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Deficit warning sounded over post-attack spending

(CNN) -- The chairman of the Senate Budget Committee warned Tuesday that the record budget surplus is on the verge of turning into a deficit, as Congress faces declining tax revenues and significantly higher spending in the wake of the terrorist attacks.

"We've had a double whammy: We've been the victims of a surprise terrorist attack and most forecasters believe our economy is heading for recession," said Sen. Kent Conrad, D-North Dakota.

Preliminary calculations by the Congressional Budget Office show the surplus for 2002, most recently projected to be $176 billion, is now expected to be less than $50 billion, according to Conrad.

That figure does not include expected new spending to increase airline security, compensate victims of the attacks, stimulate the economy and pay for further defense and security needs. Those additional measures are expected to cost significantly more than $50 billion. (Full story)

President Bush praised Congress Tuesday for passing a $343 billion defense bill, saying it was a "vital step to ensure our nation's security." The statement released by the White House said the Defense Authorization Bill gives U.S. armed forces "the most significant pay raise in recent memory."

U.S. stocks posted modest gains Tuesday, closing with the Dow Jones industrial average up more than 56 points and the Nasdaq index up more than 2 points. Stocks stumbled at mid-session as caution re-emerged about the continued weakness in the nation's economy and its possible military response to this month's terrorist attacks. (Full story)

Latest developments

• During a visit to FBI headquarters to thank agents for their work, President Bush pressed for laws to give federal agencies more power to obtain evidence. "We must make sure the law enforcement men and women have go t the tools necessary -- within the Constitution -- to defeat the enemy. (Full story)

• Advocacy groups, legal experts and some members of Congress are voicing strong concerns that proposals to expand law enforcement powers in order to ratchet up the fight on terrorism could end up treading on civil liberties enjoyed by all Americans. (Full story)

• "Several individuals" who might have had links to the hijackers implicated in the attacks sought or held licenses to transport hazardous materials, Attorney General John Ashcroft said Tuesday as the investigation took on new urgency abroad.

• Interpol issued an all-points bulletin for an Egyptian believed to be the right-hand man of Osama bin Laden, suspected of masterminding the terrorist attacks against the United States. The Interpol so-called "Red Notice" posted for Aiman al Zawahri called on 179 countries to trace his whereabouts. (Full Story)

• Four people were detained in Paris Tuesday in connection with a planned attack on the U.S. Embassy and other U.S. targets in France, police said. (Full story)

• Saudi Arabia announced Tuesday it was cutting all ties with Afghanistan's Taliban government. The official Saudi Arabian news agency reported the move, saying the Taliban were defaming Islam by harboring and supporting terrorists. Bin Laden is believed to be hiding in Afghanistan. (Full story)

• Following the Saudi announcement, a Taliban representative urged Pakistan to maintain its diplomatic ties and prevent the United States from using Pakistani airspace to launch an attack on Afghanistan. Pakistan is the only country that maintains relations with the Taliban.

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• The Pentagon has identified 1,940 more of the 35,000 National Guard and Reserve members it is calling to active duty to support ongoing military operations in the United States and abroad. The latest units include communications, intelligence and security specialists. (Full story)

• "Operation Enduring Freedom" is the name of the military buildup in response to the attacks on the United States, Secretary of Defense Donald Rumsfeld said Tuesday. He said the name denotes that the campaign would not be a "quick fix" and could last for years. "The truth is, this is not about revenge. It's not about retaliation. This is about self-defense." (Full story)

• Pakistani officials said that despite claims of mass mobilizations, the Taliban have only between 12,000 and 15,000 troops. A Taliban defense ministry official said his country was "mobilizing" up to 300,000 men in the face of a pending attack by the United States. (Full story)

• The United States gave support Tuesday to Russia's claims that separatist Chechen rebels have links to worldwide terrorist organizations. Although State Department spokesman Richard Boucher said Chechen leaders should immediately cut all contact with terrorist groups, he also said that "only a political process" can resolve the Chechen conflict.

• Japanese Prime Minister Junichiro Koizumi visited Washington Tuesday and offered his country's support, telling President Bush the Japanese are "determined to stand by the United States." Koizumi said the two leaders discussed providing supply transportation, providing financial, diplomatic and medical assistance, and assisting refugees.

• While taking whatever steps it can to accommodate the flood of Afghan refugees to the Pakistani and Iranian borders, the U.N.'s refugee agency is looking for help to handle what will be "an enormous challenge," a spokesman for the agency said Tuesday. (Full story)

• New York Mayor Rudy Giuliani said at a news conference the city would begin processing death certificates Wednesday for those who have "come to terms with the idea that [family members are] dead and they're not going to be recovered." Giuliani said the number of missing was now 6,398, that 279 bodies had been recovered and that 209 of those had been identified. (Full Story)

• Giuliani told reporters that one of the largest remaining pieces of the south tower of the World Trade Center to survive the terrorist attacks was taken down Tuesday and preserved for use in a possible memorial. (Full story)

• OPEC representatives are scheduled to meet Wednesday to discuss whether to cut production as the world economy looks down the barrel of a possible recession. Members of the Organization of the Petroleum Exporting Countries will be under pressure not to cut quotas amid concerns that any U.S. military action against Afghanistan could further damage the sluggish global economy. (Full story)

• President Bush has significantly curtailed his planned trip to Asia next month, postponing stops in Tokyo, Seoul and Beijing, and traveling only to Shanghai for the two-day meeting of the Asian Pacific Economic Conference, White House press secretary Ari Fleischer said in a statement Tuesday. (Full story)

• American Airlines announced CEO Donald Carty is giving up his pay for the rest of this year; the world's largest airline company is asking employees to volunteer for pay cuts to help it weather the financial crisis.

• The World Health Organization warned Western governments to be on the alert for attacks using chemical and biological weapons. (Full story)

• Police are randomly stopping and searching cars and trucks that enter Manhattan, a spokesman for the Port Authority of New York and New Jersey said Tuesday. While authorities would not say what they were looking for, Attorney General John Ashcroft has said he is concerned terrorists might use tanker trucks as weapons.

• The United States consulted in Italy Tuesday with the exiled king of Afghanistan ahead of a possible strike on the ruling Taliban regime. The U.S. Embassy in Rome would not disclose the topics discussed in the meeting between King Mohammed Zahir Shah and a U.S. embassy official. (Full story)

• Several of the hijacking suspects sent money and a mysterious package to overseas contacts before the terrorist attacks, according to law enforcement sources close to the investigation.

• A Texas doctor detained and later released by the FBI as a material witness in the investigation of this month's terrorist attacks asserted his innocence Tuesday in what he called an "insane crime," and he called on the news media to refrain from speculating about the wide-ranging probe. Dr. Albader Alhazmi, a San Antonio radiologist, was released Monday. He was not charged with any crime. (Full story)

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