WASHINGTON |
Sun Jul 10, 2011 8:24pm EDT

WASHINGTON (Reuters) – Republican presidential candidate Tim Pawlenty, trailing in public opinion polls, criticized Republican rival Michele Bachmann on Sunday for a “non-existent” record in the Congress.

Pawlenty, a former governor of Minnesota, is competing for the same conservative voters as Bachmann in the early voting state of Iowa.

Bachmann, also from Minnesota and a member of the U.S. House of Representatives, is running neck-and-neck in Iowa with front-runner Mitt Romney while Pawlenty had only 6 percent support among Republican voters in a recent poll by the Des Moines Register.

“Well, I like Congresswoman Bachmann. I’ve campaigned for her. I respect her, but her record of accomplishment in Congress is non-existent. It’s non-existent,” Pawlenty told NBC’s “Meet the Press.”

Bachmann has gained traction with a fiery speaking style that is altogether different from Pawlenty’s laid-back manner.

“We’re not looking for folks who just have speech capabilities, we’re looking for people who can lead a large enterprise in a public setting and drive it to conclusion,” Pawlenty said, touting his own experience as a two-term governor of Minnesota.

In response to Pawlenty’s comments, Bachmann said people could count on her as a fighter. She also defended her records while taking a jab at Pawlenty.

“I have fought the cap-and-trade agenda, rather than implement it, and I will work to end cap-and-trade as president of the United States,” she said in a statement. “I stood up against President Obama’s support of the $700 billion bailout rather than defend it.”

Pawlenty once supported a cap-and-trade system on greenhouse gas emissions but has since changed his stance, saying it was a mistake. He also backed the Bush administration’s bailout of the U.S. financial industry.

In the NBC interview, Pawlenty also raised questions about Romney, saying the healthcare plan he developed for Massachusetts served as a model for President Barack Obama’s overhaul that Republicans want to repeal.

“I don’t think we can have a nominee that was involved in the development and construction of Obamacare and then continues to defend it,” he said.

(Reporting by Steve Holland; Editing by Vicki Allen)

By Thomas Ferraro

WASHINGTON |
Sat Jul 9, 2011 9:06am EDT

WASHINGTON (Reuters) – As a freshman senator, Republican Pat Toomey punches above his weight in the high-stakes fight over increasing the U.S. debt limit.

To cheers and jeers, Toomey — a Tea Party favorite and Wall Street veteran — dismisses as an exaggeration worries about a short-term debt default and wants the Constitution changed to require a balanced federal budget.

Toomey’s stance has won over enough Republicans — some 20 in the Senate and more than 100 in the House of Representatives — to create a potential bloc able to sway talks this weekend between President Barack Obama and leaders in Congress.

“Those numbers lurk like a black cloud over negotiations,” Ethan Siegal of the Washington Exchange, a private firm that tracks Congress and the White House for investors, said of the bloc that includes many Tea Party movement-backed Republicans who have resisted compromise on the debt ceiling.

Obama and congressional leaders ordered staff to work through the weekend toward a possible agreement to trim the massive U.S. deficit, raise the U.S. debt limit and avoid default by an August 2 deadline.

With the White House warning of dire economic consequences of a default, the president and congressional leaders are to meet on Sunday to discuss progress.

Toomey will not be in the room, but his views will be.

“When Toomey speaks, people listen,” a senior Republican aide said.

“He’s a well-regarded member of the new class of freshmen senators,” the aide added, citing his background as a bond trader and small businessman who served in the House and headed Club for Growth, an influential conservative group, before being elected to the Senate last year.

He’s introduced legislation backed by 20 of his 46 fellow Senate Republicans that demands there be no increase in the debt limit unless Congress passes a long-shot amendment to the Constitution to require a balanced federal budget. To become law, it would have to be approved by two-thirds majority votes in the House and Senate, then ratified by three-quarters of the 50 states.

CREATED A STIR

Early this year, he created a stir by accusing Obama of trying to frighten Congress into raising the debt limit by overstating the threat of U.S. default.

Then, he went a step further by offering legislation — denounced by critics as unworkable but backed by 22 Senate Republicans and 101 House Republicans — aimed at shielding against default by ordering the Treasury Department to prioritize debt service over other payments if the debt limit is not raised.

“I’m just trying to shed some light on the situation that we face and engage everybody in an honest discussion,” said Toomey, 49, a self-described “boring wonkish kind of guy.”

While the two measures have helped shape the debate, neither has received the support of Republican leadership and both have drawn fire.

A simple majority is needed to pass most bills in the House, which is now controlled by Republicans, 240-192. Sixty votes are generally needed in the Senate, which is held by Democrats, 53-47.

Democratic Senator Chris Coons calls Toomey’s suggestion that the U.S. avoid default by not paying other federal bills “ludicrous, irresponsible.”

“The idea that we would only spend money on servicing our debt and then not pay other things — well what is that we would suddenly stop doing, paying Social Security benefits, paying Medicare, paying our troops?” Coons said.

Federal Reserve Chairman Ben Bernanke says even delays in non-debt payments would rattle investors and undermine the economy.

Toomey brushes off such criticism and says his approach would calm edgy but savvy financial markets.

“As a former government bond trader and someone who stays in touch with the market, I can promise you the bond market knows the difference between some kind of payment obligations and defaulting on our debt,” Toomey said.

With Democrats and Republicans voicing concerns about a possible deal, which could include cuts in entitlement programs and comprehensive tax reform, Toomey says lawmakers must get it right.

“The debt ceiling debate is our best chance, if not the only remaining one, for this Congress to show the American people that we will stop the overspending and skyrocketing debt,” Toomey said. “We have high hurdles to clear.”

(Additional reporting by Andy Sullivan and Tim Reid; editing by Vicki Allen)

By David Bailey

MINNEAPOLIS |
Fri Jul 8, 2011 5:05pm EDT

MINNEAPOLIS (Reuters) – Minnesota entered its second week of a government shutdown on Friday with no new top level budget talks scheduled among political leaders, and some experts said the impasse could last a month or more.

With a Democratic governor and Republican-controlled legislature, party polarization in Minnesota has virtually made compromise a four-letter word. In the meantime, the shutdown — which has furloughed thousands of state workers and closed down revenue-generating operations like the lottery — is seen taking a toll on the state’s economy.

The impasse between Governor Mark Dayton and the Republican legislative leaders echoes similar differences in Washington and in other states and has dragged Minnesota into the national spotlight.

Still, Minnesota is the only state where the government has shut down. Large parts of the government were shuttered when the new fiscal year started July 1 without a budget deal to address a $5 billion deficit.

“I think it is going to go about a month because I don’t see at this point any political forces that are driving them to the bargaining table to compromise,” said David Schultz, a Hamline University professor and expert on Minnesota politics.

After meeting daily up to the end of the last fiscal year, the governor, House Speaker Kurt Zellers and Senate Majority Leader Amy Koch did not meet over the Fourth of July holiday weekend and had two short meetings this week.

The government shutdown is much broader in scope than a nine-day partial closing Minnesota endured in 2005 when Tim Pawlenty, now a Republican presidential candidate, was governor.

The impasse may have been all but ensured by the election last November of a Democratic governor and majorities in control of the state Senate and House majorities who believe they were mandated to close the budget gap with new spending or cuts alone respectively.

But Minnesota often has had divided executive and legislative branches that forged compromises, and the roots of the impasse run much deeper and defy easy solutions.

INTRACTABLE POSITIONS

“What we are seeing this year is not just sort of a small bump in the road, it is part of something broader that is going on in Minnesota,” Schultz said. “It is about the fact that for either side, compromise becomes tantamount to capitulation.”

Lawrence Jacobs, a University of Minnesota professor and political scientist, said conservative Democrats and moderate Republicans have been worn away by party polarization that has accelerated the last few years. Past Republican leaders would have negotiated a compromise that raised revenue a little and cut spending more, but not now, he said.

“If Amy Koch brings in a compromise that raises revenue, she is going to have a revolt in her caucus,” Jacobs said.

The differences in positions remain stark. Dayton this week proposed increases in income taxes or cigarette taxes along with healthcare surcharges and delayed school aid payments to close a roughly $1.4 billion gap between his budget proposal and the $34.2 billion plan Republicans have proposed.

Republican leaders have said that a tax increase of any kind was off the table. Both sides also have acknowledged they have education and health policy differences to negotiate.

The impasse drove former Democratic Vice President Walter Mondale and former Republican Governor Arne Carlson to form a bipartisan panel to map a third budget plan to try to end the shutdown.

The panel proposed a budget much closer to the governor’s spending plan than to Republicans’ that included a broad income tax increase and increased cigarette and alcohol taxes. It gained no support from Republicans.

Measuring the economic drag from the shutdown can be hard, but Schultz estimated the furlough of 23,000 of some 36,000 state workers and the impact on private vendors would raise the state’s unemployment rate by a full percentage point.

All but critical state services such as prison staffing, police patrols and spending on nursing and veterans homes have been cut back during the shutdown.

Dozens of road construction projects have been halted, state parks closed at night, and the state has suspended its lottery, fee collections for high occupancy vehicle lanes and the tax auditing functions among other services.

“It is going to be a drag on the economy and getting worse as it goes on,” Schultz said. “As the economy still is not great, it certainly doesn’t help the state of Minnesota.”

(Reporting by David Bailey; Editing by Leslie Adler)

By John Rondy

MILWAUKEE |
Fri Jul 8, 2011 5:56pm EDT

MILWAUKEE (Reuters) – Republican Governor Scott Walker signed a bill on Friday allowing citizens to carry concealed weapons, leaving Illinois as the lone state with a ban on concealed weapons still in place.

Under the Wisconsin law, gun owners who want to carry concealed weapons will have to get special training and permits. Permits and photo IDs are required when carrying a concealed weapon.

The state Department of Justice will issue permits to state residents 21 and over who get training and clear background checks that show they were not felons or otherwise prohibited from carrying guns.

“By signing concealed carry into law today we are making Wisconsin safer for all responsible, law abiding citizens,” said Walker in a statement.

Twice in recent years the Wisconsin legislature passed a law allowing concealed carry but then Democratic Governor Jim Doyle vetoed it. Doyle left office in January and was succeeded by Republican Walker.

Opponents of concealed carry have said that allowing more freedom for citizens to carry guns in public places will increase violence rather than reduce.

After Walker signed the bill at a ceremony in Wausau, guns will be allowed in most public places except police stations, courts, schools and businesses that post signs. Concealed weapons could also be carried in parks and taverns.

In April, lawmakers in the Illinois state House attempted to pass a measure that would have allowed gun owners to carry them in public, but it fell short of the number needed to pass.

(Writing and reporting by John Rondy; Editing by Mary Wisniewski and Greg McCune)

WASHINGTON |
Fri Jul 8, 2011 6:33pm EDT

WASHINGTON (Reuters) – The U.S. government is working to limit the diplomatic fallout after Texas executed a Mexican national over Washington’s objections that it violated U.S. treaty obligations and put U.S. citizens abroad at risk.

Secretary of State Hillary Clinton was “quite disappointed” on Thursday after Texas went ahead with the execution by injection of Humberto Leal Garcia, convicted of murdering a 16-year-old girl, despite pleas from the federal government for a last-minute stay, State Department spokeswoman Victoria Nuland said.

“It’s important that our partners overseas know that the U.S. government, the executive branch, was not comfortable with what happened in this case,” Nuland said.

“The secretary is making clear to her counterparts, whether they’re in Mexico or anywhere else, that we seek to remedy this situation and we seek to remedy it as quickly as we possibly can,” Nuland said at a news briefing.

Nuland said the Obama administration would work with Congress to speed passage of legislation that would spell out the rights of foreigners to consular access.

The top U.N. official for human rights, Navi Pillay, issued a statement on Friday saying Leal Garcia’s execution “places the U.S. in breach of international law.”

The U.S. Supreme Court rejected a stay of execution despite warnings from the Obama administration that the case violated the Vienna Convention on Consular Relations because Leal Garcia had not been given appropriate consular access.

In legal briefs, the U.S. government had warned the execution would create an irreparable breach of international law and Mexico’s government said it would seriously jeopardize cross-border cooperation on joint ventures and extraditions.

Leal Garcia, 38, who had lived in the United States since he was an infant, was convicted of raping the girl and bludgeoning her to death with a piece of asphalt in 1994.

While the United States has joined the Vienna Convention, critics have argued that individual U.S. states are not bound by it until Congress passes enabling legislation.

Nuland said the State Department was concerned that the case might impact the welfare of U.S. citizens who run into legal problems overseas.

The State Department says some 5 million U.S. citizens live overseas and many millions more travel regularly outside of the country. About 3,500 Americans were arrested overseas in 2010 and U.S. consular officials conducted more than 9,500 prison visits.

“Frankly, if we don’t protect the rights of non-Americans in the United States we seriously risk reciprocal lack of access to our own citizens overseas,” Nuland said.

“Texas justice is Texas justice. This is simply about ensuring a non-American facing judicial proceedings in the United States has the same rights that we expect an American facing judicial proceedings overseas would have.”

(Editing by Bill Trott)

WASHINGTON |
Fri Jul 8, 2011 6:11pm EDT

WASHINGTON (Reuters) – The top U.S. military officer begins a four-day trip to China on Sunday in another sign of warming military ties between the two countries after a break in relations following a $6.3 billion U.S. arms deal with Taiwan.

Admiral Mike Mullen, chairman of the U.S. Joint Chiefs of Staff, was leaving Washington on Friday afternoon for a visit to Beijing at the invitation of his counterpart, General Chen Bingde, chief of the general staff of the People’s Liberation Army, who visited Washington earlier this year.

“Admiral Mullen looks forward to continuing the engagement and dialogue that began during General Chen Bingde’s visit to the United States in May,” said Pentagon spokesman Colonel David Lapan.

Mullen had a wide range of meetings scheduled with senior military officials, including visits to PLA military units, Lapan said. He also is scheduled to speak to students at Renmin University in Beijing.

Mullen’s visit to China is the first by a chairman of the Joint Chiefs since his predecessor, General Peter Pace, went there in 2007. Mullen’s last visit to China also was in 2007, when he Chief of Naval Operations.

U.S.-China military ties were severed in January 2010 after President Barack Obama’s administration announced a $6.3 billion arms deal with Taiwan that included Patriot anti-missile systems and Apache attack helicopters.

Military links remained severed through much of the year, even as Mullen and former Defense Secretary Robert Gates, who resigned last week, called for regular contacts to improve trust and avoid misunderstands that could spin out of control.

U.S. officials have watched with concern as China has displayed a growing military assertiveness and begun developing weapons that could be used to undermine U.S. strengths in the region, from anti-satellite missiles to radar-evading jet fighters.

Military ties between the two countries resumed in late 2010 and have picked up pace since President Hu Jintao visited President Barack Obama in January.

In addition to the Mullen-Chen visits, Gates visited China in January and met with his counterpart, Defense Minister Liang Guanglie, at the annual Shangri-La Security Dialogue in Singapore last month.

(Editing by Christopher Wilson)

NEW YORK |
Fri Jul 8, 2011 7:33pm EDT

NEW YORK (Reuters) – Though the governors of New York and Connecticut parted company on some of their budget-fixing strategies, both Democrats are still struggling to persuade their unionized workers to accept cuts.

New York Governor Andrew Cuomo and Connecticut Governor Dannel Malloy on Friday both faulted what they see as the unions’ preference for thousands of layoffs over accepting harsh concessions, from wage freezes to benefit changes.

The layoffs planned by the two neighboring states, which compete fiercely for employers, give weight to economists’ forecasts that cash-strapped states, counties, cities and towns are undermining the recovery — already surprisingly soft — by slashing their workforces.

Malloy, who says he tried to make everyone share in the sacrifices needed to balance the budget by cutting spending and raising taxes, including income taxes for the wealthy, told reporters “large scale layoff notices” could go out Tuesday.

About 6,500 positions will be cut to close a $700 million deficit, Malloy said. “I have never hidden my desire not to be having, not be engaged, in large-scale layoffs.”

Connecticut has about 45,000 unionized workers; some of its 5,000 managers also could be laid off, as Malloy also is consolidating agencies.

Asked what services will be cut, Malloy responded: “A little bit of everything…I don’t think there are any areas of government that will be unaffected.” He added he would be “loath” to close beaches and parks, a tack taken by some other states, most notably California, which shut 70 parks.

Malloy showed little interest in reopening the union talks, saying: “Been there; done that.”

Yet Spokesman Matt O’Connor of the State Employees Bargaining Agent Coalition said Malloy’s negotiator contacted his union counterpart about resuming talks. “We are confident we are going to find a path forward; we’re certainly not giving up when the consequences are so catastrophic,” he said.

Most of Connecticut’s unions accepted Malloy’s deal, though the concessions include fewer sick days. The accord failed because more than one union rejected it. Connecticut’s budget assumes the savings from the layoffs will start on September 1.

Like Malloy, Cuomo’s new budget cut spending though New York’s governor raised no taxes and he got the biggest union to accept his offer though it raised health care premiums. But talks with the second-biggest union, the Public Employee Federation (PEF), have snarled and nearly 800 layoff notices recently were sent to its members.

New York’s governor manages about 132,000 workers.

Cuomo told Talk 1300, an Albany radio show, that PEF’s rejection of his proposal “lacks credibility” because it was accepted by the Civil Service Employees Association.

“That’s the pressure they’re feeling. We don’t want to do any layoffs,” Cuomo said. In spurning his offer, Cuomo said “The union would have to say ‘We would rather do layoffs, and lay off our own members, than agree to a contract.’”

Though Cuomo said both unions were offered the same deal, PEF President Kenneth Brynien said the latest offer had significant differences, especially for health benefits. “It’s disappointing to see the state continuing to use the threat of layoffs to hold hostage our members, their families and the state services on which New Yorkers rely,” he added.

(Reporting by Joan Gralla in New York and Dan Wiessner in Albany; Editing by Andrew Hay)

By David Morgan and Richard Cowan

WASHINGTON |
Fri Jul 8, 2011 2:52pm EDT

WASHINGTON (Reuters) – Limiting the tax break for employer-provided health insurance became a bargaining chip on Friday in congressional negotiations to beat an August 2 deadline for averting a U.S. default.

“Limiting the deduction for the higher income brackets is something that is on the table,” Representative Sandy Levin told Reuters. He is the senior Democrat on the tax-writing U.S. House Ways and Means Committee.

The employer-provided healthcare income exclusion cost about $117.3 billion this year. Limiting it could bring in considerably more new government revenues than other, smaller options that have been discussed by negotiators.

President Barack Obama and congressional leaders are trying to craft a deal to cut $4 trillion from budget deficits over 10 years to give lawmakers political cover to raise the government’s debt ceiling of $14.3 trillion.

The employer healthcare tax break allows employees to exclude from their taxable income the value of contributions toward employer-provided health insurance plans.

A cap could be politically feasible because it would not register as a tax increase. The initial pain would be minimal and those affected would be higher-income employees rather than the elderly or the poor, analysts said.

Eliminating or capping this tax break was discussed during debate over the 2010 healthcare reform act, but Congress instead put an excise tax on high cost “Cadillac” plans only. It take effects in 2018.

Health experts and economists have long seen reining in the healthcare tax exclusion as a way to control soaring healthcare costs. Advocates say individuals would respond to the higher costs that would result by choosing cheaper insurance plans.

Analysts would expect any change to take effect gradually, probably beginning after the November 2012 elections, with a cap set below the expected rate of rising healthcare costs.

In 2009, 58.5 percent of Americans got health insurance coverage through employers.

Investors may view potentially limiting the tax break as a negative for health insurers because without the incentive, more employers may stop offering coverage.

“The general consensus of non-elected people who pay attention to this is that that’s really the way to go. You’ve got to ease yourself into something like this,” said Joseph Antos, a healthcare policy expert at the conservative American Enterprise Institute.

Levin said that removing the break too quickly could upset last year’s landmark health reform law.

“Those provisions are essential to healthcare reform. So you have to be very, very careful,” he said.

(Additional reporting by Andy Sullivan and Kevin Drawbaugh, with Lewis Krauskopf in New York; Editing by Howard Goller)

By Andy Sullivan and Richard Cowan

WASHINGTON |
Fri Jul 8, 2011 4:47pm EDT

WASHINGTON (Reuters) – Dismal unemployment figures on Friday complicated efforts to avert a looming U.S. debt default, and a top Republican said negotiators were not close to a deal that would ensure continued borrowing.

Tamping down expectations that Democrats and Republicans could reach agreement over the weekend, House of Representatives Speaker John Boehner said the two sides must overcome serious disagreements on taxes and spending cuts.

“It’s not like there’s some imminent deal about to happen,” Boehner told a news conference. “This is a Rubik’s Cube that we haven’t quite worked out yet.”

Partisan finger-pointing erupted anew after a government report showed the unemployment rate rose to 9.2 percent in June, dousing hopes that the economy is picking up steam.

Boehner, the top Republican in Congress, and President Barack Obama, a Democrat seeking reelection in 2012, are trying to craft a sweeping budget deal that would ensure the national debt remains at a sustainable level by cutting $4 trillion from budget deficits over 10 years.

That would give lawmakers political cover to raise the government’s debt ceiling of $14.3 trillion before August 2, when the country is due to run out of borrowing capacity. Failure to act soon, some warn, could push the United States back into recession and send shock waves through the global economy.

Democrats and Republicans remain at odds over what elements should be part of the deal. Democrats are pushing for roughly $1 trillion in new tax revenue, while Republicans want to restructure popular benefit programs.

Negotiators might scale back a tax break for companies that provide health benefits to their workers, Representative Sander Levin, the top Democrat on the tax-writing Ways and Means Committee, told Reuters. That would dwarf other revenue-generating elements on the table but could prompt more employers to stop offering health coverage.

The uncertainty in the debt-ceiling debate is hurting American companies and the overall economy, Obama said.

“The sooner we get this done, the sooner that the markets know that the debt limit ceiling will have been raised and that we have a serious plan to deal with our debt and deficit, the sooner that we give our businesses the certainty that they will need in order to make additional investments to grow and to hire,” he said at the White House.

MEETING ON SUNDAY

For now, financial markets are showing little concern.

In fact, investors beat a path to the U.S. Treasury’s sale of $28 billion in four-week bills on Wednesday, elbowing each other for the chance to buy debt paying zero interest and maturing on August 4 — two days after the deadline.

Obama, Boehner and other congressional leaders are due to meet at the White House on Sunday at 6 p.m. EDT, with staffers working through the weekend to lay out options.

The session could see some hard bargaining but is not likely to produce a final deal, White House spokesman Jay Carney said.

The Republican-led House canceled a planned break during the week of July 18, which could make it easier for Congress to pass a deal by August.

Boehner faces a delicate balancing act. With dozens of conservative House Republicans expected to vote against any compromise, he will likely have to rely on Democratic votes to get a deal passed. That means some revenue increases may have to be part of the package, which could imperil Boehner’s standing among conservative activists.

House Democratic Leader Nancy Pelosi said she was optimistic a deal can be reached after meeting with Obama on Friday morning, but she insisted that the popular Social Security retirement program should not be part of the deal.

“We are not going to reduce the deficit or subsidize the tax cuts for the rich on the backs of America’s seniors,” Pelosi said.

Prospects probably were not helped by Friday’s disappointing jobs report, which showed employers hired the fewest number of workers in nine months.

Obama is eager to bring the jobless rate down ahead of the November 2012 election, which will largely hinge on how Americans feel about the economy.

Republicans said his policies have made businesses reluctant to hire. A budget deal that includes tax hikes could make things worse, they said.

“It just does not make sense for Americans to suffer under higher taxes in an economy like this,” said Representative Eric Cantor, the No. 2 House Republican.

Democrats fear the sharp spending cuts that Republicans want would further weaken the economy, and they are pushing for new tax cuts and spending measures to boost employment.

(Additional reporting by Thomas Ferraro, Caren Bohan, Laura MacInnis and Matt Spetalnick and David Morgan in Washington and Ellen Freilich in New York; Editing by John O’Callaghan)

By Patricia Zengerle

WASHINGTON |
Fri Jul 8, 2011 4:45pm EDT

WASHINGTON (Reuters) – Friday’s bleak unemployment report boosts Republicans hoping to oust President Barack Obama from the White House next year, but translating a difficult economy into election results will not be easy.

U.S. jobs growth ground to a near halt in June, frustrating hopes the economy would bounce back quickly from a slowdown and underscoring how difficult the issue will be for Obama in his bid for a second term next year.

“This is Obama’s greatest vulnerability. It’s his losing war, the economy and unemployment,” said Julian Zelizer, a professor at Princeton University.

Mitt Romney, a former governor and wealthy businessman, has in particular made job creation the center of his front-running campaign for the Republican presidential nomination. Co-founder of private equity firm Bain Capital, Romney tells voters he helped create tens of thousands of jobs by helping launch successful corporations.

Romney has scored some points against Obama on the issue, giving a speech on the economy last week at a shuttered factory that the Democrat visited in 2009 as a potential symbol of economic renewal.

On Friday he issued a statement accusing Obama and his aides of caring too little about joblessness. “With their cavalier attitude about the economy, the White House has turned the audacity of hope into the audacity of indifference,” Romney said, referring to the title of one of Obama’s books.

“It (the poor jobless report) makes Obama look vulnerable and therefore within the Republican party they get more serious about putting up a serious contender,” said Christopher Arterton, a political scientist at George Washington University who has consulted for Democratic candidates.

“Romney has a flavor of being a serious contender and somewhat more moderate,” he said.

Other prominent Republican candidates, such as U.S. Representative Michele Bachmann who has leaped to second place in recent polls, are better known for conservatism on social issues such as opposition to abortion or gay marriage rights than for business expertise.

REPUBLICANS NEED THEIR OWN PLAN

And Republicans, while freely criticizing Obama, have been criticized in turn for lacking their own job creation plans, and for pushing for big cuts in government services — without tax cuts — during acrimonious budget negotiations.

“Republicans really don’t have their alternative — including Romney — to what the president has done,” Zelizer said.

“Budget cuts are popular, but I don’t think they are enough of an answer,” he said. “People see jobs going to other countries. I don’t see how cutting Social Security is going to solve that problem,” he said of the retirement program.

Democrats have seized on some of Romney’s campaign gaffes, such as telling unemployed workers in Florida that he was also out of work. Romney’s fortune is estimated at $250 million.

They also have hammered Romney for what they say is “flip-flopping” on his view of the economy. For instance he gave apparently contradictory statements in recent days on whether Obama’s policies made the U.S. recession worse.

“Candidate qualities do play a role,” said Richard Eichenberg, a political scientist at Tufts University which is near Boston, noting the former Massachusetts governor’s difficulties connecting with voters.

Romney’s woodenness on the campaign trail and reputation for changing his position on issues hurt his unsuccessful bid for the 2008 Republican presidential nomination.

Democrats will also blast Romney’s business record, slamming Bain Capital as a firm that made money for investors by slashing jobs or reducing pay and benefits at companies in which it invested.

“The Democrats will challenge Romney’s credentials as an economic steward, primarily because of his experience as a venture capitalist,” Eichenberg said.

But most experts say it will take an economic rebound for Obama’s 2012 prospects to brighten significantly, and economists said Friday’s report left them little hope for an upturn.

“After kind of moving in the right direction for quite some time, we are no longer moving in the right direction,” said Heather Boushey, an economist at the Center for American Progress, a think tank with close ties to the White House.

“I cannot find anything in today’s report that gives me optimism,” she said.

(Editing by Alistair Bell and Vicki Allen)

LOS ANGELES |
Fri Jul 8, 2011 9:53pm EDT

LOS ANGELES (Reuters) – Betty Ford, the wife of the late President Gerald Ford and whose battles with addiction led to the founding of a famed drug and alcohol rehabilitation clinic bearing her name, died on Friday. Ford was 93.

“I was deeply saddened this afternoon when I heard of Betty Ford’s death,” former first lady Nancy Reagan said in a statement confirming Ford’s death.

(Reporting by Bob Tourtellotte; Editing by Paul Simao)

LONDON |
Fri Jul 8, 2011 7:33am EDT

LONDON (Reuters) – Britain, the United States and Canada are increasing travel curbs on members of the Iranian government over Iran’s disputed nuclear program, Britain’s Foreign Office said in a statement.

“The UK is working closely with its partners to prevent a wide range of individuals connected with Iran’s nuclear enrichment and weaponization programs from entering our countries,” Foreign Secretary William Hague said.

“These include scientists, engineers and those procuring components,” he added.

Hague said the measures were being coordinated with partners such as the United States and Canada.

“Iran continues to seek equipment and components from around the world for its illicit nuclear program,” Hague added.

Britain also plans to bar Iranians it believes are guilty of human rights abuses. It said more than 50 individuals would be targeted but it did not plan to name them.

“We are also taking action against more Iranians who have committed serious human rights abuses, including government ministers, members of the judiciary, prison officials and others associated with the Iranian government’s brutal crackdown on its people since the disputed elections of 2009,” he added.

Western powers suspect Iran is seeking to develop a nuclear weapons capability, while Tehran says its nuclear program is aimed at generating electricity.

Britain believes there is some evidence that international sanctions have slowed Iran’s nuclear program, but remains concerned about its activities and its support for repression in Syria.

(Reporting by Keith Weir; Editing by Jon Hemming)

By Steve Holland and Andy Sullivan

WASHINGTON |
Thu Jul 7, 2011 8:19pm EDT

WASHINGTON (Reuters) – President Barack Obama told top U.S. lawmakers on Thursday he would not sign a short-term extension of the U.S. debt ceiling and said negotiators would work through the weekend on a deal to avoid a debt default.

Trying to break a budget deadlock and allow for an increase in the debt ceiling with an August 2 deadline approaching, Obama and congressional leaders are aiming for more than $2 trillion in budget savings and possibly as much as $4 trillion.

Inside the White House Cabinet Room, Obama urged congressional leaders to take a big step toward resolving the country’s debt and deficit woes, a position in which he found agreement from the top U.S. Republican, House of Representatives Speaker John Boehner, sources said.

In the 90-minute meeting, Obama rejected proposals floated by some Republicans for a six- or eight-month extension of the $14.3 trillion debt ceiling, saying he would not sign such legislation. Instead he said he wanted a deal that would last through the November 2012 elections, the sources said.

With both sides still far apart, the meeting dwelt only with the size of a deal, not policy specifics. A Sunday meeting is to tackle the more difficult question of how those savings can be achieved, congressional aides said.

But as Obama strives for a deficit reduction deal that would clear the way for Congress to increase the $14.3 trillion cap on government borrowing by the deadline, he faces a possible rebellion on the left flank of his own party.

The top Democrat in the House of Representatives, Nancy Pelosi, expressed concern that cuts in popular entitlement programs like the Social Security retirement program and the government-run Medicare program for the elderly might be part of the deficit-reduction deal.

Obama is to meet Pelosi at the White House on Friday.

Obama and U.S. lawmakers are aiming for an agreement that will cut government spending, possibly raise taxes, and restore some semblance of order to U.S. fiscal policy. The U.S. deficit is expected to be $1.4 trillion this year.

The U.S. Treasury has warned it will run out of money to pay all of the country’s bills if the debt ceiling is not increased by August 2.

If negotiators fail to reach a budget agreement by then, the government will default, which could push the United States back into recession and cause turmoil in global financial markets.

‘HARD BARGAINING’

In the meeting, Obama outlined three options: the short-term measure he rejected, a second option that would increase the debt ceiling by about $2 trillion and reduce the deficit by the same amount, and a third option of as much as $4 trillion, sources said.

This third option would include all the elements that are the subject of a pitched battle in Washington: Addressing spending in entitlement programs, defense spending and finding new revenues and taxes to lessen the pain of spending cuts.

Briefing reporters after the talks, Obama said both sides still were far apart and that staff negotiators will work through the weekend to find each side’s bottom line.

He said he will have another round of talks with top Democrats and Republicans on Sunday, hoping to begin “the hard bargaining that’s necessary to get a deal done.”

“Everybody acknowledged that there’s going to be pain involved politically on all sides but our biggest obligation is to make sure that we are doing the right thing,” he said.

Pelosi, who was speaker of the House until Democrats lost control of that in elections last November 2, said Democrats feared the poor and elderly would bear the brunt of budget-cutting.

The two sides have discussed changing the way the government measures inflation to restrain the growth of Social Security benefits and tax breaks, an approach that could save roughly $300 billion over 10 years.

“Do not consider Social Security a piggy bank for giving tax cuts to the wealthiest people in our country. We are not going to balance the budget on the backs of seniors, women and people with disabilities,” Pelosi said.

Boehner told Republicans that they should know by the end of the week whether a big agreement is possible. “He said it was maybe 50-50,” said a Republican Party aide.

Normally a routine vote, the debt ceiling has been embroiled in partisan politics, with Republicans seeking to impose deep spending cuts to reduce the budget deficit, which opinion polls show is a major worry for many Americans.

Obama, seeking to avoid angering his liberal base before the 2012 reelection bid, wants tax increases on the wealthy to lessen the pain of spending cuts.

“I want to emphasize that nothing is agreed to until everything is agreed to and the parties are still far apart on a wide range of issues,” Obama said.

Boehner said comprehensive tax reform is on the table and that changes are needed in benefit programs for the poor and elderly to ensure their long-term viability.

WASHINGTON |
Thu Jul 7, 2011 1:38pm EDT

WASHINGTON (Reuters) – Congressional leaders are still far apart on a wide range of budget issues but agree on the need to raise the debt ceiling, and will meet again in three days, President Barack Obama said on Thursday.

“I thought it was a very constructive meeting and I will be seeing them back here on Sunday,” Obama told reporters after the Thursday session with top Republicans and Democrats. “A lot of work will be done between now and then.”

Obama said the lawmakers discussed various options for cutting the budget deficit as a prerequisite for raising the $14.3 trillion debt limit, which the Treasury Department says must happen by August 2.

“Everybody acknowledged that we have to get this done before the hard deadline of August 2 to make sure that America does not default for the first time,” the president said.

Democrats and Republicans have been at loggerheads over how to trim the budget deficit, especially on the issue of whether higher taxes for the wealthy should be part of the solution.

Obama suggested some important differences remain.

“I want to emphasize that nothing is agreed to until everything is agreed to and the parties are still far apart on a wide range of issues,” he said.

“I will reconvene congressional leaders here on Sunday with the expectation that at that point the parties will at least know where each others’ bottom lines are and will hopefully be in a position to then start engaging in the hard bargaining that’s necessary to get a deal done.”

White House spokesman Jay Carney later said while there was no specific breakthrough in Thursday’s talks, there was an agreement to keep working toward a deal.

(Reporting by Laura MacInnis, Matt Spetalnick and Patricia Zengerle; Editing by Eric Walsh)

By Susan Cornwell

WASHINGTON |
Thu Jul 7, 2011 8:54pm EDT

WASHINGTON (Reuters) – A move to stop funding for President Barack Obama’s military intervention in Libya was narrowly defeated in the U.S. House of Representatives on Thursday, underscoring Congress’ unhappiness with the undeclared war.

Both political parties split on the measure, highlighting how tensions over U.S. involvement — in conjunction with NATO — in Libya’s civil war have crossed party lines and created unusual alliances.

Republicans and Democrats argued that President Obama violated the U.S. Constitution and the 1973 War Powers Resolution by failing to secure congressional authorization for U.S. military operations in the north African country.

The House did vote, 225-201, to bar any money in the defense spending bill from being spent on military equipment or training for Libyan rebels. The measure also would have to get Senate approval and be signed by Obama before becoming law.

Representative Tom Cole, who sponsored the measure, called it a “very important moment.”

“It’s extraordinarily important that we stop the erosion of the war-making authority of the Congress of the United States, that we end this ill-advised adventure in Libya and that we reassert the rightful place of this institution in conducting war, authorizing it and funding it,” he said.

Senator John McCain, a fellow Republican, acknowledged frustration over Obama’s lack of consultation with Congress over the conflict but said the vote to bar funding for “freedom fighters in Libya is deeply disturbing.”

“This action sends the wrong message to both (Libyan leader Muammar) Gaddafi and those fighting for freedom and democracy in Libya — especially with Gaddafi is clearly crumbling,” McCain said.

The House, in a 316-111 vote, also approved a measure barring the Pentagon from using funds from the 2012 defense spending bill on anything that violates the War Powers Resolution, which requires the president to seek congressional approval within 60 days of committing U.S. forces to a conflict.

SPONSORED BY MEMBERS OF BOTH PARTIES

On a vote of 199-229, the House rejected the proposal to block defense funds in fiscal year 2012, which begins October 1, for U.S. military participation in the NATO-led mission against Gaddafi’s forces.

The failed measure’s sponsors were Democratic Representative Dennis Kucinich and Republican Representative Justin Amash.

“We are at war,” Amash argued before the vote. “The Constitution vests Congress with the exclusive power to declare war.”

He said it was embarrassing to hear the Obama administration’s “flimsy” arguments for being involved in Libya but it would be even more embarrassing if Congress did nothing about its constitutional role being ignored. “We must stand up and say stop.”

But Representative Norm Dicks, a Democrat, said it would be wrong to undermine the president, as well as NATO allies involved in the war, by cutting off funds for it. He said the administration estimated the conflict would cost the United States a little more than $1 billion by September 30.

Representative Bill Young, a Republican, said there were no funds in the fiscal 2012 defense spending bill for Libya anyway, because the administration had said that it was taking the money from the “base budget” that had already been appropriated in the current fiscal year.

The House has held several votes on the Libyan operation. Last month it defeated another move to curb the intervention, while also refusing to formally authorize the U.S. participation. The Senate has yet to take any votes on the war, although a resolution to authorize the U.S. role has passed a committee.

The House actions reflect growing war fatigue among lawmakers after almost a decade of fighting in Afghanistan and Iraq that have cost more than $1 trillion and have helped fuel a $1.4 trillion budget deficit.

The United States and its NATO allies launched the U.N.-backed mission against Libya more than three months ago, aiming to prevent Gaddafi’s forces from attacking civilians in regions opposed to his rule. The mission now appears to have the unstated goal of driving Gaddafi from power.

(Additional reporting by David Alexander; Editing by Bill Trott)

By David Bailey

MINNEAPOLIS |
Thu Jul 7, 2011 8:45pm EDT

MINNEAPOLIS (Reuters) – Minnesota’s government shutdown reached a seventh day on Thursday with no end in sight, and a major debt rating agency stripped the state of its AAA bond rating, citing the budget battle as a reason.

Democratic Governor Mark Dayton and Republican legislative leaders met over the education budget, and House Speaker Kurt Zellers and Senate Majority Leader Amy Koch called the governor’s latest proposals “incredibly disappointing.”

Minnesota’s state government has been shut down since Friday, when the political adversaries failed to reach a budget deal to address a $5 billion deficit before the new fiscal year began.

No new talks are scheduled between the leaders.

The public positions by Minnesota’s leaders have echoed differences in Washington and several other states. But Minnesota is the only state where the government is shut down.

President Barack Obama’s pronouncement on Thursday that nothing would be done until everything was wrapped up on a deal to raise the U.S. debt ceiling was similar to Dayton’s position on Minnesota state budget negotiations.

Before the shutdown began, Dayton and Republican leaders had imposed a “cone of silence” over budget details under negotiation. That has ended since talks resumed on Tuesday.

On Wednesday, Dayton released details of two options he proposed to close a roughly $1.4 billion gap between his budget proposal and the $34.2 billion plan Republicans have proposed.

Dayton offered proposals for either a temporary income tax increase on people making more than $1 million per year or a $1 per pack tobacco tax increase, along with healthcare surcharges and a delay in school aid payments.

Republican leaders responded that a tax increase of any kind was off the table. Both sides also have acknowledged they have education and health policy differences to negotiate.

Fitch debt ratings agency mentioned the budget impasse as one reason for slashing the AAA bond rating, which is the highest rating possible.

“The context of budget decisionmaking has become increasingly contentious over time,” the ratings agency said.

Minnesota Management and Budget Commissioner Jim Schowalter said the downgrade would increase state borrowing costs and indirectly impact interest rates for other public entities including cities, counties and schools.

“For years Minnesota has prided itself on having constructive, responsive public solutions but in the eyes of the marketplace, we are slipping,” Schowalter said.

Koch said the downgrade, “along with everything else” should hasten the move to resolve the budget impasse, and renewed a call for a temporary funding bill, saying talks were close on six of the nine remaining budget bills.

“As everything that is going on here in Minnesota, it is incredibly disappointing, it’s incredibly frustrating,” Koch said in a telephone interview. “I think all of this is bad for Minnesota and it is completely unnecessary.”

Also on Thursday, a bipartisan panel formed by former Vice President Walter Mondale and former Republican Governor Arne Carlson released an independent budget plan that much more closely resembled the governor’s proposals than those of Republicans.

The panel recommended a budget of about $35.4 billion with a temporary 4 percent across-the-board income tax increase.

The proposal also included an alcohol tax increase, raising the cigarette tax by more than a $1 per pack to match Wisconsin’s, adding a human services surcharge and delaying school aid payments.

Minnesota’s government shutdown is much broader in scope than a nine-day impasse in 2005 under then-governor and now Republican presidential candidate Tim Pawlenty.

More than 20,000 of Minnesota’s 36,000 state employees have been furloughed in the shutdown, leaving sparse staffing at several departments. Dozens of state funded road construction projects have been suspended as was the state lottery.

In the case of the state Department of Natural Resources, for example, state parks lose $1 million per week in revenue from visitors, and fishing license sales have been suspended, putting pressure on resorts and outfitters as well.

State parks, closed at night during the shutdown, also have reported mostly minor but widespread damage, from graffiti to broken locks and gates.

Prisons, state police patrols and nursing and veterans homes and other critical services have been maintained.

(Reporting by David Bailey in Minneapolis, Andy Greder in Pine City, Minnesota, and Andrew Stern in Chicago; Editing by Greg McCune and Richard Chang)

BEIJING |
Thu Jul 7, 2011 7:12pm EDT

BEIJING (Reuters) – China’s Foreign Ministry warned U.S. officials on Thursday not to meet with visiting exiled spiritual leader the Dalai Lama, saying it hoped Washington “appropriately dealt” with Tibet-related issues.

China reviles the Nobel Peace Prize-winning Dalai Lama, saying he supports the use of violence to establish an independent Tibet. He strongly denies either accusation, insisting he seeks only true autonomy for the remote region.

The Dalai Lama is currently visiting the United States and is due to give a public talk in Washington Saturday.

The U.S. State Department said he met on Wednesday with Under Secretary of State for Democracy and Global Affairs Maria Otero, but that it remained to be decided whether he would have any meetings at higher levels.

On Thursday, House of Representatives Speaker John Boehner, Democratic leader Nancy Pelosi and other senior U.S. lawmakers also met the exiled Tibetan spiritual leader.

Chinese Foreign Ministry spokesman Hong Lei said Beijing’s position on the Dalai Lama’s foreign visits was clear.

“We oppose the underhand visits of the Dalai Lama which he uses to engage in activities to split the motherland,” Hong told a regular news briefing.

“At the same time, we also oppose any foreign government or politicians supporting or abetting in such activities by the Dalai Lama,” he added.

“We hope that the United States strictly abide by its promises on the Tibet issue and … cautiously and appropriately deal with relevant issues,” Hong said.

The Dalai Lama met U.S. President Barack Obama last year, drawing strong denunciation from Beijing.

Representative Ileana Ros-Lehtinen, chair of the House Foreign Affairs Committee, issued a statement saying Obama should also meet the Dalai Lama to make it “clear that the U.S. sides with the victims in Tibet, not the perpetrators in Beijing.”

“President Obama has an opportunity to make a strong statement about what we stand for by meeting with the Dalai Lama during his current visit, and I urge him to take it,” said Ros-Lehtinen, a staunch critic of Communist governments.

State Department spokeswoman Victoria Nuland said China had complained about the Dalai Lama’s meeting with Otero, who is the State Department’s coordinator for Tibet issues.

“The Chinese always make their views known when the Dalai Lama is in Washington,” she said.

(Reporting by Ben Blanchard, additional reporting by Andrew Quinn in Washington; Editing by Sanjeev Miglani and Eric Walsh)

By Dan Wiessner

NEW YORK |
Thu Jul 7, 2011 6:46pm EDT

NEW YORK (Reuters) – New York Governor Andrew Cuomo ramped up the pressure on union officials to concede hundreds of millions of dollars in savings on Thursday with the delivery of layoff notices to more than 300 state workers.

The 321 workers receiving the lay notices are members of the Public Employee Federation (PEF), the state’s second-largest public employee union, which publicly rejected some of Cuomo’s proposals earlier this year.

The union is continuing labor talks with the state. The new layoff notices come on top of 450 layoffs announced last week. All the layoffs are scheduled to take effect on July 28.

Cuomo, a Democrat, had threatened 9,800 layoffs unless unions concede $450 million in savings from wages and benefits to help close a $10 billion deficit without new taxes or debt.

Cuomo, like several of his peers, has taken on public unions, using layoffs or wage and benefit cuts, though unions traditionally support Democrats. Unlike Wisconsin and New Jersey, Cuomo has not curbed collective bargaining rights.

New York has 132,000 state workers.

A PEF spokeswoman said Cuomo should hold off on handing out pink slips while negotiations continue.

“We’re not happy that our members and their families are being threatened with losing their job security while we’re still at the table,” spokeswoman Darcy Wells said.

Last month, the Civil Service Employees Association (CSEA), the state’s largest public union, reached an tentative accord with the state that includes a three-year wage freeze and higher employee health care contributions. The deal, which must be ratified next month, will shield CSEA members from layoffs.

Cuomo has tried to use the CSEA deal to force a compromise from PEF and other unions, but PEF President Ken Brynien has framed those proposals as painful, long-term solutions to the state’s short-term fiscal problems.

Cuomo’s office did not return requests for comment. In a memo sent to agency heads on Thursday, the director of state operations who leads the labor talks, Howard Glaser, said he was “hopeful” more unions would make the same concessions as CSEA.

“There is no path to fiscal stability in New York that does not address work force spending,” wrote Glaser.

The hardest-hit agency in Thursday’s round of layoffs was the Department of Environmental Conservation, which will lose 43 employees. The agency has already lost hundreds of workers over the last decade, including 139 in December.

Environmental advocates said they were concerned that the cutbacks could affect regulation of hydraulic fracturing, a controversial method of natural-gas drilling that could be allowed in New York as early as next year.

“Without proper staff levels, the regulations are not worth the paper they’re written on,” said Kate Sinding, senior attorney at the Natural Resources Defense Council.

DEC spokeswoman Emily DeSantis said the layoffs would not harm the agency’s ability to regulate hydraulic fracturing.

“Any layoffs required as part of achieving workforce savings will have no impact on the review, monitoring and enforcement of activities associated with hydraulic fracturing. None of the affected individuals are part of DEC’s oil and gas program,” DeSantis said by email.

(Editing by Joan Gralla and Leslie Adler)

By Kim Dixon

WASHINGTON |
Thu Jul 7, 2011 5:03pm EDT

WASHINGTON (Reuters) – Donations to federal political candidates by labor unions are down sharply this year, an analysis found on Thursday, in an ominous sign for the Democratic Party heading into next year’s elections.

Reported contributions by unions’ political committees — traditionally bastions of support for Democrats — were down 40 percent for the first quarter of 2011 compared with two years earlier, according to the Center for Responsive Politics, which tracks campaign finance.

Membership in labor unions has been slowly dropping for years, but this year’s decline in donations is more likely due to disenchantment with politicians including President Barack Obama and the stunted U.S. economic recovery.

For the first quarter of this year, union political action committees gave nearly $4.8 million to federal candidates, compared with $8.4 million in the same period in 2009, according to the Center for Responsive Politics.

“Labor unions have been the foot soldiers of the Democratic Party,” Gary Chaison, a professor of labor studies at Clark University in Massachusetts, said. “But the labor movement is seriously having to rethink its political role this year.”

A lack of focus by their Democratic allies on creating new jobs and failure to deliver legislation strengthening unions has members disillusioned, several experts said.

Just under 12 percent of Americans, or 14.7 million people, belonged to unions in 2010, down from 12.3 percent a year earlier. More than 20 percent of Americans were union members in 1983.

“There is a longer-term trend in place, but it definitely does not explain the sizable drop-off, which may be better explained by the economic downturn and quite possibly the disconnect with the Democratic Party’s lack of focus on jobs,” said Mark Rozell, professor of public policy at George Mason.

Obama “has done a lot for bankers from their perspective,” he said, referring to the bailout of big banks amid the 2007-2009 financial meltdown.

NOT JUST CASH

Obama is not expected to be wanting for cash in his re-election bid, and he is seen meeting or surpassing a $60 million goal for the second quarter alone. That means the impact will likely be felt most in congressional races.

Harold Schaitberger, president of the International Association of Fire Fighters, said his members are angry that attacks on unions on the state level has been met with silence by federal officials.

“This is about a pattern of disappointment, and it really was brought to a head by what we feel is overall silence from our friends in Congress on these outrageous assaults on our members around this country,” he said.

Unions provide more than just money. They are experts at organization, which can be key in close elections.

“It is not that unions have that many members, but they can get those members to show up at political rallies and drive people to the polls,” Chaison said.

Union contributions topped $64 million during 2010, with 93 percent going to Democrats, according to the Center for Responsive Politics.

Interest groups that tend to back Republicans also spend heavily.

During the 2010 elections, among the biggest outside spending groups were the Chamber of Commerce, which spent $33 million and the American Action Network, which spent $26 million, according to report by New York City’s public advocate office. Both groups nearly always back Republicans.

(Editing by Cynthia Osterman)

By Yereth Rosen

ANCHORAGE, Alaska |
Thu Jul 7, 2011 10:01pm EDT

ANCHORAGE, Alaska (Reuters) – Former Alaska Governor Sarah Palin said in a newly disclosed email she sent just days after taking office in 2006 that she felt her circle of trusted advisors was “shrinking daily.”

The message was released late on Wednesday as part of 54 pages of additional email correspondence from Palin’s early days as governor that state officials said were inadvertently omitted from a load of over 24,000 pages furnished last month to news organizations.

Palin, the 2008 Republican vice presidential nominee, prematurely resigned as governor two years ago and has said she is thinking about running for president in 2012.

The latest release of documents contained only half a dozen emails from Palin, with the rest of the collection consisting of notes sent by her aides. The most frequent topics discussed in the messages were appointments to Palin’s then new administration.

One message in particular illustrated Palin’s apparent sense she only had a few aides she felt she could trust.

In the email sent to an official with the Alaska Department of Natural Resources, Palin complained about her legislative director, John Bitney, whom she eventually fired.

“I am finding my circle of confidants to be shrinking daily,” Palin said in the message dated December 12, 2006, eight days after she was inaugurated as governor.

Bitney had been a key figure in Palin’s campaign for governor, but in the message Palin said she was “very disappointed” that he spoke about potential appointees before she was prepared to discuss those names.

Palin, a favorite of the Tea Party movement, is known to rely on a relatively small, tightly knit group of advisors as she weighs her political ambitions.

MORE EMAILS COMING

The newly released emails cover the period from December 9 to December 29, 2006. The documents, along with the earlier load, have been released in response to a number of 2008 public records requests from news organizations and Alaska citizens that were made when former Republican presidential nominee John McCain chose Palin as his running mate.

Alaska plans to release more emails that will cover the last 10 months of Palin’s truncated gubernatorial tenure. Palin abruptly resigned as governor on July 26, 2009, with a year and a half left in her term.

Exactly when the next batch of emails will be released is unknown, said Linda Perez, administrative director for Governor Sean Parnell, Palin’s successor. The material is being reviewed by the state Department of Law and the governor’s office to ensure confidential material is not released, she said.

Perez said she does not know the volume of yet-to-be-released emails. “I can only assume it would be similar” to the load of made public a month ago, she said.

Most of the e-mails released so far involve mundane government matters, a pattern likely to continue in the next release, said Ivan Moore, an Anchorage-based pollster and political consultant.

Those messages from the final months in office could reveal Palin “becoming gradually more and more fed up with the job,” Moore said.

Publication of the emails seems to have had little effect on Palin’s popularity in her home state, according to Moore’s recent polling.

In a mid-June survey of about 650 registered voters, he found Palin’s positive rating in Alaska at 39 percent and her negative rating at 49 percent, similar to figures posted since March 2010.

(Writing by Alex Dobuzinskis: Editing by Steve Gorman)

NEW YORK |
Thu Jul 7, 2011 5:00pm EDT

NEW YORK (Reuters) – Minnesota lost its top credit rating on Thursday as Fitch Ratings downgraded the state’s general obligation bonds one notch to AA-plus, citing the budget impasse.

Minnesota’s state government has been shut since last Friday, when Democratic Governor Mark Dayton and the Republican-led legislature missed the July 1 deadline for a budget. The governor’s latest plan totals about $1.4 billion more than the GOP’s $34.2 billion proposal.

The credit agency faulted Minnesota’s use of so-called “one-shots”, or nonrecurring revenues, to close deficits during the recession, a pattern it said likely will be repeated in the new budget.

Fitch also cited “an increasingly contentious budgeting environment” though it said the rating outlook was stable.

Almost all states have a July 1 deadline for their budgets, and despite the lingering damage to revenues inflicted by the recession, Minnesota is the only state that had to shutdown.

Minnesota has furloughed more than 20,000 of the 36,000 state employees, suspended the lottery and dozens of road construction projects, and closed state parks during their peak season.

Options for balancing the budget could include further delaying a $700 million payment to schools, Fitch said. While the governor might recommend an income tax hike for wealthy individuals, according to the credit agency, the legislature could prefer selling debt backed by payments cigarette-makers owe to help cover the health care costs of ailing smokers.

Fitch’s downgrade affected about $5.7 billion general obligation bonds.

The credit rating agency also lowered the rating on the state’s school district credit enhancement program, which is linked to the GO rating, to double-A from double-A-plus.

(Additional reporting by David Bailey in Minneapolis and Andy Greder in Pine City, Minnesota and Andrew Stern in Chicago)

(Reporting by Joan Gralla and Chip Barnett in New York)

By Kevin Drawbaugh

WASHINGTON |
Thu Jul 7, 2011 5:18pm EDT

WASHINGTON (Reuters) – Symbolic gestures and agreements in principle, but not substantive reforms, are likely to be the main tax policy result of urgent talks about raising the U.S. debt ceiling.

As President Barack Obama and congressional leaders met on Thursday, Republicans sounded more flexible on tax breaks with fresh talk of ending ethanol subsidies and tax loopholes for corporate jets, private equity financiers and Big Oil.

While important as political signposts, such steps would barely move the needle on cutting the $1.4 trillion U.S. budget deficit and $14.3 trillion national debt.

A broad overhaul of the tax code, like the one proposed in December by Obama’s Simpson-Bowles deficit commission, would be needed for that. But that would take far more time than the 27 or so days that debt ceiling negotiators have to cut a deal.

August 2 is the deadline set for raising the debt limit and preventing the government from defaulting on its borrowings for the first time in U.S. history, an event that could devastate world markets.

President Ronald Reagan and congressional Democrats took two years to get the last comprehensive tax reform to the finish line in 1986.

“We haven’t even started the car yet, let alone get it out of the garage,” said a top congressional aide on the tax reform project, which most aides and analysts expect will have to wait until late 2012 and into 2013, after presidential and congressional elections in November next year.

The Obama administration is drafting a proposal for tax code changes expected to be released later this year.

A business lobbyist said that a debt-ceiling deal might sketch out “broad parameters” for tax cuts, with details to be filled in later by tax-writing committees of Congress.

Earlier this week, Republicans said they were willing to discuss possibly closing some tax loopholes. Their remarks were seen by some as signs of new flexibility on raising revenue, though Republicans were quick to add they would not support any tax increases.

TAX BREAKS AND LOOPHOLES

Taxing private equity fund managers’ gains as ordinary income, instead of as capital gains as is done now, would raise $2.2 billion in 2012, or $21.4 billion from 2012 to 2021, according to Congress’s Joint Committee on Taxation.

Ending two oil and gas industry tax breaks — last-in, first-out inventory accounting and expensing of exploration and development costs — would raise tax revenues by a combined $10.5 billion in 2012, or $107.5 billion over 10 years.

Extending depreciation of corporate jets, according to Republicans on Congress’s Joint Economic Committee, would raise $300 million a year, or $3 billion over 10 years.

Three U.S. senators reached a deal on Thursday to repeal the $6 billion per year ethanol tax credit by the end of July, an agreement that must still be passed by Congress. The deal would reduce the federal deficit this year by $1.3 billion.

“We’re spending most of our time talking about things that are in the millions and billions, when the real deal comes in the trillions … That’s corporate tax overhaul, changes to the tax structure, changes to entitlements,” said Ed Mills, policy analyst at FBR Capital Markets. “A lot of this debate is as much about message as it is about substance.”

A delicate political equation underlies the tax aspect of the debt ceiling debate. Republicans want to avoid being seen as defending specific tax loopholes, such as accelerated depreciation of corporate jets. But at the same time, they are determined not to be seen as supporting tax increases.

Democrats want to protect spending programs dear to their constituents while winning limited tax increases. Neither side wants tax rises that choke off the sluggish economic recovery.

‘THROWING CRUMBS’

Former Republican Senator Alan Simpson and former Clinton White House Chief of Staff Erskine Bowles said in a statement:

“Putting our nation on a fiscally sustainable path will require a willingness of leaders in both parties to take on all sacred cows in all areas of the budget — defense and domestic spending, entitlements, and the tax code.”

Obama and top lawmakers emerged from talks on Thursday still far apart on the debt issue. Negotiators will work through the weekend for a deal to avoid a default.

The president said he would have another round of talks with House of Representatives Speaker John Boehner, the top U.S. Republican, and other lawmakers on Sunday.

“It’s possible that a final deal might throw a few crumbs at Democrats who want to change the tax subsidies for ethanol or oil companies. But this would be face-saving, hardly a major whack at corporate tax deductions,” said Greg Valliere, chief political strategist at consultancy Potomac Research Group.

“The militance — and unity — of House Republicans has been underestimated. They’re on a mission from God; they are determined to slash spending and have no stomach for tax hikes — and they’re utterly indifferent to the fact that their rigidity could cost them re-election next year,” he said.

“They have veto power over any deal, so the revenue raisers will be modest and the spending cuts will be significant.”

(Additional reporting by Richard Cowan and Timothy Gardner; Editing by Christopher Wilson and Howard Goller)

BOSTON |
Sun Jun 26, 2011 3:14pm EDT

BOSTON (Reuters) – Republican presidential hopeful Mitt Romney takes his fund-raising machine to London next month, holding a reception aimed at wealthy American expatriates working at banks and hedge funds.

A handful of London fund-raisers were held during the 2008 presidential election cycle, but Romney’s event, scheduled for July 6, will be the earliest ever of its kind.

The reception will be held at Dartmouth House, an opulent mansion in the heart of Mayfair that is often used for weddings and conferences.

The suggested contribution to the “Romney for President” campaign is $2,500, according to an invitation seen by Reuters. Under U.S. law, only American citizens and green card holders can contribute.

Romney is the front-runner for the Republican nomination to take on President Barack Obama in 2012, in part because of his campaign’s huge war-chest. He also ran unsuccessfully for the Republican presidential nomination in 2008.

The former Massachusetts governor has held dozens of fund-raisers across the United States this year, including at least three in New York that were hosted by backers from the financial industry.

Co-chairs of the London event include billionaire hedge fund manager Louis Bacon, founder of Moore Capital Management; businessman Robert Wood “Woody” Johnson IV; and Dwight Poler, managing director for Europe at Bain Capital, the venture capital firm that Romney co-founded in 1984.

Overseas fund-raisers were unknown for U.S. candidates until former New York Mayor Rudolph Giuliani, at that point among the top Republican candidates, broke the ice in September 2007.

John McCain, who eventually won the Republican nomination in 2008, also raised funds in London. And Obama raised a reported $400,000 at the London home of Elizabeth Murdoch, daughter of media tycoon Rupert Murdoch, in May 2008.

Romney campaign officials did not immediately comment on the candidate’s plans while in London.

(Reporting by Ros Krasny; Editing by Paul Simao)

By Jeff Mason

WASHINGTON |
Mon Jun 27, 2011 8:01am EDT

WASHINGTON (Reuters) – She does not consider herself a “secret weapon,” but Michelle Obama’s trip to Africa showed the first lady has sharp political skills that White House aides can exploit to help re-elect her husband.

On her second official solo trip abroad, Mrs. Obama played the roles of traditional and non-traditional politician, meeting with the president of Botswana, calling on the first lady of South Africa, and sharing a moment with Nelson Mandela, the former South African president and anti-apartheid icon.

She delivered a well-received speech to encourage young leaders, painted a wall with teenagers infected with HIV/AIDS, and gave, along with her daughters, a lively oral reading of Dr. Seuss’ “The Cat in the Hat” to a group of children.

Audiences were smitten, highlighting her unique ability to connect with people on behalf of and independently from President Barack Obama.

Those skills will now be applied to domestic politics as the 2012 presidential election heats up.

The first lady arrived back in Washington late on Sunday and has a series of fund-raisers for Democrats this week. More campaign-related activities will crop up in her schedule over the coming months.

Despite her popularity at home and abroad, Mrs. Obama downplays her role in the president’s political universe.

“I think my husband is his secret weapon. I mean, people will vote on who they think will make a good president. And they’re going to look at his accomplishments,” she said during an interview in Botswana with reporters traveling with her through Africa.

“They’re going to look at the future — or what kind of future we envision as a country. I think that’s what happened in the last election. My motto is: Do no harm.”

She does not appear to be doing any harm.

In events throughout her trip audiences lapped up her “mom-in-chief” style of international diplomacy.

One of her most effective tools: the hug.

At event after event, the first lady wrapped the young people she met in her arms, triggering tears from some who seemed, more than awed by the presence of a famous figure, overwhelmed by the intimacy of her outreach.

POLITICAL INSTINCTS

Obama is not shy about discussing her initial disdain for politics. She draws laughter regularly when she says she tried to discourage her husband from running for the White House.

But she is a canny politician in her own right. Like the president, she stays on message. She can be wordy but she is deft at dodging a question or steering a conversation toward a theme she finds more comfortable.

Those skills — and her clear ability to connect with people — make her valuable, and she knows that.

But the first lady restricts her schedule to be available to her girls, Malia and Sasha, and White House staff adjust her public appearances accordingly.

“People don’t even ask me to do certain things. The first question is, what are the girls doing? And what time of the year is this?” she said. “So it’ll be the same thing (for this campaign). But when I get out there, my whole thing is that when I’m out, let’s make good use of my time.”

Analysts say first ladies do not swing elections. But they can, as Michelle Obama and her predecessors have demonstrated, bring in dollars and affect the images of their respective spouses.

“First ladies very often top the list of ‘most admired women’ in polls — but it doesn’t seem to affect the feelings for their husbands,” said John Mark Hansen, dean of the social sciences division at the University of Chicago.

If the feelings shown in Africa are a guide, however, this first lady’s impact will be a net positive in the 2012 campaign and on the continent she just left.

“There’s no better goodwill ambassador, I think, especially to Africa and to South Africa in particular,” said Jennifer Cooke, director of the Africa program at the Center for Strategic and International Studies in Washington.

“Obviously she’ll be a powerful force in the campaign cycle as well. She’s got a very human, humble touch.”

(Editing by Todd Eastham)

By Alister Bull

WASHINGTON |
Mon Jun 27, 2011 5:41am EDT

WASHINGTON (Reuters) – President Barack Obama must bridge a wide gap separating his Democrats from Republicans when he meets with Senate leaders on Monday over raising the debt ceiling, but neither side seems inclined to compromise.

Talks broke down last week over Democrats’ demands to include tax-revenue raising steps alongside spending cuts in order to beat an August 2 deadline to lift the $14.3 trillion borrowing limit.

Failure to act risks a devastating U.S. debt default that could push the country back into recession. But Obama must also ease public concern over his handling of the deficit, which is likely to be a key topic as he seeks re-election next year.

Republican Senate leader Mitch McConnell, who meets Obama at 5 p.m. EDT (2100 GMT), stuck firmly to his party’s line that revenue-raising measures were off the table.

“The whole business of raising taxes, regardless of how you go about it, is something that this Congress is not likely to do,” McConnell told ABC’s “This Week” on Sunday.

The debt ceiling needs to be raised by around $2.4 trillion to ensure that the government has enough money to keep functioning through the November 2012 election.

Republicans say they want spending cuts to equal any increase in the limit, but the administration is pushing for a package that also includes revenues. Obama favors $3 dollars in spending cuts for every extra dollar in revenue.

Obama will meet at 10:30 a.m. EDT (1430 GMT) with Senate Democratic leader Harry Reid to explore what Democrats could live with.

But the president spelled out in his weekly address on Saturday that the United States could not “cut our way to prosperity”, and this message was repeated by senior Democratic lawmakers, who adamantly deny that raising revenue equals increasing taxes.

DEFINE A TAX INCREASE

“We want to close those loopholes up. We do not want to raise anybody’s tax rates. That’s never been on the table,” said Democratic Representative Jim Clyburn.

Democrats are aiming at tax subsidies for oil and gas companies, so-called carried interest tax break for hedge fund managers, and loopholes that favor private corporate jets.

But the president has also backed limiting tax deductions for wealthier Americans.

The White House says this targets millionaires and billionaires. But Republicans warn it would also hit hundreds of thousands of small business owners, and say the problem is too much government spending, not insufficient taxes.

The U.S. federal deficit stands at $1.4 trillion, among the highest levels relative to the economy since World War Two.

The administration wants to frame the debate as Republicans protecting tax breaks for the rich at the expense of older Americans, while cuts in spending must also include the Defense Department budget that Republicans traditionally protect.

“Any package of any significance that passes is going to have to have significant spending reductions, including reductions in Pentagon spending. You are going to have some of these tax loopholes for the wealthy and special interests closed,” said a senior administration official.

Democrats lost control of the House of Representatives to Republicans in congressional elections last year — in part because of voter anger over the deficit — but they still control the Senate.

“To get anything through the House you are probably going to need some Democratic votes, and to get it through the Senate you are going to need a lot of Democratic votes. So you need a package that can attract support from both parties in both chambers,” the official said.

(Editing by Mohammad Zargham)

By Paul Eckert

WASHINGTON |
Sun Jun 26, 2011 1:53pm EDT

WASHINGTON (Reuters) – The Obama administration’s plan to withdraw some U.S. troops from Afghanistan is a welcome sign the country can start defending itself, President Hamid Karzai said in remarks aired on Sunday.

“The number of troops that he announced will be withdrawn this year and the rest next year is a sign that Afghanistan is taking over its own security and trying to defend its territory by its own means, so we are happy with the announcement,” Karzai told CNN’s “Fareed Zakaria GPS” program in an interview.

“As for the number of troops, we have no opinion on that,” he added.

President Barack Obama unveiled a plan last week to remove 10,000 troops from Afghanistan this year and a total of 33,000 by the end of next summer, a pace some top military officials have said is too aggressive.

Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, and General David Petraeus, top U.S. commander in Afghanistan, said in congressional testimony that Obama’s drawdown was riskier than they recommended but that they backed the strategy to start winding down the nearly decade-old war.

Mike Rogers, the chairman of the House of Representatives Intelligence Committee, told CNN’s “State of the Union” program on Sunday the planned drawdown appeared to be politically driven and could allow the Taliban to gain ground.

“The time line is just too darned close. … The fact that it lines up to have those troops out before the first (U.S. presidential) debate of 2012 is concerning to me mainly because the conditions on the ground have not changed,” Rogers said.

PAKISTAN, U.S. HELP ON TALIBAN

Karzai said information from local sources that he has received indicated “security in parts of the country has improved, that life is better now. Of course, not desirable, but better,” he said.

Military and civilian casualties hit record levels in 2010, the most violent year of the war since U.S.-backed Afghan forces toppled the country’s Taliban government in late 2001.

This year is following a similar trend, with violence growing across Afghanistan since the Taliban announced a spring offensive at the beginning of May.

A suicide car bomber killed at least 20 people, and possibly as many as 35, in an attack at a hospital in a remote district of the eastern Logar province on Saturday that damaged the hospital’s maternity ward.

Karzai acknowledged to CNN that roadside explosives and suicide bombings persisted and were difficult to stop, but said they did not represent a major military threat.

“These are incidents, not attacks of the kind that would enable anybody to take a village or a road,” he said.

Karzai said his country’s High Council for Peace has made “initial contacts” with the Taliban about more formal talks on ending the conflict.

But he said the talks will not achieve results unless the United States, Pakistan and other allies apply all “means that they have” at their disposal.

“There are forces beyond the means of Afghanistan that are interfering in this process that have power over the process, and unless those forces begin to cooperate, the Taliban will not be able to come forward … as a group, as a unified structure,” Karzai said.

“Pakistan is extremely important for a quick solution,” he added in a reference to what U.S. and Afghan officials believe are close Pakistani connections to and influence over some Taliban factions.

(Additional reporting by John Crawley)

By Steve Holland

WASHINGTON |
Sun Jun 26, 2011 1:49pm EDT

WASHINGTON (Reuters) – Conservative firebrand Michele Bachmann will test the limits of how far a favorite of the Tea Party movement can go when she formally launches her campaign for the 2012 Republican presidential nomination on Monday.

The Minnesota congresswoman, who vows to cut spending, shrink the government and repeal President Barack Obama’s 2010 healthcare overhaul law, may well pull the Republican campaign toward the right in her bid for an upset victory.

After months of flirting with a run, Bachmann, 55, enters the Republican campaign with an event in her hometown of Waterloo, Iowa. The Midwestern state holds the first contest on the road to her party’s nomination for the right to challenge Obama in 2012.

Her strong performance at a New Hampshire debate two weeks ago has given her a boost and prompted Republicans to take a second look at Bachmann, who is a mother of five children on her own and has provided foster care for 23 others.

A Des Moines Register poll issued on Saturday of likely participants in the state’s Republican presidential caucuses showed Bachmann in second place with 22 percent support, right behind former Massachusetts Governor Mitt Romney with 23 percent.

Bachmann said the poll matched her experience in Iowa.

“We had very strong support, enthusiasm wherever we went, and so this confirmed that,” she told the CBS program “Face the Nation” in an interview broadcast on Sunday.

Interviewed on the “Fox News Sunday” program, Bachmann was confronted with what interviewer Chris Wallace called past verbal gaffes and misstatements of fact, and he asked her, “Are you a flake?”

“That would be insulting, to say something like that, because I’m a serious person,” Bachmann responded, listing her achievements as a former tax lawyer with a post-doctorate degree in federal tax law, a state lawmaker and businesswoman.

Her rise is proof that the Tea Party conservative movement remains a potent force after helping Republicans win control of the House of Representatives in elections in November.

“The Tea Party was wildly successful because it was not personality driven,” said Republican strategist Scott Reed. “Bachmann’s challenge is to harness that energy and score an early state victory.”

Bachmann will be vying with conservative rivals such as former Minnesota Governor Tim Pawlenty in Iowa, where social conservatives play a major role in Republican politics.

DIFFERENT FROM PALIN

Her presence in the race could also dampen the chances that former Alaska Governor Sarah Palin will make a late entry into the campaign, since their messages resonate with the same conservative voters.

Unlike Palin, Bachmann holds public office and has a role in the Republican Party, as head of the Tea Party House caucus.

Bachmann’s path to the nomination would have to include a victory or a high finish in Iowa’s caucuses early next year, along with a strong result in South Carolina’s primary.

New Hampshire’s first-in-the-nation primary may be a tougher test for her, since Romney, who many consider the front-runner in the race, leads the polls there.

Bachmann’s brand of conservatism has generated such proposed legislation as the Light Bulb Freedom of Choice Act that would prevent the government from requiring Americans to use energy-efficient light bulbs.

“The question for me is whether she can get any establishment support,” said Republican strategist Matt Mackowiak. “We know she has Tea Party support. But the question is, can she gain credibility with the establishment, governors, senators, senior members of the party in and out of office.”

Bachmann has rejected as “scare tactics” warnings of economic catastrophe if lawmakers don’t approve raising the U.S. debt ceiling. On Sunday she struck a tough line on the debt debate, which is a focus of the Tea Party movement.

“I have no intention of voting to raise the debt ceiling because, right now, the federal government continues to spend more money than what it takes in,” she told CBS.

“We need to seriously cut back on spending first and foremost, and then prioritize,” Bachmann added.

(Additional reporting by Paul Eckert; Editing by Mohammad Zargham and Vicki Allen)

WASHINGTON |
Sun Jun 26, 2011 1:33pm EDT

WASHINGTON (Reuters) – The Senate’s top two Republicans on Sunday stood firm against including tax increases in any deal to raise the debt limit and shrink budget deficits one day before a meeting with President Barack Obama, but said the showdown need not go down to the “11th hour.”

Obama is to meet separately with Senate Democratic and Republican leaders on Monday to try to revive negotiations that collapsed on Thursday when Republicans walked out over Democrats’ demands for tax increases.

Sending a message to Obama in appearances on Sunday news interview shows, Senate Republican leader Mitch McConnell and Jon Kyl, his deputy in the leadership, presented a unified front demanding spending cuts and opposing tax hikes.

“We have a spending problem. We don’t have a problem because we tax too little,” McConnell said on the ABC program “This Week.”

“We need to quit borrowing, quit spending, and get us our trajectory heading in the right direction. Throwing more tax revenue into the mix is simply not going to produce a desirable result, and it won’t pass,” McConnell added.

Obama said on Saturday he remained committed to working with Congress to solve the government’s debt problem, but the focus could not be only on spending cuts, as Republicans demand.

The $14.3 trillion U.S. debt ceiling must be raised before August 2 or the Treasury Department will run out of money to pay the nation’s bills. A default on debt payments could send markets plunging globally and raise the risk of another U.S. recession.

“One of the reasons we are meeting tomorrow (Monday) is that I think both the Democrats and the Republicans would like to come together and finish this negotiation and finish it sometime soon. It need not necessarily go to the 11th hour,” McConnell said.

“We need to put something together that will actually pass and make a difference, impress Standard Poor’s and Moody’s and the rating agencies that are about to downgrade the U.S. credit rating for the first time in our history,” he added.

‘KILL THE ECONOMY’

The U.S. federal deficit stands at $1.4 trillion, among the highest levels relative to the economy since World War Two.

Speaking on “Fox News Sunday,” Kyl said “we have to try” to get a deal by August 2.

“I think the president has to make a decision — which is more important to him: solving this problem, reducing spending somewhat, or making sure that we raise taxes on American economy?” Kyl said.

“If you want to kill the economy, raise taxes. Are we going to vote to absolutely put another anchor around the neck of the economy, which is struggling to try to recover here? Absolutely not. It’s terrible policy,” Kyl added.

Democrats have eased back from their insistence that personal income tax rates need to rise on the wealthiest Americans to focus instead on ending a wide range of tax breaks on everything from corporate jets to oil and gas subsidies.

They have also proposed closing tax breaks that benefit the wealthy, such as limiting the deductions for households making more than $500,000 a year.

Republicans control the House of Representatives while the Democrats control the Senate.

Appearing on CNN’s “State of the Union” program, House Minority Leader Nancy Pelosi said Democrats must have a say in crafting an agreement, especially if Republicans in the chamber cannot generate enough support on their own to pass a final plan.

Pelosi said any package that only cuts spending is unworkable, suggesting that closing what she and other Democrats call corporate “tax subsidies” for oil companies and other businesses should be included in any deal.

“You cannot achieve what you set out to do if you say it’s just about cutting. It has to be about increasing the revenue stream as well. There are many things you can do in terms of special interest loopholes,” Pelosi said.

Republican Senator Jim DeMint, a favorite of the conservative Tea Party movement advocating deep spending cuts, said he believes the United States would not default on its obligations if Congress fails to raise the debt ceiling.

“If we add another $2 trillion to our debt without taking control of it, I think you’re going to see the markets respond in a much worse way,” DeMint said on CNN.

(Reporting by John Crawley, Paul Simao, Paul Eckert and Lucia Mutikani; Writing by Will Dunham; Editing by Vicki Allen)

By Travis Quezon

HONOLULU |
Sun Jun 26, 2011 4:20am EDT

HONOLULU (Reuters) – The United States and China kicked off a new round of consultations on the Asia Pacific region in Hawaii Saturday by broaching the flaring tensions in the South China Sea, a U.S. official said.

The first set of talks in the superpowers’ Asia Pacific push — agreed upon by President Barack Obama and Chinese President Hu Jintao — came at the end of a difficult week for the two countries over the growing antagonism in the South China Sea between China and its neighbors.

U.S. Assistant Secretary of State for East Asian and Pacific Affairs Kurt Campbell emerged from the day-long talks acknowledging detailed discussions on the South China Sea and maritime security, but offered few details.

“We want tensions to subside,” Campbell said. “We have a strong interest in the maintenance of peace and stability. And we are seeking a dialogue among all the key players.”

China has shown increasing assertiveness in its claim to the entire South China Sea, believed to be rich in oil and gas. Vietnam has accused Chinese boats of harassing a Vietnamese oil exploration ship in the region.

Campbell said the U.S. delegation stressed China’s military expansions have raised concerns, but hoped greater transparency and dialogue would help ease those concerns.

His counterpart in the talks, China’s Vice Foreign Minister Cui Tiankai, did not make himself available to the media.

Earlier in the week, Cui told foreign reporters in Beijing China had not provoked any incidents in the South China Sea and said if Washington wanted to play a role it should urge restraint on other claimants.

Secretary of State Hillary Clinton struck back by saying she was “concerned that recent incidents in the South China Sea could undermine peace and stability in the region.”

She pledged support to the Philippines, which lays claims to parts of the South China Sea, along with Brunei, Malaysia, Taiwan and Vietnam.

The two delegations also discussed North Korea and Campbell said he asked China to urge North Korea to deal responsibly and appropriately with South Korea without provocation.

“We believe that for North Korea to be effective in its diplomacy, it must responsibly first work and engage with South Korea and we are encouraging that process as we go forth,” Campbell said.

Also discussed were issues relating to climate change, health, disaster preparedness, piracy, and poverty in the Asia Pacific region.

The next round of talks will take place in China, Campbell said.

(Editing by Mary Milliken and Todd Eastham)

WASHINGTON |
Fri Jun 24, 2011 4:56pm EDT

WASHINGTON (Reuters) – U.S. Treasury Secretary Timothy Geithner said first half U.S. growth will likely slow to about two percent because of high energy prices and shocks to the global economy, but the underlying trend is still improving.

Geithner, speaking at Dartmouth College in Hanover, New Hampshire, said many economists had anticipated growth in the 3-4 percent range in the first half of 2011.

“It’s mostly lower because we had the combination of oil prices high, a catastrophic shock in Japan, terrible weather that pushed construction down, a big unanticipated slowdown in defense spending, a lot of concern about risk from Europe and a bit of tightening of policy in the most rapidly growing parts of the world,” he said. “That’s a lot of slowdown all at once.”

(Reporting by David Lawder)

By Susan Guyett

INDIANAPOLIS |
Sat Jun 25, 2011 10:51am EDT

INDIANAPOLIS (Reuters) – A judge on Friday granted a preliminary injunction preventing the state of Indiana from enforcing a law that eliminated funding to Planned Parenthood because it performs abortions.

The Republican-led Indiana legislature had voted to strip the women’s health group of funding, including money from the federal Medicaid program for the poor, and Indiana Governor Mitch Daniels signed the legislation into law.

But the decision by U.S. District Court Judge Tanya Walton Pratt grants a preliminary injunction to block enforcement of the ban on Planned Parenthood offices in Indiana receiving reimbursement for Medicaid claims.

“This decision means that Planned Parenthood of Indiana can once again be reimbursed for the preventive health care it provides its 9,300 Medicaid patients,” Planned Parenthood of Indiana (PPIN) said in a statement.

Indiana is one of three states that cut funds for Planned Parenthood because it performs abortions. The others are Kansas and North Carolina but they cut only state funding and not federal Medicaid funds.

Responding to the ruling, Indiana Attorney General Greg Zoeller said: “We will thoroughly review the ruling but it is likely that the State of Indiana will seek an …appeal to the U.S. 7th Circuit (court).”

A spokesman for Gov. Mitch Daniels said the governor would not be issuing a statement on the ruling at this time.

But both sides agree the fight over federal funding for abortions in the state is not over. Indiana officials have been battling to defend the new law in the courts and through administrative reviews.

“This is a positive step in what likely will be a long legal battle,” said Ken Falk, legal director of the American Civil Liberties Union of Indiana. “We are encouraged by the judge’s ruling, but know our work is not yet done.”

Planned Parenthood said the judge’s ruling noted that public interest “tilts in favor” of granting the injunction because federal officials threatened partial or total withdrawal of all Medicaid dollars to the state, a loss of as much as $5 million if the law was enforced.

“If dogma trumps pragmatism and neither side budges, Indiana’s most vulnerable citizens could end up paying the price as the collateral damage of a partisan battle,” the judge said in the opinion quoted by Planned Parenthood.

Stopping the cuts is the “most prudent course of action” while the judicial process runs its course, Pratt wrote.

PPIN had stopped seeing Medicaid clients on Tuesday after the organization ran out of money to cover those patients.

“This ruling means we can resume providing Pap tests, breast exams, STD testing and birth control to both existing and new Medicaid patients,” said PPIN president Betty Cockrum.

Pratt’s ruling came down on both sides on two other issues in contention, PPIN said.

The portion of the law that requires health care providers to say a fetus can feel pain at or before 20 weeks after fertilization will also not go into effect. But the section that requires medical professionals to tell a woman that human physical life begins at conception must be implemented.

(This story corrects name of judge in first reference)

(Writing by Greg McCune and Susan Guyett. Editing by Peter Bohan)

By Kay Henderson

INDIANOLA, Iowa |
Sat Jun 25, 2011 4:58pm EDT

INDIANOLA, Iowa (Reuters) – Republican presidential contender Newt Gingrich on Saturday said the adoption of same-sex marriage in New York showed the nation is “drifting toward a terrible muddle.”

Saying he thinks marriage is between a man and a woman, he told reporters that he “would like to find ways to defend that view as legitimately and effectively as possible.”

He said he thinks the nation should be defending the federal Defense of Marriage Act, which defines marriage ass being between a man and a woman.

In February, the Obama administration decided it would no longer defend the 15-year-old law.

“I think the president should be, frankly, enforcing that act, and I think we are drifting toward a terrible muddle which I think is going to be very, very difficult and painful to work our way out of,” he said.

With a vote by its legislature on Friday, New York became the sixth and most populous state to legalize same-sex marriage. The legalization is seen as a huge boost for gay rights.

Speaking at a Tea Party bus tour event in Indianola, Gingrich said mass resignations among his campaign staff stemmed from his “fundamental disagreement” with consultants.

“Our campaign is going to survive and I’m going to be in it all the way and I believe I can win it… because people want substance more than baloney,” he said.

A former aide said the differences mainly involved the staff view that Gingrich should campaign heavily in the early primary states and Gingrich’s view that he should instead go on a Greek cruise with his wife.

Gingrich told the Tea Party crowd he is the kind of leader who “will cooperate” but “not compromise.”

(Editing by Mary Wisniewski and Ellen Wulfhorst)

By Susan Guyett

INDIANAPOLIS |
Fri Jun 24, 2011 11:13pm EDT

INDIANAPOLIS (Reuters) – A federal judge on Friday temporarily blocked parts of an Indiana immigration law cracking down on illegal immigrants, in a ruling handed down a week before the bill was to go into effect.

The preliminary injunction granted by U.S. District Judge Sarah Evans Barker comes as a blow to lawmakers in the Republican-dominated state legislature who this year have taken a get-tough approach to immigration.

Barker’s decision was in response to a lawsuit filed with backing from the American Civil Liberties Union of Indiana and the National Immigration Law Center.

The judge’s decision temporarily blocks a provision of the state law signed in May and scheduled to take effect July 1 that allows state and local police to arrest anyone ordered deported by an immigration court.

Barker faulted the Indiana bill for not requiring the arrested person be brought before a judge for potential release. She noted that under federal law, a foreign national can seek to overturn an immigration judge’s removal order and be freed on bond.

The judge also blocked a section of the law that would prohibit any person in the state, other than a police officer, from knowingly accepting or offering a consular ID card as a valid form of identification.

Barker said in her judgment that states such as Indiana have sought to enact immigration laws that do not run afoul of federal powers.

“Unfortunately, insofar as Indiana’s efforts to carve out such a permissible role, at least with regard to the two sections of the statute under review here, their results have proven to be seriously flawed and generally unsuccessful,” Barker wrote in her judgment.

Indiana Attorney General Greg Zoeller said in a statement the ruling represented “an indictment of the federal government” for failing to “enact and enforce immigration policy.”

“It underscores the challenge to Indiana and other state lawmakers who have tried to respond to Washington’s failure,” Zoeller said.

A spokeswoman for Mitch Daniels, the state’s Republican governor, said the governor’s office would not issue comment Friday on the ruling.

Several U.S. states have this year passed legislation cracking down on illegal immigration, inspired by Arizona, where Republican governor Jan Brewer signed a law in April 2010 including a measure requiring police to determine the immigration status of those they have detained and suspect are in the country illegally.

Key parts of that law were blocked by a federal judge, after the Obama administration successfully sued arguing that it improperly infringed on federal powers. The ruling was upheld by an appeals court, although Arizona is taking its challenge to the U.S. Supreme Court.

Utah and Georgia have also faced legal challenges to their state laws passed this year, while Alabama and South Carolina, which passed measures in June, are also likely to face legal challenges.

(Additional reporting by Alex Dobuzinskis and Tim Gaynor: Editing by Peter Bohan)

By Yereth Rosen

ANCHORAGE, Alaska |
Sat Jun 25, 2011 7:03am EDT

ANCHORAGE, Alaska (Reuters) – Failed Senate candidate Joe Miller must reimburse Alaska more than $17,000 in legal fees and costs incurred during his fight to overturn Lisa Murkowski’s write-in victory, a state judge ruled on Friday.

Miller, a Tea Party favorite, beat the more moderate Murkowski in the Republican primary. But she then mounted a write-in candidacy in the general election and beat him by about 4.5 percentage points.

Miller sued to overturn the results, arguing that elections officials improperly counted write-in ballots, but was rejected by a Superior Court judge, a ruling that was upheld at the state Supreme Court.

State officials asked a judge to compel the former candidate to reimburse the state for part of the costs, a request that Superior Court Judge William Carey approved.

Carey, in his ruling, said that Miller did not qualify as a public interest litigant because his lawsuit sought to secure something of value for himself: A Senate seat with a $174,000-a-year salary and other personal benefits.

“The main thrust of this action was not, in this court’s view, to altruistically promote and preserve constitutional protections, but to win an election, with the political and pecuniary benefits that would accrue thereby,” Carey wrote.

Miller, a Fairbanks attorney who was backed by former Alaska Gov. Sarah Palin, had challenged Murkowski as too liberal and too prone to compromising with Democrats.

In a statement Miller said the judge missed the point of his election challenge.

“The Tea Party revolution is not about salary, position, or prestige: it’s about bringing America back to its constitutional foundations, where the rule of the law rather than the ruling class prevails,” Miller said in the statement.

Murkowski won the general election with the support of Alaska Native groups, labor unions and other voting blocs that typically back Democrats.

The state said in court motions that it spent about $100,000 in total to defend the election results against Miller’s legal challenge. State law allows prevailing parties to get partial reimbursement in certain cases.

John Tiemessen, Miller’s attorney, said he had not seen Carey’s order and could not comment on whether Miller would appeal.

Carey also ordered Murkowski to reimburse the state $400 in costs, as she did not prevail in her attempt to be credited for some of the dismissed write-in ballots.

(Editing by Dan Whitcomb and Peter Bohan)

By Ayesha Rascoe

WASHINGTON |
Sat Jun 25, 2011 6:05am EDT

WASHINGTON (Reuters) – President Barack Obama said on Saturday he remained committed to working with Congress to find a solution to the government’s debt problem, but the focus could not only be on spending cuts.

Obama’s comments come as the president prepared to meet separately with Senate Democratic and Republican leaders on Monday to attempt to revive negotiations that collapsed on Thursday when Republicans walked out over Democrats’ demands for tax hikes.

“Of course, there’s been a real debate about where to invest and where to cut, and I’m committed to working with members of both parties to cut our deficits and debt,” Obama said in his weekly radio address.

“But we can’t simply cut our way to prosperity,” he added.

Obama said the nation still needed to invest in education, infrastructure and developing new technologies to grow the U.S. economy.

Lawmakers have been working to hash out a deal to lower budget deficits and raise the U.S. debt limit. The federal deficit now stands at $1.4 trillion, among the highest levels relative to the economy since World War Two.

The $14.3 trillion U.S. debt ceiling must be increased before August 2 or the Treasury Department will run out of money to pay the country’s bills. A default on debt payments could send markets plunging around the world and raise the risk of another U.S. recession.

Republicans and Democrats have clashed over the composition of the deficit reduction package, with Republicans opposing any tax increases and Democrats saying they will not support a package that relies only on spending cuts.

Conservatives in Congress, including many Tea Party activists who are credited with winning the House for Republicans in the 2010 election, have questioned whether there really is a pressing need to increase the debt limit.

(Editing by Peter Cooney)

By Susan Guyett

INDIANAPOLIS |
Fri Jun 24, 2011 10:20pm EDT

INDIANAPOLIS (Reuters) – A judge on Friday granted a preliminary injunction preventing the state of Indiana from enforcing a law that eliminated funding to Planned Parenthood because it performs abortions.

The Republican-led Indiana legislature voted to strip the women’s health group of funding, including money from the federal Medicaid program for the poor, and Indiana Governor Mitch Daniels signed the legislation into law.

“This decision means that Planned Parenthood of Indiana can once again be reimbursed for the preventive health care it provides its 9,300 Medicaid patients,” Planned Parenthood said in a statement.

Indiana is one of three states that cut funds for Planned Parenthood because it performs abortions. The others are Kansas and North Carolina but they cut only state funding and not federal Medicaid funds.

The decision by U.S. District Court Judge Sarah Evans Barker grants a preliminary injunction to block enforcement of the ban on Planned Parenthood offices in Indiana receiving reimbursement for Medicaid claims.

Responding to the ruling, Indiana Attorney General Greg Zoeller said: “We will thoroughly review the ruling but it is likely that the State of Indiana will seek an …appeal to the U.S. 7th Circuit (court).”

(Writing by Peter Bohan; Additional reporting by Susan Guyett, Alex Dobuzinskis and Tim Gaynor; Editing by Greg McCune)

By David Alexander

WASHINGTON |
Fri Jun 24, 2011 7:39pm EDT

WASHINGTON (Reuters) – A move to curb President Barack Obama’s military intervention in Libya was defeated in the U.S. House of Representatives on Friday, despite having the support of leaders of the majority Republicans.

But Obama was delivered a symbolic rebuke hours earlier when lawmakers refused another measure to formally authorize U.S. participation in the NATO-led Libya mission.

The twin votes starkly highlighted the ambivalence on Capitol Hill over U.S. involvement in Libya’s civil war. Some lawmakers argue that Obama violated the 1973 War Powers Act by failing to secure Congressional authorization after 60 days of hostilities, an argument the White House rejects.

Secretary of State Hillary Clinton said the administration was gratified the House had “decisively rejected” efforts to restrict funding for U.S. involvement in the operation, adding that it was important to keep up the pressure on Libyan leader Muammar Gaddafi.

The measure would have allowed U.S. forces to continue providing reconnaissance, refueling, planning and other services to the NATO-led mission in the North African nation but would have barred them from carrying out both manned and drone air strikes against Gaddafi’s forces.

Since NATO took over the Libya operation on March 31, the United States has conducted 755 strike sorties, including 119 in which the planes actually fired at targets. Thirty-nine of the strikes involved the use of drone aircraft.

The White House, however, expressed disappointment over the failure of the separate Democratic-backed measure that would have authorized the United States to continue its limited involvement in the Libya mission for a year.

“Now is not the time to send the kind of mixed message that it sends when we are working with our allies to achieve the goals that we believe are widely shared in Congress,” White House spokesman Jay Carney said. “The writing is on the wall for Colonel Gaddafi and now is not the time to let up.”

The congressional actions were another warning to Obama about growing discontent among lawmakers after a decade of wars in Afghanistan and Iraq that have cost more than $1 trillion and have helped fuel a $1.4 trillion budget deficit.

The United States and its NATO allies launched the U.N.-backed mission against Libya more than three months ago, aiming to prevent Gaddafi’s forces from attacking civilians in regions opposed to his rule. The U.N. authorized a no-fly zone and an arms embargo to put additional pressure on Gaddafi. The mission now appears to have the unstated goal of driving Gaddafi from power.

MIXED FEELINGS

The House, which is controlled by Republicans, voted 180-238 to reject the Republican measure to curb U.S. involvement in Libya. Eighty-nine Republicans joined Democrats in opposing it.

Both House Speaker John Boehner and Representative Buck McKeon, chairman of the House Armed Services Committee, had endorsed the measure. Boehner said the House was forced to act because Obama had failed to fulfill his obligation to consult with Congress.

“I support the removal of the Libyan regime … ,” Boehner said. “But when the president chooses to challenge the powers of the Congress, I, as speaker of this House, will defend the constitutional authority of the legislature.”

McKeon said the measure would continue to provide NATO with the essential backing it needed to carry out the mission while helping “the president to be truthful in saying that we’re not engaged in hostile action.”

“The president has repeatedly stated that the United States is not engaged in hostilities and that congressional authorization is not necessary to continue our role in this operation,” McKeon added. “I share with many of my colleagues the view that firing a missile at a target in a foreign nation does indeed constitute hostile action.”

Many lawmakers professed mixed feelings over the vote. Representative Mike Rogers, head of the House intelligence committee, backed the measure and criticized Obama’s failure to explain his Libya policy. But he added “that doesn’t change the fact that the United States has important strategic interests in finishing the job there.”

A spokesman for Representative Mike Honda, a leading member of a bloc of left-leaning House Democrats, said the measure had failed because it amounted to a “back door authorization” of the Obama administration’s course of action, providing it with funding and legal authority for most of what it was already doing.

The House voted 123-295 to reject the resolution that would have authorized Obama to continue with the limited U.S. mission in Libya for a year.

(Additional reporting by Andrew Quinn, Alister Bull, Susan Cornwell and Missy Ryan; Editing by Warren Strobel and Paul Simao)

By Richard Cowan and Alister Bull

WASHINGTON |
Fri Jun 24, 2011 7:38pm EDT

WASHINGTON (Reuters) – Republicans and Democrats dug in their heels Friday as President Barack Obama prepared to wade into a divisive debate over taxes and spending aimed at heading off a default on the U.S. government’s debt.

The White House said Obama would meet separately with Senate Democratic and Republican leaders Monday in an effort to resurrect negotiations that collapsed when Republicans walked out Thursday over Democrats’ demands for tax hikes.

“The president is willing to make tough choices but he cannot ask the middle class and seniors to bear all the burden for deficit reduction and sacrifice while millionaires and billionaires … are let off the hook,” said White House spokesman Jay Carney aboard Air Force One.

Republicans Friday ruled out any tax increases as part of an agreement to narrow stubborn budget deficits and raise the U.S. debt limit. The federal deficit now stands at $1.4 trillion, among the highest levels relative to the economy since World War Two.

The $14.3 trillion U.S. debt ceiling must be increased before August 2 or the Treasury Department will run out of money to pay the country’s bills. A default on debt payments could send markets plunging around the world and raise the risk of another U.S. recession.

House Speaker John Boehner and fellow Republicans say any package that includes tax increases stands no chance of passing the Republican-controlled House. Senate Republicans threaten to block the measure if it includes tax increases.

“A tax hike can’t pass the Congress. They might as well ask us to herd unicorns through the Senate chamber,” said Don Stewart, spokesman for Senate Republican leader Mitch McConnell. “It just can’t happen.”

Conservatives in Congress, including many Tea Party activists who are credited with winning the House for Republicans in the 2010 election, have questioned whether there really is a pressing need to increase the debt limit. They have laid down tough prerequisites to win their votes, including passage of a balanced budget amendment to the Constitution.

Democrats have expanded their demands in recent days to say any package must include measures to boost the struggling economy, which could add to the deficit. They say they will not support a package that relies only on spending cuts.

“Make no mistake. there needs to be revenues in any deal,” said senior Democratic Senator Charles Schumer.

Treasury Secretary Timothy Geithner said he was confident Congress could still reach a budget deal, but that it would have to include some tax hikes.

“You need to have modest changes in revenue,” Geithner said in New Hampshire. “There is no way to do a deal without it.”=

ON THE TABLE

Democrats have eased back from their insistence that personal income tax rates need to rise on the wealthiest Americans to focus instead on ending a wide range of tax breaks on everything from corporate jets to oil and gas subsidies.

They have also proposed closing tax breaks that benefit the wealthy, such as limiting the deductions for households making more than $500,000 a year.

Representative Chris Van Hollen, one of the Democrats who was involved in the failed talks led by Vice President Joe Biden, said Republicans had refused to budge.

“What we’ve seen is all take and no give,” he said.

A senior administration official said eliminating loopholes and tax breaks on corporate jets, energy companies and hedge funds, and capping itemized deductions for wealthier Americans — all steps identified in Obama’s 2012 budget — could save $400 billion over 10 years.

“This is what they are throwing the fit about. Because they somehow believe that special loopholes for millionaires and billionaires, oil and gas subsidies — somehow they are willing to go to the wall for that,” said a second senior administration official.

But a Republican source familiar with the talks said Democrats were also pushing repeal of the “last in first out,” (LIFO) accounting convention that he said would cost manufacturers billions of dollars, while capping itemized deductions would hurt hundreds of thousands of small U.S. businesses.

“They’re not talking about a few tax loopholes. They’re talking about hundreds of billions of dollars. You can’t get there by just going after corporate jets,” the source said.

The National Association of Manufacturers estimates that repealing LIFO, which allows companies to match sales revenues against inventory replacement costs, would raise taxes for U.S. companies by $50 billion over 10 years.

Boehner said if Obama offered up spending cuts that were at least the size of a debt limit increase — thought to be around $2 trillion to $2.5 trillion — and if new budget reforms were put in place, “He has my word that the House will act on it.”

Those are requirements Boehner and fellow Republican leaders have been voicing for months.

“We believe that we can move forward, as long as no one in these talks takes a my-way-or-the-highway approach,” Carney said.

(Editing by Peter Cooney)

WASHINGTON |
Fri Jun 24, 2011 9:12am EDT

WASHINGTON (Reuters) – The Obama administration is exploring different ways to provide greater support for rental housing, a top U.S. Treasury official said on Friday.

One approach would be to expand the government’s capacity to support lending for the multifamily market, Treasury’s under secretary Jeffrey Goldstein told a national housing conference in Washington.

Goldstein said the administration is considering a range of reforms such as risk-sharing with private lenders to reduce the risk to the government and taxpayer.

(Reporting by Rachelle Younglai, Editing by Chizu Nomiyama)

By Peter Apps, Political Risk Correspondent

LONDON |
Fri Jun 24, 2011 7:07am EDT

LONDON (Reuters) – From the streets of Cairo and Madrid to online forums and social media sites, “leaderless” protests are on the rise. But the very qualities that led to their short-term success may condemn them to failure in the long run.

Activists in Egypt, Tunisia and elsewhere say the lack of top-down management has been an important element in their recent success in rallying crowds disillusioned with the ruling establishment, using social networking sites like Twitter and Facebook.

Anti-austerity protesters in Europe have used similar tactics to organize mass street protests they hope will put pressure on governments to rethink spending cuts.

It’s not all online. In street demonstrations, sit-ins and meetings in Cairo, Athens, Madrid and London, loosely organized protesters hold public meetings and votes on immediate logistical issues and wider political aims, trying to build agreement and consensus.

“Our revolution did not have a head but it did have a body, a heart and a soul,” Egyptian-British psychiatrist Sally Moore, one of the protesters in Cairo’s Tahrir Square, told a Thomson Reuters Foundation event this month on the “Arab spring.”

Disparate protest groups around the world say they are learning from each other. While in previous decades leaderless groups struggled to build name-recognition and media coverage, social media has allowed them to put huge crowds on the street at speed.

It’s a model that has proved very appealing to youthful protesters angry at her the way they believe an older generation — whether the leaders of the Arab world or West’s bankers and politicians — have stolen their future.

POWER TO THE PEOPLE

“You will still have a core group of several dozen or more people who will provide a lot of direction, but the rhetoric is very much against the emergence of traditional power structures,” says Tim Hardy, author of the UK-based blog Beyond Clicktivism.

“Social media is a part of it, definitely, but it goes beyond that.”

But the model has its limits. In Egypt and Tunisia, where protesters successfully ousted President Hosni Mubarak and Zine al-Abidine Ben Ali, there are already signs the protesters are being sidelined by more established power centers.

In elections likely only weeks away, the westernized activists of Tahrir Square may be barely represented as power shifts back to the military — who remain in control — and the more organized Muslim Brotherhood.

In Libya and Syria, where popular uprisings turned into outright armed intervention and insurgency, initially leaderless rebels found themselves at an immediate disadvantage.

Whether at the ballot box or on the battlefield, some experts say that without some form of command and control leaderless groups will simply be outmaneuvered. That might leave them a simple choice: build more coherent leadership structures or join with other organizations that already have them.

“If leaderless movements are not wholly self-destructive, they might… fizzle out allowing the pre-existing power elites to take advantage,” said Hayat Alvi, lecturer in Middle East politics at the U.S. Naval War College. “They need a general consensus about what they seek in the future.”

That can prove difficult. One of the strengths of the “leaderless” model, protesters say, is the way it can quickly bring together disparate groups working toward a common goal. But as frustration mounts, so does demand for change.

PUSH TO EXTREMES?

On Libya’s stalemated eastern front, fed-up rebels say they want their commanders to build more unity and better discipline.

In Britain, groups of left-wing anti-austerity activists are torn between the idea of joining the opposition Labour party, starting their own to challenge for parliamentary seats or sticking with largely peaceful direct action.

Some of Egypt’s young protesters are working with Serb activists who ousted Slobodan Milosevic in 2000 to build more coherent strategies, contest elections and build lasting structures to hold authority to account.

There are risks that without a formal decision-making structure, the room for error is huge.

“There is a danger people will simply focus on one leader and projects all their hopes on to that person or group,” says Beyond Clicktivism’s Hardy. “You’re already seeing membership of nationalist groups pick up.”

Some are also concerned about the radicalism of emerging cyber entities such as Anonymous and Lulzsec, “hactivist” groups who were behind a string of recent attacks on government and corporate targets.

Both groups are believed to have a “leaderless” structure but there are signs that Lulzsec at least is already being undermined by internal feuding [ID:nL6E7HM12C].

Like Islamist networks such as Al Qaeda — whose central leadership was weakened after September 11 and is now believed to consist largely of semi-independent franchises — leaderless organizations might sometimes achieve big spectacles but struggle to have a lasting impact.

“In general, not having a single leader makes an organization harder to track,” said Amichai Shulman, chief technical officer of IT security firm Imperva. “(But) at the same time it reduces the ability… to carry out complex operations.”

(Editing by Sonya Hepinstall)