Fed Says Recovery is Moderate: Stimulus Will End in June

Federal Reserve policy makers said the economy is recovering at a “moderate pace” and a pickup in inflation is likely to be temporary, as they agreed to finish $600 billion of bond purchases on schedule in June.

“The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually,” the Federal Open Market Committee said today in its statement after a two-day meeting in Washington. “Increases in the prices of energy and other commodities have pushed up inflation in recent months,” and the Fed expects “these effects to be transitory,” the statement said.

Chairman Ben S. Bernanke has signaled he’ll maintain record stimulus until job growth accelerates and the recovery is robust enough to withstand tighter credit. The Fed chief has said he expects that a surge this year in fuel and food costs will have only a passing inflationary impact, differing with Fed regional bank presidents who say borrowing costs may need to rise to contain prices.

Stocks rose and the dollar weakened after the statement. The Dow Jones Industrial Average advanced 0.3 percent to 12,636.62 at 1:33 p.m. in New York. The dollar fell to $1.4706 per euro from $1.4644 late yesterday.

‘Prepared to Adjust’
The Fed, discussing its securities portfolio, said it “is prepared to adjust those holdings as needed to best foster maximum employment and price stability.” Bernanke will discuss the FOMC statement and the panel’s updated economic projections today at his first news conference, scheduled to begin at 2:15 p.m. in Washington.

The FOMC’s characterization of the recovery as “moderate” is similar to the description in the Fed’s Beige Book regional business survey this month and compares with the committee’s March 15 statement saying the economy is on a “firmer footing.”

“The Fed’s view of the world hasn’t changed very much,” Gary Stern, former president of the Minneapolis Fed, said in an interview with Bloomberg Radio. “They continue to emphasize the transitory nature of inflation” and “continue to talk about the economy improving at a moderate pace.”

The Fed left its benchmark interest rate in a range of zero to 0.25 percent, where it’s been since December 2008, and retained a pledge in place since March 2009 to keep it “exceptionally low” for an “extended period.” The central bank will keep reinvesting proceeds of maturing mortgage debt purchased in the first round of large-scale asset purchases that lasted from December 2008 to March 2010.

Unemployment ‘Elevated’
“The unemployment rate remains elevated, and measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate” for stable prices and maximum employment, the Fed said. The “depressed” housing industry remains a weak spot in the economy, it said.

The Fed repeated that it will “pay close attention to the evolution of inflation and inflation expectations.”

Bond markets share the Fed’s assessment that inflation will be transitory. Traders expect inflation, as measured by the difference between Treasury Inflation Protected Securities and nominal bonds, to be 2.62 percent over the next two years and then moderate to 2.39 percent over the next five years.

Today’s FOMC decision was unanimous for a third consecutive meeting. Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser, both skeptics of the second round of so-called quantitative easing who voted for the statement today, have suggested they may favor raising interest rates later this year.

Record Stimulus
The Fed’s commitment to record stimulus contrasts with the interest-rate increase this month by the European Central Bank and tightening this year by the biggest emerging-market economies, including China, Brazil and India, which face faster inflation.

Bernanke will become the first Fed chairman to conduct a press briefing following an FOMC decision when he takes the microphone at the Fed’s headquarters. His counterparts in Europe, Japan, the U.K. and Canada already hold regular news conferences.

The press conference, to be broadcast on television and the central bank’s website, marks one of Bernanke’s biggest efforts to improve the Fed’s connections with the public and demystify the institution, which as recently as 1993 didn’t announce its monetary-policy decisions. Bernanke said in February that the central bank was weighing benefits of more transparency against the risk that his remarks would trigger unwanted fluctuations in financial markets.

Projections
The Fed will also release economic projections of governors and regional bank presidents at 2:15 p.m., three weeks sooner than prior practice.

Increases in employment and inflation are helping drive calls to tighten credit. Payrolls have increased by an average 149,000 a month for the past six months, while the unemployment rate has dropped by 1 percentage point since November to 8.8 percent, a two-year low.

Federal Reserve Bank of New York President William C. Dudley, the FOMC’s vice chairman, reiterated in a speech April 1 that a faster pace of job growth is “sorely needed” and that even with 300,000 new jobs per month, the labor market would still have “considerable slack” at the end of 2012.

Janet Yellen, vice chairman of the Fed’s Board of Governors, said April 11 that the increase in food and fuel costs will have only a temporary impact on prices and consumer spending, and warrants no reversal of monetary stimulus.

Food Prices
Food and beverage prices rose in the first quarter by the most since 2008, based on the Labor Department’s Consumer Price Index, while the cost of regular-unleaded gasoline has increased by 26 percent this year to $3.88 a gallon as of yesterday.

The increases helped slow U.S. growth to a 2 percent pace in the first quarter, according to the median estimate of analysts surveyed by Bloomberg News, from 3.1 percent in the prior period. The government releases preliminary figures tomorrow.

The Fed’s preferred price gauge hasn’t flashed a warning. The Commerce Department’s personal consumption expenditures price index, excluding food and energy, rose 0.9 percent in February from a year earlier. Policy makers have a long-run goal for total inflation of about 1.6 percent to 2 percent annually.

Months Away
Economists say the Fed is at least a few months away from starting to reverse the stimulus. Most of the 44 economists surveyed by Bloomberg News from April 20 to April 25 said the central bank this year will probably halt its policy of replacing maturing mortgage debt with Treasuries. The majority of respondents also said the Fed will announce a plan next year of selling mortgage bonds and Treasuries among its assets.

Since the Fed announced the second round of asset purchases on Nov. 3, yields on 10-year Treasuries increased to 3.31 percent as of yesterday from 2.57 percent, while the Standard & Poor’s 500 Index gained 12 percent, yesterday reaching the highest level since June 2008. The dollar weakened by 3.5 percent to the lowest since August 2008 against an index of six currencies.

In a few months, “the data will probably compel them to begin a gradual process of tightening,” Larry Hatheway, chief economist for UBS Investment Bank in London, said in a Bloomberg Television interview before the decision.

“The Fed is still looking essentially at ex-food, ex- energy prices at core, ticking a little higher,” though not enough to raise interest rates now, Hatheway said.

Politicians’ Objections
Bernanke is still seeing objections from politicians within the U.S. and abroad almost six months after the Fed began the unprecedented second round of asset purchases to criticism from Republican politicians and government officials in Germany, China and Brazil.

Senator Mark Kirk, a first-term Republican from Illinois, sent Bernanke a letter on April 25 expressing concern about inflation. He called for an early end to asset purchases should Bernanke “also find the trends that I have now heard widely about.”

Russian Prime Minister Vladimir Putin said last week that compared with the U.S., his country doesn’t have the “same opportunity to make trouble.” The U.S. is “financing the government by using a printing press,” he said.

Some U.S. companies are benefiting from global growth. Atlanta-based United Parcel Service Inc., the world’s largest package-delivery company, yesterday raised its full-year profit forecast after increased international shipping demand pushed first-quarter earnings higher than analysts estimated.

Sporting Goods
Firms are also coping with inflation. Beaverton, Oregon- based Nike Inc., the world’s biggest sporting goods company, said last month it would raise prices. The increases will come on a “wide range of footwear and apparel styles to help mitigate the overall impact of higher input costs,” and the company will carry out “more significant price increases” in 2012, Chief Financial Officer Don Blair said March 17.

Today marked the first time the Fed’s statement was released at about 12:30 p.m. after more than a decade of aiming for 2:15 p.m. The central bank said last month it will provide the statement at 12:30 p.m. during the four two-day meetings when Bernanke has his press conferences and 2:15 p.m. for the other four one-day FOMC meetings.

White House Releases Birth Certificate

The White House has released President Obama's long-form birth certificate, saying the document is "proof positive" the president was born in Hawaii.

The release marked an unexpected turn in the long-simmering, though widely discredited, controversy over Obama's origin. Obama's advisers have for the better part of three years dismissed questions about the president's birth, directing skeptics to the short-term document released during the 2008 campaign. But as the issue gained more attention at the state level and particularly in the 2012 presidential race, Obama said Wednesday that it was starting to distract attention from pressing challenges like the budget.

The president, who discussed the release at the White House without taking questions, said he had been "puzzled" by the enduring shelf life of the issue and acknowledged the announcement may not put the so-called birther controversy to rest. But he told the public and the media that it's time to "get serious."

"We do not have time for this kind of silliness," Obama said. "We've got better stuff to do. I've got better stuff to do. We've got big problems to solve."

He said the country will not solve those problems if people are "distracted by sideshows and carnival barkers."

The document released by the White House lists Obama's birthplace as Honolulu, Hawaii, and his birth date as Aug. 4, 1961. The hospital listed is Kapiolani Maternity & Gynecological Hospital. The name on the birth certificate is Barack Hussein Obama II.

Obama's presidential campaign, in response to questions raised in 2008, at the time posted a short-form version of the document on the Internet. But conspiracy theories continued to fester. They gained legs in recent weeks as Donald Trump, who is toying with the possibility of running as a presidential candidate in 2012, repeatedly and publicly questioned Obama's origin.

White House Communications Director Dan Pfeiffer noted that what started as Internet chatter had moved into the national political debate and ended up being discussed regularly on mainstream news outlets.

Pfeiffer, on the White House blog, said the president thought the attention was "bad for the American people" and directed his counsel to request access to the long-form document from the Hawaii State Department of Health. The department granted an exception to release the long-form document "because of the tremendous volume of requests they had been getting," the White House said.

"At a time of great consequence for this country -- when we should be debating how we win the future, reduce our deficit, deal with high gas prices, and bring stability to the Middle East, Washington, D.C., was once again distracted by a fake issue," Pfeiffer said on the blog. "The president's hope is that with this step, we can move on to debating the bigger issues that matter to the American people and the future of the country."

Trump, speaking in New Hampshire, took credit Wednesday for the president's decision to release the document. He said his team would have to examine the birth certificate and questioned why the White House took so long, but indicated he wanted to move beyond the issue.

"Today, I'm very proud of myself, because I've accomplished something that nobody else has been able to accomplish," Trump told reporters. "Why he didn't do it when everybody else was asking for it, I don't know. But I am really honored, frankly, to have played such a big role in hopefully, hopefully getting rid of this issue."

The document states that Obama's father, Barack Hussein Obama, was born in Kenya and that his mother, Stanley Ann Dunham, was born in Kansas.

* How long will it take before someone claims it's a fake?

GOP Raises Debt Ceiling

One day after being named to a presidential task force to negotiate deficit reduction, House Majority Leader Eric Cantor fired off a stark warning to Democrats that the GOP “will not grant their request for a debt limit increase” without major spending cuts or budget process reforms.

The Virginia Republican’s missive is a clear escalation in the long-running Washington spending war, with no less than the full faith and credit of the United States hanging in the balance.

In the most recent budget battle — over a six-month spending bill — Republican leaders carefully avoided threatening to shut down the government. Now, Cantor says he’s ready to plunge the nation into default if the GOP’s demands are not met. People close to Cantor say that he hopes to make clear that small concessions from Democrats, including President Barack Obama, will not be enough to deliver the GOP on a debt increase.

Democrats were quick to punch back.

“Congress will not permit the nation to default on its obligations because it would be beyond irresponsible to do so,” said Brian Fallon, a spokesman for Sen. Charles E. Schumer (D-N.Y.), in a statement to POLITICO. “Leader Cantor knows this, and should heed the many business leaders who are telling Republicans to stop playing games with the debt ceiling to gain political leverage.”

Republicans are floating a wide range of major structural reforms that could be attached to the debt limit vote, including statutory spending caps, a balanced budget amendment and a two-thirds vote requirement for tax increases and debt limit increases. Liberals want a “clean” vote to raise the $14.3 trillion borrowing limit.

Those in the center simply hope to find an accord that will prevent the nation from defaulting on its obligations and sending global markets into a tailspin.

The Treasury Department estimates the country will hit the debt ceiling between mid-May and July 8, and Democrats say it’s no time to play chicken with the standing of the nation’s credit — which has taken a hit already this week with Standard and Poor changing its outlook on U.S. debt from “stable” to “negative.”

“Mr. Cantor believes he has found political leverage in mixing the retroactive debt ceiling debate with the forward looking debt reduction debate. What he is willing to risk for this so-called leverage is a mid-air stall in America’s fledging economic recovery and the tarnishing of the full faith and credit of the United States of America,” said Vermont Rep. Peter Welch, who is leading House Democrats in demanding a “clean” vote. “America pays its bills. It always has and it always will. Holding that solemn tradition hostage in a game of kamikaze budget politics is reckless, irresponsible and playing with fire.”


Republican leaders have said all along that the public won’t stand for a debt-limit increase that doesn’t include spending reforms, but Cantor’s comments Wednesday suggest a deeper line in the sand. And the term “serious” reforms suggests Republicans may want a stronger long-term spending agreements in place before they schedule a debt limit vote.

It’s a tricky issue that divides the parties from traditional allies.

The Chamber of Commerce, which typically aligns with Republicans, has been working hard to ensure that the debt limit is increased, and the Washington Post’s editorial page, a traditional voice for liberals, argued on Wednesday morning that deficit-reduction measures must be attached to any debt-limit increase.

Aside from his post in leadership, Cantor’s remark carries additional significance because he is the House Republican representative on a White House panel slated to examine the nation’s deficit in the months leading up to the debt ceiling increase. The Virginia Republican also warned that the panel, led by Vice President Joesph R. Biden and composed of members of Congress, needs “a clearly defined mission and a targeted purpose to be accomplished within a specific and binding timeframe.”

It sets the stage for an incredibly tricky political dance in the next few weeks between Senate Democrats, the White House and House Republicans over an issue that could shake international markets and the fragile economic recovery.

House Speaker John Boehner’s office played down any difference in degree between Cantor’s remarks and those made in the past by Boehner, a Republican from Ohio. Boehner has said the “American people will not stand” for a debt ceiling increase “unless it is accompanied by serious action to reduce our deficit.”

And in a statement issued to POLITICO before Cantor’s release on Wednesday, Boehner spokesman Michael Steel said “The President has asked us to raise the debt ceiling, but the American people won’t tolerate an increase if we don’t begin to address the problem of ever-higher spending and debt. House Republicans are listening, and we will insist on real spending cuts and reforms in this debate.”

Congressional Republicans have still yet to coalesce around which spending cuts or process overhauls they’ll seek as an attachment to the debt-ceiling vote. Lawmakers are out of town for a two-week recess, slated to return the first week in May.

But several options are being bandied about in GOP circles.

One possibility that has gained some traction among Republicans is statutory spending caps to both mandatory and discretionary spending.

Cantor has casually floated a proposed amendment to the Constitution, originally written by Sen. Mike Lee (R-Utah), that would require the budget to be balanced by prohibiting spending from outstripping revenue in any year without a two-thirds vote of each chamber of Congress.


It would also require two-thirds votes for tax increases and debt-limit increases, as well as capping federal spending at 18 percent of the nation’s gross domestic product.

Sen. Bob Corker’s (R-Tenn.) “CAP Act” proposal is also a popular alternative among Republicans and Democrats in both the Senate and House. It sets a cap on all spending, aiming to bring outlays down to roughly 20 percent of GDP. It also mandates that the Office of Management and Budget make cuts throughout the federal budget if Congress is unable to get spending down the mandated level.

House Republicans may try to attach elements of their recently passed budget to a debt-limit package. Block-granting Medicaid to states is one proposal that has gotten strong support in GOP circles and among a handful of Democratic officials at the state level.

Several GOP sources said Republicans could also move to limit the growth of federal bureaucracy by capping the federal workforce — a plan sure to be derided by Democrats as an instant job-crusher.

At this rate, the debt ceiling will be the all-consuming battle going into the summer, and it provides the GOP what they’ve dubbed as another bite of the apple – essentially another opportunity to cut spending and reform how Washington spends money.

The debt ceiling has been raised 74 times since 1962. In most cases, debt-limit increases have been tied to other bills in an effort to ensure support for both measures. For example, the Democrats’ stimulus law in the last Congress raised the debt ceiling, as did several budget resolutions passed in the past few decades.

House Republicans are also trying to frame the debt ceiling increase as belonging to Obama: They say that if he wants to raise it he has to sell it to the American people. Democrats – in the House, Senate and White House — seem to have accepted the fact that the debt ceiling will almost certainly need to be coupled with other spending control measures.

But they are far from agreement with Republicans on the specifics.

As Republicans flex their muscles on the upcoming vote, House Majority Whip Steny Hoyer of Maryland is seizing on a promise in the GOP’s 2010 “Pledge to America” to “advance major legislation one issue at a time” to scold Republicans.

“I think that to hold hostage the full faith and credit of the United States of America to another agenda item is wrong. In fact, the Republicans pledged that they would not do that,” Hoyer said. “And, in fact, they said, and Mr. Boehner has said, that he would keep separate divisive issues from important bills and he would take them up individually. That is what ought to be done here.”

iPhone Tracking Your Movement

Privacy concerns raised as researchers find that iPhone saves every detail of users' movements without their knowledge


Researchers have discovered secret files on the iPhone that track user location and store it on the device, without the user's knowledge.

The log file was discovered by the University of Exeter senior research fellow in astronomy Alasdair Allan and writer Pete Warden.

The revelation has raised privacy concerns as the data that is stored is unencrypted and could easily be read by anyone having access to the phone. It could also be misused by someone if the phone is stolen.

"Apple has made it possible for almost anybody - a jealous spouse, a private detective - with access to your phone or computer to get detailed information about where you've been," said Warden.

The pair of data scientists also added Apple could not have placed the software accidently as the log file tranfers onto new devices when an old one is replaced.

They said, "Apple might have new features in mind that require a history of your location, but that's our specualtion. The fact that [the file] is transferred across [to a new iPhone or iPad] when you migrate is evidence that the data-gathering isn't accidental."

However, Allan and Warden say they have no evidence that the data is collected by Apple or anybody else.

The secret file in the smartphone contains the latitude and longitude along with a timestamp of the location of the phone. Allan and Warden created a tool which shows the data in the form of a visual map.

The researchers said the movement tracking software is exclusive to Apple's iPhones. They could not find it in Google's Android phones.

"Alasdair has looked for similar tracking code in Android phones and couldn't find any," said Warden.

"We haven't come across any instances of other phone manufacturers doing this."

Facebook and Free Speech

President Barack Obama will travel to Facebook Inc.'s Silicon Valley headquarters Wednesday to hold a "town hall" meeting on the economy with users of the social-networking site.

But Facebook is still trying to find a path to Washington, where the company has only a fledgling lobbying operation, even though it finds its privacy policies under increasing scrutiny and is trying to navigate a politically sensitive expansion into China.

In seven years, Facebook has risen from a tiny start-up to an Internet power with a potential market value estimated at more than $50 billion. Now an online forum with more than 600 million users, Facebook faces growing pressure from lawmakers and regulators concerned about the way it uses personal information shared by its users.

At the same time, the company is confronting questions about how it will handle its role as a global public square for dissidents if it enters China and other countries with little tolerance for dissent. In an interview with The Wall Street Journal about its approach abroad, Facebook officials in Washington suggested the company might be willing to play by China's rules—a stance that could raise hackles in Congress.

Until lately, Facebook has spent very little money in Washington, even by Silicon Valley's frugal standards. The company's outlays on lobbying totaled $351,000 last year, federal records show. That's a fraction of the amount spent by other technology giants, including Google Inc.'s $5.2 million and Microsoft Corp.'s $6.9 million.

Facebook's new Washington office, designed to look like a hacker's lair, with walls of faux construction rubble, is a work in progress.

People familiar with the company's plans said talks to hire former Obama press secretary Robert Gibbs to guide the company's communications strategy, including with Washington, have fallen apart in the wake of a leak to the media that made a deal for him to join the company sound imminent. Facebook declined to comment.

Meanwhile, Facebook is talking with potential Chinese partners about entering the huge China market, where the government has been cracking down on dissidents. That crackdown has come in response to the uprisings shaking authoritarian Middle Eastern regimes, movements that have used U.S.-based social-media sites like Facebook and Twitter as organizing tools.

"Maybe we will block content in some countries, but not others," Adam Conner, a Facebook lobbyist, told the Journal. "We are occasionally held in uncomfortable positions because now we're allowing too much, maybe, free speech in countries that haven't experienced it before," he said.

"Right now we're studying and learning about China but have made no decisions about if, or how, we will approach it," said Debbie Frost, Facebook's director of international communications.

Facebook's plans may not sit well with congressional leaders already incensed with the company for sidestepping congressional inquiries on its China plans. Last spring, Sen. Dick Durbin, the Illinois Democrat who heads the Senate Judiciary Committee's panel on human rights, rebuked Facebook for refusing to appear at a Capitol Hill hearing on "global Internet freedom."

The company hasn't joined the Global Network Initiative, a group that includes information-technology companies like Google and Microsoft and human-rights groups that have agreed to common principles of conduct in nations such as China, which restrict speech and expression.

Neither Facebook nor its founder, Mark Zuckerberg, have said much publicly about Facebook's role as a tool for pro-democracy activists in Tunisia or Egypt. In Tunisia, where Facebook took technical steps to counter government efforts to steal users' Facebook passwords, the company said its efforts were driven by a safety and security breach—not politics.

"We've witnessed brave people of all ages coming together to effect a profound change in their country. Certainly, technology was a vital tool in their efforts but we believe their bravery and determination mattered most," Ms. Frost said.

Steering clear of association with human-rights issues could help Facebook woo officials in China, where the government is sensitive to the Internet's potential for fomenting dissent. But it would also attract criticism. "Blocking content in some countries—but not others—would deeply damage Facebook's brand and raise troubling questions about its commitment to human rights and Internet freedom," said Sen. Tom Coburn of Oklahoma, the top-ranking Republican on the Senate's human- rights panel.

Online privacy is an equally pressing policy issue for Facebook's Washington office. Sen. John McCain, an Arizona Republican, and Sen. John Kerry, a Massachusetts Democrat, recently co-sponsored legislation that would establish a consumer privacy bill of rights. House lawmakers, meanwhile, have introduced privacy legislation that would require more disclosure to consumers but rely on industry self-regulation.

In mid-January, Facebook came under fire after it opened up a new feature allowing external websites and applications to gain access to users' addresses and phone numbers, with their permission.

Two weeks later, the company received a pointed letter from Rep. Joe Barton, a Texas Republican, and Rep. Edward Markey, a Massachusetts Democrat, demanding an explanation of how the plan fit into the company's privacy policies.

White House spokeswoman Jennifer Psaki said the president will answer online questions from Facebook users Wednesday. He won't deliver prepared remarks addressing China or privacy issues with Facebook's leadership. "Facebook, with more than a half a billion users, is a great opportunity for the president to speak directly to the American people," she said.

In the past six months, Facebook has hired two outside lobbying firms and four new Washington staff members, bringing its staff head count to 10 at its D.C. office. Only two of those staffers are registered lobbyists, and they lack ties to the congressional committees that will lead the privacy debate.

People familiar with Facebook's Washington plans said it is looking to hire more people with deeper congressional experience and bring on more seasoned communications and public-relations hands.

No End to War in Libya

PARIS — France and Italy said Wednesday that they would join Britain in sending liaison officers to support the rebel army in Libya, in what military analysts said was a sign that there would be no quick and easy end to the war in Libya.

The dispatching of the liaison officers — probably fewer than 40 of them, and carefully not designated as military trainers — is a sign also, they said, that only a combination of military pressure from the sky, economic pressure on the government and a better-organized and coordinated rebel force will finally convince Col. Muammar el-Qaddafi that he has no option but to quit.

“Some countries thought the Libya operation could be over quickly,” said a senior NATO ambassador. “But no military commander thinks so.”

Sending advisers to Libya is the latest in a series of signs of trouble for the NATO campaign, which began in earnest with a stinging, American-led attack but has seemed to fizzle since operational command was transferred to NATO on March 31. After that, a rebel offensive was smashed by Colonel Qaddafi’s forces, which sent the rebels reeling toward the eastern city of Ajdabiya.

New tactics used by Colonel Qaddafi’s forces — mixing with civilian populations, camouflaging weapons and driving pickup trucks instead of military vehicles — have made it hard for NATO pilots to find targets. At the same time, loyalist artillery and tanks have hammered the rebel-held city of Misurata with cluster bombs, which have been banned by much of the world, making a mockery of NATO’s central mission of protecting civilians.

Divisions within NATO seem to be harming the strategy as much as Colonel Qaddafi’s new tactics, said Robin Niblett, the director of Chatham House, the Royal Institute of International Affairs in London. Only six of the 28 member countries are participating in the airstrikes, with France and Britain doing half of them and Denmark, Norway, Belgium and Canada the rest.

Prominent nations like Italy and Spain are hanging back, and others have sent planes only to support the no-fly zone, or are helping to enforce the arms embargo. The Obama administration, which has ruled out deploying American troops in Libya, announced Wednesday that it would authorize as much as $25 million in military surplus supplies, though not weapons, to the Libyan opposition forces.

“You want to send Qaddafi a message of collective will, that there’s no way out, that he’s facing a determined and unified opposition,” Mr. Niblett said. “And he’s seeing a European-led NATO that is not sufficiently cohesive.”

“If I were him, I would look at European disagreements and take heart from them, especially when the opposition appears so weak,” Mr. Niblett said.

Colonel Qaddafi “senses there is a gap between means and ends,” he added. “He can look at divisions among members of NATO and feel he can be part of a political solution, because in the end he may feel there is not sufficient cohesion to follow the strategy through to its end,” which is his ouster.

To persuade Colonel Qaddafi and his sons to leave, he said, “we need both the political and military track, and we have bits of the military and a fractured political situation, and we’re not giving the strategy the best shot.”

To some extent, the problems in NATO can be traced to changes since the end of the cold war. With the end of the Soviet threat and its expansion to global missions outside Europe, NATO has become less an alliance than a coalition of like-minded nations, analysts say.

“As soon as NATO went out of area it stopped being an alliance,” said François Heisbourg, a defense expert at the Foundation for Strategic Research in Paris. “In area, it is an unlimited liability partnership. But now with a global scope, everything must be negotiated, and it’s all à la carte. That’s the post-cold-war world.”

Tomas Valasek, a defense expert at the London-based Center for European Reform, compared NATO to an American political party, “a coalition of countries with broadly the same interests, but with different views.”

It was inevitable after the cold war, he said, that NATO countries would focus on different threats: terrorism and Afghanistan for some, like the United States, Britain, Canada and the Netherlands; Russia, for the Central Europeans.

“As for the rest,” he said, “I don’t even know why they stay in NATO.”

NATO will never be what it was, Mr. Valasek said. “NATO will become more of a transactional place in the future, so, as in Libya, more often than not there will be coalitions of the willing, with NATO support.”

NATO officials reject the criticism, saying the alliance has done a good job in a short time and that the air campaign is working well.

“There is no question about the collective will in NATO” to carry out the United Nations’ resolution on Libya, said Oana Lungescu, the alliance spokeswoman. She said that in the three weeks since NATO took over command of the operation, “we are steadily degrading Qaddafi’s ability to carry out and sustain attacks on his own people and gradually squeezing the regime’s forces.”

But just about everyone agrees “that there can’t be a military solution to the crisis as such,” Ms. Lungescu said.

“This mission keeps up the pressure for a credible political solution,” she said.

A senior NATO ambassador asked for patience. “In the end the balance will shift; it has to,” he said. “Qaddafi gets no more arms, no more tanks, no more ammo, and he gets weaker and over time the others get stronger. And at some point someone around Qaddafi decides to have a political way out.”

While Colonel Qaddafi’s foreign minister, Moussa Koussa, defected to Britain three weeks ago — where he was treated leniently, as an encouragement to others around the Libyan leader to change sides — there have been no prominent defections since.

The current political debate, the senior NATO ambassador said, is not about whether the Libya war will end in negotiations, but the nature and context of the talks. Some countries would like to begin negotiations with Colonel Qaddafi before he leaves power, with the clear aim that he must leave. But others, particularly the rebels, say that negotiations can begin only after the colonel and his sons are safely out of the country.

For now, Mr. Valasek said, the problem is that both Colonel Qaddafi and the NATO-supported opposition think that time is on their side. “It may take everyone longer to realize that this is as far as military force takes us. But unless we want a divided Libya, we need to sit down and negotiate.”

Uncle Jay 4/11

Ivory Coast Violence Increases

French forces have snatched the Japanese ambassador to safety from near the besieged presidential residence in Ivory Coast's main city, Abidjan.

Soldiers exchanged fire with guards at the compound where Laurent Gbagbo is holed up, refusing to stand down.

His rival Alassane Ouattara's forces surround the residence, where fighting continued through the night.

French Foreign Minister Alain Juppe says Israel has now asked Paris to extract Israeli diplomats from Abidjan.

Mr Gbagbo has refused to step down despite being beaten in an election in November.
'A lot of blood'

He says he won, but the Ivorian election commission found that he lost and the UN certified that result.

The ballot had been intended to reunite the former French colony, which split in two following a northern rebellion in 2002.

After months of negotiations, pro-Ouattara forces last week swept south to Abidjan.

The BBC's Andrew Harding, near the city, says it was lit up by explosions overnight, with much but by no means all the fighting around the presidential residence.

He says although Mr Gbagbo's senior generals have given up the fight, his armed supporters continue to put up strong resistance in several neighbourhoods.

On Wednesday, pro-Ouattara forces were driven back after launching what they said would be a decisive assault on the presidential compound.

Mr Gbagbo says his rival's troops want to kill him, but they say they have strict orders to capture him alive.

Late on Wednesday, French helicopters moved in to evacuate the Japanese ambassador, Okamura Yoshifumi, after his home near the presidential residence was invaded by unidentified gunmen.

The envoy and his aides were whisked to safety in a French military camp at Port-Bouet, south of Abidjan, the French embassy said.

The French said they had acted after a request from Japan and the UN.

During the operation, French forces exchanged fire with fighters defending Mr Gbagbo's residence.

A number of other diplomatic missions are based in the besieged area.

France has had troops in Ivory Coast alongside UN peacekeepers since the country's civil war almost a decade ago.

Mr Okamura told AFP news agency a group of "mercenaries" had occupied his residence for five hours.

He said the gunmen had launched rockets and fired machine-guns and cannon from the building, while he and others sheltered in a room.

The envoy said he later found four employees, security guards and a gardener, were missing and there was "a lot of blood" in the house.
Civilians under siege

Speaking by phone to French radio on Wednesday, Mr Gbagbo denied he was hiding in a bunker.

"I am in the residence - the residence of the president of the republic," he said.

Earlier he rejected claims he was surrendering, saying he was only negotiating a truce.

French Foreign Minister Alain Juppe said Mr Gbagbo's "intransigence" had stopped UN-brokered talks to negotiate an orderly departure.

On Monday, UN attack helicopters bombarded Gbagbo arms sites in Abidjan, including inside the presidential compound.

Pro-Gbagbo forces had been accused of firing heavy weaponry at UN peacekeepers and into areas of the city that voted for his opponent.

As the rival presidents' forces continue to fight over the presidency, concern is growing over the humanitarian situation in Ivory Coast.

The battle for Abidjan has now been raging for a week and it is unsafe for many of the city's four million people to go outside.

The main banks have been closed for nearly two months and few people have the funds to stock up on food.

The UN refugee agency reports an increase in the number of Ivorians crossing the border into neighbouring Liberia.

The International Criminal Court says it will investigate reports of human rights abuses by both sides during the fighting, which has left hundreds dead.

Gov Calls Teachers Unions "Thugs"

TRENTON, N.J. - Gov. Chris Christie took another shot at New Jersey's largest teachers union in an interview with ABC's Diane Sawyer.

It aired last night on "World News Tonight".

"Here's what I say to them: That I believe the teachers in New Jersey deserve a union, as good as they are, and they don't have one," Christie said. "And they should start demanding to get a union as good as they are, because I believe the teachers in New Jersey in the main are wonderful public servants and care deeply. But they're union – their union are a group of political thugs."

Christie also says he has no plans to run for president because he doesn't feel ready.

Shut Down?

WASHINGTON – The top Democrat on Capitol Hill on Thursday blamed a threatened government shutdown on House Speaker John Boehner's insistence on keeping conservative policy prescriptions for the environment and abortion in a funding bill that must be passed by midnight Friday.

Amid virtually round-the-clock wrangling, the White House called key lawmakers to another meeting with President Barack Obama at midday Thursday.

In the meantime, Senate Majority Leader Harry Reid said that late-night negotiations have largely produced an agreement on how much to cut spending but that Republicans are insisting on rewriting the Clean Air Act and injecting the volatile abortion issue into the spending debate.

"The issue is ideology, not numbers," Reid said. "The two main issues that are holding this matter up are ... reproductive rights and clean air. These matters have no place on a budget bill."

Among the abortion battles on the bill is a ban on taxpayer-funded abortions in Washington, D.C., an effort to restrict U.S. aid to overseas family planning groups that perform abortions and cutting off Planned Parenthood, the nation's largest provider of abortion assistance, from taxpayer money that it uses to offer contraception and health care for women.

Reid also rejected a proposal by House Republicans to blend money for financing the government for a week with a full-year Pentagon budget, adding $12 billion in additional budget cuts to the $10 billion enacted so far in two prior stopgap measures.

Democrats insist on a longer-term solution and say the short-term approach is a political maneuver meant to blame them if the government if forced to close its doors on Saturday.

Obama emerged from the negotiations late Wednesday night to declare that differences between Republicans and Democrats had narrowed somewhat. But at this point, only urgent action can avert a shutdown of much of the government at midnight Friday, he said.

"It's going to require a sufficient sense of urgency," Obama said, "to complete a deal and get it passed and avert a shutdown."

Even a brief shutdown could affect a wide range of Americans, from troops fighting abroad who are awaiting their pay to tourists planning trips to national parks.

The move by Boehner to advance a one-week interim budget measure angered his Democratic negotiating counterparts and came after negotiations at the White House moved slower than had been hoped.

Obama told reporters that his differences with the House Republicans were narrowing but not resolved.

"I thought the meetings were frank, they were constructive, and what they did was narrow the issues and clarify the issues that are still outstanding," Obama said. "I remain confident that if we're serious about getting something done, we should be able to complete a deal and get it passed and avert a shutdown. But it's going to require a sufficient sense of urgency from all parties involved."

After the late-night White House session, Boehner, R-Ohio, said: "We did have a productive conversation this evening. We do have some honest differences, but I do think we made some progress. ... There's an attempt on both sides to continue to work together to try to resolve this."

Boehner's move appeared aimed at shifting political blame if a shutdown occurs, but the announcement of Thursday's vote angered Democrats who felt talks were progressing.

Democrats also said privately that the White House was infuriated after Rep. Jeb Hensarling, R-Texas — the No. 4 House Republican — accused Obama of leaving the talks to focus on his re-election campaign in official appearances in Pennsylvania and New York City.

Obama had already ruled out the weeklong measure Republicans intend to push through the House, and Senate Democrats have labeled it a non-starter. Republican officials said the details of the bill could yet change. But passage of any interim measure is designed to place the onus on the Democratic-controlled Senate to act if a shutdown is to be avoided.

At issue is legislation needed to keep the day-to-day operations of federal agencies going through the Sept. 30 end of the budget year. A Democratic-led Congress failed to complete the must-pass spending bills last year, setting the stage for Republicans assuming power in the House in January to pass a measure with $61 billion in cuts that even some GOP appropriators saw as unworkable. It was rejected in the Democratic-controlled Senate.

Meanwhile, Boehner told ABC News in an interview that he's in lockstep with tea partiers demanding severe budget cuts.

"Listen, there's no daylight between the tea party and me," he said. "What they want is, they want us to cut spending. They want us to deal with this crushing debt that's going to crush the future for our kids and grandkids. There's no daylight there."

Separately Wednesday, the White House used its unmatched megaphone to emphasize the stakes involved in the negotiations, arranging a briefing for the presidential press corps on the ramifications of a partial government shutdown.

The officials who spoke did so on condition of anonymity, under rules set by White House aides eager to apply pressure to congressional negotiators.

The officials said military personnel at home and abroad would receive one week's pay instead of two in their next checks. Among those affected would be troops in Iraq, Afghanistan and the region around Libya.

Tax audits would be suspended — welcome news to some, no doubt — but there were unhappy tidings for others. Income tax returns filed on paper would pile up at the IRS, and refunds would be delayed as a result.

National parks would close, as would the Smithsonian Institution and its world-class collection of museums clustered along the National Mall within sight of the Capitol. Officials were less clear about the Cherry Blossom Festival, scheduled for this weekend in Washington.

As for the broader talks, it appeared progress had been made on spending cuts demanded by Republicans, though Democrats warned that a series of unrelated GOP policy provisions remain unresolved.

Democrats have already ruled out agreeing to stop funding the year-old health care overhaul or to deny Planned Parenthood all federal money. And Reid has said he will not agree to any of the curbs Republicans want to place on the Environmental Protection Agency.

While the political wheels turned, hundreds of demonstrators rallied outside the Capitol, calling for budget cuts and a shutdown, if necessary, to get them.

"Shut the sucker down," one yelled, and the crowd repeatedly chanted, "Shut it down."

Will the GOP "HIRE" or "FIRE"?

Former Massachusetts Gov. Mitt Romney appears to be the early front-runner in the largely unformed race for the Republican nomination for president, but real estate magnate Donald Trump may be a surprise contender, according to a new Wall Street Journal/NBC News poll.

Among Republican primary voters, Mr. Romney captured the support of 21% in a broad, nine-candidate field. Mr. Trump was tied for second with former Arkansas Gov. Mike Huckabee, with 17%. House Speaker Newt Gingrich got 11%, just ahead of former Republican Vice Presidential nominee Sarah Palin’s 10%. Former Minnesota Gov. Tim Pawlenty, considered a strong contender by political handicappers, remains largely unknown, with just 6% support. Rep. Michele Bachmann of Minnesota had 5%, former Pennsylvania Sen. Rick Santorum 3%, and Mississippi Gov. Haley Barbour with just 1%.

Mr. Trump “may be a punch line but when he talks about the way to solve our problems, he makes a lot of sense to the average guy out there,” said Todd Mauney, a conservative Republican in Weatherford, Texas. “I don’t know if people can get over him being the butt of every joke but for me, he can be serious when it’s time to make real decisions.“

In a narrower field of five candidates, excluding Mr. Trump but including Messrs. Gingrich, Pawlenty and Barbour and Ms. Bachmann, Mr. Romney comes out with a comfortable 20-point lead, 40% to Mr. Gingrich’s second-place 20%. Mr. Pawlenty had 12% and Ms. Bachmann 11%. Mr. Barbour, a former Republican National Committee chief and chairman of the Republican Governors Association, has a powerful fund-raising network and a vast Rolodex of contacts, but he has yet to catch on with primary voers. He garnered 3% of the support of those polled.