Obama Predicts GOP Will Cave on Taxes

As the clock ticks toward a tax hike on all Americans in 20 days, President Obama predicted Republicans would join Democrats to extend current rates for 98 percent of earners before the end of the year.

"I'm pretty confident that Republicans would not hold middle class taxes hostage to trying to protect tax cuts for high-income individuals," Obama said today in an exclusive interview with ABC News' Barbara Walters.

"I don't think they'll do that," he said of Republicans forcing tax-rate increases for families earning $250,000 a year or less.

The sign of optimism follows weeks of tense negotiations and public posturing to avert the so-called "fiscal cliff," an economically toxic package of $6 trillion in across-the-board tax hikes and $1.2 trillion in deep spending cuts that could begin in early 2013.

The White House and House Speaker John Boehner have exchanged new, competing deficit-reduction plans over the last 24 hours, sources say, but there is little indication of real progress toward a deal.

Obama has taken a hard line against extending current, lower tax rates on income over $250,000, which would affect the top 2 percent of income-earners. Republicans have said those rates should be extended.

The standoff threatens higher rates for everyone unless a broad "cliff" deal is reached, or the middle-income rates are extended on their own.

"I remain optimistic," Obama told Walters. "I'd like to see a big package. But the most important thing we can do is make sure that middle class taxes do not go up on Jan. 1."

Official White House Photo by Pete Souza

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More of Barbara Walters' exclusive first joint, post-election interview with President Obama and first lady Michelle Obama airs Friday, Dec. 14, on "20/20" at 10 p.m. ET on ABC stations.

Related: In the interview Obama also recognized the Syrian opposition movement

Obama met privately with Boehner at the White House on Sunday for their second face-to-face session on the fiscal negotiations, signaling potential progress toward an agreement. But neither side presented specific details about the outcome of the meeting.

"I think the tone was good," Obama told Walters. "I believe that both Speaker Boehner and myself and the other leaders want to see a deal happen. And the question now is can we get it done. The outlines, the framework of what a deal should look like are pretty straightforward."

While the administration has emphasized tax increases on the wealthy, Republicans insist they need specific commitments from the White House on cuts to entitlement program spending, which are the primary drivers of federal deficits and debt.

"It was a nice meeting, it was cordial," Boehner said today of his Sunday meeting. "But we're still waiting for the White House to identify what spending cuts the president is willing to make as part of the 'balanced approach' that he promised the American people."

Boehner and House Republicans have proposed curbing the rate of increase for Social Security payments and raising the eligibility age for Medicare, among other changes, which are non-starters for many Obama supporters.

In his interview with Walters, the president hinted at new flexibility on entitlement spending cuts, but only once Republicans concede on top tax rates.

"If the Republicans can move on that [taxes] then we are prepared to do some tough things on the spending side," Obama said. "Taxes are going to go up one way or another. And I think the key is that taxes go up on high-end individuals."

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Cairo faces rival protests over constitution crisis

CAIRO (Reuters) - Opponents and supporters of Egyptian President Mohamed Mursi's plans to vote on a new constitution will take to the streets in central Cairo later on Tuesday, risking more violent confrontation after last week's deadly clashes.

Leftists, liberals and other opposition groups have called for marches to the presidential palace in the afternoon to protest against the hastily arranged referendum planned for Saturday, which they say is polarizing the country.

Islamists, who dominated the body that drew up the constitution, have urged their followers to turn out "in millions" the same day in a show of support for the president and for a referendum they feel sure of winning and that critics say could put Egypt in a religious straitjacket.

Seven people were killed and hundreds wounded last week in clashes between the Islamist Muslim Brotherhood and opponents besieging Mursi's graffiti-daubed presidential palace.

The elite Republican Guard has yet to use force to keep protesters away from the palace, now ringed with tanks, barbed wire and concrete barricades, but a decree issued by Mursi late on Sunday gives the armed forces the power to arrest civilians during the referendum and until the announcement of the results.

Leftist politician Hamdeen Sabahy, one of the most prominent members of the National Salvation Front opposition coalition, said Mursi was driving a wedge between Egyptians and destroying prospects for consensus.

As well as pushing the early referendum, Mursi has angered opponents by taking sweeping temporary powers he said were necessary to secure the country's transition to stability after a popular uprising overthrew autocratic former president Hosni Mubarak 22 months ago.

"The road Mohamed Mursi is taking now does not create the possibility for national consensus," said Sabahy.

If the constitution was passed, he said: "Egypt will continue in this really charged state. It is certain that this constitution is driving us to more political polarization."

The National Salvation Front also includes Nobel Peace Prize laureate Mohamed ElBaradei and former Arab League chief Amr Moussa.

The opposition says the draft constitution fails to embrace the diversity of 83 million Egyptians, a tenth of whom are Christians, and invites Muslim clerics to influence lawmaking.

But debate over the details has largely given way to noisy street protests and megaphone politics, keeping Egypt off balance and ill equipped to deal with a looming economic crisis.

Lamia Kamel, a spokeswoman for Moussa, said the opposition factions were still discussing whether to boycott the referendum or call for a "no" vote.

"Both paths are unwelcome because they really don't want the referendum at all," she said, but predicted a clearer opposition line if the plebiscite went ahead as planned.

Mahmoud Ghozlan, the Muslim Brotherhood's spokesman, said the opposition could stage protests, but should keep the peace.

"They are free to boycott, participate or say no; they can do what they want. The important thing is that it remains in a peaceful context to preserve the country's safety and security."

The army stepped into the conflict on Saturday, telling all sides to resolve their disputes via dialogue and warning that it would not allow Egypt to enter a "dark tunnel".

The continuing disruption is also casting doubts on the government's ability to push through tough economic reforms that form part of a proposed $4.8 billion IMF loan agreement.

(Writing by Edmund Blair; Editing by Will Waterman)

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Dollar dips as investors expect new Fed stimulus

NEW YORK: The dollar dipped against other major currencies Monday as investors bet the Federal Reserve would provide more stimulus to the lackluster US economy at its rate-setting meeting this week.

The euro was buying $1.2939 at 2200 GMT, up from $1.2928 at the same time Friday.

Against the Japanese currency, the European currency weakened to 106.53 yen from 106.64 yen late Friday, while the dollar edged down to 82.33 yen from 82.46 yen.

"We believe the weakness in the greenback reflects the market's expectations for easier monetary policy from the Fed," said Kathy Lien of BK Asset Management.

The US central bank's policy-setting Federal Open Market Committee opens a two-day meeting Tuesday. Stubborn high unemployment and the looming fiscal cliff challenge give the Fed every reason to expand its stimulus efforts, analysts said.

Gathering just before its "Twist" asset-swap operation expires at year-end, there are signs the FOMC will replace it with more outright bond purchases, or "quantitative easing," aimed at lowering interest rates to encourage businesses to invest and hire.

"Given the increasing uncertainty about America's looming fiscal crisis, the Fed is likely to signal that it will continue its outright purchases of mortgage and agency bonds worth $85 billion and maintain lending rates near zero until mid-2015," said Omer Esiner of Commonwealth Foreign Exchange.

"If the Fed signals that further easing next year is likely, the dollar could suffer."

Against the Swiss currency, the dollar fell to 0.9335 francs from 0.9343 francs late Friday.

The British pound fetched $1.6075, up from $1.6039.

-AFP/ac

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SC refers Zakia Jafri's plea to larger bench

NEW DELHI: A Supreme Court bench on Monday referred to a larger bench the plea of slain Congress leader Ehsan Jafri's widow seeking documents on the probe by the Special Investigation Team (SIT) into the Gulberg Housing Society riot case in Ahmedabad in 2002.

A two-judge bench of Justices D K Jain and Madan B Lokur said it cannot go into the issue as the SIT probe and related issues concerning the Godhra and other riot cases of 2002 in Gujarat was dealt by a three-member special bench, which on September 12, 2011 had passed the order relating to supply of documents to Jafri's widow, Zakia Jafri.

"We are of the view that the said order was passed by another bench and so it would be appropriate that the matter be heard by the same bench. Let the matter be placed before that larger bench as expeditiously as possible," it said.

The bench said that it would not be proper for it to pass the order and propriety also demands that the matter be referred to the larger bench which had passed the order. The SC on September 12, 2011 had directed the SIT to forward its final report regarding the Gulberg Society riots to the local court. The SIT had probed the riot cases including the Ahmedabad Gulberg Society massacre case.

An Ahmedabad trial court had on November 27 accepted the SIT closure report filed on March 13, 2012 in the case. Zakia Jafri has filed the SLP challenging the trial court's order rejecting her plea for supply of some documents relating to the investigation in the case.

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Surprise: New insurance fee in health overhaul law

WASHINGTON (AP) — Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with pre-existing conditions under President Barack Obama's health care overhaul.

The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to workers.

Employee benefits lawyer Chantel Sheaks calls it a "sleeper issue" with significant financial consequences, particularly for large employers.

"Especially at a time when we are facing economic uncertainty, (companies will) be hit with a multi-million dollar assessment without getting anything back for it," said Sheaks, a principal at Buck Consultants, a Xerox subsidiary.

Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee.

The Obama administration says it is a temporary assessment levied for three years starting in 2014, designed to raise $25 billion. It starts at $63 and then declines.

Most of the money will go into a fund administered by the Health and Human Services Department. It will be used to cushion health insurance companies from the initial hard-to-predict costs of covering uninsured people with medical problems. Under the law, insurers will be forbidden from turning away the sick as of Jan. 1, 2014.

The program "is intended to help millions of Americans purchase affordable health insurance, reduce unreimbursed usage of hospital and other medical facilities by the uninsured and thereby lower medical expenses and premiums for all," the Obama administration says in the regulation. An accompanying media fact sheet issued Nov. 30 referred to "contributions" without detailing the total cost and scope of the program.

Of the total pot, $5 billion will go directly to the U.S. Treasury, apparently to offset the cost of shoring up employer-sponsored coverage for early retirees.

The $25 billion fee is part of a bigger package of taxes and fees to finance Obama's expansion of coverage to the uninsured. It all comes to about $700 billion over 10 years, and includes higher Medicare taxes effective this Jan. 1 on individuals making more than $200,000 per year or couples making more than $250,000. People above those threshold amounts also face an additional 3.8 percent tax on their investment income.

But the insurance fee had been overlooked as employers focused on other costs in the law, including fines for medium and large firms that don't provide coverage.

"This kind of came out of the blue and was a surprisingly large amount," said Gretchen Young, senior vice president for health policy at the ERISA Industry Committee, a group that represents large employers on benefits issues.

Word started getting out in the spring, said Young, but hard cost estimates surfaced only recently with the new regulation. It set the per capita rate at $5.25 per month, which works out to $63 a year.

America's Health Insurance Plans, the major industry trade group for health insurers, says the fund is an important program that will help stabilize the market and mitigate cost increases for consumers as the changes in Obama's law take effect.

But employers already offering coverage to their workers don't see why they have to pony up for the stabilization fund, which mainly helps the individual insurance market. The redistribution puts the biggest companies on the hook for tens of millions of dollars.

"It just adds on to everything else that is expected to increase health care costs," said economist Paul Fronstin of the nonprofit Employee Benefit Research Institute.

The fee will be assessed on all "major medical" insurance plans, including those provided by employers and those purchased individually by consumers. Large employers will owe the fee directly. That's because major companies usually pay upfront for most of the health care costs of their employees. It may not be apparent to workers, but the insurance company they deal with is basically an agent administering the plan for their employer.

The fee will total $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. That means the per-head assessment would be smaller each year, around $40 in 2015 instead of $63.

It will phase out completely in 2017 — unless Congress, with lawmakers searching everywhere for revenue to reduce federal deficits — decides to extend it.

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Syrian Ex-General: Assad Will Use Chemical Weapons

A former top general in Syria's chemical weapons program says he doesn't doubt for a moment that President Bashar al-Assad will deploy his chemical weapons arsenal as he tries to hold onto power and crush the uprising that started almost two years ago.

"The regime started to fall and deteriorate. It's coming to its end," said retired Major General Adnan Sillou in an interview in a hotel near Antakya, on Turkey's southern border with Syria. "It's highly possible that he'll start using [chemical weapons] to kill his own people because this regime is a killer."

Sillou told ABC News that until September 2008, he was chief of staff on the defensive side of the chemical weapons program. He said he was in charge of training soldiers against attacks and contact with the weapons, as well as procuring safety equipment to guard against them.

Courtesy Major-General Adnan Sillou

He listed mustard gas along with the sarin, VX and tabun nerve agents as the main elements in Syria's chemical arsenal, whose existence Syria doesn't even acknowledge. Foreign intelligence officials and analysts have focused on the first three as the main threats, and last week U.S. officials said there was evidence sarin had not only been moved, but its binary components, usually stored separately, had been combined and placed into bombs for use.

Sillou accuses Assad's forces of already spraying pesticides and dropping white phosphorous, claims also made by opposition activists.

"They're idiots, crazy. Simply they are killers," he said.

Sillou believes the regime could step it up to more serious chemical weapons if Aleppo, Syria's most populous city where fighting has raged for months, falls to the rebels.

In July, Sillou left Syria for Turkey almost four years after he said he retired from the military. Sillou told ABC News that in his last post, which he held for six years, he was second in command behind a man named Said Ali Khalil, a member of Assad's ruling Alawite sect, an offshoot of Shiite Islam.

After defecting, Sillou said he was debriefed by an Arabic-speaking agent from the Central Intelligence Agency in Turkey's capital, Ankara. The meeting lasted three hours and was the last contact he said he had with them or any other intelligence agency.

Fighting is raging around the capital, Damascus, notably on the airport road where rebels are trying to take the airport to hamper outside support and deal a highly symbolic blow to the regime. The uptick in violence near the seat of Assad's power has raised American fears that he could resort to using his chemical weapons.

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Egypt's opposition rejects constitutional referendum

CAIRO (Reuters) - Egypt's main opposition coalition rejected on Sunday Islamist President Mohamed Mursi's plan for a constitutional referendum this week, saying it risked dragging the country into "violent confrontation".

Mursi's decision on Saturday to retract a decree awarding himself wide powers failed to placate opponents who accused him of plunging Egypt deeper into crisis by refusing to postpone the vote on a constitution shaped by Islamists.

"We are against this process from start to finish," Hussein Abdel Ghani, spokesman of the National Salvation Front, told a news conference, calling for more street protests on Tuesday.

The Front's main leaders - Nobel peace laureate Mohamed ElBaradei, former Foreign Minister Amr Moussa and leftist Hamdeen Sabahy - did not attend the event.

Hundreds of protesters milled around Mursi's palace, despite tanks, barbed wire and other barriers installed last week after clashes between Islamists and their rivals killed seven people.

"Holding a referendum now in the absence of security reflects haste and an absence of a sense of responsibility on the part of the regime, which risks pushing the country towards violent confrontation," a statement from the Front said.

The Muslim Brotherhood, which propelled Mursi from obscurity to power, urged the opposition to accept the referendum's verdict.

Islamists say the vote will seal a democratic transition that began when a popular uprising toppled Hosni Mubarak 22 months ago after three decades of military-backed one-man rule.

Their liberal, leftist and Christian adversaries say the document being fast-tracked through could threaten freedoms and fails to embrace the diversity of Egypt's 83 million people.

"ACT OF WAR"

Mursi had given some ground on Saturday when he annulled the fiercely contested decree issued on November 22 that gave him extra powers and shielded his decisions from judicial review.

But some measures taken under the decree remain in force and the president has insisted the referendum go ahead on December 15.

Liberal opposition leader Ahmed Said earlier described the race to a referendum as an "act of war" against Egyptians.

Egypt is torn between Islamists, who were suppressed for decades, and their rivals, who fear religious conservatives want to squeeze out other voices and restrict social freedoms. Many Egyptians just crave stability and economic recovery.

Brotherhood spokesman Mahmoud Ghozlan said the scrapping of Mursi's decree had removed any reason for controversy.

"We ask others to announce their acceptance of the referendum result," he said on the group's Facebook page, asking whether the opposition would accept "the basics of democracy".

The cancellation of Mursi's decree, announced after a "national dialogue" on Saturday boycotted by almost all the president's critics, has not bridged a deep political divide.

Prime Minister Hisham Kandil, a technocrat with Islamist leanings, said the referendum was the best test of opinion.

"The people are the makers of the future as long as they have the freedom to resort to the ballot box in a democratic, free and fair vote," he said in a cabinet statement.

But opposition factions, uncertain of their ability to vote down the constitution against the Islamists' organizational muscle, want the document redrafted before any vote.

"A constitution without consensus can't go to a referendum," said Hermes Fawzi, 28, a protester outside the palace. "It's not logical that just one part of society makes the constitution."

DIALOGUE

Egypt tipped into turmoil after Mursi grabbed powers to stop any court action aimed at hindering the transition. An assembly led by the Brotherhood and other Islamists then swiftly approved the constitution it had spent six months drafting.

Opponents, including minority Christians, had already quit the assembly in dismay, saying their voices were being ignored.

After the dialogue hosted by Mursi, a spokesman announced that the president had issued a new decree whose first article "cancels the constitutional declaration" of November 22. He said the referendum could not be delayed for legal reasons.

The decree ignited more than two weeks of sometimes violent protests and counter-rallies in Egypt. Mursi's foes have chanted for his downfall. Islamists fear a plot to oust the most populous Arab nation's first freely-elected leader.

Islamists reckon they can win the referendum and, once the new constitution is in place, a parliamentary election about two months later. The Islamist-led lower house elected this year was dissolved after a few months by a court order.

Investors appeared relieved after Mursi rescinded his decree, sending Egyptian stocks 4.4 percent higher on Sunday. Markets are awaiting approval of a $4.8 billion IMF loan later this month designed to support the budget and economic reforms.

The military, which led Egypt's transition for 16 turbulent months after Mubarak fell, told feuding factions on Saturday that only dialogue could avert "catastrophe". But a military source said these remarks did not herald an army takeover.

(Additional reporting by Edmund Blair and Yasmine Saleh; editing by David Stamp)

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Obama meets with top Republican on fiscal cliff

WASHINGTON: President Barack Obama and House of Representatives speaker John Boehner met Sunday to discuss the so-called impending fiscal cliff of steep tax hikes and spending cuts.

No details of the talks were given, but a statement from Boehner's office said "the lines of communication remain open."

That sounded relatively upbeat compared to Boehner's statement on Friday, when he reported "no progress" in deficit talks. He accused the White House of recklessly pushing the country to the fiscal brink over tax hikes.

The last time the two leaders had spoken was Wednesday, by telephone.

The so-called fiscal cliff refers to a combination of severe tax increases and spending cuts due to kick in automatically in January if the president and Congress don't find a compromise plan to cut the deficit first.

Economists warn that careening over the fiscal cliff would throw the country back into a recession.

Obama sent Treasury Secretary Timothy Geithner to Capitol Hill last week with an opening gambit, proposing $1.6 trillion in new tax revenues over the next decade, mainly from higher tax rates on the wealthiest two percent of Americans.

A Republican counter-offer included a plan for $800 billion in tax revenue raised through closing loopholes and ending some deductions. Both plans have been rejected.

In his weekly address Saturday, Obama said he was willing to find ways to reduce health costs and make more entitlement spending cuts as sought by the Republicans.

But he said asking "the wealthiest Americans to pay higher tax rates -- that's one principle I won't compromise on."

-AFP/ac

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India misguided, paranoid over China: Guha

Shreya Roy Chowdhury, TNN Dec 8, 2012, 06.12AM IST

MUMBAI: A good half-hour into the discussion on 'India, China and the World', historian Ramachandra Guha issued a disclaimer—all the three members on the panel had been to China only once. "We should learn their language, promote quality research, and have a panel on China driven by Chinese scholars," he said. And that was the general tenor of the debate—that the Indian attitude to China was influenced by a mix of ignorance, cautious optimism about partnerships and a whole lot of misguided paranoia. "Don't demonise the Chinese, please," Guha finally said in response to a question.

"China has existed in our imaginations," observed Sunil Khilnani, professor of politics and author of The Idea Of India. "There's been very little sustained engagement with the reality of China and very little of our own produced knowledge about China." It was after the events of 1962 ('war' in the popular imagination, 'skirmish' to the scholars participating in the discussion), explained Khilnani, that a miffed India "withdrew". It's the 50th anniversary of that exchange this year, and "what we haven't been able to do is learn from the defeat", observed Khilnani. Both could have benefited from greater engagement. "China has had a very clear focus on primary education and achieved high levels of literacy before its economic rise. It has also addressed the issue of land reform," said Khilnani. Guha added that China could learn from the "religious, cultural and linguistic pluralism" in India.

But China and India weren't always so out of sync with each other. Srinath Raghavan, a scholar of military history, got both Guha and Khilnani to talk about pre-1962 relations between the two when the picture was rosier. Tagore was interested in China and so was Gandhi. Both were very large countries with large populations and shared what Guha calls a "lack of cultural inferiority". "They were both," he continued, "also heavily dependent on peasant communities." Nehru was appreciative of China's will to modernize and industrialize and its adoption of technology to achieve those ends. In turn, Chinese politicians argued for Indian independence.

Things soured more, feel both Khilnani and Guha, after the Dalai Lama fled to India in 1959. "He was welcomed here as a spiritual leader but the intensification of the conflict dates to the Dalai Lama's flight," said Guha. Both Guha and Khilnani argued that Nehru's decision to not react aggressively to China's occupation of Tibet was, in the long run, the right one and prevented further "militarization" of the region. An audience member wondered if that didn't make India "China's puppet". Guha disagreed. "If there's a Tibetan culture alive today," he said, "it's not because of Richard Gere. Don't believe in the hypocrisy of the Western countries. Will they give them land, employment, dignified refuge? The Tibetans is one of the few cases in which our record is honorable."

But the difference in levels of development and the lopsided trade relations between the two countries have only fuelled the suspicions many Indians seem to harbour about China. People were worried, said Guha, even about cricket balls made in China. Audience questions reflected those worries. A member asked about China's "strategy to conquer the world" and its likely impact on India. Guha cautioned against stereotypes; Khilnani explained, "History is littered with the debris of states that have tried to dominate the world. What we're doing may be more long-lasting."

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Smokers celebrate as Wash. legalizes marijuana

SEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.

Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.

A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.

Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.

King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.

Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.

Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."

Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.

Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.

"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.

___

Johnson can be reached at https://twitter.com/GeneAPseattle

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