The Bush administration is increasing pressure on Palestinian leaders to dismantle terrorist groups in the wake of Tuesday's deadly bus bombing in Jerusalem, a senior US official said, while denying that the apparent collapse of a declared cease-fire by main Palestinian extremist groups has jeopardized the US-backed road map to peace. President Bush conferred with British Prime Minister Blair on the issue by phone Tuesday, a White House spokes-man said, and US envoy John Wolf is headed back for talks with Israeli and Palestinian officials.

In his first major speech against the Oct. 7 recall vote, a defiant California Gov. Gray Davis (D) defended his actions since taking office and vowed to fight what he termed part of an "ongoing national effort to steal elections Republicans cannot win." During the address broadcast statewide Tuesday night from the University of California, Los Angeles, Davis conceded he'd made mistakes, but said he'd done his best when confronted with an inherited energy crisis and a budget debacle linked to the nation's "tanked" economy.

On the next stops in a month-long tour to counter criticism of the USA Patriot Act, Attorney General Ashcroft visits Detroit and Des Moines, Iowa, Thursday. At a Washington think-tank Tuesday, Ashcroft said the act, approved six weeks after the attacks of Sept. 11, 2001, had provided "tools to prevent terrorists from unleashing more death and destruction on our soil." Civil liberties groups and some members of Congress contend the expanded authority to gather information on suspects infringes on constitutional privacy rights.

The federal budget deficit rose to just under $324 billion last month, more than double the $145 billion imbalance of July 2002, the Treasury Department reported Tuesday. Critics attributed the 8 percent drop in revenues from last year to tax cuts that Bush sought, and Congress approved, earlier this year.

Gas prices rose an average of 10 cents a gallon nationwide - higher in some areas - in the past three weeks, partly due to last week's Northeast power blackout, the Energy Department's Energy Information Administration said. In Phoenix, where prices are more than $2 a gallon, there were signs of relief, with testing approved for a pipeline shut down Aug. 8.

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