Stocks edge higher as Fed ends two-day meeting






NEW YORK (AP) — Stocks edged higher, extending a winning streak, as investors awaited news on whether the Federal Reserve will announce more bond purchases to stimulate the U.S. economy. Wall Street also watched for developments from budget talks in Washington.


The Dow Jones industrial average was up 10 points at 13,260 as of noon in New York. The Standard and Poor‘s 500 was up three points at 1,431. The Nasdaq composite was little changed at 3,022.






The U.S. central bank is expected to announce a revamped bond-buying plan at the end of a two-day policy meeting Wednesday to help hold down interest rates and encourage borrowing. The expectation is that the Fed will unveil a program Wednesday to buy $ 45 billion a month in long-term Treasurys. That would replace a program that expires at the end of the year.


In Washington, lawmakers are still trying to reach a deal to avoid the “fiscal cliff,” a series of sharp tax increases and spending cuts that will hit the economy in January if Congress and President Barack Obama are unable to thrash out an agreement to reduce the U.S. budget deficit.


House Speaker John Boehner and Obama spoke on the phone Tuesday, a day after the president offered to reduce his initial demand for $ 1.6 trillion in higher tax revenue over a decade to $ 1.4 trillion.


Boehner says “serious differences” remain between him and President Barack Obama in negotiations to avert automatic spending cuts and tax increases that economists fear could send the U.S. economy over a “fiscal cliff.” Democrats are resisting GOP demands for steps like raising the Medicare eligibility age.


Both the Dow and the S&P have advanced for the past five days as optimism increased that a deal can be struck. The S&P is trading at its highest in five weeks and has now erased all of its post-election losses. Stocks fell immediately after the vote Nov. 6 on concern that a divided government would struggle to resolve the budget issue.


“There’s some optimism that we are going to have some sort of an agreement on the cliff before December 31,” said JJ Kinahan, Chief Derivatives Strategist for TD Ameritrade. More Fed stimulus is “pretty much mostly priced in,” he said, because policymakers would be unlikely to risk disappointing market expectations given the concerns about the unresolved fiscal situation.


Chemicals giant DuPont advanced 83 cents to $ 44.52 after the company unveiled plans to buy back up to $ 1 billion of its shares next year and said that profit for this year will reach the high end of its forecasts.


The yield on the 10-year Treasury note was little changed 1.66 percent.


Other stocks making big moves:


Eli Lilly and Co. fell $ 1.65 to $ 48.95 after the Indianapolis drugmaker it will conduct the additional, late-stage study of its possible Alzheimer’s treatment solanezumab. The move delays a regulatory decision on a drug that flashed potential to help patients with mild cases of the disease.


—Health insurer Aetna Inc. rose $ 1.94 to $ 46.41 after the company said late Tuesday that it expects sales and profit to grow next year.


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North Korea’s new leader burnishes credentials with rocket






SEOUL/TOKYO (Reuters) – North Korea successfully launched a rocket on Wednesday, boosting the credentials of its new leader and stepping up the threat the isolated and impoverished state poses to its opponents.


The rocket, which North Korea says put a weather satellite into orbit, has been labeled by the United States, South Korea and Japan as a test of technology that could one day deliver a nuclear warhead capable of hitting targets as far as the continental United States.






“The satellite has entered the planned orbit,” a North Korean television news-reader clad in traditional Korean garb triumphantly announced, after which the station played patriotic songs with the lyrics “Chosun (Korea) does what it says”.


The rocket was launched just before 10 a.m. Korea time (9 p.m. ET on Tuesday), according to defense officials in South Korea and Japan, and easily surpassed a failed April launch that flew for less than two minutes.


The North American Aerospace Defense Command (NORAD) said that it “deployed an object that appeared to achieve orbit”, the first time an independent body has verified North Korean claims.


North Korea followed what it said was a similar successful launch in 2009 with a nuclear test that prompted the United Nations Security Council to stiffen sanctions that it originally imposed in 2006 after the North’s first nuclear test.


The state is banned from developing nuclear and missile-related technology under U.N. resolutions, although Kim Jong-un, the youthful head of state who took power a year ago, is believed to have continued the state’s “military first” programs put into place by his deceased father Kim Jong-il.


North Korea lauded Wednesday’s launch as celebrating the prowess of all three Kims to rule since it was founded in 1948.


“At a time when great yearnings and reverence for Kim Jong-il pervade the whole country, its scientists and technicians brilliantly carried out his behests to launch a scientific and technological satellite in 2012, the year marking the 100th birth anniversary of President Kim Il Sung,” its KCNA news agency said.


Washington condemned Wednesday’s launch as a “provocative action” and breach of U.N. rules, while Japan’s U.N. envoy called for a Security Council meeting. However, diplomats say further tough sanctions are unlikely to be agreed at the body as China, the North’s only major ally, will oppose them.


“The international community must work in a concerted fashion to send North Korea a clear message that its violations of United Nations Security Council resolutions have consequences,” the White House said in a statement.


Japan’s likely next prime minister, Shinzo Abe, who is leading in opinion polls ahead of an election on December 16 and who is known as a North Korea hawk, called on the United Nations to adopt a resolution “strongly criticizing” Pyongyang.


BEIJING BLOCK


China had expressed “deep concern” prior to the launch which was announced a day after a top politburo member, representing new Chinese leader Xi Xinping, met Kim Jong-un in Pyongyang.


On Wednesday its tone was measured, regretting the launch but calling for restraint on possible counter-measures, in line with previous policy when it has effectively vetoed tougher sanctions.


“China believes the Security Council’s response should be cautious and moderate, protect the overall peaceful and stable situation on the Korean peninsula, and avoid an escalation of the situation,” Chinese Foreign Ministry spokesman Hong Lei told journalists.


Bruce Klingner, a Korea expert at the Heritage Foundation, told a conference call: “China has been the stumbling block to firmer U.N. action and we’ll have to see if the new leadership is any different than its predecessors.”


A senior adviser to South Korea’s president said last week it was unlikely there would be action from the U.N. and that Seoul would expect its allies to tighten sanctions unilaterally.


Kim Jong-un, believed to be 29 years old, took power when his father died on December 17 last year and experts believe the launch was intended to commemorate the first anniversary of the death.


The April launch was timed for the centennial of the birth of Kim Il Sung, the grandfather of its current ruler.


Wednesday’s success puts the North ahead of the South which has not managed to get a rocket off the ground.


“This is a considerable boost in establishing the rule of Kim Jong-un,” said Cho Min, an expert at the Korea Institute of National Unification.


There have been few indications the secretive and impoverished state, where the United Nations estimates a third of the population is malnourished, has made any advances in opening up economically over the past year.


North Korea remains reliant on minerals exports to China and remittances from tens of thousands of its people working on labor projects overseas.


The 22 million population often needs handouts from defectors who have escaped to South Korea in order to afford basic medicines.


Given the puny size of its economy – per capita income is less than $ 2,000 a year – one of the few ways the North can attract world attention is by emphasizing its military threat.


Pyongyang wants the United States to resume aid and to recognize it diplomatically, although the April launch scuppered a planned food deal.


It is believed to be some years away from developing a functioning nuclear warhead although it may have enough plutonium for around half a dozen nuclear bombs, according to nuclear experts.


The North has also been enriching uranium, which would give it a second path to nuclear weapons as it sits on vast natural uranium reserves.


“A successful launch puts North Korea closer to the capability to deploy a weaponized missile,” said Denny Roy, a senior fellow at the East-West Center in Hawaii.


“But this would still require fitting a weapon to the missile and ensuring a reasonable degree of accuracy. The North Koreans probably do not yet have a nuclear weapon small enough for a missile to carry.”


Pyongyang says that its development is part of a civil nuclear program, but has also boasted of it being a “nuclear weapons power”.


(Additional reporting by Jumin Park and Yoo Choonsik in SEOUL; David Alexander, Matt Spetalnick and Paul Eckert in WASHINGTON; Linda Sieg in TOKYO; Sui-Lee Wee in BEIJING; Rosmarie Francisco in MANILA; Writing by David Chance; Editing by Raju Gopalakrishnan)


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Facebook revises privacy controls in effort to make them more accessible, comprehensible






SAN FRANCISCO – Facebook is trying to make its privacy controls easier to find and understand in an effort to turn the world’s largest social network into a more discreet place.


The fine-tuning announced Wednesday will include several revisions that will start rolling out to Facebook Inc.‘s more than 1 billion users in the next few weeks.






The biggest change will be a new “privacy shortcuts” section that will appear as a tiny lock on the right-hand side at the top of people’s news feeds. This feature offers a drop-down box where users will be able to get answers to common questions such as “Who can see my stuff?”


Other updates will include a tool that will enable individuals to review all the publicly available pictures identifying them on Facebook.


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‘Lincoln,’ ‘Les Mis,’ ‘Playbook’ lead SAG awards






LOS ANGELES (AP) — The Civil War saga “Lincoln,” the musical “Les Miserables” and the comic drama “Silver Linings Playbook” boosted their Academy Awards prospects Wednesday with four nominations apiece for the Screen Actors Guild Awards.


All three films were nominated for overall performance by their casts. Also nominated for best ensemble cast were the Iran hostage-crisis thriller “Argo” and the British retiree adventure “The Best Exotic Marigold Hotel.”






Directed by Steven Spielberg, “Lincoln” also scored individual nominations for Daniel Day-Lewis in the title role as best actor, Sally Field for supporting actress as Mary Todd Lincoln and Tommy Lee Jones for supporting actor as abolitionist firebrand Thaddeus Stevens.


“Les Miserables,” from “The King’s Speech” director Tom Hooper, had nominations for Hugh Jackman for best actor as Victor Hugo’s long-suffering hero Jean Valjean and Anne Hathaway for supporting actress as a woman fallen into prostitution, plus a nomination for its stunt ensemble.


“Silver Linings Playbook,” made by “The Fighter” director David O. Russell, also had lead-acting nominations for Bradley Cooper and Jennifer Lawrence as lost souls who find a second chance at love and Robert De Niro for supporting actor as a football-obsessed dad.


Besides Lawrence, best-actress nominees are Jessica Chastain as a CIA analyst pursuing Osama bin Laden in “Zero Dark Thirty”; Marion Cotillard as a woman who finds romance after tragedy in “Rust and Bone”; Helen Mirren as Alfred Hitchcock’s strong-willed wife in “Hitchcock”; and Naomi Watts as a woman caught in the devastation of a tsunami in “The Impossible.”


Joining Cooper, Day-Lewis and Jackman in the best-actor field are John Hawkes as a polio victim aiming to lose his virginity in “The Sessions” and Denzel Washington as a boozy airline pilot in “Flight.”


SAG nominees are almost all familiar names in Hollywood’s awards season. Eighteen of the 20 film acting contenders are past Academy Awards nominees and 13 have won Oscars, among them five two-time winners. Only Cooper and Jackman have never before earned Oscar nominations.


One of the year’s most-acclaimed films, Paul Thomas Anderson’s “The Master,” earned only one nomination, supporting actor for Philip Seymour Hoffman as a mesmerizing cult leader. The film was snubbed on nominations for ensemble, lead actor Joaquin Phoenix and supporting actress Amy Adams.


Other individual performances overlooked by SAG voters include Anthony Hopkins in the title role of “Hitchcock,” Keira Knightley in the title role of “Anna Karenina,” Bill Murray as Franklin Roosevelt in “Hyde Park on Hudson” and “Argo” director Ben Affleck, who also starred in the film.


The SAG Awards will be presented Jan. 27. The guild nominations are one of Hollywood’s first major announcements on the long road to the Feb. 24 Oscars Awards, whose nominations will be released Jan. 10.


Nominations for the Golden Globes, the second-biggest film honors after the Oscars, come out Thursday.


Maggie Smith had four individual and ensemble nominations. Along with sharing the ensemble honor for “Best Exotic Marigold Hotel,” Smith joined the cast of “Downton Abbey” among TV ensemble contenders and had nominations for supporting film actress as a cranky retiree in “Marigold Hotel” and TV drama actress for “Downton Abbey.”


Nicole Kidman earned two individual nominations, as supporting film actress as a woman smitten with a prison inmate in “The Paperboy” and best actress in a TV movie or miniseries as war correspondent Martha Gellhorn in “Hemingway & Gellhorn.”


Bryan Cranston had three overall nominations, as best actor in a TV drama for “Breaking Bad,” an ensemble honor for that show and a film ensemble honor for “Argo.”


Along with “Breaking Bad” and “Downton Abbey,” best TV drama ensemble contenders are “Boardwalk Empire,” ”Homeland” and “Mad Men.” TV comedy ensemble nominees are “30 Rock,” ”The Big Bang Theory,” ”Glee,” ”Modern Family,” ”Nurse Jackie” and “The Office.”


___


Online:


http://www.sagawards.org


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Wall Street edges up with help from McDonald’s






NEW YORK (Reuters) – Stocks were modestly higher on Monday, helped by stronger-than-expected sales from McDonald’s, but gains were constrained as investors awaited any sign of progress in talks to avert the so-called fiscal cliff.


Developments in Europe also tempered sentiment after Italian Prime Minister Mario Monti said he would resign once the 2013 budget is approved. The move added to uncertainty about reducing euro zone debt and drove Italy’s borrowing costs higher.






U.S. President Barack Obama met with Republican House Speaker John Boehner on Sunday to negotiate a deal for avoiding the “fiscal cliff” that is set to go into effect in the new year.


The two sides declined to provide details about the unannounced meeting. Obama is expected to make remarks at 2 p.m. (1900 GMT) from Michigan where he is touring an auto plant.


The fiscal cliff talks have kept markets on edge in the last month as investors worry the scheduled measures could send the economy into recession if politicians do not reach a deal.


While the negotiations are at the forefront of investors‘ minds, most have adopted the position that a deal will be reached, even if it is at the last minute, said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati, Ohio.


“We haven’t had any ‘progress’ the last two weeks or so, yet all in all equity markets have continued to hang tough,” said Detrick. “The rhetoric from Washington is strong, but Wall Street is betting something probably will get done.”


The Dow was helped by a gain in McDonald’s Corp . The fast food chain’s stronger-than-expected November sales marked a rebound after a decline in October. The stock was up 1 percent at $ 89.33.


The Dow Jones industrial average <.dji> gained 32.64 points, or 0.25 percent, to 13,187.77. The Standard & Poor’s 500 Index <.spx> added 1.09 points, or 0.08 percent, to 1,419.16. The Nasdaq Composite Index <.ixic> rose 9.90 points, or 0.33 percent, to 2,987.95.</.ixic></.spx></.dji>


Ingersoll-Rand Plc said it will spin off its security division and announced a $ 2 billion share buyback, sending its shares up 2.4 percent at $ 49.86.


Cisco Systems boosted the Nasdaq after it laid out its midterm growth strategy on Friday. Its shares were up 2 percent at $ 19.72.


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RIM teases BlackBerry 10 launch with image of first BB10 smartphone






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Black women battle obesity with dialogue, action






WASHINGTON (AP) — Nicole Ari Parker was motivated by frustration. For Star Jones, it was a matter of life or death. Toni Carey wanted a fresh start after a bad breakup.


All three have launched individual campaigns that reflect an emerging priority for African-American women: finding creative ways to combat the obesity epidemic that threatens their longevity.






African-American women have the highest obesity rate of any group of Americans. Four out of five black women have a body mass index above 25 percent, the threshold for being overweight or obese, according to the Centers for Disease Control and Prevention. By comparison, nearly two-thirds of Americans overall are in this category, the CDC said.


Many black women seem to not be be bothered that they are generally heavier than other Americans.


Calorie-rich, traditional soul food is a staple in the diets of many African-Americans, and curvy black women are embraced positively through slang praising them as “thick” with a “little meat on their bones,” or through songs like the Commodore’s “Brick House” or “Bootylicious” by Destiny’s Child. A study by the Kaiser Family Foundation and The Washington Post earlier this year found that 66 percent of overweight black women had high self-esteem, while 41 percent of average-sized or thin white women had high self-esteem.


Still, that doesn’t mean black women reject the need to become healthier.


Historically black, all-female Spelman College in Atlanta is disbanding its NCAA teams and devoting those resources to a campus-wide wellness program. In an open letter announcing Spelman’s “wellness revolution,” president Beverly Daniel Tatum cited a campus analysis that found many of Spelman’s 2,100 students already have high blood pressure, Type 2 diabetes or other chronic ailments.


“Spelman has an opportunity to change the health trajectory of our students and, through their influence, the communities from which they come,” Tatum’s letter said.


Jones, who underwent open heart surgery in 2010 at age 47 and now urges awareness about heart disease among black women, was met by an overflow crowd earlier this year when she convened a Congressional Black Caucus Foundation panel on black women and obesity.


“We have to get ourselves out of being conditioned to think that using soft words so we don’t hurt peoples’ feelings is doing them any favor,” Jones said. “Curvy, big-boned, hefty, full-figured, fluffy, chubby. Those are all words designed to make people feel better about themselves. That wasn’t helpful to me.”


Jones once embraced being large and fabulous, at 5 feet 5 inches tall and 300 pounds. But under that exterior, she said, she was morbidly obese, suffering from extreme fatigue, nausea, lightheadedness, heart palpitations and blurred vision. The attorney and TV personality also had gastric bypass surgery in 2003.


Now, she advises women to make simple changes such as reducing salt intake, exercising 30 minutes a day, quitting smoking, controlling portion sizes and making nutritious dietary choices.


Nutritionist and author Rovenia M. Brock, known professionally as Dr. Ro, agrees with Jones. She said getting active is only about 20 percent of the fight against obesity. The rest revolves around how much people eat.


“Our plates are killing us,” she said.


Brock said “food deserts,” or urban areas that lack quality supermarkets, are a real obstacle. She suggested getting around that by carpooling with neighbors to stores in areas with higher-quality grocery options or buying food in bulk. She also suggested growing herbs and vegetables in window-box gardens.


“Stop focusing on what’s not there, or what you think is not there,” Brock said. “We have to get out of this wimpy, ‘woe is me’ mentality.”


While first lady Michelle Obama has encouraged exercise through her “Let’s Move” campaign targeting childhood obesity, the spark for this current interest among black women may have been comments last year by Surgeon General Regina Benjamin, who observed publicly that women must stop allowing concern about their hair to prevent them from exercising.


Some black women visit salons as often as every two weeks, investing several hours and anywhere from $ 50 to hundreds of dollars each visit — activity that, according to the Black Owned Beauty Supply Association, helps fuel a $ 9 billion black hair care and cosmetics industry.


In an interview during a health conference in Washington last week, Benjamin said the damage sweat can inflict on costly hairstyles can affect women’s willingness to work out, and she hopes to change that. She goes to beauty industry conferences to encourage stylists to create exercise-friendly hairdos.


“I wouldn’t say we use it as an excuse, we use it as a barrier,” Benjamin said. “And that’s not one of the barriers anymore. We’re always going to have problems with balancing our lives, but we could take that one out.”


Parker, an actress who starred in “A Streetcar Named Desire” on Broadway earlier this year, understands this dilemma well. Out of personal frustration over maintaining both her workout and her hair, she created “Save Your Do” Gymwrap — a headband that can be wrapped around the hair in a way that minimizes sweat and preserves hairstyles.


“Not just as a black woman, but as a woman, since the beginning of time, beauty has been our responsibility,” Parker said in an interview. Because of that, she said, exercise has become linked with vanity instead of health.


“We’ve turned exercise into a weight-loss regimen,” Parker said. “No. Exercise is about being grateful for the body you have and sustaining the life you have. … Take all the hype out of the exercise and think of it as brushing your teeth.”


With their mutual family histories of diabetes and high blood pressure in mind, Carey, 28, and her sorority sister Ashley Hicks, 29, co-founded the running club Black Girls Run. Carey also considered it a new beginning after a bad breakup and a move across country. Since 2009, Black Girls Run has amassed 52,000 members who serve as a support system for runners.


Black Girls Run has about 60 groups nationwide that coordinate local races in Atlanta, New York, San Francisco, Washington, D.C, Houston and Greensboro, N.C. Most groups run at least five times a week. Next month, the national running club will take its first “Black Girls Run — Preserve the Sexy” tour to cities with high obesity rates. The tour includes health and fitness clinics with information on nutrition, hair maintenance and running gear.


“We found that when you want to get healthy and when you want to be active, it’s intimidating,” Carey said. “You don’t know where to start. There’s a little coaxing that has to go along with that.”


Parker said once African-American women place value on their bodies and longevity, everything else will follow. It costs her nothing, she said, to walk around an outdoor track with her husband, actor Boris Kodjoe, or run up and down stairs at home with her headphones.


“One good step breeds another one,” Parker said. “You’re going to have one less margarita, one less scoop of Thanksgiving macaroni … and yet you’re not doing anything fanatical or dramatic.”


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Amgen buys Icelandic gene hunter Decode for $415 million






LONDON (Reuters) – U.S. biotechnology group Amgen Inc has agreed to buy unlisted Decode Genetics, a pioneer in hunting down genes linked to disease, for $ 415 million in cash to boost its drive to develop better targeted drugs.


Founded in 1996, Decode blazed a trail in personal genomics by trawling Iceland’s unique genetic heritage, which has changed little since the Vikings arrived more than 1,000 years ago, to work out the links between gene variants and common diseases.






But it failed to live up to early expectations after going public in 2000 and filed for bankruptcy protection in 2009, weighed down by debts after 13 years of failing to make a profit, before re-emerging as a privately owned company.


Amgen and Decode said on Monday that the transaction did not require regulatory approval and was expected to close before the end of 2012.


As part of Amgen, Decode’s scientists will help in the task of ensuring that experimental medicines hit the right spot. Their know-how should allow Amgen to identify promising new avenues earlier and close down dead-ends more quickly.


“This fits perfectly with our objective to pursue rapid development of relevant molecules that reach the right disease targets, while avoiding investments in programs based on less well-validated targets,” Amgen Chief Executive Robert Bradway said.


PERSONALISED MEDICINE


UBS analysts said that the purchase, which will be funded by cash held offshore, was not surprising given that Amgen has key experimental drugs in its pipeline that were identified by human genetics work, including AMG 145 for heart disease and the bone drug romosozumab.


Understanding the genetic basis of disease has become increasingly important in drug discovery as the pharmaceutical industry shifts to developing personalized medicine that is suited for a patient’s particular genetic profile.


It is an area where Decode has extensive experience and its scientists have published prolifically on genetic mutations linked to a range of diseases including cancer, heart conditions and schizophrenia.


Commercially, however, the Reykjavik-based company has been far less successful. Its drug development programs stalled and its DNA tests for diseases have not brought in much cash.


The acquisition leaves Decode’s diagnostics business facing an uncertain future, with Amgen likely to evaluate this and other parts of the business after the deal closes.


Decode is currently owned by Saga Investments, a consortium including Polaris Venture Partners and ARCH Venture Partners, which bought it out of bankruptcy in 2010.


Polaris general partner Terry McGuire said his group had made a “substantial” return on its investment through the sale to Amgen, but he declined to give details or say if other large drug companies had been invited to bid for business.


CEO STAYS


Decode went public on a wave of euphoria about genetics after U.S. President Bill Clinton announced the completion of a working-draft DNA sequence of the human genome in 2000. Turning that gene promise into new drugs has proved harder and more time-consuming than initially hoped.


McGuire said that Decode’s founder and chief executive Kari Stefansson, a neurologist by training, would continue as president of the company after the Amgen takeover and would be a vice-president of research at the U.S. company.


Other genomics companies have fallen by the wayside over the years, though one Human Genome Sciences has managed to develop the first new drug for lupus in half a century with its partner GlaxoSmithKline (GSK).


GSK bought Human Genome Sciences for $ 3 billion this year, taking advantage of a dip in the U.S. biotech company’s shares. Two people familiar with the situation said in July that Amgen had also offered to buy the business for twice as much in 2010.


(Editing by David Goodman)


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The Fiscal Cliff Isn’t the Problem






Early in Bill Bryson’s book A Walk in the Woods, the story of his ill-starred Appalachian Trail expedition, the author’s out-of-shape and impulsive hiking companion, Katz, decides his backpack is too heavy. So he starts throwing out the food they’d packed for the trip: rice, pepperoni, cheese, peanuts, Spam—he even discards coffee filters, which weigh next to nothing.


Panic about the fiscal cliff is threatening to lead Congress into the same short-term thinking. Investments in education, scientific research, and infrastructure—which account for a tiny portion of federal spending but make the economy more productive in the long run—are at risk. Restraining them by spending cap or sequester would be as dumb as discarding coffee filters to lighten one’s backpack. Yet if Democrats and Republicans don’t agree on a budget compromise by the end of the year, that’s what could happen.






A new Bloomberg Government analysis makes clear just how much pressure Washington is under. Instead of needing $ 4 trillion in deficit cuts over 10 years to stabilize the ratio of debt to gross domestic product ratio, negotiators need $ 5.9 trillion in cuts, according to Bloomberg Government’s calculations. In a Dec. 4 interview with Bloomberg Television, President Obama said he’ll fight to protect investments in things like education. He’s right. House Speaker John Boehner says the U.S. needs to grapple with big projected deficits in Medicare, Medicaid, and Social Security. He’s right, too. But their two rights have made a wrong: stalemate.


f991f  or50  01  inline405 The Fiscal Cliff Isnt the ProblemIllustration by Ana Benaroya


The solution is to figure out what problems need solving on which time scale. The most urgent priority is keeping the roughly $ 600 billion hit to GDP from kicking in. Edward Kleinbard, a professor at the University of Southern California’s Gould School of Law, who was chief of staff for the Joint Committee on Taxation from 2007 to 2009, proposes turning the cliff into a ramp. He would suspend the automatic spending cuts and allow the Bush tax cuts to expire in three years instead of overnight. Congress would commit to devote all of the savings from future spending cuts to lowering tax rates, but starting with the lowest brackets, not the highest. Says Kleinbard: “None of this is impossible.”


After that comes a bigger challenge: getting the economy to grow faster and foster innovation to make burdens on future generations as light as possible. Supporting the aged and infirm will be far easier if median household income rises to, say, $ 75,000 adjusted for inflation, rather than remaining stuck at just over $ 50,000. And Medicare and Medicaid expenses will be less daunting if medicine can find cures for killers such as diabetes and dementia.


That’s why it’s foolish to slash public programs indiscriminately to get out of the fiscal hole. It’s up to government to fund growth-enhancing investments that the private sector does too little of. James Heckman, a Nobel prize-winning economist at the University of Chicago, has shown that the return on a dollar invested in human capital is highest from birth to age five, lower during the school years, and lowest for adult job training. Yet the budget for Head Start, which helps children from low-income families aged five and younger to get ready for school, is paltry relative to the benefits bestowed on older Americans.


Physical capital is underfunded as well. In 2009 the American Society of Civil Engineers gave the U.S. a grade of D for infrastructure. It’s doubtful that things are much better now; only about $ 100 billion of the Obama administration’s nearly $ 800 billion stimulus program went toward roads, bridges, and other needs. Infrastructure investment would make the U.S. more competitive in the long run while creating jobs in the short run, and since the U.S. can borrow for next to nothing, the financing would be cheap. But Boehner is opposing Obama’s debt proposal—which includes $ 50 billion in infrastructure spending—because it doesn’t cut spending enough. That’s unfortunate.


Where could the U.S. cut that wouldn’t damage its growth potential? The obvious targets are defense and entitlements, which together account for nearly three-quarters of federal spending outside of interest payments. The U.S. spends more on its military than the next 13 countries combined; that would suggest potential for some nips and tucks. Social Security’s imbalance could be fixed by raising the ceiling for wages subject to the payroll tax. The knottier problems are Medicare and Medicaid, whose costs have been driven up by extraordinarily inefficient health-care spending. The U.S. spends 53 percent more on health care per capita than No. 2 Norway while getting worse results. (Norwegians’ life expectancy at birth is a year and a half longer.)


Making benefits less generous is the no-brainer way to close the gap. The forward-thinking way is to conquer diseases that sap America’s human and economic potential, as Jonas Salk’s vaccine did for polio in the 1950s. Medicare and Medicaid alone spend $ 140 billion a year on dementia care, the Alzheimer’s Association estimates, yet the U.S. spends only about half a billion dollars a year researching cures. George Vradenburg, chairman of USAgainstAlzheimer’s, argues that the disease could be mostly eliminated by 2020 with Manhattan Project-size funding; cuts to research could make the problem worse. “This disease could very well become the financial and social sinkhole of the 21st century,” says gerontologist Ken Dychtwald, chief executive officer of the consulting firm Age Wave.


Taxes, too, need to be reformed to amplify growth. Loopholes are a good place to start. The home mortgage interest deduction could be phased out over a long period, since all it does is encourage people to buy bigger houses and take on more debt. Savings incentives in the tax code mostly benefit the rich without actually increasing the rate of savings. But zeroing out all tax breaks would be a mistake. Some, like the one for research and development, enhance growth.


There is, of course, a point at which high tax rates slow the economy. Conservatives argue for holding down rates on capital gains and dividends while preserving all of the Bush high-end cuts on ordinary income. But the U.S. appears to be well shy of the tipping point at which hiking taxes would be counterproductive. The economy grew faster in the 1950s when the highest rate was 91 percent.


What’s limiting business investment and hiring today isn’t the prospect of slightly higher tax rates but the fear that there won’t be enough customers. Weak, uncertain demand is the lasting legacy of the Great Recession and the slow rebound since. In manufacturing, mining, and utilities, depreciation has outpaced fresh investment since the start of the recession in December 2007, leaving the sector with a decline in productive capacity, according to Federal Reserve data. Recessions have lasting consequences: Eroding capacity, they limit the economy’s ability to grow—and generate tax revenue—in the future.


Refocusing the budget debate on the future is something that both conservatives and liberals should support. Representative Jim Cooper of Tennessee, a fiscally conservative Democrat, worries that Congress isn’t taking the long-term entitlements crisis seriously. He says the government should copy the private sector by adopting accrual accounting instead of just measuring each year’s cash in and cash out. Accrual accounting would acknowledge how much the country owes future retirees. It would also differentiate investments in roads, bridges, and Head Start from day-to-day spending on paper clips and electricity. “The government is the last major entity left in America that doesn’t use accrual accounting,” says Cooper. “The business mantra is, if you can’t measure it, you can’t manage it.” Without that kind of discipline, he says, “Congress has very poor eyesight and won’t necessarily cut in the right place.”


Or, to put it in terms Katz might understand: When you still have 2,000 miles to hike, don’t throw away all of your pepperoni.


Businessweek.com — Top News


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Peru’s capital highly vulnerable to major quake






LIMA, Peru (AP) — The earthquake all but flattened colonial Lima, the shaking so violent that people tossed to the ground couldn’t get back up. Minutes later, a 50-foot (15-meter) wall of Pacific Ocean crashed into the adjacent port of Callao, killing all but 200 of its 5,000 inhabitants. Bodies washed ashore for weeks.


Plenty of earthquakes have shaken Peru‘s capital in the 266 years since that fateful night of Oct. 28, 1746, though none with anything near the violence.






The relatively long “seismic silence” means that Lima, set astride one of the most volatile ruptures in the Earth’s crust, is increasingly at risk of being hammered by a one-two, quake-tsunami punch as calamitous as what devastated Japan last year and traumatized Santiago, Chile, and its nearby coast a year earlier, seismologists say.


Yet this city of 9 million people is sorely unprepared. Its acute vulnerability, from densely clustered, unstable housing to a dearth of first-responders, is unmatched regionally. Peru’s National Civil Defense Institute forecasts up to 50,000 dead, 686,000 injured and 200,000 homes destroyed if Lima is hit by a magnitude-8.0 quake.


“In South America, it is the most at risk,” said architect Jose Sato, director of the Center for Disaster Study and Prevention, or PREDES, a non-governmental group financed by the charity Oxfam that is working on reducing Lima’s quake vulnerability.


Lima is home to a third of Peru’s population, 70 percent of its industry, 85 percent of its financial sector, its entire central government and the bulk of international commerce.


“A quake similar to what happened in Santiago would break the country economically,” said Gabriel Prado, Lima’s top official for quake preparedness. That quake had a magnitude of 8.8.


Quakes are frequent in Peru, with about 170 felt by people annually, said Hernando Tavera, director of seismology at the country’s Geophysical Institute. A big one is due, and the chances of it striking increase daily, he said. The same collision of tectonic plates responsible for the most powerful quake ever recorded, a magnitude-9.5 quake that hit Chile in 1960, occurs just off Lima’s coast, where about 3 inches of oceanic crust slides annually beneath the continent.


A 7.5-magnitude quake in 1974 a day’s drive from Lima in the Cordillera Blanca range killed about 70,000 people as landslides buried villages. Seventy-eight people died in the capital. In 2007, a 7.9-magnitude quake struck even closer, killing 596 people in the south-central coastal city of Pisco.


A shallow, direct hit is the big danger.


More than two in five Lima residents live either in rickety structures on unstable, sandy soil and wetlands that amplify a quake’s destructive power or in hillside settlements that sprang up over a generation as people fled conflict and poverty in Peru’s interior. Thousands are built of colonial-era adobe.


Most quake-prone countries have rigorous building codes to resist seismic events. In Chile, if engineers and builders don’t adhere to them they can face prison. Not so in Peru.


“People are building with adobe just as they did in the 17th century,” said Carlos Zavala, director of Lima’s Japanese-Peruvian Center for Seismic Investigation and Disaster Mitigation.


Environmental and human-made perils compound the danger.


Situated in a coastal desert, Lima gets its water from a single river, the Rimac, which a landslide could easily block. That risk is compounded by a containment pond full of toxic heavy metals from an old mine that could rupture and contaminate the Rimac, said Agustin Gonzalez, a PREDES official advising Lima’s government.


Most of Lima’s food supply arrives via a two-lane highway that parallels the river, another potential chokepoint.


Lima’s airport and seaport, the key entry points for international aid, are also vulnerable. Both are in Callao, which seismologists expect to be scoured by a 20-foot (6-meter) tsunami if a big quake is centered offshore, the most likely scenario.


Mayor Susana Villaran’s administration is Lima’s first to organize a quake-response and disaster mitigation plan. A February 2011 law obliged Peru’s municipalities to do so. Yet Lima’s remains incipient.


“How are the injured going to be attended to? What is the ability of hospitals to respond? Of basic services? Water, energy, food reserves? I don’t think this is being addressed with enough responsibility,” said Tavera of the Geophysical Institute.


By necessity, most injured will be treated where they fall, but Peru’s police have no comprehensive first-aid training. Only Lima’s 4,000 firefighters, all volunteers, have such training, as does a 1,000-officer police emergency squadron.


But because the firefighters are volunteers, a quake’s timing could influence rescue efforts.


“If you go to a fire station at 10 in the morning there’s hardly anyone there,” said Gonzalez, who advocates a full-time professional force.


In the next two months, Lima will spend nearly $ 2 million on the three fire companies that cover downtown Lima, its first direct investment in firefighters in 25 years, Prado said. The national government is spending $ 18 million citywide for 50 new fire trucks and ambulances.


But where would the ambulances go?


A 1997 study by the Pan American Health Organization found that three of Lima’s principal public hospitals would likely collapse in a major quake, but nothing has been done to reinforce them.


And there are no free beds. One public hospital, Maria Auxiliadora, serves more than 1.2 million people in Lima’s south but has just 400 beds, and they are always full.


Contingency plans call for setting up mobile hospitals in tents in city parks. But Gonzalez said only about 10,000 injured could be treated.


Water is also a worry. The fire threat to Lima is severe — from refineries to densely-backed neighborhoods honeycombed with colonial-era wood and adobe. Lima’s firefighters often can’t get enough water pressure to douse a blaze.


“We should have places where we can store water not just to put out fires but also to distribute water to the population,” said Sato, former head of the disaster mitigation department at Peru’s National Engineering University.


The city’s lone water-and-sewer utility can barely provide water to one-tenth of Lima in the best of times.


Another big concern: Lima has no emergency operations center and the radio networks of the police, firefighters and the Health Ministry, which runs city hospitals, use different frequencies, hindering effective communication.


Nearly half of the city’s schools require a detailed evaluation to determine how to reinforce them against collapse, Sato said.


A recent media blitz, along with three nationwide quake-tsunami drills this year, helped raise consciousness. The city has spent more than $ 77 million for retention walls and concrete stairs to aid evacuation in hillside neighborhoods, Prado said, but much more is needed.


At the biggest risk, apart from tsunami-vulnerable Callao, are places like Nueva Rinconada.


A treeless moonscape in the southern hills, it is a haven for economic refugees who arrive daily from Peru’s countryside and cobble together precarious homes on lots they scored into steep hillsides with pickaxes.


Engineers who have surveyed Nueva Rinconada call its upper reaches a death trap. Most residents understand this but say they have nowhere else to go.


Water arrives in tanker trucks at $ 1 per 200 liters (52 gallons) but is unsafe to drink unless boiled. There is no sanitation; people dig their own latrines. There are no streetlamps, and visibility is erased at night as Lima’s bone-chilling fog settles into the hills.


Homes of wood, adobe and straw matting rest on piled-rock foundations that engineers say will crumble and rain down on people below in a major quake.


A recently built concrete retaining wall at the valley’s head lies a block beneath the thin-walled wood home of Hilarion Lopez, a 55-year-old janitor and community leader. It might keep his house from sliding downhill, but boulders resting on uphill slopes could shake loose and crush him and his neighbors.


“We’ve made holes and poured concrete around some of the more unstable boulders,” he says, squinting uphill in a strong late morning sun.


He’s not so worried if a quake strikes during daylight.


“But if I get caught at night? How do I see a rock?”


___


Associated Press writer Franklin Briceno contributed to this report.


___


Frank Bajak on Twitter: http://twitter.com/fbajak


Latin America News Headlines – Yahoo! News


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