Euro falls as German, French economies disappoint

LONDON (Reuters) - The euro dropped and European shares fell on Thursday as growth data from the region's two largest economies came in weaker than forecast, throwing a first quarter recovery for the bloc into doubt.

The German economy, Europe's largest, contracted by 0.6 percent in the final quarter of 2012, marking its worst performance since the global financial crisis was raging in 2009.

Worryingly for Berlin, it was export performance - the motor of its economy - that did most of the damage. France's 0.3 percent fall was also a touch worse than expectations.

The figures suggest the euro zone could remain slumped in recession in the first quarter of this year and pushed down the euro 0.5 percent to a session low $1.3382.

"This is major data, so it's dampening sentiment," said Anita Paluch, sales trader at Gekko Capital Markets.

"It is kind of disappointing that Germany, which had shown so much resilience, is now showing signs of suffering from the debt crisis."

Stock markets also edged lower although the impact was not so marked. The pan-European ESTOXX 50 index <.stoxx50e> was down 0.1 percent by 0815 GMT with London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> all down by a similar amount.

German bonds were steady, stabilizing after a fall in the previous session as demand for traditional safe-haven assets returned.

Benchmark Bund futures were 3 ticks higher on the day at 142.08, with analysts targeting a further rise if the remaining GDP data for countries such as Italy (0900 GMT), and the euro zone as a whole (1000 GMT), also come in weak.

The pain is not confined to Europe. Japan, under some pressure over its aggressive monetary and fiscal policies which are driving down the yen, came up with an unwanted riposte earlier on Thursday - its GDP shrank 0.1 percent in the fourth quarter, leaving it in recession and crushing expectations of a modest return to growth.

The Bank of Japan also kept monetary policy steady and upgraded its economic assessment, as recent falls in the yen and signs of a pick-up in global growth in recent months give it some breathing space after expanding stimulus just a month ago.

Markets in China and Taiwan remain shut for the Lunar New Year holiday but Hong Kong resumed trading on Thursday.

(Reporting by Marc Jones; Editing by Peter Graff)

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Olympian Pistorius in custody after woman killed

PRETORIA, South Africa (AP) — Olympic athlete Oscar Pistorius was taken into custody and was expected to appear in court Thursday after a 30-year-old woman who was believed to be his girlfriend was shot dead at his home in South Africa's capital, Pretoria.

Police Lt. Col. Katlego Mogale told The Associated Press that officers received a call in the early hours of the morning that there had been a shooting at the double-amputee runner's home in a gated housing complex.

Mogale said when police arrived they found paramedics trying to revive the woman, who had been shot an unspecified number of times. Mogale, who was speaking to the AP from the scene, said the woman died at the house.

Officers found a 9 mm pistol at Pistorius' house and Mogale said the 26-year-old Pistorius is expected to appear in court later on Thursday.

Police have not released the name of the woman, but the publicist for Reeva Steenkamp, Pistorius' girlfriend, told Sky News that Steenkamp had died. Tributes to Steenkamp, a model, poured onto social media sites.

Many South African media outlets had reported that the dead woman was Pistorius' girlfriend Steenkamp and that he may have mistaken her for a burglar and shot her, but police did not clarify the dead woman's relationship to Pistorius. Mogale said the victim's family had not yet identified the body.

It was reported that the woman may have been trying to surprise Pistorius for Valentine's Day and he thought she was an intruder breaking into his home. The shooting prompted discussions on talk radio shows about the country's gun control laws.

Radio 702 talk show host Redi Thlabi discussed accidental shootings, including one in which a father shot his daughter as she tried to sneak out early one morning, mistaking her for an intruder.

"I am just shocked and speechless," Thlabi said. "I wonder if this puts the spotlight on the gun ownership debate. Do you feel safe when you hear such stories?"

Pistorius made history in London last year when he became the first double-amputee track athlete to compete in the Olympic Games. He is one of South Africa's and the world's most famous sportsmen.

Having had both his legs amputated below the knee before his first birthday because of a congenital condition, he campaigned for years to be allowed to compete against able-bodied athletes. Having initially been banned because of his carbon fiber blades — which critics said gave him an unfair advantage — he was cleared by sport's highest court in 2008 and allowed to run at the top events.

He competed in the 400 meters and on South Africa's 4x400 relay team at the London Games, making history after being have his selection confirmed on South Africa's team at the very last minute. He also retained his Paralympic title in the 400 meters in London.

South Africa's Sports Confederation and Olympic committee released a statement later Thursday saying they had been "inundated" with requests for comment but were not in a position to give out any details of the shooting.

"SASCOC, like the rest of the public, knows no more than what is in the public domain, which is there has been an alleged fatal shooting on the basis of a mistaken identity and an apparent assumption of a burglary," the South African Olympic committee said. "The organization is in no position to comment on the incident other than to say our deepest sympathy and condolences have been expressed to the families of all concerned."

South Africa has some of the world's highest murder rates, with nearly 50 people killed each day in the nation of 50 million. It also has high rates of rape, other assaults, robbery and carjackings.

U.N. statistics show South Africa has the second highest rate of shooting deaths in the world, second only to Colombia.

___

Imray reported from Cape Town, South Africa.

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Obama and Rubio: How did they do?

(CNN) -- CNN asked for views on President Obama's State of the Union address Tuesday night, which was dominated by domestic issues such as the economy and need to reinvigorate the middle class, gun control, minimum wage, early education and immigration. Afterward, Sen. Marco Rubio of Florida delivered the Republican response.

Sutter: A night that offered no hope for the jobless

John D. Sutter is a columnist for CNN Opinion. He heads the section's Change the List project, which focuses on human rights and social justice.

After Barack Obama's speech and Marco Rubio's rebuttal, we should have heard from Kim Peters.

The 47-year-old single mother, who has been more or less unemployed since the start of the Great Recession, wore fuzzy Shrek slippers as she watched the president's State of the Union address Tuesday night from the middle of an empty living room south of Atlanta.

If the country and the president could have peered back at her through her small TV, they would have seen the piles of black trash bags, full of clothes, in the corners of the room. They haven't been unpacked since she was evicted from her last apartment. They would have seen the worry in her eyes -- felt the panic that wakes her up at 3 a.m. and makes her wonder how long it will be before she and her 7-year-old daughter end up homeless. Full story

Granderson: Rubio must have missed the year of the woman

LZ Granderson, who writes a weekly column for CNN.com, is a senior writer and columnist for ESPN the Magazine and ESPN.com

You would think that in the shadow of a general election dubbed "Year of the Woman," the last thing any Republican in Washington would want to do is tick off women.

And while the Violence Against Women Act passed in the Senate by a healthy bipartisan majority a few hours before President Obama's State of the Union address, the fact that 22 senators -- all Republicans, all men -- voted against it should be troubling to GOP leaders.

And perhaps the most troubling aspect of that is Florida Sen. Marco Rubio, the so-called savior of the Republican Party, was one of those Republican men.

Just think: A few hours before Rubio was to deliver a message reflecting a new Republican Party, he casts a vote that screams more of the same. Full story

Welch: Obama's 'do-something' plan for 'have-nothing' government

Matt Welch is editor-in-chief of Reason and co-author of "The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong With America."

The two most memorable lines of President Barack Obama's fourth State of the Union address were the ad-libbed: "Get it done" (which doesn't appear in the remarks as prepared), and the emotional "They deserve a vote," concerning victims of gun violence.

As exasperated appeals for an obstructionist Congress to get off its duff, the exhortations provided emotional catnip for Democrats. For the rest of us, however, they were sobering reminders of what governing liberalism has deteriorated into: content-free calls to take action for action's sake.

Consumers of national governance are within their rights to ask just what we've gotten in return for ballooning the cost of the stuff since 2000. The answer may lie in not just what the president said, but what he has assumed we've already forgotten. Full story

Rothkopf: Obama's message: I'm in charge

David Rothkopf is CEO and editor-at-large of the FP Group, publishers of Foreign Policy magazine, and a visiting scholar at the Carnegie Endowment for International Peace.

It is sometimes said of a great actor that he could hold an audience spellbound while reading a laundry list. This is essentially what President Obama tried to do on Tuesday night. As State of the Union addresses go, his was artless. It lacked inspired phrases or compelling narrative. Save for the energy he gave it at key moments, it was pedestrian.

It was also very important.

It was important because with it, Obama returned in earnest to the work of governing. Having won a clear victory in November, and having spent the intervening months putting out the wildfires our Congress likes to set, he delivered word Tuesday night that he had a clear and full agenda for his second term. Full story

Navarrette: A kinder, gentler, wiser Marco Rubio

Ruben Navarrette is a CNN contributor and a nationally syndicated columnist with the Washington Post Writers Group.

Sen. Marco Rubio was ready for his close-up, and he got it. Now you know what all the fuss is about.

Rubio, a rising star and possible 2016 GOP presidential hopeful, was picked to deliver the official Republican response to President Obama's State of the Union sddress.

The selection tells you a lot about what the Republican Party has in store for Rubio, and what this 41-year-old son of Cuban immigrants can do for a party that needs to become more user-friendly for Latinos. His remarks were also delivered in Spanish. Full story

Slaughter: Obama dares Congress to get the job done

Anne-Marie Slaughter is a former director of policy planning in the U.S. State Department and a professor of politics and international affairs at Princeton University.

The hallmark of the 2013 State of the Union address was progressive pragmatism.

Time and again, President Obama punctuated his proposals with the refrain: "We should be able to get that done." After his call for "bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit," he said: "We can get this done," and later, "That's what we can do together."

When he proposed the addition of three more urban manufacturing hubs and asked Congress "to help create a network of 15 of these hubs and guarantee that the next revolution in manufacturing is made right here in America," he added: "We can get that done." Full story

Coleman: Where was the foreign policy?

Isobel Coleman is the author of "Paradise Beneath Her Feet" and a senior fellow for U.S. foreign policy at the Council on Foreign Relations in New York.

President Obama's State of the Union address predictably focused on his domestic priorities.

Immigration reform, a laundry list of economic initiatives including infrastructure improvements (Fix it First), clean energy, some manufacturing innovation, a bit of educational reform and the rhetorical high point of his speech -- gun control.

As in years past, foreign policy made up only about 15% of the speech, but even within that usual limited attention, Tuesday night's address pointed to few new directions.

On Afghanistan -- America's longest war -- Obama expressed just a continued commitment to bringing the troops home, ending "our war" while theirs continues. On Iran, there was a single sentence reiterating the need for a diplomatic solution, which makes me think that a big diplomatic push is not likely. Full story

Greene: In 2013, democracy talks back about State of the Union

CNN Contributor Bob Greene is a best-selling author whose 25 books include "Late Edition: A Love Story" and "Duty: A Father, His Son, and the Man Who Won the War."

"To report the state of the union." Within the first few seconds of President Barack Obama's address Tuesday night, he quoted the late President John F. Kennedy, who 51 years ago used those words to describe a president's annual duty.

As Obama spoke, citizens around the country were tapping away at keyboards, posting and sending messages -- public and private -- characterizing their own view of how the union, and its president, are faring.

Obama told the packed House of Representatives chamber: "We can say with renewed confidence that the state of our union is stronger." And those citizens around the country, typing away, were in essence saying: We'll be the ones to decide that, thank you very much. Full story

Follow @CNNOpinion on Twitter.

Join us at Facebook/CNNOpinion.

The opinions in this commentary are solely those of the writers.

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Anxiety grows as Chicago Public Schools narrows closing list

After trimming the number of schools that could be closed to 129, Mayor Rahm Emanuel's school administration on Wednesday entered the latest and what is likely to be the most intense phase so far in trying to determine which schools should be shut.

Chicago Public Schools chief Barbara Byrd-Bennett is expected to pare the preliminary list before unveiling a final one at the end of March. She said administrators will determine which schools are saved in the coming weeks amid a final round of community meetings to hear arguments from parents, teachers and community groups about why their schools should stay open.

If a hearing Wednesday night in North Lawndale was any indication, CPS still has a long way to go to gain the public's trust.

"Our schools don't need to close," Dwayne Truss, vice chairman of CPS' Austin Community Action Council, said in front of hundreds of people packed inside a church auditorium in the West Side neighborhood. "CPS is perpetrating a myth that there's a budget crisis."

CPS initially said 330 of its schools are underenrolled, the chief criterion for closing. Members of a commission assembled to gather public input on the issue told CPS officials earlier this year that closing a large number of schools would create too much upheaval. The Tribune, citing sources, said the commission indicated a far smaller number should be closed than initially feared, possibly as few as 15.

CPS then started holding its own hearings and on Wednesday, while following many of the formal recommendations made by the Commission on School Utilization, said 129 schools still fit the criteria for closing.

The new number and the latest round of hearings sets the stage for the administration to counter questions about the district's abilities to close a large number of schools and the need to do so.

For many who have already turned up to school closing meetings, this final round of hearings will be even more critical. School supporters must show how they plan to turn around academic performance and build enrollment, and also make the case for any security problems that would be created by closing their school.

"We are prepared now to move to the next level of conversation with our community and discuss a list of approximately 129 schools that still require further vetting and further conversation," Bryd-Bennett said. "We are going to take these 129 and continue to sift through these schools."

In the past, political clout has played a role in the district's final decisions. Already this year, several aldermen have spoken out on behalf of schools in their wards.

On the Near Northwest Side, for instance, the initial list of 330 underused schools included about six in the 1st Ward. Ald. Proco "Joe" Moreno helped organize local school council members, school administrators and parents to fight any closing. He also took that fight to leaders in City Hall and within CPS' bureaucracy. Nearly all of the schools in the ward were excluded from the list of 129.

"It is effort and it's organizing and not just showing up at meetings and yelling. Anybody can do that," Moreno said. "Those schools that proactively work before those meetings and explain what they are doing, what they need and that they are willing to accept new students, that's when politics works.

"My responsibility in this juncture was to focus on these schools," he said. "I had to work on the inside, with CPS and with City Hall, and with my schools on the outside."

Most of the schools on the list of 129 are on the West, South and Southwest sides, many in impoverished neighborhoods that saw significant population loss over the last decade. Largely spared were the North and Northwest sides.

In all, more than 43,000 students attend those 129 schools on the preliminary list, according to CPS records.

The area with the most schools on the list is a CPS network (the district groups its schools in 14 networks) that runs roughly from Madison Street south to 71st Street and from the lake to State Street. The preliminary list includes 24 schools in that area.

The Englewood-Gresham network has the second-largest number, 19, while the Austin-North Lawndale network where Wednesday night's meeting was held still has 16 schools on the list.

CPS critics said the preliminary list is still too large to be meaningful and that the district's promise to trim it before March 31 is only a tactic to make the final number seem reasonable.

"They started out with such a far-fetched, exaggerated list of schools, many of which are nowhere near underutilized," said Wendy Katten, co-founder of the parent group Raise Your Hand. "They might appear to be looking like they're listening, but they're not. They have not done a thorough and substantive assessment of these schools."

Following the commission's recommendations, CPS last month removed high schools and schools performing at a high level academically from consideration. On Wednesday, the district said schools with more than 600 students or utilization rates of at least 70 percent have also been taken out of consideration for closing.

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South Korea unveils missile it says can hit North's leaders

SEOUL (Reuters) - South Korea unveiled a cruise missile on Thursday that it said can hit the office of North Korea's leaders, trying to address concerns that it is technologically behind its unpredictable rival which this week conducted its third nuclear test.

South Korean officials declined to say the exact range of the missile but said it could hit targets anywhere in North Korea.

The Defence Ministry released video footage of the missiles being launched from destroyers and submarines striking mock targets. The weapon was previewed in April last year and officials said deployment was now complete.

"The cruise missile being unveiled today is a precision-guided weapon that can identify and strike the window of the office of North Korea's leadership," ministry spokesman Kim Min-seok told reporters.

North Korea has forged ahead with long-range missile development, successfully launching a rocket in December that put a satellite into orbit.

The North's ultimate aim, Washington believes, is to design an intercontinental ballistic missile capable of carrying a nuclear warhead that could hit the United States.

North Korea, which accuses the United States and its "puppet", South Korea, of war-mongering on an almost daily basis, is likely to respond angrily to South Korea flexing its muscles.

North Korea, technically still at war with the South after their 1950-53 conflict ended in a truce, not a peace treaty, carried out its third nuclear test on Tuesday, drawing condemnation from around the world including its only major ally China.

The test and the threat of more unspecified actions from Pyongyang have raised tensions on the Korean peninsula as the South prepares to inaugurate a new president on February 25.

"The situation prevailing on the Korean peninsula at present is so serious that even a slight accidental case may lead to an all-out war which can disturb the whole region," North Korea's official KCNA news agency said.

(This story has been refiled to drop redundant "said" in fourth paragraph)

(Reporting by Ju-min Park; Editing by Nick Macfie)

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Dollar, euro ease against yen on G7 policy doubts

LONDON (Reuters) - The yen rose against the dollar and the euro on Wednesday as investors reconsidered a G7 statement on exchange rates aimed at soothing concerns of a currency war but instead provoked a fresh bout of volatility.

The G7 reaffirmed its commitment to market-determined exchange rates and said that fiscal and monetary policies must not be directed at devaluing currencies in its statement which was interpreted as condoning the recent weakness in the yen.

However, an official from the group later said Tuesday's statement was meant to signal concerns about excessive yen moves, prompting a vicious reversal in the currency.

"It appears there is a lack of consensus at the G7 level in tackling the unintended weakening of currencies, due to the adoption of expansionary domestic monetary policies," analysts at Barclays said in a note clients.

In early European trading the dollar and the euro had both fallen by 0.3 percent against the yen to 93.20 yen and 125.42 yen respectively.

At the center of the debate is Japan, where Prime Minister Shinzo Abe's government has made it clear that it will push for aggressive policies to beat deflation through drastic monetary expansion. Anticipation of a bolder Bank of Japan policy has sent the yen down nearly 20 percent against the dollar since November.

Dealers said the market was likely to trade cautiously ahead of the outcome of a Bank of Japan meeting ending on Thursday and before a meeting of the Group of 20 finance ministers and central bankers in Moscow on Friday and Saturday.

Markets are also awaiting the Bank of England's quarterly inflation report which should show whether there's any realistic chance of further asset purchases in coming months which would add to pressure on sterling.

The euro zone will publish industrial production data for December at 1000 GMT, seen as likely to confirm that output in final quarter was very weak.

The data comes out a day ahead of flash estimates of fourth quarter GDP for the whole euro area which is forecast to show growth contracted by around 0.4 percent in the final three months of the year - the steepest quarter-on-quarter decline since the first quarter of 2009.

Ahead of the data Europe's share markets were little changed with the FTSE Eurofirst 300 index <.fteu3> of top companies opening flat but near the top of a six-day trading range, with the focus on corporate earnings reports.

London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were between 0.1 percent higher and 0.2 percent down.

Debt markets were also little changed as investors await the results of an auction of long-term Italian debt which is seen as a test of demand before elections later this month.

Italian debt has been under pressure in recent weeks as a comeback in the opinion polls by former Prime Minister Silvio Berlusconi's party has raised the prospect of a fragmented parliament that could hamper the next government's reform efforts.

Germany also plans to sell 5 billion euros of two-year bonds.

(Editing by Anna Willard)

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No. 8 Michigan State routs No. 4 Michigan 75-52

EAST LANSING, Mich. (AP) — Michigan State has muddled through much of its season, finding ways to win games short on style with gritty substance.

The eighth-ranked Spartans, though, showed their potential in an impressive 75-52 win over No. 4 Michigan on Tuesday night in the rivalry's first matchup of top 10 teams.

"The sky is the limit," guard Keith Appling said.

If Michigan State can play anything like it did against the Wolverines, Appling might be right.

The Spartans (21-4, 10-2 Big Ten) broke a first-place tie in the conference with No. 1 Indiana, which plays at Michigan State next Tuesday after the Spartans try to avoid a letdown Saturday night at Nebraska.

Appling acknowledged he was a little bit surprised by the lopsided victory — the school's largest since beating Michigan by 27 points in 2002 — but shrugged off the significance of it with much of the regular season remaining.

"We just have to take it for what it is and prepare for our next game," Appling said.

The Wolverines (21-4, 8-4) have lost three of four, but the closely contested setbacks on the road against the Hoosiers and at Wisconsin were nothing like the latest when they were held to a season-low points total.

"They bullied us — point blank," said Tim Hardaway Jr., who matched a career low with two points.

Michigan State didn't trail once, led by as many as 16 points in the first half and enjoyed 30-point leads in the second.

"We probably played our best game in three years," Spartans coach Tom Izzo said. "And, they probably played one of their worst."

Michigan coach John Beilein agreed.

"That was the worst we've played in a long, long time and credit Michigan State for that," he said.

Burke scored 18 points for the Wolverines and didn't get much help from his teammate offensively, or defensively.

"It was an embarrassing loss," Burke said.

Hardaway Jr. was held scoreless until making a layup in the opening minute of the second half — after turning down Beilein's suggestion to work on his shot during halftime warmups — and didn't score again. Hardaway was 1 of 11 from the field.

"He's been playing as good as any player in the country," Beilein said. "He had a bad night, credit Michigan State's defense. Tim had a bad night and Tim Hardaway will bounce back like he always has."

Glen Robinson III was 1 of 4 and scored two points to match his season low.

The Wolverines, who pride themselves on taking care of the basketball, had a season-high 16 turnovers and didn't have much success getting the ball away from the turnover-prone Spartans. Michigan made fewer than 40 percent of its shots and scored one fewer point than it did in a three-point loss at Ohio State.

"Maybe we got exactly what we deserve and it's medicine for the future," Beilein said.

Everything went right for Michigan State, which had just eight turnovers and made 48-plus percent of its shots.

Gary Harris scored 17 points, making five 3-pointers, and Derrick Nix had his way on the inside, scoring 14 points as part of a balanced offense.

Appling had 11 points and Branden Dawson scored 10 before leaving the court late in the game because Michigan's Mitch McGary hit him in the face inadvertently with his right arm.

Izzo said Dawson got hit in the nose and had a cut on his lip.

"I do think he's going to be OK," Izzo said.

Matt Costello scored a season-high eight points and fellow freshman Denzel Valentine had seven points to help Michigan State win its second straight in the series after losing three in a row following a run of dominance for the Spartans.

White-clad fans in the stands were fired up before the game even started and they stayed enthusiastic, standing for much of the game, because the home team gave them plenty of reasons to cheer from start to finish.

"The crowd was just awesome," Izzo said. "It kind of reminded me of back in the day."

In the first matchup of 20-win teams in Division I basketball this season, Michigan State showed it might not be a rebuilding this season.

Michigan, meanwhile, has been humbled since being ranked No. 1 last month for the first time since the 1992-92 season.

"It was a big step for us, but don't think that's the real Michigan team because it's not," Izzo said.

___

Follow Larry Lage on Twitter: http://twitter.com/larrylage

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Obama's chance to lead?

STORY HIGHLIGHTS

• John Avlon: President Barack Obama is well-positioned to help solve debt problem


• He says Obama should avoid temptation favored by some Democrats to put off action


• Relatively modest changes in entitlements could help ensure their survival, Avlon says


• Avlon: Obama can rally his party behind deficit cuts that won't hurt economy

Editor's note: John Avlon is a CNN contributor and senior political columnist for Newsweek and The Daily Beast. He is co-editor of the book "Deadline Artists: America's Greatest Newspaper Columns." He is a regular contributor to "Erin Burnett OutFront" and is a member of the OutFront Political Strike Team. For more political analysis, tune in to "Erin Burnett OutFront" at 7 ET weeknights.

(CNN) -- "What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further. ... We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else's."

So said President-elect Barack Obama at a Washington Post editorial board meeting in January 2009, just days before taking his first oath of office. He was talking about the importance of dealing with the long-term deficit and debt.

The rhetoric hasn't met the record -- debt has exploded under Obama's watch. Reasonable people can forgive the president for expenses incurred while confronting the worst financial crisis since the Great Depression -- and, let's be honest, alternative paths of austerity have not worked that well across the Atlantic. But now is the time to get serious about reigning in our long-term debt, which now exceeds an unsustainable 70% of gross domestic product.

At this moment of maximum political capital, Obama is perfectly positioned to act on his original impulse in the State of the Union on Tuesday night.

But there is a dangerous bit of hubris sweeping the Democratic Party, which says that dealing with deficits and debt is a sucker's bet, best left to the next Republican president.

Instead, the Keynesians are riding high and arguing that deficit and debt is not a primary concern to most voters and irrelevant to economic growth. And so the pregame expectation setting comes: White House minions told The Washington Post not to expect the president to present "an ambitious new plan to rein in the debt" in the State of the Union.

Opinion: Obama needs to lay out a plan on climate crisis

This would be a major mistake and a costly lost opportunity.

With an eye toward his legacy, Obama should follow his original instincts and put the power of presidency behind a balanced long-term plan to deal with deficits and debt -- including spending cuts, tax reform and, most importantly, entitlement reform.

This is the time for Obama to pull a Nixon in China.

Just as only a committed anti-communist such as Nixon could establish relations with communist China, Obama is perfectly positioned to do what he knows is necessary to preserve the long-term strength and solvency of the social safety net: Medicare and Social Security.

This does not mean draconian cuts or a voucherization of the existing system as imagined by Rep. Paul Ryan and many House Republicans. But it does mean following through on the president's previous negotiated offers to consider "chained CPI," which would lower inflation-related increases in Social Security benefits, and to raise the eligibility age for Medicare.

Formula adjustments such as these can save billions of dollars over the next 10 years, keeping these popular programs solvent. Other solutions, such as raising the Social Security payroll tax cap to more than the current income cutoff of $110,000, are worth consideration as part of a package. This is an idea that liberals love because it extends the progressivity of the tax code to the wealthiest Americans.

Alternatively, we could means-test Social Security to make sure it serves primarily as a safety net -- or (gasp!) raise the retirement age. When the Bowles-Simpson commission suggested raising the retirement age to 69 in 2075, it was met with howls of outrage from unions in particular. This makes no sense, especially if common-sense exemptions are made for manual labor.

Beltway cynics say that the bipartisan deficit and debt reduction plans that are often cited have no chance of passing Congress. When you look at the pathetic support for Bowles-Simpson when it was actually put to a vote in the House last March -- 16 Republicans and 22 Democrats supported it -- you see why cynicism is always a safe bet in Washington.

But take a step back, and you'll see much broader support among the American people. The Pew Research Center found that the top three issues are "strengthening the economy" (at 86%), "improving the jobs situation" (79%) and "reducing the budget deficit" (at 72%). Crucially, the deficit has shown the biggest increase as an issue over the past four years -- up 19 percentage points from 2009. This is evidence of a pent-up demand for action -- but it will require presidential leadership.

Of course the devil is in the details, and politicos will point out that when confronted with tough medicine to deal with deficits and debt, even alleged tea party supporters balk (hence the classic "Government Get Your Hands Off My Medicare!" sign that I saw at one 2009 rally).

But strengthening America to remain competitive in the 21st century will require getting our long-term debt under control along with other important but less poll-prioritized policies such as comprehensive immigration reform and a public-private infrastructure bank to fund nation-building "here at home."

The State of the Union is a chance for the president to put forward a balanced bipartisan solution that contrasts with radical conservatives who believe that increased tax revenues from closed tax loopholes can't be part of a big deal to bring down our debt. Wall Street lawyers will fight to protect every loophole they embedded in our tax code, but their argument doesn't begin to make sense to people on Main Street.

Obama will probably point out Tuesday night that economic growth is the essential X Factor to reducing long-term deficits and debt. On this point at least, he and some conservatives might agree. But dumb meat cleaver cuts such as the looming sequestration could push our economy back into recession.

That's why a smart balanced alternative plan is necessary. But it will require presidential leadership and putting some Democratic sacred cows on the table.

This doesn't just make practical sense in a divided government (a reality some Democrats seem to forget) -- it makes compelling political sense as well. By seizing the mantle of fiscal responsibility -- in contrast to fiscal conservatism -- Obama will build on his post-election bump among centrists and some independents.

The more Machiavellian Democrats might argue that this outreach could only serve to isolate Republicans more. Nonpartisan strategists might argue that this approach would drive a wedge between reasonable Republicans and the House radicals.

But the real reason for Obama to address the need to reduce long-term deficits and debt directly is because it's the right thing to do for our country -- and he is uniquely positioned to achieve it. Just as Nixon could go to China, a Southern Democrat such as Lyndon Johnson was needed to pass civil rights legislation and Bill Clinton was able to sign welfare reform after decades of Republicans talking about it, Obama can put our country on a balanced path of long-term economic growth and fiscal responsibility.

Bottom line: Obama has the political opportunity, but does he have the political will? We'll all find out in real time if he decides to lead on this issue or just be the latest in a long line to kick the can further down the road.

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The opinions expressed in this commentary are solely those of John Avlon.

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Dorner case: Human remains found in debris of burned cabin

Charred human remains have been found in the debris of the burned-out Big Bear area cabin where police believe fugitive ex-cop Christopher Dorner was holed up, authorities said.

Investigators will attempt to identify the remains through forensic means, the San Bernardino County Sheriff’s Department said in a statement.

Dorner, whose alleged crimes have kept Southern California on edge for days, is wanted for the slayings of an engaged couple and two law enforcement officers. He was believed to have shot at pursuing law enforcement officials, then fled into a cabin shortly before it ignited Tuesday afternoon near ski resorts in the San Bernardino Mountains.

Authorities had lost track of Dorner since late last week. Then, on Tuesday, two maids stumbled upon a man resembling Dorner as they arrived to clean a vacant cabin.

The suspect was found close to where law enforcement officials had held news conferences over the weekend concerning their search for Dorner, 33, and near where Dorner’s car was set aflame last week.

The suspect tied the two maids up, took a car from the residence and left, according to a law enforcement official. One of the maids was eventually able to break free at the residence in the 1200 block of Club View Drive, close to Snow Summit and Bear Mountain Resort, and called 911 at 12:20 p.m.

Then, at 12:45 p.m., according to state Fish and Wildlife officials, the suspect was allegedly driving a purple Nissan on California 38 when he passed a marked vehicle driven by the agency’s law enforcement officers.

The officers recognized the suspect as he passed and swung their vehicle around in pursuit.

The suspect attempted to evade them by turning off onto Glass Road, and at some point crashed and abandoned the small car.

With officers still in pursuit, the suspect then stopped a truck driven by another resident and ordered him out of the vehicle.

Behind the wheel of the stolen truck, the suspect was once again careening down Glass Road, and once again he passed a Fish and Wildlife vehicle coming from the opposite direction. Again an officer recognized the suspect. That driver radioed his colleagues traveling behind him that the suspect was heading in their direction in a silver pickup.

When the suspect saw the second Fish and Wildlife truck approaching, he rolled down his window and took aim. The suspect opened fire into the cab as the vehicles passed just two feet apart, shattering the driver's side window and strafing the state truck with a handgun.

The badly damaged truck skidded to a halt and a game warden, a 35-year-old former Marine, fired 20 rounds from a high-powered rifle as the suspect fled in the hijacked truck.

The suspect subsequently crashed that truck and ran into the woods. He ended up in the cabin. A firefight ensued. Two San Bernardino County sheriff’s deputies were shot; one was pronounced dead at a hospital, while another is undergoing surgery. Hundreds of rounds were fired in the firefight.

For days, multiple law enforcement agencies from across Southern California laid out a dragnet for the man accused of going on a revenge-fueled rampage following his termination from the LAPD in 2008. In addition to the San Bernardino County sheriff’s deputy who was fatally wounded Tuesday, Dorner allegedly killed the 28-year-old daughter of a former LAPD captain, her fiance and a Riverside police officer.

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Analysis: North Korea nuclear-test drama rehashes old script

WASHINGTON/BEIJING (Reuters) - A North Korean nuclear test draws international condemnation, modest U.N. sanctions and expressions of hope in the United States that China will finally rein in its brazen ally.

Beijing chides North Korea, but nothing much happens.

The world has seen this movie before and it's likely to witness another rerun after North Korea's third nuclear test on Tuesday.

Beijing has always been loath to back harsh sanctions on North Korea, fearing it could lead to upheaval in the unpredictable nation on its doorstep. Now, threatened by the U.S. military's "pivot" to Asia, Beijing is even less likely to fall in line with Washington's position on North Korea.

"The more the United States rebalances its forces in the Western Pacific, the more China has to give leeway in regulating its relationship with North Korea," said Shen Dingli, a regional security expert at Shanghai's Fudan University.

And North Korea is exploiting the current high levels of Sino-American mistrust.

China's initial reaction to the test - that it was "strongly dissatisfied and resolutely opposed" to the North's move - suggested Beijing's new leadership would not crack down on its isolated neighbor, with whom it shares a long border and rising trade.

And the remarks were tepid compared with tough warnings in some state-run Chinese media, including hints of aid cuts, that preceded the explosion.

Foreign policy experts in China say Beijing's priorities differ from those of the United States and allies South Korea and Japan. Instability on a sensitive border is a greater immediate concern than the North Korean nuclear problem.

"China has always been worried that North Korea could collapse quickly," said Zhu Feng, a professor of international studies at Peking University.

"It could be a refugee issue, or civil unrest, or military confrontations. That is why China has been hesitating," he said.

In addition to providing undisclosed amounts of food and fuel to keep North Korea afloat since a mid-1990s famine killed more than a million North Koreans, Beijing has stepped up trade and investment.

China-North Korea trade rose an annual 24.7 percent to $3.1 billion in the first half of 2012, while the 2011 figure of $5.7 billion was a 62.4 percent gain over 2010. Beijing is also thought to take a generous - to Pyongyang - view of what constitutes "luxury goods" under a U.N. sanctions resolution banning exports of such items to North Korea.

PUSH TO THE WALL

"Not only are there many other ways China provides economic support to North Korea, but Beijing is not going to push the regime to the wall, because they don't want a war and they don't want a change to the status quo that favors the U.S.," said Stephanie Kleine-Ahlbrandt, the Beijing-based Northeast Asia director for the International Crisis Group.

In a foreshadowing of how difficult negotiations over new sanctions will be, diplomats at the United Nations said China initially bristled on Tuesday at the wording in a U.N. Security Council draft statement that the nuclear test was "a clear threat to international peace and security".

Eventually, Beijing came around.

Asked about China's measured initial response, State Department spokeswoman Victoria Nuland said it was early days in diplomacy. Beijing's influence on North Korea is the reason "it's so important for us to stay closely linked up with China and why the secretary's made it a priority to work well with his new Chinese counterpart", she said, referring to new U.S. Secretary of State John Kerry.

But U.S. leverage on the issue may have been blunted by U.S. President Barack Obama's own policies. Obama's "pivot" of strategic focus and military assets to the Asia-Pacific, seen in Washington as a necessary correction after a decade of U.S. wars in the Muslim world, is seen in Beijing as threatening.

To induce Beijing to get tougher, the United States should invoke the specter of Japan or South Korea arming themselves with nuclear weapons or taking other actions to strengthen their alliances with the United States, said George Lopez, a former U.N. Panel Expert for monitoring North Korea sanctions.

The message should be, "You need to deal with us, Dear Beijing, and create a bilateral leadership framework with the same goals, or all hell breaks loose in an unpredictable way," said Lopez, University of Notre Dame's Kroc Institute for International Peace Studies.

Lopez and other experts also see plenty of scope for the United States to use existing laws to force tighter scrutiny of bank transactions through China to North Korea.

A 2005 move by the U.S. Treasury Department against Banco Delta Asia, a small bank in the Chinese enclave of Macao, which targeted money laundering and counterfeit-currency trafficking, sparked big financial troubles for Pyongyang and spooked Chinese banks who feared getting shut out of the U.S. banking system.

Obama, in his State of the Union address, said the United States would take the lead in responding to threats posed by North Korea. He did not refer to any possible role to be played by China.

"The regime in North Korea must know they will only achieve security and prosperity by meeting their international obligations," Obama said.

"Provocations of the sort we saw last night will only further isolate them, as we stand by our allies, strengthen our own missile defense, and lead the world in taking firm action in response to these threats."

(Additional reporting by Chen Aizhu and Ben Blanchard in Beijing; Louis Charbonneau at the United Nations; Editing by Raju Gopalakrishnan and Mark Bendeich)

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