Arizona Attorney General Terry Goddard shortly before 5 p.m. Friday filed a complaint in U.S. District Court in Tucson to stop the closure of the Tucson Citizen.

A motion for a temporary restraining order is in the process of being filed, said Anne Hilby, spokeswoman for Goddard’s office.

The case has been assigned to Raner Collins, Hilby said, “but we do not yet know if he will rule on it before tomorrow morning.”

“The process has been initiated,” Hilby said. “We will be notified by the court as how Judge Collins will rule.”

Collins could not be reached for comment.

Kate Marymont, vice president of news for Gannett Co. Inc., visited the Citizen newsroom Friday morning to say the paper would print its final issue Saturday, continuing with a “modified” Web site focused on opinion and commentary.

When asked about Goddard’s action, Marymont said she could not comment without seeing the actual filing.

“I have little to say, I’d need to see what was filed and speak with our lawyers,” Marymont said.

Goddard was informed of the Citizen’s pending closure when Stephen Hadland, CEO of the Santa Monica Media Co. and the final bidder in the sale announced by Gannett in January, wrote a letter Friday morning asking Goddard to intervene.

“I am requesting the Arizona Attorney General’s office file a Temporary Restraining Order preventing the Gannett Corporation from closing the Citizen and require Gannett to continue printing the newspaper pending a sale to a qualified buyer,” Hadland wrote. “The Tucson Citizen has been systematically destroyed by its owners and I believe it remains a viable and popular newspaper in the community.”

Hadland has contended from his first bid that Gannett was not serious about selling the paper because it was only offering the name of the paper, its Web site, archives and a subscriber list, but not the 50 percent interest in the joint operating agreement it has with Lee Enterprises Inc., owner of the Arizona Daily Star.

The JOA has been in effect since 1940 and allows Lee and Gannett to share equally in the operating costs and profits of Tucson Newspapers, also known as TNI Partners, a subsidiary that handles all noneditorial operations for both papers.

Hadland,who said his bid for the Citizen “assests” was $400,000, considers his media company a qualified and viable buyer, something Marymont denied in speaking with employees Friday morning.

“In the end, there was no buyer,” she said.

Hadland said in a phone interview that if a paper goes without printing one day, it loses all value and that is why he urged Goddard to act quickly.

By Carli Brosseau, Renee Schafer Horton

Obama plan’s start slow; foreclosure alternatives added

WASHINGTON – The Obama administration on Thursday outlined an expansion of its housing rescue plan that will help homeowners who face foreclosure because they are ineligible for current assistance programs.

Officials also provided a report card of sorts on how the home-loan modification and refinancing efforts are going since the housing rescue plan was announced in February.

The expanded program includes:

• Foreclosure alternatives. Homeowners unable to qualify for a modification will see a more streamlined process for pursuing short sales and deeds-in-lieu of foreclosures, which transfer a home back to the lender. The goal is to help homeowners avoid a foreclosure that could lead to a severe hit on their credit scores.

A short sale occurs when a home is sold for less than the remaining mortgage, but lenders agree to consider the debt paid.

• Protections for homeowners whose home value has fallen. Under a $10 billion program, new incentives will be provided to lenders to help them make modifications in regions where home prices have had steep drops.

The Obama administration has said it expects up to 9 million homeowners to get help through mortgage refinancing and loan modifications.

But the complexity of the program has made for a slow start and done little to dampen foreclosures, which have risen as banks ended temporary moratoriums on foreclosures.

“It’s been slow. The foreclosure problem is not going away,” said Mark Zandi, with Moody’s Economy.com.

DETROIT – A day after Chrysler LLC told a quarter of its dealers that it won’t renew their contracts, owners of General Motors Corp. dealerships are awaiting word on whether they will be next.

GM said it will notify 1,100 U.S. dealers on Friday that their franchise agreements will not be renewed. Dealers expect to hear either by telephone or FedEx letters that will begin arriving Friday morning.

GM spokeswoman Susan Garontakos said the company will not make public a list of dealers to be cut, leaving the decision to release information to individual business owners.

The company has scheduled a conference call for noon Friday to explain its dealer reduction strategy.

The cuts will come just a day after crosstown rival Chrysler announced it was dropping 789 of its roughly 3,200 dealerships by around June 9. Both companies have too many dealerships for too few sales are slashing costs as they race to restructure.

Dealers around the country nervously awaited news Friday morning, with some saying they were in the dark about how they would be notified. In Richmond, Va., Royal Chevrolet co-owner Del Mugford was slightly relieved when he sifted through FedEx packages Friday morning and hadn’t received any bad news from General Motors. But he knew his future could be determined by a phone call or a piece of mail.

“This is absolutely nerve wracking. It’s like a death sentence. It’s the worst feeling in the world,” said Mugford, 45, who bought the dealership with his younger brother in 2002 after owning an Oldsmobile franchise down the street. GM closed its Oldsmobile line of cars in 2004.

John Rogin, who owns a Buick dealership and GMC truck dealership in the Detroit area, was also awaiting word. But he said he’s not worrying. His Buick store, he said, has been among the top 10 performers in the country for 15 years.

“I’m just selling cars. I’m still a loyalist, and for the most part a purist as far as GM goes,” he said.

Many dealers, though, will fight the cuts in court, he said.

“Most of the dealer body realizes that just because you get a letter doesn’t mean it’s all over,” he said. “This company isn’t in bankruptcy.”

GM’s dealer cuts are part of the company’s plan announced last month to cut more than 2,600 dealers by 2010. The remaining cuts will come from closed Saturn and Hummer dealers, along with 400 dealers that the company expects will close voluntarily. Another 500 would be consolidated into other dealerships.

The GM dealer cuts are likely to have a much greater impact than Chrysler’s. While many Chrysler dealers also sell other brands and will stay open after losing their franchises, a large number of GM dealers sell only GM vehicles. So if their franchises are revoked, they run a greater risk of closing for good.

In both cases, the cuts will cost thousands of jobs, create holes in local tax bases, eliminate community pillars and create economic ripple effects across the country.

Chrysler is operating under bankruptcy protection, so it is likely to have an easier time tearing up its franchise agreements with its dealers than GM. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler’s motion to fire its dealers.

Chrysler executives said Thursday the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

Chrysler has received $4 billion in government aid, while GM has received $15.4 billion. GM is continuing to restructure out of court and faces a government-imposed deadline of May 31 for doing so. Several difficult hurdles remain, and many experts say that it is all but inevitable that it will follow Chrysler into Chapter 11 bankruptcy.

To remake itself outside of court, GM must persuade its bondholders to swap $27 billion in debt for 10 percent of its risky stock. In addition, it must work out deals with its union, announce factory closures, cut or sell brands and shutter dealers.

Swapping its bond debt for equity may be its most difficult task. The company is trying to get 90 percent of its bondholders on board for the so-called debt-for-equity swap. A committee representing the bondholders has rejected the swap, saying it unfairly favors the government and the United Auto Workers union. They have counteroffered seeking a 58 percent ownership stake, which the automaker in turn rejected.

On Thursday, GM said that bankruptcy is possible if it doesn’t get enough takers on the exchange. If that happens, it likely would sell most of its assets to a new company and liquidate the rest, the automaker disclosed in a regulatory filing.

The automaker also says it could seek court approval of its reorganization plan even if creditors vote against it.

Shares of GM wobbled between $1.13 and $1.16 in morning trading Friday.

By Tom Krisher, Dan Strumpf

WASHINGTON – The nation’s industrial production fell in April by the smallest amount in six months, fresh evidence that the pace of the economy’s decline is slowing.

Output by U.S. factories, mines and utilities fell by 0.5 percent last month, after revised declines of 1.7 percent in March and 1 percent in February, the Federal Reserve said Friday. Analysts expected a drop of 0.6 percent in April.

Still, the report shows that U.S. industry remains weak. Industrial production has fallen in 15 of the 17 months since the recession began in December 2007, and is down 16 percent since then.

That has led industrial companies to idle more of their plants and equipment. The overall operating rate for factories, mines and utilities fell to 69.1 percent last month from a revised 69.4 percent in March. That’s the lowest rate on records dating to 1967.

That also compares with the 80 percent rate usually seen during a healthy economy. It stood at 80.6 percent when the recession began.

A 3.2 percent drop in mining output as oil and gas production fell, contributed to the overall decline, the Fed said. Utilities boosted their output 0.4 percent last month.

Manufacturing production fell 0.3 percent, as the factory operating rate dipped to 65.7 percent from 65.8 percent. That’s the lowest on records dating to 1948.

Auto factories actually increased production 1.4 percent after cutting back sharply in January. But the increase isn’t expected to continue as Chrysler LLC and General Motors Corp. are closing plants in May and June.

Manufacturers have been forced to reduce production as companies seek to clear stockpiles of unsold goods. The effort to reduce inventories also leads to fewer orders for new goods.

Businesses cut inventories 1 percent in March, the seventh straight decrease, the Commerce Department said Wednesday. Still, the reductions in stockpiles eventually should help businesses get their inventories more in line with reduced sales. If that occurs, any strengthening in consumer demand should lead to increased production.

Industrial production plummeted at a 19.2 percent annual rate in the first three months of this year, the Fed said, but some economists expect that pace to slow to less than 10 percent in the current quarter.

The steep drops in the first quarter contributed to a 6.1 percent decline in gross domestic product, the broadest measure of the economy. Analysts expect a smaller decline of about 3 percent in the current quarter.

NEW YORK – Stocks were set to open moderately lower on Friday, with investors reluctant to get too enthusiastic about economic data.

Stock futures pared their losses after the Labor Department said consumer prices in April were flat, as economists predicted. Excluding declining energy and food prices, core consumer prices edged up 0.3 percent, a bit higher than forecast.

Investors were also relieved by reports that New York-area manufacturing activity and industrial production contracted less than economists expected. They also shrank significantly less than they did earlier in the year, fitting in with the trend seen in most data since early March: that the economy continues to slide, but at a slower pace.

But investors are still awaiting a midmorning report from the University of Michigan on consumer sentiment, as well as readings next week on the housing market. After European countries reported on Friday a massive 2.5 percent contraction in the first quarter, investors remain nervous about pushing stocks higher.

Wall Street’s huge spring rally has hit a lull. The government’s stress tests of banks are done, earnings reports are winding down and the first wave of April economic data has been released. Investors are growing concerned that perhaps they got too optimistic when they saw signs of the economy bottoming.

Before the market’s opening, Dow Jones industrial average futures fell 16, or 0.2 percent, to 8,271. Standard & Poor’s 500 index futures fell 3.60, or 0.4 percent, to 885.90. Nasdaq 100 index futures fell 4.00, or 0.3 percent, to 1,349.00.

In mixed news for the market, the Treasury Department agreed to extend billions in bailout funds to six major life insurers. The move was positive because it means the insurers will get more capital, but negative because it implied that the insurers’ problems posed a serious risk to the financial system.

The Hartford Financial Services Group Inc. said it is eligible for $3.4 billion from the Troubled Asset Relief Program, or TARP, while Lincoln National Corp. said it has been initially approved for a $2.5 billion injection.

Allstate Corp., Ameriprise Financial Inc., Principal Financial Group Inc. and Prudential Financial Inc. have also been approved for funds. The capital invested in the six companies will total less than $22 billion, The Wall Street Journal reported Friday, citing a person familiar with the situation.

Meanwhile, the ailing auto industry continues to face challenges. General Motors Corp. says it will notify 1,100 U.S. dealers on Friday that their franchise agreements will not be renewed. GM said the closures — which come a day after Chrysler LLC cut ties with a quarter of its dealers — must be made as part of its government-ordered restructuring plan.

Earnings data was also troubling. Blockbuster Inc. reported late Thursday a sharp decline in first-quarter profit, sending the video rental chain’s shares tumbling about 20 percent in premarket trading.

Bond prices fell after the inflation data. The yield on the 10-year Treasury note rose to 3.11 percent from 3.09 percent late Thursday.

The dollar was mixed against other major currencies, while gold prices edged slightly lower.

Light, sweet crude fell 67 cents to $57.85 a barrel in electronic trading on the New York Mercantile Exchange.

In overseas stock trading, Japan’s Nikkei stock average rose 1.9 percent. In midday trading, Britain’s FTSE 100 was down 0.6 percent, Germany’s DAX index was down 0.6 percent, and France’s CAC-40 was down less than 0.1 percent.

WASHINGTON – Consumer prices were unchanged in April as both food and energy costs declined to offset gains elsewhere. Prices over the past year fell by the largest amount in more than a half-century, the government said Friday.

The disappearance of inflation has been a product of the country’s deep recession as surging job layoffs dampen wage pressures and weak consumer demand keeps a lid on price increases. Some economists are worried about a dangerous bout of falling prices, but most say that possibility remains remote because the Federal Reserve has responded with force to combat the current downturn.

Meanwhile, the Fed said the nation’s industrial production fell in April by the smallest amount in six months, more evidence that the pace of the economy’s decline is slowing.

The Labor Department said its Consumer Price Index was flat last month, meeting economists’ expectations. The docile inflation performance reflected a second monthly drop in energy costs and a third straight decline in food prices.

Over the past year, consumer prices have fallen 0.7 percent, the largest 12-month decline since a similar drop for the 12 months ending in June 1957.

A destabilizing period of falling prices has not been seen in the U.S. since the Great Depression of the 1930s, although Japan suffered through a period of deflation in the 1990s.

The Fed says output by the nation’s factories, mines and utilities fell 0.5 percent last month, after revised declines of 1.7 percent in March and 1 percent in February. Analysts expected a drop of 0.6 percent last month.

Still, the report showed U.S. industry remains weak. Industrial production has fallen in 15 of the 17 months since the recession began in December 2007, and is down 16 percent since then.

Core inflation, which excludes food and energy, rose 0.3 percent last month, the biggest jump since July. However, 40 percent of April’s gain came from a huge rise in tobacco prices, reflecting an increase in federal taxes.

Consumers in the U.S. and overseas — fearful of losing their jobs or homes — likely will remain cautious spenders in the months ahead, a Fed official said Friday.

“Under these conditions, I envision a slow recovery,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in prepared remarks to a banking convention in San Antonio, Texas. “Not a V-shaped snapback — nor even a U-shaped one — but a very slow slog as we find a more sensible and sustainable mix between consumption and savings and investment.”

Energy prices dropped 2.4 percent in April and are down 25.2 percent over the past 12 months, as prices retreat from record-highs set last spring and summer. Food costs fell 0.2 percent in April as the price of dairy products dropped sharply.

Most economists believe inflation will not be a threat for a prolonged period. The CPI followed a report Thursday that wholesale prices rose 0.3 percent in April, but fell 3.7 percent over the past 12 months, the biggest decline since 1950.

The concerns about deflation are muted in this country because of the aggressive actions taken so far by the Fed. The central bank has pushed a key interest rate to a record low near zero and has taken a number of other measures to flood the banking system with cash to deal with a severe credit crisis.

There are more worries about deflation in other parts of the world. Prices have been falling again in Japan, China and India as the global economy deals with what the International Monetary Fund has said will be the worst global downturn since the 1930s.

A year ago, the Fed was worrying about the threat of runaway inflation as prices for crude-oil and other energy products hit record-highs. But since last fall when the financial crisis hit, the Fed switched its focus to boosting economic growth.

“The recent pressures have been to the deflationary side, though we seem to have beaten that back,” Fisher said.

Federal Reserve Chairman Ben Bernanke, speaks to a meeting of the Atlanta Federal Reserve Bank Monday. Referring to the federal stimulus, Bernanke said, "You have to take away the punchbowl, as someone once said, in order to avoid the inflation risk."

The federal government has committed trillions of dollars to domestic bailouts and propping up the recessionary economy, much of it borrowed, much created out of thin air by the Federal Reserve.

How much longer can all this go on? That’s the pressing question facing policymakers, and one without a clear answer.

At some point, “You have to take away the punchbowl, as someone once said, in order to avoid the inflation risk,” said Federal Reserve Chairman Ben Bernanke, paraphrasing William McChesney Martin Jr., who served as Fed chairman in the 1950s and ’60s under five presidents.

But change course too soon, and it could nip a fragile recovery in the bud. Wait too long, and runaway inflation and gargantuan federal debt could be the sequel to the worst downturn since the 1930s.

While nobody thinks the current combination of near-zero interest rates, bank and auto bailouts and trillion-dollar annual deficits is a sustainable economic model, knowing just when to take away the punchbowl is the problem.

For now, the Bernanke Fed is still filling the punchbowl. And President Obama and the Democratic-controlled Congress are doing the same with government spending.

One reason the Fed has been so aggressive in slashing rates and taking unconventional recession-fighting steps is because “we are trying to avoid another form of price instability, which is deflation,” Bernanke told a Fed financial conference in Jekyll Island, Ga., earlier this week.

The risk of deflation – a widespread and prolonged decline in retail prices, wages and real estate and other asset values – is “receding, but it certainly needs not to be ignored,” Bernanke said.

Despite some recent glimmers of hope, evidence is mixed on whether things are getting better or still worse. Disappointing reports Wednesday on falling retail sales and a jump in foreclosures fueled continuing uncertainties and helped push stocks down.

“You’ve got to take the stimulus off at some point. I don’t think that point is this year,” said David Wyss, chief economist at Standard & Poor’s in New York. He said Wednesday’s economic reports point to a continuing recession, despite some recent signs of encouragement.

Government and most private economists expect the recession, which began in December 2007, to end later this year, although they expect high levels of joblessness to continue beyond.

In the meantime, recent developments are complicating efforts to tame the deficit once the recession does end:

• White House budget officials said this week that the deficit would widen to a record $1.8 trillion this year, $89 billion more than their estimate in February. They blamed the recession.

• With nearly 80 million baby boomers nearing retirement, the government reported that Medicare and Social Security will face insolvency sooner than previously projected because of the recession – for Medicare in 2017 and for Social Security in 2037.

• A potential $90 billion shortfall opened up in paying for Obama’s health care proposal. The gap comes from congressional reluctance to go along with his proposal to help pay for the plan by limiting high-income families’ charitable-giving and other tax deductions. House Speaker Nancy Pelosi said the health care bill will be on the House floor before the August recess.

• The administration asked Congress on Tuesday to add $100 billion in new U.S. contributions to the International Monetary Fund as part of a war-spending bill.

Obama proposed just $17 billion in new spending cuts last week, representing savings of less than one-half of 1 percent in his $3.4 trillion budget. Republicans scoffed and even some top Democrats criticized him for targeting popular programs in recessionary times.

By some accounts, the sum of all the U.S. grants, loans, guarantees and new money created electronically by the Fed since the financial crisis began totals some $11 trillion – roughly equal to the country’s national debt.

That sum does include loan guarantees that might not be needed, money that hasn’t been spent, various revolving accounts and U.S. investments in bad mortgages and other toxic, hard-to-value securities that could someday return money to taxpayers. Still, staggering amounts are involved.

“We are creating a government debt bubble that we’re going to have to deal with in a massive way,” suggested Rep. Kevin Brady of Texas, the senior Republican on the Congressional Joint Economic Committee.

History shows the dangers of calling the end of economic downturns too soon.

President Franklin D. Roosevelt made this mistake in 1936 when, believing the Depression largely over, he sought to pare back public spending and to balance the federal budget. It torpedoed a fragile recovery and pushed the economy back under water in 1937.

Japanese leaders made a similar mistake in the 1990s when they prematurely – and temporarily – withdrew government stimulus spending, helping to prolong Japan’s recession to one that lasted a full decade.

At the White House, presidential spokesman Robert Gibbs dismissed suggestions by some analysts, including Liz Ann Sonders, chief investment strategist for brokerage Charles Schwab, that the recession may have already ended.

“I can report nobody has intoned that message” at daily White House economic briefings, Gibbs said. “There’s much work to be done.”

Veteran budget analyst Stanley Collender said increases in public spending are an important fiscal tool and that “a bigger deficit is justified in the current economic environment.”

Furthermore, Collender added, if Obama doesn’t push his agenda for more health care, energy and education spending now, when will he?

“He’s got a 60-percent-plus approval rating. And Democrats are willing to work with him. He should go for it now. He’s never going to get a better chance,” Collender said.

Tom Raum covers politics and the economy for The Associated Press.

The next time you see several Sonora license plates in the parking lot of a Tucson store, you’re seeing your taxes being cut.

The Tucson area reaped $968.7 million in direct economic benefits from July 2007 through June 2008. That’s up from $280.2 million in 2001, according to a University of Arizona study released this week.

Dollars that Mexicans spend in Tucson boost our economy and are responsible for employing many Tucsonans.

Sales and other taxes paid by those shoppers are taxes that don’t have to be collected from the rest of us.

Many complain about the problems of living close to the international border. But there is a substantial upside.

No Tucson dealerships are affected in Chrysler LLC’s plan to eliminate a quarter of its dealers across the U.S.

Chrysler is targeting five dealerships in Arizona for elimination as part of its bankruptcy court proceeding.

Dealers got the news Thursday.

In a bankruptcy court motion filed in New York, Chrysler said it wants to eliminate 789 dealerships by June 9. The motion said the dealerships sell too few cars and trucks, or compete with themselves.

The five Arizona dealerships picked for elimination are Arnold Motor Sales in Superior, Brothers Motors in Flagstaff, Darner Motor Sales in Mesa, Jones Dodge Chrysler Jeep in Wickenburg and Performance Dodge in Phoenix.

Dealers can appeal the Chrysler decision.

Jim Click Chrysler-Jeep at the Automall, Tucson Chrysler-Jeep, Jim Click Dodge and Tucson Dodge are not on the list.

The automaker has about 3,200 dealers but says that’s too many. It wants to have stronger, more profitable dealers with better facilities.

NEW YORK – Stocks traded modestly higher Thursday morning amid a worse-than-expected weekly unemployment report left investors with little reason to continue a two-month rally.

The Labor Department’s weekly jobless claims data showed more workers filed last week for benefits than anticipated. New claims jumped to 637,000, above what economists had anticipated.

The number of people overall seeking unemployment benefits also grew faster than expected, increasing to 6.56 million, while continuing claims hit a 15th consecutive record.

Stocks had tumbled on Wednesday, sending the Standard & Poor’s 500 index down 2.7 percent, after the Commerce Department said retail sales unexpectedly fell in April for the second straight month, while a separate report showed home foreclosures on the rise.

The twin hits to two key areas of the economy — consumer spending and the ailing housing market — led investors to drop stocks and seek the shelter of bonds, putting on hold a two-month rally that has sent the Dow Jones industrial average spiking 31 percent off of 12-year lows reached in early March, the markets biggest short-term jump since the Great Depression.

A separate report Thursday also showed inflation at the wholesale level jumped more than expected in April. Wholesale prices rose 0.3 percent last month, larger than the 0.1 percent analysts had expected.

Market indicators gave up some early gains and were trading in a narrow range.

In morning trading, the Dow Jones industrial average rose 38.94, or 0.47 percent, to 8,323.83. The Standard & Poor’s 500 index rose 5.14, or 0.58 percent, to 889.06, while the Nasdaq composite index rose 16.53, or 0.99 percent, to 1,680.72.

A two-month rally has stalled in recent days amid worries that the economy would not recover as quickly as hoped.

Investors also received some insight into consumer spending as retailer Wal-Mart Stores Inc. reported first-quarter results that met analysts’ expectations. Wal-Mart earned $3.02 billion, or 77 cents per share.

Wal-Mart had been performing better than most retailers during the ongoing recession. It shares fell 4 cents to $49.99.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 187.7 million shares.

The market was battered Wednesday by a worse-than-expected report on monthly retail sales for April. Economists had been expecting sales to remain flat in April, but they instead fell 1.2 percent. March figures were also revised lower.

Also, department store chain Macy’s Inc. reported Wednesday that its first-quarter loss widened from the year-ago period, a further sign consumer spending is not rebounding. Consumer spending accounts for about two-thirds of U.S. economic activity, so a rebound in sales is a key indicator that the economy might be strengthening.

Bond prices were mixed after rising a day earlier. The yield on the benchmark 10-year Treasury note fell to 3.10 percent from 3.12 percent late Wednesday. The yield on the three-month T-bill rose to 0.17 percent from 0.16 percent late Wednesday.

The dollar mostly rose against other major currencies, while gold prices fell.

The Russell 2000 index of smaller companies fell 1.45, or 0.31 percent, to 470.37.

Overseas, Japan’s Nikkei stock average fell 2.6 percent. In afternoon trading, Britain’s FTSE 100 fell 0.1 percent, Germany’s DAX index dropped 0.6 percent, and France’s CAC-40 slipped 0.2 percent.

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ON THE WEB

New York Stock Exchange: www.nyse.com

Nasdaq Stock Market: www.nasdaq.com

WASHINGTON – House Democrats are looking at big health care changes, including federal aid to help families earning up to $88,000 pay for insurance and a requirement that all must carry coverage.

A document obtained by The Associated Press shows the plan being developed by the House Energy and Commerce Committee would also require employers to offer coverage to their full-time workers, or pay a percentage of their payroll to the government.

The committee summary is a first look at where House Democrats are headed as leaders try to meet an ambitious goal of passing a health care overhaul by the end of July. Energy and Commerce Chairman Henry Waxman, D-Calif., is expected to play a leading role in crafting the plan and steering it through negotiations with the Senate later in the year.

The three-page summary broadly tracks with the type of plan President Barack Obama outlined during the political campaign. The summary does not include any cost estimates, but independent experts have put the price tag for such a plan at $1.2 trillion to $1.5 trillion over 10 years, with some estimates ranging as high as $1.7 trillion.

Obama has said the final legislation must rein in costs, guarantee choice of health plans and medical providers, and ensure that all Americans have access to affordable coverage. The president has proposed a downpayment of $634 billion over 10 years to pay for expanding coverage. He’s also promising to hold hospitals, doctors, drug makers and other providers to their recent offer of $2 trillion in savings over 10 years.

The Energy and Commerce plan would build on the current system in which employers, government and individuals share responsibility for the cost of health insurance. But it would make major changes in the way Americans get and pay for coverage. Workers and employers would have new obligations to obtain coverage. Insurers would have to abide by new consumer protections to prevent sick people from being denied coverage.

The subsidies for health insurance would be offered on a sliding scale to those earning up to four times the federal poverty level, or $88,200 for a family of four, according to the document.

The House plan would set up a new insurance purchasing pool called an “exchange” to help make private coverage more affordable for individuals and small businesses. In its first year, the exchange would be open only to employers with fewer than 10 workers.

Health insurance plans that participate in the exchange would have to follow the same consumer protection rules. They would not be able to deny coverage to the sick, or charge them exorbitant rates.

The document also calls for creation of a new government insurance plan to compete with private companies. The government plan would probably be run by the Health and Human Services department, but it would have to compete on its own. The government insurance plan would be financed by premium payments, not taxpayer dollars.

By Erica Werner, Ricardo Alonso-Zaldivar

WASHINGTON – New jobless claims rose more than expected last week due partly to an increase in layoffs by the automobile industry, while the number of people continuing to receive unemployment benefits set a record for the 15th straight week

The Labor Department said Thursday the number of new claims rose to a seasonally adjusted 637,000, from a revised 605,000 the previous week. That’s above analysts’ expectations of 610,000.

The increase comes after initial claims dropped in four of the previous five weeks, which raised hopes that the wave of layoffs announced earlier this year has crested and that the recession was nearing a bottom.

A department analyst said most of the increase was due to auto layoffs. Economists estimate Chrysler LLC has laid off 27,000 workers in the wake of its April 30 bankruptcy filing. General Motors Corp. has said it will temporarily shut 13 factories beginning later this month through July, potentially affecting 25,000 workers.

Still, many economists expect the downward trend in jobless claims to return once the impact of the auto industry’s job cuts has passed.

Also Thursday, the department said wholesale prices climbed 0.3 percent last month, larger than the 0.1 percent gain economists had expected. The biggest jump in food costs in more than a year offset a second monthly decline in the price of energy products.

Even with the larger-than-expected gain last month, wholesale prices over the past year have fallen 3.7 percent, the biggest 12-month decline since 1950. While falling prices can raise fears about deflation, economists believe the efforts by the Federal Reserve to combat the recession will prevent a dangerous bout of falling prices.

In another sign of labor market weakness, the tally of people continuing to receive benefits increased to 6.56 million from 6.36 million, setting a record for the 15th straight week and worse than analysts expected. The continuing claims data lags initial claims by one week.

The large number of people on the jobless benefit rolls is a sign that unemployed workers are having difficulty finding new positions.

Economists are closely watching the health of the labor market. If layoffs continue at a rapid pace, consumers could cut back further on spending and prolong the recession.

New applications for jobless benefits have declined since reaching 674,000 in late March, the highest level in the current recession. But claims remain elevated. Weekly initial claims were 375,000 a year ago.

The four-week average of claims, which smooths out volatility, rose to 630,500, after falling for four straight weeks. Still, the average remains nearly 30,000 below its high in early April, a drop that economists at Goldman Sachs and JPMorgan Chase & Co. have said indicates that the economic downturn is bottoming out.

There have been other signs the pace of job cuts is moderating, though still brutal. Employers eliminated 539,000 jobs in April, the fewest in six months and below the average of 700,000 in the first quarter of this year.

Still, more than 5.7 million jobs have been lost since the recession began in December 2007. The jobless rate rose to 8.9 percent in April, the Labor Department said last week. Many economists expect unemployment to hit 10 percent by year’s end.

More job cuts have been announced recently. Steel giant ArcelorMittal said Wednesday it will eliminate nearly 1,000 positions at an Indiana steel plant in July, while DuPont said last week it will cut 2,000 jobs.

Among the states, Illinois reported the largest increase in initial claims, which it attributed to layoffs in the construction and manufacturing industries. The next biggest increases were in Kansas, Puerto Rico, Indiana and Ohio.

New York reported the largest drop in claims of 13,386, which it said was due to fewer layoffs in the transportation and service industries. The next largest drops were in Michigan, North Carolina, Massachusetts and Connecticut. The state data is for the week ending May 2, one week behind the initial claims data.

Their spending more than triples since 2001

Ana Cota, Carlos Silva and their daughter, Carla Silva, 7, of Hermosillo, Son., arrive at Park Place mall, where they planned to shop for clothing and a large-screen television. The family makes the 4- to 5-hour trip to Tucson to shop about once a week.

Mexican visitors’ annual economic impact on the Tucson area has grown dramatically and is approaching the $1 billion mark, according to a University of Arizona study released last week.

“It’s a huge economic driver for us here in Tucson,” said Felipe Garcia, vice president of community affairs and Mexico marketing at the Metropolitan Tucson Convention & Visitors Bureau.

Metro Tucson reaped a $968.7 million direct economic benefit from Mexican tourists from July 2007 through June 2008, up 245 percent over the $280.2 million in 2001, according to “Mexican Visitors to Arizona: Visitor Characteristics and Economic Impacts 2007-2008.”

Pima County reaped the largest share of their economic impact in Arizona, with more than 36 percent of the $2.7 billion in statewide spending occurring here, the report said.

Carlos Silva, Ana Cota and their daughter, Carla Silva, 7, make the four- to five-hour drive from Hermosillo, Son., weekly to shop in Tucson.

Tucson offers a better selection of products than he can find at home, Silva said Sunday as the family prepared to enter Park Place, ranked in the study as the No. 2 shopping destination in Tucson, behind Tucson Mall.

The family’s favorite stores at the mall are Old Navy, Sears and Macy’s, he said. They also like to get to Tucson Mall, Best Buy, Wal-Mart and Target, he said.

Silva said he was looking for clothing for Carla and a large-screen television.

The family typically spends six to eight hours shopping per trip to Tucson, he said.

Carla said the trips are about more than shopping. The family had breakfast at IHOP to celebrate Mother’s Day before hitting the mall, she said.

And her mom would be getting a nice gift at the mall, Carla said.

About 65,000 Mexican residents on average came to Arizona each day to legally work, visit friends and relatives, shop and play in 2007-08, the study says.

That comes to 24 million visitors for the year, a 4.9 percent increase over the 2001 total of 22.9 million.

Each day, visitors from Mexico spent $7.3 million in Arizona stores, restaurants, hotels and other businesses, an increase of 213 percent from 2001.

“Over 5 percent of taxable sales in Pima County are attributed to the Mexican visitors,” Garcia, of the visitors bureau, said. “It’s really good for us.”

The study was prepared by Vera Pavlakovich-Kochi and Alberta H. Charney of the University of Arizona Eller College of Management’s Economic and Business Research Center for the Arizona Office of Tourism.

Mexican tourism “really plays a significant role,” Pavlakovich-Kochi said. “Spending has occurred when our regional economy shows signs of recession. It has really offset to a degree the effect of the declining regional economy.”

Mexican consumers seem to be more willing to spend during the current economic downturn than Americans, Garcia said.

“When we talk to our visitors, they don’t seem to have a lot of anxiety about the economic turmoil,” Garcia said.

“They don’t stop spending because of what they see and read. The Mexican consumer is more used to it, better prepared, and they know things happen. They say things are bad but we’ll get out of this.”

More staying overnight

Local efforts to boost Mexican visitors and spending have paid off, Garcia said.

Mexican visitors who stayed here overnight jumped from 4 percent in 2001 to 16 percent in 2007-08, Garcia said.

“Overnight visitors always spend more than day trippers,” Pavlakovich-Kochi said.

A Tucson tourism office in Hermosillo, Son., has helped boost the number of visitors and their spending in recent years, Garcia said.

The office sells tickets for concerts or shows at Tucson-area casinos and offers other Tucson tourism services, he said.

Lower prices and greater product selection draw shoppers from Mexico, Garcia said.

Many textile and electronic products sold in Mexico are imported from Asia, he said.

Mexico and China are engaged in a “non-declared” tariff war, which means high prices for goods in Mexico, which pushes shoppers to Tucson, Garcia said.

Growing challenges

The Convention & Visitors Bureau has increased its spending aimed at attracting Mexican visitors from $30,000 to $300,000 in recent years, Garcia said.

But other communities – Scottsdale, Phoenix, Tempe and Las Vegas – are also going after Mexican visitors, he said.

Maricopa County’s economic benefit from Mexican visitors jumped from $36.5 million in 2001 to $694.2 million in 2007-08, an 1,800 percent increase.

“We’re definitely ahead of the curve,” Garcia said, “but there are a lot of communities that are trying to position themselves and gain market share. Here in Tucson, we know that retail is directly impacted by tourism. We cannot slow down, we cannot say we have been successful.”

One area being investigated for growth is drawing visitors here from Mexico for medical services.

That includes cosmetic and elective surgery, Garcia said.

“We are working with the medical industry to develop more medical tourism into Tucson,” he said.

“They come here and they pay cash. No insurance, no billing.”

A slide in the peso’s value against the dollar has made it more expensive for Mexicans to shop in the U.S., so fewer customers may be crossing now.

In April, the average exchange rate was 13.3944 pesos to a U.S. dollar compared with 10.5146 in April 2008, a decline of 27 percent.

Increasingly restrictive regulations for crossing the border and more stringent entry documentation policies could pose another challenge to Mexican visitor spending, Pavlakovich-Kochi said.

Making it tougher for Mexican visitors to get here means less revenue for local merchants – something few people consider when pushing for making crossing more difficult, she said.

“The focus has really been on the border issues and the illegal immigration,” she said. “This (economic benefit) has been on the back burner.”

While spending by Mexican visitors may decrease from 2007-08 levels, the area will continue to reap some economic benefit, Pavlakovich-Kochi said.

“Realistically, looking at the near future, we will probably expect a decrease in total spending,” she said.

“Maybe we had an extraordinary year of Mexican visitors and expenditures in Arizona. But it will continue: It is not something that will be totally erased overnight.”

Cronkite News Service contributed to this report.

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TOP DESTINATIONS

Where Mexican visitors to metro Tucson shopped 2007-2008.

Malls/shopping centers

1. Tucson Mall

2. Park Place

3. Foothills Mall

4. Plaza Palomino

5. El Con Mall

6. St. Philip’s Plaza

7. La Encantada

8. Casas Adobes Plaza

9. Crossroads

Other stores

1. Wal-Mart

2. Costco

3. Best Buy

4. Target

5. Ross

6. Mervyn’s*

7. Walgreens

8. Circuit City*

8. Marshall’s

9. Home Depot

10. Food City

* now closed

Metro Tucson attractions visited by Mexican tourists

1. Casinos

2. Reid Park Zoo

3. Old Tucson Studios

4. Arizona-Sonora Desert Museum

5. Other museums

6. Saguaro National Park

7. San Xavier Mission

8. Tucson Convention Center

9. Concerts/theaters

10. Colossal Cave

11. University of Arizona

12. Downtown

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WHY TUCSON?

A number of factors led to an increase in local expenditures by Mexican visitors between 2001 and 2007-08, said Vera Pavlakovich-Kochi of the University of Arizona Eller College of Management’s Economic and Business Research Center.

Metro Tucson saw a fourfold increase in overnight visitors from Mexico, she said.

The peso/dollar exchange rate was very favorable to Mexican visitors, who could purchase more goods for their cash, particularly in the first half of 2008, she said.

Fears of an impending peso devaluation, which occurred later that year, saw Mexican consumers increase their Arizona spending during the time of the study, she said.

And 2008 was the last year Mexican visitors were allowed to enter the U.S. before more stringent documentation requirements were enforced, she said.

———

$968 million

Tucson-area expenditures by Mexican visitors in 2007-08

245%

Increase in Tucson-area expenditures by Mexican visitors from 2001 to 2008

5.2%

Portion of taxable sales Mexican visitors accounted for in Pima County in 2007-08

SAN FRANCISCO – Nearly three-quarters of U.S. newspaper executives responding to a recent survey said their ability to inform readers has diminished with their steadily shrinking staffs.

The survey conducted by the Associated Press Managing Editors illuminated the doubts and concerns hovering over newspapers as the industry reels from a slump that has been worsening since last fall.

The 20-question survey got responses from 351 editors and publishers. Although a few newspapers provided answers from more than one editor, the survey still offered an unusually large sampling.

APME surveys typically elicit a smattering of responses to very specific questions about a topic in the news. But this one clearly touched a nerve as it sought to find out how newspaper management is coping with a downturn that has wiped out $11.6 billion, or nearly one-fourth, of the industry’s annual advertising revenue since 2005.

“These are the people out there on the front lines of this battle and they really don’t know how it is going to turn out,” said Bobbie Jo Buel, the APME’s president and executive editor of the Arizona Daily Star in Tucson.

Seventy-one percent of the survey participants said cutbacks have “somewhat affected” or “greatly affected” the quality of their newspapers’ coverage. Just 20 percent said their newspapers’ staff reductions had little or no effect.

The comments accompanying the responses were filled with resignation, frustration, anger, despair, confusion and even some gallows humor that reflected the depressed state of the U.S. economy as more people lose their homes because they can’t afford their mortgages.

“Our newspaper’s biggest revenue source today is foreclosure notices,” wrote Clifford Buchan, editor of the Forest Lake Times, a free weekly newspaper in Minnesota. “We have uncertainty once that run ends, as it most surely will.”

To cope with the hard times, 65 percent of the survey respondents said they have laid off workers since January 2008. Nearly 30 percent said they have lowered wages.

Total employment in the newspaper industry averaged 407,000 people during 2008, a 20 percent decline from 508,000 in 2005, according to the Bureau of Labor Statistics. Newspapers have eliminated thousands more jobs so far this year.

Now editors are worried they won’t have the adequate resources and skills to keep newspapers relevant as more readers turn to the Internet for information.

Nearly 68 percent of the respondents cited staffing shortages as the chief impediment to change; more than 57 percent said they didn’t have enough money to innovate. Thirty-one percent said their personnel didn’t have the skills to change with the times.

“It’s not worth complaining about having too few people because the staffing status quo of two years ago isn’t coming back,” wrote Jeff Gauger, executive editor of The Repository, a daily newspaper in Canton, Ohio, with a circulation of about 65,000.

Newspapers have been shrinking, largely because their audiences and advertisers have been defecting to the Web. The U.S. recession that began in December 2007 has accelerated the slide in ad revenue and may also be contributing to a circulation drop as more households try to save money.

Many editors seem to be having second thoughts about the industry’s practice of giving away stories and photos on their Web sites. Twenty-eight percent of the respondents said they plan to charge for online content. About 20 percent said they will offer some coverage exclusively in their print editions to reward their paying customers.

With so much information readily available online for free, more newspapers are concentrating coverage on community issues unlikely to attract the attention of other media outlets. Nearly 40 percent of the respondents said they are devoting more space to “hyper-local” news while decreasing the pages devoted to national and international stories.

Despite the challenges facing newspapers, 72 percent of the survey’s participants said they are staying in the industry because they believe in “the mission of journalism.” Just 6 percent said they were sticking it out because the pay was too good to give up.

Fifty-nine percent of the respondents predicted their publications will find ways to be profitable. But nearly 17 percent said they’re worried their newspapers will die.

While most newspapers seem to be trying different ways to engage readers and drum up revenue, 25 percent of the respondents said their publications are mostly “hunkering down” until the economy recovers.

“We’re all in this together,” wrote Steve Bagwell, managing editor of the News-Register, a newspaper in McMinnville, Ore. “All oars are pulling in the same direction.”

To bolster staff morale, many survey respondents said they are going out of their way to praise outstanding work and occasionally serving free lunches or snacks.

Other editors are reminding their reporters and photographers that they are fortunate to still have their jobs after so many of their colleagues have been ushered out the door.

“Aren’t we lucky to continue doing what we love while others are forced to leave the industry?” wrote Eric Petermann, managing editor of The Journal-Standard, a newspaper in Freeport, Ill., with a circulation of about 11,500. “This is gut-check time. Our `new reality’ is a time of separation. Love what you are doing, and be the best, or find a job as a PR flack.”

———

ON THE WEB

Associated Press Managing Editors: www.apme.com

One in every 164 housing units had filing in April

MIAMI — The number of U.S. households faced with losing their homes to foreclosure jumped 32 percent in April compared with the same month last year, with Nevada, Florida, California and Arizona showing the highest rates, according to data released Wednesday.

Arizona posted the fourth highest rate, with one in every 164 housing units receiving a foreclosure filing.

The 10 states with the most foreclosure filings accounted for more than 75 percent of April’s national total. California documented the highest total (96,560), followed by Florida (64,588), Nevada (16,266) and Arizona (16,245).

More than 342,000 households received at least one foreclosure-related notice in April, RealtyTrac Inc. said. That means one in every 374 U.S. housing units received a foreclosure filing last month, the highest monthly rate since the Irvine, Calif.-based foreclosure listing firm began its report in January 2005.

April was the second straight month with more than 300,000 households receiving a foreclosure filing, as the number of borrowers with mortgage troubles failed to abate.

The April number, however, was less than one percent above that posted in March, when more than 340,000 properties were affected. The March data was up 17 percent from February and 46 percent from a year earlier.

“We’ve never seen two consecutive months like this,” said Rick Sharga, RealtyTrac’s senior vice president for marketing. “It’s the volume that’s surprising.”

While total foreclosure activity was up, the number of repossessions by banks was down on a monthly and annual basis to their lowest level since March of last year, RealtyTrac said.

But that’s far from positive news. Because much of the foreclosure activity in April was in the default and auction stages — the first parts of the foreclosure process — it’s likely that repossessions will increase in coming months, RealtyTrac said.

About 63,900 homes were repossessed in April, down 11 percent from about 71,700 in March, RealtyTrac said. But the mortgage industry has resumed cracking down on delinquent borrowers after foreclosures were temporarily halted by mortgage finance companies Fannie Mae and Freddie Mac, together with many other lenders.

“All of these loans are now being processed pretty rapidly by the servers,” Sharga said.

Help might be on the way. The Obama administration announced a plan in March to provide $75 billion in incentive payments for the mortgage industry to modify loans to help up to 9 million borrowers avoid foreclosure. But the extent of the relief remains unclear, with questions lingering about how much the lending industry will cooperate in modifying loans.

After banks take over foreclosed homes, they usually put them up for sale at deep discounts. Nationwide, sales of foreclosures and other distressed properties made up about half of the market in the first quarter, the National Association of Realtors reported.

First-quarter home sales fell in all but six states — Nevada, California, Arizona, Florida, Virginia and Minnesota — where buyers have been able to grab foreclosed homes at discounts, the realtors group said Tuesday.

On a state-by-state basis, Nevada had one in every 68 households receive a foreclosure filing, down 18 percent from March but still the nation’s highest rate. In Florida, one in every 135 households received a filing in April. For California, the rate was one in every 138 households.

Rounding out the top 10 were Arizona, Idaho, Utah, Georgia, Illinois, Colorado and Ohio.

Among large cities, Las Vegas led the way with one in every 56 households receiving a filing. That was a slightly higher rate than the southwest Florida metro area of Cape Coral-Fort Myers, which saw one in 57 housing units receive a filing.

Cities in California took the next six spots: Merced, Modesto, Riverside-San Bernardino, Bakersfield, Vallejo-Fairfield and Stockton. The Florida cities of Miami and Orlando were ninth and 10th, respectively.

By Wire Report, Staff