Gingrich steals Romney's cloak of electability as president (Reuters)

COLUMBIA, South Carolina (Reuters) – Newt Gingrich didn't just beat Mitt Romney in Saturday's South Carolina primary, the former House speaker kicked away one of the main pillars of his rival's election campaign.

Exit polling data shows Gingrich convinced voters he would be the toughest Republican opponent against President Barack Obama in the November general election.

Electability - Republican campaign-speak for a candidate's ability to beat Obama - had been one of Romney's top selling points until Saturday.

Conventional wisdom was that the former Massachusetts governor's emphasis on jobs and the economy and his perceived appeal to independents would help him against Gingrich, who is often seen as erratic and divisive.

But Gingrich's combative style in debates resonated with voters keen for a heavyweight debater to take on Obama, who is grudgingly respected by Republicans as a formidable campaigner.

This may also be helping Gingrich's message on the economy gain traction, exit polling data showed.

South Carolina's Republicans rated the ability to beat Obama as a candidate's most important quality, an exit poll on CNN showed.

Forty-five percent of voters said that was the main attribute they sought in a nominee. Of that group, 51 percent voted for Gingrich compared to 37 percent for Romney.

Twenty-one percent of South Carolina voters said the quality that mattered most to them in their candidate was that he had the right experience.

"It is electability, and that is measured in your ability to effectively debate and prosecute your case against Obama," said Republican strategist Matt Mackowiak.

Exit polls also showed that for 63 percent of South Carolina voters the most important issue was the economy. Gingrich won this group by a margin of eight percentage points over Romney.

The attraction of Gingrich as an anti-Obama candidate may be the factor that increased his ratings on other issues like the economy, Mackowiak said.

Attacks on Obama in recent weeks, including dubbing him "a foodstamp president," endeared Gingrich to voters in a state with unemployment of almost 10 percent.

OLD TIMER WITH EXPERIENCE

"He is an old timer with a lot of political experience. He's the only one who can beat Obama," said Jim Walters, a retired marine owner in the town of Aiken.

Gingrich slammed Obama as "truly a danger to the country" in his South Carolina victory speech and promised to bring down Obama in a series of long debates.

A master of the sharp turn of phrase who talks in big broad sweeps, the former House speaker was the clear star of the more than 20 Republican debates in recent months.

He left Romney floundering, particularly during two televised contests in South Carolina this week where the millionaire former executive stumbled over questions about his personal finances.

Republican voters in South Carolina, a conservative state with a taste for rough and tumble politics, lapped it up.

"I think a lot of it has to do with the fact that people really want to see Newt debate Obama," Mackowiak said.

"It reminds me of gladiators. You see an amazing gladiator have a string of victories in the middle of the Coliseum so you really want to see him go up against the biggest, baddest gladiator there is."

In a sign that Gingrich's well-documented marital infidelities might have created a problem with female voters, exit polls showed Gingrich held an advantage over Romney of 16 points among men but only 9 points among women.

(Editing by David Storey)

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Mitt Romney to release tax returns Tuesday (Reuters)

WASHINGTON (Reuters) – Mitt Romney said on Sunday he will release tax returns for the last two years this week and admitted the flap over his returns hurt him in South Carolina, where he lost a primary to Newt Gingrich.

"I will release my tax returns for 2010, which is the last returns which were completed, on Tuesday of this week," Romney said on Fox News Sunday. "And I will also release at the same time an estimate for 2011 tax returns."

"We made a mistake holding off as long as we did and it just was a distraction," the former Massachusetts governor added.

Gingrich won 40 percent of the vote in the South Carolina primary on Saturday, while Romney came in a distant second with 28 percent.

Romney, one of the wealthiest U.S. presidential candidates in history, emphasized he was releasing two years of returns after Gingrich posted his returns for only 2010 on Thursday.

Gingrich and other Republican rivals attacked Romney in debates last week, asking why the former private equity executive would not release his returns.

Romney had said he would release them in April and also paved the way for the disclosure by saying he paid a tax rate of around 15 percent, below many American wage earners, but in line with wealthy individuals who earn income from investments.

Romney said his returns will be posted on his website.

(Reporting By Mary Milliken; Editing by Philip Barbara)

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Republican hopefuls take fight to Florida (Reuters)

COLUMBIA, South Carolina (Reuters) – After a bruising clash in South Carolina, Republican presidential frontrunners Mitt Romney and Newt Gingrich will take their battle to a bigger stage when the campaign moves to Florida on Sunday.

Gingrich, a former U.S. House of Representatives speaker, thrashed Romney in the South Carolina primary on Saturday, suggesting the race for their party's nomination and the right to face President Barack Obama in November may last months more.

The largest of the early voting states by far, Florida presents logistical and financial challenges that appear to give an advantage to Romney's well funded campaign machine.

But Gingrich has momentum after coming from behind in South Carolina to win around 40 percent of the vote, followed by Romney with 28 percent. Rick Santorum, a former U.S. senator, was in third with 17 percent and U.S. congressman Ron Paul in fourth with 13 percent.

"We proved here in South Carolina that people ... with the right ideas beats big money," Gingrich told supporters after his victory in the conservative state.

After strong performances in a series of debates, Gingrich was seen by South Carolina voters as the most likely Republican to beat Obama, a Democrat, in the November 6 election.

They also rejected millionaire former businessman Romney's pitch that he is the best bet to fix a broken U.S. economy and win the White House.

Romney and Gingrich, who have attacked each other mercilessly in a series of negative television ads since December, face off in a debate in Tampa, Florida, on Monday night.

ROMNEY TAX SOLUTION?

Romney has stumbled over questions about his personal finances in recent debates and acknowledged last week that he only pays a 15 percent tax rate, much lower than that of most working Americans.

The former Massachusetts governor has so far resisted calls from rivals, and even ally New Jersey Governor Chris Christie, to release his tax returns.

To try to put the tax return controversy behind him, the Romney campaign has a plan to settle the issue next week, a Republican official said.

That is part of a strategy to be more aggressive against Gingrich, a formidable debater who nevertheless has personal and professional baggage that the Romney team could exploit. Romney accuses Gingrich of being a Washington insider.

"The choice within our party has also come into stark focus. President Obama has no experience running a business and no experience running a state. Our party can't be lead to victory by someone who also has never run a business and never run a state," Romney said on Saturday.

Romney saw his aura of inevitability erode in South Carolina after leading opinion polls by 10 percentage points a week ago.

In Florida, he leads Gingrich by 40.5 percent to 22 percent, according to a poll of polls by RealClearPolitics.com. Santorum, a social conservative who is from Pennsylvania, is third with 15 percent.

Campaigns must spend at least $1 million each week to reach voters in the sprawling southern state, according to local political officials. Romney's allies have already spent $5 million, mostly on ads attacking Gingrich. No other candidate has a significant presence in the state.

(Editing by Paul Simao)

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Wolfeboro, NH, braces for possible "White House North" (Reuters)

WOLFEBORO, New Hampshire (Reuters) – If Mitt Romney gets his wish, the ranks of presidential retreats that include Crawford, Texas, and Rancho del Cielo near Santa Barbara, California, could soon be joined by Wolfeboro, New Hampshire.

Big change could be coming to the rustic but affluent lakeside resort town on Lake Winnipesaukee if front-runner Romney becomes Republican nominee Romney, and ultimately President Romney after the November 2012 election.

Residents are already bracing for the good, the bad and the ugly that could accompany a "Northern White House."

The Romney's summer house on New Hampshire's largest lake is a three-story, six-bedroom, 5,400-square-foot contemporary home set on an 11-acre lot with a wide water frontage and estimated value of about $10 million.

The spread includes a large boathouse and a former stable that has been converted into a guest house. It sits well back from the road up a long driveway, invisible to passers-by.

The Romney clan, which includes five grown children and 16 grandchildren, often congregate in Wolfeboro in the summer. Empty-nesters Mitt and Ann Romney also own a townhouse in Belmont, Massachusetts, and an oceanfront house in La Jolla, California, which is undergoing a fourfold expansion.

Locals describe the Wolfeboro house, within walking distance of town, as tasteful and classy, which is also pretty much how they describe the owners.

Romney, the former chief executive of buyout firm Bain Capital and Massachusetts governor, is estimated to be worth some $200 million. He is the richest man to run for the White House since publisher and businessman Steve Forbes, who was worth about $430 million when he ran in 1996 and 2000.

Unlike Forbes, who made little headway in his quest, Romney is a strong favorite to win Tuesday's New Hampshire Republican primary, kick on to become party's nominee and have a fighting chance to take down President Barack Obama.

"We're already talking about how we might change this business if he is the nominee. We know things would change if he's the president," said Judith Colcord, co-owner of the Downtown Grille and Cafe. That might include adding staff or changing operating hours at the stylish coffee shop, with views of the lake from its back room and seasonal patio.

"I would like to talk to businesses in Kennebunkport about how it changed their community," said Colcord, referring to the coastal town in Maine where George H. W. Bush spent large amounts of time while he served as president and vice president.

Almost everyone in Wolfeboro has a story about the Romneys, many revolving around seeing the former Massachusetts governor cycling around town, helmetless (don't touch the hair!) on an old three-speed bike, or going to the town's popular ice-cream stand with various family members.

"I delivered him a pizza once, about five years ago, when he was governor," said Nick Sackos, 22, who works at Dive Winnipesaukee, an outdoor equipment store.

GEO-CACHING WITH THE ROMNEYS?

A few hundred yards off the Romney property at Clark's Point is a sunken rowboat, the Bumble Bee, used for "geo-caching" -- a treasure-hunting game that involves finding targets, including submerged objects, using GPS coordinates.

"We go scuba diving right outside his house," Sackos added. "We would probably do even more dives if Romney were president."

Wolfeboro residents insist they are not star-struck, given the many celebrities who visit the town each summer.

The roster has included actors Drew Barrymore and Leonardo DiCaprio; talk show host Jimmy Fallon; Duke basketball coach Mike Krzyzewski, recruiting at the elite boarding school Brewster Academy; and many current or former corporate executives who either own or rent properties here.

"We love the waterfront people in Wolfeboro. They pay almost 70 percent of the property taxes and don't put kids in the schools," said realtor Robert Hughes. "They are people who can live anywhere - and this is a very nice 'anywhere.'"

A 2007 vacation in town by French President Nicolas Sarkozy is remembered more critically than interactions with the good-neighbor Romneys. Some locals spoke of an overly aggressive security detail comprised of local law enforcement and private bodyguards while he stayed at a $30,000-a-week rental.

Teachers Joshua and Jennifer Keaton, out walking the family labradoodle, have seen Romney and his wife Ann cycling through town. "One time we saw him at Mise en Place (a local upscale restaurant). Most of the people in town are used to him," Joshua Keaton said.

Driving through downtown takes just a few minutes in the winter, when many stores are shut and summer residents long gone. The town is congested in the summer, and some residents worry about presidential motorcades clogging narrow roads and nosy tourists taking up the good parking spots.

The candidate was introduced to the Wolfeboro area by members of the Marriott hotel clan - not surprising since Willard Mitt Romney was named after J. Willard Marriott, the devout Mormon businessman who founded the company.

Romney bought the property in 1997 from Butch Cash, another hotel executive, for less than $3 million.

In 2004, realtor Hughes sold Romney, then Massachusetts governor, a small parcel of land abutting the main property. Hughes told him in an overnight letter the piece was available and being keenly sought by developers.

Romney quickly called back. "I dealt with him directly. I had his office phone, his private phone, his cell phone," Hughes recalled from his comfortable Main Street office.

"The residents here take pride in not bothering him. He's not a showy person. He's just a neighbor."

(Reporting By Ros Krasny; editing by Todd Eastham)

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Romney wrestles with GOP attacks on corporate past (Reuters)

MANCHESTER, New Hampshire (Reuters) – Mitt Romney is poised to take a big step toward the Republican U.S. presidential nomination on Tuesday by capturing New Hampshire, hoping to ride out last-minute attacks from his rivals and recover from a self-inflicted wound.

The former governor of neighboring Massachusetts carried a sizeable lead in polls into voting day, a sufficient cushion that should force rivals Ron Paul, Jon Huntsman, Newt Gingrich and Rick Santorum into a battle for second place.

Romney, 63, would be the first Republican who is not an incumbent president to win the first two early voting states, after his slim eight-vote victory over Rick Santorum a week ago in the Iowa caucuses.

A more resounding win on Tuesday would give him momentum going into South Carolina on January 21 and Florida on January 31. He leads in both states and victories there could all but sew up his nomination to face Democratic President Barack Obama in the November 6 election.

"You're going to make a big statement tomorrow, let's take it to the next step, give me the boost I need, I hope," said Romney in Bedford on Monday night at his final rally of the day.

It was unclear how much damage had been done by a mess of his own making in which Romney declared "I like being able to fire people," in addressing his desire for greater competition between health insurance companies.

His opponents, Republican and Democratic alike, quickly seized on the comment as evidence of an out-of-touch politician and coupled it with attacks over his record at Bain Capital, a firm that bought companies and restructured them.

"Governor Romney enjoys firing people. I enjoy creating jobs," Huntsman said.

In a remarkable turnaround in a party known for being friendly to business, Republicans seeking to slow Romney down sounded more like populists as they bashed Romney's work as a venture capitalist.

Gingrich, brooding over negative attacks from Romney and his backers that knocked him out of the front-runner position, has launched the toughest onslaught on Romney.

"Mitt Romney was not a capitalist during his reign at Bain. He was a predatory corporate raider," says a video produced by a pro-Gingrich group.

New Hampshire voting stations close at 7 p.m. EST (midnight GMT). About 250,000 people are expected to vote in the Republican primary while 75,000 are likely to vote to endorse Obama's re-election.

HUNTSMAN HOPING FOR 'BONANZA'

"Mitt Romney, I think he will come out on top," said voter Albert Guptill in Nashua. "By how much, I don't know, but I think he will, yeah."

But not everyone was happy about voting for him.

Eli Haykinson of Bedford said he did not want to vote for Romney but might have to because he could have the best chance to defeat Obama.

"I personally don't like his huge campaign style. You don't really get to feel him at all. I don't want to vote for him but I may have to," Haykinson said.

The Monday Suffolk University tracking poll had Romney at 33 percent, Paul 20 percent, Huntsman 13 percent, Gingrich 11 percent, Santorum 10 percent and undecided 12 percent.

Since victory looked out of reach for Romney's rivals, they were waging a fierce battle to sway undecided voters their way in the final hours and win second place.

Both libertarian Representative Paul and Huntsman, a former U.S. ambassador to China, have been on the rise in recent days.

"It could be a bonanza," Huntsman told CNN.

Former Pennsylvania Senator Santorum, who nearly won Iowa by appealing to social conservatives, has found that his message in New Hampshire is not attracting the same surge of support.

He and Texas Governor Rick Perry, along with Gingrich, are looking to South Carolina to challenge Romney as his conservative alternative.

Romney leads there for now but Gingrich backers have launched $3.4 million worth of ads in South Carolina to try to slow him down in the conservative state.

(Additional reporting by Ros Krasny, Sam Youngman, Jason McLure and Mary Milliken; editing by Mohammad Zargham)

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Santorum comes under closer scrutiny in New Hampshire (Reuters)

MANCHESTER/NORTHFIELD, New Hampshire (Reuters) – Republican presidential upstart Rick Santorum found himself under increasing scrutiny on Thursday as front-runner Mitt Romney tried to chip away at his credibility ahead of the key New Hampshire primary.

Santorum's surge in Iowa, which held its nominating contest on Tuesday, was so quick that his record as a U.S. senator and strong conservative views against abortion and gay marriage escaped close attention from his 2012 presidential rivals and the media.

His entry into New Hampshire was rocky. College students booed him at New England College over his position against gay marriage and he was forced to explain a remark he made in Iowa that appeared to single out blacks as recipients of federal assistance.

A Suffolk University tracking poll showed Romney on cruise control in New Hampshire ahead of its primary next Tuesday but that Santorum had risen to a distant third. It gave Romney 41 percent support, Ron Paul 18 percent and Santorum 8 percent, and Romney spent the day campaigning in South Carolina.

After finishing a close second to Romney in Iowa and bursting into the limelight, Santorum is under the microscope, drawing fire from Senator John McCain, a Romney supporter who clashed often with Santorum over government spending when they were Senate colleagues.

McCain, the 2008 Republican presidential nominee, is a sharp critic of spending items called earmarks that typically escape the scrutiny that accompanies U.S. budget legislation, to the dismay of conservatives.

"He was an avid earmarker and a staunch defender of porkbarrel spending," McCain told Reuters. "I just don't think he can portray himself as a fiscal conservative. We all know that earmarking is a 'gateway drug' to corruption."

Santorum's efforts to obtain taxpayer funds for spending projects for his home state of Pennsylvania have long been an issue. McCain specifically cited the $500,000 that Santorum engineered for a polar bear exhibit at the Pittsburgh zoo as an example of wasteful spending.

"The polar bears are living well," McCain said wryly. "That's the good news."

GREAT EXPECTATIONS

Santorum has fought back against accusations of profligate spending, saying he wanted to make sure his taxpayers got their "fair share" of money back. He says he will fight for deep spending cuts if elected next November.

Santorum is hoping to recreate his Iowa magic in New Hampshire, which holds the second contest to determine a Republican challenger to Democratic President Barack Obama.

He wants to finish strong enough to generate momentum going into South Carolina, where a conservative like him has a better chance.

"Obviously Mitt Romney is at 40 percent in the polls, the chances in five days to make up a 35 or 40 point lead is going to be pretty limited but we expect to make a run and to move up in those polls," Santorum told reporters in Manchester.

The NAACP civil rights organization complained about a remark Santorum made in Iowa in which he appeared to say, "I don't want to make black people's lives better by giving them somebody else's money."

Santorum insisted to Fox News that he had "blurred" the word and did not actually say blacks.

"Senator Santorum's targeting of African Americans is inaccurate and outrageous, and lifts up old race-based stereotypes about public assistance," NAACP President Benjamin Todd Jealous said.

Romney's big lead gives him great expectations in New Hampshire, perhaps more than he can reasonably expect to fulfill in a state that is unpredictable and can provide crucial momentum to the second-place finisher.

McCain said he believed the race will tighten in New Hampshire and doubted Romney will end up with 40 percent support or more.

"It's important for the Romney campaign and all of us who are supporting him not to raise expectations," said McCain, who surprised George W. Bush here in 2000. "So much of this is the expectations game. I think he'll win New Hampshire well but I can't imagine any candidate winning with 43 percent of the vote."

Keeping Obama in their sights, the Republicans blasted Obama for bypassing Congress to fill politically sensitive posts.

Obama upset Republicans by making four recess appointments - naming Richard Cordray to run the new Consumer Financial Protection Board and filling three vacancies on the National Labor Relations Board.

Ron Paul called Obama's move a clear disregard of the U.S. Constitution.

"The president must be called to account for his actions," Paul said in a statement, adding that Congress may need to take action to rein in Obama's "flagrant contempt" for the rules.

(Additional reporting by Ros Krasny and Scott Malone)

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Will the new Newt Gingrich have staying power? (Reuters)

WASHINGTON (Reuters) – During his quick ride to the top of voter surveys, Newt Gingrich has cast himself as the more conservative alternative to a flip-flopping Mitt Romney, the other leading Republican candidate for president.

But the rise of Gingrich, a former speaker of the House of Representatives, is drawing increased attention to the fact that his own views - on issues including healthcare, the environment and medical marijuana - haven't always been in line with those of most conservative Republicans.

The inconsistencies have raised questions about Gingrich's true beliefs, as well as his staying power as the conservative of the moment in the Republican campaign. They also have given his opponents a significant target for their criticisms.

Before running for president, Gingrich said the U.S. government should require people to buy health insurance or face penalties. Now Gingrich, who did not respond to requests to comment for this story, says that such a mandate is "unconstitutional."

Gingrich's stance on the environment also has taken a turn to the right. Before his campaign, he said the United States should step up its efforts to reduce greenhouse gases. In 2008, he appeared with Democrat Nancy Pelosi, who at the time was speaker of the House, in a TV ad to support a global-warming awareness campaign headed by former Vice President Al Gore.

Today, Gingrich has distanced himself from the idea that the government should try to help curb global warming. He has said the 2008 video with Pelosi was "probably the dumbest thing I've done in recent years."

'TERRIBLE IDEA'

Gingrich's position also has evolved on another provocative issue: whether the federal government should endorse the use of marijuana for medical purposes.

As a member of Congress in 1981, Gingrich co-sponsored a failed bill with liberal Massachusetts Democrat Barney Frank that was aimed at legalizing medical marijuana nationwide. Gingrich now says medical marijuana is a "terrible idea."

Taken together, Gingrich's policy switches have helped him attract the support of conservative Republicans who often dominate the party's nomination process. In national polls Gingrich now leads Romney, a former Massachusetts governor who is trying to win over conservatives who are skeptical of his own moves to the right on health care and other issues.

Romney and another Republican presidential candidate, Representative Ron Paul of Texas, are beginning to target Gingrich over his position changes. Romney is preparing an effort to brand Gingrich as a flip-flopper, and Paul released a Web ad on November 30 accusing Gingrich of "serial hypocrisy."

If such messages begin to resonate with Republican voters, Gingrich's efforts to get in line with conservative orthodoxy could wind up undermining his appeal to voters who are unsettled by Romney's policy shifts, a former Gingrich aide said.

"As more and more of these flip-flops come to light, it will tend to blur the problems that a lot of conservatives have with Romney," said Rich Galen, a Republican strategist who is staying neutral in the 2012 nominating contest.

Some analysts caution that although Gingrich's rebranding has served him well to this point, he could end up being a poor fit with the strain of conservatism that is dominant in the Republican Party today.

The party's conservative base is more interested in shrinking government than simply making it work more effectively, said Michael Tanner, a senior fellow at the libertarian Cato Institute. Improving government's efficiency has been a constant theme for Gingrich, 68, since his political career began in the 1970s.

"I don't understand how he's the conservative alternative now," Tanner said. "I can understand why people are looking for one, but if I was looking at that field I would say, 'Newt?' "

AN ACTIVE FEDERAL GOVERNMENT

Many of the positions Gingrich is moving away from are recorded in a stream of books and policy papers he has issued since leaving Congress in 1999.

Gingrich's work has tackled goals such as protecting the environment and improving healthcare from a free-market perspective.

In a 2007 book, "A Contract with the Earth," Gingrich and co-author Terry Maple argue that businesses and local governments often are better positioned to respond to environmental problems than the federal government.

But the book also outlines an active role for the federal government, calling for expanded tax breaks for wind power and hybrid cars, new international efforts to reduce greenhouse gases, and a solar-research project on the scale of the World War II-era effort that yielded the atomic bomb.

"As we recognize the scientific evidence that the Earth is experiencing a warming trend over the past 100 years and that this trend may have serious consequences for the future, we favor reducing carbon loading in the atmosphere as a bold forward step and a positive public value," Gingrich and Maple wrote.

"To be a global leader, America will have to be proactive and persuasive on a massive scale," they write later in the book.

During a mild-mannered debate with Democratic Senator John Kerry in 2007, Gingrich said the United States should "move toward the most effective possible steps to reduce carbon loading of the atmosphere ... and do it urgently."

Gingrich also backed the idea of tax credits to reduce carbon emissions during an interview with The Washington Times on January 19, 2009.

Gingrich now says the government should not try to tackle global warming, a position that appears more reflective of Republican conservatives' push to limit government regulation.

"I don't think it should be a priority (for government) at all right now except for research," he said on November 16 on The Mark Levin Show, a conservative radio program. "We have no proof that justifies a large-scale government program that distorts the economy and centralizes power in bureaucrats."

Maple, his former collaborator, said Gingrich has not changed his environmental views but is not emphasizing them as he courts Republican primary voters. As president, Gingrich would make environmental protection a top priority, he said.

"You're going to see somebody who's going to change priorities and I'm going to be confident that the environment will be one of those priorities," said Maple, who said he talks with Gingrich regularly.

"He's going to go into this primary season with the priorities that the party is interested in right now," Maple added. "It's not him, it's everybody else. It's such a strongly united party against big government."

A NEW STANCE ON HEALTH CARE

Gingrich has also recalibrated his stance on healthcare.

As recently as May 15, Gingrich said he backed the idea of a universal mandate -- the idea that individuals must buy health insurance to keep the system solvent. That notion is a central element of President Barack Obama's healthcare overhaul that was enacted last year, and the Massachusetts healthcare law that Romney signed as the state's governor in 2006.

Gingrich backed an insurance mandate even as other Republicans pushed court challenges against Obama's national plan on the grounds that the insurance mandate is unconstitutional. The Supreme Court has agreed to review challenges to the law from 26 states next year.

"I've said consistently we ought to have some requirement that you either have health insurance or you post a bond or in some way you indicate you're going to be held accountable," Gingrich said on NBC's "Meet the Press" on May 15.

Gingrich renounced that position during a debate in June, and has since said that he backed an insurance mandate because it was put forward as a conservative alternative to then-First Lady Hillary Clinton's proposed healthcare reform in the 1990s.

Gingrich has contrasted his change of heart with Romney's continued support for the idea.

"I concluded I was wrong," Gingrich says on Fox News last month. "Why hasn't he concluded that he was wrong?"

Gingrich has similarly changed his mind on whether Congress should allow medical marijuana nationwide. Currently, 16 states and Washington, D.C., have laws allowing marijuana use for medicinal purposes.

"It is a drug," Gingrich said in 2009, in response to a question about whether Florida should join the states allowing medical marijuana. "It is currently illegal. It should remain illegal."

(Additional reporting by Sam Youngman; editing by David Lindsey and Cynthia Osterman)

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Republicans show rare discord over tax policy (Reuters)

WASHINGTON (Reuters) – The Republican brand, built on a rock-solid "no new tax" pledge to voters, is showing a few cracks as internal party divisions erupt in the face of rapidly escalating U.S. government debt.

Republicans have hopes of capturing control of the White House and both chambers of Congress in November 2012 elections, and tax policy looms as a central issue.

But in these early days of the campaign, Republicans have been debating an unlikely opponent: themselves.

The most immediate battle finds rank-and-file members fighting over whether to follow party leaders and back an extension of President Barack Obama's payroll tax cut, which would put more money in the pockets of millions of Americans.

But the internal debate affects tax policies far larger than the payroll tax cut.

"There is kind of a revisitation by the party in terms of where they are on tax policy," said Dean Zerbe, a former tax counsel for Republicans on the Senate Finance Committee and now managing director of alliantgroup, a tax consulting firm.

BEYOND THE PAYROLL TAX ISSUE

Republicans are pushing for a major overhaul of U.S. tax law, which is riddled with loopholes and special interest breaks. The last such review was done in 1986 by then-President Ronald Reagan, an idol to conservatives.

They argue a streamlined tax code would help boost the economy and create jobs. But with U.S. debt now topping $15 trillion, some are starting to entertain an idea they vehemently rejected in the past: devoting some of the revenue generated by closing loopholes to deficit reduction and not just lowering income tax rates.

"There is a debate internally about what the appropriate level of tax burden is," said Alex Brill, an American Enterprise Institute tax expert and former chief economist for the House of Representatives Ways and Means Committee.

For years, Republicans have bristled at any notion that tax cuts needed to be offset by revenue increases elsewhere in the code. Lower taxes, they argued, would generate enough economic growth to pay for themselves.

Lately there are doubts. The huge debt has led to a fundamental change in thinking, said conservative Republican Senator Saxby Chambliss.

"As to whether or not we're going to have to pay for any tax cuts, I think we're going to have to pay for everything," Chambliss told Reuters. "These are very difficult times. If you don't pay for it, you're adding to the deficit."

'YOU'RE ON YOUR OWN, KID'

During deficit-reduction negotiations in November, which ultimately failed in a "super committee" of Congress, Senator Patrick Toomey opened the door to Republicans accepting new revenue for deficit reduction. He floated a plan to limit certain special interest tax breaks in return for lowering the top tax rate to 28 percent from 35 percent.

Democrats rejected it saying it would raise too little revenue from taxes and provide a net tax cut for the rich while raising taxes for the middle class. And for other reasons, so did many Republicans including Grover Norquist, president of Americans for Tax Reform, a group that advocates a single low, national income tax. ATR asks candidates for office to sign a pledge to "oppose and vote against tax increases."

Norquist has been a powerful force within the Republican Party in recent years, and almost all congressional Republicans have signed the so-called "Taxpayer Protection Pledge." Some now seem willing to take a step back, at their peril.

"The people who brought it up, all they did was open the door to thinking about tax increases," Norquist said during a Reuters Insider TV interview last month of ideas such as Toomey's. "The good news is the rest of the Republican Party said, 'you're on your own, kid.'"

Recent polls show public backing for tax increases to bring down the deficit - if they are twinned with spending cuts. But supporting higher taxes of any kind is dangerous for Republican lawmakers, who could draw primary challenges in 2012 from Tea Party movement conservatives.

Many conservatives argue that President George H.W. Bush lost his re-election bid in 1992 because he broke his "no new taxes" campaign pledge.

One lawmaker's expendable tax perk is another's essential service, as Republican House Speaker John Boehner was reminded in November when he proposed ending a corporate jet tax break as part of deficit reduction package.

"I mentioned to the Speaker: 'quit picking on us. In Wichita (Kansas) we've come through a rough time,'" veteran Senator Pat Roberts told Reuters. The Kansan was referring to aircraft makers in his home state that could feel the impact of ending the jet tax break, which would save an estimated $3 billion over 10 years -- a relatively small savings given deficits of around $1 trillion a year.

Obama appears to have seized a political advantage with his demands for a balanced approach to deficit reduction that includes spending cuts as well as tax increases.

After years of Republicans painting Democrats as wanting to tax and spend the country into bankruptcy, the president has turned the tables somewhat with polls showing support for his call to increase taxes on the very rich to help shrink the debt.

As Obama pushes to extend a temporary payroll tax cut for wage earners, Republicans find themselves in the awkward position of debating whether to block a tax cut.

Many Republicans argue that the payroll tax cut has done little to stimulate the economy and over the long-term could weaken the Social Security retirement fund that the tax supports. But Republican leaders - fearing the party will be accused of protecting tax cuts for the rich, but not workers - said they will push for the extension as long as the cost is covered by spending cuts.

Not all Republicans are happy with that decision, arguing another one-year extension will do nothing for long-term U.S. economic growth.

"I just think they're wrong," Republican Representative Jeff Flake said of his own leaders in the House and their drive to extend the payroll tax cut.

(Editing by Vicki Allen)

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Mitt Romney flexes New Hampshire muscle (Reuters)

MANCHESTER, New Hampshire (Reuters) – Republican presidential candidate Mitt Romney flexed his campaign's organizational muscle in the key early voting state of New Hampshire on Saturday, unleashing hundreds of volunteers to knock on doors and make phone calls on his behalf.

The former Massachusetts governor also criticized the attorney general, calling for Eric Holder to resign or be fired over "Fast and Furious," the botched law enforcement action aimed at disrupting gun-trafficking networks on the U.S.-Mexico border.

Standing before a poster reading "Earn It," Romney said his campaign had already placed 200,000 phone calls in the state of 1.3 million people, and planned to call an additional 12,000 potential voters on Saturday.

Romney has held a wide lead in most polls of likely Republican voters in New Hampshire, which holds the first primary of the 2012 presidential contest on January 10. Republican hopefuls are vying to challenge President Barack Obama in the November 2012 election.

But in a survey taken last Monday, former House of Representatives Speaker Newt Gingrich pulled to within 10 percentage points of Romney following an important newspaper endorsement.

Gingrich recently added advisers in New Hampshire, but his grass-roots apparatus there pales next to that of Romney, whose volunteers aimed to "knock on 5,000 doors ... and put together 10,000 yard signs" on Saturday alone.

Romney continued to draw contrasts with Gingrich, who has soared to the top of many national Republican polls.

Gingrich could benefit from the suspension of businessman Herman Cain's campaign on Saturday after weeks of allegations of sexual impropriety against the former pizza magnate.

Romney, who has had an uneasy relationship with the conservative Tea Party movement that had been at the core of Cain's support, made an appeal for the group's backing by highlighting his background in the private sector.

"Speaker Gingrich is a fine person but he's spent his life in Washington," said Romney. "That doesn't exactly line up with the Tea Partiers. I think when things are said and done, I'll have good support from the Tea Party and hopefully the majority of their support."

DEMANDS HOLDER QUIT OR BE FIRED

Romney went on the attack against Holder after the White House released documents on Friday showing how some Justice Department officials had given false denials about involvement in the "Fast and Furious" endeavor.

"I think it's now increasingly clear that he misled Congress. It's time for Attorney General Holder to leave office, either to resign or be removed by the president," Romney said in an interview with Fox News.

Other Republican presidential hopefuls, including Texas Governor Rick Perry and former Utah Governor Jon Huntsman, have also called for Holder to quit.

Fast and Furious was a sting operation designed to stem illegal weapons traffic into Mexico. But many of the guns bought by straw purchasers in Arizona have been used for violent crimes.

The debacle came to light after a U.S. Border Patrol agent was killed in a shootout with illegal immigrants on the border. Two of the weapons at the scene were tied to the operation, although it was not clear if they fired the fatal shot.

Holder has expressed regret over the botched operation, but said he knew about it only after the controversy erupted.

(Reporting by Jason McLure; Editing by Ros Krasny and Peter Cooney)

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Romney picks up important New Hampshire endorsement (Reuters)

LITTLETON, New Hampshire (Reuters) – Republican Mitt Romney, looking to close the deal in the early primary state of New Hampshire, picked up an important endorsement on Sunday from U.S. Senator Kelly Ayotte.

Ayotte was elected in 2010 from New Hampshire as part of big Republican gains in Congress, and is the top Republican elected official in the state. Her campaign had support from, among others, former vice presidential candidate Sarah Palin.

Romney has won nearly every major Republican endorsement in New Hampshire so far, and has led in Republican polls in the state by a wide margin for almost two years.

On Friday, though, a survey by Magellan Strategies showed former House Speaker Newt Gingrich drawing within two percentage points of Romney.

New Hampshire holds its 2012 Republican primary election on January 10. The vote is regarded as one that Romney must not just win, but win convincingly.

The former Massachusetts governor has stepped up his campaigning in the state, where he owns a house. On Sunday he and Ayotte appeared at a rally in Nashua, her home town.

Ayotte was one of Palin's "Mama Grizzlies" in 2010, and is a former state attorney general.

In a statement, Ayotte cited Romney's experience as a businessman and governor, and his "excellent presidential debate performances" in her decision to endorse him.

Romney has also been endorsed by major New Hampshire figures like former Republican governor John Sununu and former U.S. Senator Judd Gregg.

(Reporting by Jason McLure, editing by Ros Krasny and David Bailey)

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Republican Perry chides Romney, defends Texas actions (Reuters)

CONCORD, New Hampshire (Reuters) – Texas Governor Rick Perry renewed his attack on Republican presidential rival Mitt Romney as untrustworthy, and defended Texas illegal immigration policy that has been criticized by conservative Republicans.

Campaigning in New Hampshire, Perry accused the former Massachusetts governor of changing positions on gun control, the causes of global warming and government health insurance mandates.

He is seeking to chip away at Romney's big lead in the polls in a key early primary state, and arrest his own slide in national surveys.

"Like it or not the governor has been on the opposite side of a lot of issues," Perry said during a live interview with conservative activist and New Hampshire Republican gubernatorial candidate Ovide Lamontagne. "The issue is who are you really going to trust to stand up and be consistent?"

The Romney and Perry camps have focused their criticism on each other on Friday rather than businessman Herman Cain who now leads in some national Republican polls, an indication that neither campaign views Cain as a serious threat.

Also piling on Romney on Friday was former Utah Governor Jon Huntsman, who is preparing to make a four-day campaign swing through New Hampshire.

"Real leadership is taking a clear position on issues even if it comes at political risk. Backflipping is for toys and gymnasts, not presidents," the Huntsman campaign said in a new web video.

Perry, who briefly led in national polls after entering the Republican race in August, has faded after a string of shaky performances in candidate debates.

In Concord on Friday he sought deflect criticism from Romney and Tea Party conservative activists who accuse him of being soft on illegal immigration.

Perry signed a bill that allowed Texas residents without legal U.S. resident status to attend Texas colleges, while paying in-state tuition. The bill passed the Texas legislature with overwhelming bipartisan support.

"We could kick these people to the side of the road and then we'll have to pick up the costs of whatever those social programs they're going to be eligible for," he said. "We're going to either have tax wasters or tax payers."

Perry's campaign also chided Romney for allowing people without proof of citizenship to access health care programs for the poor while governor of Massachusetts, an indication of how strongly the illegal immigration issue is resonating with Republican primary voters.

Romney campaign spokesman Andrea Saul termed Perry "desperate" in an emailed response.

He "will try anything to deflect attention away from his liberal policy on in-state tuition for illegal immigrants and his advocacy for turning Social Security over to the states," Saul said.

At a town hall meeting in Manchester on Friday evening, Romney focused on President Barack Obama rather than Perry, saying Obama as trying to "divide America into haves and have nots" and invite a "very dangerous" brand of class divisions.

The Texas governor, who has indicated he may skip some of the remaining Republican debates, joked about his debating shortfalls and sought to minimize the importance of debate performances.

"Shoot, I may be a great debater before it's all over," he said. "We have a very very good debater and a slick politician in the White House right now, and it's not working."

(Reporting by Jason McLure; Editing by Ros Krasny and Greg McCune)

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Top Obama aide vents frustration with Congress (Reuters)

WASHINGTON (Reuters) – A top aide to President Barack Obama expressed frustration on Friday with his fellow Democrats as well as Republican members of Congress for resisting the White House's domestic agenda.

The comments by Obama's chief of staff William Daley, made in an interview with the Politico newspaper, could add to tension that has arisen between Obama and some congressional Democrats.

"On the domestic side, both Democrats and Republicans have really made it very difficult for the president to be anything like a chief executive," Daley told Politico. "This has led to a kind of frustration."

Some Democrats have been unhappy with Obama's handling of this year's budget battles, viewing him as having been too willing to compromise with Republicans on their demands for spending cuts to cherished social programs.

"There's no question that Democrats haven't agreed, or some Democrats haven't agreed, with every position the president has taken on every issue," White House spokesman Jay Carney told reporters.

Democrats were upset when word leaked out last summer about the shape of a "grand bargain" on deficit reduction that was discussed between Obama and Republican House of Representatives Speaker John Boehner. Under discussion were changes to the Social Security retirement program that Democrats opposed.

Ultimately, Boehner walked away from the talks because his fellow Republicans balked.

Carney, seeming to play down Daley's comments, said it had been Republicans, not Democrats, who have thwarted the president's agenda.

"The obstacle to getting things done that the American people want done on the economy and jobs has been congressional Republicans," Carney said.

Obama this week took a series of actions on the economy, including steps to help struggling homeowners, college students and small businesses, that do not require congressional action.

Rolling out a new slogan, "We can't wait," Obama has pledged to take further executive actions.

The White House has sought to paint Republicans as obstructionists for impeding his $447 billion jobs package and the new executive actions are aimed at part in putting pressure on them to work with the administration on that legislation.

(Writing by Caren Bohan; Editing by Eric Walsh)

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Cain, Romney in tight Republican race in Iowa: poll (Reuters)

DES MOINES, Iowa (Reuters) – Republican White House hopefuls Herman Cain and Mitt Romney are in a tight race in Iowa, which kicks off next year's presidential nominating contests, according to a closely watched opinion poll published on Saturday.

The poll conducted for The Des Moines Register showed Cain, a conservative businessman, with the support of 23 percent of Republicans surveyed. Romney, a former Massachusetts governor, had 22 percent, and Texas Representative Ron Paul 12 percent in the race to challenge Democratic President Barack Obama in the November 2012 election.

Texas Governor Rick Perry, who has stumbled in debates and on the campaign trail after a fast start, scored only 7 percent support.

The Iowa caucuses will take place on January 3, the first of the state-by-state contests to choose a party presidential nominee.

The poll showed Minnesota Representative Michele Bachmann fading after running neck and neck with Romney in the June Iowa poll. Bachmann dropped to 8 percent and fourth place in the new poll.

Neither Cain nor Romney has spent much time campaigning in Iowa. Romney, who has just four paid staff and a consultant in the state, has rarely visited Iowa since a second-place finish in the caucuses in 2008 wounded his campaign.

Iowa has a large bloc of conservative voters distrustful of Romney's past support of abortion rights and a Massachusetts healthcare overhaul that was a precursor of Obama's federal law.

Cain's surprising rise has been achieved with a small organization in states that hold early primaries and caucuses.

"One thing I've noticed in my short two months with the campaign is that the more people see of Mr. Cain, the more they like him," said J.D. Gordon, a spokesman for the campaign.

Romney's campaign declined to comment on the poll results.

Former Pennsylvania Senator Rick Santorum, who has spent more time in Iowa than the other candidates and visited more than 70 of Iowa's 99 counties, received just 5 percent support in the poll. Former Utah Governor Jon Huntsman, who has lagged consistently behind his rivals, received 1 percent.

The Iowa Poll was conducted Sunday through Wednesday and was based on telephone interviews with 400 Republican likely to attend the caucuses. The margin of error is plus or minus 4.9 percentage points.

In 2008, the poll correctly predicted wins for former Arkansas Governor Mike Huckabee in the Republican contest and Obama, then a senator, in the Democratic caucus.

(Additional reporting by Kay Henderson in Des Moines; Editing by Greg McCune and Peter Cooney)

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Cain upsets Perry in Florida Republican straw poll (Reuters)

ORLANDO, Florida (Reuters) – Former pizza executive Herman Cain surprised rival Rick Perry with an upset victory on Saturday in a Republican presidential straw poll in Florida, dealing a disappointing loss to the Texas governor two days after a shaky debate performance.

Perry, leading in the polls for the Republican presidential nomination in 2012, had needed a victory in what was an early test of strength to salve the wounds left over from a debate with his rivals on Thursday in which he struggled.

Instead, former Godfather's Pizza executive Cain, who is far behind the two top-tier candidates Perry and Mitt Romney, won with 37 percent of 2,657 votes cast.

Perry was a distant second at 15 percent, just ahead of Romney, who won 14 percent despite not participating in the poll. Further back were Rick Santorum, Ron Paul, Newt Gingrich, Jon Huntsman and Michele Bachmann.

Florida's straw poll is a nonbinding popularity poll and is significant only in terms of showing a candidate's strength in the state. The state contests to determine the Republican nominee do not start until early next year.

The Perry camp shrugged off the results.

"Cain won, we still have work to do," said Perry spokesman Mark Miner. "It's his day. The conservative message won today. We've been in this race for five weeks. We're going to continue campaigning hard."

Miner put the focus on Romney's third-place finish, saying Perry's chief rival has been running for president for years and is still not breaking through.

"It's more of what happened to Mitt Romney. He's not going to be crowned president of the United States. He's going to have to work for it. And after five and a half years he once again got rejected in a key state in the Republican primary process," Miner said.

Perry created doubts among some conservatives at a debate with his Republican rivals on Thursday that he admitted on Friday was not his best performance. He was criticized by his rivals for a Texas policy that allows children of illegal immigrants to pay in-state tuition rates at Texas colleges.

"Perry doesn't stand for our constitutional values," said delegate Kris Anne Hall, who voted for Cain. "Perry doesn't stand up against illegal immigration."

Perry surrogate Michael Williams, in addressing the straw poll delegates on Saturday before the vote, sought to do some damage control for the Texas governor, who had addressed an Orlando breakfast earlier before campaigning in Michigan.

"We're not electing a debater-in-chief, we're electing a commander-in-chief," said Williams, adding that no illegal immigrant in Texas had received a handout for a free education.

Cain, an African-American who promotes himself as a pragmatic problem-solver with a clear tax reform plan, eagerly welcomed the victory.

"This is a sign of our growing momentum and my candidacy that cannot be ignored," Cain said after his win.

Most political analysts give him no chance of winning the nomination.

But Florida's Republican Party had noted that since 1979 every winner of the Florida straw poll has gone on to become the party's nominee. Senator John McCain won it in the 2008 cycle and defeated Romney to become the nominee.

Florida, the most populous of the presidential swing states, is a critical test for both Republicans and Democrats. The Florida vote was so close in the 2000 election that it led to a ballot recount battle between Democrat Al Gore and Republican George W. Bush, who was ruled the winner.

Romney, the former governor of Massachusetts, and Bachmann chose not to compete in the straw poll but since they took part in the debate and spoke earlier to delegates at the convention in Orlando, the Florida Republican Party put their names on the ballot.

Perry issued a statement after the straw poll results were revealed that was clearly aimed at Romney.

"Floridians and voters nationally want a candidate who is clear on the issues and talks honestly about the future, not someone who takes multiple sides of an issue and changes views every election season. Today's vote demonstrates that Floridians are energized and ready to help get America working again," he said.

(Editing by Will Dunham)

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Perry passes Romney among Republicans in polls (Reuters)

WASHINGTON (Reuters) – Rick Perry has taken a double-digit lead over Mitt Romney in the Republican presidential nomination race in two polls released on Wednesday, an indication that the Texas governor could replace the former Massachusetts governor as early favorite.

Although he only formally entered the race on August 13, 29 percent of Republicans and Republican-leaning independents said Perry would most likely be their choice to oppose Democratic President Barack Obama in 2012, according to a Gallup poll.

Perry's support among Republicans was not dented by strong comments just after getting into the race, when he raised eyebrows among some of the party's opinion leaders by seeming to threaten Federal Reserve Chairman Ben Bernanke and questioning Obama's patriotism.

The first nominating contests will not begin until early next year, but most of the other Republican White House hopefuls have been campaigning for months. Romney had been first in most nationwide opinion polls.

Gallup said 17 percent favored Romney, when asked to rate the field of candidates vying for the nomination. Texas Congressman Ron Paul was third, at 13 percent, and Minnesota Congresswoman Michele Bachmann came fourth, with 10 percent.

The telephone poll of 1,040 Republicans and Republican-leaning independents on August 17-21 was the first conducted after the second Republican candidates' debate in Iowa, the Iowa Straw Poll and Perry's entry into the race.

Businessman Herman Cain was at 4 percent, former Speaker of the House Newt Gingrich had 3 percent, ex-Pennsylvania Senator Rick Santorum was at 3 percent and former Utah Governor Jon Huntsman had 1 percent support in the Gallup poll.

Perry also had a big lead over Romney in a survey of Republican primary voters conducted by the Democratic pollster Public Policy Polling.

Thirty-three percent said they would vote for Perry, versus 20 percent for Romney. Bachmann had 16 percent support. The rest of the field was in single digits, with Gingrich at 8 percent, Paul and Cain at 6 percent, Santorum at 4 percent and Huntsman with 3 percent.

PPP surveyed 663 Republican primary voters from August 18 to 21st.

(Reporting by Patricia Zengerle, editing by Cynthia Osterman)

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Analysis: Romney's play-it-safe strategy at risk (Reuters)

BOSTON (Reuters) – Republican presidential hopeful Mitt Romney is running a disciplined campaign focused on slamming President Barack Obama and promoting his own skills, but pressure could mount for a more aggressive approach as his poll numbers worsen.

This week a trio of opinion surveys showed Romney trailing Texas Governor Rick Perry, who jumped into the 2012 race less than two weeks ago and generated a blaze of mostly favorable publicity.

Romney, a former Massachusetts governor and venture capitalist, has been the nominal front-runner among Republicans so far, partly reflecting his name recognition after finishing second to John McCain in his 2008 run.

Romney's second White House run, launched in June, has been designed around almost daily attacks on Obama. His campaign appearances have been relatively scarce and balanced by a heavy fund-raising schedule.

"We've stayed focused on talking to people about why Governor Romney is the best alternative to President Obama on the most important issue facing our country: jobs and the economy. That's what this race will be about," said Romney spokeswoman Andrea Saul.

The Romney campaign issues regular videos on the theme "Obama Isn't Working," which highlights high unemployment. It mocked the president's recent bus trip through the Midwest as a "Magical Misery Tour," complete with tie-dye T-shirts available for a $30 campaign pledge.

Romney has led most polls among the Republican challengers this year, but with numbers well below levels that create a sense of inevitability.

Both Gallup and Public Policy Polling on Wednesday issued national surveys of likely Republican primary voters that showed Rick Perry holding a sizable lead.

"So far he (Romney) has really played it safe. I really think that strategy can't continue with Rick Perry in the race," said Krystal Ball, a Democratic strategist and former Congressional contender in Virginia.

"If Romney is going to stay in the game, he has to take more risks."

TOO EARLY FOR PANIC?

Political scientist Charles Franklin said it was too early for Romney to panic about Perry, but his campaign needs to stay on its toes.

Romney has been polite but distant in talking about Perry. In New Hampshire, this week he termed the Texan "a very effective candidate ... maybe when the field narrows down to two or three we'll spend more time talking about each other."

"So far, the Romney strategy to not be reactive to the 'flavor of the week' is smart. But it's only in hindsight when we know if someone was a flash in the pan or not," said Franklin, a professor at the University of Wisconsin.

Indeed, the 2012 Romney campaign has been shaped by a different dynamic from the wide-open 2008 race: running against an incumbent with low approval ratings who has left many of his previous supporters disappointed.

His strategists believe voters will respond positively to Romney's business pedigree as the polar opposite of Obama.

As the leading moderate among Republican contenders, Romney also might hope that his opponents simply beat each other up.

"My sense is that Romney's strategy is based on the assumption that Bachmann, Perry and others, even Rick Santorum, will fight it out among themselves," said Donna Robinson Divine, professor of government at Smith College in Northampton, Massachusetts.

"Then, Romney will be able to claim that he is focusing on the real issue -- capturing the White House. It has been a sound strategy. Whether he has to change it at this point is unclear."

Divine said the danger is that Romney's campaign could lose control of the message; this week's pro-Perry opinion polls could be the start of such a trend.

The Gallup survey had Perry with 29 percent support among Republicans and Republican-leaning independents. Romney was at 17 percent, down 6 points from a month ago, with Texas Congressman Ron Paul at 13 percent and Bachmann at 10 percent.

"The polls create a certain narrative that could force Romney to change tactics," said Divine.

As voting in the 2012 primaries draws closer, Romney's campaign might need to acknowledge a shift in the electorate with a sharper tone, said Ball.

In polling, Romney does better among independent leaning Republicans and moderates, but they don't typically vote in big numbers in primaries," she said.

Even compared with 2008, Republican voters are more conservative, largely because of the emergence of the Tea Party that was so influential in the 2010 mid-term elections and in the recent fractious debate over raising the U.S. debt limit.

"I think Mitt Romney really has to do some soul searching about what the Republican party is. at this point in time," Ball said. "The Republicans are looking for someone to get aggressive in attacking Obama."

Ultimately, though, strategists think Romney, who has a large campaign funding warchest, will be ready for hand-to-hand combat if he needs to.

"I suspect if he sees Perry approaching some kind of tipping point, Romney will engage him," said Divine.

(Additional reporting by Jason McLure; editing by Christopher Wilson)

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Republicans back new revenues in debt deal: Kyl (Reuters)

WASHINGTON (Reuters) – Republicans have tentatively agreed to between $150 billion and $200 billion in increased revenues in budget talks, Republican Senator Jon Kyl said on Wednesday.

"If the government sells something and gets revenue from it, that's revenue. If there is a user fee of some kind and we want to raise that to keep up with the times, that's revenue. And if you add up all of the revenues that we Republicans have agreed to, it's between $150 billion and $200 billion," Kyl said on the Senate floor.

(Reporting by Andy Sullivan and Richard Cowan; Editing by Philip Barbara)

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Republicans agree to revenue increases: Senator Kyl (Reuters)

WASHINGTON (Reuters) – One day before a crucial U.S. budget meeting between the White House and congressional leaders, a high-ranking senator said Republicans have agreed to including significant revenue increases in a deficit-reduction framework.

"If you add up all of the revenues that we Republicans have agreed to, it's between $150 billion and $200 billion," said Senator Jon Kyl, the No. 2 Republican in the Senate.

Kyl said two possible ways to bring additional revenue to the government would be through sales of government property and additional fees for government services,

Meanwhile, House of Representatives Majority Leader Eric Cantor floated a possible tax compromise, saying Republicans could agree to closing some tax breaks in a budget deal as long as they were offset with tax cuts elsewhere.

"Any discussion about loopholes must be accompanied by offsetting tax cuts," Cantor said at a news conference.

Republicans had been adamant about tax increases not being included in a deficit-reduction deal that President Barack Obama hopes clears the way for also increasing U.S. borrowing authority.

In a lengthy speech on the Senate floor, Kyl talked about increased revenues from the sale of government assets or higher user fees.

He criticized, however, Democratic proposals to get rid of tax breaks on corporate jets or tossing an accounting method known as "last in first out" that eases business tax burdens.

Democrats say they have offered up a "menu" of revenue increases of as much as $400 billion in the deficit-reduction and debt limit talks.

If the limit on U.S. borrowing authority, now at $14.3 trillion, is not raised by the Treasury Department's August 2 deadline, there are fears the United States could either miss some debt repayments or be forced into cutting off major government benefits including Social Security checks.

Obama said such an outcome could push the United States economy into a second recession or worse.

On Thursday, Obama is scheduled to meet at 11:15 EDT with a bipartisan group of congressional leaders. Obama will push for a big agreement that could target as much as $4 trillion in savings -- double the size of what had been under discussion, according to Democratic officials. They provided no details on how they would reach that target.

(Additional reporting by Thomas Ferraro, Susan Cornwell, Jeff Mason and Steve Holland in Washington and Richard Leong in New York; editing by Ross Colvin and Jackie Frank)

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Romney raises $18 million for White House bid (Reuters)

WASHINGTON (Reuters) – Republican presidential hopeful Mitt Romney raised more than $18 million over the last three months, a total that dwarfed his Republican rivals but lagged some predictions.

Romney's second-quarter fundraising reinforced the former Massachusetts governor's role as early Republican front-runner. But it also raised questions about voter enthusiasm for the party's current field of White House hopefuls.

The Romney campaign said on Wednesday the $18.25 million came from all 50 states and the District of Columbia and represented primary donations, not funds for a prospective general election battle against Democratic incumbent President Barack Obama.

Some advisers and analysts had speculated that Romney could raise $30 million or more in the second quarter. Republicans said the sputtering economic recovery may be dampening giving.

"Part of it is the economy. People have less money to give on things like this," said Romney fundraiser Lee Cowen.

A pillar of Romney's support comes from those on Wall Street, Cowen noted, many of whom he said feel "betrayed" by some of Obama's policies.

More Republican establishment figures are giving to the former governor this election season, he said.

Romney, who mounted an unsuccessful presidential bid in 2008, raised more money -- $23 million -- in the first fundraising quarter of 2007, according to Federal Election Commission records. Four years ago, he was less well known.

Still, those figures included some of his own funds. He did not contribute to his campaign for the second quarter of 2011.

The Romney campaign also said it ended the second quarter with $12.6 million in cash on hand.

The sum was at least four times larger than second-quarter fundraising totals for Romney's closest money race rivals, some of whom have only just entered the contest.

Former Minnesota Governor Tim Pawlenty reported raising $4.2 million last week, while Texas congressman Ron Paul's campaign said he collected about $4.5 million.

Jon Huntsman, the former Utah governor and U.S. ambassador to China, formally entered the race on June 21 and has taken in $4.1 million, according to aides. But just under half of that is his own money.

Both Romney and Huntsman have large personal fortunes.

Minnesota congresswoman Michele Bachmann, a Tea Party favorite and formidable fundraiser, has yet to report her second-quarter takings.

Meanwhile, the Obama campaign's second-quarter goal is to raise $60 million including money from a joint account with the Democratic National Committee.

(Editing by Doina Chiacu)

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Romney raises $15-20 million, leads Republican cash race (Reuters)

WASHINGTON (Reuters) – Republican presidential hopeful Mitt Romney is expected to report raising between $15 million and $20 million in campaign cash for the quarter ending on Thursday, a campaign aide said, a sum that far outpaces rivals.

Romney's dominance in the money race stems from his relentless campaigning and fund-raising since he lost a presidential bid in 2008. In addition, several of his rivals have only just entered the race.

Aides to rival Jon Huntsman, who formally announced his candidacy on June 21, said on Thursday he had taken in about $4 million in recent weeks, with a bit less than half coming from his own pockets.

Romney, a former Massachusetts governor, is the front-runner in the Republican race to replace President Barack Obama in the 2012 election. He leads most polls of party rivals and has more than enough money to stay competitive.

"He is raising money far more quickly than he can spend effectively, especially in Iowa and New Hampshire where retail politics is important," said Georgetown University government professor Clyde Wilcox.

Romney rivals like Huntsman and Tim Pawlenty must raise enough to remain competitive, he said.

"If you don't have enough money, volunteers and fund-raisers may start wandering," he said, adding that "enough" may be a matter of surpassing expectations.

The second-quarter figures have not been officially released for the campaigns.

Some outside experts had predicted Romney would raise between $20 million and $30 million, especially after a one-day haul of $10 million last month.

A senior Romney adviser said the totals are in line with what they planned, but also cited "economic headwinds," which could depress fund-raising.

BACHMANN UP, PAWLENTY DOWN

Meanwhile, Pawlenty is struggling in the polls and being overshadowed by the entry of rising Tea party star Michele Bachmann into the race.

"She's clearly stealing oxygen from him in terms of Iowa," University of Minnesota professor Larry Jacobs said.

Pawlenty's advisers have been trying to downplay expectations since the former Minnesota governor entered the race.

"Our numbers are going to be respectable but it's not going to blow (anything) out of the water," said Ray Washburne, national finance chair for Pawlenty's operations in Texas.

Bachmann, a conservative member of the House of Representatives, is an adroit fundraiser. Her congressional committee out-raised all of her House colleagues during 2010, with a $13.5 million haul.

The campaign to re-elect Obama had a goal of raising $60 million, between the campaign and an account at the Democratic National Committee, in the quarter ending on Thursday.

In addition to Romney's official figures, a new so-called Super political action committee created by former Romney aides is said to have pulled in at least $10 million, according to a report in the Wall Street Journal.

These are a new form of political action committee created after a federal court decision last year allowed unlimited contributions from corporations and unions to independent political committees.

(Additional reporting by Steve Holland and Todd Melby; Editing by Xavier Briand)

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