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Monday, 25 July 2011

Obama, Republicans Still Wrangling Over Debt Solution

U.S. President Barack Obama on Saturday urged Congress to enter into what he called "shared compromise " in an effort to solve the country's debt and deficit problems.
In his weekly address, Mr. Obama said he is willing to do whatever it takes to solve the problem, even if it is not politically popular.  But he also noted the wealthiest Americans must "pay their fair share."

Watch President Obama's weekly address:

A White House official said President Obama, Vice President Joe Biden, and other administration officials were discussing "various options" with congressional leaders from both parties.  However, no new talks were scheduled for Sunday.

With an August 2 deadline approaching to raise the $14.3 trillion debt ceiling or allow the United States to default,  the two sides appear far from an agreement.

Mr. Obama said earlier he would consider cuts in popular entitlements including pensions, health care for the elderly, and aid to veterans.  In return, the president has called for higher taxes on wealthy Americans and large corporations.  Republicans rejected the move saying it would hurt the economic recovery.
In the weekly Republican address, Senator Orrin Hatch of Utah blamed Democrats for the financial mess and said the president and his Democratic allies in Congress need to come up with a serious plan to control runaway spending.  Hatch said that cutting spending, limiting expenditures and requiring balanced budgets is the only long-term solution to the problem.

Watch the Republican weekly address:

Speaker of the House of Representatives, Republican John Boehner, said Friday the House will vote next week on a $2.4 trillion measure to raise the debt ceiling through 2012 if Congress passes a Balanced Budget Amendment to the Constitution. 

President Obama said getting such major cuts without increasing revenue would cause unacceptably deep cuts in programs that are vital to many Americans. He also said elected officials do not need a constitutional amendment to make the tough spending decisions that are a key part of their jobs.

Meanwhile, credit rating agencies have warned that the U.S. government's credit rating would be downgraded if an agreement is not reached soon.

Obama, Republicans Still Wrangling Over Debt Solution

U.S. President Barack Obama on Saturday urged Congress to enter into what he called "shared compromise " in an effort to solve the country's debt and deficit problems.
In his weekly address, Mr. Obama said he is willing to do whatever it takes to solve the problem, even if it is not politically popular.  But he also noted the wealthiest Americans must "pay their fair share."

Watch President Obama's weekly address:

A White House official said President Obama, Vice President Joe Biden, and other administration officials were discussing "various options" with congressional leaders from both parties.  However, no new talks were scheduled for Sunday.

With an August 2 deadline approaching to raise the $14.3 trillion debt ceiling or allow the United States to default,  the two sides appear far from an agreement.

Mr. Obama said earlier he would consider cuts in popular entitlements including pensions, health care for the elderly, and aid to veterans.  In return, the president has called for higher taxes on wealthy Americans and large corporations.  Republicans rejected the move saying it would hurt the economic recovery.
In the weekly Republican address, Senator Orrin Hatch of Utah blamed Democrats for the financial mess and said the president and his Democratic allies in Congress need to come up with a serious plan to control runaway spending.  Hatch said that cutting spending, limiting expenditures and requiring balanced budgets is the only long-term solution to the problem.

Watch the Republican weekly address:

Speaker of the House of Representatives, Republican John Boehner, said Friday the House will vote next week on a $2.4 trillion measure to raise the debt ceiling through 2012 if Congress passes a Balanced Budget Amendment to the Constitution. 

President Obama said getting such major cuts without increasing revenue would cause unacceptably deep cuts in programs that are vital to many Americans. He also said elected officials do not need a constitutional amendment to make the tough spending decisions that are a key part of their jobs.

Meanwhile, credit rating agencies have warned that the U.S. government's credit rating would be downgraded if an agreement is not reached soon.

White House and Congressional Leaders: No Default on US Debt

The White House and congressional leaders remain adamant the United States will not default on its $14.3 trillion national debt, less than three weeks before a deadline for raising the federal borrowing limit.  But a bipartisan deal to put the nation on a sustainable fiscal path shows no sign of materializing.

On one point top Democrats and Republicans agree: failing to raise America’s debt ceiling in time to avert a default on federal obligations is unthinkable.  Jacob Lew is President Barack Obama’s top budget official. "All the leaders of Congress and the president have acknowledged that we must raise the debt limit, and the question is how," he said.

Lew spoke on ABC’s This Week television program.

The Senate’s number-two Republican, Jon Kyl, had a similar message. “The country will not default.  Whether or not there are savings achieved in the process remains open to question," he said.

Weeks of negotiations have failed to yield a so-called “grand bargain” to trim U.S. budget deficits by $4 trillion over 10 years.  The impasse has prompted several fallback plans to raise the debt ceiling if the $4 trillion target is not met.

Senate leaders are negotiating a plan that would allow President Obama to extend the federal borrowing limit even if majority votes in Congress do not materialize authorizing such a move.  In the Republican-controlled House of Representatives, a vote is expected later this week that would tie a debt ceiling increase to a more-modest deficit reduction target, as well as a constitutional amendment requiring a balanced budget.

Neither plan of last resort is seen as solving America’s fiscal woes.  Appearing on CBS’ Face The Nation program, Republican Senator Tom Coburn of Oklahoma criticized any attempt to shield Congress from painful votes to raise the borrowing limit. “It takes the pressure off all the politicians.  It allows us to pass a debt limit [increase] without making the hard choices that this country has to make," he said.

Another Republican, Senator Marco Rubio of Florida, blasted any scaling back of deficit reduction goals. “The real problem here is not the debt limit.  The real problem here is the debt.  If all we do is raise the debt limit, and it is not accompanied by a credible solution to America’s debt problem, we are in big trouble," he said.

August 2 is the deadline for raising the federal government’s borrowing limit.  Beyond that date, treasury officials say the U.S. government risks default.

Some Republican lawmakers have questioned this assertion, saying the United States could service the national debt and fulfill core obligations using tax revenue alone.  Democrats and the White House dispute the claim, saying the government would have to choose between interest payments on the debt, funding programs that provide income and health care for retirees, and funding the U.S. military.

Office of Management and Budget Director Jacob Lew says there is still time strike a deal and avert financial ruin.  But he adds that time is running out. “It is kind of unfortunate that things always have to get to the last minute.  Sometimes there are no consequences.  Right now, we are in a place where the world is watching, and we should get our business done," he said.

Credit ratings agencies have warned of a possible downgrading of U.S. debt, which would make U.S. Treasury bonds less attractive to investors and creditor nations and require higher interest rates to attract purchasers.  Economists warn that higher interest rates would cripple America’s shaky economic recovery.

White House and Congressional Leaders: No Default on US Debt

The White House and congressional leaders remain adamant the United States will not default on its $14.3 trillion national debt, less than three weeks before a deadline for raising the federal borrowing limit.  But a bipartisan deal to put the nation on a sustainable fiscal path shows no sign of materializing.

On one point top Democrats and Republicans agree: failing to raise America’s debt ceiling in time to avert a default on federal obligations is unthinkable.  Jacob Lew is President Barack Obama’s top budget official. "All the leaders of Congress and the president have acknowledged that we must raise the debt limit, and the question is how," he said.

Lew spoke on ABC’s This Week television program.

The Senate’s number-two Republican, Jon Kyl, had a similar message. “The country will not default.  Whether or not there are savings achieved in the process remains open to question," he said.

Weeks of negotiations have failed to yield a so-called “grand bargain” to trim U.S. budget deficits by $4 trillion over 10 years.  The impasse has prompted several fallback plans to raise the debt ceiling if the $4 trillion target is not met.

Senate leaders are negotiating a plan that would allow President Obama to extend the federal borrowing limit even if majority votes in Congress do not materialize authorizing such a move.  In the Republican-controlled House of Representatives, a vote is expected later this week that would tie a debt ceiling increase to a more-modest deficit reduction target, as well as a constitutional amendment requiring a balanced budget.

Neither plan of last resort is seen as solving America’s fiscal woes.  Appearing on CBS’ Face The Nation program, Republican Senator Tom Coburn of Oklahoma criticized any attempt to shield Congress from painful votes to raise the borrowing limit. “It takes the pressure off all the politicians.  It allows us to pass a debt limit [increase] without making the hard choices that this country has to make," he said.

Another Republican, Senator Marco Rubio of Florida, blasted any scaling back of deficit reduction goals. “The real problem here is not the debt limit.  The real problem here is the debt.  If all we do is raise the debt limit, and it is not accompanied by a credible solution to America’s debt problem, we are in big trouble," he said.

August 2 is the deadline for raising the federal government’s borrowing limit.  Beyond that date, treasury officials say the U.S. government risks default.

Some Republican lawmakers have questioned this assertion, saying the United States could service the national debt and fulfill core obligations using tax revenue alone.  Democrats and the White House dispute the claim, saying the government would have to choose between interest payments on the debt, funding programs that provide income and health care for retirees, and funding the U.S. military.

Office of Management and Budget Director Jacob Lew says there is still time strike a deal and avert financial ruin.  But he adds that time is running out. “It is kind of unfortunate that things always have to get to the last minute.  Sometimes there are no consequences.  Right now, we are in a place where the world is watching, and we should get our business done," he said.

Credit ratings agencies have warned of a possible downgrading of U.S. debt, which would make U.S. Treasury bonds less attractive to investors and creditor nations and require higher interest rates to attract purchasers.  Economists warn that higher interest rates would cripple America’s shaky economic recovery.

World Bank Chief Calls Open Trade Best Economic Stimulant

World Bank President Robert Zoellick is urging the United States to take the lead in pushing the moribund Doha-round free-trade talks forward. He said open trade is the best way to help the struggling global economy. Zoellick delivered his blunt assessment at a World Trade Organization meeting in Geneva on Monday.

Zoellick said practically everybody in the world is in dire economic straits. He noted Europe is struggling with the eurozone. The United States is bogged down with debt and deficits, and is in desperate need of a growth strategy. He said Japan is coming out of a nuclear disaster and is struggling with low growth.

“So, it seems to me that in addition to the work on sovereign debt and deficits, the world needs a global growth strategy," said Zoellick.  "And, opening trade drives growth. It is the best driver of structural forms that the world has seen. We have seen it with proven effectiveness all throughout the past 60 or 70 years. So, why not revive Doha?”

That is a question more easily asked than answered. Zoellick has invested a lot of his time and his capital as a trade negotiator in Doha. He helped launch the Doha Round of free-trade talks in 2001, and remains deeply disappointed that 10 years later an agreement remains elusive.

Agriculture continues to be the main stumbling block to a deal. The developing countries are demanding the United States and European Union cut their farm subsidies. But the United States and European Union are calling on developing countries and emerging economies, such as India and Brazil, to open their markets to industrial goods and to grant greater access to services.

Since these conflicting demands appear unsolvable, Doha negotiators are discussing a potential smaller package of trade concessions, but no consensus has been reached on what is to be included in that package.

Zoellick is no fan of this “mini-deal,” which he said will be as hard to achieve as the big deal. He called it the dumbing down of the Doha round.

"So, I urge a turnaround. Now, I certainly understand that this requires leadership and it has to come from the major developed countries, as well as the emerging market countries," he said. "That is a different world than it was 15 or 20 years ago. And, obviously, the U.S., as the world’s largest economy, is a good candidate. Why not? The U.S. is going to be cutting agricultural subsidies as part of its budget deal.  There was just an agreement in the U.S. Congress to cut not only the ethanol tariff, but the ethanol subsidy.”

Zoellick called this a serious moment. He warned that the failure of the major trading nations to talk about lowering global trade barriers is putting economic growth at risk, particularly for the poorest countries.

He said it would be a huge mistake for countries to allow the Doha round to die. He also said that at a time when the world desperately needs a pro-growth strategy - closing down, rather than opening up markets - would be the worst possible thing to do.

World Bank Chief Calls Open Trade Best Economic Stimulant

World Bank President Robert Zoellick is urging the United States to take the lead in pushing the moribund Doha-round free-trade talks forward. He said open trade is the best way to help the struggling global economy. Zoellick delivered his blunt assessment at a World Trade Organization meeting in Geneva on Monday.

Zoellick said practically everybody in the world is in dire economic straits. He noted Europe is struggling with the eurozone. The United States is bogged down with debt and deficits, and is in desperate need of a growth strategy. He said Japan is coming out of a nuclear disaster and is struggling with low growth.

“So, it seems to me that in addition to the work on sovereign debt and deficits, the world needs a global growth strategy," said Zoellick.  "And, opening trade drives growth. It is the best driver of structural forms that the world has seen. We have seen it with proven effectiveness all throughout the past 60 or 70 years. So, why not revive Doha?”

That is a question more easily asked than answered. Zoellick has invested a lot of his time and his capital as a trade negotiator in Doha. He helped launch the Doha Round of free-trade talks in 2001, and remains deeply disappointed that 10 years later an agreement remains elusive.

Agriculture continues to be the main stumbling block to a deal. The developing countries are demanding the United States and European Union cut their farm subsidies. But the United States and European Union are calling on developing countries and emerging economies, such as India and Brazil, to open their markets to industrial goods and to grant greater access to services.

Since these conflicting demands appear unsolvable, Doha negotiators are discussing a potential smaller package of trade concessions, but no consensus has been reached on what is to be included in that package.

Zoellick is no fan of this “mini-deal,” which he said will be as hard to achieve as the big deal. He called it the dumbing down of the Doha round.

"So, I urge a turnaround. Now, I certainly understand that this requires leadership and it has to come from the major developed countries, as well as the emerging market countries," he said. "That is a different world than it was 15 or 20 years ago. And, obviously, the U.S., as the world’s largest economy, is a good candidate. Why not? The U.S. is going to be cutting agricultural subsidies as part of its budget deal.  There was just an agreement in the U.S. Congress to cut not only the ethanol tariff, but the ethanol subsidy.”

Zoellick called this a serious moment. He warned that the failure of the major trading nations to talk about lowering global trade barriers is putting economic growth at risk, particularly for the poorest countries.

He said it would be a huge mistake for countries to allow the Doha round to die. He also said that at a time when the world desperately needs a pro-growth strategy - closing down, rather than opening up markets - would be the worst possible thing to do.

IMF Urges Swift Action on US Debt Dispute

President Barack Obama haggle over plans to cut Washington's massive debt, the International Monetary Fund says the United States must take urgent and effective action on the issue.
International Monetary Fund IMF Mission Chief Gian Maria Milesi-Ferretti (File Photo)
Monday, the newest IMF report on the U.S. economy said it is critical to the U.S. and other economies for Washington to promptly raise the legal limit on debt, while gradually cutting spending.

Leaders of the U.S. Senate and House of Representatives are working on competing plans to raise the federal debt limit and trim budget deficits. Congress and the White House failed to reach a bipartisan agreement Sunday, prompting declines on many stock markets Monday.   Gold prices also hit a record high.

The leader of the majority party in the House, John Boehner, called on his fellow Republicans to support a short-term extension of the debt ceiling accompanied by a package of spending cuts.  Boehner earlier said he was not sure a bipartisan deal could be reached.

Senate Majority Leader Harry Reid, a Democrat, wants a longer-term deal on the debt ceiling, while also cutting trillions of dollars in spending. President Barack Obama has said he wants an ambitious debt-reduction package.

August 2 is the deadline for raising the debt ceiling and allowing the federal government to continue to borrow money.  The Obama administration and congressional leaders had hoped to announce a framework for an agreement before Asian financial markets opened Monday.

IMF Urges Swift Action on US Debt Dispute

President Barack Obama haggle over plans to cut Washington's massive debt, the International Monetary Fund says the United States must take urgent and effective action on the issue.
International Monetary Fund IMF Mission Chief Gian Maria Milesi-Ferretti (File Photo)
Monday, the newest IMF report on the U.S. economy said it is critical to the U.S. and other economies for Washington to promptly raise the legal limit on debt, while gradually cutting spending.

Leaders of the U.S. Senate and House of Representatives are working on competing plans to raise the federal debt limit and trim budget deficits. Congress and the White House failed to reach a bipartisan agreement Sunday, prompting declines on many stock markets Monday.   Gold prices also hit a record high.

The leader of the majority party in the House, John Boehner, called on his fellow Republicans to support a short-term extension of the debt ceiling accompanied by a package of spending cuts.  Boehner earlier said he was not sure a bipartisan deal could be reached.

Senate Majority Leader Harry Reid, a Democrat, wants a longer-term deal on the debt ceiling, while also cutting trillions of dollars in spending. President Barack Obama has said he wants an ambitious debt-reduction package.

August 2 is the deadline for raising the debt ceiling and allowing the federal government to continue to borrow money.  The Obama administration and congressional leaders had hoped to announce a framework for an agreement before Asian financial markets opened Monday.

Friday, 22 July 2011

How We Broke the Murdoch Scandal

Guardian editor Alan Rusbridger on his dogged reporter, a U.S. ally—and a gamble that finally paid off.

murdoch-the-guardian-fe06 Dan Chung / Eyevine-Redux (portrait)
Alan Rusbridger, editor of The Guardian. Inset: Cover of The Guardian after the scandal.
Every so often—perhaps once every 18 months—the veteran Guardian writer Nick Davies comes into my office, shuts the door with a conspiratorial backward glance, and proceeds to tell me something hair-raising.
In June last year he wanted to inform me about Julian Assange. He’d read that the (then little-known) snowy-haired hacker was on the run with a data stick full of millions of secret documents that the U.S. Defense and State departments had carelessly hemorrhaged. His plan was to track him down … and then The Guardian would publish them all. Good idea?
Early in 2009 there had been a similar moment. He’d discovered that James Murdoch, the son and heir of the most powerful private news-media company on earth, had done a secret deal to pay more than $1 million to cover up evidence of criminal behavior within the company. Interested?
The answer to both questions was—of course. Followed by a small inner gulp at the sheer scale and implications of the stories. Followed by the sight of Nick, invariably dressed in jeans and a defiantly unfashionable brown leather jacket, disappearing back out through the door in search of trouble.
Everyone knows how WikiLeaks ended: a global swarm of revelations and headlines, with governments the world over transfixed by the daily drip-feed of disclosures, war logs, classified cables, and diplomatic indiscretions. And now everyone knows how the Murdoch story ended: with a kind of giant heave of revulsion at what his employees had been up to, and with a multibillion-dollar merger stopped in its tracks by the most overwhelming parliamentary vote anyone can remember. A profitable newspaper selling millions of copies a week had been killed off. The British press regulator was dead in the water.
Except the Murdoch story isn’t finished. It reaches so deeply into so many aspects of British and American civic life—including policing, politics, media, and regulation—that the story will continue to play out over the months, even years, ahead. Everyone expects more arrests. There are numerous civil actions wending their way through the British courts. There will be two public inquiries—into the behavior of press and police. And who knows what trouble the News Corp. shareholders or American regulatory authorities might create the more they learn about the management of the British wing of the family business.
Rewind to July 2009 and think how different it could have been. Up to this point the official narrative was straightforward. News of the World’s royal correspondent, Clive Goodman, had been caught “hacking” the palace phones. Or, rather, he had subcontracted the job to a private investigator, Glenn Mulcaire, who was expert at accessing voice messages and cracking any security (such as PIN numbers) that a victim might have put in place. The police had pounced. The two men went to jail, and News International told everyone—press, Parliament, police, and regulator—that Goodman was a lone rotten apple. The editor, Andy Coulson, resigned, protesting that he knew nothing about any of it. Game over.

How We Broke the Murdoch Scandal

Guardian editor Alan Rusbridger on his dogged reporter, a U.S. ally—and a gamble that finally paid off.

murdoch-the-guardian-fe06 Dan Chung / Eyevine-Redux (portrait)
Alan Rusbridger, editor of The Guardian. Inset: Cover of The Guardian after the scandal.
Every so often—perhaps once every 18 months—the veteran Guardian writer Nick Davies comes into my office, shuts the door with a conspiratorial backward glance, and proceeds to tell me something hair-raising.
In June last year he wanted to inform me about Julian Assange. He’d read that the (then little-known) snowy-haired hacker was on the run with a data stick full of millions of secret documents that the U.S. Defense and State departments had carelessly hemorrhaged. His plan was to track him down … and then The Guardian would publish them all. Good idea?
Early in 2009 there had been a similar moment. He’d discovered that James Murdoch, the son and heir of the most powerful private news-media company on earth, had done a secret deal to pay more than $1 million to cover up evidence of criminal behavior within the company. Interested?
The answer to both questions was—of course. Followed by a small inner gulp at the sheer scale and implications of the stories. Followed by the sight of Nick, invariably dressed in jeans and a defiantly unfashionable brown leather jacket, disappearing back out through the door in search of trouble.
Everyone knows how WikiLeaks ended: a global swarm of revelations and headlines, with governments the world over transfixed by the daily drip-feed of disclosures, war logs, classified cables, and diplomatic indiscretions. And now everyone knows how the Murdoch story ended: with a kind of giant heave of revulsion at what his employees had been up to, and with a multibillion-dollar merger stopped in its tracks by the most overwhelming parliamentary vote anyone can remember. A profitable newspaper selling millions of copies a week had been killed off. The British press regulator was dead in the water.
Except the Murdoch story isn’t finished. It reaches so deeply into so many aspects of British and American civic life—including policing, politics, media, and regulation—that the story will continue to play out over the months, even years, ahead. Everyone expects more arrests. There are numerous civil actions wending their way through the British courts. There will be two public inquiries—into the behavior of press and police. And who knows what trouble the News Corp. shareholders or American regulatory authorities might create the more they learn about the management of the British wing of the family business.
Rewind to July 2009 and think how different it could have been. Up to this point the official narrative was straightforward. News of the World’s royal correspondent, Clive Goodman, had been caught “hacking” the palace phones. Or, rather, he had subcontracted the job to a private investigator, Glenn Mulcaire, who was expert at accessing voice messages and cracking any security (such as PIN numbers) that a victim might have put in place. The police had pounced. The two men went to jail, and News International told everyone—press, Parliament, police, and regulator—that Goodman was a lone rotten apple. The editor, Andy Coulson, resigned, protesting that he knew nothing about any of it. Game over.

How We Broke the Murdoch Scandal

Guardian editor Alan Rusbridger on his dogged reporter, a U.S. ally—and a gamble that finally paid off.

murdoch-the-guardian-fe06 Dan Chung / Eyevine-Redux (portrait)
Alan Rusbridger, editor of The Guardian. Inset: Cover of The Guardian after the scandal.
Every so often—perhaps once every 18 months—the veteran Guardian writer Nick Davies comes into my office, shuts the door with a conspiratorial backward glance, and proceeds to tell me something hair-raising.
In June last year he wanted to inform me about Julian Assange. He’d read that the (then little-known) snowy-haired hacker was on the run with a data stick full of millions of secret documents that the U.S. Defense and State departments had carelessly hemorrhaged. His plan was to track him down … and then The Guardian would publish them all. Good idea?
Early in 2009 there had been a similar moment. He’d discovered that James Murdoch, the son and heir of the most powerful private news-media company on earth, had done a secret deal to pay more than $1 million to cover up evidence of criminal behavior within the company. Interested?
The answer to both questions was—of course. Followed by a small inner gulp at the sheer scale and implications of the stories. Followed by the sight of Nick, invariably dressed in jeans and a defiantly unfashionable brown leather jacket, disappearing back out through the door in search of trouble.
Everyone knows how WikiLeaks ended: a global swarm of revelations and headlines, with governments the world over transfixed by the daily drip-feed of disclosures, war logs, classified cables, and diplomatic indiscretions. And now everyone knows how the Murdoch story ended: with a kind of giant heave of revulsion at what his employees had been up to, and with a multibillion-dollar merger stopped in its tracks by the most overwhelming parliamentary vote anyone can remember. A profitable newspaper selling millions of copies a week had been killed off. The British press regulator was dead in the water.
Except the Murdoch story isn’t finished. It reaches so deeply into so many aspects of British and American civic life—including policing, politics, media, and regulation—that the story will continue to play out over the months, even years, ahead. Everyone expects more arrests. There are numerous civil actions wending their way through the British courts. There will be two public inquiries—into the behavior of press and police. And who knows what trouble the News Corp. shareholders or American regulatory authorities might create the more they learn about the management of the British wing of the family business.
Rewind to July 2009 and think how different it could have been. Up to this point the official narrative was straightforward. News of the World’s royal correspondent, Clive Goodman, had been caught “hacking” the palace phones. Or, rather, he had subcontracted the job to a private investigator, Glenn Mulcaire, who was expert at accessing voice messages and cracking any security (such as PIN numbers) that a victim might have put in place. The police had pounced. The two men went to jail, and News International told everyone—press, Parliament, police, and regulator—that Goodman was a lone rotten apple. The editor, Andy Coulson, resigned, protesting that he knew nothing about any of it. Game over.

How We Broke the Murdoch Scandal

Guardian editor Alan Rusbridger on his dogged reporter, a U.S. ally—and a gamble that finally paid off.

murdoch-the-guardian-fe06 Dan Chung / Eyevine-Redux (portrait)
Alan Rusbridger, editor of The Guardian. Inset: Cover of The Guardian after the scandal.
Every so often—perhaps once every 18 months—the veteran Guardian writer Nick Davies comes into my office, shuts the door with a conspiratorial backward glance, and proceeds to tell me something hair-raising.
In June last year he wanted to inform me about Julian Assange. He’d read that the (then little-known) snowy-haired hacker was on the run with a data stick full of millions of secret documents that the U.S. Defense and State departments had carelessly hemorrhaged. His plan was to track him down … and then The Guardian would publish them all. Good idea?
Early in 2009 there had been a similar moment. He’d discovered that James Murdoch, the son and heir of the most powerful private news-media company on earth, had done a secret deal to pay more than $1 million to cover up evidence of criminal behavior within the company. Interested?
The answer to both questions was—of course. Followed by a small inner gulp at the sheer scale and implications of the stories. Followed by the sight of Nick, invariably dressed in jeans and a defiantly unfashionable brown leather jacket, disappearing back out through the door in search of trouble.
Everyone knows how WikiLeaks ended: a global swarm of revelations and headlines, with governments the world over transfixed by the daily drip-feed of disclosures, war logs, classified cables, and diplomatic indiscretions. And now everyone knows how the Murdoch story ended: with a kind of giant heave of revulsion at what his employees had been up to, and with a multibillion-dollar merger stopped in its tracks by the most overwhelming parliamentary vote anyone can remember. A profitable newspaper selling millions of copies a week had been killed off. The British press regulator was dead in the water.
Except the Murdoch story isn’t finished. It reaches so deeply into so many aspects of British and American civic life—including policing, politics, media, and regulation—that the story will continue to play out over the months, even years, ahead. Everyone expects more arrests. There are numerous civil actions wending their way through the British courts. There will be two public inquiries—into the behavior of press and police. And who knows what trouble the News Corp. shareholders or American regulatory authorities might create the more they learn about the management of the British wing of the family business.
Rewind to July 2009 and think how different it could have been. Up to this point the official narrative was straightforward. News of the World’s royal correspondent, Clive Goodman, had been caught “hacking” the palace phones. Or, rather, he had subcontracted the job to a private investigator, Glenn Mulcaire, who was expert at accessing voice messages and cracking any security (such as PIN numbers) that a victim might have put in place. The police had pounced. The two men went to jail, and News International told everyone—press, Parliament, police, and regulator—that Goodman was a lone rotten apple. The editor, Andy Coulson, resigned, protesting that he knew nothing about any of it. Game over.

Twin terror attacks shock Norway

Hours after a massive bomb struck the heart of Oslo, reports began emerging of fresh horror: the indiscriminate shooting of young people attending a youth camp of the ruling Labour Party on an island west of the capital.
A gunman wearing police uniform opened fire on campers on the tiny island of Utoeya, sowing panic among them, before finally being arrested.
TV aerial images showed police commandos arriving in boats as survivors tried to swim to shore.
Others tried to hide in undergrowth, appealing for help through text messages (SMS) from mobile phones, because they feared that calls would give them away.

Start Quote

There is gunfire, I am hiding”
End Quote Text message received by a father from his daughter on the island
Anita Bakaas, mother of a teenage girl who survived the island ordeal unharmed, told BBC World TV that some 600 people had been camping in tents in woods.
Her daughter, she said, had hidden in a toilet with four other girls for an hour, keeping in contact by text message.
The girl told her mother the shooting had begun after campers were called to a meeting to hear about the bombing in Oslo, which had occurred several hours earlier.
As she hid, people outside the toilet door were being shot and killed, her mother said.
'Complete panic'
A witness quoted by Norwegian broadcaster NRK said a man in police uniform had called over young people, telling them "Come here", before shooting them.
The father of a girl attending the summer camp said he had received an SMS that said: "There is gunfire, I am hiding."
"We communicated by SMS," he added. "She told me not to call so as not to give away her hiding place."
Anders Frydenberg, Oslo police, on island attack: "The police are doing everything they can"
Ali Esbati, a Swedish politician of Iranian descent who was at the camp, said in messages through his Twitter account that he had tried to help two children traumatised by the shooting.
Unhurt himself, he said he had been tens of metres from the gunman.
Adrian Pracon, an official who attended the event, told Norway's Varden newspaper of "complete panic" among the campers. He personally had seen four dead bodies.
Andre Skeie, 26, told Reuters news agency by telephone that he had seen 20 dead bodies in the water after arriving on his boat to help evacuate people.
Several witnesses told Norwegian media the gunman was of northern European appearance.

Twin terror attacks shock Norway

Hours after a massive bomb struck the heart of Oslo, reports began emerging of fresh horror: the indiscriminate shooting of young people attending a youth camp of the ruling Labour Party on an island west of the capital.
A gunman wearing police uniform opened fire on campers on the tiny island of Utoeya, sowing panic among them, before finally being arrested.
TV aerial images showed police commandos arriving in boats as survivors tried to swim to shore.
Others tried to hide in undergrowth, appealing for help through text messages (SMS) from mobile phones, because they feared that calls would give them away.

Start Quote

There is gunfire, I am hiding”
End Quote Text message received by a father from his daughter on the island
Anita Bakaas, mother of a teenage girl who survived the island ordeal unharmed, told BBC World TV that some 600 people had been camping in tents in woods.
Her daughter, she said, had hidden in a toilet with four other girls for an hour, keeping in contact by text message.
The girl told her mother the shooting had begun after campers were called to a meeting to hear about the bombing in Oslo, which had occurred several hours earlier.
As she hid, people outside the toilet door were being shot and killed, her mother said.
'Complete panic'
A witness quoted by Norwegian broadcaster NRK said a man in police uniform had called over young people, telling them "Come here", before shooting them.
The father of a girl attending the summer camp said he had received an SMS that said: "There is gunfire, I am hiding."
"We communicated by SMS," he added. "She told me not to call so as not to give away her hiding place."
Anders Frydenberg, Oslo police, on island attack: "The police are doing everything they can"
Ali Esbati, a Swedish politician of Iranian descent who was at the camp, said in messages through his Twitter account that he had tried to help two children traumatised by the shooting.
Unhurt himself, he said he had been tens of metres from the gunman.
Adrian Pracon, an official who attended the event, told Norway's Varden newspaper of "complete panic" among the campers. He personally had seen four dead bodies.
Andre Skeie, 26, told Reuters news agency by telephone that he had seen 20 dead bodies in the water after arriving on his boat to help evacuate people.
Several witnesses told Norwegian media the gunman was of northern European appearance.

Twin terror attacks shock Norway

Eyewitness Ingunn Anderson says she saw many injured people
Norway has been hit by twin attacks - a massive bomb blast in the capital and a shooting attack on young people at a governing Labour Party youth camp.
At least seven people were killed in the bombing, which inflicted huge damage on government buildings in Oslo.
At least 10 more died at the camp, on an island outside Oslo, police say. One witness said he had seen 20 bodies.
The suspected gunman was arrested at the camp and the government have confirmed that he is Norwegian.
Police have said that he is also linked with the bomb attack. Reports described him as tall and blond.

Analysis

The prime minister and justice minister have declined to speculate on a motive behind the attack but police are saying that they believe the car bomb and the shooting are linked and that they have a suspect in custody from Utoeya.
The ministers are confirming he is Norwegian. During the day, after an initial focus on an al-Qaeda link, the possibility of domestic extremism increasingly came into focus.
The choice of targets - government buildings and a political youth rally - suggested a possible political agenda rather than the mass casualty approach typically employed by al-Qaeda.
Constructing a large car bomb requires a degree of sophistication and the crucial factor for the police will be establishing how many people are behind this attack, whether any are still at large and to whom they might be connected.
Prime Minister Jens Stoltenberg, whose Oslo offices were among those damaged by the bomb, described the attacks as "bloody and cowardly" in a news conference.
He said that Norway had been "shaken by evil" but that Norwegian democracy and ideals would not be destroyed.
"We are a small nation and a proud nation. No-one will bomb us to silence no-one will shoot us to silence," he said.
Norwegian media reports said the shootings at the island, on the Tyrifjorden lake, were carried out by a man in police uniform.
Several people from the island camp are still missing, government officials said. Police also confirmed that undetonated explosives were found on the island.
No group has said it carried out the attacks.
Car wreckage
In Oslo, rubble and glass from shattered windows littered the streets and smoke from the fires drifting across the city could be seen in television footage from the devastated government quarter.
Hours after the bomb struck, officials said some people were still inside the damaged buildings, some of which were on fire.
Norway's prime minister Jens Stoltenberg: 'No one will bomb us into silence'
All roads into the city centre have been closed, said national broadcaster NRK, as security officials evacuated people from the area, fearing another blast.
Government officials urged people to stay at home and avoid central areas of Oslo.
Earlier Egil Vrekke, Assistant Chief Constable of Oslo police told the BBC the rescue operation in Oslo was ongoing.
"We are issuing warnings just [to] make sure people are not in the area in case there are further explosions," he told the BBC.
"We have cordoned off large areas. There are bomb experts at the scene investigating whether there are other devices in the area."
A few hours after the explosion, a gunman opened fire at a camp in Utoeya for young members of the Labour Party.
NRK journalist Ole Torp said there were reports the gunman had been armed with a handgun, an automatic weapon and a shotgun.
"He travelled on the ferry boat from the mainland over to that little inland island posing as a police officer, saying he was there to do research in connection with the bomb blasts," he told the BBC.
Smoke in downtown Oslo
"He asked people to gather round and then he started shooting, so these young people fled into the bushes and woods and some even swam off the island to get to safety."
Mr Stoltenberg had been due to visit the camp on Saturday. Foreign Minister Jonas Gahr Store, who visited the camp on Thursday, praised those who were attending.
"The country has no finer youth than young people who go for a summer camp doing politics, doing discussions, doing training, doing football, and then they experience this absolutely horrendous act of violence."
'Focus on rescue'
State Secretary Kristian Amundsen said Friday was a public holiday in Norway so the government offices were not as busy as they might usually have been.
"But there are many hundreds of people in these buildings every day," he told the BBC.
"We have to focus on the rescue operation - there are still people in the building, there are still people in the hospital."
Journalist Hanne Taalesen on island attack: "There are reports that youths hid in bushes"
Reuters said the oil ministry was among the other government buildings hit, while NRK journalist Ingunn Andersen said the headquarters of tabloid newspaper VG were also damaged.
"It's complete chaos here. The windows are blown out in all the buildings close by," she told AP.
Oistein Mjarum, head of communications for the Norwegian Red Cross, which has offices nearby, said the blast could be heard across Oslo.
"We have never had a terrorist attack like this in Norway - if that's what it is - but of course this has been a great fear for all Norwegians when they have seen what has been happening around the world."
The United States has condemned the "despicable acts of violence" in Oslo, while the President of the European Council, Herman Van Rompuy, said he was "deeply shocked" by "these acts of cowardice for which there is no justification".

Twin terror attacks shock Norway

Eyewitness Ingunn Anderson says she saw many injured people
Norway has been hit by twin attacks - a massive bomb blast in the capital and a shooting attack on young people at a governing Labour Party youth camp.
At least seven people were killed in the bombing, which inflicted huge damage on government buildings in Oslo.
At least 10 more died at the camp, on an island outside Oslo, police say. One witness said he had seen 20 bodies.
The suspected gunman was arrested at the camp and the government have confirmed that he is Norwegian.
Police have said that he is also linked with the bomb attack. Reports described him as tall and blond.

Analysis

The prime minister and justice minister have declined to speculate on a motive behind the attack but police are saying that they believe the car bomb and the shooting are linked and that they have a suspect in custody from Utoeya.
The ministers are confirming he is Norwegian. During the day, after an initial focus on an al-Qaeda link, the possibility of domestic extremism increasingly came into focus.
The choice of targets - government buildings and a political youth rally - suggested a possible political agenda rather than the mass casualty approach typically employed by al-Qaeda.
Constructing a large car bomb requires a degree of sophistication and the crucial factor for the police will be establishing how many people are behind this attack, whether any are still at large and to whom they might be connected.
Prime Minister Jens Stoltenberg, whose Oslo offices were among those damaged by the bomb, described the attacks as "bloody and cowardly" in a news conference.
He said that Norway had been "shaken by evil" but that Norwegian democracy and ideals would not be destroyed.
"We are a small nation and a proud nation. No-one will bomb us to silence no-one will shoot us to silence," he said.
Norwegian media reports said the shootings at the island, on the Tyrifjorden lake, were carried out by a man in police uniform.
Several people from the island camp are still missing, government officials said. Police also confirmed that undetonated explosives were found on the island.
No group has said it carried out the attacks.
Car wreckage
In Oslo, rubble and glass from shattered windows littered the streets and smoke from the fires drifting across the city could be seen in television footage from the devastated government quarter.
Hours after the bomb struck, officials said some people were still inside the damaged buildings, some of which were on fire.
Norway's prime minister Jens Stoltenberg: 'No one will bomb us into silence'
All roads into the city centre have been closed, said national broadcaster NRK, as security officials evacuated people from the area, fearing another blast.
Government officials urged people to stay at home and avoid central areas of Oslo.
Earlier Egil Vrekke, Assistant Chief Constable of Oslo police told the BBC the rescue operation in Oslo was ongoing.
"We are issuing warnings just [to] make sure people are not in the area in case there are further explosions," he told the BBC.
"We have cordoned off large areas. There are bomb experts at the scene investigating whether there are other devices in the area."
A few hours after the explosion, a gunman opened fire at a camp in Utoeya for young members of the Labour Party.
NRK journalist Ole Torp said there were reports the gunman had been armed with a handgun, an automatic weapon and a shotgun.
"He travelled on the ferry boat from the mainland over to that little inland island posing as a police officer, saying he was there to do research in connection with the bomb blasts," he told the BBC.
Smoke in downtown Oslo
"He asked people to gather round and then he started shooting, so these young people fled into the bushes and woods and some even swam off the island to get to safety."
Mr Stoltenberg had been due to visit the camp on Saturday. Foreign Minister Jonas Gahr Store, who visited the camp on Thursday, praised those who were attending.
"The country has no finer youth than young people who go for a summer camp doing politics, doing discussions, doing training, doing football, and then they experience this absolutely horrendous act of violence."
'Focus on rescue'
State Secretary Kristian Amundsen said Friday was a public holiday in Norway so the government offices were not as busy as they might usually have been.
"But there are many hundreds of people in these buildings every day," he told the BBC.
"We have to focus on the rescue operation - there are still people in the building, there are still people in the hospital."
Journalist Hanne Taalesen on island attack: "There are reports that youths hid in bushes"
Reuters said the oil ministry was among the other government buildings hit, while NRK journalist Ingunn Andersen said the headquarters of tabloid newspaper VG were also damaged.
"It's complete chaos here. The windows are blown out in all the buildings close by," she told AP.
Oistein Mjarum, head of communications for the Norwegian Red Cross, which has offices nearby, said the blast could be heard across Oslo.
"We have never had a terrorist attack like this in Norway - if that's what it is - but of course this has been a great fear for all Norwegians when they have seen what has been happening around the world."
The United States has condemned the "despicable acts of violence" in Oslo, while the President of the European Council, Herman Van Rompuy, said he was "deeply shocked" by "these acts of cowardice for which there is no justification".

Microsoft annual profit soars on Xbox 360 demand revenue

SAN FRANCISCO--U.S. technology giant Microsoft said Thursday its annual profit soared on record revenue thanks in part to hot demand for its Xbox 360 video game console gear and online network.
Microsoft reported its net income surged 23 percent to US$23.15 billion on record high revenue of US$69.94 billion in the fiscal year that ended June 30.

The annual results came with word that Microsoft posted profit of US$5.87 billion on record revenue of US$17.37 billion in the fiscal fourth quarter that ended June 30.

“Throughout fiscal 2011, we delivered to market a strong lineup of products and services which translated into double-digit revenue growth, and operating margin expansion,” said Microsoft chief financial officer Peter Klein.

Microsoft Business Division revenue grew 16 percent for the year, with the Redmond, Washington-based company selling more than 100 million licenses for the latest version of its Office software.

“We continue to see strong business demand across all our products, from small businesses all the way up to the largest global enterprises,” said Microsoft chief operating officer Kevin Turner.

Businesses recovering from the economic meltdown of two years ago continued to spend money replacing or upgrading computer gear, while consumer spending outside the workplace remained soft.

“Basically, Office put the ball over the goal line again,” said Rob Helm, managing vice president of research at private analyst firm Directions on Microsoft.

Microsoft said its online services unit saw revenue climb 15 percent during the year, primarily driven by gains in income from Internet search.

Bing's share of the U.S. search market had grown to 14.4 percent by the end of June, according to the company.

Revenue from Microsoft's Entertainment & Devices Division leaped 45 percent for the year due to “ongoing momentum” of the Xbox 360, Kinect gesture-sensing controllers for the consoles and the Xbox Live network that connects consoles to online games, films and other digital offerings.

Xbox Live membership has reached 35 million, according to Klein.

While the business division remains “the bright spot” at the company, sales of Windows operating software and licenses were being hurt by a shift from personal computers to smart mobile devices such as tablets, according to Helm.

“We are not expecting a Microsoft tablet solution to show up for at least a year,” the analyst said. “The tablet problem is going to be chewing away throughout fiscal year 2012.”

Another challenge facing Microsoft is that demand for personal computers is growing most in emerging markets where prices are lower and software piracy prevalent.

More than half of personal computers shipped in the past year went to emerging markets, according to Microsoft executives who predicted that meant lower average selling prices and higher piracy rates in the coming year.

“The economies doing best are in countries where they are reluctant for pay for software,” Helm said.

Microsoft saw companies embracing Office 365, which offers business software as services in the Internet “cloud.”

Microsoft said it remains committed to its deal to power Internet search at Yahoo! websites and the companies are working together to “uncover and address gaps and inefficiencies” in the merged technology platform.

“We are totally aligned with Yahoo,” Klein said. “The collaboration is fantastic and we will have this turned around by the end of this calendar year

Microsoft annual profit soars on Xbox 360 demand revenue

SAN FRANCISCO--U.S. technology giant Microsoft said Thursday its annual profit soared on record revenue thanks in part to hot demand for its Xbox 360 video game console gear and online network.
Microsoft reported its net income surged 23 percent to US$23.15 billion on record high revenue of US$69.94 billion in the fiscal year that ended June 30.

The annual results came with word that Microsoft posted profit of US$5.87 billion on record revenue of US$17.37 billion in the fiscal fourth quarter that ended June 30.

“Throughout fiscal 2011, we delivered to market a strong lineup of products and services which translated into double-digit revenue growth, and operating margin expansion,” said Microsoft chief financial officer Peter Klein.

Microsoft Business Division revenue grew 16 percent for the year, with the Redmond, Washington-based company selling more than 100 million licenses for the latest version of its Office software.

“We continue to see strong business demand across all our products, from small businesses all the way up to the largest global enterprises,” said Microsoft chief operating officer Kevin Turner.

Businesses recovering from the economic meltdown of two years ago continued to spend money replacing or upgrading computer gear, while consumer spending outside the workplace remained soft.

“Basically, Office put the ball over the goal line again,” said Rob Helm, managing vice president of research at private analyst firm Directions on Microsoft.

Microsoft said its online services unit saw revenue climb 15 percent during the year, primarily driven by gains in income from Internet search.

Bing's share of the U.S. search market had grown to 14.4 percent by the end of June, according to the company.

Revenue from Microsoft's Entertainment & Devices Division leaped 45 percent for the year due to “ongoing momentum” of the Xbox 360, Kinect gesture-sensing controllers for the consoles and the Xbox Live network that connects consoles to online games, films and other digital offerings.

Xbox Live membership has reached 35 million, according to Klein.

While the business division remains “the bright spot” at the company, sales of Windows operating software and licenses were being hurt by a shift from personal computers to smart mobile devices such as tablets, according to Helm.

“We are not expecting a Microsoft tablet solution to show up for at least a year,” the analyst said. “The tablet problem is going to be chewing away throughout fiscal year 2012.”

Another challenge facing Microsoft is that demand for personal computers is growing most in emerging markets where prices are lower and software piracy prevalent.

More than half of personal computers shipped in the past year went to emerging markets, according to Microsoft executives who predicted that meant lower average selling prices and higher piracy rates in the coming year.

“The economies doing best are in countries where they are reluctant for pay for software,” Helm said.

Microsoft saw companies embracing Office 365, which offers business software as services in the Internet “cloud.”

Microsoft said it remains committed to its deal to power Internet search at Yahoo! websites and the companies are working together to “uncover and address gaps and inefficiencies” in the merged technology platform.

“We are totally aligned with Yahoo,” Klein said. “The collaboration is fantastic and we will have this turned around by the end of this calendar year

Republican House Speaker John Boehner quits debt talks

Republican House Speaker John Boehner has walked away from crunch debt ceiling talks at the White House with US President Barack Obama.

Mr Obama said Mr Boehner had rejected an "extraordinarily fair deal" that would have included $650bn (£400bn) of cuts to entitlement programmes.

Mr Obama said he had been willing to take "a lot of heat" from his party.

Explaining the walkout, Mr Boehner told his Republican colleagues: "In the end, we couldn't connect."

"I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward," Mr Boehner said in a letter to the Republican rank and file.

The president called for new talks with congressional leaders on Saturday at 1100 (1500 GMT).

'Call not returned'

The talks were aimed at avoiding what analysts say would be a financially catastrophic US debt default on 2 August.

"It is hard to understand why Speaker Boehner would walk away from this kind of deal," President Obama said at a news conference on Friday evening.

"There are a lot of Republicans who are puzzled as to why it couldn't get done," he added.

Senior Republican aides said President Obama and congressional Republicans had been close to reaching a deal last week, but that the White House had changed its demand to call for higher taxes.

White House correspondents said Mr Obama looked visibly angry as he told reporters that until "sometime early today when I couldn't get a phone call returned, my expectation was that Boehner was going to go to his caucus" to help finalise a deal.

Despite the breakdown in talks, Mr Obama said on Friday he was confident the $14.3tn (£8.7tn) limit on US borrowing would be raised by the approaching deadline.

But the president also countenanced for the first time the possibility of the US not meeting its financial obligations.

"If we default, then we're going to have to make adjustments," he said.

Mr Obama said he was "fed up" with political posturing and was willing to "sign an extension of the debt ceiling which takes us through 2013".

'Taxes destroy jobs'

In his letter to congressional colleagues, Mr Boehner said the president was "emphatic that taxes have to be raised".

"As a former small businessman, I know tax increases destroy jobs," he added.

Republicans have been unwilling to consider raising new tax revenues to counter the growing budget deficits.

The Democrats have been opposed to cutting popular healthcare and welfare programmes for pensioners and the poor.

Earlier on Friday, the Democratic-led US Senate rejected a "cut, cap and balance" bill passed by the Republican-led House, which would have severely cut public spending and forced the government to balance its budget.

Republican House Speaker John Boehner quits debt talks

Republican House Speaker John Boehner has walked away from crunch debt ceiling talks at the White House with US President Barack Obama.

Mr Obama said Mr Boehner had rejected an "extraordinarily fair deal" that would have included $650bn (£400bn) of cuts to entitlement programmes.

Mr Obama said he had been willing to take "a lot of heat" from his party.

Explaining the walkout, Mr Boehner told his Republican colleagues: "In the end, we couldn't connect."

"I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward," Mr Boehner said in a letter to the Republican rank and file.

The president called for new talks with congressional leaders on Saturday at 1100 (1500 GMT).

'Call not returned'

The talks were aimed at avoiding what analysts say would be a financially catastrophic US debt default on 2 August.

"It is hard to understand why Speaker Boehner would walk away from this kind of deal," President Obama said at a news conference on Friday evening.

"There are a lot of Republicans who are puzzled as to why it couldn't get done," he added.

Senior Republican aides said President Obama and congressional Republicans had been close to reaching a deal last week, but that the White House had changed its demand to call for higher taxes.

White House correspondents said Mr Obama looked visibly angry as he told reporters that until "sometime early today when I couldn't get a phone call returned, my expectation was that Boehner was going to go to his caucus" to help finalise a deal.

Despite the breakdown in talks, Mr Obama said on Friday he was confident the $14.3tn (£8.7tn) limit on US borrowing would be raised by the approaching deadline.

But the president also countenanced for the first time the possibility of the US not meeting its financial obligations.

"If we default, then we're going to have to make adjustments," he said.

Mr Obama said he was "fed up" with political posturing and was willing to "sign an extension of the debt ceiling which takes us through 2013".

'Taxes destroy jobs'

In his letter to congressional colleagues, Mr Boehner said the president was "emphatic that taxes have to be raised".

"As a former small businessman, I know tax increases destroy jobs," he added.

Republicans have been unwilling to consider raising new tax revenues to counter the growing budget deficits.

The Democrats have been opposed to cutting popular healthcare and welfare programmes for pensioners and the poor.

Earlier on Friday, the Democratic-led US Senate rejected a "cut, cap and balance" bill passed by the Republican-led House, which would have severely cut public spending and forced the government to balance its budget.