News Digest
National debt first on priority list
Mart Wilson/Newsmakers
Federal Reserve Chairman Alan Greenspan testifies before the Senate Banking
Committee Tuesday in Washington, 0.C
THE ASSOCIATED PRESS
WASHINGTON — Federal
Reserve Chairman Alan
Greenspan signaled Hiesday that
further cuts in interest rates may
be needed to help an economy
facing significant "downside
risks." He said President Bush’s
effort to speed up tax relief would
n’t prevent recession.
Greenspan faced a barrage of
questions from Republicans and
Democrats on die Senate Banking
Committee about his statement
last month that endorsed the use
of the government’s ballooning
surpluses for tax relief
While not backing off from his
support of tax cuts, Greenspan
said he held the belief that paying
off the national debt remained the
top priority. He repeated that he
believed surplus estimates were
so large they could accommodate
both goals.
Democrats contended in their
questioning that the Bush admin
istration overstated Greenspan’s
endorsement of tax cuts by saying
that he was in support of the full
$1.6 trillion program that Bush
has proposed.
Greenspan said some news
reports had failed to include his
qualifiers, including a recommen
dation that Congress consider
tying tax relief in coming years to
specific debt reduction targets. He
refused to be drawn into specify
ing for either party how large a tax
cut he would feel comfortable
with. Such a decision, he said,
should be left to the politicians.
Eliminating the federal debt
Tor the period ahead,
downside risks
predominate.
Alan Greenspan
Federal Reserve chairman
“is still, frankly, my first priority,”
Greenspan said, a point he repeat
ed several times during the hear
ing. In response to one question,
he read pah of his Jan. 25 testimo
ny in which he warned Congress
against getting carried away with
the mushrooming budget sur
plus.
Economists didn’t view
Greenspan’s remarks as back
tracking on his tax-cut position,
but they detected political
maneuvering.
“He might be buying back
some of what he said last month in
an effort to rein in the most
aggressive tax-cut efforts that
seemed to be unleashed by his
previous comments on taxes,”
said Mark Zandi, chief economist
for Economy.com, a consulting
firm
On Wall Street, Greenspan’s
hints of future rate cuts didn’t
buoy investors. The Dow Jones
industrial average lost 43.45
points to close at 10,903.32.
Greenspan offered a sober
assessment of the economy, say
ing growth was close to “stalling
out” at the beginning of the year.
Much of the weakness came as
businesses cut back quickly on
production as sales slumped, he
said
Greenspan said, however, “at
the moment we are not” in a full
blown downturn.
“For the period ahead, down
side risks predominate,”
Greenspan said in his semiannual
economic report to the Senate.
The risks include whether con
sumer confidence, which has fall
en sharply, holds up during the
slowdown and the extent to which
businesses will continue to reduce
production in the months ahead
Economists viewed
Greenspan's comments that the
Fed, which has already reduced
interest rates by a full percentage
point this year, was prepared to
cut rates again to prevent the
economy from slipping into a
recession. Many analysts expect a
cut of one-half percentage point
at the Fed's next meeting on
March 20.
In his testimony, Greenspan
rejected suggestions made by
Bush and other Republicans that a
$1.6 trillion tax cut made retroac
tive to the beginning of the year
could avert a recession.
“If a recession is going to hap
pen - and I must say to you, it's not
happened yet - it's very unfikely to
be affected one way or the other
by what the tax policy is going to
be,” Greenspan said
Looking ahead, he dted signs
of hope that the economy would
emerge relatively quickly from its
current weakness. The remark
able surge in productivity growth
that begin four years ago contin
ued even as the economy slowed,
he said
Violence between Israel, Palestine returns
THE ASSOCIATED PRESS
GAZA CITY, Gaza Strip
—Israeli helicopters target
ed a member of an elite unit
in Yasser Arafat’s police force
and killed him with a missile
as he drove on a busy street
Tuesday, marking a return to
Israel’s policy of slaying sus
pected Palestinian militants.
A 13-year-old Palestine
ian boy was shot and killed
in central Gaza, and 60 other
people reportedly were
wounded by gunfire in the
latest escalation of Mideast
violence. The Israeli military
said its soldiers did not
shoot die boy.
In Washington, State
Department spokesman
Richard Boucher said the
Israelis’ use of helicopter
gunships and Palestinian
attacks on settlements and
motorists marked a "serious
deterioration of die security
situation.”
On the political front,
It is a clear
message to anyone
who is planning to
attack Israelis that
they will not be
able to do so with
impunity,”
Ehad Barak
former Israeli prime minister
Israel's Prime Minister-elect
Ariel Sharon and his defeat
ed predecessor, Ehud Barak,
moved closer to forming a
coalition government that
would seek only a partial
peace deal with the
Palestinians, a Sharon
spokesman said.
Sharon, who must form
a government with majority
support in the 120-member
parliament before assuming
power, can expect to face a
Palestinian population
angered by the renewed vio
lence and the diminished
prospects for a comprehen
sive peace agreement
Israel, which has killed
several suspected
Palestinian militants in
recent months, sent a pair of
helicopter gunships to strike
at Massoud Ayyad, 54, as he
drove on the outskirts of the
Jebaliya refugee camp, just
outside Gaza Gty.
Ayyad, an officer in the
elite Force 17 unit was killed
as a missile turned the car
into a smoldering, twisted
pile of metal. The blasts
from the missiles shattered
windows in buildings up
and down the street includ
ing a mosque, witnesses
said.
A senior Israeli military
officer said the killing foiled
an operation that was about
to be carried out
The officer, insisting on
anonymity, said it involved a
kidnapping, but would give
no further details.
Barak sent his "heartfelt
congratulations” to the
army for killing Ayyad, who
was accused of twice attack
ing Netzarim, a Jewish set
tlement in central Gaza,
with mortars.
But Palestinian Justice
Minister Freih Abu Medein
said Israel was guilty of war
crimes.
"Israel is a state above
the law.”
He also disputed Israel’s
claim that Ayyad had ties to
Hezbollah, the Lebanese
guerrilla group. The killing
of Ayyad marked the first
time since December that
Israel targeted a suspected
Palestinian militant
Barak said Tuesday that
the policy would continue.
"It is a clear message to
anyone who is planning to
attack Israelis that they will
not be able to do so with
impunity,” Barak said.
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Bush:Technology to modernize
THE ASSOCIATED PRESS
NORFOLK, Va. — President
Bush pledged Tuesday to mod
ernize the military to face “the
dangers of a new era,” even if it
means scaling back some older
systems beloved by the Pentagon
and members of Congress.
He called for a new generation
of lighter, more mobile and soph
isticated military devices that
would harness new technologies.
“Our goal is to move beyond
marginal improvements” in older
weaponry, Bush said after visiting
a joint U.S.-NATO command post
on the nation’s Eastern Seaboard
and viewing an electronic naval
battle simulation.
To those who might criticize
his plans, Bush suggested they
wait until Defense Secretary
Donald Rumsfeld finished a top
to-bottom review of the military.
He did not suggest which
weapons systems he might delay
or seek to caned to make room for
new technology.
But later, aboard Air Force
One, Bush told reporters, “We
must do it We’ve got some tough
choices to make, but that’s why
yougetdected.”
Bush also promoted his pro
posal for a multibillion-dollar
national missile defense shield
that would protect not only the
United States but allies from limit
ed ballistic missile attack.
“The defenses we build must
protect us all,” he told an audience
that included emissaries from 18
NATO partners.
European allies have been
skeptical about such a system,
which is strongly opposed by
Russia and China.
"We must prepare our nations
against the dangers of a new era,”
Bush said.
The visit was the second
installment on Bush’s three-day
tour of U.S. military installations.
The president expressed
anguish over the loss of life, both
in an Army helicopter mishap
Monday night on the Hawaiian
island Oahu and of Japanese pas
sengers on a fishing boat that was
struck by a U.S. submarine just
south of the island
Bush led a silent prayer for the
six killed and 11 injured in the
crash of two Army Black Hawk
helicopters.
“Just this morning, we were
reminded of the risks of your duty
and the sacrifices that you make,”
Bush said
“The soldiers are my direct
responsibility as commander in
chief. I take the responsibility
incredibly seriously.
“We need to be very judicious
and careful about committing our
troops,” Bush said in his Air Force
One remarks.
Through his campaign, and
now as president, Bush has talked
about committing defense dollars
to fast-forwarding research and
skipping to a new generation of
weaponry and defense systems.
“On land, our heavy forces will
be lighter. Our light forces will be
more lethal,” he said. “All will be
easier to deploy and to sustain. In
the air, we’ll be able to strike across
the world with pinpoint accuracy
using both aircraft and
unmanned systems. On the
oceans, we'll connect information
and weapons in new ways.... In
space, we'll protect our network of
satellites.”
El Salvador hit
by earthquake,
more lives lost
■ The country has been hit for the second time
since January.
THE ASSOCIATED PRESS
SAN VICENTE, El Salvador—A powerful earth
quake shook El Salvador Tuesday, toppling hun
dreds of buildings and killing at least 70 people in a
country still mourning more than 800 who died in
an even stronger quake exactly one month ago.
The quake flattened much of the heart of San
Vicente, 35 miles east of San Salvador, and damaged
most of the homes and buildings in four surround
ing towns. (
Government emergency put the national death
toll at 70, with 200 injured and hundreds - perhaps
thousands - left homeless.
The earthquake struck at 8:25 a.m. and was cen
tered halfway between San Vicente and San
Salvador. The U.S. Geological Survey measured its
magnitude at 6.6, a strong quake but not as devas
tating as the 7.6 magnitude temblor that killed at
least 844 people last month.
“It is true that this is another blow for El
Salvador, but I call for tranquillity. We have to be
calm,” President Francisco Flores told The
Associated Press during a helicopter tour to assess
the damage.
i licit; cue ueau licie, cuiu veiy uicuiy pcupic
have lost their houses," Flores said during a stop in
San Vicente. He said the brunt of the damage was in
a corridor between Ilopango, just east of San
Salvador and San Vicente.
At least 12 adults and three children were killed
in San Vicente, the regional army commander Col.
Juan Armando Reyes told Flores.
He said half its houses were damaged, as well as
90 percent of the houses in the nearby towns of San
Cayetano, Guadalupe, Verapaz and Texistepeque.
Landslides blocked several highways that were
still being restored after the Jan. 13 quake, including
the Panamerican Highway to Guatemala.
Telephone service was patchy to much of the coun
try, and San Salvador’s airport also was briefly
closed.
Radio station YSKL reported that two children
died in the collapse of a school in Cojutepeque, 20
miles east of San Salvador, and that landslides had
isolated many small villages.
Emergency officials said at least three people
died when a grain silo collapsed in San Martin,
about 10 miles east of the capital.
Hie government sent students home across the
nation of 6 million people and evacuated most pub
lic buildings so they could be checked for damage.
In San Salvador, hospital patients’ beds were
lined up in the streets as administrators waited for
officials to inspect the buildings.
A small aftershock Hit as Flores toured the hos
pital in San Vicente, where hundreds of patients
were sprawled on the floor or the grounds outside
for lack of beds.
When the quake struck, thousands of people
fled buildings and ran into the streets of San
Salvador, a city jittery from more than 3,200 after
shocks of last month's quake - some as strong as
magnitude 5.
“It’s pretty obvious they’re related.” U.S.
Geological Survey spokesman Butch Kinemey said
of the two quakes.
The January earthquake killed at least 844 peo
ple, injured 4,723 and destroyed 278,000 houses.
Hundreds more remain missing and are believed
deaf*
World/Nation
The Associated Press
■ NewYoffc
Rapper Eminem gains
support from Rocket man
NEW YORK — Some peo
pie are still scratching their
heads over Elton John's deci
sion to sing a duet with
Eminem at next week’s
Grammys.
But the rapper, who has
included anti-gay rhymes in
his songs, thinks he under
stands why the gay superstar
is a supporter.
“I think that Elton John, I
think he gets it. Because the
kids ... they are taking my
music for what it's worth, you
know what I mean? they're
taking it with a ... grain of
salt,” Eminem said backstage
during a concert last month.
John said he was a big fan
of Eminem and did not
believe his lyrics, which
include references to gays as
“fags” and violent imagery,
were hateful. The Grammys
will be broadcast live from Los
Angeles on CBS on Feb. 21.
■ California
Napster lights to remain
open for music business
SAN FRANCISCO -
Napster Inc., the online song
swapping sensation, has its
work cut out if it wants to par
lay Monday’s legal defeat into
financial victory.
Napster has said it
planned to start charging sub
scription fees by summer, but
major record labels haven't
yet been persuaded to work
side-by-side with the
Redwood City-based compa
ny.
As a result, the record
companies will not willingly
part with titles from their cov
eted artists.
It's not even clear whether
the one industry heavyweight
that does support Napster,
Bertelsmann AG, will contin
ue to finance the Internet
upstart in the face of a losing
legal battle.
Under Monday’s ruling by
the 9th U.S. Circuit Court of
Appeals, the company must
somehow stop the millions of
people who use it as a clear
inghouse to swap copyrighted
music without charge and
without restriction.
The court sent the case
back to a trial judge, asking
her to rewrite an injunction so
it allows Napster to survive if
it is able to patrol its network
for copyright infringement -
something its own lawyers
have said is virtually impossi
ble.
Bertelsmann insists it will
continue to support Napster
financially.
"This is neither the begin
ning nor the end of Napster,”
said Andreas Schmidt, head of
Bertelsmann AG’s
eCommerce group. “Now it’s
really important to move to
the future with a member
ship-based service.”
■Yugoslavia
Milosevic to fate extradition
with passing of new law
BELGRADE — A law now
in the works would provide for
extraditing suspects - like
Slobodan Milosevic - for trial
by the U.N. war crimes tribu
nal, Yugoslavia’s president
said Tuesday.
In a further tightening of
the vise around the former
Yugoslav president, a key
Milosevic associate was
arrested and another was
reported to have fled the
country.
Milosevic has been indict
ed by the U.N. war crimes tri
bunal for alleged atrocities in
Kosovo, and the Netherlands
based tribunal has asked that
he be extradited to face trial.
Despite the new law,
which would remove the ban
on extradition of Yugoslav cit
izens, President Vojislav
Kostunica suggested he
remain opposed to Milosevic’s
immediate extradition.
"The law will take up the
question of extradition, but
that will not be its most
important part, nor will extra
dition solve everything,”
Kostunica said.
