Today's meeting between President Bush and his senior defense advisers will focus on broad issues such as military transformation and not on war plans against Iraq, White House aides said. Defense Secretary Rumsfeld, National Security Advisor Condoleezza Rice, and Gen. Richard Myers, chairman of the Joint Chiefs of Staff, are also expected to discuss the 2004 Pentagon budget and new missile defense strategies.

Arab terrorists with ties to Al Qaeda may have tested biological and chemical weapons at a small facility in Northern Iraq,

according to US intelligence agencies. Reports said that the Bush administration considered a covert military operation against the facility, but decided it was too small and crude to risk American lives.

Nuclear weapons installations in the US may be vulnerable to terrorist attacks, a new report compiled by a key congressional Democrat claimed. Rep. Edward Markey (D) of Massachusetts said the Energy Department has cut security at sensitive facilities by almost 40 percent over the past decade, leading to severe shortages of armed guards and support personnel. The release of his report follows a decision by Bush to veto $5.1 billion in funding that Congress had approved for homeland security.

House Republicans were hammering out an election-year tax bill designed to stimulate the economy and help investors who have endured stock-market losses. The emerging package would significantly raise the amount of capital losses that taxpayers may deduct each year on their returns. The proposed legislation also would increase the age at which people must take distributions from 401(k) retirement plans. With federal deficits mounting, however, a number of lawmakers are arguing that any new tax cuts would have to be offset by spending reductions or by tax increases elsewhere in the budget.

After setting records in May, the US trade deficit decreased only slightly in June to $37.2 billion, the second-largest imbalance to date, the Commerce Department reported. Despite the deficit, economists found some hope in the fact that both imports and exports rose for the month.

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