The federal deficit is expected to reach a record $455 billion this year, the Bush administration said. The budget figures for the first time include initial costs of the war in Iraq and project an even larger $475 billion shortfall next year before steadily declining to $226 billion in 2008. New White House press secretary Scott McClellan said the deficit "certainly remains a concern, but it's one that is manageable, and it's one that we are addressing."

Federal Reserve policymakers are ready to maintain "a highly accommodative stance ... for as long as needed" to encourage growth, Chairman Alan Greenspan told a congressional panel. The economy could be on track for extended growth, he added. Market watchers are looking for clues on whether the Fed may cut interest rates again, after a quarter-point trim in June. The key federal funds rate stands at a 45-year low.

President Bush said he remains "absolutely convinced" that Iraq had a prewar weapons program, that proof will be found, and that toppling Saddam Hussein was "the right decision." With his administration under fire over unverified claims that Hussein's regime tried to buy African uranium, Bush insisted Monday that the intelligence he receives is "darn good." Critics, mainly congressional Democrats, say the flap threatens to undermine Bush's credibility and that of the US as a global leader.

An Illinois judge lacked the authority to reduce a $12 billion bond that cigarettemaker Philip Morris USA must pay to challenge an award in a class-action lawsuit, an appeals court found. The panel gave Judge Nicholas Byron 30 days to reconsider his decision to lower the bond to $6 billion. Philip Morris said it would appeal the latest ruling to the state Supreme Court. The unit of Altria Group maintains that posting the full amount would force it into bankruptcy.

Heavy rains and wind battered the Gulf Coast of Texas as hurricane Claudette moved ashore near Port O'Connor, 100 miles southwest of Houston. Emergency officials in Galveston County, where the approaching storm tore roofs off beachfront homes and sent waves crashing over a 17-foot seawall, were advising some residents to evacuate.

A rapidly growing wildfire prompted evacuation orders for 5,000 people in and around Whiteriver, Ariz., Monday. Emergency officials said the 5,800-acre blaze on the Fort Apache Indian Reservation was threatening at least 700 homes. Other fires were burning near Huntsville, Utah; Helena, Mont.; and Yakima, Wash.

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