Republican senator sees Obama budget offer as positive

WASHINGTON (Reuters) - South Carolina Senator Lindsey Graham on Sunday became the first prominent Republican to publicly praise, however lukewarm, the budget proposal the White House outlined last week.

Graham said that while he believes President Barack Obama's plan is overall bad for the economy, "there are nuggets of his budget that I think are optimistic." He was speaking on NBC's "Meet the Press" program.

Graham, a conservative who has deviated from party positions in the past, and has said he would consider raising up to $600 billion in new tax revenue if Democrats accept significant changes to Medicare, the government health program for elderly Americans, and Medicaid, the health safety net for low-income people.

The White House on Friday said the president would propose a budget that would offer cuts to so-called entitlement programs such as Social Security, a retirement program, and Medicare in exchange for increased tax revenues and a commitment to spend money on education and infrastructure repair.

Obama's proposal, which will formally be made public on Wednesday, is a symbolic document, and both the Senate and House of Representatives have already passed their own budget resolutions.

The president's aides have said he hopes to use the offer to appeal to enough middle-of-the-road lawmakers of both parties to pass a broad deal to reduce the budget deficit.

Obama also hopes to reverse the deep spending cuts that automatically kicked in March 1 as a result of the failure of the White House and Congress to reach an agreement on replacing them.

Graham's reception of the president's budget proposal is warmer than fellow Republicans and some of the president's own allies have accorded it so far.

House Speaker John Boehner said last week the president was ignoring Republicans' staunch opposition to any tax hikes. And independent Senator Bernie Sanders, who votes with the Democrats, said he would oppose any efforts to lower payments to Social Security beneficiaries.

But Graham said that the president's offer contained approaches to cutting spending that he supports. One is the proposal to index cost-of-living increases for government program benefits to a less-generous measure of inflation.

"The president is showing a little bit of leg here, this is somewhat encouraging," Graham said. "He has sort of made a step forward in the entitlement-reform process."

Obama has invited 12 Republican senators for dinner on the day of the budget release as part of an effort to soften resistance among the opposition political party.

"The president's focus, in addition to the regular order process that members of Congress say they want, is to try to find a caucus of common sense, folks who are willing to compromise, that don't think compromise is a dirty word, and try to get something done," White House senior advisor Dan Pfeiffer said on ABC News' "This Week with George Stephanopoulos" program.

(Reporting By Aruna Viswanatha and Philip Barbara, writing by Mark Felsenthal)

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World powers await Iran's reaction to nuclear offer

By Justyna Pawlak and Yeganeh Torbati

ALMATY (Reuters) - World powers will urge Iran on Friday to accept their offer to ease some economic sanctions if it stops its most sensitive nuclear work, in talks aimed at easing tensions that threaten to boil over into war.

The six powers - the United States, Russia, China, France, Britain and Germany - will meet Iranian negotiators in the Kazakh city of Almaty for the second round of talks this year, aiming to settle a decade-old dispute over Tehran's nuclear work.

With an Iranian presidential election in June complicating decision-making in Tehran, there is little chance of a breakthrough, but Israel has indicted its patience with diplomacy is running out.

Israel has threatened to bomb Iran's nuclear facilities if Tehran does not curb the activities it suspects are aimed at making a nuclear bomb.

Without a conclusive deal in sight, Western diplomats are hoping for at least a serious discussion of specific points of their proposal, made at the last talks in February.

"We hope that Iran comes prepared, makes a substantive and concrete response that really enters into serious ... negotiations to meet the international community's concerns," a senior U.S. administration official said on Wednesday.

Iran has resisted international pressure, arguing its uranium enrichment is for peaceful purposes only and therefore should be allowed to continue, under international law.

Its negotiators arrived in Almaty with their own proposals, the Iranian media reported without giving any details. Chief negotiator Saeed Jalili struck a defiant tone.

"We think our talks tomorrow can go forward with one word. That is the acceptance of the rights of Iran, particularly the right to enrichment," Jalili said in a speech at a Kazakh university.

World powers say Tehran has relinquished that right by hiding its nuclear work from United Nations inspectors in the past and refusing to grant them full access.

Talks were due to start at 10:30 a.m. (0430 GMT) and last through Saturday.

AT ALL COST

If they fail to produce sufficient progress, Western governments are likely impose new economic sanctions, with the double aim of pressuring Tehran while seeking to persuade Israel to hold back from any military action.

In Israel, widely assumed to be the only nuclear power in the Middle East, Prime Minister Benjamin Netanyahu told visiting U.S. senators that Tehran's nuclear work must be stopped.

"We cannot allow a situation in which a regime that calls for our annihilation has the weapons of annihilation. And I think that must be stopped at all cost," he said.

U.S. President Barack Obama sought to cool tempers during a trip to Israel in March, saying diplomacy was the best option, but he alluded to the possibility of last-resort military action.

Experts say Iran would likely seek to keep diplomacy on track ahead of the election, in part to avert new sanctions, but without coming close to any deal.

There is broad unity within the Iranian political establishment on pursuing the nuclear program. Policy on the issue is directed by Ayatollah Ali Khamenei, Iran's supreme leader, rather than by the president.

"The nuclear talks will be affected by the election insofar as the leadership is concerned about maintaining internal stability throughout the election," said Emanuele Ottolenghi, of the Foundation for the Defense of Democracies, a think-tank that has advised the U.S. government on sanctions against Iran.

At the core of the powers' concerns is Iran's enrichment of uranium to 20 percent fissile purity, a level that closes an important technological gap en route to making weapons-grade material.

During the last meeting in Almaty in February the powers told Iran to stop producing such uranium, ship out most of its stockpile and shutter its Fordow facility, buried deep in a mountain near the city of Qom.

In return, they offered to ease a ban on trade in gold and other precious metals and an import ban on Iranian petrochemical products.

(Additional reporting by Dan Williams in Jerusalem; Editing by Robin Pomeroy)

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Lawyers for accused Colorado theater gunman offer guilty plea

By Keith Coffman Chris Frantz

DENVER (Reuters) - Defense attorneys for the former graduate student accused of killing 12 people at a Denver area movie theater last July have offered to have him plead guilty in exchange for a life prison term, according to court documents filed on Wednesday.

Public defenders for James Holmes, 25, said in the Arapahoe County District Court filing that prosecutors have so far not accepted the offer, which would spare their client the death penalty in one of the deadliest mass shootings in U.S. history.

Holmes faces multiple counts of first-degree murder and attempted murder stemming from the July 20 massacre at a showing of the Batman film "The Dark Knight Rises" in Aurora, Colorado that also wounded 58 people.

Arapahoe County District Attorney George Brauchler has said that he would formally inform the court during a hearing scheduled for Monday whether his office would seek the death penalty against Holmes.

Brauchler has not made his decision public, but in February announced that he had added a death penalty lawyer to the prosecution team.

All three of Colorado's death row inmates were convicted and sentenced in Arapahoe County. At a state legislative hearing earlier in March, Brauchler testified in favor of keeping the death penalty on the books in Colorado.

A spokeswoman for the Arapahoe County District Attorney's Office could not be reached for comment on Wednesday afternoon.

"Prior to arraignment, Mr. Holmes made an offer to the prosecution to resolve the case by pleading guilty and spending the rest of his life in prison without the opportunity for parole," lawyers for Holmes say in the papers.

Holmes was arraigned on March 12. At that hearing, Arapahoe County District Judge William Sylvester entered a not guilty plea on his behalf after defense attorneys said they were not prepared to enter a plea.

INSANITY DEFENSE

In Wednesday's pleading, defense lawyers said that if prosecutors agree to take the death penalty off the table for Holmes the case could be resolved at Monday's hearing.

Attorneys for the former University of Colorado neuroscience graduate student, who surrendered to officers outside the theater minutes after the shooting rampage, had been expected to mount an insanity defense on his behalf at trial.

"As previously stated in court, counsel for Mr. Holmes are still exploring a mental health defense, and counsel will vigorously present and argue any and all appropriate defenses at a trial or sentencing proceeding as necessary," defense lawyers said in the court papers.

"Nevertheless, Mr. Holmes is currently willing to resolve the case to bring the proceedings to a speedy and definite conclusion for all involved," the defense said.

Lawyers for Holmes have said in court filings that their client has been hospitalized twice since his arrest, once after hitting his head against a cell wall.

Holmes was also held in restraints for several days at a psychiatric hospital in November after jail officials determined he was a threat to himself, according to his defense team.

In a separate written ruling on Wednesday, Sylvester denied a request by Fox News journalist Jana Winter to postpone her testimony, scheduled for Monday, about confidential sources she cited in a story about the shooting rampage.

Sylvester ordered Winter to take the witness stand as he tries to determine who leaked information to the New York-based journalist despite a gag order he issued in the case.

Winter's attorneys sought a delay while she filed an appeal of Sylvester's ruling on the grounds that she was protected against revealing her sources by New York's shield law for journalists.

(Reporting by Keith Coffman and Chris Frantz; Writing by Dan Whitcomb; Editing by Ellen Wulfhorst, Tim Dobbyn and Cynthia Osterman)

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Britain to offer childcare tax break to parents

By Peter Griffiths

LONDON (Reuters) - Prime Minister David Cameron will unveil a new tax break on Tuesday to help working parents with their childcare costs from 2015, the government said, seeking to placate families squeezed by austerity, a stagnant economy and weak wage growth.

The announcement comes a day before Chancellor George Osborne is due to reject calls to abandon the coalition government's deficit reduction programme when he delivers his budget statement to parliament.

Trailing in the polls before an election due in 2015, Cameron and Osborne's Conservatives are accused by the Labour opposition of choking the economic recovery with a focus on austerity rather than growth.

Under pressure to do more to revive the economy and help hard-pressed households, Cameron will visit a nursery school in London on Tuesday to set out details of the tax break. It will be open to 2.5 million families and will be worth up to 1,200 pounds ($1,800) a year per child.

Britain's childcare costs are among the highest in the world, hitting parents already struggling with years of rising household bills and economic uncertainty.

"This is a boost direct to the pockets of hard-working families in what will be one of the biggest measures ever introduced to help parents with childcare costs," Cameron said in a statement.

A finance ministry spokeswoman said around 1 billion pounds had been set aside for the scheme, doubling the existing budget and taking in five times as many parents. The annual breakdown of public funding for the system will be announced later.

The Labour Party, which urged Osborne on Saturday to cut payroll taxes to boost growth, said many families had already lost money in government cuts.

"This announcement will not make up for the up to 1,500 pounds that families on middle and low incomes have lost in cuts to childcare support," Labour education spokesman Stephen Twigg said.

(Editing by Alison Williams)

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Powers wait to hear Iran response to nuclear offer

ALMATY (Reuters) - World powers hope Iran will respond positively on Wednesday to their new offer to lift some sanctions if Tehran scales back nuclear activity the West fears could be used to build bombs.

The United States, France, Germany, Britain, China and Russia presented the offer when their first meeting with Iran in eight months began in Almaty on Tuesday and the Islamic state was considering it, the powers' spokesman said.

The two sides began a second - and what is expected to be the last in this round of negotiations - day of discussions in the Kazakh city shortly after 11 a.m (0500 GMT) on Wednesday.

Western officials described the first day of the meeting as "useful". One said Iran discussed aspects of the powers' ideas in bilateral talks with three of them - Russia, Germany and Britain - but gave no indication how Tehran viewed them.

Iranian state television described the atmosphere in the discussions as "very serious".

The outcome of the meeting in the Kazakh city will be closely watched in Israel, which has strongly hinted that it could attack Iran's nuclear sites if diplomacy and sanctions fail to stop the uranium enrichment program.

Iran says Israel's assumed nuclear arsenal is the main threat to peace and denies Western allegations it is seeking to develop the capability to make atomic bombs. It says it is only aiming to produce nuclear energy so that it can export more oil.

In their latest attempt to break years of deadlock in the dispute, the powers are offering Iran a relaxation of some of the sanctions that are taking a heavy toll on its economy.

"Hopefully the Iranians will be able to reflect overnight and will come back and view our proposal positively," the spokesman for European Union foreign policy chief Catherine Ashton, who represents the powers in the talks, said.

"The ball is in their court," Michael Mann added after the first day of discussions on Tuesday.

He did not give details of the offer, but other Western officials have confirmed it includes some limited sanctions easing if Iran closes a underground site where it carries out its most controversial uranium enrichment work.

Diplomats see scant chances of a conclusive deal with Iran before a June presidential election - with the political elite preoccupied with domestic issues - but they hope to hold follow-up talks to the Almaty meeting soon.

IRANIAN COUNTERPROPOSAL

Iran would put forward its own proposal of "the same weight" as that of the other side, a source close to the Iranian negotiating team said on Tuesday, but Western officials said it had not done so during the first day of negotiations.

Iran has shown no sign of willingness to scale back its nuclear work. Its chief negotiator, Saeed Jalili, is close to Supreme Leader Ayatollah Ali Khamenei and is a veteran of Iran's 1980s war against Iraq and the Western powers that backed it.

It argues that has a sovereign right to carry out nuclear enrichment for peaceful energy purposes, and in particular refuses to close its underground Fordow enrichment plant, a condition the powers have set for any sanctions relief.

Tightened Western sanctions on Iran over the last 14 months are hurting Iran's economy and slashing oil revenue. Its currency has more than halved in value, which in turn has pushed up inflation.

But analysts say the sanctions are not close to having the crippling effect envisaged by Washington and - so far at least - they have not prompted a change in Iran's nuclear course.

Western officials said the powers' offer would include an easing of restrictions on trade in gold and other precious metals if Tehran closes Fordow.

The facility is used for enriching uranium to 20 percent fissile purity, a short technical step from weapons grade.

Western diplomats acknowledge an easing of U.S. and EU sanctions on trade in gold represents a relatively modest step. But gold could be used as part of barter transactions that might allow Iran to circumvent financial sanctions.

Iran's foreign ministry spokesman last week dismissed the reported incentive as insufficient and a senior Iranian lawmaker has ruled out closing Fordow, close to the holy city of Qom.

(Additional reporting by Yeganeh Torbati in Almaty and Zahra Hosseinian in Zurich; Editing by Robin Pomeroy and Jackie Frank)

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Obama renews offer to cut social safety nets

WASHINGTON (Reuters) - President Barack Obama raised anew the issue of cutting entitlements such as Medicare and Social Security as a way out of damaging budget cuts, a White House official said on Sunday, as both sides in Washington tried to limit a fiscal crisis that may soon hit millions of Americans.

Signaling he might be ready to explore a compromise to end automatic spending cuts that began late Friday, Obama mentioned reforming these entitlement programs in calls with lawmakers from both parties on Saturday afternoon.

"He's reaching out to Democrats who understand we have to make serious progress on long-term entitlement reform and Republicans who realize that if we had that type of entitlement reform, they'd be willing to have tax reform that raises revenues to lower the deficit," White House senior economic official Gene Sperling said on Sunday on the CNN program "State of the Union."

Republicans have long argued that the only way to tame budget deficits over the long haul is by slowing the cost of sprawling social safety net programs.

These include the Social Security retirement program and Medicare and Medicaid healthcare programs for the elderly, disabled and poor that are becoming more expensive as a large segment of the U.S. population hits retirement age.

While Obama also has proposed some savings on these programs, he has insisted that significant new tax revenues be part of the deficit-reduction formula, an idea Republicans so far reject.

Budget fights in Congress took their most serious turn in years on Friday when $85 billion in indiscriminate spending cuts known as "sequestration" began to kick in after both parties failed to agree on how to stop them.

Democrats predict the automatic cuts could soon cause air-traffic delays, meat shortages as food safety inspections slow down, and hundreds of thousands of furloughs for federal workers.

As the budget battles rage on in Washington, sources said Obama plans to nominate on Monday Sylvia Mathews Burwell to head to White House Office of Management and Budget. A veteran of the Bill Clinton White House, Burwell is president of the Walmart Foundation, which handles the corporation's charitable efforts.

Neither Sperling nor White House spokesmen would provide further details on Obama's conversations on Saturday with members of Congress, and they did not identify the lawmakers to whom the president spoke.

Obama's mention of entitlement reform may help bring Republicans to the table to halt the cuts. Republican leaders also made soothing noises on Sunday about the need to avoid a government shutdown on March 27, when funding runs out for most federal programs.

BOEHNER'S MAXIMUM EFFORT

House of Representatives Speaker John Boehner, interviewed on NBC's "Meet the Press," said he "absolutely" would do whatever it takes to keep the government operating. Toward that end, he will seek House passage this week of a "continuing resolution" to fund the government through September 30, when the fiscal year ends.

Lately, some rank-and-file Democrats and Republicans have been sending signals that they are willing to compromise to end a two-year-old deadlock over tax and entitlement reforms.

Last week, conservative Republican Senator Lindsey Graham of South Carolina said he was open to raising $600 billion in new tax revenue if Democrats accepted significant changes to Medicare and Medicaid as part of a long-term budget deal.

A few days later, liberal Democratic Senator Ben Cardin of Maryland told Reuters that he had discussed with Senate Democratic leader Harry Reid the possibility of replacing the automatic spending cuts with a mix of entitlement reforms and tax increases.

"Democrats know we have to do entitlement reforms and Republicans know they have to do revenues (increases)," Cardin said.

Now that they are in place, the $85 billion in spending cuts must be carried out by September 30 if no alternative is found. Half of those cuts would hit the military with the rest scattered over thousands of other domestic programs.

Economists have warned that such a heavy dose of belt tightening over such a short period will slow U.S. economic growth and potentially cost 750,000 jobs.

Speaking of the search for alternatives, Boehner said on "Meet the Press:" "I don't think anyone quite understands how it gets resolved."

No matter how Obama and Congress resolve the 2013 battle, this round of automatic spending cuts is only one of a decade's worth of annual cuts totaling $1.2 trillion mandated by the sequestration law.

DEEP DIVISIONS STILL

Deep divisions between Democrats and Republicans have soured previous negotiations.

Slamming the door on Democrats' demands for new tax hikes, Boehner said that Obama "got $650 billion of higher taxes on the American people on January the first. How much more does he want?" He was referring to the higher tax rate that began in the new year on households making more than $450,000 a year.

"It's time for the president and Senate Democrats to get serious about the long-term spending problem that we have," Boehner said.

In the meantime, both Democrats and Republicans were hoping to win the immediate fight over the automatic spending cuts so that they are best positioned in any upcoming battles over long-term budget deficits.

Senate Republican leader Mitch McConnell on Sunday played down the severity of the automatic cuts, describing them as modest.

"We're willing to talk to him (Obama) about reconfiguring the same amount of spending reduction over the next six months," McConnell said on CNN. "The American people look at this and say: 'Gee, I've had to cut my budget more than this,' - probably on numerous occasions over the last four years because we've had such a tepid economy now for four long years."

At the heart of Washington's persistent fiscal crises is disagreement over how to slash the budget deficit and gain control of the $16.7 trillion national debt, bloated over the years by wars in Iraq and Afghanistan and government stimulus for the ailing economy.

Government red ink also rose over the last decade after the enactment of across-the-board tax cuts in 2001 and 2003 secured by President George W. Bush.

(Additional reporting by Will Dunham and Philip Barbara; Editing by Alistair Bell, Philip Barbara and Eric Beech)

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Powers wait to hear Iran response to nuclear offer

ALMATY (Reuters) - World powers hope Iran will respond positively on Wednesday to their new offer to lift some sanctions if Tehran scales back nuclear activity the West fears could be used to build bombs.

The United States, France, Germany, Britain, China and Russia presented the offer when their first meeting with Iran in eight months began in Almaty on Tuesday and the Islamic state was considering it, the powers' spokesman said.

The two sides began a second - and what is expected to be the last in this round of negotiations - day of discussions in the Kazakh city shortly after 11 a.m (0500 GMT) on Wednesday.

Western officials described the first day of the meeting as "useful". One said Iran discussed aspects of the powers' ideas in bilateral talks with three of them - Russia, Germany and Britain - but gave no indication how Tehran viewed them.

Iranian state television described the atmosphere in the discussions as "very serious".

The outcome of the meeting in the Kazakh city will be closely watched in Israel, which has strongly hinted that it could attack Iran's nuclear sites if diplomacy and sanctions fail to stop the uranium enrichment program.

Iran says Israel's assumed nuclear arsenal is the main threat to peace and denies Western allegations it is seeking to develop the capability to make atomic bombs. It says it is only aiming to produce nuclear energy so that it can export more oil.

In their latest attempt to break years of deadlock in the dispute, the powers are offering Iran a relaxation of some of the sanctions that are taking a heavy toll on its economy.

"Hopefully the Iranians will be able to reflect overnight and will come back and view our proposal positively," the spokesman for European Union foreign policy chief Catherine Ashton, who represents the powers in the talks, said.

"The ball is in their court," Michael Mann added after the first day of discussions on Tuesday.

He did not give details of the offer, but other Western officials have confirmed it includes some limited sanctions easing if Iran closes a underground site where it carries out its most controversial uranium enrichment work.

Diplomats see scant chances of a conclusive deal with Iran before a June presidential election - with the political elite preoccupied with domestic issues - but they hope to hold follow-up talks to the Almaty meeting soon.

IRANIAN COUNTERPROPOSAL

Iran would put forward its own proposal of "the same weight" as that of the other side, a source close to the Iranian negotiating team said on Tuesday, but Western officials said it had not done so during the first day of negotiations.

Iran has shown no sign of willingness to scale back its nuclear work. Its chief negotiator, Saeed Jalili, is close to Supreme Leader Ayatollah Ali Khamenei and is a veteran of Iran's 1980s war against Iraq and the Western powers that backed it.

It argues that has a sovereign right to carry out nuclear enrichment for peaceful energy purposes, and in particular refuses to close its underground Fordow enrichment plant, a condition the powers have set for any sanctions relief.

Tightened Western sanctions on Iran over the last 14 months are hurting Iran's economy and slashing oil revenue. Its currency has more than halved in value, which in turn has pushed up inflation.

But analysts say the sanctions are not close to having the crippling effect envisaged by Washington and - so far at least - they have not prompted a change in Iran's nuclear course.

Western officials said the powers' offer would include an easing of restrictions on trade in gold and other precious metals if Tehran closes Fordow.

The facility is used for enriching uranium to 20 percent fissile purity, a short technical step from weapons grade.

Western diplomats acknowledge an easing of U.S. and EU sanctions on trade in gold represents a relatively modest step. But gold could be used as part of barter transactions that might allow Iran to circumvent financial sanctions.

Iran's foreign ministry spokesman last week dismissed the reported incentive as insufficient and a senior Iranian lawmaker has ruled out closing Fordow, close to the holy city of Qom.

(Additional reporting by Yeganeh Torbati in Almaty and Zahra Hosseinian in Zurich; Editing by Robin Pomeroy and Jackie Frank)

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