither
George Bush nor the four elected Presidents of Central America view Managua as
Jerusalem. "War is not the solution," insisted Oscar Arias of Costa Rica last week,
in announcing an accord to disband the Contras. And elections in Nicaragua,
scheduled for February, might actually produce some form of power sharing. In
Poland, two splinter parties said they would open talks with Solidarity, aimed at
ousting the newly elected Communist Prime Minister, Gen. Czeslaw Kiszczak.
But in Nicaragua and Poland, the combatants all belong to the same tribe, if not
the same party. And slowly, very slowly, they are starting to grip the edges of the
same handkerchief. In Lebanon, the rival chieftains would rather burn the hand-
kerchief and keep a whole nation hostage.
by Steven V. Roberts
Driven by terror. Residents (
10
U.S.NEWS & WORLD REPORT
AFP
loodletting that has turned their city into a jungle of blasted buildings and failed hopes. And yet, warring militias still find victims
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
11
We're committed
to building a car
insurance system
everyone can
live with.
People in many areas of the country feel angry about the cost of car insurance these days. We couldn't agree more.
At Allstate, it's been our history to do everything we can to hold the line on costs by attacking the source of what
drives them up. In fact, we've done more of this than any other company in our field.
We started back in the early 50's, helping to make better drivers out of new drivers by supporting driver's ed as a
standard high school course.
We created Tech-Cor Inc., a state-of-the-art research facility, which leads the way in the study of auto repair
methods, theft prevention, and safer damage-resistant automobile designs. We've fought for better bumpers and con-
tinue to support the 5 m.p.h. bumper as the minimum standard for all cars. And in experience with our own fleet
logging over 30 million miles, we ve proven the value and reliability of air bags and safety belts. These efforts have led
to cars that are now both cheaper to repair and safer to ride in.
Drunk drivers are involved in nearly 40% of all fatal traffic crashes. We want them off the road. And to that end we
are working with such groups as M.A.D.D. and the National Commission Against Drunk Driving, and have chartered
a program that asks people to act responsibly when drinking at sporting events.
We're also working with legislatures and law enforcement groups to stop insurance fraud and car theft. And we're
helping the public understand what they can do to safeguard their cars against theft.
But there's more to be done. Today Allstate is working with other insurance companies, consumer groups and
lawmakers to literally change the way the car insurance system works. The goal is to give you options for insuring
your car that you don't have now. Options that should lower car insurance rates and maintain coverages for millions of
people across the country.
Thanks to a lot of hard work, many new ideas are now coming into focus.
A member of the
We think they'll lead to a fair and lasting solution.
Sears Financial Network
If you like more information about our ideas for making insurance more
affordable, write to: Allstate Consumer Information Center, Public Issue Department 101,
Allstate®
P.O. Box 7660, Mount Prospect, IL 60056-9961, and we'll send them along.
You're in good hands.
© 1989 Allstate Insurance Company, Northbrook, Illinois
CURRENTS
WESLEY BOCXE-SIPA
THE LAW
The trial of an
embryonic issue
A
divorcing Tennessee couple's fight
over seven frozen embryos caught
the country's attention last week
and brought predictions that a landmark
court ruling was in the offing. But the
nation's 200 in-vitro-fertilization (IVF)
clinics don't have the luxury of sitting
idle while Blount County Circuit Court
Judge W. Dale Young struggles to de-
cide whether Mary Sue Davis, 28, or her
estranged husband, Junior Lewis Davis,
30, is to gain control over the fate of the
embryos-produced through in-vitro
fertilization. The clinics are setting firm-
er guidelines on what procedures to fol-
low in such circumstances, hoping to cut
legal battles to a minimum in a field
largely barren of precedent.
Are the Contras liquidado? The U.S.-
demobilization and voluntary repatria-
Most clinics now require couples to
backed Nicaraguan rebels-shown in
tion of as many as 10,000 Contras. But
sign elaborate consent agreements pro-
training, above-last week received an
the Contras say they won't return to
viding that their frozen embryos will be
eviction notice signed by five Central
economically distressed Nicaragua un-
donated anonymously to another couple
American Presidents, who agreed for the
armed unless convinced the Sandinistas
or for research, or be destroyed, in the
first time on a deadline (December 8) for
will honor promises of more democracy.
event of divorce, the death of either of
disbanding the anti-Sandinista forces in
The U.S. Congress earlier pledged nonle-
them or if they change their minds about
Honduras. Under the pact, a U.N.-ap-
thal aid to the rebels at least until elec-
IVF. The embryos would also be ear-
pointed commission is to supervise the
tions in Nicaragua next February.
marked for donation or destruction no
later than a certain date-usually the
45th birthday of the woman or 10 years
having embryos frozen. The technology
THE FAMILY
from the time the embryos were pro-
allows doctors to remove a batch of eggs
duced. In the Davis case, she wants to
in one surgical procedure and freeze
A new kind of
use the embryos in another attempt to
those not being used right away. The
become pregnant. He wants her barred
frozen eggs only need be thawed for an-
from access to them and would like
spouse in the house
other go at pregnancy if earlier tries fail,
them to stay frozen-at least for now.
sparing the women the need for egg ex-
The hoary greeting "How's the family?"
The who-owns-the-embryo issue has
traction surgery each time. This reduces
is giving way to Who's the family?" Last
gained urgency because an increasing
the cost by as much as $5,000 per proce-
week, New York Mayor Edward Koch
number of couples undergoing IVF are
dure. One in 4 couples undergoing IVF
gave bereavement leave to city workers
HANK MORGAN-RAINBOW
today has embryos frozen, a
whose "domestic partners" die. It is part
ratio expected to rise to 2 in 4
of a trend toward giving homosexual and
in the next two years. Over
unmarried couples perks once reserved
the next decade, experts pre-
for men and women with marriage li-
dict freezing could be a rou-
censes. A half-dozen cities have new laws
tine part of virtually all in-vi-
recognizing some rights for the unmar-
tro-fertilization procedures.
ried. Policymakers "are adopting a con-
Though Judge Young's de-
cept of family more in line with the way
cision will be closely studied in
people actually live," says Prof. Arthur
the medical and legal worlds,
Leonard of New York Law School.
it will be up to other courts and
The strongest such law is San Francis-
the state legislatures to resolve
co's, which lets those who "share one
the issue, a process that will
another's lives in an intimate and commit-
take years. Complicating mat-
ted relationship" file a declaration mak-
ters further, changes in state
ing them eligible for full benefits given to
abortion laws, following the
married spouses. New York State's high-
Supreme Court's Webster de-
est court recently said a homosexual can
cision diluting abortion rights,
inherit a rent-controlled apartment from
could affect IVF questions,
a longtime companion. If the new concept
too. Laws dictating that life
of family takes hold, the 2.6 million un-
begins at conception-the pro-
married heterosexual couples and un-
life position-would, in effect,
counted other groups may benefit. "Three
make destruction of frozen
nuns have been declared a family for
Crucible. Retrieving cryopreserved embryos
embryos illegal.
zoning purposes," notes Thomas Cole-
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
13
OurN
Security
The Subaru Loyale Wagon.
When you're traveling
securely through snow, rain
element when it's in the ele-
with precious cargo, you need
and touchy terrain. The kind
ments. And, with the impres-
the kind of security system
that's more popularly known
sive Subaru record of
that does a lot more than just
as the Subaru Loyale wagon.
reliability (93% of all Subaru
buzz at thieves.
The Loyale wagon, with
cars registered since 1979 are
You need the kind that
full-time four wheel drive, is a
still on the road*), this wagon
helps you navigate your family
wagon that's actually in its
could give you the assurance
C
Subaru of America, Inc. 1988. *R.L. Polk & Company Statistics, July 1, 1988. $See your local Subaru dealer for details of the warranty.
TODUE
System.
not only of a car for all seasons,
make Subaru the most popular
without jeopardizing your
but a car for many seasons.
station wagon in America.
financial security.
It is just this kind of
Happily, however, the
reassurance - now expanded
philosophy of Subaru isn't
1990 Subaru Loyale
to include a 36-month/36,000
peace at any price. It's peace at
mile, bumper-to-bumper
a low one. Which means you
We Built Our Reputation
warranty+ - that has helped
can now have mobile security
By Building A Better Car.
R.L. Polk & Company Statistics, YTD December 1987. Seat belts save lives.
CURRENTS
man of the Family Diversity Project in
Los Angeles, where traditional marriages
Wide wings. Some players have changed,
low supercarriers, American,
but six airlines hold 70 percent of the air market,
Delta and USAir, all are subjects
account for 44 percent of households.
the same as 10 years ago, before deregulation.
of takeover speculation. They
Yet drastic change will meet resis-
Carriers with the largest percentages of
have emerged from a decade of
tance. Opponents of the San Francisco
total revenue passenger miles
deregulation with the equipment,
plan have forced a referendum in Novem-
personnel, routes, hubs and fare
ber. The Washington-based Family Re-
United
16.3%
American
15.3%
structures necessary to ward off
search Council will fight the idea else-
1988
Delta
12.2%
and even stifle competition. Rela-
where. "The nuclear family is the central
Continental
9.6%
tively low fixed costs for labor and
building block of Western civilization,"
Northwest
9.5%
jet fuel and sophisticated comput-
argues the group's Gary Bauer. The ques-
Trans World
8.2%
er systems for maximizing yields
tion now is how far the bicoastal notion of
United
17.4%
from air fares have widened profit
a family will reach into the heartland.
American
12.8%
margins. The flying cash ma-
1978
Trans World
11.9%
chines have radically raised Wall
BUSINESS
Eastern
11.1%
USN&WR-
Delta
Basic data:
Street's assessment of their values.
10.3%
Air Transport
And the Northwest deal showed
Takeover weather
Pan American
9.3%
Association
that buyers don't need high-inter-
for the airlines
est junk bonds for financing; com-
profits they generate. Record earnings
mercial banks are willing to lend money at
last quarter for UAL Corporation, par-
much lower rates if the loans are backed
If only airlines paid frequent fliers in
ent of Chicago-based United Airlines,
by planes sold and then leased back.
stock-say, one share for every 10,000
encouraged Denver oilman Marvin Da-
As with Northwest, Davis may not
miles. That would enable customers to
vis's $5.4 billion cash offer, which last
gain his prize. A management buyout
get at least some benefit from a surge of
week sent UAL stock zipping up more
with some participation by employes
airline takeovers and takeover attempts
than $90, or 56 percent.
seems a better bet. Yet until the market
being spurred by higher ticket prices (up
Except for Northwest, which was just
turns sour or profits evaporate, the con-
15 percent in the last year) and the fatter
taken over for $3.65 billion, United's fel-
trol tower is on Wall Street.
THE NATIONAL ARCHIVES
In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scare heard amid the guns below.
We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flanders fields.
-"In Flanders Fields,"
by John McCrae
Ditched ideas. Trench warfare killed 19th-century idealism
idealism-a ruination seen nowhere
WORLD WAR I
and long-range artillery wreaked
more clearly than in the copious liter-
their havoc. The war of attrition, in
ature the conflict evoked.
Disquiet on the
which more than 12 million men
Britain's soldier poets set off for
were killed, soon led to bitterness and
Western Front
the Western Front with romantic no-
disillusionment. "When it was all said
tions of war, honor and glory. Early
and done, the war was mainly a mat-
on, Laurence Binyon wrote of the
ter of holes and ditches," wrote Brit-
With the thunder of the guns of Au-
war dead: "Age shall not weary them,
ish poet Siegfried Sassoon.
gust, heard 75 years ago this month,
nor the years condemn." And Rupert
It wasn't only despairing poetry
European powers plunged themselves
Brooke, who died of blood poisoning
that made World War I the last great
into a continental war for the first
on a hospital ship in 1915, could de-
war of words. The conflict came be-
time since Napoleon Bonaparte. By
clare: "Now God be thanked who has
fore the dawn of radio, newsreels and
the time the Great War ended four
matched us with His Hour, / And
television, when print was still the
years later, in 1918, Europe's old po-
caught our youth, and wakened us
dominant means of communication.
litical and social orders were not the
from sleeping." But such ideas met a
Says literary scholar Paul Fussell,
only edifices that had disappeared.
sudden death in the wet, cold trench-
"Today, we expect TV, not poetry,
World War I destroyed 19th-century
es where poison gas, machine guns
from wars."
16
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
YOUR CHILD IS WORKING
HARD TO PREPARE
FOR COLLEGE.
ARE YOU?
With college costs rising at such a rapid pace, it's
Projected College Cost For A Child Born Today+
going to take more than a high G.P.A. to get a
4-Year Degree in the Year 2006
degree. Financial planning to meet college educa-
tion expenses is essential.
$133,466
Consider that a child born today will probably
face college costs ranging from $52,000 for four
years at a public university to over $133,000 for
a degree from a private institution. As high as
these figures may seem, they don't have to put a
$52,361
college degree beyond your child's reach.
To help you prepare for your child's education,
ask for a free copy of the Franklin College Costs
Planner published by the Franklin Group of
Mutual Funds. You'll also receive some valuable
investment ideas for college savings.
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CURRENTS
MAO BELL
OPPRESSES
BOB KARP-AP
AT&T averted a strike by agreeing to an
innovative family-health-care package.
But the regional firms are taking a tough
WORKERS
line on health-care costs. "To compete in
future markets, they have to be more
competitive in labor costs," predicts Prof.
Wallace Hendricks, University of Illinois
telecommunications scholar. "They are
going to get leaner and meaner."
Today's highly automated telephone
network tilts the battle toward manage-
ment. So far, the primary inconveniences
are long waits for operator assistance
and delays for installations and repairs.
HIGHER EDUCATION
ON
STRIKE
AGAINST
N.J.BELL
LOCAL
IBEW
Have the halls of ivy
827
AFL-CIO
2%
grown too green?
NEW
JERSEY
Bankrolling a child through four years of
private college cost $19,000 on average a
decade ago. Today, the bite is a lot deep-
er-$47,000-and by the year 2000 it
may exceed $100,000. Parents are not the
only ones choking. Last week, the Justice
Labor hang-up. Strikers hit the bricks in Newark against New Jersey Bell
Department said it was probing possible
collusion in fee setting by elite schools.
TELECOMMUNICATIONS
national Brotherhood of Electrical
Educators blame both teachers and
Workers, and three others were negotiat-
students for tuition rises that the College
Why the Baby Bells
ing down to contract deadlines.
Board announced last week would aver-
The Baby Bells have reason to feel bold.
age 5 to 9 percent next school year.
are fat and sassy
The seven firms that operate 100 million
Institutions wage bidding wars for top
of the nation's 130 million phone lines
professors, sometimes doubling pay and
What a difference three years can make.
have outperformed Ma Bell since 1984,
offering perks to lure the best. Potential
In 1986, the regional phone companies,
earning combined profits last year of $8.4
students can be harder yet to please.
deprived of Ma Bell's protective em-
billion compared with AT&T's $2 billion.
"Today's applicants are astute shoppers,"
brace, secured labor peace by agreeing to
The seven enhanced their regulated mo-
says Gary Sojka, president of Pennsylva-
profit-sharing bonuses in lieu of wage
nopolies with regionally tailored special-
nia's Bucknell University. "They ask for
hikes. Today, the seven Baby Bells are
izations and branched out into real estate,
the number of writing tutors or whether
tougher bargainers. By early August,
computers and other unregulated fields.
we have squash courts." Some colleges
three of them had accepted strikes by
Meanwhile, AT&T took bruising losses in
even raise fees for appearance's sake.
157,000 members of the Communica-
long-distance service, equipment and
"The public has the misconception the
tions Workers of America and the Inter-
computer sales wars. Two months ago,
price is equivalent to educational quali-
THE BRAIN
convenient; it is downright
roadway traffic patterns, he
dangerous.
says, favor the clockwise pref-
Now, on the
Left-handers are nearly
erences of righties.
twice as likely as right-handers
Still, all is not black for the
other hand
to need medical attention for
left-handed. The trait has long
an accident at home, at work,
been associated with creativ-
Pity the left-hander. Not only
in sports or on the road, Stan-
ity-witness Michelangelo, Le-
do lefties bear a hefty load of
ley Coren of the University of
onardo da Vinci and Thomas
DONALD GATES FOR USN&WR
linguistic stigmas-sinister, af-
British Columbia found in sur-
Edison. Far more lefties than
ter all, comes from the Latin
veying 1,896 college students.
right-handers are believed to
for left, gauche from the
Ten percent of the lefties re-
have their language abilities lo-
French-but the roughly 10
ported suffering injuries while
cated in the right hemisphere
percent of mankind that uses
driving, for example, compared
of the brain, which is thought
the "wrong" hand must also
with 6 percent of righties. The
to be the seat of creative and
cope with the unwieldiness of
rub, the psychologist theorizes,
spatial skills. Nor does a left-
scissors, can openers and other
is that power tools such as
ward bias hold back people
gadgets designed with the
drills, band saws and lathes of-
who may wish to strut on the
"righty" majority uppermost
ten require lefties to make do
world stage. Alexander the
in mind. Now comes a study
with their less dexterous hand
Great, Charlemagne, Napo-
suggesting that the antileft bias
or to work in an uncomfortable
leon, Queen Victoria-and
of the world is more than in-
or hazardous position. Even
George Bush-would all agree.
18
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
"Isee you've switched
Vodkas, Vladimir"
"I see you are as perceptive
as you are beautiful, Natasha"
ICY
VODKA OF ICELAND
IMPORTED
E
ICY COLD. ICY CLEAR. ICY VODKA. IT'S SMOOTH AS ICE.
Vodka, 40% Alc. by Volume, Imported by Brown-Forman Beverage Co., Louisville, KY. © 1989
"WE MOVE HEAVEN AND EARTH
TO BRING TECHNOLOGY HOME."
CHARLTON HESTON FOR CONTEL
CONTEL
CONST
© 1989 Contel Corporation
At Contel, we've had years of experience managing NASA's sophisticated
satellite communications system.
And the things we learn relaying voice, video and digital signals from outer
space have a down-to-earth benefit too.
They help us bring technology to all our customers. So whether we're
planting fiber optic cable down south, or keeping upper Minnesota up to the
minute, we go out of our way. It isn't just good experience. It's also good business.
CONTEL
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We go out of our way. SM
CURRENTS
ty," asserts Kent Halstead of Research
Associates of Washington.
PEOPLE MAKING NEWS
No evidence has emerged that threat-
ens to make college administrators into
Man against the sky and the desert
prison trusties. Yet schools may face an
antitrust challenge to the longstanding
In the Fugnido refugee camp, home
practice of sharing data on scholarship
to at least 17,000 orphans of Sudan's
offers, which is designed to limit aid to
civil war, the roar of airplane engines
MARTY LAVOR
real needs. It would be ironic indeed if
is one of the only signs of hope. The
costs then rose further as schools began
children heard that sound one time
competing for top students by giving gen-
too few last week. The plane of Tex-
erous grants to those not needing them.
as Representative Mickey Leland,
Parents do have cheaper options. Four
friend of hungry people everywhere,
years at a public college costs less than
never arrived at the camp. A dozen
$25,000 on average, a sum that makes
aircraft spent four unsuccessful days
tax-supported classes seem a bargain.
searching vast stretches of the Ethio-
pian terrain for a sign of the chair-
man and founder of the U.S. House
GUINNESS PLC, LONDON
Select Committee on Hunger and his
13 companions. Back in the U.S.,
Leland's pregnant wife, congressio-
nal staff and fellow hunger activists
clung to hope alone.
House of Wang
Leland. A Sudanese stopover
The father started out with few ad-
vantages. At age 21, just off the boat
Paul's pictures
from Shanghai, he survived on $100
To almost any other art collector, the
BREWING
a month. The son started out with
sale of 42 works by Picasso, van
The crowned heads
every advantage; his father had be-
Gogh, Degas, Manet and others
come a corporate giant, one of the 10
would represent total liquidation. To
of Britain in a can
richest in the United States. By age
philanthropist art collector Paul Mel-
31, the son made the board of direc-
Ion, the pieces are but "a very small
tors. At 36, he took over as presi-
selection." The 82-year-old, whose
Just as Othello needs Desdemona, a dark,
dent. But for all of his breaks, Fred-
donated artworks are numbered in
almost muddy pint of Guinness stout
erick Wang never attained the
the tens of thousands, assured the
must have its white, creamy head. Publi-
heights of success reached by his
National Gallery and other art cen-
cans long held a monopoly on the thick
father, An Wang. Last week, after
ters that he will continue his tradition
foam, using the spumous keg tap, backed
Wang Labs posted a $424 million
of support. One sale from the group is
by a humongous patent, including one
loss for fiscal year 1989, young Fred-
expected to fetch $85 million, the
full page on the qualities of a good froth.
erick resigned as president.
Now, Britain's 7 million Guinness drink-
highest presale estimate ever.
ers no longer need go to the pub to savor
the perfect marriage of dark and light.
After spending four years and $8 mil-
lion, the onetime Dublin-based brewer
RICHARD HOWARD
has introduced the 14-ounce keg in a
can. Draught Guinness opens and pours
much like any other can of beer. The
difference is deep within, where the brew
surges through the tiny holes of a plastic
tap mounted in the can on the bottom,
sending up a velvety froth of minute
bubbles. Nitrogen provides the pressure,
unlike most beers, which use CO2.
The firm has no plans to export the
technology to the U.S., where dark beer
has yet to catch the fancy of the masses.
But some Americans could benefit any-
way. Unlike the usual lukewarm pints
that U.S. visitors must endure, if the tiny
tap is to work its magic, Draught Guin-
ness in a can must be served cold.
Currents contributors: Steven Findlay, Sandra R.
Gregg, Jim Impoco, Louise Lief, Ted Gest, Clemens
Frederick and An Wang. The father was too tough an act to follow
P. Work, Ronald A. Taylor, William F. Allman, Don
L. Boroughs, Leslie Viney
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
19
WASHINGTON
WHISPERS
Sheikdown. Israel videotaped its exten-
Israel shows video
were given Senior Executive Service ap-
sive interrogation of Sheik Abdul Karim
pointments, paying up to $80,000 a year,
Obeid, the Hezbollah leader abducted
from his home in Lebanon, and has
of sheik interrogation
and will serve until December 31 as spe-
cial consultants to the agencies they pre-
shown the tape to top U.S. officials.
Obeid, who is being kept in a windowless
President encounters
viously ran, even though they have al-
ready moved back to their hometowns in
room north of Tel Aviv, is said to have
Angst of August
California and Colorado. Moreover, Lu-
revealed incriminating details of Iranian
jan allowed them to charge their moving
participation in the kidnapping of Lt.
Guess who is coming
expenses to the government, a privilege
Col. William Higgins and disclosed the
accorded only when the government re-
names of key members of the Hezbollah
to the bar mitzvah?
locates an employe from one federal job
network as well as orders and payments
to another. Burford received $12,900,
by officials in Teheran for specific acts of
Dunkle $11,298 and Mott $1,956. Lujan
terror. Israeli authorities say Obeid was
says he approved the arrangement for the
so cooperative in telling them what they
Getting to know you. Vice President Dan
trio to allow his department "to tap their
wanted to know that they intend to use a
Quayle has developed a new interest in
collective expertise."
threat to make public the tape as a bar-
Jewish ceremonies. In his 12 years in
gaining chip in negotiations for the re-
Congress, Quayle had little contact with
lease of Western hostages.
Indiana's small and overwhelmingly
We mean business. Washington is not
Democratic Jewish community. Now,
wasting any time in trying to impress
Jewish leaders say he is turning up at bar
Toshiki Kaifu, the new Japanese Prime
Bush's "defining point." His approval
mitzvahs and other functions. The Veep
Minister, with its determination to force
rating remains extraordinarily high, ap-
also plans to visit Israel later this year.
Tokyo to lower nontariff barriers. Com-
proaching 70 percent. His staff believes he
Could politics possibly be involved? Ban-
merce Secretary Robert Mosbacher is to
has passed "the defining point of his ad-
ish the thought. Explains one host: "The
fly to Tokyo next month to tell Kaifu,
ministration." And even his critics find it
purpose is simply to get acquainted.
Japan's third head of government in the
hard to fault his adroit handling of this
past three months, that despite the con-
month's hostage crisis. Yet George Bush
Taylor
Jones
tinuing political crisis in his country the
is a worried man. Friends who have
Bush administration means business in
talked with the President recently say he
its demand for the removal of so-called
feels his current popularity is shallow and
structural impediments to the importa-
could easily dissipate with any misstep in
tion of more goods and services from the
the delicate hostage situation. At home,
United States. In 1988, Japan ran a $52
Bush is said to feel vulnerable for having
billion surplus in its trade with America.
proposed bold domestic initiatives-such
as a manned mission to Mars and im-
proving air quality-without suggesting
Fame of "The Rose." The presidential
the means to pay for it all. "He sees
aide most White House staffers love to
problems coming in the fall," says one
hate is a 63-year-old grandmother from
Bush pal, "but he doesn't have any idea
Florida named Rose Zamaria who over-
how to deal with them right now.'
sees perks, parking and the staff budget.
"The Rose," as she is known in the West
Wing, pinches presidential pennies for
The uncollectibles. With the savings and
Bush the way the legendary Hugh
loan rescue finally under way, U.S. offi-
"Cousin Cheap" Carter, Jr., pinched
cials predict the next candidate for fed-
them for his tightfisted cousin Jimmy.
eral bailout will be the Farmers Home
Since coming out of retirement to rejoin
Administration, $24 billion in the red
TAYLOR JONES
George Bush, who had been her boss on
and still hemorrhaging. The FmHA
Capitol Hill when he was in Congress,
wrote off $1.8 billion in delinquent loans
Zamaria has clamped a lid on spending
in 1988, and insiders suggest that during
Vice President Dan Quayle
for everything from power lunches to
the next three years the agency will have
Cordially invited
power beepers to the dispensation of
to declare $8.7 billion worth of farm
presidential tie clips and key chains. Her
loans uncollectible. To stanch the bleed-
Bonus for bureaucrats. It might be called
latest ploy-reducing communications
ing, Agriculture Secretary Clayton
the golden handshake, government-style.
expenses at Kennebunkport by eliminat-
Yeutter wants to tighten lending stan-
In a grand gesture of benevolence, Interi-
ing internal phone lines-has infuriated
dards and boost interest rates, some of
or Secretary Manuel Lujan, Jr., bestowed
normally tranquil White House stenog-
which have been negotiated at rates as
unusual farewell bonuses on three de-
raphers. They argue that their work re-
low as 1 percent. But proposed changes
parting agency directors: Robert Burford
quires phones in their rooms, but the
must undergo scrutiny by Representa-
of the Bureau of Land Management,
odds favor Zamaria, whose most casual
tive Jamie Whitten of Mississippi, the
Frank Dunkle of the Fish and Wildlife
remarks are interpreted as commands.
powerful chairman of the Appropria-
Service and William Penn Mott of the
For example, when she recently men-
tions Committee and senior member of
National Park Service. The three, who
tioned that blueberry muffins served in
the House, for whom low-interest farm
came to Washington in the mid-1980s,
the mess seemed to have "too much sug-
loans are an article of political faith.
ar," less-fattening bran muffins quickly
Yeutter has a tough row to hoe.
Edited by Charles Fenyvesi
appeared on the menu.
20
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
The check really is in the mail.
SAMP
SAMP
SAMP
Sequence No.
26-17028062 000417
000418
090
04/26/89
17028062
Draft No.
174
17028063
Distribu
185
PAY 763.48
17028064
Draft
Drah
26-17028064 000419
68/98/40
Drah No.
SSH
PAY
PAY 952.25
26
No.
Control
600379-12-10
05259686413
THOUSAND FIVE HUNDRED EIGHTY NINE DOLLARS AND 20 CENTS
Control
CENTS
409253-07-621
he
58
Control
AND
DOLLARS
Identification No.
Payer
0036942891
THREE
Identification
SIXTY
Come
THOUSAND NINE HUNDRED FIFTY TWO DOLLARS AND 25 CENTS
CALLAN
BANK
Altha insurance Company Agent Payer
DOWLING
GALLACHER
SNIMMOO
ML
/tna
I I
Name
Payable
Employee
© 1989 AEtna Life and Casualty Company
Very few things in life are more frustrating than waiting around for
money that someone owes you.
Particularly if that someone is an insurance company.
Unfortunately, it's by no means unusual to wait months on end for
an insurance company to pay up.
At Aetna, we think that's unconscionable.
So at our Employee Benefits Division, we've reduced the entire
health insurance claims process to a mere nine days. Despite the fact
that we receive nearly a quarter-million claims a day.
Of course, you don't get results like this by waving a wand. At Aetna,
it takes a national on-line claims network, three mainframe computers,
32 automatic collating machines, five Zip Code pre-sorters, and 225
dedicated people dedicated solely to getting those checks in the mail.
Still, we find the extra effort pays. We like to think that such un-
usual promptness is why so many companies are so
quick to employ us for their employee benefit programs.
/Etna
And why they're so slow to leave us.
AETNA. WE GIVE NEW MEANING TO THE WORD DILIGENT.
U.S.NEWS
The drug-money hunt
Narcotics warriors target dealers' cash as well as their stash
T
he war on drugs is undergoing a
gling bad cash with good and infecting
ty, now signed by 67 nations, calls for all
subtle but far-reaching shift. Amer-
many who touch it along the way. The
countries to make money laundering a
ica's many-faceted drug-enforce-
physical connection between money and
crime and adopt measures allowing for
ment attack is gradually broadening its
drugs is so pervasive that random lab
confiscation of drug-related assets. The
focus from the traditional targets of nar-
tests show virtually every U.S. bill in
need to ferret out dirty traces in the $615
cotics shipments, traffickers and users to
circulation bears microscopic traces of
billion daily exchange of wire transfers
the increasingly critical element that
cocaine. That amounts to 12 billion bills
in and out of the U.S. is made especially
keeps the whole illicit system moving:
worth about $230 billion.
urgent by Europe's race toward financial
Money. Federal authorities now believe
integration in 1992, which will allow
that damming the flow of drug money
Stanching the flow of dirty dollars
both clean and tainted money to flow
that passes through myriad laundering
The fight against laundering has just
even more freely across all Common
schemes can cripple a trafficking net-
now risen to the top of the international
Market borders.
work just as effectively as arresting deal-
agenda. At last month's summit in Paris,
Gripped by the notion that money is
ers and seizing narcotics. "The old
President Bush and other leaders of the
the drug dealers' lifeblood, the Bush ad-
school was bodies and kilos," says Drug
Group of Seven industrial nations an-
ministration this month launched a series
Enforcement Administration agent Al-
nounced plans for multilateral efforts to
of antilaundering initiatives. Treasury
bert Latson. "But when you seize mon-
stanch the flow of drug dollars through
Secretary Nicholas Brady urged drug
ey, you're seizing the trafficker's end
the global financial vascular system. A
czar William Bennett to form a "national
product, his profits."
joint financial-action task force will con-
money-laundering control center" as part
Drug money is the invisible scourge of
vene next month in France to follow up
of his new national drug strategy due to
narcotics-ridden America. Tainted dol-
the new United Nations Convention
be unveiled September 5. The NMLCC
lars course through the nation's banking
Against Illicit Traffic in Narcotic Drugs
would coordinate the complex, often ar-
arteries like a polluted stream, commin-
and Psychotropic Substances. The trea-
cane laundering investigations that now
La Mina: The $1 billion laundering "mine"
1
2
THE SCHEME. La Mina was the largest laundering operation
diamond district. A federal agent watched from a stairwell.
ever uncovered, washing more than $1 billion in three years
through a ring of Los Angeles-based Armenian jewelers. This
2
THE PACKAGER. A launderer packed the hundreds of
is the federal government's account of how all the money
thousands of dollars in small cartons, swathed in duct tape
landed in the coffers of Colombia's notorious Medellín cartel.
and labeled as jewelry. Then, he telephoned an Armenian
jewelry front in Los Angeles and announced his shipment in
1
THE COURIERS. The money trail began with cash deliveries
code ("kilos" meant $100,000 and "grams" meant $10,000).
by Colombian couriers to bogus jewelry fronts in Manhattan's
He did not bother with amounts less than $10,000.
22
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
fall into the jurisdictions of dozens of
expanded the federal government's abili-
the way up, the unlikely pair were the
federal, state and local agencies. Atty.
ty to go after laundering schemes. Assis-
equivalent of "Miami Vice's" Crockett
Gen. Dick Thornburgh called for the
tant U.S. Attorney Wilmer Parker III
and Tubbs as they penetrated the cash
formation of a Justice Department office
reached a plea-bargain agreement in a
trail of Colombia's notorious Medellín
of international affairs to handle the ris-
precedent-setting case in Atlanta federal
cartel. Díaz met with a top cartel laun-
ing tide of overseas laundering cases,
court, which calls for a foreign-owned
derer, Eduardo Martínez, in the very
among other things. In Mexico, Secretary
bank to plead guilty this week to laun-
heart of the Banco de Occidente, where
of State James Baker urged the Carlos
dering drug money. With a $5 million
"they treated him like the president of
Salinas government to make money laun-
penalty, it is the largest laundering con-
the bank," reported Díaz. The under-
dering an extraditable offense.
viction ever obtained by prosecutors
cover duo then lured Martínez to anoth-
Yet America's drug warriors know
against any bank and the first time that
er meeting at a posh hotel on the Carib-
they are only beginning to nudge at the
any foreign bank without any operations
bean island of Aruba. They became
edges of the problem. Some law-enforce-
in the U.S. has been convicted. At the
friends over drinks and dinner in a $500-
ment experts estimate that all laundering
Panama branch of Colombia's Banco de
a-night suite while discussing laundering
prosecutions, though on the upswing,
Occidente, two officers were caught
techniques. Martínez never knew he was
touch no more than 2 percent of the
washing more than $10 million. Not
being secretly videotaped.
money being washed. For all the new
only were the bank officers indicted, so
Once the evidence became over-
international cooperation, the millenni-
was the bank.
whelming, prosecutor Parker moved ag-
um is not quite at hand. Luxembourg,
gressively to secure a new level of coop-
Liechtenstein, the Netherlands Antilles,
The Crockett and Tubbs takedown
eration by the governments of Canada,
the Cayman Islands, Panama and Uru-
The scope and subtlty of the probe is a
Switzerland and Germany and that led
guay remain relatively safe places for
good example of how hard it is to make
to the freezing of $82 million in Banco
dirty money, federal officials argue. "It
money-laundering cases and how com-
de Occidente's deposits-half the bank's
only takes one or two countries agreeing
plex laundering schemes can be. The
total. Even though charges against the
to be renegades, and you have an oppor-
players in this undercover game were
parent bank in Colombia were dropped,
tunity to pollute the entire system," says
John Featherly, a pudgy New York Irish
the freezing of funds had the salutary
a knowledgeable U.S. Senate staffer.
DEA agent in the middle years, and his
effect of forcing the bank into a plea
Still, some new crackdowns on laun-
sidekick, César Díaz, a dapper young
bargain. Under a never-before-used por-
dering are already paying off. The 1986
Cuban-born DEA agent who was raised
tion of the 1986 law, the U.S. govern-
Money Laundering Control Act for the
in Miami. Posing respectively as Jimmy
ment hopes to share the $5 million pen-
first time made money laundering itself a
Brown, a sometime Mafia money mover,
alty money with the cooperating foreign
crime, and last fall's omnibus drug law
and Alex Carrera, a Hispanic hustler on
governments. This is a breakthough that
STEVE McCRACKEN FOR USN&WR
3
4
3
THE CARRIERS. Armored-car couriers picked up the cash,
diamond district, the cash was sorted and counted on a high-
thinking it was jewelry. They transferred it to a plane for
speed machine. It was then rebundled for delivery to several
overnight delivery to Los Angeles. One day, a box broke open
banks. Members of the laundering network frequently argued
in the back of an armored car, revealing thousands of dollars
over money counts and late shipments. Counting such huge
"packed like bricks." The armored-car company notified
volumes of cash was so tedious that one launderer often laid
federal agents.
his head down on layers of cash to take a пар. Federal
investigators set up a video camera in the ceiling and made
4
THE COUNTERS. In a secluded room in the Los Angeles
extensive tapes of the scene.
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
23
U.S.NEWS
is bound to get the attention of countries
La Mina was based in Montevideo,
even cash that has been mixed with un-
that until now have been ambivalent
Uruguay. But it employed a cosmopoli-
tainted money and cannot be traced
about helping zealous U.S. prosecutors.
tan bazaar of Armenians, Turks, Arabs,
back to the scene of the crime. Washing
The Banco de Occidente plea agree-
Syrians, Vietnamese and Latin Ameri-
cash is crucial to the drug kingpins be-
ment also sends a dramatic new signal
cans working mainly in the U.S. Two
cause of the enormous sums generated
to banks at home and abroad that even
jewelry firms operated by Armenian im-
by sales of narcotics, often estimated at
the actions of a few corrupt employes
migrants in the Los Angeles diamond
more than $100 billion annually, almost
can be a costly oversight. "The word is
district were cornerstones of the scam,
as much as the revenues of General Mo-
out that if you launder, the U.S. can
secretly counting and depositing hun-
tors, the world's largest corporation
prosecute. It has absolutely terrified ev-
dreds of thousands of dollars in local
(1988 sales: $123 billion).
ery bank in South America. They're
banks every day for a 3 to 7 percent
Laundering schemes function as an
shook," says Jerome Froelich, Banco de
commission. La Mina's unique method,
alternative underground banking system
Occidente's attorney.
according to prosecutors, was to move
for the narcotics industry, moving mon-
huge sums of money through the legiti-
ey around the world the way regular
The largest laundry ever
mate banking system. That generated a
banks do it for legitimate businesses. Co-
In size, the Atlanta case pales by com-
detailed paper trail of federal currency
lombian drug bosses need large and
parison to the largest laundering ring
transaction reports, which are required
steady remittances to maintain produc-
ever uncovered in the U.S. The ring,
when more than $10,000 in cash is de-
tion and distribution, just the way a for-
called La Mina, which means "the mine"
posited. But the launderers attempted to
eign car manufacturer must repatriate
in Spanish, was smashed in February by a
legitimize this banking record by creat-
its U.S. profits to keep building cars for
four-agency federal investigation called
ing among themselves a corresponding
the U.S. market. One accused trafficker,
Operation Polar Cap that led to 127
set of intramural gold trades, sometimes
Juan Francisco Pérez-Piedrahita, told an
indictments. La Mina is alleged to be a
real, sometimes bogus.
informant that $400 million in drug cash
multicontinent scheme that authorities
The image of "laundering" is apt for
once rotted in a California basement be-
say sluiced $1 billion in dirty dollars in
the process that turns drug money into
cause Medellín-cartel boss Pablo Esco-
three years through a floodgate of U.S.
something indistinguishable from other
bar could not export it quickly enough
and foreign banks, jewelry fronts, gold
legitimate assets. Those who launder
through a laundering operation. The tale
brokerages and international wire trans-
money pass illegally obtained funds
is probably apocryphal, but authorities
fers (see graphic). The cash was finally
through some mechanism so that it
treated it as a vivid illustration of the
wrung dry in the coffers of Colombia's
comes out looking clean, or legal. The
dimensions of the traffickers' laundering
notorious Medellín cartel, which narcot-
money can be transformed into some
needs-and their vulnerabilities.
ics experts estimate supplies 80 percent of
other kind of asset, such as property,
Laundering has bred a new kind of
the cocaine consumed in the U.S.
foreign currency, cashier's checks or
white-collar criminal. The quick-bucks,
5
6
5
THE MONEY. The Armenian jeweler and his accomplices
ordered the banks to wire-transfer hundreds of thousands of
delivered satchels of money to several Los Angeles banks-the
dollars by computer to gold brokerages and to banks in New
first stage of laundering. One bank became suspicious when
York. This laundered the money again, because it changed
one jeweler's account took in $25 million in cash in three
banks and accounts. Some of the money was then transferred
months. Apparently, the jewelers thought their paper trail
to a London commodities broker for gold purchases-another
would be covered by trading gold with one another.
wash cycle. Finally, the funds were wire-transferred to drug-
cartel bank accounts in Panama and Uruguay controlled by
6
THE TRANSFERS. The day after each deposit, the launderers
agents of the Colombian drug cartels.
24
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
clean-hands allure of the trade some-
cans suddenly began showing up in the
banks seem to be diligently complying
times leads otherwise upstanding citi-
economically depressed area. Authori-
with the law, say federal investigators.
zens to the shady side of the law. "The
ties then discovered that almost $10 mil-
But some officials argue that banks
people we're focusing on now are re-
lion in Mexican drug money was being
should take more-aggressive steps to
spectable-type people who live in the
laundered through a score of banks and
identify and report potential launderers,
suburbs, talented people with business
used for purchases of 5,000 acres of
as the Wells Fargo Bank of Los Angeles
savvy," says DEA financial specialist
ranch land. In Roma, Tex., drug-en-
did in the La Mina case when a clerk
Doug Ross. Then Georgia Representa-
forcement officials contend that an in-
reported suspiciously high deposits.
tive Pat Swindall was in 1988 secretly
flux of drug cash into the dust-blown
Banking experts argue that this is an
taped by undercover agents discussing a
border town has distorted its tiny econo-
improper role for a financial institution.
laundering scheme designed to finance
my and driven land prices way up.
"It puts an impossible burden on the
an $850,000 cash mortgage on his $1.4
banks, which don't have the expertise to
million home. He was convicted this
The bank connection
make that judgment," says John Villa, a
summer of perjury. Former California
Banks are the most frequently used
Washington attorney who is an expert
state budget director Richard Silber-
vehicles for money laundering. The in-
on banking crime.
man, now a San Diego businessman,
ternational financial system is a com-
American drug warriors note that ev-
was arrested in April while negotiating
puter-driven labyrinth of instantaneous
ery time they uncover a new laundering
to launder $1.1 million in purported
electronic transfers ideally suited for
method, their foes seem already to have
drug cash.
launderers. In 1988, the Clearing House
mastered another, harder-to-penetrate
Wherever there is a drug problem,
Interbank Payments System (CHIPS),
way to exploit the global banking sys-
there is money laundering. In Washing-
the unique U.S.-based wholesale-elec-
tem. "Every day, they find a new tech-
ton, D.C., with one of the most violent
tronic-transfer network in and out of
nique," says David Binney, chief of the
drug cultures in America, three brothers
the U.S., processed 33.9 million interna-
FBI's drug section. "They're limitless in
operating a luxury-car dealership were
tional transfers with an aggregate value
the ways they can expatriate that money.
charged last month with laundering
of $165 trillion-plenty of cover for an
Trying to stay abreast of that-not
drug funds through the old-fashioned
average laundering ring. Because their
ahead, just abreast-is a difficult task for
technique of "smurfing"-breaking
volume is so great, wire transfers are
law enforcement." Yet authorities insist
large cash deposits into chunks of less
virtually impossible to saddle with the
they will press into this new area with
than $10,000 each to avoid filing a cur-
same federal reporting requirements that
more vigor because it lets them squeeze
rency transaction report. Even without
are applied to cash transactions.
drug traffickers from the profit side, the
drugs, small-town America feels the ef-
Since a sensational 1985 case against
place where it hurts them the most.
fects of drug cash. In depressed Atoka,
the prestigious Bank of Boston for not
Okla. (pop. 3,409), free-spending Mexi-
filing currency transaction reports, most
by Peter Ross Range with Gordon Witkin
STEVE McCRACKEN FOR USN&WR
London
Los Angeles
0
New York
Miami
7
THE GLOBAL TRADES. La Mina's grand plan called for ill-
PANAMA
gotten cash to jump countries and continents in a series of
COLOMBIA
computer flashes. Money transfers designed to get drug
proceeds from the streets of America back to the drug-
producing cartel were masked by shipments of bullion in a
circular gold-trading scheme. At first, gold was shipped from
a Uruguayan exchange house to a Florida gold refiner. It was
then traded to the Los Angeles jewelers, who sold it back to
7
the original Uruguayan company that had started the
transaction. In effect, it was a closed system. The Uruguayan
exchange house "lost money" on the trades because it bought
back the gold at a price higher than it had sold the gold. But
that did not matter, because the exchange house was raking in
hundreds of millions in drug profits. After federal
URUGUAY
investigators tracked the scheme for some time, they noticed
that the traders often made their transactions entirely on
paper and did not even bother shipping the gold. But by then,
agents had hundreds of hours of video and audio tapes.
25
U.S.NEWS
JOHNNY CRAWFORD-ATLANTA NEWSPAPERS
Forward march. Gen. Colin Powell rides taller as he reviews the troops at Fort McPherson, Ga., his command before his new job
Breaking barriers in the barracks
share of the most dangerous and dirty
incidents and harassment in the services
A black man and a white
jobs until President Harry Truman de-
still surface from time to time. And,
woman show that the armed
segregated the armed forces in 1948.
notes Ruffin, "the promotion process is
"Since that time, the opportunities for
not totally free of racial subjectivity. But
forces still lead the pack
blacks in the military have been better
it's a lot less of a factor in the military."
in promoting social change
than in civilian life," says David C. Ruf-
A "sea change." Indeed, today, blacks
fin of the Joint Center for Political Stud-
hold more management positions in the
W
hen it comes to social progress,
ies in Washington. "You could make
military than they do in any other sector
the warrior-dominated, tradi-
general or admiral, whereas you couldn't
of American society. In the Army, long in
tion-oriented, rigidly ruled
rise to become CEO of a corporation."
the forefront of minority recruiting and
armed services are among the best places
Minority advancement has continued
advancement, blacks have risen from con-
to find enlightenment. That was dramati-
to grow steadily, especially since the
stituting 3.3 percent of the officer corps in
cally demonstrated last week when a
Vietnam War. In 1969, only 2.1 percent
1968 to 10.7 percent last year-twice the
black man and a white woman were ap-
of officers in all services were black. Ten
proportion in the Air Force and Marines
pointed to high-prestige, high-visibility
years later, the proportion had doubled,
and three times that of the Navy. Eighteen
posts never held before by persons of
and by 1989 it had tripled to 6.6 percent,
years ago, there were only two black
their race or gender. The black man is
while the representation of all minority
generals. Now, there are 37. "It's really
Army Gen. Colin Powell, a 52-year-old
races in the officer corps had risen to
been a sea change since the days when I
son of Jamaican immigrants who was
11.2 percent. To be sure, reports of racist
came in," Powell said recently. But it may
named by President Bush to be the next
well be the enlisted ranks
NINA BERMAN-SIPA FOR USN&WR
chairman of the Joint Chiefs of Staff, the
that have provided the big-
top job in the uniformed military. The
gest lift for minorities and
white woman is Kristin Baker, a 20-year-
the underprivileged. The
old self-described "Army brat" who was
chance for a steady job, gen-
chosen First Captain of the Corps of
erous health and education
Cadets at West Point. Baker says that she
benefits and the opportuni-
was chosen to oversee her 4,400 fellow
ty to compete fairly and
cadets purely for her abilities and by an
command others regardless
Army that doesn't discriminate. "I really
of race have given many
think it's an individual thing. A good
minority youngsters the
woman is going to go places. Just as a
self-respect they could not
good male is," she told U.S. News.
find in the outside world.
To many who serve in the military
Powell knew this when
and study the institution, Baker's words
he left his South Bronx
ring true. But that was not always the
melting-pot neighborhood
case. Blacks held a disproportionate
Captain their captain. Kristin Baker leads at West Point
in 1958 to join the Army.
26
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
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U.S.NEWS
Wounded once in Vietnam, later com-
manding an infantry battalion and an
airborne brigade, he advanced to become
BUSH IS WARY AND HOPEFUL ABOUT THE HOSTAGES
the fourth black to reach four-star rank
in the armed services. In 1983, Defense
Beware bad deals at the bazaar
Secretary Caspar Weinberger tapped
Powell, who was then in the Pentagon,
n the 13 years since 1976, only
Americans and has begun exercising
to be his military adviser. Four years
258 days have passed when
influence through Syria, a client
later, Powell was asked by President
Americans were not held hostage
state, and through Iran. In U.S.
Reagan to join the National Security
by terrorists somewhere in the
Council staff, and he succeeded Frank
eyes, the Soviets are being helpful
world. Since March, 1985, not a day
but will not be a decisive factor.
Carlucci as national-security adviser in
has passed without an American in
The United States has also begun
November, 1987. Powell is credited with
captivity in Lebanon. Terror is now
shifting toward a more flexible
helping to rebuild the NSC after the
woven into national life.
Iran-Contra debacle. He is, however,
stance toward Iran, partly because
Yet, as the sense of immediate
of new hope for rapprochement and
known to have been heavily involved in
crisis eased over Lebanon late last
partly because George Bush can try
planning Reagan's failed attempts to
week, U.S. experts in and out of the
approaches Ronald Reagan could
oust Panama's Gen. Manuel Noriega.
Bush administration began gingerly
not consider. Though Iran is no lon-
Heading for stardom. Younger than
talking about the prospect of an
ger as pivotal as in the cold-war
most of the 30 other contenders he leap-
end to the hostage drama. The ba-
period, the U.S. would like to re-
frogged, Powell lacks the lengthy experi-
sis for hope is a fundamental re-
store some of its old ties and keep
ence as a combat general some see as
alignment of international interests
Teheran out of the Soviet orbit.
necessary for the JCS chairman's job.
and the rise of pragmatic leaders.
The next step in bringing home
But these times may require more of a
Brian Jenkins of the Rand Corpo-
soldier-diplomat as the President's key
the hostages, say several experts, is
to defuse the issue. In a
military adviser, and Powell fits that bill
DARRYL
less highly charged atmo-
so well that he may become a star amid
sphere, the U.S. and Iran
Bush's low-energy foreign-policy team.
Powell's admirers say that his strengths
can quietly explore better
are an icy realism, a keen understanding
relations, perhaps using
Pakistan as an intermedi-
of how Washington works and an un-
canny ability to build consensus.
ary, that could prompt
Iran to win the release of
As she moves into the officer corps,
Kristin Baker, unlike Powell, will run
the hostages while the U.S.
would act to unfreeze Ira-
smack into the longstanding laws prohib-
iting women from serving under fire in
nian assets, worth up to $4
billion.
combat roles. Since the route to the top is
The trouble with this
traditionally through combat command,
many women in the military believe their
happy scenario is how easi-
careers are stymied because men do not
ly it can unravel. Highest
regard women as leaders, according to an
among U.S. fears is that
internal Pentagon study. Women consti-
one of the radical groups
in Lebanon, anxious to fo-
tute about 11 percent of the military's
ment trouble, will kill an-
283,000-person officer corps, a figure that
matches the percentage of officers repre-
other American hostage,
senting racial minorities. But fewer than 1
Slow mo. Bush wants to proceed cautiously
probably forcing Bush to
percent of the admirals or generals are
strike back and severing
ration cites important changes in
talks with Iran. New tensions be-
female, as opposed to nearly 5 percent for
three countries:
tween Israel and the Palestinians
minority men. Meanwhile, Congress con-
Iran has begun moving away
tinues to pressure the military to let wom-
could also throw a spanner in the
from radicalism and, with the eleva-
works, as would a discovery that
en get closer to combat, and the Defense
tion of Hashemi Rafsanjani to its
Department says in the past two years it
Rafsanjani is ultimately unwilling
Presidency, seems more interested
has opened an additional 24,000 positions
or unable to deliver on a hostage
in Western trade and investment
to women. "Women are in a position in
release. Bush must also worry
the military where blacks were 40 years
than in tormenting Americans. U.S.
about continuing support at home,
intelligence reports that by the end
ago," says Mark Eitelberg, a professor at
especially on his right flank. Con-
of this month Rafsanjani may even
the Naval Postgraduate School in Monte-
servatives already grumble that he
be able to shove aside his hard-line
has missed his chance to use mili-
rey, Calif. "Twenty years from now, I
rival, Ali Akbar Mohtashemi. In
think people are going to look back at the
tary force, and as the public learns
the U.S. view, Iran lacks direct con-
combat-exclusion debate and chuckle."
more about Iran's backing of ter-
trol over terrorism in Lebanon, but
rorism, such as the destruction of
Baker says her promotion has not come
officials hope that the Rafsanjani
without resentment. "There's always go-
Pan Am Flight 103, it could be dif-
faction could tip the radical Islamic
ing to be some resistance to change. Hope-
ficult to justify a rapprochement.
fully, that will be overcome eventually,"
groups holding American hostages
With so many mines in his path,
she adds. For black men like Powell, that
toward releasing some and perhaps
Bush seemed well-advised last week
all of them.
seems to have happened already.
to feel his way along, inch by inch.
The Soviet Union has been openly
enlisted in the effort to free the
by David R. Gergen
by Peter Cary with Liz Galtney,
Joannie M. Schrof and Peter Ross Range
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
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U.S.NEWS
The last city machine in America
PHOTOS BY KEVIN HORAN FOR USN&WR
East Chicago, Ind., is run by
an all-powerful mayor. He gets
things done quickly, but
problems and graft persist
R
obert A. Pastrick is so proud of the
government buildings erected dur-
ing his 18 years as mayor of East
Chicago, Ind., that he allowed some to be
named after him. There is a Robert A.
Pastrick Library and a Robert A. Pas-
trick Marina. But his crowning achieve-
ment is the new Central High School, a
modern brick citadel that stands out
against the old factories and run-down
bungalows that make up this small city
wedged between Gary and Chicago. Spe-
cial touches, like a gym with $100,000
worth of exercise machines, make Cen-
tral High at a cost of $40 million the most
expensive school ever built in Indiana.
"It's a beautiful building," says Pastrick.
There is, however, one nagging prob-
lem. Last year, East Chicago, with the
second-highest per-pupil school budget
in the state, produced students with the
second-lowest standardized-test scores in
Robert A. Pastvick Marina
Edifice complex. For 18
the state. Critics say the schools scrimp
years Mayor Robert
on essentials and waste money through
Pastrick, above, has
patronage jobs. East Chicago employs
used the proceeds from
four athletics administrators, for in-
his thriving tax base to
stance, while districts of similar size typi-
pump money into many
cally have one. Yet until last year there
construction projects
were SO few textbooks that students were
around his city that
prohibited from taking their books home.
keep a small army of
Pastrick brushes off such criticism, insist-
city workers and
ing the situation is improving while
contractors happy. Some
blaming the poor test scores on East
of the more elaborate
Chicago's lower-income parents, too
projects, like the Lake
many of whom, he says, "aren't interest-
Michigan marina on the
ed in their [children's] education, and
left, bear his name
when you have that situation existing, it's
very difficult to educate the youngsters."
bosses made cities work. Polls indicate,
nearby Inland Steel, pay over 90 percent
The heat goes on. Not every mayor has
for instance, that New Yorkers doubt
of the city's taxes, pumping more than
the power to spend money so freely and
whether any current mayoral candidate
$400 million into the coffers of this
blame voters for the poor results, but
has the power to solve that city's worst
40,000-resident area. That allows Pas-
Pastrick is not just any mayor. He is
problems. A look at East Chicago shows
trick to dish out hundreds of city jobs to
boss of the most extensive city political
that voters' yearnings are not altogether
supporters, a tool that mayors of cities
machine left in America, the kind Pas-
foolish. Pastrick's machine helps free
with eroded tax bases no longer have.
trick's idol, the late Mayor Richard J.
him from the race wars and unresponsive
No civil-service problems. Pastrick also
Daley, had in Chicago. Like Daley, Pas-
bureaucracies that paralyze other may-
enjoys freedom from civil-service laws,
trick chairs his county's Democratic
ors. Yet rather than use that freedom to
put on the books in most cities early in
Party, and, as with Daley, many of those
tackle poor education and other prob-
the century, that seek to make compe-
around him have been corrupt, though
lems, Pastrick has spent his years build-
tence, not connections, the key to munici-
Pastrick remains personally untainted.
ing monuments to his power. The darker
pal jobs. The downside of civil-service
U.S. Attorney James Richmond has
lesson of East Chicago is that political
laws, however, is that protected employes
convicted three former Lake County
machines with so much potential to do
have little incentive to follow orders
commissioners and two former tax asses-
good can easily go bad.
swiftly because it is hard to fire them.
sors on corruption charges, and the
With his handsome lined face and
The responsiveness of East Chicago's
probe continues.
great gray eyebrows, Pastrick looks like
bureaucracy is most obvious to those in
Curiously, as urban areas throughout
Hollywood's idea of an old-fashioned
whom the mayor takes a personal inter-
America deteriorate, there is a growing
politician. Behind his old-fashioned
est. Ruben Carrasquillo's year-old firm,
nostalgia for the days when powerful
power is a cash cow. Businesses, such as
New Way Auto Parts, is featured promi-
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
29
U.S.NEWS
nently in a slide show
CITY
EAST
KEVIN
chief, nearly beat Pas-
the mayor uses to sell
OF
CHICAGO
trick in the 1983 mayor-
the city to visiting busi-
al primary, Pastrick had
nessmen. Carrasquillo
him appointed to the
fondly recalls that a city
coveted post of Lake
official helped him get
County sheriff. The
bank financing, while a
mayor has similarly neu-
city building inspector's
tralized East Chicago
advice saved him money
Republicans by placing
1
during construction.
I
their chairman, Robert
When suppliers recently
Cantrell, in a top schools
left him with a pile of
job. The city council is
empty cardboard boxes,
largely passive because
Carrasquillo called the
each member also holds
sanitation department.
another city job con-
"No sooner did I hang
trolled by Pastrick.
up the phone than a
In addition to secur-
truck was down here,"
ing the votes of hun-
he says.
Well-oiled machine. Many workers contribute to a political "flower fund"
dreds of city workers,
Patronage also has
the machine has been
helped East Chicago rise above the kind of
Pastrick hired Jack Spratt, an Inland
known to indulge in vote fraud, to the
racial antagonisms that have hurt nearby
Steel executive, to shape up the badly
point where cheating is sometimes on
Chicago and Gary. (East Chicago is
run sanitation agency. Spratt built a new
autopilot. Last summer, a federal court
roughly 40 percent black, 40 percent His-
waste-water-treatment plant on time and
convicted Elmore Harris, an East Chica-
panic and 20 percent white.) Pastrick
within budget. Even the mayor's worst
go elections judge, of rigging votes in a
"spreads jobs around to various political
critics concede it is a gem. But those
1986 county election. A tally sheet
factions, to keep those factions close to
same critics blame Pastrick for hiring a
showed that Harris's boss, precinct com-
him and obligated to him," says Dewey
former steelworker, John Armenta, to
mitteeman Ben Gueyser, won 310 votes.
Pearman, executive vice president of the
run the city's air-quality office, which
Federal investigators found the voting
East Chicago Chamber of Commerce.
performed so poorly that the state pulled
machine recorded only 244 votes for
Yet, satisfying the political demands of
its funding and took over the job itself.
Gueyser. What made this small crime
minorities by giving them city jobs does
Given such problems with the city's
remarkable was that no one was running
not ensure good city services to minor-
parks, environment and schools, why
against Gueyser.
ities. Parks in mostly white middle-class
don't the voters simply elect someone
East Chicago is a good example of
East Chicago neighborhoods look lush
else as mayor? The main reason is Pas-
why reformers trying to make city gov-
and well maintained, but those in black
trick's power over the electoral process.
ernments more responsive do not put
and Hispanic lower-income sections of
Nearly all city workers knock on doors
much stock in a return to the machine-
town are full of litter and uncut weeds. "If
and work the polls for Pastrick at elec-
politics alternative. During a heated
it snows and you don't have a committee-
tion time, and they contribute up to 2
public hearing a couple of years ago, a
man on your street, you're stranded,"
percent of their annual pay to a "flower
citizen struggling to make a point about
contends city electrician Zeke Godinez.
fund" that Pastrick distributes to fa-
an expensive sewer-construction propos-
Under enough outside pressure, Pas-
vored candidates.
al shouted, "This is America!" "No,"
trick's machine responds with remark-
Silent opposition. When politically chal-
chuckled sewer division chief John Do-
able efficiency. When environmental
lenged, Pastrick uses the power of patron-
bay: "This is East Chicago."
lawsuits threatened the city with mil-
age to hire his opponents. After Stephen
lions of dollars in lost federal grants,
R. Stiglich, East Chicago's former police
by Paul Glastris in East Chicago
JOSE MORE-CHICAGO TRIBUNE
Chicago's sonny days
H
e lacks the vast patronage
Behind Daley's post-pa-
machine that undergird-
tronage clout is the wide-
ed his father's power, but
spread presumption that he
Richard M. Daley has en-
is powerful simply by being
joyed the most successful
a Daley. And he is using
first hundred days in office
that strength to build his po-
of any Chicago mayor in re-
litical base. Besides calming
cent memory. Politicians are
the city's racial tensions, he
fawning over him. Projects
has carefully courted "lake-
that languished for months
front liberals," a key voting
Hizzoner. Daley, here in gay-lesbian parade, has silenced foes
or years, such as a down-
bloc, by doing such things as
town pier renovation, have
marching in the annual gay-
book. It is aimed at reform-
trol of the sprawling city bu-
suddenly moved forward. A
lesbian parade.
ing the city's woeful schools,
reaucracy that in the post-
once powerful black opposi-
Daley has thrown his op-
rooting out municipal cor-
patronage era often acts as if
tion has largely fallen silent
ponents further off by push-
ruption and toughening up
it is beyond a mayor's
because of his deft placement
ing a political agenda that is
ethics laws. The biggest test
reach-even if his name is
of minorities in key jobs.
straight out of a civics text-
he still faces is to gain con-
Richard Daley.
30
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
TOMORROW
'DUELING COMMISSIONS' PLOT HEALTH CARE INTO THE NEXT CENTURY
FIXING A FRACTURED SYSTEM
additional expansion of medicaid to cover
Concern about the U.S. health-care system,
health care for more of the poor.
especially its high costs and gaps in
Panelists also seem increasingly
insurance coverage, has reached a fever
interested in broadening employer-paid
pitch. Now, these issues are the focus of
health insurance to cover more workers, as
two heavyweight commissions at work in
commission member Senator Edward Kennedy
Washington: The congressional Bipartisan
(D-Mass.) has proposed. They may suggest
Commission on Comprehensive Health Care
that businesses be required either to
and the quadrennial Advisory Council on
insure their workers or pay taxes to
Social Security, the Quad Commission. The
finance care for the uninsured.
panels seem certain to propose drastically
different solutions to health-care
A DRASTIC OVERHAUL?
problems, prompting some observers to call
Those proposals could prove popular with
them the "dueling commissions." Just which
beneficiaries, but they would also provoke
group's recommendations ultimately move to
attack from businesses and from states
the fore could influence the shape of
already concerned about their rising
health care into the next century.
medicaid outlays. An alternative might be
a radical overhaul that would dramatically
CLAUDE PEPPER'S LEGACY
reallocate the costs of health care.
The congressional panel, headed by Senator
Considering such bold strokes is the
Jay Rockefeller (D-W.Va.) but dubbed the
mandate for the Quad Commission, a panel
Pepper Commission after its original
of prominent citizens and experts convened
chairman, the late Representative Claude
every four years to review Social Security
Pepper, was created in 1988 to help
and medicare. The panel is now headed by
lawmakers work their way out of a
Washington lawyer Deborah Steelman, a
political quagmire. Elderly voters have
former campaign aide to President Bush.
been clamoring for a costly new long-term-
Scheduled to report by July, 1990, the
care program, even as an estimated 31
Quad panel will address such problems as
million to 37 million Americans go without
the possible bankruptcy of medicare's
health insurance. To address the demands
hospital-insurance trust fund in the late
of the politically powerful aged--but keep
1990s. But its overriding goal is to
them from overshadowing the needs of the
"stretch the thinking in Washington" about
uninsured--the Pepper panel was designed
revamping health care, Steelman says.
to make recommendations for meeting both.
Among other options, the council could
Rockefeller says he is determined that
propose scrapping the current system and
the panel will reach a consensus,
creating a health-insurance "continuum"
reporting back to the full Congress in
that would protect people from birth to
March, 1990. But getting there will not be
death. Individuals (including retirees)
easy. The 15 panel members (six from each
and employers would pay for all necessary
house of Congress, including new member
health care up to an affordable lifetime
Representative Louis Stokes (D-Ohio), and
dollar threshold. In turn, the federal
three outsiders appointed by President
government would insure "high risks," such
Reagan) come from varying ideological
as astronomical expenses for long-term
perspectives. Moreover, many are still
care, while sharing with the states the
preoccupied with fixing medicare's new
cost of care for the poor and disabled.
catastrophic insurance program, which has
Whether such an iconoclastic plan could
sparked a rebellion by better-off seniors
prevail over the Pepper Commission's is
slated to pay a surtax to help finance it.
far from certain. Those empowered to write
Still, panel members may soon begin
the laws sit on the congressional panel,
edging toward a comprehensive plan.
not the Quad Commission. But Steelman's
Addressing long-term care, they could
panel has been given the Bush
propose augmenting nursing-home coverage
administration's blessing to be bold.
under medicaid, adding a home-care program
Given the dire state of the health-care
for the aged and disabled to medicare and
system, blue-sky thinking may be just what
paying for it all with a mix of taxes on
the doctor ordered.
the elderly and on younger workers. For
the uninsured, the panel may propose an
by Susan Dentzer
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
31
WORLD REPORT
AFP
New leader. Party chief Jiang Zemin meets Gorbachev
The crumbling colonial facades of Shanghai and
the glass towers of Hong Kong (page 36) appear
worlds apart, but the two share a mercantile
tradition-and now, an uncertain future
Bright lights fade
in China's big city
E
ven Deng Xiaoping was once a
the price of oil was near $40 a barrel, and
third is whether Shanghai will again be-
young man. In his green years, in
were opened—or foreclosed on-when it
come a scapegoat for Beijing.
the 1920s, he went off to Paris and
fell to about $10. Shanghai's building
The Chinese Communist Party was
returned to work underground for the
boom, including a $200 million extrava-
born in Shanghai and the Red Guards got
Communist Party in Shanghai, a city
ganza of offices and condominiums from
their start there, but these contributions
then so stylish that it supposed itself to
Atlanta's Portman Companies, is simi-
to Marxist progress never won Shanghai
be the "Paris of the East." Now, Deng is
larly out of phase with events, reflecting
the trust of the government in Beijing.
in his dotage, and the
DAVE BARTRUFF
optimistic assumptions
Everything Mao Tse-tung's Communists
Shanghai of his final years
about China's and Shang-
said they were fighting against seemed to
does not much resemble
hai's economic future that
be on display in pre-revolutionary Shang-
Paris.
few people now share. The
hai. It was a center of industry and capi-
The rest of China has
CIA last week predicted
talist commerce, the one Chinese city
never trusted Shanghai,
that China's political
with a real skyline dominated by trading
with its cosmopolitan airs,
crackdown will only aggra-
houses and banks. It was a center of
and today the city is feeling
vate the country's already
foreign influence, a symbol of China's
the weight of the rigid com-
serious economic prob-
impotence against the Western World.
missars who have corked
lems, distract the leader-
This largest of China's cities was carved
China's effervescent de-
ship from solving them and
into zones where the laws of Britain,
mocracy movement. The
encourage the military to
France and America, rather than those of
signs are subtle, however.
hog more scarce resources.
China itself, held sway. And it was the
If anything, life on its
What next? Three ques-
purist center of the decadence that Marx
streets looks more promis-
tions, all of them for the
and Mao said Western capitalism would
ing and progressive than it
moment unanswerable,
bring. The most stylish structure, the
did two years ago. One
Shanghai's Wall Street
will determine whether
urbane art-deco tower of the Cathay Ho-
month after the shootings
Shanghai has businessmen
tel (now known as the Peace), was built
in Beijing, workmen were busily digging
to fill its new office buildings, or ever
with money the Sassoon family of En-
sewers, reroofing houses and shops and
has phones and sewers suitable to a
gland had extracted from China through
climbing bamboo scaffolding on count-
modern metropolis. The first is how far
the opium trade. Tubercular coolies
less new buildings. Shanghai's skyline in
China will go in reversing the political
coughed their lungs out as they ran along
1989 is like Houston's in 1979, with
and economic reforms of the last de-
Bubbling Wells (now Nanjing Road),
scores of new skyscrapers zooming up.
cade; the second is how foreign govern-
hustling huge blocks of ice toward the
Houston's buildings were begun when
ments and business will respond; the
foreigners' mansions to cool the swim-
32
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
HIROJI KUBOTA-MAGNUM
GREENHILL-BLACK STAR
Hard times. Buyers must line up before
dawn to shop on Shanghai's Nanking
Road, and poverty, not pride, has
preserved the scenery from a
cosmopolitan and controversial past
ming pools. "Its apogee from the 1890s to
modernity," Life in the Big City said.
But even before this June's repression
the 1930s coincided with the nadir of
"There is little nostalgia for the colonial
in Beijing and the executions of railroad
Chinese national pride," said a report
era. Given enough money, most Shang-
saboteurs in Shanghai, the economic cli-
called "Life in the Big City," from the
hainese would gladly tear down the old
mate had chilled in Shanghai, as it had
U.S. consulate in Shanghai. "The idea of
mansions and put up skyscrapers."
in the rest of China. Western business-
Shanghai is linked historically in the Chi-
A new Shanghai? That is exactly what
men and diplomats-that is, virtually
nese consciousness with corruption and
Shanghai got the chance to do starting in
the only people in Shanghai who will
foreign domination."
the mid-1980s. In a city known for fad-
speak with foreign reporters now-say
Shanghai has paid for its sins before.
ed-grandeur hotels like the Peace and
that starting early this year it has be-
It remained Communist China's indus-
the Park, a high-rise Sheraton opened,
come harder and harder to get commit-
trial core, the seat of its entertainment,
followed last year by a taller and more
ments from the Chinese government,
fashion and automobile industries. But
elegant Hilton in the heart of the old
which is increasingly strapped for cash.
the money that Shanghai manufacturers
French concession. Shanghai became a
Heinz Schwander, a jaunty German who
made was drawn north to Beijing, to be
focus for industrial joint ventures, espe-
manages the Hilton with a "Grand Ho-
redistributed by the modern mandarins.
cially with American high-tech firms.
tel" flair-"I kept my violinists playing
Ironically, foreign tourists have been the
McDonnell Douglas agreed to help
through the troubles, people will remem-
real beneficiaries of Beijing's determina-
teach China how to assemble modern
ber these things"-said the government
tion to bleed Shanghai. While Beijing
airliners; 40 years after he fled Shanghai
is obviously more desperate for hard
bulldozed, razed and paved its old pre-
for the United States, the computer pio-
currency. His hotel is the leading hard-
cincts, throwing up block structures as if
neer An Wang brought Wang computers
currency earner in Shanghai: "When we
trying to make China's capital resemble
back to his original home. Shanghai's
traded our dollars or foreign-exchange
Joseph Stalin's Moscow, Shanghai
planners also dream of restoring the
certificates each day, suddenly they were
lacked the money to rebuild or even tear
city's long neglected and hopelessly
like gold."
down what the colonialists had left be-
overtaxed infrastructure. Their new
The signs that political repression is
hind. Until a few years ago, much of the
Shanghai would have a subway system,
weighing heavily on Shanghai are evident
city looked like scenes from the movie
working sewers, a telephone network
in other ways. In happier times, it was not
"Empire of the Sun," in its squalor and
that, if everything went right, would
unusual to be stopped on the street per-
in its suburban verdure. The city's resi-
provide 9.5 phones for every 100 people
haps 20 times a day by people wanting to
dents, unlike the tourists, did not think
by 1990. It would build a research park
speak English. Now, only one person
it charming that their city had been fro-
for scientists outside the crowded heart
stopped in five days, after dark, in an
zen in time. "To the extent they regard
of the city, and revive the Shanghai
alley where no one else could see. Busi-
Shanghai favorably, they do so for its
Stock Exchange.
nessmen report a sharp increase in politi-
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
33
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WORLD REPORT
MELVYN CALDERON-JB PICTURES
cal surveillance at their factories. At the
McDonnell Douglas plant, for instance,
one manager said, "There's been a big
increase in the hours of indoctrination
per week, held right in the factory."
Surprising response. Foreign reaction
to Beijing's crackdown is constantly
evolving, but it so far has contained one
predictable and one surprising develop-
ment. The predictable event is that busi-
nesses have behaved very differently, de-
pending on whether they have already
sunk money in China or are still consid-
ering doing so. The surprising fact, in
New worries. Protest against China's crackdown
light of Japan's muted reponse to the
Chinese crackdown, is that Japanese
businessmen seem not to have returned
to Shanghai any more rapidly than have
Will the last one to leave
their American or European competi-
tors. Japanese firms generally have con-
centrated on trade with China, rather
please turn out the lights?
than investment there; this leaves them
with less money at risk and less reason
to rush back. In the time-honored way
A jittery Hong Kong wonders where the lifeboats are
of dealing with foreign devils, the Chi-
nese government, meanwhile, has fig-
ured out that competition among Japan,
F
amously apolitical Hong Kong has
considering buying an island to build a
the U.S. and Europe is for now its best
undergone a personality change since
new Hong Kong off Scotland or Austra-
weapon. In early July it began dispatch-
the Tienanmen massacre. Local Chi-
lia. Local worthies have proposed asking
ing messages warning reluctant foreign
nese have found that they are not pure
China to extend its lease or inviting the
companies that if they did not invest
economic animals after all. First, they
United Nations to move to Hong Kong.
now, when China needed them, they
surprised themselves by mounting the
The most provocative proposal is a dec-
could forget about investing later, since
world's biggest demonstrations in support
laration of Hong Kong's independence.
the business would go to someone else.
of their Beijing cousins.
MARY BETH CAMP-MATRIX
But the most popular de-
The first big showdown was over the
Then, pro-Beijing fellow
mand is for "right of
Shanghai subway contract, worth nearly
travelers and single-minded
abode" in Britain for all
$1 billion. A German firm had won the
moneymakers suddenly
Hong Kong people, which
main contract after fierce bidding, but
joined with human-rights
would allow them to re-
when the German government suspend-
activists in demanding
main in Hong Kong with
ed a "soft" loan, the Chinese threatened
guarantees against unfree-
an assured lifeline should
to bring in other bidders.
dom after Hong Kong re-
disaster strike. Margaret
Shanghai's treatment at the hands of
verts to China in 1997. One
Thatcher's answer: No
its own government is also difficult to
form of insurance, now sup-
way.
predict. The new chief of the Chinese
ported by 80 percent of
Colonial democracy. With
Communist Party, Jiang Zemin, is a for-
Hong Kongers, is demo-
confidence in this showcase
mer mayor of Shanghai. Yet the natural
cratic self-rule. A more reli-
of capitalism at a five-year
logic of China's new policies-recentral-
able kind, which just about
low, mirrored by falling
ization of political power, reimposition
everybody wants, is a pass-
stock and land prices, even
of political controls, new suspicion about
port to safety abroad.
Hong Kong's Wall Street
the Hong Kong govern-
foreign influence-runs directly counter
Hong Kong people have
ment has joined the outcry
to the measures that were building
been migrating in increasing numbers
against Britain for rejecting the right of
Shanghai's business base.
ever since the early 1980s. Today, Tienan-
abode. This is the first time in memory
And the business of Shanghai has al-
men is turning a flow into a flood. Be-
that a British governor and his cabinet
ways been business. In 1854, an improb-
tween two thirds and three quarters of
have confronted their masters in London
able Bible-waving group known as the
professionals, executives and entrepre-
head-on. They also have declared them-
Taiping rebels rose to protest the Chi-
neurs say they intend to leave, compared
selves ready to go along with an acceler-
nese Emperor's iniquitous rule. Imperial
with less than 50 percent of the same
ated schedule for direct elections to the
soldiers slaughtered at least 2,000 of the
group in January. Last month, when Sin-
colonial parliament, even if this means
rebels, and 66 heads (plus a few com-
gapore offered to take in 25,000 Hong
directly defying Beijing. Last month,
plete bodies) were mounted throughout
Kong people over eight years, 12,000
Hong Kong legislators voted to double
Shanghai to reassure nervous citizens
applicants stormed the consulate in the
the number of members (20 out of 60) to
that the Emperor would not permit the
first hour. Waiting lists and lines at some
be directly elected in 1991. Liberals and
rebellion to endanger their precious
other consulates are 10 times longer than
conservatives are still battling over
prosperity. China's emperors have again
they were before the crackdown. Emigra-
whether to opt for a fully elected legisla-
dispelled any doubts about their ability
tion this year will be as high as the rest of
ture before 1997. Despite moves toward
to maintain control, but this time Shang-
the world allows it to be-perhaps double
greater democracy, resentment of Britain
hai has little reason to rejoice.
last year's 45,000.
may grow. Some observers are predicting
The search for security has taken bi-
outbreaks of violence as Hong Kong's
by James Fallows in Shanghai
zarre forms. A legislative committee is
economy slows in response to the crisis in
36
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
STEVE McCURRY-MAGNUM
Hong Kong. Most countries, however,
Japanese Re
including the United States, Canada and
Australia, require would-be immigrants
ROUP
to establish residence as soon as they are
granted visas. Several bills before Con-
ON
PUB
gress would raise the U.S. quota for Hong
Kong from 5,000 to 10,000 or 20,000 a
year. But any credible international emer-
gency plan would require much larger
quotas, and adopting them would only
accelerate the exodus from Hong Kong.
Losing sympathy. So far, Britain has
done little to induce its allies to share the
burden. Its Hong Kong package is likely
to offer only about 25,000 places, mostly
to people who could move elsewhere. And
Hong Kong and Britain have both lost
LOR
sympathy lately, especially in the U.S., by
insisting on sending back unwanted refu-
gees from Vietnam. Ultimately, however,
Britain has some leverage: Once Europe-
an barriers go down in 1992, any Hong
Konger with British citizenship will be
able to move anywhere in the EC.
Britain's Hong Kong solution, expect-
ed last month, has been delayed while new
Foreign Secretary, John Major, learns the
ropes. Major is promising that Britain will
take a tough line in its talks with China in
September, demanding that Beijing
pledge to keep its Army out of Hong Kong
after 1997. This has become a sensitive
point in Hong Kong, for obvious reasons.
But British hopes overlook that it was
Deng Xiaoping himself who insisted that
Chinese troops must be stationed in Hong
Kong. They also suggest that Britain is
not listening very closely to ominous
noises from Beijing.
Although China has been bending over
backward to convince tourists and busi-
nessmen to return, it has been trying to
intimidate political activists in Hong
359
Kong. A few weeks ago, the People's Daily
warned that China's commitment to 50
years of capitalism and autonomy in
Hong Kong is conditional on good behav-
ior there. What China will not tolerate,
High rollers. Even a gold Rolls-Royce is no substitute for a good passport
the party paper explained, is not only
Hong Kong support for China's dissi-
China and as political frustration mounts.
secret calculations which suggest that by
dents but also formation of a political
As holders of British Dependent Terri-
1997 the real number of potential immi-
party by local liberals.
tory passports, about 3.3 million Hong
grants from Hong Kong, including their
The British are now proposing to shore
Kongers have a direct claim on Britain.
immediate relatives in China, could be as
up or at least to codify Hong Kong's
But these documents convey neither Brit-
high as 6.8 million. That's as many as all
freedoms by enacting a Bill of Rights,
ish nationality nor the right to live in
the people in Hong Kong today with the
which they say does not need China's
Britain. Thatcher and her ministers insist
population of Brussels thrown in.
O.K. This has been welcomed in Hong
that taking in these millions is unthink-
Brussels may, in fact, be one of the keys
Kong, along with British readiness to
able, because Britain's insular voters
to an insurance policy for Hong Kong.
push China for democratizing changes in
wouldn't permit it. The government re-
Britain already has started feeling out its
Hong Kong's constitution-to-be, the Ba-
mains resolutely unconvinced by polls in
Common Market colleagues, along with
sic Law. But Hong Kongers will not be
Britain showing that 60 percent favor
Australia, Canada and the United States,
diverted from demanding the concession
admitting all Hong Kong passport hold-
on ways to cope with a Hong Kong
that matters most. The leading campaign-
ers, by polls in Hong Kong showing that
exodus. The aim would be to enable peo-
er for democracy, Martin Lee, says it
only 6 percent want to go to Britain
ple to remain in Hong Kong by offering
Patrick Henry-style. "To give us democ-
anyway, or by a report showing that
them the promise of safe haven if things
racy right now without giving us pass-
Britain would profit from a large-scale
turn sour. France has done this by offer-
ports is to give us death."
influx of skilled Hong Kong workers.
ing delayed-action entry permits to about
Official resistance is partly based on
100 employes of French companies in
by Emily MacFarquhar
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
37
WORLD REPORT
The internecine war of the West Bank
Palestinians in the occupied territories are killing each other
S
abah Kanaan knew she was going
to direct hit squads to intifada leaders—
takes." But the Israeli government
to be murdered. The 32-year-old
an accusation Israeli Army spokesman
charges that assassination is a tool the
single mother had been accused of
Col. Raanan Gissen terms "ludicrous."
Palestine Liberation Organization uses to
collaborating with Israeli intelligence
Some of those murdered have been
discourage West Bank and Gaza Palestin-
and of promiscuity. A Palestinian
collaborators in the full sense of that
ians from bypassing Yassir Arafat and
"shock committee" broke into her home
ugly word: Palestinians who betrayed
dealing directly with Israel on terms for
in the West Bank city of Nablus and held
other Palestinians in exchange for mon-
an interim settlement.
her prisoner for three nights while they
ey or favors from Israeli occupation au-
Intifada leaders insist the claim is an
brutally beat her. Taken to a hospital by
thorities. U.S. officials say others have
Israeli canard. They say the PLO gave its
neighbors, Kanaan denied all the whis-
been common criminals. Still others
blessing to some Palestinians who recent-
pered charges against her and told re-
have criticized or opposed the intifada,
ly met with Prime Minister Yitzhak Sha-
porters "they will never let me live."
or simply refused to pay protection
mir; one of them, West Bank lawyer Jamil
Two months after she was released, her
money to thugs who terrorize in its
Tarifi, held a press conference to say so.
bludgeoned body was found near
SVEN NACKSTRAND-AFP
Moreover, they point out, there have been
the Nablus Onion Market, axed
no assassinations of major political figures
and riddled with stab wounds.
in the territories since the intifada began.
It was not the first such execu-
Turning on the PLO. In fact, the rising
tion in Nablus. Adli al-Thalji was
tide of violence is turning against the
clad in pajamas when his corpse
PLO, too. Within a day of his press
was found dangling from a meat
conference, the walls at PLO-backed
hook in the market. In Gaza, Ja-
lawyer Tarifi's home were daubed with
mil Mahmud Shehedeh, a resident
so many threats to his life, reportedly
of the teeming Jabaliya refugee
from more-radical Palestinian groups,
camp, was stabbed to death and
that he left town. Cars belonging to PLO
his arm hacked off at the shoulder.
leaders in the West Bank city of Ramal-
A message near his body said,
lah have been mysteriously burned. And
"Death sentence carried out
just last week, anonymóus pamphlets ac-
against a collaborator."
cused 12 leading Palestinians, including
In the 21 months of the intifa-
Radwan Abu Ayash, considered a cen-
da, the Palestinian uprising
tral leader in Arafat's Fatah organiza-
against Israel's occupation of the
tion, of embezzling "millions of dollars
West Bank and Gaza, 40 Israelis
allocated for the intifada." According to
have died in the violence and 533
Israeli Army intelligence, various Pales-
Palestinians have been killed by
tinian factions have organized rival hit
Israeli soldiers or settlers. But
teams in the occupied territories. Pales-
street battles between Palestinian
tinians accuse Israeli intelligence opera-
stone throwers and Israeli soldiers
tives of the attacks and of the distribu-
are declining and increasingly,
tion of the leaflets in an attempt to cause
Arabs are attacking one another.
internal dissension in Palestinian ranks.
A recent Palestinian underground
A few accused collaborators have re-
leaflet warned that the killing of
taliated with their own brand of Wild
Palestinians by other Palestinians
West Bank justice. Ali Najar, who open-
is getting out of hand. At least 67
ly worked for Israel's military adminis-
have been slain by fellow Arabs
Knife in the back. Fratricide is rising
tration and was driven out of his village
since December, 1987; 40 such
of Yaabad, recently returned with an
killings have taken place in the past three
name. But Israeli analysts insist that
armed band of his own. According to
months. Israeli officials claim 48 percent
many of the victims of the intifada's
Israeli analyst Stockman, Najar imposed
of 1,403 beatings, stabbings and attacks
kangaroo courts have been guilty only
a curfew on his hometown and am-
on property by Arabs during the first half
of doing routine business with Israelis.
bushed several of his erstwhile neigh-
of 1989 were directed against Palestinian,
Israeli analyst Israel Stockman charges
bors. The Israeli Army did not intervene.
not Israeli, targets.
that the attacks are part of a "systematic
Alarmed by the situation, the intifada
Self-defense? Palestinian leaders in the
campaign to intimidate." But he also
leadership recently issued two directives
West Bank and Gaza say the Israeli statis-
believes many of the slayings are Leba-
calling for killing "only in extreme cases
tics are distorted because they exclude
nese-style rubouts that use the charge of
of collaboration, and after full, thorough
stone-throwing attacks on Jewish targets,
collaboration to cover old feuds and per-
and irrefutable evidence is available and
but they admit that suspected collabora-
sonal vendettas. Israeli military authori-
after gaining approval from the highest
tors are being killed. Liquidation of in-
ties charge that was the case with some of
levels of Palestinian leadership."
formers, they claim, is self-defense, com-
the 10 recent stranglings inside the bleak
The danger is that the intifada already
munal retribution meted out to traitors
Ketziot detention camp, where Israel now
has spawned a self-defeating wave of vio-
who have ignored warnings to change
holds 2,000 Palestinians. Palestinians al-
lence no one can control.
their ways. This frontier justice is made
lege that those killed were snitches.
increasingly necessary, they charge, be-
At the same time, Palestinians freely
by Richard Z. Chesnoff with Daoud Kuttab
cause the Israelis are using collaborators
admit that some killings have been "mis-
and David Makovksy in Jerusalem
38
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
WORLDGRAM
OLD RESTRAINTS WILL PLAGUE JAPAN'S NEW PRIME MINISTER
TOKYO
MEXICO CITY
WELLINGTON
WHERE'S THE BEEF?
changing attitudes south of the border:
Japan's new Prime Minister, Toshiki Kaifu,
Mexico is upbeat about reducing its debt
intends to move quickly to deal with his
burden after its recent agreement in
two overriding priorities--restoring the
principle with creditors to adopt U.S.
ruling Liberal Democratic Party's falling
Treasury Secretary Nicholas Brady's debt-
political fortunes and ending diplomatic
reduction formula. Mexican irritation with
drift abroad. But the odds are against
U.S. Central American policy has turned to
him. Cynics already are dismissing him as
grudging, albeit not total, acceptance.
a mere caretaker.
Washington, for its part, is delighted
Fresh attributes seem to be Kaifu's
with Mexico's economic reforms, crackdown
greatest strength. He is a youthful 58,
on drug traffickers, offers to probe
articulate and unscathed by the stock
money-laundering schemes and efforts to
scandal that has riddled the leadership
check the flow of illegal workers.
ranks of the LDP and cost it control of
If there is one big reason for the
the upper house of the Diet. To help
honeymoon, it's President Carlos Salinas
defuse the party's troubles with female
de Gortari's conclusion that strong
voters, he has named two women to his
economic ties to the U.S. are essential to
cabinet. To mollify irate consumers, he
Mexico's own economic and political
plans to modify the unpopular 3 percent
stability. Still, even the best aims can
sales tax by reducing its impact on food
go awry. Mexico will be counting more than
and education costs. To try to reduce
ever on firm U.S. economic backing.
trade friction with the U.S., he hopes to
Anything less could leave it floundering
visit Washington as early as next month.
and its relations with the U.S. a target
But Kaifu will need more than style and
of the usual mischief-making nationalists.
good intentions to win over a skeptical
public or to hold sway over LDP veterans.
STATUS QUO IN NEW ZEALAND
With no political base of his own, Kaifu
Frosty relations between the U.S. and New
owes his nomination to the same back-room
Zealand aren't about to thaw anytime soon,
politics that he now pledges to reform.
even though America's antinuclear nemesis,
Given that indebtedness, it's unlikely
David Lange, is no longer Prime Minister.
Kaifu will be able or willing to dominate
Successor Geoffrey Palmer is committed to
the party's inner councils where strategy
maintaining the Labor government's ban
is charted. That augurs few policy shifts.
against letting ships armed with nuclear
Kaifu also must face a bolder, opposition-
weapons enter New Zealand ports, and 8 out
dominated upper house eager to force
of 10 of his countrymen now back him up.
elections for the more important lower
Lange, whose strident antinuclear stance
house. The opposition seems sure to
angered the U.S. and effectively wrecked
challenge Kaifu's every legislative move.
the ANZUS (Australia-New Zealand-U.S.)
How long will Kaifu last? In order to
defense alliance, resigned unexpectedly as
retain power, he must initiate reforms,
a result of ill health and intraparty
win a two-year term as President of the
wrangling. He was especially irate over
LDP at its October convention, call early
the re-election to the cabinet of former
elections and lead his party to victory.
Finance Minister Roger Douglas, a free
He may accomplish one "must," maybe even
marketeer whom Lange fired some time ago.
two; achieving all seems impossible.
Palmer, more cautious and less colorful
than Lange, seems sure to steer a moderate
THE U.S.-MEXICO HONEYMOON
course at home and abroad. He will drop
Once again, there's a lot of talk about
Lange's radical antinuclear rhetoric and
the dawning of a new era in U.S.-Mexican
seek early talks with U.S. officials in a
friendship. Previous new beginnings soon
bid to improve ties. But with elections
gave way to indifference or ill will. Is
slated for next year at the latest and
this one any different? Maybe so.
public sentiment solidly behind the
While little of substance resulted from
nuclear ban, there is little room for
Secretary of State James Baker's visit to
compromise with Uncle Sam.
Mexico City, consider this evidence of the
warming climate, much of it generated by
by Gerson Yalowitz with foreign-bureau reports
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
39
BUSINESS
General Motors
reinvents the wheel
Retiring Chairman Roger Smith leaves America's
largest firm with little margin for mistakes
W
hen Roger Smith took the helm of
for size, and when it misread the market
a troubled General Motors near-
with its new $55,000 Allanté model.
ly a decade ago, he had to over-
Four years later, both Cadillac and
haul the world's biggest auto maker. GM
the Hamtramck factory are making an
had lost $726.5 million in 1980 and faced
impressive comeback. Part of the plant
an onslaught of foreign competition. To-
has been cleared for bleachers where em-
day, the company is making money again.
ployes gather to study competitors' vehi-
GM's 1988 profits hit $4.8 billion, helped
cles and to pore over quality charts. De-
by Smith's multibillion-dollar cut in oper-
signers, engineers and workers
ating costs, and the company has some
collaborate on better, easy-to-assemble
promising products in the pipeline. But
designs. A hot line to dealers provides
much of the growth in profits has come
instant feedback on customer complaints
from acquisitions and international sales.
so that Hamtramck can fix problems be-
As Smith prepares to retire next summer,
fore more cars roll off the line. Those
GM still is struggling to boost its domes-
efforts earned Cadillac a No. 5 rating on
tic-car business.
the latest J. D. Power & Associates cus-
Wary buyers. Smith had pinned his
tomer-satisfaction index, a five-place
hopes on multibillion-dollar, automated
leap from the mid-1980s.
factories as the best way to lower pro-
GM's current challenge is to take the
duction costs, keep retail prices under
lessons from Cadillac companywide, and
control and improve competitiveness
it isn't going to be easy. In the mid-1980s,
against unprecedented low-cost foreign
GM invested $40 billion in automation
competition. In the process, GM paid
and acquisitions. But the addition of
inadequate attention to quality improve-
data-services conglomerate Electronic
ment and their historically respected
Data Systems and Hughes Aircraft, ac-
automotive design-factors that have
quired by Smith in part to strengthen
Change of focus. After spending billions on
helped Ford Motor Company win new
GM's technological base and its claim on
fans and outearn GM for the first time
high-tech talent, understandably divert-
ers, without doing enough to remove bot-
in decades. GM's U.S. market share,
ed attention from GM's core business:
tlenecks. For example, while Pontiac
meanwhile, has declined 8 points since
The manufacture of automobiles. Smith's
managers pinpointed quality as the top
1984, to 36 percent. Smith still believes
1984 reorganization of a bureaucracy
priority as early as 1981 and seized on
in the importance of advanced technolo-
that had grown too complacent with its
teamwork as the way to achieve it, their
gy, but he acknowledges that it is not a
industry dominance led to layoffs and
initiatives came to a halt when they were
magic bullet capable of solving all prob-
disaffection among managers and work-
scattered in the reshuffling.
lems. His legacy is likely to rest on how
well he lays the groundwork for creating
a company that depends as much on
teamwork as it does on technology.
At Toyota, rank loses its privileged titles
"We've been ignoring our best re-
t is Japan's biggest earner, controlling
to boost its response time as it gears up for
sources," concedes Smith. "This is not a
nearly a third of the auto market. In
the car wars of the 1990s. To snag its share
one-man corporation; we run as a team
America, it ranks fourth after the Big
of entry-level workers from a shrinking
and the team is important."
Three. So why has Toyota Motor Corpo-
youth pool, the company also is sinking
Nowhere was the need for teamwork
ration just launched one of its biggest-
some $730 million into refurbishments,
more evident than at Cadillac. When GM
ever corporate overhauls, shaving two
including new employe housing (the old
opened its sprawling Hamtramck plant in
tiers of middle management and even
dormitories lacked phones, for instance),
Detroit in 1985, the robotized assembly
dispensing with such formal titles as sha-
tennis courts, a golf range and other
line was to be the cornerstone of Smith's
cho, president?
leisure-time amenities. Toyota is revamp-
high-tech gambit. But the machinery had
Part of the answer lies in demographics.
ing its time-honored seniority system as
been bought without enough input from
Like many other Japanese behemoths,
well. From now on, promotions will de-
the employes who would have to make it
Japan's No. 1 auto maker finds its middle
pend not only on the number of years on
work, and news soon spread of robots
echelon bloated with baby-boomers. By
the job but on performance-a shift many
painting each other instead of the cars.
reassigning some 1,000 managers and
Japanese companies seem to be making.
Cadillac's prestigious name was dimin-
trimming its bureaucracy, Toyota hopes
Gone, too, are job-specific titles; Presi-
ished when the division shortened its
cars, misjudging its customers' penchant
40
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
KEVIN HORAN FOR USN&WR
a result, GM was late with its Lumina
sedan, a rival to Ford's Taurus but un-
veiled only this year.
To push decisions further down the
hierarchy, GM divided its five car divi-
sions into a "big car" group, known as
Buick-Oldsmobile-Cadillac, and "small
car" Chevrolet-Pontiac-Canada team.
Each would design, build and sell its own
cars. The plan was designed to stimulate
creativity, invite fresh views and build a
more freewheeling atmosphere for ex-
changing ideas. Inevitably, in a company
so large that its sales dwarf the gross
national product of many nations, some
employes found the changes difficult to
bear. Others, with old division loyalties
suddenly strained, struggled as well.
Setting standards. Today, GM is pin-
ning its hopes on bold initiatives that are
designed to identify, then standardize,
the best product-planning and manufac-
turing methods. President Robert Stem-
pel and Donald Ephlin, GM's union rep-
resentative until his recent retirement,
championed an ambitious plan to get
workers and managers collaborating on
such wide-ranging issues as inventory
control and how best to oversee suppli-
ers. One joint management-union team,
for example, has recommended that ev-
ery division be assigned several statisti-
cians trained in the theories of W. Ed-
wards Deming, the quality-control
expert who gets some of the credit for
Ford's revival.
Still, GM will have to translate its
new policies into better products quick-
automation, GM Chairman Roger Smith now sees teamwork as the key to revving up sales
ly. Car sales have slowed 6 percent
since 1988. Japanese auto makers are
GM's glacial decision making has often
and assembly divisions, with the buck
expected to more than double their U.S.
been criticized, most recently by Ross
never stopping until it hit the president's
capacity to 2.5 million units by 1991,
Perot, the maverick billionaire founder of
desk. A power struggle between the three
says consultant James Harbour, and
EDS who resigned from the GM board
groups stymied development of a mid-
Toyota and Nissan are introducing lux-
after a public dispute with Smith. In the
sized car, the GM-10. The project
ury cars this fall. GM's minivans are
mid-1980s, product decisions got
dragged on for seven years, writes auto
among its few new offerings to get rave
bounced between marketing, engineering
analyst Maryann Keller in a new book; as
reviews. A major test of GM's "team"
strategy will come next summer, when
Smith drives the first Saturn cars off the
T. MATSUMOTO-SYGMA
dent Shoichiro Toyoda and
runner by increasingly adroit
assembly line. Saturn will be a larger
assembly-line worker alike
rivals. Toyota was well be-
car than first planned, and what was to
will go by the simple suffix
hind Honda and Nissan in
be a high-tech showcase now also is be-
san, equivalent to mister in
setting up U.S. assembly lines
ing touted as a new standard in labor-
English. "The whole point is
-facilities now giving De-
management cooperation.
to reinvigorate the compa-
troit a run for its money-
Ultimately, GM's ability to win back
ny," says a spokesperson.
and in coming out with luxu-
customers will depend on new manage-
Industry analysts contend
ry models. But Toyota's bu-
ment, both in the union and at GM, where
the overhaul will augment
reaucratic shake-up hardly
Smith's successor may be picked as early
the Japanese car maker's al-
means that America's Big
as next winter. While the naming of a
ready formidable competi-
Three can start cruising. The
finance executive would be consistent
tive edge. "This is the kind of
Mr. Shoichiro Toyoda
company was "already in-
with GM tradition, many believe the com-
foresight that has been Toyo-
credibly successful," points
pany would be well-served by turning to
ta's hallmark all along," notes Maryann
out analyst Ron Glantz. Toyota's work
someone with extensive production ex-
Keller at Furman Selz Mager Dietz &
force may be less driven but not its cars.
pertise. While Smith now has GM on a
Barney. But others contend that many of
smoother road, he leaves his successor
the changes have been forced on the front-
by Jim Impoco
little room to be wrong.
by Andrea Gabor in Detroit
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
41
BUSINESS
FROM HORSE-BUGGY BUILDERS TO INDUSTRIAL DISNEYLAND
Volvo's back-to-the-future factory
round the house, Swedish fac-
Uddevalla has taken the team con-
A
Despite its state-of-the-art trap-
tory hand Marianne Apelman
cept a step further, claiming to be the
pings, much of the inspiration for
lets her husband play Mr. Fixit.
first automobile factory to totally
Uddevalla comes from Volvo's past.
On the job at Volvo's Uddevalla
abandon the assembly line. Cars are
When the company set up shop in
plant, however, the 35-year-old ex-
put together by crews of eight to 10
1927, most of the workers were
shipyard worker routinely assembles
people who work on stationary, pre-
craftsmen originally trained as horse-
entire luxury automobiles from chas-
painted bodies mounted on devices
carriage builders who could, in prin-
sis to windshields. "We think that
called "tilts." These stands can raise,
ciple, make an automobile on their
our new way of building cars is the
lower or rotate a chassis by 90 degrees.
own. "But the car builders of this
right way," she explains proudly.
Each stage of the assembly takes an
new age lost the holistic view of pro-
Goodbye, Henry Ford.
duction, and professional
VOLVO
Three quarters of a centu-
pride was lost at the same
ry after the pioneering
time," says Volvo Car
U.S. auto maker intro-
Corporation President
duced the first assembly
Roger Holtback. To in-
line at his Highland Park
still that craftsman's
car plant, Volvo is turning
pride, Volvo trains new
conventional wisdom
employes over 16 months,
about mass production on
assigning each to a work
its ear-literally. In its
team from Day One.
radically redesigned man-
Workers take turns serv-
ufacturing facility north
ing as the group's liaison
of Göteborg, work teams
with management.
build vehicles much like
Swedish government
doctors operate on a pa-
officials tout the plant as
tient. Each car frame sits
a showcase of Scandina-
on its individual rotating
vian know-how, but life
holder while assembly
was not always so
crews attach the pieces.
charmed at Uddevalla. In
Instead of foremen and
1984, the seaside city was
engineers, ordinary work-
floundering; its largest
ers manage the shop floor.
Firing line. Scrapping the
employer, a shipyard,
Some economists won-
assembly-line concept,
was about to pull out and
der if Volvo's new scheme
left, introduced by
yank 2,300 jobs. Volvo
can match the speed and
Henry Ford, Volvo's new
was given a tax break to
cost-effectiveness of auto-
Uddevalla plant in
put its new factory on the
mated production lines in
Sweden features "tilts"
site. Though trade unions
the U.S. and Japan. The
that raise, lower or
were involved in the
simple answer: The Swed-
rotate a prepainted auto
planning, along with lo-
ish firm has little choice
body while work teams
cal politicians and com-
but to try. Absenteeism in
piece together the
pany officials, their task
the wealthy Scandinavian
finished vehicle. A
is far from over. Some as-
nation is Europe's highest,
computer-guided supply
sembly teams, 43 percent
according to the Swedish
system ferries parts from
of which are composed of
Employers' Organization.
the central warehouse.
women, have had trouble
One domestic Volvo fac-
CULVER PICTURES
coping with freedom and
tory had a 28 percent no-show rate,
hour or more, with components such
managerial responsibilities. Workers
compared with 4 percent at its Belgian
as prefabricated transmission systems
report "friction" and disagreements.
plant, where wages are lower. With
whizzing in from the central ware-
Still, few wish to return to the old
Swedish unemployment a meager 1
house like ghost ships at an industrial
way, with supervisors making all the
percent, if Volvo wanted people to
Disneyland; magnetic strips buried in
decisions-including who gets per-
show up for work, it had to make its job
the polished factory floors guide parts
mission to go to the toilet. "It is our
environment more attractive.
to the appropriate workstation.
special interest to make sure that this
The task of revamping the work-
Weekly production goals are set by
factory succeeds," says Lennert
place fell to Volvo Group Chairman
the assembly teams in consultation
Ericsson, chairman of the Uddevalla
Pehr Gyllenhammar. In 1974, he had
with management. The 85,000-square-
Metalworkers Union. "Many people
overseen the development of the firm's
yard plant is turning out 200 vehicles a
are watching to see what happens
innovative Kalmar plant, which boast-
week, but company executives claim
here." If Henry Ford were alive, un-
ed five hexagonal buildings, each with
that by 1991 some 40,000 cars in Vol-
doubtedly he would be one of the
a set of construction crews, and a
vo's 740 and 745 series will be pro-
keenest observers.
computer-guided parts carrier to ferry
duced annually. By then, too, the com-
supplies from the central warehouse.
pany hopes to be operating at a profit.
by David Bartal in Uddevalla
42
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
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BUSINESS
Ins and outs on America's trade list
Made-in-U.S.A. items have new cachet, but not enough to dent the deficit
MAGGIE STEBER-JB PICTURES FOR USN&WR
merica's stubborn trade gap resem-
most of which is now
A
bles the weather. Everyone talks
manufactured almost
about it, but no one can do much to
exclusively overseas.
change things. Former Treasury Secre-
Other imports such as
tary James Baker tried pushing down the
steel, trucks and cars re-
dollar to help U.S. products compete
mained sluggish, partly
overseas while making imports less at-
because of more-com-
tractive. But the gains have not been
petitive U.S. output.
nearly as great as the greenback's sharp
Economists credit the
decline should have yielded.
improvement largely to
To be sure, the outlook has brightened
the weaker greenback,
somewhat. The combination of a weaker
which made U.S. prod-
dollar and more-efficient U.S. industries
ucts cheaper overseas.
helped boost exports by 26.6 percent last
Here's the beef. Meat exports to Japan are up, and
Fred Bergsten, director
year. At the same time, saturated markets
Mexico is following a loosening of trade restrictions
of the Institute for Inter-
and sticker shock slowed import growth
national Economics in
to 8.7 percent. As a result, U.S. accounts
cent as several Asian countries, including
Washington, D.C., calculates that from
improved by $32.2 billion. But when all
South Korea and Japan, removed protec-
December, 1987, to February, 1988, the
the exports and imports for 1989 are
tionist barriers. And the U.S. has scored
dollar fell 157 percent against the German
tallied, the trade deficit will still total an
big with music fans overseas; from 1987 to
mark and 121 percent against the yen. At
intimidating $110 billion.
1988, America's two premier guitar mak-
the same time, strong economic growth in
Grace notes. Most of the gains stem
ers, Gibson and Fender, saw electric-
Europe and Asia's newly industrialized
from sales of such big-ticket items as
guitar exports increase by 103 percent,
countries expanded appetites for such
aircraft and agricultural products; some
mostly to Japanese and British musicians
Made-in-U.S.A. items as jet engines, sci-
unusual elements also have contributed to
who prize the quality of U.S. instruments.
entific instruments and chemicals.
the recent U.S. trade picture. Gold ex-
On the import side, much of the slow-
Pressure from Washington is showing
ports rose nearly 59 percent from 1985 to
down was serendipitous. Oil products, for
modest effects. U.S. items now account
1988, thanks to major purchases last year
example, slipped over the last three years
for about 15 percent of the Japanese
by Taiwan, which bought gold to avoid
thanks to falling petroleum prices, while
market and 17 percent of Taiwan's. Meat
sanctions under stiffened U.S. trade laws.
saturated consumer markets dampened
exports to both Mexico and Japan are up,
Tobacco shipments increased 30.7 per-
demand for electronics and stereo gear,
following a loosening of restrictions on
What the U.S. sells abroad
From aircraft to soybeans, these 35 products make up more than 60 percent of total U.S. shipments in 1988
1988 1985
Percentage change
Value
1988
1985
Percentage change
Value
rank
rank
1985-88
(in billions)
rank
rank
1985-1988
(in billions)
1.
1. Aircraft
11.6%
$20.3
19. 21. Pharmaceuticals
12.6%
$4.0
2.
2. Auto parts
6.6%
$13.2
20. 10. Coal
-3.9%
$4.0
3.
3. Computer equipment and parts
17.3%
$12.6
21. 23. Electrical connectors
15.2%
$3.8
4.
4. Computers
16.2%
$11.6
22. 29. Pulp and wastepaper
27.1%
$3.7
5.
8. Semiconductors
25.2%
$10.4
23. 13. Civil-engineering equipment
-4.2%
$3.6
6.
5. Automobiles
14.3%
$9.1
24. 27. Animal feed
21.4%
$3.4
7.
9. Organic chemicals
16.0%
$7.8
25. 31. Paper and paperboard
18.6%
$3.0
8. 6. Measuring instruments
10.4%
$7.4
26. 35. Tobacco
30.7%
$2.9
9. 15. Rubber and plastics
24.3%
$7.3
27. 24. Trucks
8.0%
$2.9
10. 16. Jet and gas turbines
18.8%
$6.2
28. 17. Refined-petroleum products
-8.9%
$2.8
11. 14. Telecommunications equipment
15.1%
$6.1
29. 26. Inorganic chemicals
10.5%
$2.7
12. 12. Piston engines
7.4%
$5.2
30. 28. Heating and cooling equipment
14.5%
$2.7
13. 7. Corn
-0.6%
$5.2
31. 30. Chemical products
13.0%
$2.6
14. 32. Gold
58.7%
$5.2
32. 20. Arms and ammunition
-3.6%
$2.6
15. 11. Soybeans
5.2%
$5.0
33. 25. Fertilizers
4.4%
$2.5
16. 18. Wheat
10.8%
$4.9
34. NR Meat
27.9%
$2.3
17. 19. Industrial machinery
12.2%
$4.1
35. NR Musical instruments
34.4%
$2.3
18. 22. Electrical turbines
16.4%
$4.1
NR = Not ranked in top 35 in 1985.
Note: Percentage change reflects average growth rate from 1985-88.
USN&WR-Basic data: U.S. Dept. of Commerce
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
43
BUSINESS
RICHARD SCHULTZ FOR USN&WR
foreign agricultural products.
makers captured almost 40 per-
Corn exports are up in volume but
cent of the $50 billion-plus do-
suffer from slumping prices.
mestic market for computer
Still, America seems woefully
equipment and parts by offering a
ill-equipped to wrestle its trade
combination of cheap knockoffs
deficit down much further. The
and high-performance models.
manufacturing base is shrinking.
Asian suppliers took the market
Rather than hike prices, Japanese
for disks and printers, while the
competitors have shaved profits
Japanese made inroads with su-
and preserved their U.S. market
percomputers and mainframes.
share while South Korea tied its
Sophisticated Japanese chips ac-
currency to the dollar. And many
counted for about 30 percent of
items, like VCR's, can only be
those imported in 1988.
purchased abroad. As Gary
Low labor costs have helped
Teske, director of trade research
South Korea, China and Taiwan
at the Department of Commerce,
build a market for shoes and
points out, "a country's trade
strollers. Imports of rubber and
structure changes very slowly."
plastic footwear increased at an
Indeed, eight of the top 10 exports
annual rate of 21.3 percent be-
in 1988 were the same ones as in
Baby-carriage boom. America's toddlers may be
tween 1985 and 1988. And while
1985. Americans bought over $62
homemade, but most strollers come from abroad
American babies may be home-
billion worth of foreign cars and
made, their carriages almost all
auto parts in 1988. And while petroleum
climbed from 68 percent to 72 percent.
come from abroad. Since the beginning of
imports may have sagged 8.7 percent over
This growth has come at the expense of
the decade, baby-carriage makers like Ja-
the past three years, the tab still came to
debt-ridden developing countries, which
pan's Aprica Kassai, Inc., Italy's Perego
$37.8 billion. Meanwhile, new foreign
have seen oil sales to the U.S. sag, notes
and the British firm Andrews Maclaren
items, from computers to baby carriages,
a new Commerce Department report.
have been squeezing U.S. rivals.
helped imports grow at an average annual
Hackers' delight. Economists caution
With the pace of growth for U.S. ex-
rate of 9.5 percent from 1985 to 1988.
that further declines in the value of the
ports slowing and the dollar up from last
America's list of trading partners also
dollar may do little to cool demand for
year's level, analysts predict the trade
has remained relatively stable. Transac-
many imported products. Compact-disk
deficit will hover around $100 billion for
tions with the developed world are on
players, for example, are not made in
some time to come. That figure may be
the rise. Europe, Canada, Japan and
America and will have a market no mat-
an improvement over the record $152
Asia's industrialized countries took in
ter how much the greenback gyrates.
billion set in 1987, but it hardly balances
slightly more than three quarters of all
And low wages give manufacturers in
the U.S. checkbook.
U.S. exports in 1985 and again in 1988,
places like South Korea a built-in price
while their share of U.S. purchases
advantage. Last year, overseas computer
by Robert F. Black
What the U.S. buys from abroad
These 35 items accounted for nearly two thirds of total imports in 1988
1988
1985
Percentage change
Value
1988
1985
Percentage change
Value
rank
rank
1985-1988
(in billions)
rank
rank
1985-1988
(in billions)
1.
2. Automobiles
7.8%
$47.5
19. 20. Radios
13.5%
$5.0
2.
1. Crude petroleum and products
-8.3%
$37.8
20. 21. Furniture and parts
9.1%
$4.8
3.
3. Motor-vehicle parts
15.7%
$14.7
21. 14. Iron and steel plates
2.3%
$4.5
4. 11. Computer equipment and parts
30.3%
$11.5
22. 27. Special industrial machinery
22.3%
$4.4
5.
7. Semiconductors
22.9%
$11.5
23. 22. Synthetic sweaters and outerwear
10.0%
$4.4
6.
5. Telecommunications equipment
11.0%
$9.7
24. 29. Electrical equipment
24.1%
$4.4
7.
6. Computers
27.5%
$8.3
25. 25. Combustion-engine parts
19.8%
$4.3
8.
9. Footwear
12.0%
$8.0
26. 30. Rubber and plastic articles
21.3%
$4.1
9. 10. Paper and paperboard
11.6%
$7.5
27. 31. Measuring instruments
16.1%
$3.6
10.
4. Trucks and other vehicles
0.9%
$7.5
28.
32. Nonelectric machine parts
18.6%
$3.5
11. 13. Organic chemicals
14.7%
$7.0
29. 34. Aluminum and alloys
19.3%
$3.4
12. 15. Baby carriages and toys
17.8%
$6.7
30. 24. Alcoholic beverages
4.3%
$3.4
13. 12. Wool and cotton apparel
11.4%
$6.5
31. 33. Manufactured metal
2.4%
$3.3
14. 19. Electrical turbines
19.7%
$6.0
32. 23. Wood
1.1%
$3.2
15.
8. TV and stereo equipment
-2.9%
$5.4
33. 28. Jewelry
10.5%
$3.1
16. 16. Piston engines
13.4%
$5.4
34. NR Furs and leather
20.5%
$2.8
17. 18. Aircraft
13.0%
$5.2
35. 35. Outer garments
13.8%
$2.8
18. 17. Precious stones
11.5%
$5.0
NR = Not ranked in top 35 in 1985.
Note: Percentage change reflects average growth rate from 1985-88.
USN&WR-Basic data U.S. Dept. of Commerce
44
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ECONOMIC OUTLOOK
CAN MARXIST ECONOMIES MAKE IT TO MARKET?
THE HIGH COST OF REFORM
would encourage factories to produce more
Of all the challenges facing Communist
higher-priced goods and eventually outgrow
reformers, none is as vexing as how to
the allotment system. "It didn't happen
prod their centrally planned economies
fast enough," says Nicholas Lardy, an
toward freer markets without courting
economist at the University of Washington.
chaos. No socialist state yet has made the
"The longer the dual-price structure
transition to a system in which prices
stayed in effect, the more opportunity
accurately reflect supply and demand.
there was for corruption." Factory
Instead, half measures have eroded living
managers preferred to sell the state's
standards without boosting production.
cheap coal to private enterprises on the
One of the key dilemmas for Communist
sly at market prices and pocket the
planners is whether to phase in market
difference rather than produce steel or
reforms or free prices in one "big bang.
run railroads for lower profits. Local
Both have disadvantages. The gradual
banks are obliged to bail out loss-making
approach tends to increase price
industries and, as a result, China's money
distortions and fuel inflation, while an
supply has spun out of control.
all-at-once strategy risks economic chaos
that could provoke a popular backlash and
MOSCOW'S DILEMMA
set back the entire reform program.
Despite its emphasis on perestroika, the
For years, the Polish government has
Soviet Union, fearing popular unrest, has
ratcheted food prices upward while trying
postponed price reforms until 1991 or 1992
to retain central control over prices. The
at the earliest. Some Soviet economists
cost increases sparked riots in 1970, 1980
want to saturate the consumer market with
and again last year. A series of weak
goods before letting prices loose. Even
regimes gave in to workers' demands for
radical reformers like economist Nikolai
increased wages and bonuses, fueling a
Shmelyov argue that the production
wage-price spiral. Inflation now hovers at
imbalances in the Soviet economy are so
an estimated 100 percent. While the
great now that freeing prices would be
government insists its latest attempt to
disastrous. "It will simply lead to
boost prices will let food costs reach
inflation," says Ed Hewett of the
their true market level, disgruntled
Brookings Institution. Without
workers already are staging walkouts and
competition, firms with a monopoly on
wildcat strikes to protest the hikes.
production will simply jack up prices
without improving quality or quantity.
THE CHINA SYNDROME
Hewett believes Mikhail Gorbachev's top
China took a different approach. After
priority should be controlling
keeping prices static for 25 years, in the
inflationary pressures by reining in the
late 1970s Beijing raised food prices and
money supply, paring the deficit and
allowed farmers to grow and sell what they
soaking up excess purchasing power through
wished. Produce and meat output soared,
such measures as selling off government
with the government cushioning the urban
housing and issuing bonds. But the Soviets
population from price rises by increasing
may lack the statistics even to measure
wages and rationing flour and rice.
their money supply, much less control it.
Now, agricultural production has leveled
In its latest effort to hike grain
off, inflation is running at over 25
production and save foreign exchange,
percent and Beijing has not been able to
Moscow announced last week that it would
extend reform to the industrial sector.
pay farmers in hard currency for wheat and
Ministries warned of runaway inflation if
other crops in excess of average
the government raised the artificially low
production. The measure may induce growers
prices of staples like coal and oil. The
to increase their yields and use the funds
compromise: A dual pricing system that
to modernize their farms. But Western
would ease the path toward a market
economists warn that establishing a two-
economy. Industries would produce a
tiered pricing system could worsen
certain amount of goods with the low,
Moscow's monetary woes and send producers
state-subsidized supplies, with anything
of other goods clamoring for dollars, too.
extra sold on the free market.
Chinese economists hoped the scheme
by Louise Lief
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
47
HORIZONS
SECRETS
OF THE SEA
The specter of a planetwide climatic
upheaval from the greenhouse effect has
given a new urgency to understanding
the oceans, which, scientists now realize,
affect everything from the formation
of clouds to temperature cycles
lasting centuries. Satellites, acoustic
CAT scanners and remote-controlled
subs are joining the new effort
to probe the mysteries of the deep
Uncharted waters. Automation is providing
ar out in the Western Pacific, two
aviators, sailors and the rest of us who
vast pools of warm water, each the
want to know what the weather will be,
size of the United States, are form-
oceanographers lacked a broad constitu-
BROWN, R. EVANS, M. CARLE-UNIVERSITY OF MIAMI
F
ing the seeds of torrential rain-
ency willing to invest in their science.
storms that will hit the South American
The growing concern over global
coast in a year and a half. Thousands of
warming, and new findings establishing
miles away, in the Greenland Sea, car-
the oceans' role as the regulator of cli-
bon-dioxide-laden surface waters chilled
mate, is changing all that. As cars and
by arctic winds are beginning a thou-
factories spew billions of pounds of car-
sand-year journey via deep ocean cur-
bon dioxide and other "greenhouse gases"
rents that may determine when the
into the air every year, the oceans will
greenhouse effect will take hold, warm-
largely determine how fast the atmo-
ing the earth and altering climate. And a
sphere will heat up and whether the cli-
mile and a half below the surface, rock
mate will change in potentially devastat-
chimneys erupting with superheated,
ing ways for all of Earth's inhabitants.
mineral-rich water may tell how and
With their enormous capacity to store
where ore deposits formed on land.
heat and to absorb carbon dioxide out of
The dynamics of the great oceans once
the atmosphere, the oceans act as a fly-
Global force. Ocean currents affect
were of interest only to a small, hearty
wheel to weather and climate; the top few
climate by moving heat and carbon
band of oceanographers and to the super-
feet of the oceans hold as much heat as the
dioxide. Red and orange above indicate
powers' navies. Unlike meteorologists,
entire atmosphere. "If you're going to
the warm waters of the Gulf Stream
who have an eager clientele of farmers,
predict climate," says Derek Spencer, an
48
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
DAVID DOUBILET
researchers with a wealth of data. Here, a National Geographic Society remote-operated submarine photographs the Cayman Wall
associate director for research at the
and slow. "The atmosphere is moni-
Woods Hole oceanographer Terrence
Woods Hole Oceanographic Institution
tored," says Richard Somerville, head of
Joyce, "you can't say where any one place
on Cape Cod, "you need to be able to
the Climate Research Group at Scripps
will warm up or cool down." The speed of
predict what the oceans are doing."
Institution of Oceanography in La Jolla,
these currents is also of the essence. If the
That's easier said than done. Data
Calif., "but the ocean is only sampled."
equator-to-poles heat shuttle moves swift-
about the oceans are remarkably sparse.
Most oceanographic data are gathered on
ly, the oceans may at least be able to
What data are available have often been
research ships that can make 10 knots, the
forestall a greenhouse-induced global
jealously guarded by the Navy, which
same speed as the world's first oceano-
warming by dumping the excess heat into
supports roughly 20 percent of oceano-
graphic vessel, the H.M.S. Challenger,
the polar regions and deep waters.
graphic research in the U.S. and which
which explored the oceans in the 1870s.
Until such data are collected, ocean-
has its own agenda. Only in March did the
ographers are skeptical-if not down-
Navy finally agree to declassify detailed
Hot on the trail
right scornful-of attempts to predict
maps of the ocean floor. Scientists argued
A major international push is now un-
the pace or extent of global warming.
that these data were essential to study the
der way to measure and map ocean cur-
While virtually all agree that rising lev-
dynamic processes that shape the earth.
rents, a linchpin in the link between ocean
els of carbon dioxide in the atmosphere
The Navy maintained that sea-floor
and climate. Most of the sun's energy is
are likely to cause climatic changes, they
charts would allow Soviet nuclear-missile
delivered at the tropics, and-scientists
say that the current computer models
submarines to navigate to precise firing
thought until recently-redistributed
that are the basis for predictions grossly
positions and thus hit American land
around the globe by winds. Scientists now
simplify the role of the oceans and may
targets with vastly improved accuracy.
know that at least half the heat is carried
give misleading results. James Hansen of
Even without bureaucratic obstacles,
by vast ocean currents. "Until you under-
the National Aeronautics and Space Ad-
collecting data at sea is difficult, costly
stand where all that heat is going," says
ministration (NASA) has attracted the
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
49
widest attention, claiming that
horizontally by winds at the sur-
his model is good enough to
face and vertically by a process
show with "99 percent confi-
called thermohaline circulation.
dence" that the greenhouse
Bitter winter winds in the Arctic
warming has already begun. But
and Antarctic cool surface wa-
Hansen's model assumes that
ters, making them more dense.
the oceans have no currents.
As the sea freezes, the ice rejects
When Syukuro Manabe and his
salt, adding to the density of the
colleagues at the National Oce-
remaining liquid. The heavy,
anic and Atmospheric Adminis-
salty water, saturated with car-
tration (NOAA) Geophysical
bon dioxide from the air, sinks
Fluid Dynamics Laboratory at
toward the bottom to begin a
Princeton added rudimentary
ocean currents, their model pre-
ing occurred, it would be con-
BRUCE CORNUELLI SCRIPPS INSTITUTION OF OCEANOGRAPHY
journey that may last 1,000
years or more. Waters formed in
dicted a new and important
the Greenland Sea, for example,
wrinkle: If a greenhouse warm-
can move along the deep ocean
all the way to Antarctica, across
fined largely to the Northern
the Indian Ocean, finally surfac-
Hemisphere. Cold, deep water
ing in the North Pacific.
from Antarctica apparently
Along with traditional meth-
would counteract the effect in
ods to track the movement of
the Southern Hemisphere. "We
water, such as setting out floats
really don't understand how the
that emit sounds so their path
ocean behaves," Manabe says.
Oceanic CAT scan. Deploying buoys in the Greenland Sea
can be followed, WOCE scien-
Without good data, cautions
tists will employ sophisticated
Roger Revelle, director emeritus of
next year and run through the mid-1990s.
new tools. A joint U.S.-French radar sat-
Scripps, "models are more than worth-
In the World Ocean Circulation Experi-
ellite, Topex/Poseidon, to be launched in
less. They are a positive menace. Over the
ment (WOCE), scientists will crisscross
1992, will track ocean currents on a global
next 10 years, we have to put a good deal
the oceans to track large-scale movements
scale. A Japanese satellite to be launched
of emphasis on making measurements."
of water, heat and chemicals, a process
in 1994 will carry a NASA scatterometer,
A major effort to do just that will begin
now poorly understood. The oceans move
an instrument measuring ocean-surface
MATT ZANG-USN&WR
Probing the deep
To understand the ocean processes that affect climate and
mineral deposits, researchers need to sample the seas on an
unprecedented scale. A variety of new tools is helping
Topex/Poseidon satellite
Radars provide precise
P-3 aircraft
measurement of sea-surface
Lasers measure the mass
elevation, an indicator
of phytoplankton blooms
of currents
1
Heat
Upwelling region
2
exchange
ATLAS
Buoys measure wind
Phytoplankton
speed and temperature
at the surface and sea
Currents
temperatures down to
Carbon-
500 meters; data is
dioxide
relayed to overhead
satellites
1
Vertical and horizontal
uptake
currents influence climate
Ocean acoustic tomography
by transporting heat and by
Array of buoys calculate sea
absorbing carbon-dioxide
temperatures and currents by the
gas, the principal player in
time it takes sound waves to travel
the greenhouse effect
between buoys
2
Minute plants known as
phytoplankton bloom near the
surface in "upwelling" areas fed by
nutrient-rich water. Through
Argo/Jason
TV-equipped, unmanned
photosynthesis, the plankton take up
sub can be operated from land
3
carbon dioxide, which is then buried
Vents
via satellite link to surface ship
in the ocean's sediments when the
Ore deposits
Ridge
plants die and sink to the bottom
3
Ore deposits form as superheated,
####
mineral-laden water gushes out of vents that
form on the ocean floor along volcanic ridges
Magma
50
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
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COVER STORY
wind speed and direction over most of the
the narrow band of surface water where
the Joint Global Ocean Flux Study are
globe. This information, now lacking in
almost all of the ocean's life is concentrat-
roaming the North Atlantic in an ambi-
detail, is vital to understanding the forces
ed. The phytoplankton population that
tious program to quantify the phenome-
that drive surface currents.
explodes in enormous blooms every
non. Aircraft are shining laser beams into
Early nuclear-bomb tests inadvertently
spring acts as a "biological pump" to
the blooms, causing them to fluoresce; by
gave WOCE scientists another important
carry carbon from the atmosphere to the
measuring the amount of light given off by
tool to track deeper currents. Bombs ex-
bottom. The blooms occur in areas where
the phytoplankton, scientists can calcu-
ploded in the atmosphere produced the
nutrient-rich water moves toward the sur-
late the mass of the bloom. The technique
hydrogen isotope tritium, which has a
face. In the spring, when the days grow
could later be used from satellites.
half-life of a dozen years and decays to
longer and surface waters warmer, the
Carbon dioxide is absorbed by the
helium 3. By measuring the ratio of triti-
tiny plants multiply rapidly as they feast
oceans from the air in another way: It
um to helium 3 in a water sample, ocean-
on the phosphates and nitrates in the
dissolves in surface water and is trans-
ographers can tell precisely how long ago
water-the same fertilizers spread on
ported by downward currents into the
the tritium entered that water at the
lawns-and extract carbon dioxide from
deep ocean, where it can reside for hun-
surface. Dating successive samples shows
the air through photosynthesis. Then the
dreds of years. If increased atmospheric
the track the deep water is following.
populations crash for reasons not fully
carbon dioxide should raise global tem-
Radioactive fallout from the 1986 Cher-
understood and dying plants sink into the
peratures, the circulation of the oceans
nobyl nuclear-power-plant disaster has
sediments carrying with them roughly 2.5
would also change, oceanographers sug-
also been used to monitor the rate at
billion tons of organic carbon annually on
gest, possibly in ways that might counter-
which particles sink into the ocean.
a global basis.
act the greenhouse effect. "As you in-
At smaller scales, the oceans are alive
Research vessels from five nations in
crease the rate of ocean circulation, you
with their own weather systems, similar to
ROBERT R. HESSLER-SCRIPPS INSTITUTION OF OCEANOGRAPHY
those in the atmosphere aithough typical-
ly only a tenth the size. These fronts and
eddies, discovered only in the 1960s, are
60 to 100 miles across and last for a month
or more. Since they contain over 90 per-
cent of the ocean's dynamic energy, they
compound the oceanographers' sampling
and modeling problems. Unless scientists
can drop an instrument overboard from a
ship every 30 miles or so, an obvious
impossibility, they'll miss one of the most
important features that drives the sea.
The ocean's pulse
This year, Scripps and Woods Hole
oceanographers are trying to give the
Greenland Sea, in effect, a CAT scan to
beat the sampling problem. In this new
technique, called acoustic tomography,
instruments that emit beeps of sound are
moored beneath the surface in a polygon
pattern 120 miles on a side. Since the
speed that sound travels through water is
closely related to temperature, measuring
DUDLEY FOSTER-WOODS HOLE OCEANOGRAPHIC INSTITUTION
the length of time it takes a beep from one
The sulfur diet. Most of the
instrument to reach the next accurately
deep ocean is a desert. So
records the ocean temperature between
scientists were astonished to
them. Since sound travels slightly faster
discover giant worms, above,
with a current than against it, simulta-
thriving 8,000 feet down in
neously transmitting beeps between two
water laden with toxic
points and timing the difference can also
hydrogen sulfide, spewed from
reveal currents. By comparing current
vents, left. Their secret is
data with surface winds, the researchers
bacteria, harbored in a cavity
hope to see the relationship between the
within the worms, which
two. If acoustic tomography works well, a
"burn" sulfur compounds,
few widely dispersed instruments might
producing energy that the
be able to measure the average tempera-
bacteria then use to synthesize
ture of an entire ocean basin, such as the
sugars. Similar symbioses
North Atlantic, to determine whether it is
between sulfur-eating bacteria
heating or cooling over long periods. If
and animals have since been
average temperatures climb, that would
discovered in less exotic
be one indicator of global warming.
places, such as a Los Angeles
In an effort to better understand the
sewer outfall that sustains the
ocean's role in absorbing carbon dioxide
"gutless sewer clam"
from the atmosphere, other researchers
are focusing on the smallest forms of life in
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
51
COVER STORY
increase the rate at which you bring nutri-
ton would grow faster and more particles
eastbound water. Torrential rains hit
ents to the surface into the light zone
would be produced. This, in turn, would
South America, and the warm water shuts
where the plants live," says Robert Gago-
lead to more clouds. With a heavier cloud
off the normal upwelling of nutrients for
sian, an associate research director at
cover, more of the sun's energy would be
phytoplankton along the coast, devastat-
Woods Hole. More plants would grow
reflected back into space, and global tem-
ing fisheries. The atmospheric effects of El
and more carbon would thus rain out into
peratures would start back down.
Niño are sometimes felt as far away as the
the sediments. "If ocean circulation
Gulf of Alaska, where North America's
changes because we're monkeying around
Climatic flywheel
weather patterns form. Then, the warm
with the system," he says, "maybe there's
As researchers discover the increasing
waters retreat westward again.
a feedback mechanism that will stop it."
importance of the oceans in long-term
Scientists who once thought El Niño
Phytoplankton may play a major role in
climate change, they are also finding new
was a local South American weather phe-
another important regulator of climate,
evidence that oceans drive natural cycles
nomenon have learned in the past decade
clouds. Clouds form when water vapor
of climate that come and go every few
that it is an endless, self-sustaining cycle
condenses around tiny particles floating
years. El Niño is the most striking. Every
of warm and cold episodes that spans the
in the air. A new and still controversial
three to five years, 83-degree water from
Pacific. Complex interactions between sea
theory suggests that phytoplankton, by
the far reaches of the western Pacific
surface temperatures, the depth of the
excreting the chemical dimethylsulfide
Ocean races eastward along the equator to
layer of warm surface water and changing
into the air, is a major source of these
the South American coast, where the
winds drive the cycle.
crucial particles. If the oceans should
surface temperature of the sea is usually in
Gathering data on this fast-changing
warm slightly, some researchers suggest,
the 70s. Enormous storms generated by
cycle so that El Niños can be predicted has
evaporation would increase, phytoplank-
the warm surface water accompany the
long been difficult in the remote Pacific,
Stopping coastline pollution at
sewer lines, and when heavy rains
overwhelm treatment plants, raw
the sewer and the farm
sewage and runoff pour directly into
coastal waterways.
This noxious bouillabaisse has vari-
S
yringes. Dead rats. Bags of blood
University. Pesticide residues, for ex-
ous effects. Volatile chemicals like oil
and used plastic tampon applica-
ample, have prompted New York
linger near the surface, killing the lar-
tors. Last summer's revolting
State officials to warn consumers not
vae of fish and shellfish. Other chemi-
tide of garbage drove beachgoers in-
to eat more than one serving per week
cals, such as PCB's from electrical
land and cost waterfront businesses
of fish pulled from New York waters.
transformers and DDT, which is still
more than a billion dollars in lost
One third of the nation's shellfish
leaching from soils 17 years after it
revenue. Yet for all the panic they
beds, from the Pacific's Puget Sound
was banned, drift to the sea floor,
caused, trash and medical
where they settle in sediments or are
ADAM STOLTMAN
waste form only a minor part
taken up by adult shellfish and other
of ocean pollution. Medical
animals, which are in turn devoured
waste made up roughly 1
by fish. Fertilizers and sewage pro-
percent of debris washed
vide a rich source of nutrients that
ashore last summer, about
feed huge blooms of algae. When the
the equivalent of one garbage
algae eventually die, the process of
bagful for every 1-ton truck-
decomposition soaks up the available
load, and even syringes and
oxygen in the water, choking off oth-
blood pose scant threat to
er life. Excessive nutrients and silt
public health since the AIDS
may contribute to the 3,000-square-
virus cannot survive for long
mile "dead zone" located off the
in the ocean.
mouth of the Mississippi River.
In fact, the most danger-
Much of the ocean is capable of
ous pollutants lurk unseen
healing if pollution is halted. Algae
below the surface. The U.S.
blooms, for example, disappear when
spews 32 billion gallons of
nutrient levels return to normal. But
toxic chemicals and sewage
Iceberg's tip. The real mess is underwater
stemming the flood will require a
into the sea every day. Thus
broad attack. Improved sewage sys-
far, this outpouring of filth has had a
to the Atlantic's Chesapeake Bay, are
tems are one obvious target. So, too,
negligible effect on the deep ocean-at
off limits because the shellfish contain
is the protection of diminishing wet-
least as far as oceanographers are able
unacceptable levels of bacteria, virus-
lands, which act as organic filters,
to measure-but it is choking the
es and toxic chemicals.
and the creation of buffer zones
coastal zone, the place where many
Surprisingly, half of pollutants
around agricultural land for control-
Americans make their living. "The
come not from industry, but from so-
ling fertilizer runoff. Naturally, the
coastal zone makes up only 10 percent
called nonpoint sources-pesticides
price tag will be staggering: Nation-
of the total area of the ocean, but it's
draining from agricultural lands, oil,
wide, it will cost at least $76 billion
the most significant in terms of fish
antifreeze, lawn fertilizer and animal
just to overhaul existing municipal
production," says Richard Bopp, a
waste washing off streets into storm
sewage-treatment plants.
geochemist at the Lamont-Doherty
drains. Moreover, many cities have
Geological Observatory of Columbia
combined storm-sewer and sanitary-
by Shannon Brownlee
52
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
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COVER STORY
where few ships travel. NOAA, France
chemical-recycling plant. In 1977, scien-
heated by magma; the hot water strips
and Japan are deploying 52 sophisticated
tists diving 8,000 feet below the surface in
minerals like iron, copper, zinc and man-
ATLAS buoys along the equator in the
the research submarine Alvin made the
ganese from the hot rocks and then jets
Pacific. The first 18 are already in place,
astonishing discovery of chimneys on the
out the chimneys. Last year, an expedition
measuring air temperature, wind speed
sea floor pouring out black, mineral-laden
looking at undersea hot springs west of
and sea temperatures to a depth of 1,600
water up to 750 degrees Fahrenheit. Close
Eureka, Calif., found sulfide-ore mounds
feet and beaming the results to a satellite
by, they found teeming colonies of tube
up to 100 feet high covering several square
passing overhead. The data are available
worms as long as 5 feet, clams and mussels
miles, comparable in size to an ore district
to researchers within 4 hours.
living in a dark, poisonous world where
on land. Most of the ore deposits that form
Satellite link-ups can even allow scien-
photosynthesis plays no part in their life
near the vents are recycled back into the
tists working in their labs to extend their
cycle. A decade of study since then has led
mantle as the sea floor moves. Occasional-
eyes and hands electronically to the ocean
geologists to develop a whole new expla-
ly over geologic time, however, a piece of
floor. The Argo/Jason system devised by
nation of how certain mineral deposits
floor containing minerals from the sea is
Robert Ballard of Woods Hole, who dis-
found on land today were formed.
pushed up onto a continent. Someday, if
covered the Titanic and the Bismarck,
Solving a riddle. "This zone is a great, big
terrestrial ores are spent and inexpensive
next year will let scientists thousands of
hot-water circulating system," explains
new technology developed, the undersea
miles away operate cameras and mechani-
Scripps geologist James Hawkins. The
deposits might be mined commercially.
cal arms on the sea bottom.
chimneylike vents form along ridges
But that is far in the future. Hawkins says,
The tremendous dynamic force of the
where hot magma from within the earth
"I have a piece of zinc sulfide worth 30
oceans is making itself known on a far
wells up and spreads outward. Cold sea
cents that cost $30,000 to bring up."
statelier scale through its role as a vast
water trickles into cracks where it is
Vent circulation also solved a problem
WILLIAM CURTSINGER-PHOTO RESEARCHERS
Is a treasure
hunter's gain
history's loss?
U
ntil a year ago, Greg Stemm and
his colleagues at R. V. Seahawk,
Inc., a Tampa-based ocean-salvage
company, spent most of their time on
routine work for insurance companies.
Diving into the wrecks of fishing boats
to determine why they sank was about
as exciting as things got.
Today, Stemm is drawing up plans to
recover what he believes to be a multi-
million-dollar treasure of coins, emer-
alds and silver ingots from a Spanish
galleon that the company discovered last
June 70 miles off the coast of Florida.
Stemm has joined a growing corps of
high-tech treasure hunters who are using
deep-diving robots, sonar and highly
sensitive cameras to locate and salvage
sunken ships. Within the last few years,
teams of divers have taken artifacts from
many wrecks, including the Titanic, the
Whydah (a slave ship that was captured
by pirates in 1717) and the galleon Ato-
ship Bismarck, which Woods Hole
memorial to the 1,513 people who died
cha, which brought salvor Mel Fisher a
Oceanographic Institution scientists re-
when the liner sank in 1912.
fortune in gold dust, jewels and coins.
cently located 600 miles west of France,
Seahawk's Dan Bagley concurs that
But as advances in technology trans-
are protected from salvage.)
the Titanic should not be plundered-for
form treasure hunting into a sometimes
Sensitive issue. Law aside, some argue
now. "We are talking about the feelings
very lucrative business, old questions of
that it is unseemly to disturb wrecks.
of people who are alive today," he says.
whether wrecks should be disturbed at
Woods Hole oceanographer Robert Bal-
In his view, however, old shipwrecks are
all, and, if so, by whom, are being raised
lard, who in 1985 helped locate the hulk
a vastly different story. No one is mourn-
with new urgency. By international law,
of the Titanic, is highly critical of his
ing the sailors who went down on Sea-
commercial vessels that sink on the high
French colleagues who later returned to
hawk's recent find. And Bagley bristles
seas can be picked over by anyone who
the site to pull crystal, jewels and other
at suggestions that his firm is robbing a
finds them. (Government vessels, on the
artifacts from the sea. He argues that the
mass grave. Sailors usually abandon a
other hand, such as the German battle-
wreck should be left undisturbed as a
sinking ship, he says. Moreover, just be-
54
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
that had long troubled oceanographers. It
the area cools. Sometimes, for reasons
a year or 10 times a year," he says. "It's
was once thought that the salts and chem-
still not explained, the ridges suddenly
an additional transfer of energy from the
icals in the ocean were eroded from the
belch a huge volume of hot water. In
crust we hadn't been aware of before."
land and carried to the sea by rivers. But
1986, Edward Baker, an oceanographer
As the oceans slowly yield their secrets,
the numbers did not add up. Much more
with NOAA's Pacific Marine Environ-
the separate scientific domains of ocean-
magnesium was observed flowing into the
mental Laboratory in Seattle, was me-
ographers, meteorologists, chemists, biol-
ocean, for example, than could be found in
thodically surveying the Juan de Fuca
ogists, geologists and supercomputer ma-
sea water. The vent systems provided the
ridge system west of Oregon and Wash-
vens are merging into a unified study of
missing piece of the puzzle. "Every few
ington when he found a "megaplume," a
earth sciences. The scientists are all learn-
million years, the entire volume of the
circular mass of hot water 2,000 feet
ing that what happens in the sea is related
ocean circulates through this system,"
thick and 12 miles across lying a mile
intimately to what happens in the air and
explains Andrew Campbell of the Massa-
above the sea floor. Analysis showed it
to the biosphere. "I'm a meteorologist,"
chusetts Institute of Technology. "In that
contained particles that would have set-
says Somerville, "but my students are
process, the chemistry of the ocean is
tled out in a few days. That meant the
oceanographers. They are not hung up
changed." Magnesium and some salts are
megaplume had just been formed. The
about where the atmosphere stops and the
removed; other chemicals are added.
next year, he found another one in a
ocean begins." As the increasingly strong
"Were it not for the vents," he says, "the
different part of the ridge. Baker specu-
connections between the ocean and cli-
ocean would have the chemistry of a soda
lates that an undersea earthquake may
mate make clear, that's not a distinction
lake" like the Great Salt Lake.
puncture a reservoir of water deep in the
made by Mother Nature, either.
Each vent field flows for a few de-
crust and expel it all at once, like a
cades, then dies as upwelled magma in
geyser. "I don't know if one occurs once
by William J. Cook
ALAN BEACH POST/BLACK STAR
so that archaeologists can study them.
Even when salvors exercise reasonable
WEST!
care with artifacts, they don't pluck the
same amount of information from wrecks
Treasures
as do archaeologists. George Bass of Tex-
as A&M University leads a team that is
conserving a 1,000-year-old shipwreck he
excavated over a decade ago. One group
is reassembling the hull, another is piec-
ing together fragments of glass from
20,000 jars, plates, cups, bowls and other
items. The trading ship carried coins,
jewelry, iron tools, weapons and glazed
pottery from the medieval Christian and
Islamic worlds. "What treasure hunter
has ever invested that much time or mon-
ey into a ship?" Bass asks.
Ultimately, the prohibitive cost of all
deep-sea operations, quick and dirty or
otherwise, will help shape whatever
JOHN BEACH POST/BLACK STAR
compromise is worked out between ar-
Science and profit. Archaeologists, surveying the hull
chaeologists and treasure hunters. Since
of a 16th-century ship off Labrador, facing page, say
governments and nonprofit foundations
salvors often destroy history in their quest for
will not pay archaeologists to labor for
treasure. Booty, such as the gold bar, left, from
decades over every historical wreck, they
galleons made Mel Fisher a fortune-and drew
may have to accept the selling of arti-
crowds as it was unloaded at his Key West museum
facts if they ever want to see the wrecks.
Some archaeologists counter that if soci-
ety will not pay to excavate important
wrecks now, they should remain undis-
cause sailors died doesn't mean that the
wrecks that have been found in shallow
turbed until the money is available.
galleon's hulk is consecrated ground.
coastal waters, this wreck appears to be
The National Park Service is drawing
Historians raise a more sweeping ob-
intact and well-preserved; at 1,500 feet,
up guidelines that it hopes will at least
jection to the work of Seahawk and oth-
the sea is cold, dark and relatively still.
dampen the market for recovered antiq-
ers. They maintain that old wrecks are
Salvors often manhandle wrecks in their
uities. Says Walter, "We'd like to see
far too precious archaeologically to be
headlong rush for booty. According to
auction houses refusing to handle tainted
salvaged for treasure. Like long sealed
Walter, the salvage of the Atocha was a
goods." But getting nations to agree to
tombs or ancient buried cities, wrecks
"horror," and salvors lost many arti-
ban treasure hunting is probably a losing
often provide a rare window into the
facts when they raised the Dutch-built
proposition. As Woods Hole's Andrew
past. J. Jackson Walter, president of the
deBraak, which sank off the coast of
Bowen notes, "We can't even stop the
National Trust for Historic Preserva-
Delaware in 1798. Seahawk promises it
sale of ivory throughout the world."
tion, calls Seahawk's new find an "irre-
will excavate carefully and keep the arti-
placeable resource." Unlike the galleon
facts together for at least a couple of years
by Betsy Carpenter
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
55
ON THE LAW
A criminal lack of common sense
T
he life story of Warren Bland is one
BY JOHN LEO
evidence linking him to Ho. He was
of those tales evenly divided be-
charged with her murder.
tween the viciousness of the criminal and the folly of
Enter the Feds. Larry Burns, an assistant U.S. Attor-
the criminal-justice system. Consider this career:
ney in San Diego, filed federal charges against Bland
In 1958, Bland stuck a knife in the stomach of a man
under the Armed Career Criminal Act, the brainchild of
in a Los Angeles bar and got off with probation. In
Senator Arlen Specter (R-Pa.). This fairly new, fairly
1960, he was arrested in a series of sexual assaults on
obscure legislation was passed in 1984. As originally writ-
women in Los Angeles County. Three women fought
ten, it provided that anyone caught with a gun after three
back and avoided rape. One had her jaw broken in the
burglaries or robbery felonies will go to jail for a mini-
process. Originally charged with one rape, three attempt-
mum of 15 years to a maximum of life imprisonment,
ed rapes, a kidnapping and a robbery, he plea-bargained
with no possibility of parole. The act was amended and
down to one rape and one kidnapping and was sent to a
enlarged in 1986 to apply to anyone who had committed
state mental hospital under the state's "mentally disor-
three crimes of violence or serious drug offenses.
dered sex offender" program, which has since been aban-
In his brief to the court, Burns noted dryly that "a
doned. The hospital warned that Bland was a sexual
public perception has arisen, in California in particular,
psychopath who would be "assaultive and/or homi-
that the stewards of our criminal-justice system have
cidal toward women" if released.
failed to come to grips in a real-
For seven years, Bland was
istic and common-sense manner
studied, interviewed, counseled,
with the mounting crime wave."
psychoanalyzed and "treated."
This is lawyerly understatement.
In the process, the hospital dis-
What he might have said is that
regarded its own warning. Al-
the state of California botched
ways expert at simulating reha-
the Bland case for three decades
bilitation, Bland was hailed in a
and is implicated by its incompe-
probation report for his "com-
tence in the savage murder of
plete change and attitude toward
little Phoebe Ho. It has known
his problem," and the hospital
for 29 years that Bland is a vio-
set him free.
lent sexual psychopath, yet it let
Within months, he was back
him go five times.
at his chosen life's work, violent
This casual approach did not
sexual attacks. He was convicted
end with Bland's latest arrest in
of two more rapes. At his sen-
Pacific Beach. Nearly three years
tencing, another dark report an-
after Ho's death, the Riverside
nounced that Bland was "clearly
County prosecutor still has not
a dangerous individual who war-
managed to hold even a prelimi-
BONNIE TIMMONS FOR USN&WR
rants segregation from society
nary hearing in the case. If it
for the longest time that is possible under existing laws."
continues at its current pace, the case could easily drag on
Existing laws being what they are, Bland served just
for another three to five years.
seven years. Shortly after his release, he kidnapped an 11-
As Burns notes, if the criminal-justice system fails to
year-old girl and her mother. The mother was molested.
protect the citizens, the public will lose confidence and
The girl was sexually assaulted and tortured.
turn to vigilantism. Yes. And if the nation is serious about
In yet another of those compassionate criminal-justice
crime, it will not release sexual monsters like Bland every
breaks that kept coming his way, Bland plea-bargained and
few years and simply let victims pay the price for the next
served only three years for those crimes. The crimes were
brief round of confinement.
growing more violent; the jail terms were getting shorter.
The lack of seriousness about violence was the real
Lethal habits. Eight months after his release, Bland was
source of the outrage over Willie Horton, just as it was in
back in jail, this time for sodomizing and torturing a
the outrage over the misguided policies at the Patuxent
small boy. At this point, in any sensible society, Bland
Institution in Maryland, where a triple-murderer serving
would have been tossed into a dungeon for the rest of his
a life sentence was allowed unsupervised furloughs. The
life, but in California he plea-bargained for 9 years and
Patuxent program is being revamped, a straw in the wind.
served only 4½ years.
Another such straw is the announcement by New York
Bland got out again in early 1986. In December, Phoe-
Governor Mario Cuomo that he now favors a lifetime
be Ho, age 7, disappeared while walking to school in
sentence without parole for some hardened criminals, a
South Pasadena. She was found dead in a ditch in River-
position he adopted when opponents of his seventh annu-
side County, mutilated with the kind of instruments
al veto of the death penalty appeared to have enough
Bland had used before. A 14-year-old girl in Orange
votes to override.
County died the same way, and an 81-year-old San Diego
The Armed Career Criminal Act also fits this new
woman was found bound, nude and choked to death, with
realism. Under this act, it took only 30 minutes in court
Bland as the chief suspect.
for Larry Burns to accomplish what the state of Califor-
Sought in the Ho murder, Bland fled and was found
nia failed to do for 30 years-take Bland off the streets
by police-working under an alias in a McDonald's in
permanently. With no fanfare at all, the sentencing came
Pacific Beach. He was wounded in the buttocks while
last week. Warren Bland will stay in federal prison for the
trying to escape. In his car, police found a gun and
rest of his life.
56
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
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FOREIGN
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JUST SAY NO.
America is hooked on foreign
The 110 nuclear plants in the
our own energy sources, like
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U.S. have cut our foreign oil
nuclear energy.
percent of the oil we use-even
dependence by over three billion
For a free booklet on nuclear
more than in 1973, when the
barrels since 1973. And they
energy, write to the U.S. Council
Arab embargo plunged us into
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for Energy
gas lines, rationing, and
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recession.
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less we have to depend on
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U.S. COUNCIL FOR ENERGY AWARENESS
Nuclear energy means more energy independence.
©1989 USCEA
NEWS YOU CAN USE
America's No. 1 tipster
EYE ON WALL STREET
Has success spoiled Dan Dorfman?
No one serves up hot stock
editor at USA Today, Thomas Paterno.
DANA FINEMAN
tips as frequently or as pre-
Even his competitors view him with
sciently as does Dan Dorf-
awe. "Everyone in the investment com-
man. In his twice-a-week in-
munity feels they have to watch him and
vestment column for USA
listen to him," notes Richard Silverman,
Today, and in regular ap-
who works for the Dow Jones Profes-
pearances on Cable News
sional Investor Report (PIR), a wire ser-
Network's nightly "Moneyline" show,
vice sold mainly to traders and other
the superstar among financial journalists
market pros to provide everything from
puts investors time and again onto what
hard information to scuttlebutt on why a
they hunger for most: The name of the
particular stock is moving up or down in
next possible takeover candidate. Dorf-
price. Often the reason behind a move-
man speaks, and stock prices pop.
ment is some item that has appeared in
But a lot of people would love to know
Dorfman's column. "There are even
who Dorfman's sources are. Others won-
traders who set their videocassette re-
der if, under the constant pressure to
corders to his TV show," says Silver-
come up with new tips for his columns
man, "so they will be able to catch what
and television appearances, Dorfman
he said when they come home."
cares who these sources are and what
Dorfman's impact reached an absurd
their motives might be. The Securities
new height on August 3, when USA To-
and Exchange Commission, U.S. News
day touted his next day's column in the
has learned, is currently looking into
upper right-hand corner of its Money
whether Dorfman, wittingly or unwit-
section, noting that Dorfman's subject
tingly, is being used by individuals who
TIPS WITH CLOUT
would be whether the takeover specula-
give him information in order to manipu-
tion in Disney stock was "for real."
late the stocks he writes about. If true,
A Dan Dorfman exclusive is often
Without a scrap of information about
that would at least call into question the
followed by a jump in a company's
what Dorfman would say the next day,
veracity and value of his exclusive tips.
stock price the day his column
investors helped push the stock higher
Latest pundit. Dorfman is only the lat-
runs. Some recent examples:
by several points. When the column ap-
est in a line of 20th-century stock-mar-
August 10: "USA Today has learned
peared, it turned out Dorfman was dubi-
ket gurus who have transfixed investors
that Centaur Partners
for a time. Market theorist Robert
acquired
ous that a Disney takeover was in the
about 3 percent of Tambrands.
works. The stock promptly dropped.
Prechter rode to new highs along with
The presence of the group
could
Clout is attended by controversy. It is
the bull market in the mid-1980s until
lure other interested investors.
only natural to expect that some of the
the crash of October, 1987, did him in.
Tambrands, Inc. +31/4
sources who provide confidential infor-
In the early part of the decade, the pro-
mation to Dorfman do SO out of self-
nouncements of forecaster Joseph Gran-
ville often made the market swoon or
August 9: "A group of investors led by
interest, and he acknowledges that this
Charles Dolan
has acquired a
may sometimes be the case. "I feel peo-
soar. Besides reeling off Broadway and
stake in Paramount Communica-
ple use me, but I also use the user to get
Hollywood gossip, Walter Winchell also
tions and may seek control, USA To-
information out to the average person,"
touted stocks on the radio in the 1940s,
day's Dan Dorfman has learned.
he said last week at his USA Today office
not always successfully. Today, a knock
Paramount +2½
in New York. His role, he said, is to
from Barron's Editor Alan Abelson can
provide investors with the market infor-
send a stock tumbling. Business Week's
July 18: "USA Today has learned
mation that normally circulates only in
Gene Marcial, who does the "Inside
that Centaur Partners
is
the superheated Wall Street rumor mill.
Wall Street" column, and the Wall
Street Journal's "Heard on the Street"
weighing [a] cash bid" for Goodrich.
"I'm an equalizer. I tell the masses what
B. F. Goodrich +23/8
a few chosen people already know."
column often affect the price of a stock
But what are investors to make of the
that has been written up.
But Dorfman's recent series of stun-
June 23: "USA Today has learned
information he provides? Dorfman in-
Paramount is on the verge of raising
sists that he does not offer picks, only
ning takeover scoops has elevated him
its offer for Time.
into a class by himself. In June, he re-
The higher bid
news about what is affecting a stock's
could come in the next few days."
price. "No one should ever buy a stock
ported that Paramount would soon make
Time, Inc. +101/2
based merely on anything I write or
a run at Time, Inc., and in July he dis-
say," he declares. Nevertheless, when
closed that Denver oilman Marvin Davis
June 19: "Peltz, I've learned, has tak-
Dorfman provides such information, in-
had taken a position in UAL Corpora-
en a stake in the chemical giant,
vestors eager to make a quick buck obvi-
tion, the airline holding company that
though the size and reason for the
ously trade on it with a vengeance.
Davis is now negotiating to buy for $5.4
purchase are unclear."
Besides his unquestioned ability to fer-
billion. "Dan is the No. 1 tipster in the
Union Carbide Corporation +21/2
ret out market scoops, Dorfman is
market today and the most plugged-in
uniquely ready to deal in rumors, or to
guy on Wall Street," boasts Dorfman's
report that someone has bought a tiny
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
59
NEWS YOU CAN USE
stake in the company and could be con-
maker of tampons. The stock of each of
sidering a takeover. Only when an inves-
these companies immediately jumped
tor has bought up at least 5 percent of a
several points after Dorfman's column
Is it time,
firm's outstanding shares does the SEC
ran. On July 18, Dorfman disclosed in an
require a "13-d" disclosure of the pur-
article that Centaur had sold its Ferro
chase, which must state the buyer's inten-
stake "after the stock ran up." The SEC
once again,
tions. Most other investment columnists
can construe such selling as manipula-
will not report such small positions. "If
tion only if some link is established be-
to bail out?
the position is under 5 percent, you run
tween Centaur's actions and what Dorf-
the risk of reporting information that
man reported.
might move the stock, while the person
The case will be tough to investigate,
INVESTING
Today's stock
or firm that has accumulated the position
let alone prove. Dorfman swears that he
market differs from 1987's,
doesn't have to disclose it and could in
will keep his sources secret and believes
fact be taking advantage of the price
that, as a journalist, he is protected by
experts say. Maybe. But a few
rise," says Timothy Andrews, managing
the First Amendment. He also insisted
defensive moves are in order
editor of Dow Jones's PIR news wire.
that no one from Centaur had given
The probe. The SEC investigation deals
him information. "Raiders do not call
all Street's week was taut with
with Centaur Partners, a Maryland-
up and say they own stocks," he said.
W
significance. Two years after
based investment partnership that Dorf-
"I come up with that kind of informa-
reaching a high of 2,722 and
man has mentioned repeatedly in the
tion on my own."
then suffering the most precipitous crash
past 14 months. The SEC wants to know
Meanwhile, Maryland businessman
in history on Oct. 19, 1987, the Dow
whether Centaur, in establishing small
Melvyn Estrin, president of one of the
Jones industrial average dallied with a
initial positions in several prominent
limited partnerships that make up Cen-
new high all week, finally breaking
companies, may be manipulating the
taur, rejects any allegations of manipula-
through to 2,728 on Thursday but then
market in the companies' stock. When
tion and denies ever giving any informa-
settling back and finally closing Friday
Dorfman reports that Centaur is buying
tion to Dorfman. He, in fact, indicates
at 2,684. Still, the virtually uninterrupt-
shares in a company, spurring a rise in
that some of the financial journalist's
ed climb back is all but complete.
the price of that stock, the question is
reports might be in error. "Suffice it to
Now, inevitably, comes the question:
whether Centaur has in fact been selling
say he is not always right," says Estrin.
Is it time to get out? Most Wall Street
shares to investors-who are then left
In Centaur's bid for Pennwalt, the tar-
market analysts, money managers and
holding the bag when the price drops
get company's management aired some
economists say no, maintaining that the
later in the absence of a takeover.
dirty Centaur linen. A number of princi-
stock market's new peak has little in
Separately, say U.S. News's sources,
pals, it seemed, had had run-ins with the
common with its 1987 high. "Two years
the New York Stock Exchange's comput-
SEC and other agencies. One Centaur
ago, stocks were overpriced by most
erized "stock watch" surveillance system
principal, Abbey Butler, had twice de-
measures, and now they are fairly
has detected unusual trading activity in
clared personal bankruptcy. Butler also
priced," says Alfred Goldman, director
several of the stocks in which Centaur
was censured by the SEC in 1976 for
of technical analysis for broker A. G.
bought stakes, as reported by Dorfman.
securities manipulation, was permanent-
Edwards in St. Louis. "Bonds were com-
Spokespersons at both the SEC and the
ly enjoined from further violations and
NYSE declined to confirm or deny that
had been censured by the National Asso-
any such probes were in progress.
ciation of Securities Dealers in 1971. At
Dorfman denied that he has been a
the start of 1989, the units that consti-
party to any manipulation, and expects
tute Centaur Partners formed SMC Ac-
any investigation to clear him totally. "I
quisition Corporation to make a run at
take great pride in my integrity," he
Standard Microsystems of Long Island.
declared. "I don't screw around." He
They withdrew and signed a standstill
also said that he has received no calls or
agreement after the semiconductor firm
requests for information from either the
filed a lawsuit alleging SMC had tried to
SEC or the Big Board.
put the company "into play" to make
Centaur Partners, the focus of the SEC
short-term profits and had "primed the
probe, made an unsuccessful bid last year
market" through the "selective release of
for Pennwalt, the Philadelphia chemical
information concerning their plan to
company eventually purchased by Elf
commence a tender offer."
Aquitaine of France. Centaur came away
Dorfman has never been charged or
with about $45 million for its efforts.
suspected of profiting personally from
Dorfman was the first to report that
his information or from the effect of his
Centaur had amassed a 6.5 percent posi-
column. Leaks from the column are non-
tion in Pennwalt, just prior to the compa-
existent. And he is careful to disclose the
ny's disclosure of the information in a
few stocks he does own.
filing with the SEC. Dorfman has also in
The indefatigable Dorfman concedes
recent months reported that Centaur has
that he is under the gun to keep coming
taken toehold positions of less than 5
up with dynamite new material. It would
percent in two other chemical firms,
be unfortunate if, in the rush to publicize
Cleveland-based Ferro and B. F. Good-
exclusive new tips, Dorfman inadvertent-
rich of Akron, Ohio, the former tire com-
ly serves interests other than those of his
pany. Dorfman reported last Thursday
wide audience of investors.
that Centaur Partners had bought 3 per-
cent of Tambrands, the country's leading
by Jack Egan
60
Reaching for another high, and beyond
Although the Dow Jones industrial average is toying coquettishly with its all-time
high, few analysts predict another crash like the calamity of October, 1987. Most
argue that the market was overvalued then and fairly valued now. The question
on most minds, rather, is what will happen once the 2,722 level is breached.
will pay per share for every dollar per
share in corporate earnings, is down
Dow Jones industrial average (Friday closes)
from more than 20 two years ago to a
much more comfortable 13.
2,683.99
All-time high:
(Aug. 11)
A frothy head? While Wall Street is
2,722.45
2,000
(Aug. 25)
generally sanguine about the market's
price level, analysts differ on the ride
investors face if the Dow moves, as some
1,500
predict, to 2,800 or higher. "Above
Crash:
1,738.74
2,722, we'll have to see how much froth
(Oct.
and speculative activity the market pro-
1,000
duces," says Gene Jay Saegle, director of
1987
1988
1989
technical analysis for Gruntal & Compa-
J J A S O N D J F M A M J J A S O N D J F M A M J J A
ny, a Manhattan-based brokerage. Wall
Note: Figures are Friday closes, except when holidays fall on a Friday, and all-time high and crash.
Street's worrywarts have their eyes on
KAREN SMITH-USN&WR
three potential problems:
peting for investors' funds with yields of
bulls stood ever ready to explain why
Program trading, a computer-driv-
10 percent and higher, while now they
stocks deserved such lofty prices.
en trading technique favored by institu-
yield 8 percent and are dropping. And
In the current market, corporate prof-
tions and partly blamed for the volatility
the majority opinion was that stocks
its are up. The higher earnings mean
that preceded and exacerbated the Octo-
would just keep going up, up and away."
that while the Dow is no higher than it
ber crash, has begun rearing its ugly
Indeed, market guru Robert Prechter
was two years ago, the price-to-earnings
head again. As program traders have
started off 1987 by predicting that the
ratio, a measure of how much investors
bought and sold huge quantities of
market would hit 3,600. Investment
stocks in rapid-fire succession, the mar-
capital from abroad seemed bot-
ket has regained some of its volatility.
tomless. Large corporations were
Takeover fever has begun pushing
being taken over, or taken pri-
some stocks up on investor hopes that
vate, in huge deals financed
more companies will become targets.
largely with high-risk, high-
Just last week, oil tycoon Marvin Da-
yield junk bonds. Stock
vis bid $5.4 billion for UAL Corpora-
prices soared as speculators
tion, parent of United Airlines.
assigned new and higher
The Fed has recently eased its
values to companies they
efforts to wring inflation out of the
thought might be the
economy, but some observers see a
raiders' next targets. The
possible slide into a mild reces-
escalating prices pulled
sion. An unexpectedly deep re-
other stocks along in
cession could make it difficult
their wake. And
for some debtors to make their
interest payments, producing
widespread defaults. Edward
Hyman, an economist with C.J.
Lawrence, Morgan Grenfell in
New York points out that corpo-
rate and consumer debt is now some 80
percent greater than the gross national
product, much higher than it was during
the recession of the early 1980s.
Many on Wall Street contend the
stock market will continue to rise be-
cause of fewer public companies and
fewer shares available to meet investor
demands. "Almost $200 billion in stocks
has been taken out of the system by
companies buying back their own shares
and others being taken over," says Mi-
chael Metz, chief market analyst at the
investment house of Oppenheimer &
Company in New York. "That has left
institutions and individuals with $200 to
$300 billion in liquid assets."
Higher stock prices, however, carry a
greater risk of a downturn. "If a lot of
money suddenly pours into the market,
things could get overheated," says Rich-
ard Reiss, Jr., a top Manhattan money
manager. Mutual-fund sales reflect in-
vestors' reluctance to repeat their errors
of 1987. While stock mutual funds
61
NEWS YOU CAN USE
gained more than $21.8 billion in the
folios will pay nothing to instruct their
tual funds. Kurt Brouwer, a San Fran-
first six months of this year, that was
brokers to enter stop-loss orders. For a
cisco money manager who specializes in
only half the $42.2 billion that poured
stock trading at $30, say, you might enter
no-load mutual funds, thinks the market
into equity funds in the first half of 1987.
a stop-loss order 10 percent less, or $27.
will go higher, pull back and then shoot
With money-market yields falling
Your broker will then automatically sell
to 3,000. He says investors should put
from 9.19 percent in April to a recent
the shares if the price drops to that level.
about 65 percent of their money into
8.33 percent, the tendency might be to
As your stocks rise, you may want to
stock funds and the rest into bond funds
join the stock market's upward march.
raise the stop-loss level.
to protect themselves if the market falls,
But some urge caution. "Stocks can
Advice from pros. While you may not be
since bonds tend to rise as stocks drop.
move higher," says Richard B. Hoey,
able to pick the right stocks, there are
Even if the market goes to 3,000 and
chief economist at Drexel Burnham
professionals who can. According to Hei-
then drops 200 points, says Gruntal's
Lambert. "But not another thousand
di Steiger, managing director of Neu-
Saegle, this 7 percent decline would not
points higher."
berger & Berman's individual-asset-man-
hurt most investors. Should a bear market
Investors who want absolute safety
agement division, investors have flocked
ensue, Jim Rogers, one of Wall Street's
have an obvious alternative in money-
to professional money managers at her
most famed investors, thinks it will lack
market funds or Treasury securities. If
firm and elsewhere since the crash. Says
the calamitous impact of a crash. "When
history is any guide, however, these cash
Steiger: "October 19 taught people they
it finally comes, you'll just lose money
equivalents will hardly generate the long-
couldn't invest by themselves."
every month," he says. "It will be a nice,
term returns available from stocks or
Most investors, however, lack the
old-fashioned bear market."
bonds. Heeding Wall Street's advice to
minimum account of $250,000 to
stay in if they are already in, wary inves-
$500,000 that most money managers re-
by Daniel P. Wiener in New York
tors with individual stocks in their port-
quire. One way to get in is through mu-
with Terri Thompson and Eva Pomice
Stock picks from
SAFE, NOT SEXY
MARKET LAGGARDS
Nola Falcone
Elaine Garzarelli
an expert panel
Lieber & Company
Shearson Lehman Hutton
Whether the economy soars or slumps,
Stocks that have lagged behind the
Two years ago, just as the
says the manager of the top-perform-
market's run-up or have been knocked
bull market neared its all-
ing Evergreen Total Return mutual
down because investors think a slow-
time peak as measured by
fund, high-yield stocks let you hedge
ing economy could hurt their prospects
the Dow, U.S. News asked
your investment bets. Should the mar-
are Garzarelli's picks. While the worst
five market seers how in-
ket tumble, dividends can cushion the
year-to-year decline in corporate earn-
dividual investors should
impact, making Falcone's strategy "a
ings should come in the first quarter of
view the market and
middle-of-the-road approach with
1990, she thinks profits will accelerate
which specific stocks to consider. We
above-average results."
again after that.
went back to some members of
52-wk. 52-wk. Recent
1987's panel and added some fresh
high
low
close
52-wk. 52-wk. Recent
faces for a new set of views on the
Bristol-Myers
521/8
403/4
477/8
high
low
close
current market. Following a wide va-
First Bancorp, Ohio
33½
261/2
33½
International Paper
571/8
42½
563/8
Dow Chemical
1001/2
81
riety of strategies, the four bulls
Freeport MacMoRan
38
271/4
35%
981/4
convert. pref.
Woolworth
63½
463/4
63½
found plenty of stocks to choose
UJB Financial
267/8
19%
267/8
Digital Equipment
122%
863/8
1013/4
from. The lone bear went for the
Kansas Gas & Electric
241/4
181/8
223/4
IBM
1307/8 1061/4 1171/2
gold.
MIXED BAG
OUNCE OF PROTECTION
ASSET PLAYS
John Connolly
Paul Stuka
Arnold Schmeidler
Dean Witter Reynolds
Stuka Associates
A. R. Schmeidler & Company, Inc.
The chairman of Dean Witter's invest-
Stuka, a Boston money manager, found
"We never believed a recession was
ment-policy committee sees a possible
plenty of bargains in 1987. But he has
something that has to occur," says
3,200 by next August. He is partial to
turned bearish and says a disaster is in
Schmeidler, a New York money man-
interest-sensitive companies like
the cards. Although he thinks gold
ager. Schmeidler continues to shop for
banks, which cut rates paid to savers
prices could drop an additional $20 to
companies that, among other things,
when interest rates fall. Connolly feels
$30 an ounce in the short term, he
generate large cash flows, have con-
that drug stocks are primed for growth
plans to begin buying soon. Gold
sistent earnings and undervalued or
and that some cyclical stocks, particu-
stocks, which rose during the crash, are
"hidden" assets and whose managers
larly technology issues, are recovering.
one way to keep from hibernating.
regularly raise dividends.
52-wk. 52-wk. Recent
52-wk. 52-wk. Recent
52-wk. 52-wk. Recent
high
low
close
high
low
close
high
low
close
Chemical Bank
39%
30
383/4
Echo Bay
191/4
123/4
167/8
Du Pont
1197/8
78½
118%
Citicorp
341/8
22½
321/8
Homestake Mining
15
121/8
131/2
Phelps Dodge
701/8
37
681/8
Schering-Plough
773/4
49½
75
Newmont Mining
457/8
311/2
41
Burlington Resources
513/4
25½
453/8
Hewlett-Packard
611/2
433/4
553/4
Battle Mountain
161/2
13
13½
GTE
60%
39%
591/4
Lotus Development
281/4
143/4
27
Placer Dome
163/4
11%
16
Vanguard Cellular
413/4
121/4
301/4
62
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
NEWS YOU CAN USE
ANDREW LUKAS FOR USN&WR
A wardrobe of accessories
for the fashionable cyclist
$35 plastic container that wedges
SPORTS
All kinds of gear and
into the bike frame, should suffice.
gadgets are on the market
It's big enough for a camera and
that make a bicyclist's ride
lunch. Bikers with only small
items such as film and keys can
safer and more comfortable
stow them in the $19.95 Bicycle
Safe (P.O. Box 11795, Wash-
S
erious cyclists these days pick the
ington, D.C. 20008), which
perfect bike and load up on gizmos,
locks around the seat tube.
too. Last year, Americans spent $1
Cyclometers. Racers and fit-
billion on bike clothing, accessories and
ness bikers can monitor their
parts, nearly as much as on the bikes
workouts with a matchbook-
themselves. Here is a sampling of the
size computer like the $37.95
latest gear. Most is available at bike
Avocet 30, which mounts on
shops or, where noted, by mail or phone.
the handlebars. It serves as a stopwatch
$8 a pair and $7 for the valve adaptor.
Helmets. The latest helmets are venti-
and displays current speed, elapsed dis-
Locks. As thieves get more sophisticat-
lated featherweights designed to satisfy
tance, top speed and total distance.
ed, so do locks. The makers of Krypton-
even racers who have traditionally gone
Pumps. Rhode Gear's $25 AT-60, a
ite's U-shaped $35 hardened-alloy-steel
bareheaded rather than add weight and
tough plastic pump for all-terrain bikes,
K4 model are so sure of its tamper resis-
drag. This year, Greg LeMond won the
inflates on both push and pull strokes to
tance that it carries a one-year $1,000
Tour de France in a custom-made foam
quickly fatten a patched flat. Pumping a
antitheft guarantee. It is valid every-
helmet by Giro similar to the company's
road-bike tire takes longer with the $17
where except New York City, where a
$120 Aerohead. Recreational riders
Vetta Micropump, but it weighs only
bike thief will probably knock down the
might choose Bell's $65 Image helmet,
2½ ounces. Most convenient of all is
lamppost your bike is shackled to and
which weighs about 9 ounces. Quality
Air Zefal, a CO2 cartridge that inflates
steal it, too.
helmets bear stickers from the American
tires in mere seconds. For one-time use,
National Standards Institute (ANSI) or
it comes in road or mountain-bike size,
by Vic Sussman
the Snell Institute, organizations that set
standards for helmet safety.
Gloves. Gel or polymer-filled gloves
can prevent blisters, as well as painful
scrapes should you fall. Cyclepro's $29
mountain-bike gloves feature gel-padded
palms and three-quarter-length fingers,
which give more protection than stan-
dard fingerless gloves.
Lights. The typical bicycle headlight is
COMPLETE
little more than a flashlight, barely visi-
ble on the road. Brite Lite's $110-to-
TIDBITS
$130 halogen lamp and rechargeable-
battery systems supply ample light for
First
Second
Third
Fourth
most recreational riders. Nightsun's
Anniversary.
Anniversary.
Anniversary.
Anniversary.
$145 Hi-Power System, with its 40-watt
high beam and 20-watt low beam, is
She does enjoy all the cookbooks
nearly as bright as a car headlight.
you ve given her.
Saddles. The best seat in town rarely
comes with your bike. The usual skinny
But she now has three more than
saddle works best on racing-style bikes,
whose dropped handlebars throw most
the Library of Congress.
of the rider's weight onto his arms. Rid-
ers who sit nearly upright need a wider
saddle for more support. A good bike
shop can help match your anatomy with
the right saddle. Avocet makes several
styles of gel saddles for $27 to $33 that
are padded with a soft, shock-absorbing
This year, tell her you'd marry her all over again.
material. The Waveflo strap-on saddle
The Diamond Anniversary Band.
pad, $27 to $32, molds to your bottom
A diamond is forever.
while you ride, then holds its shape.
Cargo carriers. Unless you haul camp-
Suggested retail price for rings $3,995-$5,900.
For more information. call 800 421-8208 or 213 286-9100.
Miniqum
ing gear, Cycle Caddy (800-456-7500), a
©All Designs Copyright Unigem 1989
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
63
NEWS YOU CAN USE
New kids' shows worth watching
TELEVISION
A preview of the fall lineup on the networks, cable and video
uning into a test pattern would be
For shows that teach as well as enter-
episodes, and the students of "DeGrassi
T
preferable to watching most of the
tain, families have come to rely on PBS.
Junior High" will graduate to "De-
new fall TV programs for children.
"Tales from the Brothers Grimm," the
Grassi High." The mid-January opener
Aside from a couple of potential gems,
sole new PBS entry, takes Old World
for this gritty series examines a pregnant
the networks are shoveling forth their
fairy tales and places them in the Appa-
girl's decision to have an abortion.
usual array of Saturday-morning car-
lachian Mountains in the 1940s. The se-
Families looking for a little comic re-
toons and mindless family sitcoms. And
ries' three, hour-long installments will
lief might try "The Simpsons," the Fox
the Public Broadcasting System is so
air early next year. In the meantime,
Network's prime-time animated series.
strapped for cash that it will introduce
"Sesame Street" will be back with fresh
Older viewers may recall the hell-raising
only one new kids' series, and
PLAYING WITH TIME, INC.
Simpson kids and their bick-
that won't air until early next
ering parents from "The Tra-
year. But by tapping into cable
cey Ullman Show." If the car-
TV and home videos, parents
toon series is as funny as the
can provide their children with
short takes, this could be a
a broad array of educational
show parents and kids can
and entertaining shows and
laugh at together.
tapes. Here is what's in store
Cable
on the tube and on video dur-
The new offerings on cable
ing the months ahead.
are commendable, if not com-
The networks
pletely original. "Eureeka's
TV shows for family audi-
Castle," a "Sesame Street"
ences tend to range between
wanna-be, makes its debut on
unbelievably wholesome and
Nickelodeon on September 4.
utterly ridiculous. But reality
The show uses puppets to
intrudes nicely in "Life Goes
teach tots the usual kid skills
ZITS
On," an ABC series about a
of sharing toys and coping
family including a child with
Class act. School is back in session on PBS's "DeGrassi High"
with bullies. Where "Sesame
Down syndrome, a form of
RICHARD TERMINE-NICKELODEON
ABC
Street" has Big Bird, "Euree-
mental retardation. Christo-
ka's Castle" has Magellan the
pher Burke, born with Down
Dragon, and two trash-loving
syndrome, plays 18-year-old
puppets not so vaguely remi-
Corky, who transfers to a regu-
niscent of Oscar the Grouch.
lar high school after years of
The show lacks the wit of
special education. Warm, fun-
"Sesame Street," but its gen-
ny and rarely mawkish, the
tle spirit should appeal to lit-
show gives children and adults
tle kids. Nickelodeon also will
a sense of what it is like to have
introduce "Fred Penner's
a Down child in the family and
Place," a Canadian series
how such a person feels.
starring the second-most-fa-
Aside from "Life Goes On,"
mous singer for preschoolers
the best the networks have to
next to Raffi. The Disney
offer children comes in the af-
Playful puppets. The cast from
"Life Goes On." A family copes
Channel, which revived the
ternoon. ABC's "Afterschool
cable's "Eureeka's Castle"
with Down syndrome on ABC
"Mickey Mouse Club" in
Specials" and CBS's "School-
WALT DISNEY HOME VIDEO
April, turns to nature in its
break Specials" each will air
new series "Super Sense." The
about six new episodes. Lead-
six parter shows how fish,
ing off will be "My Dad Can't
birds and other critters use
Be Crazy
(Can He?),"
their senses to survive.
about a family's efforts to cope
Video
with Dad's mental illness.
The best of the new videos
(ABC, September 14) and
draw on children's stories for
"Frog Girl: The Jenifer Gra-
inspiration. "The Maurice
ham Story," based on the true
Sendak Library" is one of
story of an animal lover who
four new titles from Chil-
refused to dissect a frog in biol-
dren's Circle ($19.95), which
ogy class (CBS, October 17).
has made enchanting videos
Past shows have won praise for
of "Dr. De Soto," "The Mys-
their treatment of controver-
terious Tadpole" and other
sial topics, and some acclaimed
stories by using finely crafted
repeats will be shown this year,
animation, vibrant narration
including "Date Rape" (ABC,
and lively music. Sony Video
September 28).
Top tape. Bambi, Thumper and the gang debut on home video
also produces excellent tapes
64
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
for children by commissioning original
art for classic tales and by hiring celebri-
ty narrators and musicians. On the fall
schedule are Rudyard Kipling's "How
the Leopard Got His Spots," read by
actor Danny Glover, with music by the
South African group Ladysmith Black
Mambazo, and "Thumbelina," read by
actress Kelly McGillis (both $14.95).
This fall's releases also include the
venerable "Bambi" (Disney, $26.99) and
"Song City USA," which offers an alter-
native to MTV with clever tunes like
"Dinosaur Rap" and "Peanut Butter
Blues" (Scholastic, $14.95). "Song City"
SVS
Cat tale. Kipling's "How the Leopard
Got His Spots" is coming on video
eschews the sex and violence of rock
videos for hippos on surfboards and oth-
er such whimsy.
Video boom. A new series of Dr. Seuss
videos (Random House, $9.95) sounds
promising, but there is far too much
Do you recall your first Jack Daniel's? We'd love to hear about it if you do.
wordplay and not enough plot to hold a
child's interest. "Richard Scarry's Best
ABC Video Ever!" (Random House,
AT JACK DANIEL'S DISTILLERY, we're blessed
$14.95) is a bit slow, although preschool-
ers may like its cutesy animal characters.
with an unusual cave and special ironfree water.
Videos for kids are now the fastest-
growing segment of the market, with 25
Not many distillers have a stream of cool, cavespring
percent of the titles aimed at youngsters.
However, large video clubs, which stock
water flowing just outside their door. But that's
mainly mass-market fare, are not always
the best places to shop. For lesser-
what we possess right here in Jack
known but worthwhile tapes such as
Daniel's Hollow. And we've used it to
"Abel's Island," the story of a marooned
mouse, and the "Ramona" series, based
on Beverly Cleary's children's books,
make our Tennessee Whiskey since
parents are better off turning to toy
stores and children's book outlets.
1866. Just watching this old stream
The fall will also bring a bit of price
relief for video-library builders. Chil-
meander along is a nice way to pass
dren's Circle recently cut prices on indi-
idle moments. Discovering how it
vidual tapes in its library from $22.50 to
$19.95. On September 28, Disney will
flavors Jack Daniel's, we believe,
reduce its $14.95 line to $12.99, and oth-
er companies are expected to follow. But
is the nicest moment of all.
beware of hucksters bearing free videos.
JACK DANIELS
TIME
"Video Toy Chest," to be given out at
malls across the country in October, is
SMOOTH SIPPIN'
75 percent toy commercials, with a few
TENNESSEE WHISKEY
Jennessee
public-service messages and quizzes
WHISKEY
BOTTLED AT THE DISTILLERY
thrown in.
Tennessee Whiskey
40-43% alcohol by volume (80-86 proof)
Distilled and Bottled by
by Marc Silver
Jack Daniel Distillery, Lem Motlow, Proprietor, Route 1, Lynchburg (Pop 361), Tennessee 37352
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
VITAL
STATISTICS
NEWS YOU CAN USE
MATT ZANG FOR USN&WR
The fairest
ON A ROLL
Americans in pursuit of fitness and recreation spent $677 million
1.1 mil.
Volleyballs
on these balls last year. Here's where the money went-
$20 mil.
fairs of all
Balls sold
Soccer balls
2.1 mil.
Amount spent
$29 mil.
Who needs a roller coaster?
Footballs
2.3 mil.
Last year, fairgoers liked the
$33 mil.
livestock best, then blue-
Baseballs
21.1 mil.
ribbon winners, such as the
$44 mil.
finest squashes and quilts.
Softballs
23.7 mil.
$51 mil.
Late summer and early fall is
Basketballs
high season for state, county
3.6 mil.
and other large fairs. Those
$60 mil.
that drew the biggest crowds in
1988 were-
Bowling balls
1.7 mil.
Attendance
$99 mil.
Ohio State Fair, Columbus
3.3 mil.
Tennis balls
105.6 mil.
State Fair of Texas, Dallas
2.9 mil.
Golf
$107 mil.
State Fair of Oklahoma,
Oklahoma City
1.7 mil.
balls
190.8 mil.
Minnesota State Fair, St. Paul
1.6 mil.
$234 mil.
Los Angeles County Fair,
USN&WR-Basic data: National Sporting Goods Association, Sporting Goods Manufacturers Association
Pomona
1.4 mil.
New Mexico State Fair,
Albuquerque
1.2 mil.
TIPS ON TIPPING
For travelers in the U.S. who get
Brockton-Middleboro Agricultural
flustered over gratuities, these guidelines may
Cliffs Notes
Fair, Brockton, Mass.
1.2 mil.
provide some help. Of course, poor service never needs to be rewarded.
Tulsa State Fair
1.2 mil.
classics
Houston Livestock Show
Service
Suggested tip
& Rodeo
1.2 mil.
Airport and
$1 per bag. $2 to $5 for trunks
With Cliff Hillegass's help,
Western Washington Fair,
train porters
millions of students have mas-
Puyallup
1.1 mil.
Arizona State Fair, Phoenix
1.0 mil.
15% of fare, minimum of 50c
Taxi drivers
tered the dubious ability of ex-
Eastern States Exposition,
pounding on plot and charac-
West Springfield, Mass.
1.0 mil.
Desk clerk
not necessary
ters without cracking the book.
Del Mar Fair, Calif.
978,329
Concierge
$2 to $10 per service performed
Hillegass founded Cliffs Notes,
Illinois State Fair, Springfield
912,933
Dade County Youth Fair
Hotel porter
which condense literary works
$1 per bag
& Exposition, Miami
845,884
(bellman)
into 70 to 90 pages of easy
Chamber-
Wisconsin State Fair,
maid
$1 a night for more than one night's stay
reading. Some 5 million copies
Milwaukee
834,782
are sold a year. For 20 years,
New York State Fair, Syracuse
809,129
15% of bill
Room-service
"Macbeth" and The Scarlet
Southwestern Exposition &
waiter
Livestock Show, Fort Worth
797,100
Shoeshine
50c to $1
Letter have sold best. Popular
lowa State Fair, Des Moines
792,400
Laundry and dry-
modern titles include The Col-
Evergreen State Fair, Monroe,
cleaning service
not necessary
or Purple and The Bell Jar.
Wash.
724,797
Doorman
50c to $1
Oregon State Fair, Salem
724,432
who hails your taxi
Erie County Fair & Exposition,
USN&WR-Basic data:
$1 to $2
Compiled by Jo Ann Tooley
Hamburg, N.Y.
720,668
Valet
The International Guide to Tipping by Nancy Star,
with Lynn Anderson Carle and
Hillsborough County Fair &
The Berkley Publishing Group
Joannie M. Schrof
Festival, Plant City, Fla.
717,849
Santa Clara County Fair,
San Jose, Calif.
688,916
STUDY SHORTCUTS
California State Fair,
Sacramento
686,710
Grade
The percentage
North Carolina State Fair,
Raleigh
684,989
of Cliffs Notes
7th
1%
647,349
users by grade-
8th
3%
College
Florida State Fair, Tampa
9th
9%
Freshman
8%
Colorado State Fair, Pueblo
642,932
Note: Numbers add to
more than 100%
10th
19%
Sophomore
6%
Bloomsburg Fair, Pa.
642,117
because of rounding.
11th
26%
Junior
5%
York Inter-State Fair, Pa.
640,340
South Texas State Fair,
Of the millions of students who
12th
19%
Senior
3%
Beaumont
630,000
use Cliffs Notes and other study
Clark County Fair,
aids each year, some want a
Vancouver, Wash.
622,613
better understanding of the
Greater Jacksonville
classics, but others want to
Agricultural Fair, Fla.
610,374
avoid reading the classics
TWAIN'S CLIFF& NOTES ON FINCKLEBERRY
MACRETH
South Florida Fair & Exposition,
THE THE 0018881
altogether. Of the 210 titles
West Palm Beach
597,607
published by Cliffs
Fresno Fair, Calif.
587,264
Notes, here are their
Maryland State Fair, Timonium
586,519
SOITRE
HAWTHORNE'S CLIFF& MOTES OR THE SCARLET
PREMIUM
10 bestsellers.
State Fair of Virginia,
Richmond
583,188
Allentown State Fair, Pa.
582,000
STEINBECK'S CLIFFS MOTES ON THE WRAPES
TWO CITIES
Kentucky State Fair, Louisville
575,364
BREAT
Indiana State Fair, Indianapolis
571,922
HAMIET
USN&WR-Basic data: International Association of
Fairs and Expositions
WR-Basic data:
Cliffs Notes, Inc.
66
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
NEWS YOU CAN USE
A FAILING GRADE FOR CLASSROOM COMPUTERS
Parents who think classroom computers are
NEW PROBLEMS WITH PAINKILLERS
enhancing their children's intelligence
People who frequently take Tylenol,
and creativity may be disappointed.
Anacin-3 or other over-the-counter pain
Preliminary results from a survey by Johns
relievers that contain acetaminophen may
Hopkins University show that up to half of
run an increased risk of kidney disease.
students' computer time is spent on
Although acetaminophen is often
mundane skills such as word processing and
recommended over aspirin because it is
programing; the rest is often used for
less likely to upset the stomach, a recent
rote drills such as memorizing
study of the medication histories of over
multiplication tables and spelling.
1,000 patients with and without kidney
Knowledge about how to use a computer is
disease found that those who took
an indisputably valuable skill. Most
acetaminophen at least once a week for a
experts agree, however, that not enough
year or more were about 50 percent more
computer time is spent challenging
likely to develop the disease. Daily use
children's creativity. Adeline Naiman,
more than tripled the risk, according to
education director of the Computer Museum
the researchers, whose study appeared in
in Boston, blames inadequate teacher
the "New England Journal of Medicine."
training and poorly designed curricula
They speculate that gradual drug buildup
that do not exploit the capabilities of
is what damages the kidneys. People who
computers. Parents can augment their
take daily dosages of acetaminophen fewer
children's computer learning at home with
than three times a month need not worry,
software programs that are challenging as
according to the study.
well as entertaining. Catalogs of some of
these programs, which cost $25 to $50 and
CASHING IN ON THE COUNT
are available by mail, are free from most
Desk jockeys and foot soldiers alike can
educational-software publishers, including
find well-paying temporary jobs with the
Scholastic, Inc., (800) 541-5513,
Census Bureau starting this fall. The
Mindscape (800) 999-2242 and the Learning
agency is offering part and full-time
Company (800) 852-2255.
hourly work throughout the country to
prepare and conduct the 1990 census. No
COMPANY BREAKS FOR TRAVELERS
medical or other benefits are offered, but
Keeping the office in mind on your next
wages are about $5 to $8 an hour,
vacation could lower your hotel bill.
considerably more than the $3.35 minimum
Companies often negotiate large volume
hourly wage. The bureau plans to hire
discounts with hotel chains to cut down on
about 300,000 census takers to go door-to-
business-travel expenses. But vacationing
door gathering demographic information,
employes can take advantage of the
usually in their own neighborhoods. The
savings, too. Most large chain hotels
fieldwork runs from April through July
offer discounts of up to 25 percent, much
1990, and workers can apply now for jobs.
better than the typical corporate discount
Another 150,000 people are needed for
of 10 to 15 percent available to all
office work, with many of those positions
business travelers. Employes of 3M
becoming available in October and lasting
Corporation, for instance, pay $78 a night
through December, 1990. The bureau is
for a midpriced double room at the North
encouraging older and handicapped workers
Shore Hilton outside of Chicago, compared
and working parents to apply for these
with a standard corporate rate of $108.
jobs, and it will allow most workers to
Some companies also strike deals with
set flexible schedules as long as they
hotels that include extras such as free
work at least 20 hours a week. Census
room upgrades, free breakfasts and no
employes need not be U.S. citizens.
service charges for phone calls.
However, they must be at least 16 years
In many cases, a company's discount will
old and take a written math and English
be available only at certain hotels in a
exam to qualify. To find out where to
chain. You can reserve discount rooms
apply in your area, call the Census Bureau
through a travel agent or by yourself as
in Suitland, Md., at (301) 763-7662.
long as you know your company's
identification number. Some hotels also
by Francesca Lunzer Kritz
require a picture ID when you check in.
with James Popkin, Rebecca Little and Gauri Goyal
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
67
EDITORIAL PAGE
by MORTIMER B. ZUCKERMAN
Editor-in-Chief
THE LOST GENERATION
S there a doctor in the house? The appeal is
only because I earned a living elsewhere. When you
associated with a medical emergency, but it
think that it can take more than $100,000 for tuition
might be adopted for America's emergency in
and living expenses to earn a Ph.D., it is not hard to
education and training. It is a crisis that similarly
see where the chips fall. Why should graduates
threatens our survival. There are just nowhere
spend more time and money to gain a Ph.D. so that
near enough doctors in the house with qualifica-
they can earn less as a professor than they would by
tions in the sciences and engineering or in the
going into work at once, or much less than if they
humanities to train our next generation. For the
graduated from law school or business school?
first time in American history, we have a genera-
The Senate's response has been to make it easier
tion of students who are less educated than the
for foreign-born Ph.D.'s and other highly skilled
previous generation-and the prognosis is that
and educated people to immigrate to America.
things will get worse. The National Science Foun-
The House should follow up. More than half of
dation estimates that between now and the year
the students at the graduate level in engineering
2000, we will turn out 450,000 too few bachelors
and science are foreign-born, with a heavy propor-
of science. Given the long lead time it
tion of Asians. And more than half of
takes to earn a doctorate-nine to 10
those on the lowest rung of the faculty
years, including graduate school-we
ladder under 35 are also foreign-born.
will be producing 10,000 Ph.D.'s a
All this is fine. It is an American
year in the natural sciences but will
tradition to import brainpower. But
need nearly double that number.
these are not necessarily permanent
The roots of the crisis lie in the
immigrants. Can we assume that the
postwar boom of the '40s and the post-
gifted Chinese or Korean will always
Sputnik boom of the '60s. Our univer-
take a job in Minneapolis rather than
sities wanted talent and granted tenure
in Kyoto or Hamburg?
to thousands of young professors. It
Is the government going to rely once
was the right response then, but with
again on rhetoric and treat this human-
penalties now. These young professors
resources problem the way we treat our
crowded out a bumper crop of Ph.D.'s in the '70s
need for VCR's, namely importing foreign prod-
and '80s who went off into other vocations. And
ucts to meet our domestic talent shortage? We rely
now the young professors of the '40s have become
at our peril on borrowing brains.
the aging professors of the '80s. The proportion of
We need more fellowships, higher faculty sala-
faculty members over 50 is 40 percent; those un-
ries, support for the construction and renovation of
der 35 have decreased to 6 percent.
the university labs that have been without appropri-
Economics is the other driving force behind the
ate federal support since the '60s, even though new
crisis. When I graduated law school in the early
experiments require vastly more expensive and
1960s, compensation for a starting lawyer was
sophisticated equipment. We need to computerize
around $6,500 a year while the average salary for a
and microfilm our library books. Most of them are
new assistant professor was around $7,500. Today,
printed on acid-based paper, and the wisdom they
a first-year associate in a top law firm can anticipate
contain will have vanished in 50 years. All this costs
a starting salary that can reach $75,000, with
money, but it is a fine investment in our intellectual
prospects of liftoff from that plateau. A new assis-
capital. Frank Press, president of the National
tant professor today can anticipate a salary of
Academy of Sciences, estimates that the social rate
$32,000, which might someday grow to the level
of return on academic research is 28 percent, a
that a first-year associate in a law firm can draw
number that is at once conservative and astounding.
today. It is remarkable that so many people have
Of all the deficits America is facing, this is the
sought academic careers out of a love of scholarship
one where the clock is most running against us.
or teaching. But man lives not by scholarship alone.
Will we act-or will we lose another generation of
My own decade of university teaching was possible
faculty and students?
68
U.S.NEWS & WORLD REPORT, Aug. 21, 1989
BEFORE:
GINGIVITIS
AFTER:
LISTERINE
One way to help get from
non-prescription mouthwash
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accepted by the American
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LISTERINE
ANTISEPTIC
Dental Association. Plus it
Listerine helps prevent and
Kills germs that cause Plaque,
Gingivitis and Bad Breath
kills the germs that cause
reduce plaque above the
bad breath. So brush. Floss.
gumline and gingivitis.
See your dentist regularly.
And it's the ONLY
And use Listerine.
LISTERINE
© 1989 Warner-Lambert Co.
Effect on periodontitis not determined.
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NOTE TO SUE PANAGOPULOS:
The comments of the Office of Program Analysis on "Six Months of the Bush
Administration" are listed below:
Notes on the Summary:
Page 6
o
Wetlands. We suggest adding after the first sentence a note about the
Interagency Task Force: "An interagency Task Force on Wetlands has been
established to coordinate the effort."
Notes on the Main Document:
Page 17
o
Alaskan Oil Spill: There is a sub-bullet concerning the Task Force on OCS
environmental concerns. The Task Force was set up well before the oil spill
occurred and has nothing to do with the spill. We believe the Task Force
should not be mentioned under the Alaskan Oil Spill paragraph. It should
appear as a separate bullet on page 17 as follows:
"o OCS Task Force: The President has set up a special task force to address
environmental concerns about oil and gas drilling off the coasts of California
and Florida."
We suggest the addition of a substitute sub-bullet in place of the Task Force
sub-bullet, as follows:
:
"On April 18, the Interior Department proposed a three-year, $6 million
program on research in oil spill detection, containment, and cleanup
technology."
[NOTE:
The attached press release may provide additional information if
needed].
Page 19
o
Wetlands. We suggest adding after the first sentence a note about the
Interagency Task Force: "An interagency Task Force on Wetlands has been
established to coordinate the effort."
Possible additions on page 6 of summary and page 19 of main document:
"o Protection of endangered wildlife: The Administration has taken steps to
declare the Afican Elephant endangered and to reduce trade in ivory through
provisions of the Convention in International Trade in Endangered Species
(CITES). All imports of ivory into tht United States were banned on June 9,
1989, except for trophies from countries with quotas."
89. 07/26 10:52 P02 * DEPT OF INTERIOR
"o
Outdoor Recreation: The President has proposed $206 million in his budget
to expand our national parks, wildlife refuges and public lands to protect
environmentally sensitive resources and expand opportunities for outdoor
recreation."
Extended Page 2.1