LEHRER: All right. We go now to Mr. Perot for a 2-minute question, and it will be asked by John Mashek.

MASHEK: Mr Perot, you talked about fairness just a minute ago and sharing the pain. As part of your plan to reduce the ballooning federal deficit, you've suggested that we raise gasoline taxes 50 cents a gallon over 5 years. Why punish the middle class consumer to such a degree?

PEROT: It's 10 cents a year cumulative. It finally gets to 50 cents at the end of the 5th year. I think "punish" is the wrong word. Again, see, I didn't create this problem. We're trying to solve it. Now, if you study our international competitors, some of our international competitors collect up to $3.50 a gallon in taxes, and they use that money to build infrastructure and to create jobs. We collect 35 cents, and we don't have it to spend. I know it's not popular, and I understand the nature of your question. But the people who will be helped the most by it are the working people who will get the jobs created because of this tax. Why do we have to do it? Because we have so mismanaged our country over the years, and it is now time to pay the fiddler. And if we don't, we will be spending our children's money. We have spent $4 trillion worth. An incredible number of young people are active in supporting my effort because they are deeply concerned that we have taken the American dream from them. I think it's fitting that we're on the campus of a university tonight. These young people, when they get out of this wonderful university, will have difficulty finding a job. We've got to clean this mess up, leave this country in good shape, and pass on the American dream to them. We've got to collect the taxes to do it. If there's a fair way, I'm all ears (laughter) --aah. (Laughter and applause) But--but--see, let me make it very clear. If people don't have the stomach to fix these problems, I think it's a good time to face it, November. If they do, then they will have heard the harsh reality of what we have to do. I'm not playing Lawrence Welk music tonight.

LEHRER: All right, Governor Clinton, you have a minute, sir.

CLINTON: I think Mr. Perot has confronted this deficit issue, but I think it's important to point out that we really have 2 deficits in America, not one. We have a budget deficit in the federal government, but we also have an investment, a jobs, an income deficit. People are working harder for less money than they were making 10 years ago, 2- 3rds of our people--a $1600 drop in average income in just the last 2 years. The problem I have with the Perot prescription is that almost all economists who've looked at it say that if you cut the deficit this much this quick it will increase unemployment, it will slow down the economy. That's why I think we shouldn't do it that quickly. We have a disciplined reduction in the deficit of 50 % over the next 4 years, but first get incentives to invest in this economy, put the American people back to work. We've got to invest and grow. 9 Nobel Prize-winning economists and 500 others, including numerous Republican and Democratic business executives, have endorsed this approach because it offers the best hope to put America back to work and get our incomes rising instead of falling.

LEHRER: President Bush, one minute, sir.

BUSH: Your question was on fairness. I just disagree with Mr. Perot. I don't believe it is fair to slap a 50-cent-a-gallon tax over whatever many years on the people that have to drive for a living, people that go long distances. I don't think we need to do it. You see, I have a fundamental difference. I agree with what he's talking about in trying to get this spending down and the discipline, although I think we ought to totally exempt Social Security. But he's talking tough medicine, and I think that's good. I disagree with the tax-and-spend philosophy. You see, I don't think we need to tax more and spend more, and then say that's going to make the problem better. And I'm afraid that's what I think I'm hearing from Governor Clinton. I believe what you need to do is some of what Ross is talking about: control the growth of mandatory spending and get taxes down. He's mentioned some ways to do it--and I agree with those. I've been talking about getting a capital gains cut forever, and his friends in Congress have been telling me that's a tax break for the rich. It would stimulate investment. I'm for an investment tax allowance; I'm for a tax break for first- time homebuyers. And with this new Congress coming in, gridlock will be gone, and I'll sit down with them and say let's get this done. But I do not want to go the tax-and-spend route.

LEHRER: All right, let's move on now to the subject of jobs. The first question goes to President Bush for 2 minutes, and John will ask that question.

MASHEK: Mr. President, last month you came to St. Louis to announce a very lucrative contract for McDonnell Douglas to build F-15s for Saudi Arabia. In today's Post- Dispatch, a retired saleswoman, a 75-year-old woman named Marjorie Roberts, asked if she could ask a question of the candidates. She said she wanted to register her concern about the lack of a plan to convert our defense-oriented industries into other purposes. How would you answer her.

BUSH: I assume she was supportive of the decision on McDonnell Douglas, I assume she was supporting me on the decision to sell those airplanes. I think it's a good decision--took a little heat for it, but I think it was the correct decision to do. And we worked it out, and indeed we're moving forward all around the world in a much more peaceful way. So that one we came away with in creating jobs for the American people. I would simply say to her, look, take a look at what the president has proposed on job retraining. When you cut back on defense spending, some people are going to be thrown out of work. If you throw another 50,000 kids on the street because of cutting recklessly in troop levels, you're going to put a lot more out of work. I would say to them, look at the job retraining programs that we're proposing. Therein is the best answer to her. And another one is: stimulate investment and savings. I mean, we've got big economic problems, but we are not coming apart at the seams; we're ready for a recovery. With interest rates down and inflation down, the cruelest tax of all, caught up in a global slowdown right now, that that will change if you go with the programs I've talked about and if you help with job retraining and education. I am a firm believer that our America 2000 education problem is the answer--a little longer run; it's going to take awhile to educate. But it is a good program. So her best help for short term is job retraining, if she was thrown out of work at a defense plant. But tell her it's not all that gloomy; we're the U.S., we faced tough problems before. Look at the misery index when the Democrats had both the White House and the Congress. It was just right through the roof. Now, we can do better. And the way to do better is not to tax and spend but to retrain, get that control of the mandatory spending programs. I'm much more optimistic about this country than some. (Applause)

LEHRER: Mr. Perot? Mr. Perot, you have one minute, sir.

PEROT: Defense industries are going to have to convert to civilian industries. Many of them are. And the sooner they start, the sooner they'll finish. And there will be a significant transition. And it's very important that we not continue to let our industrial base deteriorate. We had someone who I'm sure regrets said it in the president's staff said he didn't care whether we made potato chips or computer chips. Well, anybody that thinks about it cares a great deal. Number one, you make more making computer chips than potato chips; and, number 2, 19 out of 20 computer chips that we have in this country now come from Japan. We've given away whole industries. So as we phase these industries over, there's a whole of intellectual talent in these industries. A lot of these people in industries can be converted to the industries of tomorrow, and that's where the high-paying jobs are. We need to have a very carefully thought through phase-over. Now, see, we practice 19th century capitalism. The rest of the world practices 21st century capitalism. I can't handle that in a minute, but I hope we can get back into it later. In the rest of the world, the countries and the businesses would be working together to make this transition in an intelligent way.

LEHRER: Governor Clinton, you have one minute, sir.

CLINTON: We must have a transition plan to plan to convert from a defense to a domestic economy. No other nation would have cut defense as much as we already have without that. There are 200,000 people unemployed in California alone because we have cut defense without planning to retrain them and to reinvest in the technologies of the future here at home. That is what I want to do. This administration may say they have a plan, but the truth is they have not even released all the money, the paltry sum of money, that Congress appropriated. I want to take very dollar by which we reduce defense and reinvest it in technologies for the 21st century--in new transportation, in communication, in environmental clean-up technologies. Let's put the American people to work, and let's build the kind of high-tech, high-wage, high-growth economy that the American people deserve.

LEHRER: All right. The next question goes to Mr. Perot for a 2-minute answer. It will be asked by Ann. Ann?

COMPTON: Mr. Perot, you talked a minute ago about rebuilding the job base. But is it true what Governor Clinton just said, that that means that unemployment will increase, that it will slow the economy? And how would you specifically use the powers of the presidency to get more people back into good jobs immediately?

PEROT: Step one, the American people send me up there, the day after election, I'll get with congressional--we won't even wait till inauguration, and I'll ask the president to help and I'll ask his staff to help me. And we will start putting together teams to put together--to take all the plans that exist and do something with them. Please understand. There are great plans lying all over Washington nobody ever executes. It's like having a blueprint for a house you never built. You don't have anywhere to sleep. Now our challenge is to take these things, do something with them. Step one, we want to put America back to work, clean up the small business problem, have one task force at work on that. The second, you've got your big companies that are in trouble, including the defense industries--have another one on that. Have a 3rd task force on new industries of the future to make sure we nail those for our country and they don't wind up in Europe and Asia. Convert from 19th to 21st century capitalism. See, we have an adversarial relationship between government and business. Our international competitors that are cleaning our plate have an intelligent relationship between government and business, and a supportive relationship. Then have another task force on crime because, next to jobs, our people are concerned about their safety. Health care, schools--one on the debt and deficit. And finally in that 90- day period before the inauguration, put together the framework for the town hall and give the American people a Christmas present. Show them by Christmas the first cut at these plans. By the time Congress comes into session to go to work, have those plans ready to go in front of Congress. Then get off to a flying start in '93 to execute these plans. Now, there are people in this room and people on this stage who've been in meetings when I would sit there and say, "Is this the one we're going to talk about or do something about?" Well, obviously, my orientation is let's go do it. Now, put together your plans by Christmas, be ready to go when Congress goes, nail these things. Small business--you've got to have capital, you've got to credit, and many of them need mentors or coaches. And we can create more jobs there in a hurry than any other place.

LEHRER: Governor Clinton, one minute.

CLINTON: This country desperately needs a jobs program, and my first priority would be to pass a jobs program, to introduce it on the first day I was inaugurated. I would meet with the leaders of the Congress, with all the newly elected members of the Congress and as many others with whom I could meet between the time of the election and the inauguration, and we would present a jobs program. Then we would present a plan to control health care costs and phase in health care coverage for all Americans. Until we control health care costs, we're not going to control the deficit. It is the number one culprit. But first we must have an aggressive jobs program. I live in a state where manufacturing job growth has far outpaced the nation in the last few years, where we have created more private sector jobs since Mr. Bush has been president than have been created in the entire rest of the country, where Mr. Bush's labor secretary the job growth has been enormous. We've done it in Arkansas. Give me a chance to create these kind of jobs in America. We can do it. I know we can. (Applause)

LEHRER: President Bush, one minute.

BUSH: We've got the plan announced for what we can do for small business. I've already put forward things that'll get this country working fast, some of which have been echoed here tonight--investment tax allowance, capital gains reduction, more on research and development, tax credit for first-time home buyers. What I'm going to do is say to Jim Baker when this campaign is over, all right, let's sit down now, you do in domestic affairs what you've done in foreign affairs, be kind of the economic coordinator of all the domestic side of the House, and that includes all the economic side, all the training side, and bring this program together. We're going to have a new Congress, and we're going to say to them, you've listened to the voters the way we have. Nobody wants gridlock anymore, and so let's get the program through. And I believe it'll work because, as Ross said, we got the plans. The plans are all over Washington. And I've put ours together in something called the Agenda for American Renewal, and it makes sense, it's sensible, it creates jobs, it gets to the base of the kind of jobs we need. And so I'll just be asking for support to get that put into effect.

LEHRER: All right. The next question goes to Governor Clinton for 2 minutes. It will be asked by Sandy.

VANOCUR: Governor Clinton, when a president running for the first time gets into the office and wants to do something about the economy, he finds in Washington there's a person who has much more power over the economy than he does: the chairman of the Federal Reserve Board, accountable to no one. That being the case, would you go along with proposals made by Treasury Secretary James Brady and Congressman Lee Hamilton to make the Federal Reserve Board chairman somehow more accountable to elected officials?

CLINTON: Well, let me say that I think that we might ought to review the terms, the way it works. But frankly, I don't think that's the problem today. We have low interest rates today. At least we have low interest rates that the Fed can control. Our long-term interest rates are still pretty high because of our deficit and because of our economic performance. And there was a terrible reaction internationally to Mr. Bush saying he was going to give us 4 more years of trickle-down economics--another across-the- board tax cut and most of it going to the wealthy, with no real guarantee of investment. But I think the important thing--the important thing-- is to use the powers the president does have on the assumption that, given the condition of this economy, we're going to keep interest rates down if we have the discipline to increase investment and reduce the debt at the same time. That is my commitment. I think the American people are ready for action. I think Congress is hungry for someone who will work with them instead of manipulate them. Someone who will not veto a bill that has an investment tax credit, middle class tax relief, research and development tax credits as Mr. Bush has done. Give me a chance to do that. I don't have to worry in the near term about the Federal Reserve. Their policies so far, it seems to me, are pretty sound.

LEHRER: President Bush you have one minute.

BUSH: I don't think the Fed ought to be put under the Executive Branch. There is a separation there. I think that's fine. Alan Greenspan is respected. I've had some arguments with him about the speed in which we have lowered interest rates, but Governor Clinton, he talks about the reaction to the markets. There was a momentary fear that he might win and that the markets went phwee, down like that. So I don't think we can judge on, the stock market has been strong. It's been very strong since I've been president. And they recognize we got great difficulties, but they're also much more optimistic than the pessimists we have up here tonight. In terms of vetoing tax bills, you're darn right. I am going to protect the American taxpayer against the spend and tax Congress. And I'm going to keep on vetoing them, because I don't think we're taxed too little. I think the government's spending too much. So Governor Clinton can label it tax for the rich or anything he wants. I'm going to protect the working man by continuing to veto, and to threaten to veto until we get this new Congress, and then we're going to move forward on our plan.

LEHRER: Mr. Perot, one minute.

PEROT: Keep the Federal Reserve independent, but let's live in a world of reality. We live in a global economy, not a national economy. These interest rates we have now don't make any sense. We have a four trillion dollar debt, and only in America would you finance seventy percent of it five years or less. So seventy percent of out debt is five years or less. It's very interest sensitive. We have a four percent gap between what we pay for treasuries, and what Germany pays for one to five year treasuries. That gap is going to close, because the Arabs, the Japanese and folks in this country are going to start buying German treasuries because they can get more money. Every time our interest rates go up one percent, that adds 28 billion dollars to the deficit or to the debt. Whichever place you put it. We are sitting on a ticking time bomb folks, because we have totally mismanaged our country, and we had better get it back under control. Just think in your own business, if you had all of your long term problems financed short term. You'd go broke in a hurry.

LEHRER: We're going to move to foreign affairs. The first question goes to Mr. Perot for a two minute answer, and Sandy will ask.

VANOCUR: Mr Perot, in the postwar coldwar environment, what should be the overriding U.S. national interest? And what can the United States do, and what can it afford to do, to defend the national interest?

PEROT: Again, if you're not rich, you're not a superpower. So we have two that I'd put as number one. I have number 1 and 1A. One is we've got to have the money to be able to pay for defense, and we've got to manufacture here. Believe it or not folks, you can't ship it all overseas, you've got to make it here. And you can't convert from potato chips to airplanes in an emergency. See, Willow Run could be converted from cars to airplanes in World War II because it was here. We've got to make things here. You can't ship them overseas anymore. I hope we can talk more about that. Second thing, on priorities. We've got to help Russia succeed in its revolution and all of its republics. When we think of Russia, remember we're thinking of many countries, now. We've got to help them. That's pennies on the dollar compared to renewing the cold war. Third, we've got all kinds of agreements on paper, and some that are being executed on getting rid of nuclear warheads. Russia and its republics are out of control or at best in weak control right now. It's a very unstable situation. You've got every rich Middle Eastern country over there trying to buy nuclear weapons. As you well know. And that will lead to another five star migraine headache down the road. We really need to nail down the intercontinental ballistic missiles, the ones that can hit us from Russia. And we've focused on the tactical. We've made real progress there. We've got some agreement on the nuclear, but we don't have those things put away yet. The sooner the better. So, in terms of priorities, we've got to be financially strong. Number two, we've got to take care of this missile situation and try to get the nuclear war behind us and give this thing very high priority. And number three, we need to help and support Russia and the republics in every possible way to become democratic capitalistic societies, and not just sit back and let those countries continue in turmoil. Because they could go back worse than things used to be. And believe me there are a lot of old boys in the K.G.B. and the military that liked it better the way it used to be.

LEHRER: Governor Clinton, one minute.

CLINTON: In order to keep America the strongest nation in the world, we need some continuity and some change. There are three fundamental challenges. First of all, the world is still a dangerous and uncertain place. We need a new military and a new national security policy equal to the challenges of a post cold war era, a smaller permanent military force, but one that is more mobile, well trained with high technology equipment. We need to continue the negotiations to reduce the nuclear arsenals in the Soviet Union, the former Soviet Union, and the United States. We need to stop this proliferation of weapons of mass destruction. Second, we have to face that in this world, economic security is a whole lot of national security. Our dollar's at an all time low against some foreign currencies. We're weak in the world. We must rebuild America's strength at home. And finally, we ought to be promoting the democratic impulses around the world. Democracies are our partners. They don't go to war with each other. They're reliable friends in the future. National security, economic strength, democracy.

LEHRER: President Bush, one minute.

BUSH: Well, we still are the envy of the world in terms of our military. There's no question about that. We're the envy of the world in terms of our economy, despite the difficulties we're having. There's no question about that. Our exports are dramatically up. I might say to Mr. Perot, I can understand why you might have missed it, because there's so much fascination with trivia, but I worked out a deal with Boris Yeltsin to eliminate, get rid of entirely, the most destabilizing weapons of all, the SS-18, the intercontinental ballistic missile. I mean, that's been done. And thank God, it has, because the parents of these young people around here go to bed at night without the same fear of nuclear war. We made dramatic progress. And so, we've got a good military. the question, to sort of get a new military, get the best in the world, we got it, and they're respected around the world. And we're more more respected because of the way we have conducted ourselves. We didn't listen to the nuclear freeze crowd. We said, "Peace through strength," and it worked and the cold war is over. And America understands that. But we're so, turned so inward we don't understand the global picture. And we are helping democracy, Ross. The Freedom Support Act is something I got through the Congress, and it's a very good thing, because it does exactly what you say, and I think you agree with that, to help Russian democracy. And we're going to keep on doing that.

LEHRER: Next question is for Governor Clinton, and John will ask it.

MASHEK: Governor Clinton, you accused the President of coddling tyrants, including those in Beijing. As President, how would you exert U.S. power to influence affairs in China.

CLINTON: I think our relationships with China are important and I don't want to isolate China, but I think it is a mistake for us to do what this Administration did when all those kids went out there carrying the Statue of Liberty in Tiananmen Square. Mr Bush sent two people in secret to toast the Chinese leaders and basically tell them not to worry about it. They rewarded him by opening negotiations with Iran to transfer nuclear technology. That was their response to that sort of action. Now that the voices in the Congress and throughout the country have insisted that we do something about China, look at what has happened. China has finally agreed to stop sending us products made with prison labor. Not because we coddled them, but because the Administration was pushed into doing something about it. And recently the Chinese have announced they are going to lower some barriers to our products, which they ought to do since they have a 15 billion dollar trade surplus with the United States under Mr. Bush. The second biggest surplus next to Japan. So I would be firm. I would say if you want to continue as Most Favored Nation status for your government owned industries as well as your private ones, observe human rights in the future. Open your society. Recognize the legitimacy of those kids that were carrying the Statue of Liberty. If we can stand up for our economics, we ought to be able to preserve the democratic interests of the people of China. And over the long run they will be more reliable partners.

LEHRER: President you have one minute.

BUSH: Well, the Administration is the first major country to stand up to the abuse in Tiananmen Square. We are the one that worked out the prison labor deal. We are the ones that lowered the barrier to products with Carla Hill's negotiation. I am theone that said let's keep the M.F.N. because you see China moving towards a free market economy. To do what the Congress and Governor Clinton is suggesting, you'd isolate and ruin Hong Kong. They are making some progress, not enough for us. But Governor Clinton's philosophy is isolate them. He says don't do it, but the policies he's expounding of putting conditions on M.F.N. and kind of humiliating them is not the way you make the kind of progress we are getting. And I've stood up with these people, and I understand what you have to do to be strong in this situation, and it's moving, not as fast as we'd like. But you isolate China and turn them inward, and then we've made a tremendous mistake. And I'm not going to do it. And I've had to fight a lot of people that were saying human right, and we are the ones that put the sanctions on and stood for it. And he can insult General Scowcroft if he wants to. They didn't go over to coddle. He went over to say we must make the very changes they're making now.

LEHRER: One minute, Mr. Perot.

PEROT: All right, it's huge. China, is a huge country, broken into many provinces. It has some very elderly leaders that will not be around too much longer. Capitalism is growing and thriving across big portions of China. Asia will be our largest trading partner in the future. It will be a growing and a closer relationship. We have a delicate, tight-wire walk that we must go through at the present time to make sure that we do not cozy up to tyrants, to make sure that they don't get the impression that they can suppress their people. But time is our friend there, because their leaders will change in not too many years, worst case, and their country is making great progress. One last point on the missiles. I don't want the American people to be confused. We have written agreements and we have some missiles that have been destroyed, but we have a huge number of intercontinental ballistic missiles that are still in place in Russia. The fact that you have an agreement is one thing. Till they're destroyed, some crazy person can either sell them or use them.

LEHRER: All right. The next question goes to President Bush for a 2-minute answer, and Ann will ask it.

COMPTON: Mr. President, how can you watch the killing in Bosnia and the ethnic cleansing, or the starvation and anarchy in Somalia, and not want to use America's might, if not America's military, to try to end that kind of suffering?

BUSH: Ann, both of them are very complicated situations. And I vowed something because I learned something from Vietnam. I am not going to commit U.S. forces until I know what the mission is, till the military tells me that it can be completed, and till I know how they can come out. We are helping. American airplanes are helping today on humanitarian relief for Sarajevo. It is America that's in the lead in helping with humanitarian relief for Somalia. But when you go to put somebody else's son or daughter into war, I think you got to be a little bit careful and you have to be sure that there's a military plan that can do this. You have ancient ethnic rivalries that have cropped up as Yugoslavia's dissolved or getting dissolved, and it isn't going to be solved by sending in the 82nd Airborne, and I'm not going to do that as commander-in-chief. I am going to stand by and use the moral persuasion of the U.S. to get satisfaction in terms of prison camps, and we're making some progress there, and in terms of getting humanitarian relief in there. And right now, as you know, the U.S. took the lead in a no-fly operation up there in-- no- fly order up in the United Nations. We're working through the international organizations. That's one thing I learned by forging that tremendous and greatly--highly successful coalition against Saddam Hussein, the dictator. Use--work internationally to do it. I am very concerned about it. I am concerned about ethnic cleansing. I am concerned about a tax on Muslims, for example, over there. But I must stop short of using American force until I know how those young men and women are going to get out of there as well as get in, know what the mission is, and define it. And I think I'm on the right track.

COMPTON: Are you designing a mission,

LEHRER: Ms.--Ann, sorry, sorry. Time is up. We have to go to Mr. Perot for a one-minute response.

PEROT: I think if we learned anything in Vietnam is you first commit this nation before you commit the troops to the battlefield. We cannot send our people all over the world to solve every problem that comes up. This is basically a problem that is a primary concern to the European Community. Certainly we care about the people, we care about the children, we care about the tragedy. But it is inappropriate for us, just because there's a problem somewhere around the world, to take the sons and daughters of working people--and make no mistake about it, our all- volunteer armed force is not made up of the sons and daughters of the beautiful people; it's the working folks who send their sons and daughters to war, with a few exceptions. It's very unlike World War II, when FDR's sons flew missions. Everybody went. It's a different world now. It's very important that we not just, without thinking it through, just rush to every problem in the world and have our people torn to pieces.

LEHRER: Governor Clinton, one minute.

CLINTON: I agree that we cannot commit ground forces to become involved in the quagmire of Bosnia or in the tribal wars of Somalia. But I think that it's important to recognize that there are things that can be done short of that, and that we do have interests there. There are, after all, 2 million refugees now because of the problems in what was Yugoslavia, the largest number since World War II, and there may be hundreds of thousands of people who will starve or freeze to death in this winter. The U.S. should try to work with its allies and stop it. I urged the president to support this air cover, and he did--and I applaud that. I applaud the no-fly zone, and I know that he's going back to the United Nations to try to get authority to enforce it. I think we should stiffen the embargo on the Belgrade government, and I think we have to consider whether or not we should lift the arms embargo now on the Bosnians, since they are in no way in a fair fight with a heavily armed opponent bent on "ethnic cleansing." We can't involved in the quagmire, but we must do what we can.