Journal By Calvin Lee Ledsome Sr.,

WASHINGTON (AP) — The number of people who signed contracts to buy homes fell sharply in April, hitting its lowest point since fall and renewing fears that a recovery in the housing market is far off.

An index of sales agreements for previously occupied homes sank 11.6 percent last month to a reading of 81.9, the National Association of Realtors said Friday.

A reading of 100 would be considered healthy.

The last time the index reached at least 100 was in April 2010.

That was the final month when people could qualify for a home-buying tax credit of up to $8,000.

Signings are still nearly 8 percent above June’s reading of 75.9, the lowest figure since the housing bust.

Contract signings are considered a reliable indicator of the housing market’s direction. That’s because there’s usually a one- to two-month lag between a sales contract and a completed deal.

But the Realtors group has noted a larger-than-usual number of contract cancellations in recent months. Some buyers have canceled purchases after appraisals showed that the homes were worth less than the buyers’ initial bids. A sale isn’t final until a mortgage is closed.

There “appears to have been a sudden arrest in willingness to commit to a home purchase,” said Pierre Ellis, a senior economist at Decision Economics.

“April sale closings came in noticeably less strong than March contract signings — hinting at mortgage problems,” Ellis said.

The Realtors group said Friday’s report “implies a slower-than-expected market recovery in upcoming months,” in light of rising oil prices, severe weather across the Midwest and South and a rise in applications for unemployment benefits.

Some analysts noted that recent natural disasters are causing a slowdown in construction. They point to the flooding Mississippi River, which has devastated homes and farmlands and closed factories; the tornado in Joplin, Mo., which has killed at least 132 people; and a tornado outbreak in April, which caused an estimated $8 billion in damage in Alabama and six other Southern states.

The Realtors index showed that contract signings were uneven across the country: They rose 1.7 percent in the Northeast but dropped 8.9 percent in the West, 10.4 percent in the Midwest and 17.2 percent in the South.

High unemployment, tighter credit and a lingering fear that home prices have yet to hit bottom are preventing many Americans from buying homes. That’s true despite super-low mortgage rates and home prices that are falling in some areas to their lowest points in a decade.

Overhanging the entire housing sector are waves of foreclosures. They are forcing down home prices.

Economists say it could be several years before the nation’s housing market recovers. Sales of previously occupied homes fell last year to their lowest level in 13 years.

This year is shaping up to be equally bleak. The number of purchases is running at just half the pace of 1963 — even though there are 120 million more people in the United States now.

A reading of 100 indicates the average level of sales activity in 2001, when the index was created. The reading exceeded the 100 threshold from March 2003 to April 2007, before sinking as the country fell into a deep recession.

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NEW YORK (AP) — Investors sent government bond prices higher Thursday after reports on unemployment claims and first-quarter economic growth reinforced expectations that the economic recovery may be moderating.

The price of the 10-year Treasury note rose 62.5 cents per $100 invested in late trading. Its yield, which moves in the opposite direction to the price, fell to 3.06 percent from 3.13 percent late Wednesday.

It was the lowest level for the 10-year yield in a year. The yield is used as benchmark on a wide variety of loans for businesses and consumers including home mortgages.

The government reported that more people applied for unemployment benefits last week, the first increase in three weeks. Analysts had expected a drop.

The government also said that the U.S. economy grew at a relatively sluggish rate of 1.8 percent in the January-March quarter, due partly to a spike in gas prices above $4 a gallon. Economists had forecast an upward revision to 2.2 percent.

Traders tend to buy Treasurys when economic growth appears to be losing momentum.

The Treasury Department also auctioned off $29 billion in seven-year notes at a yield of 2.43 percent, the lowest yield of the year. Investors placed bids for 3.24 times the amount offered, higher than the previous four auctions this year.

The yield of the seven-year note was 2.36 percent late Thursday.

In other trading, the price of the 30-year bond rose $1.03 per $100 invested, while its yield fell to 4.22 percent from 4.27 percent late Wednesday. The yield on the two-year note slipped to 0.50 percent from 0.54 percent.

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PARIS (AP) — Arab uprisings are pushing aside deficits and austerity as the biggest worry of the leaders of the Group of Eight industrialized nations this year.

President Barack Obama and the other leaders will seek to marshal their combined economic might behind the grass-roots democracy movements that have swept the Arab world — and driven away tourists and investors.

Egypt and Tunisia, where popular revolts this year overthrew authoritarian regimes, want to show G-8 leaders and international financiers that they are still sound investment destinations — which might be a tall order as the future shape and policies of their governments remains unclear.

The discussions starting Thursday in the chic Normandy resort of Deauville will see the host, French President Nicolas Sarkozy, bring together the heads of wealthy nations for what one of Sarkozy’s top advisers describes as “the founding moment” of a partnership between the G-8 and the Arab countries.

That partnership may be strained, however, by tensions over how to handle Libya’s rebel movement and entrenched leader Moammar Gadhafi. NATO appears to have no exit strategy, and efforts to oust Gadhafi remain elusive.

The leaders of the U.S., Canada, Britain, Germany, France, Japan, Italy and Russia will greet counterparts from Tunisia, Egypt and the head of the Arab League to hash out details of what some are calling a new “Marshall Plan” for these countries, similar to the massive U.S. aid to Europe after World War II that helped the continent rebuild and stave off communism.

The historic parallel is fitting, as Deauville is just a short drive along the English Channel from the D-Day landing beaches where the U.S. and its allies began to roll back the Third Reich in 1944.

A top Sarkozy official drew another historical analogy, saying the aid and investment to be promised to the Arab nations would resemble that which the G-8 offered to Eastern and Central European nations after the collapse of communism in 1989.

Last week President Barack Obama said the U.S. has asked the World Bank and the International Monetary Fund to present a plan at the G-8 summit that sets a path to stabilize and modernize the economies of Tunisia and Egypt.

The U.S. will forgive up to $1 billion in Egyptian debt and guarantee another $1 billion to finance infrastructure and new jobs. Obama said he will ask Congress to finance enterprise funds that will provide money for investment in both countries — a request that comes as Congress seeks to cut spending.

Tunisia, followed by Egypt, kicked off change around the Arab world, as broad-based popular movements took to the streets demanding greater rights and political representation from their authoritarian governments.

But the street demonstrations in Cairo and Tunis that thrilled and inspired the Arab world also drove away the tourists and investors on which these economies are heavily dependent.

“The first thing they will be looking for is direct financial aid,” said Said Hirsh, a Middle East economist with Capital Economics consultancy in London. “Both countries need quite a lot of money considering the hit to their economies and their revenues.”

While U.S. officials say G-8 countries will discuss their role in the process, they say it is too soon to reach a deal on dollar amounts for assistance.

The European Bank for Reconstruction and Development, a London-based institution set up in 1991 to foster transition to market economies in post-communist Europe, could be “repurposed” to focus its expertise on the southern Mediterranean region, a top official in Sarkozy’s office said, speaking on condition of anonymity because of protocol.

The heads of the World Bank and the United Nations will also be present and add their signatures to the partnership declaration. Former IMF chief Dominique Strauss-Kahn, under house arrest in New York following his indictment for sexual assault, will be replaced for the event by the institution’s acting managing director John Lipsky.

Finding a permanent replacement for Strauss-Kahn is likely to take up a good part of the summiteers’ small talk.

Nuclear safety will be another topic, with Japanese Prime Minister Naoto Kan scheduled to provide leaders with an update on the continuing crisis at the Fukushima Dai-ichi nuclear power plant.

The future of the Internet will also figure in the G-8 leaders’ talks. Mark Zuckerberg of Facebook and Eric Schmidt of Google and other Internet executives took part in two days of debates focused broadly on the Internet’s impact on the global economy. Several of the Internet conference’s speakers will then take policy recommendations to Deauville in talks with the G-8 leaders.

Police have established one security cordon around the conference center where the leaders are meeting, and another perimeter encompassing all of Deauville. Local ports, train stations and the airport will be shut from Wednesday to Friday, and a no-fly zone enforced over the town.

The show of force may have discouraged radicals and other protesters from attempting to organize demonstrations close to the summit. Anti-G8 protesters plan symbolic demonstrations in the neighboring towns of Caen and Le Havre, but they do not plan to try to disrupt the event in Deauville itself, according to a statement circulated by radical groups online.

___

Associated Press writers Julie Pace in Washington, D.C., Geir Moulson in Berlin, Charmaine Noronha in Toronto, David Stringer in London and Paul Schemm in Rabat, Morocco contributed to this report.

Greg Keller can be reached at http://twitter.com/Greg_Keller

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NEW YORK (AP) — Stock futures rose Tuesday, a day after fears about European debt sparked steep declines in financial markets around the world.

Ahead of the opening bell, Dow Jones industrial average futures are up 39, or 0.3 percent, at 12,401. Standard & Poor’s 500 futures are up 5, or 0.4 percent, at 1,319. Nasdaq 100 futures are up 7, or 0.3, at 2,322.

The modest advance in futures trading came despite more troubling news about the state of European debt management.

Greece‘s main opposition party said it opposed the government’s new austerity measures. The announcement dashed hopes that the country might be able to repair its finances enough to get another loan package from the International Monetary Fund.

Ratings agency Moody’s warned that a Greek restructuring of its debt would constitute a default. Moody’s said such a move would hurt the credit ratings of Greece and other debt-laden European countries. The ratings agency also said it would review 14 British financial institutions for a possible downgrade.

Nonetheless, European stocks recovered Tuesday after Monday’s declines.

The FTSE 100 index of leading British shares rose 0.4 percent in midday trading. Germany’s DAX rose 0.7 percent and the CAC-40 in France was 0.2 percent higher. The euro also rose slightly against the dollar after falling to a two-month low Monday.

In economic news, the Commerce Department is expected to report at 10 a.m. Eastern on how many new homes were bought in April, offering traders a glimpse at the housing market.

Analysts expect sales to have been roughly flat, rising slightly to an annual rate of 303,000 from 300,000 in March. That is still far below the 700,000 in annual sales seen as representing a healthy market.

New homes are unappealing to budget-conscious families because their median price is nearly 31 percent higher than previously-occupied homes. That’s twice the price difference typical of a healthy economy. At their current rate, new-home sales are on track to experience a sixth straight year of declines.

The Dow fell as much as 180 points Monday before paring back some of its losses after Greece, Italy and Spain suffered weekend setbacks in their attempts to control their debt. The Dow fell 130.78 points, or 1 percent, to close at 12,381.26.The S&P 500 index lost 15.90, or 1.2 percent, to 1,317.37. The Nasdaq dropped 44.42, or 1.6 percent, to 2,758.90.

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Warmest regards, ]]> https://economicnewsblog.wordpress.com/2011/05/24/new-york-ap-%e2%80%94-stock-futures-rose-tuesday-a-day-after-fears-about-european-debt-sparked/feed/ 0 26.525349 -80.066430 26.525349 -80.066430 adminenb NEW YORK (AP) — Stock futures rose Tuesday, a day after fears about European debt sparked ... https://economicnewsblog.wordpress.com/2011/05/23/ap-gfk-poll-most-americans-say-they-dont-believe-medicare-has-to-be-cut-to-balance-the-federal-budget-ditto/ https://economicnewsblog.wordpress.com/2011/05/23/ap-gfk-poll-most-americans-say-they-dont-believe-medicare-has-to-be-cut-to-balance-the-federal-budget-ditto/#comments Mon, 23 May 2011 13:38:10 +0000 http://economicnewsblog.wordpress.com/?p=564 AP-GfK Poll: Medicare doesn’t have to be cut
May 23, 2011, 7:02 a.m. EDT
Associated Press

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WASHINGTON (AP) — They’re not buying it. Most Americans say they don’t believe Medicare has to be cut to balance the federal budget, and ditto for Social Security, a new poll shows.

The Associated Press-GfK poll suggests that arguments for overhauling the massive benefit programs to pare government debt have failed to sway the public. The debate is unlikely to be resolved before next year’s elections for president and Congress.

Americans worry about the future of the retirement safety net, the poll found, and 3 out of 5 say the two programs are vital to their basic financial security as they age. That helps explain why the Republican Medicare privatization plan flopped, and why President Barack Obama’s Medicare cuts to finance his health care law contributed to Democrats losing control of the House in last year’s elections.

Medicare seems to be turning into the new third rail of politics.

“I’m pretty confident Medicare will be there, because there would be a rebellion among voters,” said Nicholas Read, 67, a retired teacher who lives near Buffalo, N.Y. “Republicans only got a hint of that this year. They got burned. They touched the hot stove.”

Combined, Social Security and Medicare account for about a third of government spending, a share that will only grow. Economic experts say the cost of retirement programs for an aging society is the most serious budget problem facing the nation. The trustees who oversee Social Security and Medicare recently warned the programs are “not sustainable” over the long run under current financing.

Nearly every solution for Social Security is politically toxic, because the choices involve cutting benefits or raising taxes. Medicare is even harder to fix because the cost of modern medicine is going up faster than the overall cost of living, outpacing economic growth as well as tax revenues.

“Medicare is an incredibly complex area,” said former Sen. Judd Gregg, R-N.H., who used to chair the Budget Committee. “It’s a matrix that is almost incomprehensible. Unlike Social Security, which has four or five moving parts, Medicare has hundreds of thousands. There is no single approach to Medicare, whereas with Social Security everyone knows where the problem is.”

That’s not what the public sees, however.

“It’s more a matter of bungling, and lack of oversight, and waste and fraud, and padding of the bureaucracy,” said Carolyn Rodgers, who lives near Memphis, Tenn., and is still working as a legal assistant at 74. “There is no reason why even Medicare, if it had been handled right, couldn’t have been solvent.”

In the poll, 54 percent said it’s possible to balance the budget without cutting spending for Medicare, and 59 percent said the same about Social Security.

Taking both programs together, 48 percent said the government could balance the budget without cutting either one. Democrats and political independents were far more likely than Republicans to say that neither program will have to be cut.

The recession cost millions their jobs and sent retirement savings accounts into a nosedive. It may also have underscored the value of government programs. Social Security kept sending monthly benefits to 55 million recipients, like clockwork; Medicare went on paying for everything from wheelchairs to heart operations.

Overall, 70 percent in the poll said Social Security is “extremely” or “very” important to their financial security in retirement, and 72 percent said so for Medicare. Sixty-two percent said that both programs are extremely or very important.

The sentiment was a lot stronger among the elderly. Eighty-four percent of those 65 or older said both programs are central to their financial security. Compare that to adults under 30, just starting out. Just under half, or 46 percent, said they believed both Social Security and Medicare would be extremely or very important to their financial security in retirement.

Old, middle-aged or just entering the workforce, most people are keenly aware of the cost of health care, and that may be helping to focus more attention on Medicare.

“Health insurance these days is very costly, and it’s not something that most people can afford to go out and buy on their own,” said Tim Messner, 38, a technology quality assurance analyst from Barberton, Ohio. “I don’t know that we could possibly plan ahead for medical insurance, but if you had to replace Social Security or investments, you at least have an idea of what you can live on.”

Numbers tell the story. As health care goes up, the value of Medicare benefits is catching up to Social Security’s. A two-earner couple with average wages retiring in 1980 would have expected to receive health care worth $132,000 through Medicare over their remaining lifetimes, and $446,000, or about three times more, in Social Security payments.

For a similar couple who retired last year, the Medicare benefit will be worth $343,000, compared to Social Security payments totaling $539,000, less than twice as much. The numbers, from economists at the nonpartisan Urban Institute, are adjusted for inflation to allow direct comparison. For low-income single retirees and some couples, the value of expected Medicare benefits already exceeds that of Social Security.

The poll found a deep current of pessimism about the future of Social Security and Medicare. As much as Americans say the programs are indispensable, only 35 percent say it’s extremely or very likely that Social Security will be there to pay benefits through their entire retirement. For Medicare, it was 36 percent.

Again, there’s a sharp difference between what the public believes and what experts say. Most experts say the programs will be there for generations to come. But they may look very different than they do today, and Americans should take note.

“Do they have a basis for worrying that these programs are going to pay them much less than they’re currently promising?” asked economist Charles Blahous. “Yes, absolutely. Do they have a basis for being concerned that the programs may have to be structurally changed in order to survive? The answer to that is yes, too.” A trustee of Social Security and Medicare, Blahous served as an economic adviser to President George W. Bush.

Republican lawmakers don’t inspire much confidence right now when it comes to dealing with retirement programs, the poll found. Democrats have the advantage as the party more trusted to do a better job handling Social Security by 52 percent to 34 percent, and Medicare by 54 percent to 33 percent. Often, but not always, major revisions have been accomplished through bipartisan compromise.

Sue DeSantis, 61, a store clerk from West Milton, Ohio, worries she won’t be able to rely on either program. Both are important to her well-being, but she thinks changes are inevitable. And she has little confidence in lawmakers.

“I don’t put my faith in politicians, and I don’t put my faith in the government,” said DeSantis. “I’m a Christian. I believe that God will take care of me. That doesn’t mean I should be foolish and not look at anything, but I don’t believe that the politicians are necessarily going to do the best for the common ordinary person like myself.”

The Associated Press-GfK poll was conducted May 5-9, 2011, by GfK Roper Public Affairs & Corporate Communications. It involved landline and cell phone interviews with 1,001 adults nationwide and has a margin of sampling error of plus or minus 4.2 percentage points.

____

Associated Press Polling Director Trevor Tompson, Deputy Director Jennifer Agiesta and AP News Survey Specialist Dennis Junius contributed to this report.

____

Online:

Poll results: http://www.ap-gfkpoll.com

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NEW YORK (AP) — Stocks opened slightly higher Thursday, extending Wednesday’s gains, after a government report showed a sharp drop in new claims for unemployment benefits. Weaker reports on home sales and economic expectations kept the gains in check.

Shares of social-networking company LinkedIn Corp. jumped 81 percent to $81.76 on their first day of trading. It is the largest U.S. Internet IPO since Google Inc.

The Dow Jones industrial average rose 26 points, or 0.2 percent, at 12,586 in early trading. The Standard & Poor’s 500 index gained 2, or 0.2 percent, to 1,343. The Nasdaq composite index added 4, or 0.1 percent, to 2,819.

The Department of Labor reported that applications for unemployment dropped 29,000 last week, more than expected, to 409,000.

Two other reports raised doubts about the strength of the housing recovery and the overall direction of U.S. growth.

The National Association of Realtors said fewer people purchased previously occupied homes in April. The number of homes sold in foreclosure also declined.

The Conference Board reported that expectations for future economic activity decreased, based on its index of leading indicators. The private research group said the index fell 0.3 percent in April, the first decline since June 2010.

In a sign that the U.S. consumer recovery remains uneven, Big Lots Inc. fell 9 percent to $34.31 after news reports that it decided not to sell itself. The Wall Street Journal said late Wednesday that the company received bids from two private-equity groups that were lower than it had hoped.

Sears Holding Corp. reported softer sales at its Kmart and Sears stores, causing a first-quarter loss of $1.58 per share, worse than analysts expected. The stock fell 3.2 percent to $73.31.

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LAGONISI, Greece (AP) — The European Central Bank‘s chief economist said a Greek debt restructuring would be a “recipe for catastrophe” and blamed “vested interests” in Britain and the United States for fueling market pressure on the country.

As Greece announced deeper cuts, Juergen Stark said Wednesday that the struggling eurozone country’s “debt sustainability is insured” as long as it fully complies with its internationally monitored austerity program.

Asked about the markets’ hostility to Greek efforts, Stark said: “This is not the view of all market participants, to be very clear. This is a discussion triggered from London and New York. I don’t know what is behind it — vested interests, people topping their books and so on. So it’s more complicated than just (saying) what markets expect.”

Stark made the comments during a financial conference at a resort near Athens.

Greece’s Socialist government was told by the European Union this week to take urgent measures to keep its austerity program on target, as part of its commitments for the €110 billion ($156 billion) package of bailout loans it is receiving from EU countries and the International Monetary Fund.

Finance Minister George Papaconstantinou heeded the latest EU warning, and confirmed that additional austerity measures worth €6 billion ($8.5 billion) for 2011 would be announced in the coming days.

Greece on Tuesday vowed to slash its bloated civil service by 150,000 people by 2015 and effectively ended government jobs for life.

Papaconstantinou insisted that the latest measures would not include more across-the-board salary and pension cuts that have sparked numerous labor protests.

In Athens, police scuffled with striking municipal workers outside parliament and used pepper spray to disperse protesters.

Greece remains frozen out of bond markets by sky-high interest rates as investors fret that the country may eventually have to restructure its debt, which is set to top 150 percent of gross domestic product this year.

Stark said the restructuring option had not been properly thought through.

“Debt restructuring would wipe out part or all capital of Greek banks,” he said. “So it would be a recipe for catastrophe.”

He urged Greece to “double its effort” on structural reforms that critics say have been stagnating and insisted that the austerity measures would be enough to bring the country back on its feet.

“Greece is solvent,” he said. “This is an important message.”

Stark’s comments underlined the split among European officials over whether Greece should consider delaying repayment of its crushing debt load. Jean-Claude Juncker, head of the eurozone finance ministers group, held the door open Tuesday to what he called a “reprofiling” of Greece debt — a voluntary extension of bond maturities.

Another top ECB official, Lorenzo Bini Smaghi, backed up Stark, saying even a “soft” or voluntary stretching out of repayment would be “devastating for overall financial stability,” according to the Ansa news agency.

“Time has been wasted these past months in the search for a way out, for an easy solution, like restructuring the debt,” Bini Smaghi was quoted as saying. He said government failure to pay all its debts would have “an immediate impact on the banking system.”

Officials are concerned Greece’s troubles could harm Europe’s economic recovery by inflicting losses on banks elsewhere in Europe that hold Greek bonds.

European officials are weighing whether to give Greece another bailout. Last year’s rescue loans were aimed at giving the country breathing space so it could return to borrowing from bond markets next year.

But it remains unable to borrow from private investors as its economy deteriorates and it struggles to meet the terms of the first bailout.

International debt monitors are currently in Greece to inspect the progress of cost-cutting reforms, and again warned that Greece needed to do more work to avoid sliding off target.

“We are in a situation where if we do not get this acceleration of structural reforms, the (budget) deficit will get entrenched at where it is now, around 10 percent,” IMF monitor Poul Thomsen told the conference.

Thomsen acknowledged pain was unavoidable given the country’s massive fiscal adjustment.

“It’s impossible to deal with a deficit of 15.5 percent of GDP without having a recession,” he said. “People are dreaming if they think you can do this kind of adjustment without having a recession.”

Thomsen, dismissing skepticism from analysts, urged Greece to speed up its ambitious privatization program worth €50 billion ($71 billion) through 2015.

“Privatization makes a real difference. If the targets can be realized it would change very substantially the debt sustainability discussions,” Thomsen said.

The government announced it had chosen a series of advisers for privatization projects — included Deutsche Bank and the National Bank of Greece as advisers for the sale of the state stake in the OPAP gambling monopoly; Credit Suisse and EFG Eurobank Equities for the privatization of the state lottery tickets company, and Credit Agricole and Emporiki Bank for the sale of its stake in the horse racing company.

___

Theodora Tongas in Lagonisi, Elena Becatoros in Athens, and David McHugh in Frankfurt contributed to this report.

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WASHINGTON (AP) — The government has maxed out its credit card.

The United States reached its $14.3 trillion limit on federal borrowing Monday, leaving Congress 11 weeks to raise the threshold or risk a financial panic or another recession.

Treasury Secretary Timothy Geithner formally notified Congress that the government would halt its investments in two federal pension plans so it won’t exceed the borrowing limit.

Geithner said the government could get by with bookkeeping maneuvers like that through Aug. 2. After that, the government could default on its debt for the first time, threatening the national credit rating and the dollar.

Geithner sent Congress a letter saying he would be unable to make the pension investments in full. He urged Congress to raise the debt limit “in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens.”

Republican leaders in the House have said they won’t raise the debt limit unless the Obama administration first agrees to big spending cuts or to steps to lower the debt over the long run.

House Speaker John Boehner repeated the pledge in a statement Monday. The statement did not address Geithner’s warning about what would happen if the limit were not raised.

“Americans understand we simply can’t keep spending money we don’t have,” Boehner said. “There will be no debt limit increase without serious budget reforms and significant spending cuts.”

Republicans have also ruled out any tax increases, including any plans to end tax cuts for high earners enacted in 2001 and 2003.

“We need to have a vote to lift the debt ceiling because the consequences of not doing so would be quite serious,” White House spokesman Jay Carney told reporters. “And those who suggest otherwise are whistling past the graveyard.”

If it doesn’t raise the limit, Congress would have to come up with $738 billion to make up for what it planned to borrow through the end of the fiscal year on Sept. 30. The options are drastic: Cut 40 percent of the budget through September, which might mean defaulting on payments to investors in government bonds; raise taxes immediately; or some combination of the two.

“In the economic area, this is the equivalent of nuclear war,” says Edward Knight, who was the Treasury Department‘s general counsel during a standoff over the debt ceiling in the mid-1990s.

Here are some questions and answers about the federal debt limit:

Q: What is the debt ceiling?

A: It’s a legal limit on how much debt the government can pile up. The government accumulates debt two ways: It borrows money from investors by issuing Treasury bonds, and it borrows from itself, mostly from Social Security revenue.

In 2010, Congress raised the limit to nearly $14.3 trillion from $12.4 trillion. Three decades ago, the national debt was $908 billion. But Washington spent more than it took in, and the debt rose steadily — surpassing $1 trillion in 1982, then $5 trillion in 1996. It reached $10 trillion in 2008 as the financial crisis and recession dried up tax revenue and as the government spent more on unemployment benefits and other programs.

Congress created the debt limit in 1917. It’s unique to the United States. Most countries let their debts rise automatically when government spending outpaces tax revenue. Raising the debt ceiling doesn’t usually create much of a stir. Congress has raised it 10 times since 2001.

A refusal to raise the debt ceiling wouldn’t mean that Congress had begun to solve the nation’s budget problems. It would just mean that lawmakers were refusing to let the government borrow more money to finance programs and tax cuts already approved.

“Having voted to run up the bill, it is utterly irresponsible to prohibit the government from borrowing the money to pay it,” writes Howard Gleckman, resident fellow at the Urban Institute.

___(equals)

Q: What is the federal debt, and how does it differ from the deficit?

A: The deficit is how much government spending exceeds tax revenue during a year. The government is expected to run a record $1.5 trillion deficit in the current fiscal year. The debt is the sum of deficits past and present. If Congress raises the limit, the debt will reach $15.5 trillion by Sept. 30, the end of the fiscal year. The huge deficits and debt reflect tax cuts, wars, the Obama administration’s stimulus program, higher costs of federal health care programs and the recession, which shrank tax revenue and led the government to spend more on social programs.

___(equals)

Q: What happens now that Treasury has hit its debt limit?

A: It can free up $232 billion by taking what Geithner calls “extraordinary measures.” Besides suspending contributions to federal employee pension funds, the government can halt payments to a government fund that buys and sells foreign currencies.

The most serious debt-ceiling showdown was in 1995. At the time, the debt limit was just $4.9 trillion. Treasury Secretary Robert Rubin used gimmicks and juggled the government’s books to keep government finances afloat for four and a half months before Congress and the Clinton White House reached a deal to end the impasse.

Geithner’s Treasury Department won’t have as much cushion because the debt is growing much faster than in the mid-1990s. Geithner estimates he’ll run out of options Aug. 2.

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Q: What would happen if Congress doesn’t raise the debt ceiling by Aug. 2 or whenever Treasury exhausts all its short-options?

A: Things would get ugly fast. “When bills became due, we could not pay all of them,” says Maya MacGuineas, president of the Committee for a Responsible Budget, a bipartisan group that advocates cutting the debt. “If that happens, you shake up markets as you’ve never seen before. … It’s inconceivable we would willingly walk ourselves over the cliff.”

The government needs to borrow $738 billion to get through the fiscal year that ends Sept. 30, according to the Congressional Research Service. Somehow, it would have to close that gap. It could:

— Cut government spending dramatically. To put things in context, $738 billion is equal to 40 percent of the $1.7 trillion that the government is expected to spend in the last six months of the fiscal year. Everything from military salaries to Medicare and Social Security benefits to interest payments on the debt would be vulnerable.

— Come up with $738 billion in new tax revenue, increasing by 66 percent the $1.1 trillion the government is expected to collect in taxes in the second half of the fiscal year.

— Choose a combination of draconian spending cuts and tax increases.

If investors become convinced the U.S. will renege on its debts, they’ll sell Treasurys to avoid the risk that the government might not make good on them. That would drive Treasury prices down and push interest rates up, raising the borrowing costs on everything from mortgages to cars. Higher rates would likely slow the economy.

So far, bond investors are taking the threat in stride; the yield on 10-year Treasury notes remains low at 3.17 percent. U.S. Treasurys are still considered perhaps the safest available investment, a haven for investors worldwide.

As Aug. 2 approaches, there’s a bigger risk that investors will become nervous.

“It would tell the world that the U.S. can’t get its act together, that this is basically a circus,” says William Gross, an influential investor who is managing director of the world’s biggest bond fund, Pimco. “Investors ultimately won’t want to be held hostage by a bunch of clowns.”

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Q: If the consequences are so dire, why is Congress suggesting it might not raise the limit?

A: As the political divide between Republicans and Democrats has widened, the debt ceiling has emerged as a divisive issue. In recent years, the party that doesn’t control the White House has used the issue to whack the party that does.

In 2006, for instance, Senate Democrats voted unanimously against raising the debt limit for President George W. Bush to protest his tax cuts and the invasion of Iraq — a vote that President Barack Obama, then a senator, says he regrets. The situation reversed in 2010: No Senate Republicans supported a higher debt limit for Obama, accusing him of reckless government spending. Congress approved the higher limit anyway because Democrats had a majority in both the House and Senate.

Congress has always ended up raising the debt ceiling before a financial crackup.

Republicans, many of them elected in November on a pledge to slash spending, are betting that the debt-ceiling deadline offers leverage to demand deep budget cuts from the Obama administration.

Obama wants to narrow the federal gaps and reduce debts, in part by reducing spending, in part by ending tax cuts for higher-income Americans enacted under President George W. Bush. But Republican lawmakers say they refuse to consider tax hikes.

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CAIRO (AP) — Egypt is near to securing a $2.2 billion loan from the World Bank, the finance minister announced, as the country’s military rulers said Monday the unrest of the past few months has battered economic growth rates and is costing the nation $40 million per day in lost tourism revenues.

Finance Minister Samir Radwan also said an International Monetary Fund team was expected in Cairo within days to look at ways of supporting the government’s efforts to boost the economy. His comments came in a statement released by the ministry and did not make clear when the deal may be completed.

Separately, Brig. Mahmoud Nasr, the deputy defense minister for financial affairs, said the unrest led to an 80 percent decline in revenues from tourism, a vital sector.

The figures revealed by the Supreme Military Council‘s finance chief offered yet another window into the drubbing sustained by the Arab world‘s most populous nation in the wake of the mass protests that deposed former President Hosni Mubarak.

Those protests expanded after Mubarak’s ouster in mid-February to include widespread labor strikes that resulted in a sharp reduction in manufacturing and exports even as foreign direct investment and tourism revenues plummeted. With revenue falling and costs mounting, Egypt has reached out to the World Bank and the IMF for aid.

Nasr, in comments carried by the official MENA news agency, said GDP growth was at around 1-2 percent compared to pre-unrest forecasts of around 6 percent for the fiscal year ending June 30. The projection is even lower than that offered by Radwan and other officials who had estimated GDP growth would slow to between 2 and 3 percent in the current fiscal year.

While the mass protests that toppled Mubarak were largely fueled by a crescendo of frustration at the growing income disparity and soaring prices in a country where about half the 80 million residents live on or below the World Bank’s $2 per day poverty threshold, the continuation of the protests has only served to exacerbate the nation’s economic troubles.

Annual urban inflation climbed to 12.1 percent in April compared to 11.5 percent in March, the government said last week, citing a continued rise in food prices.

The economic troubles have been building for months.

As the demonstrations unfolded in the end of January, the stock market plunged — a drop that Nasr said led to losses of 113 billion pounds ($19 billion). The exchange remained closed for nearly two months as officials first grappled with bank closures and strikes in the sector, then sought to enact safeguards to prevent its collapse once it reopened.

The market, which reopened near the end of March, has vacillated between moderate gains and losses. On Monday, the benchmark EGX30 index closed 1.2 percent higher, at 5,127 points, but its year-to-date losses were still at more than 28 percent.

The government and the military rulers have been trying to revive the economy, but the near daily protests have crimped those efforts and led to a 40 percent drop in exports and almost a halving of the nation’s pre-crisis manufacturing levels, officials have said.

Despite the losses, Nasr said the military was “optimistic,” noting that the unrest had not affected the country’s economic infrastructure and that factories were not damaged. As a result, the challenges are “difficult, but not impossible,” he said.

The coming period is a time “for action and production, not words,” Nasr was quoted as saying, so that Egypt can move beyond the current crisis.

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LONDON (AP) — Forecast-busting economic growth in Germany and a surprise rebound in Greece helped the 17-nation eurozone start the new year with a bang, with the region growing twice as fast as the U.S. despite constant fears about debt.

The eurozone’s economy expanded by a quarterly rate of 0.8 percent in the first three months of the year, according to Eurostat, the EU’s statistics office on Friday.

That was more than double the 0.3 percent growth posted in the previous three-month period, ahead of analysts’ expectations for a 0.6 percent increase and twice U.S. growth.

“The eurozone is therefore significantly outperforming all other major developed economies at the moment,” said Chris Williamson, chief economist at Markit.

The figures have cemented expectations that the European Central Bank, which has to look at the whole eurozone as it seeks to tame inflation, will follow up April’s interest rate increase — the first in nearly three years — with another, possibly in July, despite some countries’ debt troubles.

In year-on-year terms, the eurozone economy grew 2.5 percent, roughly in line with what many say should be its long-term average.

Unsurprisingly, given its sheer size, Germany was the main reason the eurozone grew so fast. Its 1.5 percent growth during the quarter means the EU’s largest economy has now made up all the output lost during the recession. It was driven by a healthy balance of exports and household spending.

“Germany is the engine of growth among industrial countries — and not just in Europe,” German Economy Minister Philipp Roesler said.

France’s economy, the eurozone’s second-biggest, expanded by a robust 1 percent on higher consumer spending and business investment. Northern economies like the Netherlands grew strongly, while Italy and Spain lagged behind.

Perhaps more surprisingly, given the debt quagmire it is in, Greece posted solid growth of 0.8 percent, its first economic expansion since the fourth quarter of 2009. However, the increase is unlikely a sign of a sustained rebound as the previous quarter’s contraction was doubled to a colossal 2.8 percent.

Manos Chatzidakis, head of investment strategy at Pegasus Securities, said the Greek figures were disappointing because of the revision.

“The economy still has a considerable way to go before recovery,” said Chatzidakis. “We remain in a very unfavorable situation.”

Portugal, another bailout recipient, returned to recession. Its 0.7 percent quarterly decline follows the 0.6 percent drop recorded in the previous three-month period — a recession is classified as two consecutive quarters of negative growth.

Portugal is the third eurozone country to agree to a bailout, following Greece and Ireland.

Those countries’ problems are likely to be protracted as they struggle to reduce their mountains of debt.

The European Commission, the EU’s executive, on Friday raised its debt forecasts for all three of them.

That will likely spice up discussions among eurozone governments on whether Greece will need a second bailout.

It will also fuel calls from many economists who say Greece needs to restructure its debts — to delay or lower its bond repayments.

Eurozone ministers will start discussing how to help Greece at a meeting on Monday.

The Commission said it expects the eurozone economy to grow 1.6 percent in 2011, while the wider 27-country EU, which includes non-euro members like Britain and Poland, is anticipated to grow by 1.8 percent for the second year running.

Germany is expected to grow 2.6 percent this year but Greece is anticipated to shrink another 3.5 percent.

Olli Rehn, the commissioner in charge of monetary and economic affairs, said the EU will surpass the pre-crisis (pre-2008) growth levels next year.

That’s far sooner than most predicted in 2008,when the global economy sank into its deepest and longest recession after the collapse of U.S. investment bank Lehman Brothers brought the financial system to its knees.

“The main message in our forecast is that the economic recovery in Europe is solid and continues, despite recent external turbulence and tensions in the sovereign debt market,” Rehn said.

The series of figures helped the euro, which had lost about 8 cents to the dollar this week as investors scaled back expectations of interest rate increases in Europe and worried about Greece’s debt troubles.

By mid afternoon London time, the euro was up 0.2 percent at $1.4262, having traded as high as $1.4338 earlier. Last week, it was near 18-month highs above $1.49.

“The solid growth performance of the EU’s core economies puts the European Central Bank in an increasingly uncomfortable situation,” said Tim Ohlenburg, senior economist at the Centre for Economic and Business Research.

“Higher interest rates would make sense for the large, central eurozone countries in which unemployment has fallen and output is making a comeback, but this would further undermine weaker economies faced with high debt levels and fragile banking sectors,” Ohlenburg added.

___

Gabriele Steinhauser in Brussels, Geir Moulson in Berlin and Nicholas Paphitis in Athens contributed to this story.

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WASHINGTON (AP) — Americans are growing more optimistic about the U.S. economy, a sentiment that is benefiting President Barack Obama despite public disenchantment with his handling of rising gasoline prices and swollen government budget deficits.

An Associated Press-GfK poll shows that more than 2 out of 5 people believe the U.S. economy will get better, while a third think it will stay the same and nearly a fourth think it will get worse, a rebound from last month’s more pessimistic attitude. And, for the first time since the 100-day mark of his presidency, slightly more than half approve of Obama’s stewardship of the economy.

Both findings represent a boost for Obama, though he still must overcome ill will over government red ink and the price of gas at the pump, now hovering around $4 a gallon.

But the public’s brighter economic outlook also could signal a boost to the current recovery, which relies to a great degree on consumer behavior. A public that is confident about economic performance is more likely to spend more and accelerate the economy’s resurgence.

The poll was conducted May 5-9 in the aftermath of the U.S. commando raid that killed Osama bin Laden, the al-Qaida leader behind the Sept. 11, 2001, terrorist attacks. The spike in public esteem for Obama as a result of that successful clandestine mission may have helped Obama’s standing on issues other than national security.

The poll coincides with renewed attention in Washington to the nation’s growing debt and the federal government’s long-term budget deficits, so any positive signs from the public could help Obama push his policy proposals. A bipartisan team of lawmakers is working with Vice President Joe Biden to identify spending cuts. Meanwhile, lawmakers also are discussing major structural changes to the tax system and to the government’s mammoth benefits programs of Medicare, Medicaid and Social Security.

The results of the AP-GfK poll stood out because other surveys taken after bin Laden’s death, while showing a spike in support for the president, continued to indicate dissatisfaction by a majority for his handling of the economy. Still, like the AP-GfK poll, other surveys also found American attitudes about the state of the nation improving.

Forty-five percent of those polled in the AP-GfK survey said the country was now moving in the right direction, an increase of 10 percentage points from five weeks ago. And attitudes about life in general remained positive, with 4 out of 5 respondents saying they were happy or somewhat happy with their circumstances.

“Once you hit bottom the only one way to go is up,” said John Bair, 23, a photographer and filmmaker from Pittsburgh. “Everybody that I come in contact with seems to be on the upswing. I consider that a pretty good thing.”

But Bair, who describes himself as a moderate to conservative independent, doesn’t believe Obama deserves re-election. He strongly disapproves of the president’s handling of gasoline prices and says Obama should do more to increase domestic production of oil.

“When I’m paying $4 for a gallon of gas, it gets me wondering what’s going on,” he said.

Obama has tried to appear engaged on gas prices even though there is little presidents can do to alter market fluctuations. He has called for new renewable energy policies and for eliminating tax breaks for oil and gas companies, while conceding those steps will not address the current price increases. The efforts have not given the public much to cheer about, however. A total of 61 percent disapprove of Obama’s approach to the rising cost of gasoline.

Indeed, for all the long-term confidence that the economy will recover, the public is hardly upbeat about the current state of things. Only 21 percent describe the economy as good and 73 percent describe it as poor. About 1 in 5 thought the economy got better during the past month; an equal number thought it got worse.

A favorable jobs report last Friday showed that private companies had exceeded expectations by creating 268,000 jobs last month, the third month of at least 200,000 new jobs. And while unemployment has dropped from a high of 10.1 percent nationally in October 2009, it is now 9 percent, the same as in January.

“We haven’t done anything to create the jobs that (Obama) promised —that all of them promised,” said John Grezaffi, 60, a rancher from Pointe Coupee Parish, La.

Grezaffi, taking a short break from working to shore up his land against a rising Mississippi River on Wednesday, said he somewhat supports Obama but does not support his handling of the economy and believes the country is moving in the wrong direction.

Approaching retirement age, he said he wasn’t eager to see his upcoming benefits shortchanged.

“I’m willing to give up a little, but not everything when you see the waste that occurs in so many other areas,” he said.

Deana Floss, 39, a Springfield, Ohio, restaurant cook and owner of a cleaning business, voiced lukewarm approval for Obama even though she doesn’t care for the state of the economy or Obama’s handling of the nation’s budget deficits.

“I don’t think he has done a very bad job with the economy,” she said. “It was already going downhill when he took the reins.”

The Associated Press-GfK Poll was conducted by GfK Roper Public Affairs and Corporate Communications. It involved landline and cell phone interviews with 1,001 adults nationwide and had a margin of sampling error of plus or minus 4.2 percentage points.

___

Associated Press Deputy Polling Director Jennifer Agiesta contributed to this report.

___

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WASHINGTON (AP) — Republicans controlling the House announced plans Wednesday to cut $30 billion from the day-to-day budgets of Cabinet agencies, doubling down on cuts to domestic programs just weeks after a split-the-differences bargain with President Barack Obama.

The moves by the powerful lawmakers atop the House Appropriations Committee are the first concrete steps to try to implement a tight-fisted 2012 budget plan approved by Republicans’ last month. It would build on $38 billion in savings enacted in a hard-fought agreement with Obama over the current year’s budget.

The $30 billion in savings from agency operating budgets that have to be annually approved by Congress seems small compared to deficits that could top $1.6 trillion this year. But they’re actually a key building block in eventually wrestling the deficit under control, assuming Congress can make the cuts now and stick with them year after year in the face of inflation.

That’s a big “if.”

Obama and his Democratic allies controlling the Senate are sure to battle hard against cuts of this size.

And since the Pentagon — which accounts for more than half of the budget that passes through the Appropriations panel each year — actually receives a $17 billion, 3 percent boost, the cuts to domestic programs like education, housing subsidies and infrastructure projects will feel much more severe. Domestic agencies and foreign aid accounts would have to absorb $47 billion in cuts, averaging about 9 percent.

“Brutal … brutal,” said Rep. Norm Dicks of Washington, the top Democrat on the Appropriations panel, who warned of cuts to food inspection, Pell Grants (college aid for low-income students), community development grants, food aid to low-income pregnant women and their children, and grants to community action agencies that serve the poor. “Those are all things that are going to hurt the lowest-income people in this country.”

A third of the entire budget passes through the Appropriations panel, once reviled in some GOP circles for its free-spending ways and addiction to home-state projects known as earmarks. The spending bills are likely to produce a long, angry summer of House floor fights, but the ultimate fate of the spending bill probably lie in broader budget talks with the White House involving must-do legislation to allow the government to continue to borrow to meet its obligations. The Senate has yet to pass a budget blueprint that’s a precursor to action on spending bills.

Appropriations Committee Chairman Harold Rogers, R-Ky., released a broad outline of the panel’s plan to cut $30 billion from appropriated accounts. That’s on top of $38 billion carved from agency budgets in last month’s spending showdown legislation and it keeps a campaign promise to bring domestic agency budgets, on average, to levels in place before Obama took office. The slow, steady advance of the actual legislation begins in two Appropriations subpanels on Friday.

“There are going to be some cuts to agencies that people aren’t used to because they’ve seen double-digit increases,” said Rep. Jeff Flake, R-Ariz. What are we going down to? 2008 levels? That wasn’t exactly austere times.”

The cuts are far larger, however, when measured against Obama’s budget request for the 2012 budget year that begins in October. The GOP plan whacks $122 billion from Obama’s request, with cuts falling particularly hardest on foreign aid, agricultural programs, and education, job training and health care accounts.

Veterans’ accounts would be spared and Congress’ own budget would face a 5 percent cut that’s well below the double-digit hits most domestic agencies would take. Homeland security spending would absorb a $1.1 billion decrease of 3 percent.

The plan also endorses Obama’s $119 billion request for military operations in Iraq and Afghanistan and $7.6 billion in anti-terror foreign aid.

It may not sound like much measured against the nation’s $14.3 trillion debt, but the GOP’s broader budget plans are in fact largely anchored by promises to cut domestic agency budgets this year and then freeze them well into the future. These “caps” on the spending that Congress approves each year — if lawmakers can stick to them — would produce more than $1.6 trillion in savings when measured against official “baseline” estimates.

Other elements of the GOP’s budget plans are dead on arrival with the White House, including sweeping cuts to Medicaid and food stamps and a plan to transform Medicare into a voucher-like program in which future beneficiaries — those presently 54 years old and younger — would purchase health insurance instead of having the government pay doctor and hospital bills directly.

Speaker John Boehner, R-Ohio, says he wants “trillions” in spending cuts attached to the so-called debt limit measure. “Caps” on the amount of money available for the appropriations bills are being eyed as a component of any deal between the White House and Republicans controlling the House.

The nuts-and-bolts work of the appropriators comes amid lots of motion — but little movement — on other deficit-reduction fronts:

—A bipartisan “Gang of Six” senators is struggling behind closed doors to reach agreement on a plan cutting $4 trillion from the deficit over the coming decade with a 3/1 mix of spending cuts to tax increases. House Republicans say that even if the group reaches agreement, its prescriptions are nonstarter.

—The chairman of the Senate Budget Committee, Kent Conrad, D-N.D., is preparing a draft plan with a 50/50 mix of spending cuts to tax increases. Even if moderate Democrats could stomach voting for $2 trillion in tax increases over 10 years to help pass the measure, the chances of Senate Democrats and tea party-backed House Republicans reaching agreement seem extremely unlikely.

—Vice President Joe Biden is hosting talks with a bipartisan group of lawmakers aimed at producing deficit cuts to attach to the debt limit increase legislation. Even Biden admits it’s an open question as to whether the group will “get to the finish line.”

—Obama invited Senate Democrats to the White House for a Wednesday afternoon meeting, with Republicans heading down on Thursday. House Democrats and Republicans are getting audiences soon.

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WASHINGTON (AP) — China is using high-level meetings to urge the United States to allow more technology exports into the booming Chinese economy as a way of balancing trade.

The United States, meanwhile, has criticized the communist-led nation’s latest crackdown on democracy advocates, arguing that long-term stability depends on respecting human rights.

Both sides issued familiar grievances at the U.S.-China Strategic and Economic Dialogue, which began in Washington on Monday, but they took pains to stress a generally positive track in relations between the two economic superpowers.

State Councilor Dai Bingguo said common interests between the world’s two largest economies now make them “inseparable” and destined to grow more interdependent.

The annual two-day round of talks brings together leaders on economics, foreign policy and security. The meetings, involving scores of officials, wrap up Tuesday with news conferences.

President Barack Obama met Dai and Chinese delegation leader Vice Premier Wang Qishan after Monday’s deliberations. He encouraged China to implement policies to support “balanced global growth as well as a more balanced bilateral economic relationship.” On human rights, he underscored his support for freedom of expression and political participation, a White House statement said.

This year’s dialogue follows a January state visit by Chinese President Hu Jintao that helped eased tensions over the U.S. arms sales to self-governing Taiwan, which Beijing regards as part of Chinese territory. The U.S. and China also have been at odds over China’s intervention in currency markets, which the U.S. says has kept the value of the yuan low against the dollar, giving an unfair advantage to Chinese exporters.

Treasury Secretary Timothy Geithner on Monday softened the long-standing U.S. criticism of China’s economic policies, possibly in a belief that the outside pressure was proving counterproductive.

Geithner praised China’s efforts, which include a decision last June to resume allowing the yuan to rise in value against the dollar after freezing the currency’s value for two years during the height of the financial crisis. The yuan has risen by about 5 percent against the dollar since last summer. American manufacturers contend the yuan is still undervalued by as much as 40 percent.

The U.S. Treasury chief still urged China to allow its currency to appreciate at a faster rate and to allow Chinese consumer interest rates to rise. Both steps could help boost domestic demand and help lower America’s trade deficit, which hit an all-time high with China last year.

A Chinese official, however, blamed U.S. policies for the ballooning trade gap. Commerce Minister Chen Deming told a news conference that China’s currency appreciation was being carried out in a “very healthy manner.” He said the United States needed to change its own policies on high-tech sales and investment as a way to spur American manufacturing.

He took aim at the U.S. screening of Chinese foreign investment proposals, contending it was neither fair nor transparent. Most recently, the Committee on Foreign Investment in the United States rejected a takeover by private Chinese technology giant Huawei of a small U.S. computer company, 3Leaf, on national security grounds.

“We hope the United States can treat Chinese investment, including by state-owned enterprises, in a fair manner,” he said.

U.S. companies have their own long list of complaints: limited access to Chinese markets, theft of intellectual property, widespread use in China of counterfeit software and problems in seeking redress through China’s legal system.

At the ceremonial opening of the talks on Monday, Vice President Joe Biden and Secretary of State Hillary Rodham Clinton offered blunt criticism of China’s human rights record, which Beijing regards as an internal matter. Clinton later had “very candid and honest” private discussions on the issue with Dai, U.S. officials said.

Since February, Chinese authorities have questioned or detained hundreds of lawyers, activists, journalists and bloggers after anonymous calls were made on the Internet for protests emulating those that have challenged and toppled authoritarian governments in the Middle East and North Africa. No such protests have taken place in China.

“We know over the long arc of history that societies that work toward respecting human rights are going to be more prosperous, stable and successful. That has certainly been proven time and time again, but most particularly in the last months,” Clinton said.

Dai said China had made progress in the area of human rights, but he did not mention the recent crackdown.

In Beijing on Tuesday, Chinese Foreign Ministry spokeswoman Jiang Yu said, “No country is perfect in its human rights record and there is no one-size-fits-all human rights policy.”

In unusually mild comments on a subject that Beijing is highly sensitive about, Jiang said, “China and the U.S. have different opinions in the area of human rights and we believe we can use dialogue to increase mutual understanding and mutual trust.”

This year’s talks for the first time included high-level military leaders from both nations, a move seen as a way to increase understanding between military commanders and reduce the risk of conflict. China’s military has expanded rapidly in the past 15 years, deploying missiles and naval assets that could challenge American supremacy in the region.

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WASHINGTON (AP) — America’s massive trade deficit with China, currency rates and human rights concerns will all be on the agenda when top officials from the United States and China sit down for high-level talks this week.

The annual meetings will bring together top officials from both countries representing dozens of government agencies in the areas of trade and finance, and foreign policy.

While no major breakthroughs are expected, both sides hope to build on the progress made during a state visit by Chinese President Hu Jintao to Washington in January.

That visit helped smooth relations that had been strained in 2010 over such issues as U.S. military sales to Taiwan.

Treasury Secretary Timothy Geithner, Secretary of State Hillary Rodham Clinton and Federal Reserve Chairman Ben Bernanke will lead the U.S. team.

Both countries will, for the first time, bring top military leaders to the discussions in an effort to defuse military tensions that were heightened last year by the U.S. arms sales.

The Chinese team will be led by Vice Premier Wang Qishan, China’s top economic policymaker, and State Counselor Dai Bingguo, a veteran diplomat.

The talks will begin with an opening session and then break into separate discussions on the economy and foreign policy. The U.S. and Chinese leaders are also scheduled to meet Monday with President Barack Obama. The talks wrap up on Tuesday.

China is facing threats of U.S. economic sanctions on goods shipped here to its largest foreign market unless it does more to end what U.S. manufacturers say are unfair trade practices, including currency manipulation, that have cost American jobs.

At the same time, China, America’s biggest foreign creditor, wants assurances that its $1.2 trillion in U.S. Treasury holdings are safe despite the impending congressional debate over raising the government’s $14.3 trillion borrowing limit.

“The Chinese are astounded that the U.S. government would let the debate get to the stage where there is even a remote possibility of a default,” said Eswar Prasad, a China expert at Cornell University.

The higher debt limit is needed to make sure America can keep paying the interest bill on the debt to China and other investors.

While Geithner said last week that the U.S. would press China to accelerate efforts to revalue its currency, the yuan, he also sounded a conciliatory tone. He noted that the yuan has risen in value by 5 percent since last June, and even faster once inflation was taken into account.

A softer approach on China’s currency will not please American manufacturers. They contend that China’s currency is undervalued by as much as 40 percent and they want Congress to approve economic penalties if Beijing doesn’t move faster.

The U.S. trade deficit with China last year was a record $273 billion, one-fifth more than in 2009. The administration is considering filing new trade cases against Chinese practices that U.S. companies contend are unfair.

U.S. officials say they want to see more progress on economic commitments made in January.

Those include closer monitoring of Chinese government purchases of software, a move intended to boost Beijing’s buying of legal U.S. software and reduce its use of pirated software. American companies say such theft is costing them billions in lost sales.

The Chinese also pledged to revamp a policy that limits the ability of U.S. companies to compete for Chinese government projects unless the products are designed in China. American businesses regard this as an effort to force them to turn over their technology to China or be locked out of its government market.

On foreign policy, officials said Clinton will renew efforts to gain China’s support in confronting nuclear threats from North Korea and Iran, and she will raise the issue of human rights.

China recently undertook the biggest security crackdown in years, apparently prompted by the communist leadership’s fear of Middle East-inspired unrest migrating to China.

The high-level talks began in 2006 in the Bush administration and focused on economic issues. The Obama administration expanded the focus in 2009 to include foreign policy as well as economic concerns.

___

Associated Press writers Matthew Pennington in Washington and Joe McDonald in Beijing contributed to this report.

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WASHINGTON (AP) — Employers added more than 200,000 jobs in April for the third straight month, the biggest hiring spree in five years. But the unemployment rate rose to 9 percent in part because some people resumed looking for work.

The Labor Department says the economy added 244,000 jobs last month. Private employers shrugged off high gas prices and created 268,000 jobs — the most since February 2006.

The gains were widespread. Retailers, factories, financial companies, education and health care and even construction companies all added jobs. Federal, state and local governments cut jobs.

The data suggests businesses are confidence in the economy despite weak growth earlier this year.

Still, unemployment increased slightly from the 8.8 percent in March. It was the first increase since November.

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WASHINGTON (AP) — Vice President Joe Biden and top lawmakers are beginning their quest to tame the spiraling U.S. debt with small steps aimed at finding what common ground might exist in vastly different approaches toward restructuring government spending.

Biden and a bipartisan team of congressional negotiators were to meet Thursday at Blair House, the government guesthouse across the street from the White House.

With a deficit that could reach $1.6 trillion this year, both sides set modest expectations. But they said the meeting offers a chance to identify even small spending cuts that can build toward a broader agreement.

“There will be no announcement after that meeting that a deal has been reached, because this is a process,” White House spokesman Jay Carney said.

Neither side seems to have any preconceptions that the talks would lead to a far-reaching restructuring of major benefit programs like Medicare or Medicaid or to an overhaul that makes the tax system simpler but yields more revenue.

The talks come as Congress begins to consider raising the debt ceiling above its current $14.3 trillion limit. Treasury Secretary Timothy Geithner has effectively taken some pressure off the talks by informing Congress this week that the government could continue to meet its obligations through Aug. 2.

Still, all sides — the White House and Democrats and Republicans in Congress — agree that spending cuts need to be approved in conjunction with must-pass legislation increasing the government’s ability to borrow to pay its bills. Treasury said Wednesday that the government is borrowing an average of $125 billion a month.

The meeting will unfold with Obama enjoying a new boost in public approval following the killing of Osama bin Laden by U.S. commandos in Pakistan. But government spending and the condition of the economy were the dominant public issues before Sunday’s assault on the al-Qaida leader and will return to the forefront in time.

The meeting is designed to have all sides place their plans on the table, narrow the focus to areas of common ground and begin setting up a framework for discussions. Republicans will come bearing a detailed House budget proposal that aims to cut spending by more than $5 trillion over the next decade. Biden will flesh out a broad budget proposal that President Barack Obama outlined last month that would reduce deficits by $4 trillion over 12 years.

“We staked out our position in a very definite way. They haven’t,” said House Majority Leader Eric Cantor of Virginia, who will represent House Republicans. “So we need to understand where they’re coming from.”

In addition to Biden, the administration will be represented by Geithner, White House budget director Jacob Lew and Gene Sperling, the director of the White House National Economic Council.

“We’re at an important point here where Republicans and Democrats alike share, recognize the problem — that’s important,” Carney said. “They share the same end goal, which is $4 trillion in deficit reduction. And they share the same general idea of what the timeline should be, 10 to 12 years.”

But Obama’s plan calls for about $1 trillion in higher tax revenues, a nonstarter with House Republicans. At the same time, a GOP plan to slash Medicaid and turn Medicare into a program in which future beneficiaries receive subsidies to purchase private health insurance is dead with the White House and Democrats.

Six lawmakers planned to attend: Cantor; Senate GOP Whip Jon Kyl of Arizona; Senate Appropriations Committee Chairman Daniel Inouye, D-Hawaii; Finance Committee Chairman Max Baucus, D-Mont.; and senior House Democrats Jim Clyburn of South Carolina and Chris Van Hollen of Maryland.

Some Republicans hope to attach legislation sponsored by Sens. Bob Corker, R-Tenn., and Claire McCaskill, D-Mo., to the so-called debt limit bill. Their proposal would cap spending at about 21 percent of the size of the economy, backed up by automatic spending cuts if Congress is unable to enact legislation that brings spending in under the cap.

The White House strongly opposes the idea, saying it would force drastic, across-the-board cuts to Social Security, Medicare and Medicaid while doing nothing to force lawmakers to clean out a tax code laden with tax breaks.

“Arbitrary spending caps are nothing but a backdoor means of imposing immediate and deep cuts in Medicare and Social Security,” said Kenneth Baer, spokesman for the White House budget office.

Cantor wouldn’t dismiss the idea, but he said Republicans want something concrete immediately.

“All that is fine, but the history of Congress has been that anytime you put enforcement mechanisms in place like that, ultimately they’re waived,” he said. “We’re about trying to effect real cuts, real reforms this year.”

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An Associated Press monthly analysis finds that lower unemployment, bankruptcies and foreclosures in March reduced the nation’s economic stress to its lowest point this year.

More than 85 percent of the nation’s 3,141 counties and every state but two — Louisiana and South Dakota — fared better than in February.

Manufacturing activity has helped ease hardship in the Great Lake states and Indiana over the past 12 months — more than in any other region.

Louisiana, Iowa and the Mountain states of Idaho and Montana have suffered the sharpest increases in stress, year over year. Post-Hurricane Katrina projects are winding down in Louisiana. The Mountain states have felt the effects of government job cuts more severely than elsewhere because of their small populations. And Iowa has suffered from more foreclosures.

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MUMBAI, India (AP) — India’s central bank raised its key interest rate by half a percentage point Tuesday, its ninth hike in just over a year, warning that persistent inflation has become a threat to growth in Asia’s third-largest economy.

The bank said the short term lending rate — or repo rate — will go from 6.75 percent to 7.25 percent, with immediate effect.

The bank said that from now on it will set only one policy rate, the repo rate, and fix the reverse repo rate — or short-term borrowing rate — at 1 percentage point below the repo rate. Tuesday’s rise automatically brings the reverse repo rate to 6.25 percent.

“High inflation is inimical to sustained growth as it harms investment by creating uncertainty,” Reserve Bank Gov. D. Subbarao said Tuesday. “Current elevated rates of inflation pose significant risks to future growth.”

“The Reserve Bank will continue to persevere with its anti-inflationary stance,” he added.

Sixty percent of forecasters had anticipated a quarter point hike, while 40 percent had projected a half point hike, according to a CNBC-TV18 poll Tuesday morning.

The bank said it expects economic growth to slow to around 8 percent this fiscal year, from 8.6 percent last fiscal year. It said growth would be between 7.4 and 8.5 percent, if monsoon rains are normal and crude oil prices average $110 a barrel for the year ending March 31, 2012.

That is lower than New Delhi’s projection of 9 percent growth and dents the ruling Congress party’s hopes of using the gains of double-digit growth to alleviate poverty and create jobs for millions of young Indians. Most Indians live on less than $2 a day.

Business leaders decried the Reserve Bank of India‘s move as too aggressive.

“This is certainly a very hawkish monetary stand and one which would make the investment environment even more difficult,” Rajiv Kumar, director general of the Federation of Indian Chambers of Commerce and Industry, said in a statement. “We are afraid that with growth slowing down, as now admitted by the RBI, employment targets will not be achieved and this could generate greater social pressure.”

India’s economic growth moderated from 8.9 percent in the first half of last fiscal year to 8.2 percent in the second half, and the bank said high oil prices, inflation, a possible slackening in global demand for India’s exports, and the impact of rising interest rates will further depress output.

The bank said it expects inflation for the fiscal year to average 6 percent, with the potential to rise. It said inflation would remain close to March’s 9 percent for the first half of the fiscal year, before softening in the second half, despite pressure from high oil prices — which would likely force New Delhi to raise regulated petrol and diesel prices — and a lagged passthrough of rising input costs to consumers.

“They’ve acknowledged they are willing to sacrifice some growth to control inflation,” said Samiran Chakraborty, head of India research at Standard Chartered in Mumbai. “This is a sea change in monetary policy. It will help bring down inflation.”

Wages in India have been rising faster than inflation, crimping corporate margins along with higher input costs.

“Inflation expectations arising from the demand side need to be contained,” Chakraborty said. “This rate hike was needed to make sure we’re not into a wage price spiral.”

India suffers from the worst inflation of any major Asian economy — economists describe India’s inflation as “virulent” and “unparalleled” — prompting the Reserve Bank of India to raise rates more than its regional peers.

It hiked the effective interest rate by 3.5 percentage points prior to Tuesday’s move. That has put pressure on growth, with capital goods production and investment both softening, but it hasn’t been enough to contain inflation.

High oil prices, loose fiscal policy and supply constraints have muted the impact of the Reserve Bank’s aggressive anti-inflation stance.

The Reserve Bank of India also increased the savings bank deposit rate Tuesday from 3.5 percent to 4.0 percent, as it considers deregulating bank deposit rates. The rise — and potential deregulation — will squeeze profit margins at Indian banks.

The benchmark Sensex index was down 1.7 percent in early afternoon trade in Mumbai, with autos and banks leading declines.

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TOKYO (AP) — Major world stock markets rose, the dollar strengthened and oil prices were lower after news that U.S. forces killed terror mastermind Osama bin Laden following a near-decade-long manhunt.

President Barack Obama announced during holiday-thinned Asian trading hours that the man who inspired the deadly Sept. 11, 2001, terror attacks in the United States was killed in Pakistan in a U.S.-led operation.

Japan’s Nikkei 225 gained 1.6 percent to 10,004.20 — the highest closing since an earthquake and tsunami on March 11 decimated the country’s northeastern coast.

South Korea’s Kospi index, meanwhile, advanced 1.7 percent to a new record high of 2,228.96, bringing the Seoul benchmark’s gain so far this year to 8.7 percent.

European markets opened higher. France’s CAC-40 rose 0.3 percent to 4,120.03 and Germany’s DAX gained 0.7 percent to 7,563.52. Britain’s FTSE 100 was closed for a holiday.

Wall Street, meanwhile, was set to open higher. Dow Jones industrial futures rose 0.6 percent to 12,837 and S&P futures gained 0.6 percent 1,367.80.

Ben Potter, market strategist at IG Markets in Melbourne, Australia, said that bin Laden’s death was an immediate boost for equity markets.

“However, like many euphoric bounces, they are often short lived, especially given the possibility for reprisal attacks from extremists,” he wrote in a report.

The greenback rose to 81.51 yen from 81.10 yen. The euro, meanwhile, was weaker at $1.4819 from $1.4839 late Friday in New York.

The dollar was bought on the belief that “terror risk will get smaller” for the United States, said Yuji Kameoka, chief currency strategist at Daiwa Securities Capital Markets in Tokyo. He said that yen weakness and a decline in the price of crude oil were boosting Japanese stock prices.

Oil prices eased off 2½-year highs to below $113 a barrel after Obama announced bin Laden’s had been killed.

Benchmark crude for June delivery was down $1.40 at $112.53 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled at $113.93 per barrel on the Nymex on Friday and reached $114.18 during in the session, the highest since September 2008.

Declining oil prices helped boost shares of airlines, which are sensitive to fuel prices. Korean Air Lines Co. Ltd., the country’s largest air carrier, soared 6.6 percent. Rival Asiana Airlines Inc. soared 12 percent. Japan’s All Nippon Airways Co. Ltd. jumped 2.5 percent.

Stock trading in Asia was thin amid a slew of holidays this week in the region. Hong Kong’s Hang Seng index and mainland China’s Shanghai Composite Index were closed Monday as were stock markets in Taiwan, Malaysia and Singapore. The Nikkei, Asia’s largest market, will be closed Tuesday through Thursday for Japan’s annual Golden Week holiday.

Australia’s S&P/ASX 200, meanwhile, recovered from early losses to rise less than 0.1 percent to 4,825.30. Markets in the Philippines and Indonesia also rose, but New Zealand and India were lower.

Markets in Japan and South Korea started in positive territory after the Dow Jones industrial average rose Friday on positive earnings news as construction equipment manufacturer Caterpillar reported strong first-quarter profit.

The Dow rose 47.23 points Friday, or 0.4 percent, to close at 12,810.54, rounding out April 4 percent higher, its best month since December.

Caterpillar, the world’s largest maker of mining and construction equipment, rose 2.5 percent after its earnings increased more than fivefold. The company also raised its sales and profit forecast for the year.

Japan’s Komatsu Ltd., the world’s No. 2 equipment maker, rose 1.7 percent in Tokyo.

Broader indices in the U.S. also gained.

The Standard & Poor’s 500 index rose 3.13 points, or 0.2 percent, to close at 1,363.61. The index gained 2.8 percent in April. The Nasdaq composite added 1.01 point to 2,873.54. It rose 3.3 percent for the month.

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Already in 2011, we have witnessed riots and revolts in the Middle East and North Africa, a war-like situation in Libya and devastating earthquakes and tsunamis in Japan. Through it all, world markets have largely held steady.

So is all this too much of a strain for global markets, or can they absorb these shocks and continue higher?

I wish I had a crystal ball… but, alas, I don’t.

I do, however, have the next best thing… numbers!

Numbers are a market lover’s best friend because they never lie! And numbers tell me that the global economy will likely continue to grow, though at a slightly slower pace.

Global Economic Impact of Japan’s Crisis

Let’s look at how the Japanese crisis might impact global economic growth.

Supply Affected… Not Demand

Japan’s economy is export driven. It produces many goods that the rest of the world consumes. Therefore, Japan’s crisis will impact supply… but not global demand.

For example, GM recently announced plant closings due to a shortage of parts from Japan. Similarly, availability of Apple’s iPad could be hurt because it sources components from Japan.

So, supply disruptions impact some sectors of the economy… but are less of a worry than disruptions in demand. A drop in demand, especially from a large consumer like the U.S., will seriously threaten global economic growth.

Japan and Global GDP Growth

At its peak in the mid-90s, the Japanese economy contributed to more than 19% of global GDP. Now, Japan’s contribution is down to 8.5%, less than half its peak.

But let’s focus on economic growth.

Japancontributed only a tiny fraction to global GDP growth in 2010. And analysts expect that Japan’s crisis will reduce global growth by only 0.1% – a pretty insignificant number.

So the good news for the rest of us is that the crisis in Japan will not derail global economic growth.

Near Term Yen Appreciation

In the near term, Japanese insurance companies will liquidate their local and global assets and convert that money into Yen (Japan’s local currency). This rush to convert billions of Dollars and Euros into Yen will spike demand for the Yen and cause it to go up.

In addition, the Bank of Japan plans to pump in $180 billion (¥16 trillion) to mitigate the crisis (much as the Fed did with its Quantitative Easing… except, Japan’s QE is less than a third of what we had in the U.S., just to put things in perspective.)

This influx of cash into rebuilding Japan’s economy will help offset some of the economic damage due to the crisis.

Impact on U.S. Consumers and Investors

Now I’m sure many of you are thinking, “now that we’ve gotten the global market taken care of, what about us?”

Thankfully, the crisis in Japan should not have much of an impact on your retirement or pension portfolios unless you’ve made indirect investments in Japanese companies.

However, Japan is one of the largest buyers and holders of U.S. government debt. This crisis may cause them to liquidate some of their Treasury holdings and pull-back on future purchases. Both these actions could in turn push U.S. interest rates higher, and increase borrowing costs for personal, business and home loans.

As Japan re-builds, demand for cement, copper, steel and other commodities could go up and drive prices higher. If Japan’s farms have been hit, prices on rice and produce could also rise… something to keep an eye on.

The crisis in Japan’s nuclear plants may cause a re-think away from nuclear fuel back to conventional oil and natural gas and that could be bullish for oil companies. It could take the cost of oil higher, and that could impact us all.

However, the overall tone from most analysts is positive. However, as always continue to exercise caution and analyze the exposure of your investments to various crises before making your investment decisions.

Are you ready to face the global economic collapse which you are progressing towards? Well, if you are not, get ready now because yes there is going to be a economic collapse very soon. The evident signs of global economic collapse confirm that yes something really very critical is going to happen. Entire Europe, USA, Middle East and Asia is continuously alarming people that a critical financial crisis is waiting. Stocks markets, real estate and Forex trading is perhaps on the death bed.

The only countries that can sustain this collapse are those countries, which have strong currency. The countries with weak currencies can never progress or sustain this global economic collapse. Economy, finance, politics and sovereignty of different nations is under server turmoil. If these countries did not take steps to improve the current economy condition, it is for sure that they will pay through nose. Different survival techniques and strategic planning systems are required to handle this hodgepodge condition that is taking the world with sweep of storm. Brighter are the chances that many nations will survive this economic crisis, if and only if they practice lucrative financial management techniques.

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WASHINGTON (AP) — The economy slowed sharply in the first three months of the year. High gas prices cut into consumer spending, bad weather delayed construction projects and the federal government slashed defense spending by the most in six years.

The 1.8 percent annual growth rate in the January-March quarter was weaker than the 3.1 percent growth in the previous quarter, the Commerce Department reported. And it was the worst showing since last spring when the European debt crisis slowed growth to a 1.7 percent pace.

Federal Reserve Chairman Ben Bernanke and other economists say the slowdown is a temporary setback. They generally agree that gas prices will stabilize and the economy will grow at a 3 percent pace in each of the next three quarters.

But gas prices are still going up. The housing market has shown little signs of recovering. And lawmakers are proposing some of the steepest cuts in federal spending in a generation. Those cuts would filter down to state and local governments, which are already wrestling with their own budget crises.

“The economy has lost its modest upward momentum, and headwinds such as rising gasoline prices and further budget cuts suggest the recovery will continue at only a moderate pace going forward,” said Sal Guatieri, senior economist at BMO Capital Markets.

The national average for a gallon of gas was $3.88 on Thursday. That’s an increase of 30 cents in the first month of the April-June quarter.

An inflation gauge in the report showed consumer prices rose last quarter at the fastest pace in nearly three years. Most of the increase came from higher fuel costs.

Rising gas prices are draining most of the extra money that Americans are receiving this year from a Social Security payroll tax cut.

That’s a major reason why consumer spending cooled off in the January-March quarter. Consumers boosted spending at a 2.7 percent pace, down from the previous quarter’s 4 percent pace and the weakest since last summer. Consumer spending is important because it accounts for roughly 70 percent of overall economic activity.

“All things considered, it could have been worse,” said economist Paul Dales at Capital Economics. Even though consumers spent less, the pace of spending by historical standards is decent. “Nevertheless, in a quarter when the economy began to benefit from additional monetary and fiscal stimulus, we had originally expected a lot more,” he said.

Pump prices weren’t the only reason spending slowed. Harsh winter weather also kept people from shopping in many parts of the country.

Winter storms — including rare snow that blanketed the South — also forced builders to delay construction projects, a big factor holding back overall economic activity. Builders slashed spending on commercial construction, such as office buildings and factories, at a 21.7 percent annualized pace, the deepest cuts since late 2009.

Residential construction was also affected. Builders cut spending on housing projects by a 4.1 percent annualized rate.

The housing market’s collapse thrust the economy into a deep recession, and economists say it will take years for the industry to heal. Two years after the recession has ended, the housing market remains depressed.

Bernanke suggested at a news conference Wednesday that the crippled housing market will continue to drag on economic growth. He pointed out that home building and commercial construction were both “very weak” in the first quarter. Normally, construction spending is much stronger at this stage of an economic recovery.

The government is also spending less. The federal government cut military spending at an annualized rate of 11.7 percent last quarter — the deepest cut since 2005.

Bernanke and other economists expect government defense spending and consumer spending will rebound in the next quarter.

Economists in a new Associated Press survey predict the economy is growing at a 3.2 percent pace this quarter and that growth will steadily improve over the remainder of the year.

One concern is the rise in prices. An inflation gauge tied to the report showed that consumer prices rose at an annual rate of 3.8 percent. That’s the biggest gain since the summer of 2008, when gasoline prices hit a record high of $4.11 a gallon nationwide.

Stripping out energy and food prices, inflation rose at a rate of 1.5 percent. That’s at the low end of the range of inflation the Federal Reserve believes is needed for a healthy economy.

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WASHINGTON (AP) — The nation’s economic upheaval has been especially hard on young people trying to start their working lives with a high school education or less. Only about a third are working full-time, compared with two-thirds of recent college grads, according to an Associated Press-Viacom poll.

Most say money was a major reason they bypassed college, and the vast majority aspire to more education someday.

Christopher Cadaret’s been fixing TVs and stereos for fun since he was 10 years old and thinks he’d like to work in electronics or auto repair. But four months after he dropped out of high school, he hasn’t found any kind of job.

He’s tried a local electronics company, the hardware store, the dollar store, the minimart. Nothing.

“I’m seeking work, anything that is put in front of me,” said Cadaret, 18, who lives with his father in Burkesville, Ky., a small town amid the hills and farmland along the Tennessee border. Without that first toehold on work, his dream of earning enough to save up for technical training seems far away.

Four in 10 of those surveyed whose education stopped at high school are unemployed. Less than a quarter have part-time jobs, the poll of 18- to 24-year-olds found.

The Labor Department’s figures document how much harder it’s become for these young adults to find a job since the recession that began late in 2007. The unemployment rate has been over 20 percent each March for the past three years for high school graduates ages 16-24 who have no college education. That’s up from 10 percent in March 2007 and 14.5 percent a year later.

For college grads that age, March unemployment peaked at 8.5 percent this year. The government’s figures count only those considered actively looking for jobs.

Young adults who skipped higher education are willing to work and have some experience; the vast majority in the AP-Viacom survey have held paying jobs at some point. About two-thirds hold high school diplomas. But a majority — almost six in 10 — say the high school they attended did only a fair to poor job in helping them prepare for work.

About three-fourths worry at least a little about having enough money to get by from week to week.

Almost four in 10 still lean on their parents or relatives for financial support. Still, most feel that their families’ financial situations have held them back, especially those whose families earn less than $50,000 per year, according to the survey conducted in partnership with Stanford University.

Three-fourths of those who bypassed college cite cost as a reason. More than half — 56 percent — say money was “very” or “extremely” important to their decision.

They still believe in the power of higher education. Nearly three-fourths say they hope to return to the classroom someday, either for trade school or college.

“I just feel like I’ve got enough drive and I’m not going to quit,” said high school senior Jonathan McDaniel, who’s made plans to join the Navy when he graduates from high school in Pittsburg, Okla., this spring. “If you work hard enough, you will get where you want to be.”

McDaniel, 18, is interested in pursuing a college degree and maybe a career as a police officer or airplane mechanic. He figures starting out serving on an aircraft carrier “will give me a solid foundation to build my life on.”

Cost isn’t the only reason many stopped school rather than starting college. Almost half say getting real-world experience before going through more school was a key factor in their decision. And almost as many said they were influenced by their ability to find a job right after high school.

“I kind of always knew college wasn’t for me,” said Ayla Godfrey, 19, of Charlotte, N.C. “I was ready to get out and work, and I really didn’t want to go back to school anymore.”

Godfrey said it took her months and more than 100 applications to find work in a clothing store after she graduated from high school in 2009. She later worked as a hostess at an assisted living facility but quit that job after becoming pregnant. Godfrey, who lives with her boyfriend’s family and relies on his paycheck, says she feels confident she’ll find job happiness after her baby is born.

“I have to make a life for my little baby girl, and I’m willing to do whatever I have to do,” she said.

Young people whose education stopped at high school don’t report as much certainty about the future as those in college, but they’re still strikingly optimistic — eight in 10 are at least somewhat confident they’ll find a career that will make them happy.

Most of those with jobs don’t feel they’ve found their calling, however. Six in 10 say their job is just something to get them by, not a career or a stepping stone to one.

And the dismal job market leaves many feeling shut out.

“It’s going to take time for the economy to work itself back up for people to find jobs,” said Cadaret, who keeps looking. Meanwhile, he said, “I’m worried about money all the time.”

The AP-Viacom telephone survey of 1,104 adults ages 18-24 was conducted Feb. 18-March 6 by GfK Roper Public Affairs & Corporate Communications. The margin of sampling error is plus or minus 3.5 percentage points.

Stanford University’s participation in this project was made possible by a grant from The Bill & Melinda Gates Foundation.

___

AP Polling Director Trevor Tompson, Deputy Director of Polling Jennifer Agiesta and AP News Survey Specialist Dennis Junius contributed to this report.

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BANGKOK (AP) — A strong rebound on Wall Street spurred by strong earnings reports and better-than-expected housing starts sent Asian stocks higher in early trading Wednesday.

The Nikkei rose 1.4 percent to 9,572.25 despite a government report showing that exports for March dropped for the first time in 16 months — one of many consequences to be felt from the mammoth earthquake and tsunami that devastated the country’s industrial northeast last month.

South Korea’s Kospi was 1.6 percent higher to 2,157.70, and Hong Kong’s Hang Seng index rose 0.9 percent to 23,735.65. Benchmarks in Singapore, Taiwan and Australia were also higher. Mainland Chinese shares were mixed, with the Shanghai Composite Index gaining 0.3 percent while the smaller Shenzhen Composite Index dropped marginally.

In New York on Tuesday, health care giant Johnson & Johnson rose 3.7 percent, leading the 30 companies in the Dow Jones industrial average, with earnings that beat Wall Street’s expectations.

In Washington, the Commerce Department reported that builders broke ground in March on more new homes than analysts expected. Home construction rose 7.2 percent from February.

The Dow Jones industrial average rose 0.5 percent to close at 12,266.75. The Standard & Poor’s 500 index rose 0.6 percent to 1,312.62. The Nasdaq composite rose 0.4 percent to 2,744.97.

Major stock indexes posted their largest one-day drop in over a month Monday after S&P said it might lower its rating on U.S. government bonds if Washington failed to tackle its mounting debts. While the rating agency kept its U.S. debt rating at AAA, the highest possible, it warned that there was a one-in-three chance it would downgrade U.S. debt within two years.

After the market closed, tech heavyweight Intel Corp. said earnings jumped 29 percent, surpassing estimates. Business spending on new computers offset a design error in one of its chips. Intel rose 6.2 percent in extended trading.

The dollar strengthened to 82.91 yen from 82.37 yen late Tuesday in New York. The euro rose against the greenback to $1.4388 from $1.4340.

Benchmark crude for June delivery rose 17 cents a barrel to $108.45 on the New York Mercantile Exchange. The contract settled at $108.28 per barrel late Tuesday

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WASHINGTON (AP) — A key credit agency issued an unprecedented warning to the United States government Monday, urging Washington to get a grip on its finances or risk losing the nation’s sterling credit rating.

For the first time, Standard & Poor’s lowered its long-term outlook for the federal government’s fiscal health from “stable” to “negative,” and warned of serious consequences if lawmakers fail to reach a deal to control the massive federal deficit.

An impasse could prompt the agency to strip the government of its top investment rating in the next two years, S&P said. A loss of the triple-A rating would ripple through the American economy, making loans more expensive and credit more difficult to obtain.

The downgrade was interpreted as a rebuke to President Barack Obama and congressional Republicans, admonishing them to put politics aside and come up with a long-term financial plan as soon as possible.

“This is a warning: Don’t mess around,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that is pushing for deficit reduction.

Analysts at S&P have never before used the outlook to cast doubt on the nation’s credit worthiness.

In response, stocks suffered their worst slide in a month. The Dow Jones industrial average plunged 245 points before recovering to close down 140 points for the day.

“The credit quality of U.S. debt is sacrosanct, and legislators will do everything within their power to avoid a downgrade,” said Jack Ablin, chief investment officer at Harris Private Bank.

The government is on pace to run a record $1.5 trillion deficit this year, the third consecutive deficit exceeding $1 trillion.

But so far, S&P sees little chance that the White House and Congress will agree on a deficit-reduction plan before the November 2012 elections, and the rating agency doubts that any plan would be in place until 2014 or later.

Obama and congressional Republicans are sparring over how to reduce the nation’s red ink. If Congress refuses to raise the nation’s debt limit this spring, and the U.S. Treasury lost authority to borrow additional money, the government would not be able to pay its bills and would default on its debt.

Although it’s a worst-case scenario that’s highly unlikely, default by the government means anyone owning federal debt of any kind — bills, notes, bonds — could go unpaid.

Both sides have proposed cutting $4 trillion from future deficits over the next 10 to 12 years.

The White House wants to reduce the deficit through spending cuts and by ending the Bush-era tax cuts for the wealthy. Republicans reject that, calling it a tax increase. They seek instead to narrow the deficit largely by overhauling Medicare and cutting spending elsewhere.

The credit report called the two proposals a “starting point” of the process, but warned that the gap between the parties remained wide.

S&P took no position about how to reduce the deficit or how to change spending and revenue plans.

“But for any plan to be credible, we believe that it would need to secure support from a cross-section of leaders in both parties,” S&P said in its report.

A lower credit rating would drive up the government’s borrowing costs. It could lead to higher interest rates on everything from mortgages to car loans and threaten to slow U.S. economic growth.

Ablin said the credit worthiness of the country is the underpinning on which all other asset classes are valued.

“If all of a sudden the credit quality of U.S. Treasurys isn’t as high as people perceive, we could see erosion of confidence,” he said.

For now, S&P continues to give the U.S. government its top investment ranking. That means S&P believes that the U.S. government can and will repay its debts and that Treasury investments are virtually risk-free. But the agency says the U.S. faces a one in three chance of a downgrade in the next two years. That would likely happen if the White House and Congress could not come up with a credible plan for reducing debt.

The other major credit agencies — Moody’s and Fitch Ratings — did not match S&P’s outlook warning.

S&P gives its top investment rating to just 19 of the 127 countries it analyzes. But it says Britain, France and Germany moved much faster to contain deficits after the 2008 financial crisis and 2007-2009 recession, which cut tax revenues and forced governments to spend more on unemployment benefits, aid to the poor and bailouts of the banking system. Those countries also have top-notch investment ratings.

S&P noted that the U.S. deficit grew to 11 percent of economic activity in 2009, a risky percentage. The deficit averaged less than half that percentage in the previous six years.

The government was beginning to run surpluses at the end of the Clinton administration. But deficits returned after President George W. Bush’s tax cuts, a 2001 recession, wars in Afghanistan and Iraq, and a massive expansion of Medicare’s drug coverage.

The deficit widened even more after the Great Recession started in 2007, depleting tax revenue and raising spending to stimulate the economy and provide benefits for the unemployed and the poor.

In the past, credit warnings have jolted politicians into action.

In May 2009, Standard & Poor’s downgraded its long-term outlook on the United Kingdom to negative, saying that the country’s debt could double in four years.

Prime Minister David Cameron and his Conservative-Liberal coalition government laid out plans to cut nearly 500,000 jobs and reduce welfare spending. Britain’s economy also posted modest gains, and the ratings agency changed its outlook in October back to “stable,” noting the government’s “political resolve.”

In recent months, at least two countries — Portugal and Greece — have had their credit ratings downgraded as they endured financial woes of their own.

The Obama administration embraced Monday’s warning as a welcome call for cooperation among the two political parties. Press secretary Jay Carney said the White House believes the political process will outperform the agency’s expectations because the president and Congress recognize the problem.

A budget showdown is likely in the next few weeks. Treasury Secretary Timothy Geithner has said the government will reach its debt limit no later than May 16. He can juggle funds to keep the government running until about July 8, after which the government could not pay its bills.

On Sunday, Geithner said Republican leaders have privately assured the Obama administration that Congress will raise the government’s borrowing limit in time to avoid an unprecedented default on the nation’s debt.

But Rep. Eric Cantor, the No. 2 Republican in the House, took a hard line Monday, calling the S&P announcement “a wake-up call to those in Washington asking Congress to blindly increase the debt limit.” He said Republicans would only agree to raise the debt ceiling if the White House agrees to “serious reforms that immediately reduce federal spending and to end the culture of debt in Washington.”

A bipartisan deficit-reduction commission appointed by Obama recommended late last year that about $4 trillion be slashed from budget deficits during the coming decade.

Under the commission’s plan, roughly two-thirds of the savings would come through spending cuts and one-third through increased tax revenue. Although overall tax rates would decline, dozens of popular tax breaks would be scaled back or eliminated, including the child tax credit, mortgage interest deductions and deductions claimed by employers who provide health insurance.

Obama praised the panel for its work, but embraced few of its recommendations, and none of the major ones on new taxes.

For now, U.S. politicians are at a stalemate. “There is bipartisan agreement on the need to reduce the debt by $4 trillion over roughly the next decade,” said Sen. Charles Schumer, D-N.Y. “Now we just need to resolve how to do it.”

___

Associated Press writers Pallavi Gogoi and Janna Herron in New York and Derek Kravitz, Andrew Taylor, Jeannine Aversa and Ben Feller in Washington contributed to this report.

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Hello, Who Do You Want As The Next USA President? Poll Below!

WASHINGTON (AP) — Economists say the U.S. economy is gaining strength despite political unrest in North Africa and the Middle East and last month’s devastating earthquake and tsunami in Japan.

A survey from the National Association for Business Economics finds that economists are hopeful that the broader economy is substantially improving, with rising employment reported for the fifth quarter in a row. The survey found that “companies appear to be positioning themselves for a firming economic environment,” said Shawn DuBravac, an economist with the Consumer Electronics Association, who analyzed the findings.

The outlook for employment rose slightly, reaching a 12-year high. No firms reported significant layoffs, with the only reductions coming from already planned cuts.

Sales increased for the third consecutive quarter, profit margins continued to improve and the number of economists whose firms increased spending over the previous quarter held steady. Nearly all of the 72 economists surveyed, about 94 percent, now expect the economy to grow at least 2 percent in 2011.

The quarterly survey includes the views of economists for private companies and trade groups who are NABE members. The data are reported by broad industry groupings. Many results in the survey are expressed through the Net Rising Index, or NRI — the percentage of panelists reporting better outlooks minus the percentage whose outlook is bleaker.

The survey looked at two new questions for its April survey, gauging the financial impact of anti-government unrest in the Arab world and the deadly Japanese earthquake and tsunami.

Nearly 60 percent of those polled said they expected higher costs because of political turmoil in Bahrain, Egypt, Tunisia, Libya and Syria and about 52 percent said they expected economic growth to be weaker in 2011 because of the protests and fighting.

The March 11 earthquake and tsunami, which left nearly 28,000 people dead or missing and sparked a crisis at a nuclear plant, had less of an impact on the economic forecasts. About 31 percent said costs would be higher and 40 percent said it would weaken the broader economic recovery.

In the first quarter of this year, 63 percent of economists said sales rose from the previous quarter — the highest percentage since 1994. The NRI rating for sales rose 11 points from the previous quarter to 54, and the improvement was across all industry sectors: goods, utilities, information and communications, finance, insurance and real estate, and services.

Profit margins rose to an NRI figure of 31 — the highest rating since 1983. The number of economists reporting rising profits has almost doubled over the past year, to 45 percent from 25 percent.

Prices rose, with about one third of those surveyed saying their firms had made increases over the past three months. Two-thirds of the goods-producing industry, which includes farming, mining, construction and manufacturing, reported their firms had raised prices. Similarly, the costs paid for materials rose for the third quarter in a row and wages and salaries jumped to the highest reading since a survey in October 2007.

The survey was conducted between March 16 and 31.

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Hello, Who Do You Want As The Next USA President? Poll Below!

WASHINGTON (AP) — The world’s major economies are pledging to provide support for the regime changes that are occurring in the Middle East and North Africa. An Obama administration official is comparing what is occurring now to the fall of the Berlin Wall more than two decades ago.

The United States and France issued a joint statement after talks on Thursday saying major nations stood ready with international lending institutions to provide economic support for the new governments in Egypt and Tunisia.

U.S. Treasury Undersecretary Lael Brainard wrote in an opinion piece that the transformations that were occurring in the region could be as successful in unlocking economic prosperity as events after the fall of the Berlin Wall in 1989.

U.S. Treasury Secretary Timothy Geithner and French Finance Minister Christine Lagarde said in their statement summarizing the talks that the group would put together a joint action plan with early recommendations coming in May to support “inclusive and sustained growth, transparency and improved governance.”

Brainard wrote in an article for Foreign Policy magazine‘s website that “across the Middle East and North Africa, unprecedented upheavals are creating historic opportunities to expand the circle of democratic societies.”

Brainard cautioned that the reforms and efforts to provide greater economic growth for the region’s young people would take a number of years, with many challenges ahead. “We must be prepared to work through the setbacks and scale up successes,” she wrote.

The discussions on the Middle East occurred at the start of three days of finance talks designed to deal with various challenges facing the global economy, from soaring food and energy prices to continued tensions between the United States and China, the world’s two largest economies, over currencies and trade.

The United States was being represented at the talks by Geithner and Federal Reserve Chairman Ben Bernanke. The discussions Friday were taking place among the Group of 20, which includes traditional economic powers such as the United States and European nations and major developing powers such as Brazil, China and India.

Lagarde was leading the talks because France is this year’s head of the G-20, the group that since the financial crisis in 2008 has become the major steering body for the global economy.

The G-20 talks were scheduled to conclude Friday afternoon with a joint statement of goals and news conferences by Lagarde and other finance officials.

The finance talks will wrap up on Saturday with meetings of the policy-setting panels of the 187-nation International Monetary Fund and the World Bank.

World Bank President Robert Zoellick said Thursday that a major goal for his institution will be to win support from the rich countries for more assistance to poor nations that are facing food crises. A 36 percent surge in food prices over the past year has pushed an additional 44 million people into poverty.

“We have to put food first and protect the poor and vulnerable, who spend most of their money on food,” Zoellick told reporters Thursday.

The G-20 talks will be focused on making more progress on a set of economic indicators that the group can use to gauge whether countries are pursuing the correct policies to prevent the growth of dangerous imbalances in trade and government debt, which contributed to the last financial crisis.

The United States is pushing for the indicators to be set up, hoping they can be used to bring more pressure on China to allow its currency to rise in value against the dollar as a way to narrow the huge trade gap that exists between China and the U.S.

However, Chinese officials do not want the rebalancing process to be used as a way to attack China’s currency policies, and it was unclear whether any progress will be made during the Washington talks.

“There are lots of things to worry about, and we want to make sure we don’t fall back into another crisis as we did not that long ago,” Canadian Finance Minister James Flaherty told reporters.

IMF Managing Director Dominique Strauss-Kahn said that while the global economy began growing again last year after the most severe downturn since World War II, there still were multiple risks to the recovery.

“The recovery is getting stronger but … it is not the recovery we want because it is still imbalanced,” Strauss-Kahn said. “We must be aware of complacency, and we need urgent action.”

___

Associated Press writer Harry Dunphy contributed to this report.

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WASHINGTON (AP) — President Barack Obama coupled a call for $4 trillion in long-term deficit reductions with a blistering attack on Republican plans for taxes, Medicare and Medicaid on Wednesday, laying down markers for a roiling debate in Congress and the 2012 presidential campaign to come.

Obama said spending cuts and higher taxes alike must be part of any deficit-reduction plan, including an end to Bush-era tax cuts for the wealthy. He proposed an unspecified “debt failsafe” that would go into effect if Congress failed to make sure the national debt would be falling by 2014 relative to the size of the overall economy.

“We have to live within our means, reduce our deficit and get back on a path that will allow us to pay down our debt,” the president said in a speech at George Washington University a few blocks from the White House. “And we have to do it in a way that protects the recovery, and protects the investments we need to grow, create jobs and win the future.”

Obama’s speech was salted with calls for bipartisanship, but it also bristled with attacks on Republicans. They want to “end Medicare as we know it,” he said, and to extend tax cuts for the wealthy while demanding that seniors pay more for health care.

“That’s not right, and it’s not going to happen as long as I am president,” he vowed. Medicare serves 47 million seniors and disabled people.

Obama spoke to an audience that included Rep. Paul Ryan, R-Wis., author of the House Republican budget that drew repeated presidential scorn. The Budget Committee chairman later told reporters he had been excited to receive an invitation to the speech, believing the administration was extending an olive branch.

“Instead, what we got was a speech that was excessively partisan, dramatically inaccurate and hopelessly inadequate to addressing our country’s pressing fiscal challenges,” Ryan said. “What we heard today was not fiscal leadership from our commander in chief. What we heard today was a political broadside from our campaigner in chief.”

Speaker John Boehner, R-Ohio, noted that the administration has asked Congress to raise the debt limit, but said, “the American people will not stand for that unless it is accompanied by serious action to reduce our deficit. More promises, hollow targets and Washington commissions simply won’t get the job done.”

The president spoke less than a week after he reached a compromise with Boehner on an unprecedented package of $38 billion in spending cuts for this year just in time to avoid a partial government shutdown. Both houses of Congress are expected to pass the measure in the next 24 hours or so, closing the books on the current budget year and clearing the way for a far more defining debate about the size and shape of the government.

Obama stepped to the podium at a juncture when tea party-backed Republicans are relishing early victories in the House, the 2012 Republican presidential field is just beginning to take shape and moderate Democratic lawmakers are charting their re-election campaigns in swing seats. His emphasis on deficit reduction marked an appeal to independents as well as other voters who are eager to stem record annual deficits as well as gain control over a national debt that is more than $14 trillion.

At the same time, he sought to keep faith with liberals and other supporters.

To opponents of revisions in Medicare, Medicaid or Social Security, he said, “I guarantee that if we don’t make any changes at all, we won’t be able to keep our commitments to a retiring generation that will live longer and face higher health care costs than those who came before.”

Of $4 trillion in cuts, Obama said $2 trillion should come from spending, $1 trillion from overhauling the tax system to eliminate some tax breaks and loopholes, and the rest recouped from lower interest payments on the national debt

Obama also wants to allow Bush-era tax cuts to expire for individuals making $200,000 or more a year and couples making $250,000 or more. The revenue that would generate is not counted in his $4 trillion in deficit reduction.

Administration officials said military spending would be reduced by $400 billion through 2023, domestic programs would absorb $770 billion in cuts and mandatory programs such as agricultural subsidies another $360 billion.

An additional $480 billion would be saved from Medicare, which provides health care principally to 33 million seniors, and from Medicaid, a state-federal program that covers lower-income families and is ticketed for a huge expansion under the health care program Obama signed into law last year.

In line with the wishes of Senate Democratic leaders, the president made no recommendations for savings from Social Security, which he said is neither in a crisis nor “a driver of our near-term deficit problems.” He said he supports unspecified steps to strengthen it for the long term, but ruled out any attempt to privatize it.

The president also urged Congress to pass tax changes, and he suggested he was open to curtailing a homeowners’ tax deduction that can currently be claimed by filers at all income levels.

Obama’s plan relied on some of the same deficit reduction measures proposed in December by a bipartisan fiscal commission he appointed. The president is scheduled to meet Thursday at the White House with the co-chairmen of the commission, Democrat Erskine Bowles and Republican Alan Simpson.

Neither Obama nor his aides distributed any detailed accounting of the effect of his recommendations on the deficit, which is expected to top $1.5 trillion this year, or the debt, now more than $14 trillion.

Obama saved some of his sharpest rhetoric for Republican proposals to end traditional Medicare for anyone currently under 55, and to give the states near-total control over Medicaid.

For Medicare, he said, “It says instead of guaranteed health care, you will get a voucher. And if that voucher isn’t worth enough to buy insurance, tough luck — you’re on your own.”

He said the Republican budget could cost 50 million Americans health care coverage in all, including grandparents needing nursing home care, children with autism and kids “with disabilities so severe that they require 24-hour care. These are the Americans we’d be telling to fend for themselves.”

The debt has grown for much of the past few decades, with the exception of a brief period after President Bill Clinton and Republicans in Congress reached a compromise that permitted payments to reduce it.

Even a recounting of the debt’s history had a political subtext.

Beginning in 2000, the president said, “we increased spending dramatically for two wars and an expensive prescription drug programs, but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts.” That was a reference to policies pursued by President George W. Bush and the Republicans who controlled Congress for six of his eight years in office.

Obama made a glancing reference to the 2012 presidential race, saying that some of his potential Republican rivals had signed onto the budget House republicans are advancing.

Former Massachusetts Gov. Mitt Romney, one likely GOP candidate, issued a statement that said Obama had “dug deep into his liberal playbook for solutions highlighted by higher taxes.”

Another, former Minnesota Gov. Tim Pawlenty, said that with his speech, the president showed a “lack of seriousness on deficit reduction.”

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WASHINGTON (AP) — President Barack Obama, two years into a presidency that increased spending to prime a weak economy, is turning his attention to the nation’s crushing debt and trying to counter a Republican anti-deficit plan with a framework of his own that tackles politically sensitive health care programs while also increasing taxes.

The president on Wednesday was to deliver a speech outlining his proposal to reduce spending in Medicare and Medicaid, raise taxes on the wealthy and cut defense costs. In a pre-emptive response Tuesday, House Speaker John Boehner, R-Ohio, called any proposed tax increase “a nonstarter.”

The White House wouldn’t offer details of the president’s approach ahead of the speech. But an official commenting on the condition of anonymity said the plan borrows from the December recommendations of Obama’s bipartisan fiscal commission, which proposed $4 trillion in deficit reduction over 10 years.

In a preview of the speech, the White House said it aims to achieve “balanced” deficit reduction by keeping domestic spending low, reducing the defense budget, cutting excess health care spending in the nation’s biggest benefit programs, and eliminating loopholes and breaks in the tax system.

Obama’s speech will draw contrasts with a Republican plan that cuts $5 trillion in spending over the next decade and which the White House says unfairly singles out middle-class taxpayers, older adults and the poor.

This new clash, just a week after the president announced he would seek re-election, ensures that the nation’s fiscal health will be at the center of the 2012 presidential campaign. For the past two months, Obama has been arguing to protect his core spending priorities, including education and innovation. His turn to deficit reduction reflects the pressures he faces in a divided Congress and with a public increasingly anxious about the nation’s debt, now exceeding $14 trillion.

The president is wading into a potential political thicket. Liberals fear he will propose cuts in prized Democratic programs like Medicare and Medicaid, the health care programs for older adults, the disabled and the poor, and in Social Security. Moderates worry that his plan could unravel bipartisan deficit-cutting negotiations. And Republicans already are poised to reject any proposal that includes tax increases.

For the White House, the speech at George Washington University comes as Obama pushes Congress to raise the limit on the national debt, which will permit the government to borrow more and thus meet its financial obligations. The country will reach its debt limit of $14.3 trillion by May 16. The Treasury Department has warned that failure to raise it by midsummer would drive up the cost of borrowing and destroy the economic recovery.

Republicans have said they would not raise the debt ceiling without deficit reduction, or at least without the White House showing progress toward sizable cuts in long-term spending. White House spokesman Jay Carney reiterated the White House view Tuesday that passage of a higher debt ceiling should not be encumbered with deficit-reduction legislation.

Pressure from Congress, however, eventually could result in a debt ceiling deal that includes fiscal discipline measures, though not necessarily a wholesale restructuring of government benefit programs.

Obama will brief Congress’ bipartisan leadership in the contents of his speech Wednesday morning at the White House.

Obama’s speech comes just before Congress votes on a $38 billion package of spending cuts that averted a government shutdown last week. Despite widespread antipathy toward the deal in both parties, House Republicans and the White House predicted the plan, which covers spending for the next six months, would pass.

As for the bigger, long-term deficit proposal, the White House was keeping a tight lid on details. But Carney made clear the president would call for changes in Medicare and Medicaid. Obama also was expected to resurrect the tax increases on wealthy Americans that he put off in December as part of a tax deal with Congress.

“He believes that there has to be a balanced approach” to reducing long-term deficits, Carney said. “And that’s entitlements, tax expenditures and defense.”

The president’s proposal is meant to be in sharp contrast with the plan offered by House Budget Committee Chairman Paul Ryan., R-Wis. That budget proposal, embraced by the House Republican leadership, would reduce spending by more than $5 trillion over 10 years with structural overhauls to Medicare and Medicaid while also making permanent all Bush-era tax cuts.

“Where the president believes the House Republican plan fails starkly is that it is imbalanced, that it places all the burden on the middle class, on seniors, on the disabled, on people in nursing homes, through its rather drastic reform of Medicare and Medicaid,” Carney said.

Obama could face resistance from Democrats. Senate Majority Leader Harry Reid, D-Nev., on Tuesday reiterated his opposition to changes in Social Security.

The president’s speech also comes as six senators — three Republicans and three Democrats — have been working on a bipartisan compromise that would tackle Medicare, Medicaid and Social Security costs but also seek to raise more revenue through tax increases. Obama’s decision to give a speech caught those senators by surprise. The Democrats are Mark Warner of Virginia, Dick Durbin of Illinois and Kent Conrad of North Dakota. The Republicans are Saxby Chambliss of Georgia, Tom Coburn of Oklahoma and Mike Crapo of Idaho.

Senate aides said members of that so-called Gang of Six would not attend the speech to avoid any suggestion that they supported the president’s view or that the president endorsed their work.

Meanwhile, Republicans were already girding for a confrontation.

“If the president begins the discussion by saying we must increase taxes on the American people — as his budget does — my response will be clear: Tax increases are unacceptable and are a nonstarter,” Boehner declared Tuesday. “We don’t have deficits because Americans are taxed too little, we have deficits because Washington spends too much.”

In the Senate, the top Republican on the Budget Committee said Obama needed to offer not just a speech but a new budget with detailed deficit-cutting proposals.

“We can begin a conversation if his proposal is substantive and is capable of evaluation, even if I might disagree with it,” Sen. Jeff Sessions, R-Ala., said. “What I don’t find acceptable at this late date is just another speech with vague generalities.”

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