Democrats try to break U.S. debt impasse, Posted by Meosha Eaton

(Reuters) - Senate Democrats aimed to seize the initiative in efforts to head off a ruinous U.S. debt default by pushing their deficit-cutting plan on Saturday towards a possible compromise with a divided Republican Party.

Entrenched differences were still hampering a compromise as Democratic leaders accused their Republican counterparts of obstructionism, less than 100 hours before the government says it will run out of money to pay all its bills.

Divided NATO tries again to define Libya role, Posted by Meosha Eaton

* NATO split on French, Turkish demands

* U.S. wants to step back from leadership within days

By David Brunnstrom

BRUSSELS, March 22 (Reuters) - NATO tried again on Tuesday to resolve a fractious debate on who should command the military campaign in Libya once the United States steps back from leading the operation.

President Barack Obama, seeking to avoid getting bogged down in a war in another Muslim country, said on Monday Washington would cede control of operations against Muammar Gaddafi's forces within days and NATO would have a coordinating role.

But a heated meeting of NATO ambassadors on Monday failed to resolve whether the 28-nation alliance should run the operation to enforce a U.N.-mandated no-fly zone, diplomats said. The NATO council was meeting again on Tuesday to resume debate.

France, which launched the initial air strikes on Libya on Saturday, has argued against giving the U.S.-led NATO political control over an operation in an Arab country, while Turkey has called for limits to any alliance involvement.

Some allies were also now questioning whether a no-fly zone was necessary, given the damage already done by air strikes to Gaddafi's military capabilities, a NATO diplomat said.

"Yesterday's meeting became a little bit emotional," the envoy said, adding that France had argued that the coalition led by France, Britain and the United States should retain political control of the mission, with NATO providing operational support, including command-and-control capabilities.

"Others are saying NATO should have command or no role at all and that it doesn't make sense for NATO to play a subsidiary role," the diplomat said.

Turkish Foreign Minister Ahmet Davutoglu suggested that air strikes launched after a meeting in Paris hosted by France on Saturday had gone beyond what had been sanctioned by a U.N. Security Council resolution. [ID:LDE72L0JR]

"There are U.N. decisions and these decisions clearly have a defined framework. A NATO operation which goes outside this framework cannot be legitimised," he told news channel CNN Turk.

ITALIAN WARNING ON BASES

Italian Foreign Minister Franco Frattini reiterated a warning that Italy would take back control of airbases it has authorised for use by allies for operations over Libya unless a NATO coordination structure was agreed. [ID:RMELEE7IO]

U.S. Defence Secretary Robert Gates has said Britain or France could take charge of the air operation, or NATO could lead it, if sensitivities in the Arab League over working under NATO leadership were assuaged. [ID:nN20241921]

However, some analysts and NATO officials question whether France or Britain would be capable of coordinating a complex multinational air mission.

British Prime Minister David Cameron said on Monday that NATO should take charge of a no-fly zone, given its "tried and tested machinery in command and control". [ID: nHOC002230].

In arguing against a prominent NATO role, France has cited the alliance's poor reputation in the Arab world as a result of the war in Afghanistan and the perception that NATO is dominated by the United States.

Senior French analyst Francois Heisbourg said the best outcome would be to have NATO handle military coordination but hand political decisions to an ad hoc council of states participating in the coalition, including Arab countries.

Italy should be given an equal role with France and Britain because of its geographical location, interests in Libya and the key role of its air bases, he said.

"If Turkey sticks to its line, that would rule out a NATO role either politically and militarily," Heisbourg told Reuters. "If it lifts its objection, France would favour having NATO do the operational military coordination but not the political conduct of operations."

The nations leading the air campaign are all prominent NATO states, but NATO's operational role has so far been limited to expanded air surveillance.

Italian officials have described the current three-way command structure involving France, Britain and the United States and the resulting bombing campaign as "anarchic".

Italy's position reflects evident Italian annoyance with the attitude of French President Nicolas Sarkozy, who led the diplomatic drive for the Security Council resolution.

Gianpiero Cantoni, head of the Italian Senate's defence affairs committee, was quoted in the Corriere della Sera daily as saying that French policy appeared to be motivated by a desire to secure oil contracts with a future Libyan government, while Italy would have to face a potential flood of refugees.

On Monday, Italian Prime Minister Silvio Berlusconi said the mission should be limited to creating a no-fly zone and that Italian planes taking part would not open fire.

(editing by Paul Taylor)

Social Security reform debate stirs in US Congress, Posted by Meosha Eaton

* Republicans want to raise retirement age, means-test
* Some Democrats maneuver to stop any benefit cuts

By Richard Cowan

WASHINGTON, March 1 (Reuters) - While the U.S. Congress brawls over how to shrink a $1.6 trillion budget deficit this year, an even tougher battle has begun over cutting popular Social Security retirement benefits to achieve long-term savings.
It's unclear whether Congress will be able to agree on how to reform the massive government pension program, which has provided a social safety net for the elderly since 1935.

That in part will depend on whether President Barack Obama throws his weight behind a reform effort that politicians of all stripes fear could be full of political risks. While the president has invited a conversation on Social Security reform, so far he has not offered specific proposals.

Undercutting Social Security reform efforts is the fact that if left alone, the retirement benefits will keep flowing unimpeded until 2037, according to government estimates last year.

Social Security has been generating surplus tax revenues for years. But with the surplus vanishing because of an onslaught of new retirees and because the surplus has been used to finance tax breaks and other government programs, the Social Security now has to be paid back.

"We're going to have a Social Security solvency bill next week that deals with age adjustment and means testing," said Senator Lindsey Graham, who is working on legislation with newcomer Rand Paul, a Tea Party activist.

Graham did not give details but an age adjustment would raise the age for full retirement benefits from the current level, which already is gradually increasing to 67. Means testing would diminish Social Security benefits for the wealthy.

"I've never seen a better moment to deal with Social Security in a bipartisan fashion than right now," Graham told reporters, saying company-backed pension plans "are going by the wayside" and "a lot of Americans are going to outlive their 401k (retirement) plans."

STRONG OPPOSITION
Tinkering with Social Security as a way to reduce federal budget deficits, which now contribute to a $14 trillion national debt, could face strong opposition from Obama's Democrats.

The House of Representatives on Tuesday voted to extend government funding for two more weeks, a move that would avert a federal shutdown but do nothing to resolve the bitter debate over the federal budget. [ID:N01138234]

A group of Senate Democrats on Monday circulated a letter to fellow senators urging support for legislation that would kill any measure to "reduce Social Security benefits or privatize Social Security" unless two-thirds of the Senate and House of Representatives went along -- a difficult hurdle.

Among the Democrats signing the letter were Sherrod Brown, Debbie Stabenow, Sheldon Whitehouse and Daniel Akaka, who face re-election next year.

In their letter, the Democratic senators pointed out that Social Security currently does not face a fiscal crisis and "will be able to pay 100 percent of promised benefits to every eligible recipient for the next 26 years."

They added: "After that, if nothing is done, there will still be enough funding to pay 78 percent of promised benefits."

A 22 percent cut in benefits then would hit retirees hard, however, Republican aides point out.

Meanwhile, House Republican leaders vow to tackle "entitlement program" costs when they write a fiscal 2012 budget outline in coming weeks. Entitlement programs include Social Security, as well as Medicare and Medicaid, the government-backed health programs for the elderly and poor.

Last week, in a speech at Harvard University, House Majority Leader Eric Cantor said their Social Security reforms would be aimed at those who are now 54 and younger.

(Additional reporting by Donna Smith; Editing by Bill Trott)

US House passes stopgap bill to avert shutdown, Posted by Meosha Eaton

WASHINGTON, March 1 (Reuters) - The U.S. House of Representatives on Tuesday voted 335-91 to extend government funding for two more weeks, a move that would avert a federal shutdown but do nothing to resolve a bitter debate over the federal budget.

With government funding due to expire on Friday, the Senate was expected to quickly take up the measure, which would give lawmakers more time to agree on funding levels for the fiscal year that ends on Sept. 30.

(Reporting by Andy Sullivan; Editing by Sandra Maler)