American should be aware of the seriousness of the step, but there are some things that government can do and some things they cannot do.

Now the example that the president cites has nothing to do with abortion. Somebody went to a woman and nearly killed her. That's always been a serious crime, and always should be a serious crime. But how does that compare with the problem of a woman who's raped? Do we really want those decisions made by judges who've been picked because they will agree to find the person guilty? I don't think so, and I think it's going in exactly the wrong direction.

In America, on basic moral questions we have always let the people decide in their own personal lives. We haven't felt so insecure that we've reached for the club of state to have our point of view. It's been a good instinct, and we're the most religious people on Earth.

One final point. President Reagan, as governor of California, signed a bill which is perhaps the most liberal pro-abortion bill of any state in the union.

But if I can get you back for a moment on my point, which was the question of when human life begins, a two-part follow-up. First of all, at what point do you believe that human life begins in the growth of a fetus; and second of all, you said that government shouldn't be involved in the decisions, yet there are those who would say that government is involved and the consequence of the involvement was 1.5 million abortions in 1980. And how do you feel about that?

MONDALE: The basic decision of the Supreme Court is that each person has to make this judgment in her own life. And that's the way it's been done. And it's a personal and private moral judgment. I don't know the answer to when life begins, and it's not that simple, either. You've got another life involved. And if it's rape, how do you draw moral judgments on that? If it's incest, how do you draw moral judgments on that? Does every woman in America have to present herself before some judge, picked by Jerry Falwell, to clear her personal judgment? It won't work. Applause

WALTERS: I'm sorry to do this, but I really must talk to the audience. You're all invited guests; I know I'm wasting time in talking to you, but it really is very unfair of you to applaud sometimes louder or less loud, and I ask you as people who were invited here, and polite people, to refrain.

We have our time now for rebuttal. Mr. President.

REAGAN: Yes. Well, with regard to this being a personal choice, isn't that what a murderer is insisting on? His or her right to kill someone because of whatever fault they think justifies that.

Now, I'm not capable -- and I don't think you are, any of us -- to make this determination that must be made with regard to human life. I am simply saying that I believe that that's where the effort should be directed to make that determination. I don't think that any of us should be called upon here to stand and make a decision as to what other things might come under the self-defense of tradition. That, too, would have to be worked out then, when you once recognize that we're talking about a life.

But in this great society of ours, wouldn't it make a lot more sense, in this gentle and kind society, if we had a program that made it possible for when incidents come along in which someone feels they must do away with that unborn child, that instead we make it available for the adoption? There are a million and a half people out there standing in line waiting to adopt children who can't have them any other way.

WALTERS: Mr. Mondale?

MONDALE: I agree with that, and that's why I was a principal sponsor of a liberal adoption law so that more of these children could come to term, so that the young mothers were educated, so we find an option, an alternative. I'm all for that.

But the question is whether this other option proposed by the president should be pursued, and I don't agree with it.

Since I've got about 20 seconds, let me just say one thing. The question of agriculture came up a minute ago. Net farm income is off 50 percent in the last three years, and every farmer knows it, and the effect of these economic policies is like a massive grain embargo which has caused farm exports to drop 20 percent; it's been a big failure. I opposed the grain embargo in my administration. I'm opposed to these policies as well.

WALTERS: I'm sitting here like the great schoolteacher letting you both get away with things because one did it, the other one did it. May I ask in the future that the rebuttals stick to what the rebuttal is, and also, foreign policy will be the next debate -- stop dragging it in by its ear into this one. Now, having admonished you, I am now saying to the panel, you are allowed one quesion and one follow-up. Would you try as best you could not ask two and three? . . . . TAXES

Mr. Mondale, let me ask you about middle-class Americans and the taxes they pay. I'm talking about, not about the rich or the poor, I know about your views on their taxes, but about families earning $25,000 to $45,000 a year. Do you think that those families are overtaxed or undertaxed by the federal government?

MONDALE: In my opinion, as we deal with this deficit, people from about $70,000 a year on down have to be dealt with very, very carefully because they are the ones who didn't get any relief the first time around. Under the 1981 tax bill, people making $200,000 a year got $60,000 in tax relief over three years, while peoople making $30,000 a year, all taxes considered, got no relief at all, and their taxes actually went up. That's why my proposal protects everybody from $25,000 or less against any tax increases, and treats those $70,000 and under in a way that is more beneficial than the way the president proposes with a sales tax or a flat tax.

What does this mean in real life? Well, the other day, Vice President Bush disclosed his tax returns to the American people. He is one of the wealthiest Americans and he's our vice president. In 1981 I think he paid about 40 percent in taxes. In 1983, as a result of these tax preferences, he paid a little over 12 percent, 12.8 percent in taxes. That meant that he paid a lower percent in taxes than the janitor who cleaned up his office or the chauffeur who drives him to work. I believe we need some fairness. And that's why I proposed what I think is a fair and responsible proposal that helps protect these people who've already got no relief or actually got a tax increase.

It sounds as if you were saying that this group of taxpayers making $25,000 to $45,000 a year is already overtaxed. Yet, your tax proposal would increase their taxes. I think your aides have said that those earning about $25,000 to $35,000, their tax rates would go up, their tax bill would go up $100, and from $35,000 to $45,000 more than that, several hundred dollars. Wouldn't that stifle their incentive to work and invest and so on, and also hurt the recovery?

MONDALE: The first thing is, everybody $25,000 and under would have no tax increase. Mr. Reagan, after the election, is going to have to propose a tax increase. And you will have to compare what he proposes. And his secretary of the treasury says he is studying a sales tax or a value-added tax. They are the same thing. They hit middle- and moderate-income Americans, and leave wealthy Americans largely untouched. Up until about $70,000, as you go up the ladder, my proposals would be far more beneficial. As soon as we get the economy on a sound ground as well, I would like to see the total repeal of indexing. I don't think we can do that for a few years, but at some point, we want to do that, as well.

Mr. President, let me try this on you. Do you think middle-income Americans are overtaxed or undertaxed?

REAGAN: You know, I wasn't going to say this at all, but I can't help it. There you go again. Applause

I don't have a plan to tax or increase taxes. I'm not going to increase taxes. I can understand why you are, Mr. Mondale, because as a senator, you voted 16 times to increase taxes. Now, I believe that our problem has not been that anybody in our country is undertaxed; it's the government is overfed. And I think that most of our people, this is why we had a 25 percent tax cut across the board which maintained the same progressivity of our tax structure in the brackets on up.

And, as a matter of fact, it just so happens in the quirks of administering these taxes, those above $50,000 actually did not get quite as big a tax cut percentage-wise as did those from $50,000 down. From $50,000 down, those people paid two-thirds of the taxes. And those people got two-thirds of the tax cut.

Now, the Social Security tax of '77 -- this, indeed, was a tax that hit people in the lower brackets the hardest. It had two features. It had several tax increases phased in over a period of time. There are two more yet to come between now and 1989. At the same time every year, it increased the amount of money, virtually every year -- there may have been one or two that were skipped in there -- that was subject to that tax. Today, it is up to about $38,000 of earnings that is subject to the payroll tax for Social Security. And for that tax there are no deductions, so a person making anywhere -- 10, 15, 20 -- they are paying that tax on the full gross earnings that they have after they have already paid an income tax on that same amount of money.

Now I don't think that to try and say that we were taxing the rich and not the other way around, it just doesn't work out that way. The system is still where it was with regard to the, with regard to the progressivity, as I've said, and that has not been changed. But if you take it in numbers of dollars instead of percentage, yes, you can say that that person got 10 times as much as this other person. Yes, but he paid 10 times as much, also. But if you take it in percentages, you find out that it is fair and equitable across the board.

I thought I caught, Mr. President, a glimmer of a stronger statement there in your answer than you've made before. I think the operative position you had before was that you would only raise taxes in a second term as a last resort. And I thought you said flatly that "I'm not going to raise taxes." Is that what you meant to say, that you will flatly "not raise taxes" in your second term as president.

REAGAN: Yes. I had used "last resort will always be with me." If you got the government down to the lowest level that you yourself could say could not go any lower and still perform the services for the people, and if the recovery was so complete that you knew you were getting the ultimate amount of revenues that you could get through that growth, and there was still some slight difference there between those two lines, then I had said once that, yes, you would then have then look to see if taxes should not be adjusted. I don't foresee those things happening. So, I say with great confidence that I'm not going to -- I'm not going to go for a tax.

With regard to assailing Mr. Bush about his tax problems and the difference from the tax he once paid and then the later tax he paid, I think if you looked at the deductions, there were great legal expenses in there that had to do possibly with the sale of his home and they had to do with the setting up of a blind trust, all of those are legally deductions, deductible in computing your tax. And it was a one-year thing with him.

WALTERS: Mr. Mondale, here we go again. It's time for rebuttal.

MONDALE: First of all, I gave him the benefit of the doubt on the house deal. I'm just talking about the 12.8 percent that he paid, and that's what's happening all over this country with wealthy Americans. They've got so many loopholes they don't have to pay much in taxes. Now, Mr. President, you said "There you go again." Right? Remember the last time you said that?

REAGAN: Um-hum.

MONDALE: You said it when President Carter said that you were going to cut Medicare. And you said, "Oh, no, there you go again, Mr. President." And what did you do right after the election? You went out and tried to cut $20 billion out of Medicare. Applause

And so when you say, "There you go again," people remember this, you know. And people remember that you signed the biggest tax increase in the history of California and the biggest tax increase in the history of the United States, and what are you going to do? You've got a $260 billion deficit. You can't wish it away. You won't slow defense spending. You refuse to do that.

WALTERS: Mr. Mondale, I'm afraid your time is up.

MONDALE: Sorry.

WALTERS: Mr. President.

REAGAN: Yes. With regard to Medicare, no, but it's time for us to say that Medicare is in pretty much the same condition that Social Security was and something is going to have to be done in the next several years to make it fiscally sound. And no, I never proposed any $20 billion should come out of Medicare. I have proposed that the program we must treat with that particular problem. And maybe part of that problem is that during the four years of the Carter-Mondale administration, medical costs in this country went up 87 percent.

WALTERS: . . . All, er . . . . Laughter

REAGAN: comment unintelligible

WALTERS: We can't keep going back for other rebuttals. There'll be time later. We now go to our final round. The way things stand now, we have time for only two sets of questions . . . . ECONOMIC RECOVERY

Mr. President, the economic recovery is real but uneven. The Census Bureau just a month ago reported that there are more people living under poverty now -- a million more people living under than when you took office. There have been a number of studies, including studies by the Urban Institute and other non-political organizations, that say that the impact of the tax and budget cuts and your economic policies have impacted severely on certain classes of Americans: working mothers who are head of households, minority groups, elderly poor. In fact, they're saying the rich are getting richer and the poor are getting poorer under your policies. What relief can you offer to the working poor, to the minorities and to the women head of households who have borne the brunt of these economic programs? What can you offer them in the future in your next term?

REAGAN: Well, some of those facts and figures just don't stand up. Yes, there has been an increase in poverty, but it is a lower rate of increase than it was in the preceding years, before we got here. It has begun to decline, but it is still going up. On the other hand, women heads of household -- single women heads of household -- have for the first time -- there's been a turndown in the rate of poverty for them. We have found also in our studies that -- in this increase in poverty -- it all had to do with their private earnings. It had nothing to do with the transfer payments from government by way of many programs.

We are spending now 37 percent more on food for the hungry in all the various types of programs than was spent in 1980. We're spending a third more on all of the, well, all of the programs of human service. We have -- we have more people receiving food stamps than were ever receiving them before -- 2,300,000 more are receiving them -- even though we took 850,000 off the food-stamp rolls because they were making an income that was above anything that warranted their fellow citizens having to support them. We found people making 185 percent of the poverty level were getting government benefits. We have set a line at 130 percent so that we can direct that aid down to the truly needy.

Some time ago Mr. Mondale said something about education and college students and help of that kind. Half -- one out of two -- of the full-time college students in the United States are receiving some form of federal aid. But there again we found people under the previous administration, families that had no limit to income were still eligible for low-interest college loans. We didn't think that was right. And so we have set a standard that those loans and those grants are directed to the people who otherwise could not go to college, their family incomes were so low.

So there are a host of other figures that reveal that the grant programs are greater than they have ever been, taking care of more people than they ever have, 7.7 million elderly citizens who were living in the lowest 20 percent of earnings, 7.7 million have moved up into another bracket since our administration took over, leaving only 5 million of the elderly in that bracket when there had been more than 13 million.

Mr. President, in a visit to Texas, in Brownsville I believe it was, in the Rio Grande Valley, you did observe that the economic recovery was uneven. In that particular area of Texas, unemployment was over 14 percent, whereas statewide it was the lowest in the country, I believe, 5.6 percent. And you made the comment, however, that man does not live by bread alone. What did you mean by that comment, and if I interpret it correctly, it would be a comment more addressed to the affluent who obviously can look beyond just the bread they need to sustain them with their wherewithal?

REAGAN: That had nothing to do with the other thing of talking about their needs or anything. I remember distinctly I was segueing into another subject -- I was talking about the things that have been accomplished and that was referring to the revival of patriotism and optimism, the new spirit that we're finding all over America. And it is a wonderful thing to see when you get out there among the people. So that was the only place that that was used.

I did avoid, I'm afraid, in my previous answer also, the idea of uneven, yes, there is no way that the recovery is even across the country. Just as in the depths of the recession there were some parts of the country that were worse off, but some that didn't even feel the pain of the recession. We're not going to rest, or not going to be happy until every person in this country who wants a job can have one, until the recovery is complete across the country.

Mr. Mondale, as you can gather from the question to the president, the celebrated war on poverty obviously didn't end the problem of poverty, although it may have dented it. The poor and the homeless and the disadvantaged are still with us. What should the federal government's role be to turn back the growth in the number of people living below the poverty level -- which is now 35 million in the United States -- and to help deal with the structural unemployment problems that the president was referring to in an uneven recovery?

MONDALE: Number one, we've got to get the debt down to get the interest rates down so the economy will grow and people will be employed. Number two, we have to work with cities and others to help generate economic growth in those communities. The urban development action grant program, I don't mind those enterprise zones -- let's try them, but not as a substitute for the others.

Certainly education and training is crucial. If these young Americans don't have the skills that make them attractive to employers, they're not going to get jobs. The next thing is to try to get more entrepreneurship and business within the reach of minorities, so that these businesses are located in the communities in which they're found. The other thing is we need the business community, as well as government, heavily involved in these communities to try to get economic growth.

There is no question that the poor are worse off. I think the president genuinely believes that they're better off. But the figures show that about 8 million more people are below the poverty line than four years ago. How you can cut school lunches, how you can cut student assistance, how you can cut housing, how you can cut disability benefits, how you can do all of these things and then the people receiving them, for example, the disabled, who have no alternative, how they're going to do better? I don't know.

Now we need a tight budget, but there's no question that this administration has singled out things that affect the most vulnerable in American life, and they're hurting. One final point, if I might. There's another part of the lopsided economy that we're in today. And that is that these heavy deficits have killed exports and are swamping the nation with cheap imports. We are now $120 billion of imports, 3 million jobs lost and farmers are having their worst year. That's another reason to get the deficit down.

Mr. Mondale, is it possible that the vast majority of Americans who appear to be prosperous have lost interest in the kinds of programs you're discussing, to help those less privileged than they are?

MONDALE: I think the American people want to make certain that that dollar is wisely spent. I think they stand for civil rights; I know they're all for education in science and training, which I strongly support. They want these young people to have a chance to get jobs and the rest. I think the business community wants to get involved. I think they're asking for new and creative ways to try to reach it, with everyone involved. I think that's part of it. I think also that the American people want a balanced program that gives us long-term growth so that they're not having to take money that's desperate to themselves and their families and give it to someone else. I'm opposed to that, too.

WALTERS: And now it is time for our rebuttal for this period. Mr. President.

REAGAN: Yes, the connection that's been made again between the deficit and the interest rates, there is no connection between them. There is a connection between interest rates and inflation, but I would call to your attention that in 1981, while we were operating still on the Carter-Mondale budget that we inherited, that the interest rates came down from 21 1/2 down toward the 12 or 13 figure. And while they were coming down, the deficits had started their great increase; they were going up. Now if there was a connection, I think that there would be a different parallel between deficit getting larger and interest rates going down. The interest rates are based on inflation, and right now I have to tell you I don't think there is any excuse for the interest rates being as high as they are because we have brought inflation down so low. I think it can only be that they're anticipating or hope, expecting, not hoping, that maybe we don't have a control of inflation and it's going to go back up again. Well it isn't going to go back up. We're going to see that it doesn't. And I haven't . . . .

WALTERS: Mr. President.

REAGAN: . . . got time to answer with regard to the disabled.

WALTERS: Thank you, Mr. President. Mr. Mondale.

MONDALE: Mr. President, if I heard you correctly, you said that these deficits don't have anything to do with interest rates. I will grant you that interest rates were too high in 1980, and we can have another debate as to why, energy prices and so on. There's no way of glossing around that. But when these huge deficits went in place in 1981, what's called the real interest rates -- the spread between inflation and what a loan costs you -- doubled. And that's still the case today. And the result is interest costs that have never been seen before in terms of real charges, and it's attributable to the deficit.

Everybody, every economist, every businessman, believes that. Your own Council of Economic Advisers, Mr. Martin Feldstein in his report, told you that. Every chairman of the Finance and Ways and Means Committee, Republican leaders in the Senate and the House, are telling you that. That deficit is ruining the long-term hopes for this economy. It's causing high interest rates, it's ruining us in trade, it's given us the highest small business failure in 50 years. The economy is starting downhill with housing failures.

WALTERS: Thank you, Mr. Mondale. You're both very obedient, I have to give you credit for that. We now start our final round of questions. We do want to have time for your rebuttal.