Obama’s 2011 Tax Returns Show 20.5 Percent Rate

U.S. President Barack Obama

President Obama paid an effective tax rate of 20.5 percent in 2011, according to tax returns he and first lady Michelle Obama released today. That makes the president’s tax rate lower than Warren Buffett’s secretary, who pays upwards of 35 percent and whom Obama often cites on the campaign trail as justification for increasing taxes on millionaires like Buffett.

But at 20.5 percent, the president paid a markedly higher percentage of his income to the federal government in 2011 than his Republican rival Mitt Romney reported paying in 2010. Despite earning more than $21 million in 2010, Romney’s effective tax rate was a mere 14 percent.


President Obama reported earning about $790,000 last year and paid $162,000 in total taxes. He and the first lady donated $172,000 to charity, or about 22 percent of their adjusted gross income, according to their tax returns. The majority of the first family’s donations went to the Fisher House Foundation which provides scholarships to veterans’ children.

Obama has pushed hard the so-called “Buffett Rule” in campaign speeches this week. The proposed tax reform would require people earning more than $1 million to pay a minimum effective tax rate of 30 percent.

With an income less than $1 million, Obama would not see his tax rate increase under the rule. Romney, on the other hand, would see his rate from 2010 more than double.

The likely GOP nominee has yet to release his tax returns for 2011, a fact the Obama campaign was quick to criticize him for today after the president released his own returns.

“Governor Romney has yet to provide tax returns from the period in which he made hundreds of millions as a corporate buyout specialist, or as governor of Massachusetts, the experience he says qualifies him to be president,” Obama campaign manager Jim Messina said in a statement. ” What does he have to hide?”

Romney’s spokesman Andrea Saul said the former Massachusetts governor will release his 2011 return “when it is filed.”  She knocked Obama for trying to “distract” voters from his economic record by putting the focus on taxes.

“It’s no surprise with the worst job creation record in modern history that President Obama would try to distract Americans from the real issues with a series of sideshows,” Saul said.

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Supreme Court moves to heart of healthcare case

U.S. President Barack Obama pauses as he speaks about health insurance reform

(Reuters) - The Supreme Court confronts the core of President Barack Obama's healthcare law on Tuesday when it hears arguments on whether Congress had the power to require most people in the United States to buy medical insurance.

The two-hour session on the second day of a historic three-day oral argument will offer a first concrete look at how the nine justices view the law Obama signed two years ago and that still divides his Democrats and rival Republicans.

No past rulings are completely on point and speculation has been rampant about how the ideologically divided justices will decide the limits of congressional power to address society's most intractable problems. Not since 1936 has the Supreme Court struck down a major piece of federal economic legislation as exceeding Congress' power.

A ruling, expected in late June before the Democratic and Republican party conventions, is likely to become a flashpoint in the November 6 presidential and congressional elections.

The court's ruling on the insurance requirement could decide the fate of the massive multi-part healthcare overhaul meant to improve access to medical care and extend insurance to more than 30 million people.

On Monday the justices took up a procedural tax-law question about the timing of lawsuits and suggested by their questions that they could decide the merits of case.

The centerpiece of the Affordable Care Act is the mandate that most people buy health insurance by 2014 or pay a tax penalty. The challengers, including 26 states and a small-business trade group, contend Congress exceeded its authority to regulate commerce with that so-called individual mandate.

In more practical terms, the challengers say that if the government can force people to enter the insurance market, it would have latitude to force people to engage in other behavior, whether it be to buy American-made cars or, in a mantra of the current litigation, to eat broccoli.

The Obama administration argues that virtually everyone will need medical care and that those who opt not to buy insurance put a disproportionate burden on the system. It has defended the law as a response to a national crisis.

In the United States, annual healthcare spending totals $2.6 trillion, about 18 percent of the annual gross domestic product, or $8,402 for every man, woman and child.

COURT DIVISIONS

The Supreme Court is deeply split on ideological and political grounds, with the five conservative Republican-appointed justices often in the majority: Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito.

The four liberal Democratic appointees are Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.

A looming point of interest for the 400 spectators who will crowd into the courtroom on Tuesday is whether that 5-4 division becomes evident or appears to splinter.

All four liberals are likely, based on their past decisions and statements, to vote to uphold the law. If that occurs, they would need only one of the conservatives for a majority. An American Bar Association legal group survey of academics and lawyers found that 85 percent thought the law would be upheld.

Among the justices most likely to become swing votes in the dispute are Roberts, a 2005 appointee of President George W. Bush who has often deferred to Congress in rulings and has signaled an interest in avoiding a deeply divided ruling.

Another conservative justice who could defy political-based assumptions is Anthony Kennedy, a 1988 appointee of President Ronald Reagan. Kennedy has straddled the middle and has most often been the swing vote when the liberals prevailed.

Based on his opinions, Justice Clarence Thomas is most likely to vote to strike down the law. Justices Scalia and Alito cannot be as easily predicted as Thomas.

CONGRESS VERSUS THE STATES

U.S. Solicitor General Donald Verrilli, the administration's top lawyer at the court, will argue that the individual mandate flowed naturally from Congress's authority to regulate commerce, including its longstanding authority in the insurance field.

In his brief to the justices, Verrilli said the law addresses an existing problem in the healthcare market brought on by the uninsured consuming health care they cannot afford.

He said that had led to at least $43 billion of uncompensated healthcare each year, much of which is passed on to people who have insurance. Verrilli estimated such "cost-shifting" adds $1,000 a year to a family's insurance policy.

Representing the 26 states is Washington lawyer Paul Clement, formerly a solicitor general under President George W. Bush. He deems the mandate "unprecedented" and said it could lead to limitless intervention by Congress in people's lives.

Washington lawyer Michael Carvin, who represents the National Federation of Independent Business, stressed in his written filings that the new law forces healthy people to purchase insurance against their will.

The Supreme Court cases are National Federation of Independent Business v. Sebelius, No. 11-393; U.S. Department of Health and Human Services v. Florida, No. 11-398; and Florida v. Department of Health and Human Services, No. 11-400.

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Obama, Netanyahu face struggle over Iran "red lines"

Barack Obama

(Reuters) - President Barack Obama and Israeli Prime Minister Benjamin Netanyahu are deeply at odds over how fast the clock is ticking toward possible military action against Iran's nuclear program, and their talks on Monday are unlikely to change that.

Even though Obama has offered assurances of stiffened U.S. resolve against Iran before the White House meeting, the two allies are still far apart on explicit nuclear "red lines" that Tehran must not be allowed to cross, and they have yet to agree on a time frame for when military action may be necessary.

Obama wants Israel to hold off on attacking Iran's nuclear sites, insisting there is still time for sanctions and diplomacy to work. But he also vowed in a speech on Sunday to the largest U.S. pro-Israel lobby that he would be ready to act militarily - with all "elements of American power" - to prevent the Islamic republic from building an atomic bomb.

Israeli leaders, who see Iran's nuclear advances as a looming existential threat and reserve the right to act alone in self-defense, have made clear they are operating on a far shorter, more urgent timeline.

Their most immediate concern is that Iran be prevented from reaching nuclear weapons capability, not just from developing an actual device, and they worry that time is running out for an effective Israeli attack as Tehran buries its nuclear facilities deeper underground.

While Obama and Netanyahu - who have had a strained relationship - will share intelligence information on Monday, a source close to the administration said there was little reason to believe they would make significant progress toward bridging key differences on a common threshold for military action.

"They'll be looking for mutual understandings and may find a few, but the biggest problem is they're working on different clocks," the source said.

GEOPOLITICAL DRAMA IN U.S. ELECTION YEAR

Obama's meeting with Netanyahu comes amid U.S. fears that Israel might opt to strike Iran on its own if it is not convinced of Washington's determination to do whatever is needed to rein in Tehran's nuclear ambitions. Iran remains defiant but says it wants nuclear technology strictly for peaceful purposes.

The geopolitical drama is being played out in the midst of a U.S. presidential campaign, with Republican presidential contenders accusing the Democratic president of being too tough on Israel and not tough enough with Iran.

Israel comes to Monday's talks with a firm belief that Iran has decided to seek to develop nuclear weaponry and is gathering the necessary components before attempting a "breakout."

Israeli officials maintain that once Iran moves forward, it could enrich uranium to weapons grade and have a rudimentary nuclear device within months, though constructing a deployable warhead would take longer, perhaps until mid-decade.

U.S. officials do not believe the situation is that close to the brink. They say that while Iran may be maneuvering to keep its options open there is no clear intelligence that the country has made a final decision to pursue a nuclear weapon.

Both sides agree that it is impossible to know the full extent of Iranian intentions. American spy agencies are wary about drawing any categorical conclusions after an embarrassing intelligence lapse that led to erroneous accusations of Iraqi nuclear arms work, which the Bush administration used to help justify the 2003 U.S.-led invasion that toppled Saddam Hussein.

Still, Obama - in an Atlantic magazine interview published on Friday - insisted that Iran "is not yet in a position to obtain a nuclear weapon without us having a pretty long lead time in which we will know that they are making that attempt."

And Obama warned in Washington on Sunday against "loose talk" of war with Iran, saying such "bluster" was counterproductive because it has been driving up global oil prices and boosting demand for Iran's oil exports.

That may have been a message to Netanyahu and other Israeli leaders, whose have engaged in a strident exchange of recriminations with Iranian officials in recent months.

Daniel Levy, an analyst at the New America Foundation think tank, said Obama had "offered clarity and commitments on mainstream Israeli concerns without capitulating to the Netanyahu narrative, which is far more dismissive of diplomacy."

Speaking in Ottawa, the right-wing Israeli leader ignored Obama's appeal to let sanctions run their course and focused on the president's insistence on keeping the military option open and backing Israel's right to defend itself.

It was unclear whether Obama's sharpened rhetoric against Iran and calls for restraint by Israel would be enough to delay any Israeli military plans against Tehran, which has called for the destruction of the Jewish state.

Israeli Defense Minister Ehud Barak has warned that Iran is approaching a "zone of immunity," when Tehran is able to shield its nuclear facilities from Israeli air strikes. The United States, however, would still likely have the firepower for a more sustained air assault to destroy the sites.

BEHIND CLOSED DOORS

Obama took a significant step forward in Israel's eyes when, in the Atlantic interview, he ruled out accepting, then acting to "contain," a nuclear-armed Iran.

While U.S. officials insist that Obama will not publicly lay down any new red lines for Iran during Netanyahu's visit, they do not rule out the possibility that the president might try to mollify some Israeli concerns in private.

"They're going to sit down and they're going to talk through the tactics involved," Obama re-election campaign strategist David Axelrod told the ABC "This Week" television program.

Still, U.S. officials doubt that Netanyahu will provide Obama with any guarantee that Israel will consult Washington - its biggest source of military assistance - before launching any strikes on Iran.

Even if Obama assures Netanyahu that the United States has the firepower to deliver a devastating blow to Iran's nuclear program further down the line, the Israelis have made clear they cannot rely on that commitment alone.

One line of thinking within the Obama administration is that keeping it in the dark about any Israeli military plans might be best for the United States since any sign of complicity would inflame anti-American sentiment in the Muslim world.

Dennis Ross, Obama's former Middle East adviser, suggested, however, that the "noise" from Israel over a possible strike was geared more toward pressuring the international community for tightened sanctions than foreshadowing an imminent attack.

"Now that it's an issue of the world against Iran, Israel likes it that way and would not be inclined to act precipitously," Ross said last week.

But others who know Netanyahu well say he is approaching the Iranian challenge with a sense of historic responsibility to ensure Israel's survival, what some have called the "Holocaust factor."

He has made clear that Israel, believed to be the Middle East's only nuclear weapons power, will do what it takes to prevent Iran from getting the bomb.

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President Obama: Everybody Must Play By The Same Rules

Barack Obama, US President

WASHINGTON -- President Barack Obama used Tuesday's State of the Union address to lay out a vision of America in which everybody gets a fair shot at economic success and everybody -- including "the wealthy" -- plays by the same rules as the average citizen.

Obama's address, which comes in the midst of a rapidly escalating presidential campaign season, delivered a strong message about the need for social and economic equality and put forward a handful of new policy ideas targeting tax reform, college affordability and clean energy. But by and large, Obama's third State of the Union was focused on proposals for boosting the economy and ensuring protections for the middle class.

"Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same," Obama said. "It's time to apply the same rules from top to bottom. No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody."

Obama laid out some notable new policy proposals, including the creation of a new international minimum tax on U.S. companies making profits overseas; the launching of a new trade enforcement unit that would target unfair trade practices in countries around the world, including China; and a plan to shift federal aid away from colleges that don't keep down tuition costs. He also announced that the Defense Department will make history's largest renewable energy purchase -- totaling 1 gigawatt. The president can use his executive power to make the last item happen.

Ahead of the address, senior administration officials who spoke only on background and wouldn't be quoted, said the underlying message of the speech is that Obama's economic policies have been working and should be continued. The country had already lost 4 million jobs to the recession before Obama came into office and lost another 4 million before his policies took effect, they said. By contrast, Obama's policies have created more than 3 million private sector jobs in the past two years.

The officials also highlighted a new initiative to place 2 million people in jobs through new partnerships with businesses and community colleges. Steve Jobs, the recently deceased CEO of Apple, had pressed Obama for proposals like this in a past meeting, said the officials.

During his remarks, Obama reiterated his support for instituting the "Buffett rule," a concept that he and congressional Democrats have been pushing for months as a way to pay for their legislative priorities. Named after billionaire Warren Buffett, the rule would require people making more than $1 million to pay a minimum effective rate of at least 30 percent.

Warren Buffett's secretary Debbie Bosanek was a guest of the First Lady at the State of the Union. Buffett has made the case that millionaires and billionaires should be taxed at higher rates by pointing out that Bosanek pays a lower effective rate than he does.

"We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by," Obama said. "Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules. What's at stake are not Democratic values or Republican values, but American values. We have to reclaim them."

Other notable attendees at the event included Rep. Gabrielle Giffords (D-Ariz.), who made the trip to Washington, D.C.,two days before she plans to step down to focus on her recovery after being shot in the head in Tucson in Jan. 2011. Giffords' husband, former astronaut Mark Kelly, also attended as a guest of the First Lady.

The president isn't wasting any time when it comes to selling his economic vision to the country. On Wednesday, he'll kick off a three-day tour of five states, Iowa, Arizona, Nevada, Colorado and Michigan, which are key battlegrounds in the upcoming presidential race. The move is a convenient way for Obama to connect his governing activities to his campaigning, which has already gotten off the ground but is not yet operating at full force.

Obama is also slated to sit down with ABC's Diane Sawyer on Thursday for his first post-State of the Union interview. Sawyer is soliciting questions from the public to ask the president.

In the meantime, White House officials will spend the week managing a social media blitz. On Tuesday night, administration officials planned to take questions from the public about the address submitted via Twitter, Facebook and Google+ in front of a live audience -- and to respond to questions in real time via Twitter, using the hashtag #WHChat and #SOTU.

From Wednesday through Friday, senior administration officials will host a marathon of online question and answer sessions via Twitter. Wednesday's panel will focus on general questions about the address. Community-focused discussions with policy advisers will take place Thursday and Friday's Q&A will be directed toward specific policy issues, including health, education and jobs. People who want to participate can ask questions on Twitter with the hashtag #WHChat, and administration officials will respond in real time.

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How Pakistan helps the U.S. drone campaign

US Drone

(Reuters) - The death of a senior al Qaeda leader in a U.S. drone strike in Pakistan's tribal badlands, the first strike in almost two months, signaled that the U.S.-Pakistan intelligence partnership is still in operation despite political tensions.

The Jan 10 strike -- and its follow-up two days later -- were joint operations, a Pakistani security source based in the tribal areas told Reuters.

They made use of Pakistani "spotters" on the ground and demonstrated a level of coordination that both sides have sought to downplay since tensions erupted in January 2011 with the killing of two Pakistanis by a CIA contractor in Lahore.

"Our working relationship is a bit different from our political relationship," the source told Reuters, requesting anonymity. "It's more productive."

U.S. and Pakistani sources told Reuters that the target of the Jan 10 attack was Aslam Awan, a Pakistani national from Abbottabad, the town where Osama bin Laden was killed last May by a U.S. commando team.

They said he was targeted in a strike by a U.S.-operated drone directed at what news reports said was a compound near the town of Miranshah in the border province of North Waziristan.

That strike broke an undeclared eight-week hiatus in attacks by the armed, unmanned drones that patrol the tribal areas and are a key weapon in U.S. President Barack Obama's counter-terrorism strategy.

The sources described Awan, also known by the nom-de-guerre Abdullah Khorasani, as a significant figure in the remaining core leadership of al Qaeda, which U.S. officials say has been sharply reduced by the drone campaign. Most of the drone attacks are conducted as part of a clandestine CIA operation.

The Pakistani source, who helped target Awan, could not confirm that he was killed, but the U.S. official said he was. European officials said Awan had spent time in London and had ties to British extremists before returning to Pakistan.

The source, who says he runs a network of spotters primarily in North and South Waziristan, described for the first time how U.S.-Pakistani cooperation on strikes works, with his Pakistani agents keeping close tabs on suspected militants and building a pattern of their movements and associations.

"We run a network of human intelligence sources," he said. "Separately, we monitor their cell and satellite phones.

"Thirdly, we run joint monitoring operations with our U.S. and UK friends," he added, noting that cooperation with British intelligence was also extensive.

Pakistani and U.S. intelligence officers, using their own sources, hash out a joint "priority of targets lists" in regular face-to-face meetings, he said.

"Al Qaeda is our top priority," he said.

He declined to say where the meetings take place.

Once a target is identified and "marked," his network coordinates with drone operators on the U.S. side. He said the United States bases drones outside Kabul, likely at Bagram airfield about 25 miles north of the capital.

From spotting to firing a missile "hardly takes about two to three hours," he said.

DRONE STRIKES A SORE POINT WITH PAKISTAN

It was impossible to verify the source's claims and American experts, who decline to discuss the drone program, say the Pakistanis' cooperation has been less helpful in the past.

U.S. officials have complained that when information on drone strikes was shared with the Pakistanis beforehand, the targets were often tipped off, allowing them to escape.

Drone strikes have been a sore point with the public and Pakistani politicians, who describe them as violations of sovereignty that produce unacceptable civilian casualties.

The last strike before January had been on Nov 16, 10 days before 24 Pakistani soldiers were killed in what NATO says was an inadvertent cross-border attack on a Pakistani border post.

That incident sent U.S.-Pakistan relations into the deepest crisis since Islamabad joined the U.S.-led war on militancy following the Sept 11, 2001 attacks. On Thursday, Pakistani foreign minister Hina Rabbani Khar said ties were "on hold" while Pakistan completes a review of the alliance.

The United States sees Pakistan as critical to its efforts to wind down the war in Afghanistan, where U.S.-led NATO forces are battling a Taliban insurgency.

Some U.S. and Pakistani officials say that both sides are trying to improve ties. As part of this process, a U.S. official said, it is possible that some permanent changes could be made in the drone program which could slow the pace of attacks.

The security source said very few innocent people had been killed in the strikes. When a militant takes shelter in a house or compound which is then bombed, "the ones who are harboring him, they are equally responsible," he said.

"When they stay at a host house, they (the hosts) obviously have sympathies for these guys."

He denied that Pakistan helped target civilians.

"If ... others say innocents have been targeted, it's not true," he said. "We never target civilians or innocents."

The New America Foundation policy institute says that of 283 reported strikes from 2004 to Nov 16, 2011, between 1,717 and 2,680 people were killed. Between 293 and 471 were thought to be civilians -- approximately 17 percent of those killed.

The Brookings Institution, however, says civilian deaths are high, reporting in 2009 that "for every militant killed, 10 or more civilians also died." Pakistan's interior minister, Rehman Malik, also said in April 2011 that "the majority of victims are innocent civilians."

Still, despite its public stance, Pakistan has quietly supported the drone program since Obama ramped up air strikes when he took office in 2009 and even asked for more flights.

According to a U.S. State Department cable published by anti-secrecy organization WikiLeaks, Pakistan's chief of army staff General Ashfaq Kayani in February 2008 asked Admiral William J. Fallon, then-commander of U.S. Central Command, for increased surveillance and round-the-clock drone coverage over North and South Waziristan.

The security source said Pakistan's powerful spy agency, the Directorate of Inter-Services Intelligence, also was supportive of the strikes, albeit privately.

Gingrich angrily rejects marital question at debate

Newt Gingrich

(Reuters) - Republican presidential candidate Newt Gingrich angrily defended himself on Thursday against allegations that he had asked his ex-wife for an open marriage, lashing out in perhaps the most crucial debate yet in the 2012 campaign.

The CNN-sponsored debate got off to a raucous start when moderator John King asked Gingrich to respond to charges put forth by his ex-wife Marianne that he had sought an "open marriage" while having an affair.

The impropriety charges have dogged Gingrich for years and threaten to slow his momentum in South Carolina as he seeks to upset front-runner Mitt Romney in the first primary vote in the South on Saturday.

"I think the disruptive, vicious, negative nature of the news media makes it harder to govern this country," Gingrich fumed. "I am appalled that you would begin a presidential debate on a topic like that."

The Republican crowd roared its approval of Gingrich.

The was the final chance for rivals to chip away at Romney's lead in South Carolina and Gingrich, the former speaker of the U.S. House of Representatives, had perhaps the best shot.

Romney came into the debate under strong pressure to turn back Gingrich, who received the endorsement of Texas Governor Rick Perry who dropped out of the race early Thursday.

Romney, a former private equity executive, insisted the company for whom he worked did in fact help create more than 100,000 jobs despite doubts about that expressed by experts.

Romney's experience at Bain Capital, which bought companies and restructured them sometimes resulting in job losses, has hurt him in South Carolina where unemployment remains around 10 percent. Gingrich lobs frequent attacks at him on this.

Romney said Bain helped nurture companies that created 120,000 jobs while business failures cost about 10,000 jobs for a net increase of 100,000.

"People have evaluated that since I ran four years ago," said Romney, who lost the Republican presidential race in 2008 to Senator John McCain.

Romney will take a huge step toward claiming the Republican nomination if he wins on Saturday.

Fighting for their political lives at the debate were former Pennsylvania Senator Rick Santorum and libertarian Congressman Ron Paul of Texas.

GINGRICH GETS CLOSER

A strong performance in a debate in South Carolina on Monday helped him get within touching distance in the polls of Romney, who has struggled to explain why he has not released his tax forms.

But Gingrich has faced troubling questions that could halt his momentum. His second wife, Marianne, told ABC News that Gingrich had sought an open marriage while having an affair with current wife Callista. She said he should not be considered electable in the race to find a Republican challenger to Democratic President Barack Obama in next November's election.

A new Reuters/Ipsos poll conducted of 656 likely South Carolina voters showed Romney with 35 percent support, Gingrich with 23 percent support, and former Senator Rick Santorum with 15 percent support.

Romney was looking for a rebound to boost his momentum after the surprise news from Iowa on Thursday that he did not receive the eight-vote victory that he had believed on January 3.

A formal count by Iowa election officials gave the nod to Santorum by a mere 34 votes, puncturing the aura of inevitability that Romney's campaign has sought to portray.

Santorum went on the attack on Thursday night against Romney and Gingrich over healthcare. He attacked Romney's healthcare plan in Massachusetts that Democrats say was a model for Obama's unpopular overhaul, and Gingrich for prior support for a provision that individuals be required to buy health insurance.

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U.S. to unveil "more realistic" plan for military

Barack Obama, US President

(Reuters) - The Obama administration will unveil a "more realistic" vision for the military on Thursday, with plans to cut tens of thousands of ground troops and invest more in air and sea power at a time of fiscal restraint, officials familiar with the plans said on Wednesday.

The strategic review of U.S. security interests will also emphasize an American presence in Asia, with less attention overall to Europe, Africa and Latin America alongside slower growth in the Pentagon's budget, the officials said.

Though specific budget cut and troop reduction figures are not set to be announced on Thursday, officials confirmed to Reuters they would amount to a 10-15 percent decline in Army and Marine Corps numbers over the next decade, translating to tens of thousands of troops.

The most profound shift in the strategic review is an acceptance that the United States, even with the world's largest military budget, cannot afford to maintain the ground troops to fight more than one major war at once. That is a move away from the "win-win" strategy that has dominated Pentagon funding decisions for decades.

The move to a "win-spoil" plan, allowing U.S. forces to fight one campaign and stop or block another conflict, includes a recognition that the White House would need to ramp up public support for further engagement and draw more heavily on reserve and national guard troops when required.

"As Libya showed, you don't necessarily have to have boots on the ground all the time," an official said, explaining the White House view.

"We are refining our strategy to something that is more realistic," the official added.

President Barack Obama will help launch the U.S. review at the Pentagon on Thursday, and is expected to emphasize that the size of the U.S. military budget has been growing and will continue to grow, but at a slower pace.

Obama has moved to curtail U.S. ground commitments overseas, ending the war in Iraq, drawing down troops in Afghanistan and ruling out anything but air power and intelligence support for rebels who overthrew Libyan leader Muammar Qaddafi.

The number of U.S. military personnel formally assigned to bases in Europe - including many now deployed in Afghanistan - is also set to decline sharply, administration sources said, while stressing that the final numbers have not been set.

'BASICALLY DISAPPEAR'

"When some army brigades start coming out of Afghanistan, they will basically disappear," one official said.

Many of the key U.S. military partners in the NATO alliance are also facing tough defense budget cuts as a result of fiscal strains gripping the European Union.

The president may face criticism from defense hawks in Congress, many of them opposition Republicans, who question his commitment to U.S. military strength.

Defense Secretary Leon Panetta and General Martin Dempsey, chairman of the military's Joint Chiefs of Staff, are set to hold a news conference to flesh out the contents of the review after Obama's remarks, which are also expected to stress the need to rein in spending at a time when U.S. budgets are tight.

White House spokesman Jay Carney said that the defense cuts stemming from an August debt ceiling deal - worth about $489 billion over 10 years - need to be enacted carefully.

"The president made clear to his team that we need to take a hard look at all of our defense spending to ensure that spending cuts are surgical and that our top priorities are met," Carney told reporters this week.

The military could be forced to cut another $600 billion in defense spending over 10 years unless Congress takes action to stop a second round of cuts mandated in the August accord.

Panetta spent much of Wednesday afternoon briefing key congressional leaders about the strategic review. Representative Adam Smith, the senior Democrat on the House of Representatives Armed Services Committee, said after speaking to Panetta that the review was an attempt to evaluate U.S. strategic priorities for the future rather than identify specific budget reductions.

Maintaining a significant presence in the Middle East and Asia, especially to counter Iran and North Korea, was a leading priority in the review, Smith said. So was making sure that military personnel are sufficiently cared for to guarantee the effectiveness of the all-volunteer force. Reductions in the size of U.S. forces in Europe and elsewhere are a real possibility, he said.

Pentagon spokesman Navy Captain John Kirby said with the military winding down a decade of war in Afghanistan and Iraq, it is appropriate to re-evaluate the role of U.S. forces abroad.

"From an operational perspective it's ... an opportune time to take a look at what the U.S. military is doing and what it should be doing or should be preparing itself to do over the next 10 to 15 years," he said on Wednesday.

"So, yes, the budget cuts are certainly a driver here, but so quite frankly are current events," Kirby said.

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Congress punts hard payroll tax work to 2012

Barack Obama

(Reuters) - President Barack Obama signed into law a two-month payroll tax cut extension on Friday, capping a year of fierce partisan combat over taxes and spending that will resume in January and play heavily in the 2012 elections.

The Senate and the House of Representatives, by voice votes in chambers nearly emptied for the holidays, passed a $33 billion (21 billion pounds) bill to keep the payroll tax rate at 4.2 percent through February. It had been scheduled to increase on January 1 to 6.2 percent. Obama swiftly signed the bill.

"We have a lot more work to do," the president said at the White House. "This continues to be a make-or-break moment for the middle class ... There are going to be some important debates next year."

Obama heads to vacation in Hawaii with an important political win in his portfolio after he and fellow Democrats prevailed in the message war by backing lower taxes for middle-class Americans in the midst of a fragile economic recovery.

The battle took a toll on House Republicans led by Speaker John Boehner, who were forced to make an embarrassing retreat and agree to a short-term deal Thursday after getting hit by critics on all sides, include their colleagues in the Senate.

The temporary fix lets lawmakers lower the curtain, for now, on a year of political deadlock that in the end produced only a series of inconclusive truces. The fiscal policy debate is set to rage straight through the 2012 election season and beyond.

While Congress is on a long winter break now and does not return to full swing until late January, newly appointed negotiators are expected to begin work soon on figuring out how to pay for extending the payroll tax cut through 2012.

Republicans have sought a continued freeze on federal worker pay and cuts in Medicare benefits for the wealthy. Democrats have rejected both ideas while proposing a surtax on the wealthy to cover the extension's cost. Republicans reject this.

Both sides have been open to cutting federal workers' pension benefits. There also were last-minute Senate negotiations last week on possibly ending some tax breaks for the wealthy, such as a small one involving corporate jets.

Minutes after the bipartisan deal was passed by Congress, the bickering that has come to dominate Capitol Hill resumed.

Republican Representative Tom Price, a leader of House conservatives, immediately criticized the short-term extension, calling it a "two-month punt" and saying it would not have been needed if Senate Majority Leader Harry Reid, a Democrat, and Obama had "been willing to do their job today."

'NOTHING OFF THE TABLE'

In a sign that the battle is far from over, Reid signaled that Democrats could renew their push for a surtax on wealthier Americans. Democrats had dropped that demand during the year-end negotiations that produced the two-month deal.

"There is nothing off the table," he said.

Obama scored a victory in the payroll tax struggle over Tea Party conservatives in the House who tried to block the two-month extension. They backed down on Thursday in the face of bipartisan criticism, but they are not going away.

Representative Tim Huelskamp, a first-term Republican, said on CNN that he was disappointed with Republican leadership caving in to pressure and accepting the two-month deal.

Next year could be a rough one for Boehner, the top House Republican, said Norm Ornstein, a scholar at the American Enterprise Institute, a conservative think tank.

Boehner spent 2011 having to negotiate with many of his own party members on just about every major piece of legislation.

Now that House Republicans have had to go along with Democrats in the payroll tax debate, "the idea that this group of angry Tea Party Republicans, who feel betrayed, now will go along or that Boehner will be more capable of defying them is a little bit wrong-headed," Ornstein said.

Meanwhile, Democrats might be emboldened, believing "they've learned to play poker," he added.

Patrick Griffin, associate director Of American University's Center for Congressional and Presidential Studies, said House Republicans "overplayed their hand. How they interpret that lesson will be very interesting."

Any edge conferred on Democrats might be short-lived, however. The 2012 election cycle is just set to kick off with the Iowa Republican presidential caucus on January 3 and a long road lies ahead until voters go to the polls in November.

The payroll tax funds the Social Security retirement pension system. If it had been allowed to rise, the increase would have hit the wallets of 160 million working Americans.

The $33 billion needed to pay for the two-month extension will be raised by increasing fees charged by housing finance giants Fannie Mae and Freddie Mac for guaranteeing mortgages.

Analysts said the fee hike, which investors will likely pass along to borrowers, could raise financing costs for mortgages, but probably not enough to slow a housing market recovery.

Unemployment benefits set to expire soon were extended as well, while cuts in payments to doctors who treat patients in the government-backed Medicare health insurance program for the elderly were postponed, under the bill signed by Obama.

Also included in it was a Republican initiative aiming to force the administration into fast approval of an oil pipeline opposed by environmentalists and many Democrats. The provision gives Obama 60 days to either approve TransCanada's Keystone XL pipeline from Canada to Gulf of Mexico facilities in Texas, or declare it not in the national interest.

Obama wants more time to evaluate the environmental impact of routing the pipeline through sensitive areas of Nebraska. The White House has said that if pushed for a decision within 60 days, the administration would be forced to reject the project.

Not extending the payroll tax cut, analysts warned, could have jeopardized the recovery, even risking another recession.

The modest two-month fix drew fire from some businesses that said it will complicate payroll processing and tax planning.

The payroll situation "could get more confusing," said Robert Gard, an accountant with Gard and LaFreniere LLC in Alpharetta, Georgia. If the tax is not extended at the end of February, businesses will need to reprogram software, he said.

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Wave of attacks kills dozens amid Iraq's upheaval

Bomb Attack in Baghdad

Baghdad (CNN) -- A wave of explosions in Baghdad Thursday killed at least 63 people and wounded 185, authorities say, raising fears about the stability of the country amid political upheaval that threatens to undo Iraq's government just days after U.S. troops withdrew from the country.

Nine car bombs and six roadside bombs went off and a mortar round was fired in a two-hour period, targeting residential, commercial and government districts in the Iraqi capital, two police officials told CNN.

The deadliest attack was a suicide car bombing outside the offices of the Integrity Commission, the country's main anti-corruption body. At least 23 people were killed and 43 others were wounded in the explosion, which also damaged part of the building, police officials said.

The attacks targeted civilians across all walks of life. One took place at a market. Another, at a school as children were arriving.

CNN's Arwa Damon in Baghdad described it as a "nightmare scenario," eerily reminiscent of earlier days of the Iraq war.

The violence comes as Iraq's Shiite, Sunni and Kurdish political leaders square off over a warrant issued for the arrest of Vice President Tariq al-Hashimi, who is accused of organizing his security detail into a death squad that targeted government and military officials.

Shiite Prime Minister Nuri al-Maliki has demanded that Kurdish lawmakers hand over the Sunni vice president, who has denied the charges and refuses to return to Baghdad from northern Iraq's semi-autonomous Kurdish region.

Finance Minister Rafie al-Issawi told CNN he does not believe the violence is directly connected to the latest political developments, "but there is a good environment for terrorists to be active in these bad circumstances."

Terrorists "will justify their criminal activities" and argue that the solution to Iraq's woes "isn't in the political process," said al-Issawi, a member of the Sunni-backed Iraqiya minority political bloc.

The seemingly coordinated explosions Thursday struck during the height of morning rush hour, hitting a number of Baghdad's primarily mixed Sunni-Shiite neighborhoods.

There have been no immediate claims of responsibility, though the attacks resemble previous bombings that have been claimed by both Sunni and Shiite insurgents as well as al Qaeda in Iraq.

At the Medical City hospital in central Baghdad, doctors treated the wounded whose bodies were peppered with what appeared to be shrapnel from explosions.

Images of bloodied, battered bodies and destroyed storefronts and homes were broadcast on Iraqi television stations.

While violence in Iraq has fallen off in recent years, the latest spate of attacks are among the worst since August when a series of coordinated bombings killed at least 75 people in 17 Iraqi cities.

The attacks come amid heightened sectarian tensions, raising fears that the political turmoil in Iraq could spark a return of sectarian bloodshed that nearly ripped the country apart during the height of the war.

Al-Hashimi has denied the charges against him, saying the accusations are politically motivated amid the rivalry between his Sunni-backed Iraqiya minority political bloc and al-Maliki's Shiite majority bloc.

The warrant for al-Hashimi's arrest was issued just days after Iraqiya suspended its participation in Parliament, claiming it was being cut out of the political process by al-Maliki.

The prime minister has said failing to hand over al-Hashimi or allowing him to flee to another country "could cause problems."

Al-Issawi, the finance minister, told CNN that before U.S. troops left, Iraqi officials made clear their fears of what could happen.

"So many times we warned the Americans, both the political and security situation (are) very fragile. Unfortunately, no one listened."

In a speech this month about bringing the U.S. troops home, President Barack Obama said, "Iraq is not a perfect place. It has many challenges ahead. But we're leaving behind a sovereign, stable and self-reliant Iraq, with a representative government that was elected by its people. "

"There can be no fuller expression of America's support for self-determination than our leaving Iraq to its people. That says something about who we are," Obama added.

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Last U.S. troops leave Iraq, ending war

Last U.S. convoy leaves Iraq

(Reuters) - The last convoy of U.S. soldiers pulled out of Iraq on Sunday, ending nearly nine years of war that cost almost 4,500 American and tens of thousands of Iraqi lives and left a country grappling with political uncertainty.

The war launched in March 2003 with missiles striking Baghdad to oust President Saddam Hussein closes with a fragile democracy still facing insurgents, sectarian tensions and the challenge of defining its place in an Arab region in turmoil.

The final column of around 100 mostly U.S. military MRAP armored vehicles carrying 500 U.S. troops trundled across the southern Iraq desert from their last base through the night and daybreak along an empty highway to the Kuwaiti border.

Honking their horns, the last batch of around 25 American military trucks and tractor trailers carrying Bradley fighting vehicles crossed the border early Sunday morning, their crews waving at fellow troops along the route.

"I just can't wait to call my wife and kids and let them know I am safe," Sgt. First Class Rodolfo Ruiz said as the border came into sight. Soon afterwards, he told his men the mission was over, "Hey guys, you made it."

For U.S. President Barack Obama, the military pullout is the fulfillment of an election promise to bring troops home from a conflict inherited from his predecessor, the most unpopular war since Vietnam and one that tainted America's standing worldwide.

For Iraqis, though, the U.S. departure brings a sense of sovereignty tempered by nagging fears their country may slide once again into the kind of sectarian violence that killed many thousands of people at its peak in 2006-2007.

Prime Minister Nuri al-Maliki's Shi'ite-led government still struggles with a delicate power-sharing arrangement between Shi'ite, Kurdish and Sunni parties, leaving Iraq vulnerable to meddling by Sunni Arab nations and Shi'ite Iran.

The intensity of violence and suicide bombings has subsided. But a stubborn Sunni Islamist insurgency and rival Shi'ite militias remain a threat, carrying out almost daily attacks, often on Iraqi government and security officials.

Iraq says its forces can contain the violence but they lack capabilities in areas such as air defense and intelligence gathering. A deal for several thousand U.S. troops to stay on as trainers fell apart over the sensitive issue of legal immunity.

For many Iraqis, security remains a worry - but no more than jobs and getting access to power in a country whose national grid provides only a few hours of electricity a day despite the OPEC country's vast oil potential.

U.S. and foreign companies are already helping Iraq develop the world's fourth-largest oil reserves, but its economy needs investment in all sectors, from hospitals to infrastructure.

"We don't think about America... We think about electricity, jobs, our oil, our daily problems," said Abbas Jaber, a government employee in Baghdad. "They (Americans) left chaos."

GOING HOME

After Obama announced in October that troops would come home by the end of the year as scheduled, the number of U.S. military bases was whittled down quickly as hundreds of troops and trucks carrying equipment headed south to Kuwait.

U.S. forces, which had ended combat missions in 2010, paid $100,000 a month to tribal sheikhs to secure stretches of the highways leading south to reduce the risk of roadside bombings and attacks on the last convoys.

Only around 150 U.S. troops will remain in the country attached to a training and cooperation mission at the huge U.S. embassy on the banks of the Tigris river.

At the height of the war, more than 170,000 U.S. troops were in Iraq at more than 500 bases. By Saturday, there were fewer than 3,000 troops, and one base - Contingency Operating Base Adder, 300 km (185 miles) south of Baghdad.

At COB Adder, as dusk fell before the departure of the last convoy, soldiers slapped barbecue sauce on slabs of ribs brought from Kuwait and laid them on grills beside hotdogs and sausages.

Earlier, 25 soldiers sat on folding chairs in front of two armored vehicles watching a five-minute ceremony as their brigade's flags were packed up for the last time before loading up their possessions and lining up their trucks.

The last troops flicked on the lights studding their MRAP vehicles and stacked flak jackets and helmets in neat piles, ready for the final departure for Kuwait and then home.

"A good chunk of me is happy to leave. I spent 31 months in this country," said Sgt. Steven Schirmer, 25, after three tours of Iraq since 2007. "It almost seems I can have a life now, though I know I am probably going to Afghanistan in 2013. Once these wars end I wonder what I will end up doing."

NEIGHBOURS KEEP WATCH

Iran and Turkey, major investors in Iraq, will be watching with Gulf nations to see how their neighbor handles its sectarian and ethnic tensions, as the crisis in Syria threatens to spill over its borders.

The fall of Saddam allowed the long-suppressed Shi'ite majority to rise to power. The Shi'ite-led government has drawn the country closer to Iran and Syria's Bashar al-Assad, who is struggling to put down a nine-month-old uprising.

Iraq's Sunni minority is chafing under what it sees as the increasingly authoritarian control of Maliki's Shi'ite coalition. Some local leaders are already pushing mainly Sunni provinces to demand more autonomy from Baghdad.

The main Sunni political bloc Iraqiya said on Saturday that it was temporarily suspending its participation in the parliament to protest against what it said was Maliki's unwillingness to deliver on power-sharing.

A dispute between the semi-autonomous Kurdish region and Maliki's central government over oil and territory is also brewing, and is a potential flashpoint after the buffer of the American military presence is gone.

"There is little to suggest that Iraq's government will manage, or be willing, to get itself out of the current stalemate," said Gala Riani, an analyst at IHS Global Insight.

"The perennial divisive issues that have become part of the fabric of Iraqi politics, such as divisions with Kurdistan and Sunni suspicions of the government, are also likely to persist."

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Obama Family Photo 2011: All Smiles!

Barack Obama with family

A brand new family portrait was released on the White House's Flickr feed today (yes, the White House has a Flickr -- how awesome is that?) It seems the president carved out some time to sit, relax and embrace the lovely Obama ladies for the family's second official portrait.

Like the first one, shot by Anne Leibovitz in 2009, Malia and Michelle sat together on one side and Sasha and Barack together on the other. Unlike 2009, however, this picture is all about bright color: Malia in blue, Sasha in purple and Barack in navy and pink (and this time, the president looks a tad more formal in a jacket).

While we don't (yet) know where Michelle got her black cap-sleeve dress, we're loving Malia's navy and black frock from Anthropologie (we know it must fit the tall teen perfectly, considering we tried it on last weekend and it hung well below our knees).

The whole family looks lovely and happy, leaving us with only one little objection...

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U.S. wants drone back from Iran, Obama says

Barack Obama, US President

President Barack Obama said Monday that the United States has asked Iran to return a U.S. drone aircraft that Iran claims it recently brought down in Iranian territory.

"We've asked for it back. We'll see how the Iranians respond," Obama said in a news conference.

The president's comments come one day after it was reported that an Iranian official said the country would not return the drone.

"No nation welcomes other countries' spy drones in its territory, and no one sends back the spying equipment and its information back to the country of origin," said Gen. Hossein Salami, deputy commander of the Armed Forces, according to the semi-official Fars news agency.

"It makes no difference where this drone originated and which group or country sent it to invade our air space," Salami said. "This was an act of invasion and belligerence."

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