Obama's fiscal cliff strategy is tricky balance

FILE - In this Nov. 16, 2012 file photo, President Barack Obama, accompanied by House Speaker John Boehner of Ohio, speaks to reporters in the Roosevelt Room of the White House in Washington, as he hosted a meeting of the bipartisan, bicameral leadership of Congress to discuss the deficit and economy in Washington. Playing both sides, Obama is trying to balance his public pressure campaign on Republicans over the looming ?fiscal cliff? with his private negotiations with GOP leaders. Advisers see the carrot-and-stick approach as key to winning concessions from Republicans on taxes and reaching a deal to avert the series of year-end tax hikes and spending cuts. (AP Photo/Carolyn Kaster, File)

FILE - In this Nov. 16, 2012 file photo, President Barack Obama, accompanied by House Speaker John Boehner of Ohio, speaks to reporters in the Roosevelt Room of the White House in Washington, as he hosted a meeting of the bipartisan, bicameral leadership of Congress to discuss the deficit and economy in Washington. Playing both sides, Obama is trying to balance his public pressure campaign on Republicans over the looming ?fiscal cliff? with his private negotiations with GOP leaders. Advisers see the carrot-and-stick approach as key to winning concessions from Republicans on taxes and reaching a deal to avert the series of year-end tax hikes and spending cuts. (AP Photo/Carolyn Kaster, File)

WASHINGTON (AP) ? Playing both sides, President Barack Obama is trying to balance his public pressure campaign on Republicans over the looming "fiscal cliff" with his private negotiations with GOP leaders.

The White House is loath to abandon the two-pronged strategy even as the Dec. 31 deadline nears. Obama's advisers see the carrot-and-stick approach as key to winning concessions from Republicans on taxes and reaching a deal to avert the series of year-end tax hikes and spending cuts.

But Obama's campaign to rally public support for his fiscal cliff positions has irked some Republicans. And continuing to publicly lambaste GOP lawmakers as obstructionists for not giving in to White House demands that tax rates rise on the top 2 percent of income earners could undercut trust between Obama and Republicans in their private talks.

For now, the White House says it plans to continue on both tracks. Asked whether the president would be more focused on his public efforts or private talks, White House spokesman Jay Carney said "both."

"We will continue to engage with leaders on Capitol Hill, we will continue to engage with a broader coalition of people who have a stake in this, and that includes ordinary Americans out in the country," Carney said.

But Republicans have made clear that they see the president's public campaign as a hindrance to private negotiations.

A spokesman for House Speaker John Boehner, R-Ohio, said Tuesday that the White House appears to be placing "a higher premium on politics than the American jobs that are at stake." And Senate Minority Leader Mitch McConnell, R-Ky., has said that the country already knows "the president is a very good campaigner. What we don't know is whether he has the leadership qualities necessary to lead his party to a bipartisan agreement on a big issue like this."

Perhaps with that in mind, there are indications that the White House is scaling back its public campaign as negotiations enter a more serious phase. Unless Congress acts, taxes will increase on all income earners on Jan. 1, and a slew of spending cuts will begin to take effect the following day.

After holding a flurry of fiscal cliff-focused events in recent weeks ? from a Twitter town hall to a photo opportunity in a Virginia family's basement apartment ? the president is expected to spend much of this week out of the spotlight.

In the one public appearance he did make this week ? a campaign-style rally at an auto plant in Michigan ? the president held back his criticism of Republicans. Instead, he put the onus for reaching a fiscal cliff deal on Congress as a whole.

"We can solve this problem. All Congress needs to do is pass a law that would prevent a tax hike on the first $250,000 of everybody's income," Obama said, referring to his position that tax rates be increased on individual incomes over $200,000 and on family incomes over $250,000.

The president's restrained rhetoric was particularly notable given that his remarks came a day after he met privately at the White House with Boehner, their first one-on-one session in 18 months.

Both sides have agreed to not publicly discuss any details of that meeting, and White House officials wouldn't say whether Obama's dialed-back approach reflected any progress in the talks.

Even if Obama continues to retreat from his public cliff campaigning, he'll have plenty of surrogates to pick up the slack.

David Plouffe, Obama's senior adviser, sent an email to supporters Tuesday encouraging them to share their support for Obama's tax proposals on social networking sites. "Your voices are being heard, and that's making a difference," Plouffe wrote.

Obama's re-election campaign, which is still up and running more than a month after Election Day, pressed further. In another email to supporters, deputy campaign manager Stephanie Cutter wrote, "Let's get one thing straight: If your taxes go up, Republicans will have made a conscious choice to let that happen."

Obama advisers came out of Election Day banking on being able to translate the enthusiasm ? and massive database ? it used to build support for candidate Obama to build support for a re-elected Obama's policies. It's something the president's aides acknowledge they failed to do during his first term, including during negotiations on the health care overhaul.

There is some evidence to support the Obama team's assertion that its public campaign is working. An Associated Press-GfK poll suggested that 48 percent of Americans want tax cuts to expire in January on earnings over $250,000 but continue for lower incomes. An additional 32 percent said the tax cuts should continue for everybody, which has been the view of Republican lawmakers who say raising taxes on the wealthy would squelch their ability to create jobs.

Some Republican-leaning groups also have sought to build public support for GOP efforts to continue tax cuts for all income earners. Crossroads GPS, the Karl Rove-backed conservative group, announced a $500,000 television advertising buy last week. The TV spots assert that the president's solution to reducing the deficit is "a huge tax increase" and urge the public to call the president and voice opposition to his proposals.

___

Follow Julie Pace at http://twitter.com/jpaceDC

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/3d281c11a96b4ad082fe88aa0db04305/Article_2012-12-12-Fiscal%20Cliff-Obama's%20Strategy/id-a808db9784d54bc980abff4dd89f97b2

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Diageo ends talks over tequila brand Cuervo

LONDON (Reuters) - Diageo , the world's biggest spirits maker, has pulled out of talks to buy a stake in top-selling tequila brand Jose Cuervo in a surprise move that could slow its race into fast-growing emerging markets.

The collapse of discussions with Cuervo, which has a distribution deal with Diageo due to end in June 2013, will leave Diageo without a major tequila brand and Cuervo without a leading distributor.

It could fuel speculation Diageo will seek a deal with U.S. group Beam , home of the world's No.2 tequila brand Sauza, while an industry source said French rival Pernod Ricard might now link up with Cuervo.

Faced with sluggish growth in recession-hit European economies, Diageo has been looking to tap burgeoning middle classes in Africa, Asia and Latin America, where it aims to make around half of its turnover by 2015.

A deal with Jose Cuervo, valued at about $3 billion, would have given the British group access to the emerging Mexican spirits market and a stronger product range there to go with its Johnnie Walker whisky and Smirnoff vodka brands.

Diageo, Cuervo's main distributor outside Mexico, had been expected to take a stake in the business with the possibility of gaining majority control at a later date.

But the firm said in a statement on Tuesday that discussions had broken down without agreement, after the two companies had been wrangling over price for more than a year.

Diageo shares were down 1.2 percent at 1,863.5 pence by 7:55 a.m. EDT, underperforming a broadly flat UK benchmark index <.ftse>.

RBC analysts noted that Cuervo only accounted for about 3 percent of Diageo revenue and 2 percent of profit, and said the failure of the deal might free up funds for other transactions.

A weekend newspaper report said Diageo had held talks with Japanese brewer Suntory over a joint bid for Beam worth over $10 billion. Diageo declined to comment.

"Whether Diageo was just using the threat of buying Beam as a bargaining tool with Cuervo is hard to say. But now the market will probably ascribe a higher probability that Diageo will take a look closer at Beam's portfolio," said analysts at Davy.

Some analysts, however, have said Diageo may not want to pay the price Beam would command, while anti-trust regulators may also prove to be a hurdle. The maker of Jim Beam bourbon beat quarterly profit expectations last month and is considered a success story since going public.

PREMIUM TEQUILA

Cuervo is owned by the Beckmann family, heirs to the Cuervo family who founded the company in the Mexican town of Tequila in 1795. The business is the clear leader in tequila's two biggest markets, the United States and Mexico, ahead of Sauza.

However, Cuervo's U.S. share has been gradually declining. It was one of Diageo's lowest margin brands and was not realizing its potential in the United States, Diageo's Walsh said when talks started in 2011.

Beckmann-owned Proximo would be the most likely distributor for Cuervo in the United States once the Diageo agreement ends, UBS analysts said.

"Cuervo has two problems at the moment: they are mono-product and mono-geography. They absolutely need to diversify the business to maintain its value," an industry source said.

The source added that Pernod Ricard, the world's second-largest spirits group and the firm behind Absolut vodka and Mumm champagne, could now look at Cuervo, and also Beam.

"Having more tequila in their portfolio would not hurt," the source said.

Diageo, meanwhile, could focus on growing its premium tequila brand Don Julio.

Premium tequila brands, which are high margin and high growth, are made entirely from the blue agave plant that grows in the Mexican state of Jalisco, while cheaper brands are mixed with spirit derived from sugar cane and other sources.

Diageo also has plenty of other acquisitions to digest.

Last month, it paid $2.1 billion for a majority stake in India's largest spirits company United Spirits, and it has also secured smaller deals for producers of baiju, cachaca and raki in China, Brazil and Turkey.

The group, whose brands also include Guinness, Tanqueray gin, and Baileys liqueur, was advised on the Jose Cuervo talks by Goldman Sachs and HSBC.

(Additional reporting by Sophie Sassard; Editing by Kate Holton and Mark Potter)

Source: http://news.yahoo.com/diageo-ends-talks-over-tequila-brand-cuervo-114730631--sector.html

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Compromise emerges in global talks on Internet oversight

DUBAI (Reuters) - Hopes rose on Tuesday for a compromise agreement that would keep intrusive government regulation of the Internet from being enshrined in a global treaty.

As a 12-day conference of the International Telecommunication Union drew near its Friday closing, the chairman of the gathering in Dubai circulated a draft that sidelined proposals from Russia, China and other countries that have been seeking the right to know where each piece of Internet traffic comes from.

"The United States believes it is the basis for any further progress toward reaching an agreement at this conference," said U.S. Ambassador Terry Kramer, who had led Western opposition to the earlier proposals.

The new draft was greeted positively by a broad swath of delegates to the conference and came as a surprise to many who had been frustrated by the deadlock gripping the event over the weekend.

Hamaoun Tour?, ITU secretary-general, told Reuters he had hosted discussions between the opposing parties and weary delegates seemed eager to resolve their differences as talks drag into the early hours each night.

A majority of the more than 150 countries represented at the conference had been willing to officially extend the mission of the United Nations agency to the Internet, while the Americans, most Europeans and some other advanced economies wanted to limit the ITU to oversight of international phone calls and other means of communication.

The issue is coming to a head now because the ITU is revamping its treaty for the first time since 1988, before the World Wide Web took shape and became an economic, cultural and political force usually free from international oversight.

The compromise-in-progress would move most Internet elements from the treaty itself to a separate, U.N.-style "resolution" that is not binding on the countries, delegates said.

A few matters that could govern the Internet remain in the main document and will be debated Wednesday, said Markus Kummer, vice president of the Internet Society, one of several nongovernmental groups that are involved in setting standards now and that sounded alarms about the Dubai conference.

Among the remaining provisions in the draft is a tentative assertion that countries could choose to "manage the naming, numbering, addressing and identification resources used within their territories for international telecommunications."

That could be interpreted as including the right to assign Web addresses, which is currently controlled by ICANN, a United States-based nonprofit under contract to the U.S. Department of Commerce.

"The Internet space as such isn't mentioned, but there are a few provisions that might go a little bit into the Internet space and that we need to look at carefully," Kummer said.

The nonbinding resolution, meanwhile, was further softened to allude to the roles of parties from outside government.

"All governments should have an equal role and responsibility for international Internet governance and for ensuring the stability, security and continuity of the existing Internet and its future development and of the future Internet, and that the need for development of public policy by governments in consultation with all stakeholders is also recognized," the draft states.

Most of the talks have been behind closed doors, and so far the key debate on whether the ITU has a mandate to set Internet-related regulations has not been held in public.

Conference Chairman Mohamed al-Ghanim, director-general of the United Arab Emirates' telecom regulator, has opted to hand over the more controversial issues to private sub-groups.

Open sessions are instead devoted to relatively minor issues, with much of Tuesday's final debate spent squabbling over when the next summit should be held.

When asked if member states had formed an agreement over the terms in which the Internet was referred to in the treaty, Tour? said, "of course," but declined to give further details, saying it had yet to be formally approved.

Tour? said the treaty would "absolutely not" cover Internet governance, but admitted some references to the Internet were likely to be included in the final text, which may be too much for the United States.

"It's normal to mention the Internet, it's not taboo, because we're all stakeholders of this Internet world," said Tour?. "The Internet is one of the biggest issues here, so for me it was important that we resolve this issue. By Thursday we should be ready."

Though the Western camp was happy with Tuesday's negotiations, some of its opponents remained unappeased. A Russia-led coalition resubmitted a previously shelved proposal that calls for sweeping new governmental powers over the Internet.

The revised submission, now co-signed by Russia, China, Saudi Arabia, Algeria, Sudan, Bahrain, Iraq and the UAE, says countries should be able to block some Internet locations and take control of address allocation. The proposal also wants to allow states to track and direct Internet traffic and provides a definition of spam so broad it could potentially apply to almost any emailed message, which opponents warn could be used to curb online freedom of expression.

But this proposal has yet to be debated in the public sessions, and its recommendations may have little chance of being approved, especially following Tour?'s insistence that the treaty would not deal with Internet governance.

"The end result is very unlikely to have anything in it that would justify the amount of fear-mongering that led up to the conference," said Kieren McCarthy, a former ICANN official who runs .Nxt, an information service that specializes in Internet policy.

"But at the same time, there were several concerted efforts to increase government control over the Internet, so it's hard to tell what would have happened if people hadn't been so vociferous."

(Reporting by Matt Smith in Dubai and Joseph Menn in San Francisco; Editing by M.D. Golan)

Source: http://news.yahoo.com/compromise-emerges-global-talks-internet-oversight-001344441--finance.html

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House Dems, GOP embrace cuts in defense spending

WASHINGTON (AP) ? Substantial reductions in military spending should be part of any budget deal that President Barack Obama negotiates with Congress to avert the so-called "fiscal cliff" of automatic tax hikes and spending cuts, a group of House Republicans and Democrats said Monday.

With just three weeks to the double economic hit, 22 lawmakers endorsed further cuts in projected military spending to address the nation's debt, arguing that long-term, strategic reductions were possible with the end of the war in Iraq and the drawdown in Afghanistan.

"As we transition from wartime to peacetime, and as we confront our nation's fiscal challenges, future defense budgets should reflect the conclusion of these wars and acknowledge that our modern military is able to approach conflicts utilizing fewer but more advanced resources," the lawmakers wrote in a letter to Obama and congressional leaders.

The lawmakers said "substantial defense savings" could be achieved without undermining national security, and they urged Obama, House Speaker John Boehner, R-Ohio, and other congressional leaders to include such savings in any agreement.

Signing the letter were Reps. Barney Frank, D-Mass., and Mick Mulvaney, R-S.C., who earlier this year led a coalition of liberal Democrats and conservative Republicans in persuading the House to cut $1.1 billion from a $608 billion defense bill. It was the clearest signal yet that defense dollars would no longer be spared from budget cuts in a time of astronomical deficits.

Also signing the letter were Reps. Chris Gibson, R-N.Y., a member of the House Armed Services Committee, and Keith Ellison, D-Minn.

The latest Republican proposal in the negotiations with Obama calls for $300 billion in cuts in discretionary spending over 10 years, but it does not specify how much would be cut from defense and domestic programs.

The Pentagon already is facing a reduction of nearly $500 billion over a decade in projected spending, part of the budget deal that Obama and congressional Republicans agreed to in August 2011. If the two sides fail to reach an agreement to avoid the fiscal cliff, the military would face automatic, across-the-board cuts totaling $55 billion next year and close to $500 billion over 10 years.

The lawmakers wrote that they had serious concerns about those arbitrary cuts, but they support the general intent to improve the nation's fiscal health.

"We know the United States can maintain the best fighting force in the world while also pursuing sensible defense savings," they wrote. "How we spend our resources is just as important as how much we spend. The true foundation of our military power is not dollars or equipment, but the men and women of our armed forces, who have no equal."

They specifically cited retired Adm. Mike Mullen, the former chairman of the Joint Chiefs of Staff, who said the single biggest threat to national security is the debt. They also pointed to the various outside organizations, conservative and liberal, that have suggested further cuts of $550 billion to projected spending.

Source: http://news.yahoo.com/house-dems-gop-embrace-cuts-defense-spending-212559270--finance.html

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Stock market is a wild card in fiscal cliff talks

FILE - This Nov. 16, 2012 file photo shows President Barack Obama shaking hands with House Speaker John Boehner of Ohio in the Roosevelt Room of the White House in Washington, during a meeting to discuss the deficit and economy. Congress and the White House can significantly soften the initial impact of the ?fiscal cliff? even if they fail to reach a compromise by Dec. 31. One thing they cannot control, however, is the financial markets' reaction, which possibly could be a panicky sell-off that triggers economic reversals worldwide. The stock market's unpredictability is perhaps the biggest wild card in the political showdown over the fiscal cliff. (AP Photo/Carolyn Kaster, File)

FILE - This Nov. 16, 2012 file photo shows President Barack Obama shaking hands with House Speaker John Boehner of Ohio in the Roosevelt Room of the White House in Washington, during a meeting to discuss the deficit and economy. Congress and the White House can significantly soften the initial impact of the ?fiscal cliff? even if they fail to reach a compromise by Dec. 31. One thing they cannot control, however, is the financial markets' reaction, which possibly could be a panicky sell-off that triggers economic reversals worldwide. The stock market's unpredictability is perhaps the biggest wild card in the political showdown over the fiscal cliff. (AP Photo/Carolyn Kaster, File)

WASHINGTON (AP) ? Congress and the White House can significantly soften the initial impact of the "fiscal cliff" even if they fail to reach a compromise by Dec. 31. One thing they cannot control, however, is the financial markets' reaction, which possibly could be a panicky sell-off that triggers economic reversals worldwide.

The stock market's unpredictability is perhaps the biggest wild card in the political showdown over the fiscal cliff.

President Barack Obama's re-election gives him a strong negotiating hand, as Republicans are increasingly acknowledging. And some Democrats are willing to let the Dec. 31 deadline pass, because a rash of broad-based tax hikes would pressure Republicans to give more ground in renewed deficit-reduction negotiations.

A chief fear for Obama's supporters, however, is that Wall Street would be so disgusted or dismayed that stocks would plummet before lawmakers could prove their newfound willingness to mitigate the fiscal cliff's harshest measures, including deep, across-the-board spending cuts that Defense Secretary Leon Panetta says could significantly damage the nation's military posture. Some Republicans believe that fear will temper the president's insistence on a hard bargain this month. Obama and GOP House Speaker John Boehner on Sunday held their first meeting between just the two of them since the election, and spokesmen for both emphasized afterward their lines of communication remain open.

The so-called cliff's recipe of major tax hikes and spending cuts can actually be a gentle slope, because the policy changes would be phased in over time. Washington insiders say Congress and the White House would move quickly in January or February to undo many, but not all, of the tax hikes and spending cuts.

Financial markets, however, respond to emotion as well as to research, reason and promises. If New Year's headlines scream "Negotiations Collapse," an emotional sell-off could threaten the president's hopes for continued economic recovery in his second term, even if Republicans receive most of the blame for the impasse.

"Nobody can predict the markets' reaction," said Rep. Jim Cooper, D-Tenn.

Some Republicans are surprised that the White House has not made clearer efforts to reassure Wall Street that if the Dec. 31 deadline is breached, the worrisome pile of tax increases and spending cuts would not hit all at once.

A few liberal commentators are making just that case.

"If we go past the so-called fiscal cliff deadlines and all the resulting budget cuts and tax increases come into force, the administration can minimize the damage," Washington Post columnist E.J. Dionne wrote last week. "Obama can publicly announce he is delaying any cuts, on the theory that Congress will eventually vitiate some of them. And he can make sure the bond markets know of his plans well in advance. ... Everyone (especially Wall Street) should calm down."

Some financial bloggers agree. "Although it would be bad to let the spending cuts and tax hikes fully go into effect, if this thing is addressed in early January, things will be okay," wrote Business Insider's Joe Weisenthal.

So far, the stock markets have stayed calm. The S&P 500 index is up 12 percent for the year.

That might be because investors agree that a temporary trip over the cliff wouldn't be too harmful. Chastened lawmakers, the thinking goes, would quickly minimize the economic damage with a deficit-reduction compromise that eluded them in December.

Or, it's possible that investors view the most pessimistic tones surrounding the fiscal cliff talks as posturing that will give way to a last-minute deal. If that is the thinking ? and if the Dec. 31 deadline instead is breached ? Obama's fear might come to pass: The expectation of a deal might produce a significant decline in stock prices if it doesn't occur.

As bad as that sounds, some liberals think it will be necessary to force many Republicans to drop their opposition to higher tax rates on the wealthy that Obama says are crucial to trimming the deficit.

Rep. Peter Welch, a Vermont Democrat who says temporarily going over the cliff wouldn't be so bad, noted what happened on Sept. 29, 2008. The House surprised investors by rejecting a proposed bailout of the crisis-stricken financial sector. Republicans strongly opposed the plan despite then-President George W. Bush's support. The Dow plunged 777 points, its largest one-day point drop ever.

Four days later the House, shaken by the market reaction, passed a slightly modified bailout bill.

Welch said a similar market meltdown next month, in the event of a fiscal cliff impasse, "is what will force members of Congress eventually to act."

Few lawmakers in either party are eager to predict how the stocks and bonds markets would react to a failure to reach a fiscal cliff accord by year's end.

"Let's not pretend the markets fully understand the politicians, or the politicians fully understand the markets," said Rep. George Miller, D-Calif., who has served in Congress for 37 years.

___

Follow Charles Babington on Twitter: http://twitter.com/cbabington

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/89ae8247abe8493fae24405546e9a1aa/Article_2012-12-10-Fiscal%20Cliff-Markets/id-c2406ef4257b4053ad02349f04def322

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