MR. SMITH: I wish that question need not be rhetorical, but it must be because we've run out of time on that. Now, the third question to Governor Reagan from William Hilliard.

WILLIAM HILLIARD, Portland Oregonian: Yes. Governor Reagan, the decline of our cities has been hastened by the continual rise in crime, strained race relations, the fall in the quality of public education, persistence of abnormal poverty in a rich nation, and a decline in the services to the public. The signs seem to point toward a deterioration that could lead to the establishment of a permanent underclass in the cities. What, specifically, would you do in the next four years to reverse this trend?

MR. REAGAN: I have been talking to a number of Congressmen who have much the same idea that I have, and that is that in the inner city areas, that in cooperation with the local government and the national Government, and using tax incentives and with cooperating with the private sector, that we have development zones. Let the local entity, the city, declare this particular area, based on the standards of the percentage of people on welfare, unemployed, and so forth, in that area. And then, through tax incentives, induce the creation of businesses providing jobs and so forth in those areas. The elements of government through these tax incentives For example, a business that would not have, for a period of time, an increase in the property tax reflecting its development of the unused property that it was making wouldn't be any loss to the city because the city isn't getting any tax from that now. And there would simply be a delay, and on the other hand, many of the people who would then be given jobs are presently wards of the Government and it wouldn't hurt to give them a tax incentive, because they... that wouldn't be costing Government anything either. I think there are things to do in this regard. I stood in the South Bronx on the exact spot that President Carter stood on in 1977. You have to see it to believe it. It looks like a bombed-out city - great, gaunt skeletons of buildings. Windows smashed out, painted on one of them "Unkept promises;" on another, "Despair." And this was the spot at which President Carter had promised that he was going to bring in a vast program to rebuild this department. There are whole or this area there are whole blocks of land that are left bare, just bulldozed down flat. And nothing has been done, and they are now charging to take tourists there to see this terrible desolation. I talked to a man just briefly there who asked me one simple question: "Do I have reason to hope that I can someday take care of my family again? Nothing has been done."

MR. SMITH: Follow-up. Mr. Hilliard:

MR. HILLIARD: Yes. Governor Reagan. Blacks and other non-whites are increasing. in numbers in our cities. Many of them feel that they are facing a hostility from whites that prevents them from joining the economic mainstream of our society. There is racial confrontation in the schools, on jobs, and in housing, as non-whites seek to reap the benefits of a free society. What do you think is the nation's future as a multi-racial society?

MR. REAGAN: I believe in it. I am eternally optimistic, and I happen to believe that we've made great progress from the days when I was young and when this country didn't even know it had a racial problem. I know those things can grow out of despair in an inner city, when there's hopelessness at home, lack of work, and so forth. But I believe that all of us together, and I believe the Presidency is what Teddy Roosevelt said it was. It's a bully pulpit. And I think that something can be done from there, because a goal for all of us should be that one day, things will be done neither because of nor in spite of any of the differences between us - ethnic differences or racial differences, whatever they may be - that we will have total equal opportunity for all people. And I would do everything I could in my power to bring that about.

MR. SMITH: Mr. Hilliard, would you repeat your question for President Carter?

MR. HILLIARD: President Carter. the decline of our cities has been hastened by the continual rise in crime, strained race relations, the fall in the quality of public education, persistence of abnormal poverty in a rich nation, and a decline in services to the public. The signs seem to point toward deterioration that could lead to the establishment of a permanent underclass in the cities. What, specifically, would you do in the next four years to reverse this trend.

MR. CARTER: Thank you, Mr. Hilliard. When I was campaigning in 1976, everywhere I went, the mayors and local officials were in despair about the rapidly deteriorating central cities of our nation. We initiated a very fine urban renewal program, working with the mayors, the governors, and other interested officials. This has been a very successful effort. That's one of the main reasons that we've had such an increase in the number of people employed. Of the nine million people put to work in new jobs since I've been in office, 1.3 million of those has been among black Americans, and another million among those who speak Spanish. We now are planning to continue the revitalization program with increased commitments of rapid transit, mass transit. Under the windfall profits tax, we expect to spend about $43 billion in the next 10 years to rebuild the transportation systems of our country. We also are pursuing housing programs. We've had a 73% increase in the allotment of Federal funds for improved education. These are the kinds of efforts worked on a joint basis with community leaders, particularly in the minority areas of the central cities that have been deteriorating so rapidly in the past. It's very important to us that this be done with the full involvement of minority citizens. I have brought into the top level, top levels of government, into the White House, into administrative offices of the Executive branch, into the judicial system, highly qualified black and Spanish citizens and women who in the past had been excluded. I noticed that Governor Reagan said that when he was a young man that there was no knowledge of a racial problem in this country. Those who suffered from discrimination because of race or sex certainly knew we had a racial problem. We have gone a long way toward correcting these problems, but we still have a long way to go.

MR. SMITH: Follow-up question?

MR. HILLIARD: Yes. President Carter, I would like to repeat the same follow-up to you. Blacks and other non-whites are increasing in numbers in our cities. Many of them feel that they are facing a hostility from whites that prevents them from joining the economic mainstream of our society. There is racial confrontation in the schools, on jobs, and in housing, as non-whites seek to reap the benefits of a free society. What is your assessment of the nation's future as a multi-racial society?

MR. CARTER: Ours is a nation of refugees, a nation of immigrants. Almost all of our citizens came here from other lands and now have hopes, which are being realized, for a better life, preserving their ethnic commitments, their family structures, their religious beliefs, preserving their relationships with their relatives in foreign countries, but still holding themselves together in a very coherent society, which gives our nation its strength. In the past, those minority groups have often been excluded from participation in the affairs of government. Since I've been President, I've appointed, for instance, more than twice as many black Federal judges as all previous presidents in the history of this country. I've done the same thing in the appointment of women, and also Spanish-speaking Americans. To involve them in the administration of government and the feeling that they belong to the societal structure that makes decisions in the judiciary and in the executive branch is a very important commitment which I am trying to realize and will continue to do so in the future.

MR. SMITH: Governor Reagan, you have a minute for rebuttal.

MR. REAGAN: Yes. The President talks of Government programs, and they have their place. But as governor, when I was at that end of the line and receiving some of these grants for Government programs, I saw that so many of them were dead-end. They were public employment that these people who really want to get out into the private job market where there are jobs with a future. Now, the President spoke a moment ago about that I was against the minimum wage. I wish he could have been with me when I sat with a group of teenagers who were black, and who were telling me about their unemployment problems, and that it was the minimum wage that had done away with the jobs that they once could get. And indeed, every time it has increased you will find there is an increase in minority unemployment among young people. And therefore, I have been in favor of a separate minimum for them. With regard to the great progress that has been made with this Government spending, the rate of black unemployment in Detroit, Michigan, is 56%.

MR. SMITH: President Carter, you have the last word on this question.

MR. CARTER: It's obvious that we still have a long way to go in fully incorporating the minority groups into the mainstream of American life. We have made good progress, and there is no doubt in my mind that the commitment to unemployment compensation, the minimum wage, welfare, national health insurance, those kinds of commitments that have typified the Democratic party since ancient history in this country's political life are a very important element of the future. In all those elements, Governor Reagan has repeatedly spoken out against them, which, to me, shows a very great insensitivity to giving deprived families a better chance in life. This, to me, is a very important difference between him and me in this election, and I believe the American people will judge accordingly. There is no doubt in my mind that in the downtown central cities, with the, with the new commitment on an energy policy, with a chance to revitalize homes and to make them more fuel efficient, with a chance for our synthetic fuels program, solar power, this will give us an additional opportunity for jobs which will pay rich dividends.

MR. SMITH: Now, a question from Barbara Walters.

BARBARA WALTERS: Mr. President, the eyes of the country tonight are on the hostages in Iran. I realize this is a sensitive area, but the question of how we respond to acts of terrorism goes beyond this current crisis. Other countries have policies that determine how they will respond. Israel, for example, considers hostages like soldiers and will not negotiate with terrorists. For the future, Mr. President, the country has a right to know, do you have a policy for dealing with terrorism wherever it might happen, and, what have we learned from this experience in Iran that might cause us to do things differently if this, or something similar, happens again?

MR. CARTER: Barbara, one of the blights on this world is the threat and the activities of terrorists. At one of the recent economic summit conferences between myself and the other leaders of the western world, we committed ourselves to take strong action against terrorism. Airplane hijacking was one of the elements of that commitment. There is no doubt that we have seen in recent years - in recent months - additional acts of violence against Jews in France and, of course, against those who live in Israel, by the PLO and other terrorist organizations. Ultimately, the most serious terrorist threat is if one of those radical nations, who believe in terrorism as a policy, should have atomic weapons. Both I and all my predecessors have had a deep commitment to controlling the proliferation of nuclear weapons. In countries like Libya or Iraq, we have even alienated some of our closest trade partners because we have insisted upon the control of the spread of nuclear weapons to those potentially terrorist countries. When Governor Reagan has been asked about that, he makes the very disturbing comment that non-proliferation, or the control of the spread of nuclear weapons, is none of our business. And recently when he was asked specifically about Iraq, he said there is nothing we can do about it. This ultimate terrorist threat is the most fearsome of all, and it's part of a pattern where our country must stand firm to control terrorism of all kinds.

MR. SMITH: Ms. Walters, a follow up?

MS. WALTERS: While we are discussing policy, had Iran not taken American hostages. I assume that, in order to preserve our neutrality, we would have stopped the flow of spare parts and vital war materials once war broke out between Iraq and Iran. Now we're offering to lift the ban on such goods if they let our people come home. Doesn't this reward terrorism, compromise our neutrality, and possibly antagonize nations now friendly to us in the Middle East?

MR. CARTER: We will maintain our position of neutrality in the Iran and Iraq war. We have no plans to sell additional materiel or goods to Iran, that might be of a warlike nature. When I made my decision to stop all trade with Iran as a result of the taking of our hostages, I announced then, and have consistently maintained since then, that if the hostages are released safely, we would make delivery on those items which Iran owns - which they have bought and paid for - also, that the frozen Iranian assets would be released. That's been a consistent policy, one I intend to carry out.

MR. SMITH: Would you repeat the question now for Governor Reagan, please, Ms. Walters?

MS. WALTERS: Yes. Governor, the eyes of the country tonight remain on the hostages in Iran, but the question of how we respond to acts of terrorism goes beyond this current crisis. There are other countries that have policies that determine how they will respond. Israel, for example, considers hostages like soldiers and will not negotiate with terrorists. For the future, the country has the right to know, do you have a policy for dealing with terrorism wherever it might happen, and what have we learned from this experience in Iran that might cause us to do things differently if this, or something similar, should happen again?

MR. REAGAN: Barbara, you've asked that question twice. I think you ought to have at least one answer to it. I have been accused lately of having a secret plan with regard to the hostages. Now, this comes from an answer that I've made at least 50 times during this campaign to the press, when I am asked have you any ideas of what you would do if you were there? And I said, well, yes. And I think that anyone that's seeking this position, as well as other people, probably, have thought to themselves, what about this, what about that? These are just ideas of what I would think of if I were in that position and had access to the information, and which I would know all the options that were open to me. I have never answered the question, however; second, the one that says, well, tell me, what are some of those ideas? First of all, I would be fearful that I might say something that was presently under way or in negotiations, and thus expose it and endanger the hostages, and sometimes, I think some of my ideas might require quiet diplomacy where you don't say in advance, or say to anyone, what it is you're thinking of doing. Your question is difficult to answer, because, in the situation right now, no one wants to say anything that would inadvertently delay, in any way, the return of those hostages if there if there is a chance that they're coming home soon, or that might cause them harm. What I do think should be done, once they are safely here with their families, and that tragedy is over - we've endured this humiliation for just lacking one week of a year now - then, I think, it is time for us to have a complete investigation as to the diplomatic efforts that were made in the beginning, why they have been there so long, and when they came home, what did we have to do in order to bring that about - what arrangements were made? And I would suggest that Congress should hold such an investigation. In the meantime, I'm going to continue praying that they'll carne home.

MR. SMITH: Follow up question.

MS. WALTERS: I would like to say that neither candidate answered specifically the question of a specific policy for dealing with terrorism, but I will ask Governor Reagan a different follow-up question. You have suggested that there would be no Iranian crisis had you been President, because we would have given firmer support to the Shah. But Iran is a country of 37 million people who are resisting a government that they regarded as dictatorial. My question is not whether the Shah's regime was preferable to the Ayatollah's, but whether the United States has the power or the right to try to determine what form of government any country will have, and do we back unpopular regimes whose major merit is that they are friendly to the United States?

MR. REAGAN: The degree of unpopularity of a regime when the choice is total authoritarianism totalitarianism, I should say, in the alternative government, makes one wonder whether you are being helpful to the people. And we've been guilty of that. Because someone didn't meet exactly our standards of human rights, even though they were an ally of ours, instead of trying patiently to persuade them to change their ways, we have, in a number of instances, aided a revolutionary overthrow which results in complete totalitarianism, instead, for those people. I think that this is a kind of a hypocritical policy when, at the same time, we're maintaining a detente with the one nation in the world where there are no human rights at all - the Soviet Union. Now, there was a second phase in the Iranian affair in which we had something to do with that. And that was, we had adequate warning that there was a threat to our embassy, and we could have done what other embassies did - either strengthen our security there, or remove our personnel before the kidnap and the takeover took place.

MR. SMITH: Governor, I'm sorry, I must interrupt. President Carter, you have a minute for rebuttal.

MR. CARTER: I didn't hear any comment from Governor Reagan about what he would do to stop or reduce terrorism in the future. What the Western allies did decide to do is to stop all air flights - commercial air flights - to any nation involved in terrorism or the hijacking of air planes, or the harboring of hijackers. Secondly, we all committed ourselves, as have all my predecessors in the Oval Office not to permit the spread of nuclear weapons to a terrorist nation, or to any other nation that does not presently have those weapons or capabilities for explosives. Third, not to make any sales of materiel or weapons to a nation which is involved in terrorist activities. And, lastly, not to deal with the PLO until and unless the PLO recognizes Israel's right to exist and recognizes U.N. Resolution 242 as a basis for Middle East peace. These are a few of the things to which our nation is committed, and we will continue with these commitments.

MR. SMITH: Governor Reagan, you have the last word on that question.

MR. REAGAN: Yes. I have no quarrel whatsoever with the things that have been done, because I believe it is high time that the civilized countries of the world made it plain that there is no room worldwide for terrorism; there will be no negotiation with terrorists of any kind. And while I have a last word here, I would like to correct a misstatement of fact by the President. I have never made the statement that he suggested about nuclear proliferation and nuclear proliferation, or the trying to halt it, would be a major part of a foreign policy of mine.