Chinese Firm Is Cleared to Buy American DNA Sequencing Company

Ramin Rahimian for The New York Times

DNA sequencing machines at Complete Genomics in California. The firm dismissed concerns about its acquisition.

The federal government has given national security clearance to the controversial purchase of an American DNA sequencing company by a Chinese firm.

The Chinese firm, BGI-Shenzhen, said in a statement this weekend that its acquisition of Complete Genomics, based in Mountain View, Calif., had been cleared by the federal Committee on Foreign Investment in the United States, which reviews the national security implications of foreign takeovers of American companies. The deal still requires antitrust clearance by the Federal Trade Commission.

Some scientists, politicians and industry executives had said the takeover represented a threat to American competitiveness in DNA sequencing, a technology that is becoming crucial for the development of drugs, diagnostics and improved crops.

The fact that the $117.6 million deal was controversial at all reflects a change in the genomics community.

A decade ago, the Human Genome Project, in which scientists from many nations helped unravel the genetic blueprint of mankind, was celebrated for its spirit of international cooperation. One of the participants in the project was BGI, which was then known as the Beijing Genomics Institute.

But with DNA sequencing now becoming a big business and linchpin of the biotechnology industry, international rivalries and nationalism are starting to move front and center in any acquisition.

Much of the alarm about the deal has been raised by Illumina, a San Diego company that is the market leader in sequencing machines. It has potentially the most to lose from the deal because BGI might buy fewer Illumina products and even become a competitor. Weeks after the BGI deal was announced, Illumina made its own belated bid for Complete Genomics, offering 15 cents a share more than BGI’s bid of $3.15. But Complete Genomics rebuffed Illumina, saying such a merger would never clear antitrust review.

Illumina also hired a Washington lobbyist, the Glover Park Group, to stir up opposition to the deal in Congress. Representative Frank R. Wolf, Republican of Virginia, was the only member of Congress known to have publicly expressed concern.

BGI and Complete Genomics point out that Illumina has long sold its sequencing machines — including a record-setting order of 128 high-end machines — to BGI without raising any security concerns. Sequencing machines have not been subject to export controls like aerospace equipment, lasers, sensors and other gear that can have clear military uses.

“Illumina has never previously considered its business with BGI as ‘sensitive’ in the least,” Ye Yin, the chief operating officer of BGI, said in a November letter to Complete Genomics that was made public in a regulatory filing. In the letter, Illumina was accused of “obvious hypocrisy.”

BGI and Complete said that Illumina was trying to derail the agreement and acquire Complete Genomics itself in order to “eliminate its closest competitor, Complete.”

BGI is already one of the most prolific DNA sequencers in the world, but it buys the sequencing machines it uses from others, mainly Illumina.

Illumina, joined by some American scientists, said it worried that if BGI gained access to Complete’s sequencing technology, the Chinese company might use low prices to undercut the American sequencing companies that now dominate the industry.

Some also said that with Complete Genomics providing an American base, BGI would have access to more DNA samples from Americans, helping it compile a huge database of genetic information that could be used to develop drugs and diagnostic tests. Some also worried about protection of the privacy of genetic information.

“What’s to stop them from mining genomic data of American samples to some unknown nefarious end?” Elaine R. Mardis, co-director of the genome sequencing center at Washington University in St. Louis, said in an e-mail.

Dr. Mardis could not specify what kind of nefarious end she imagined. But opponents of the deal cited a November article in The Atlantic saying that in the future, pathogens could be genetically engineered to attack particular individuals, including the president, based on their DNA sequences.

BGI and Complete Genomics dismissed such concerns as preposterous.

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2 Sides in Talks Inch Closer but No Fiscal Deal on Final Day

WASHINGTON — A frantic round of late-night negotiations on Sunday between Vice President Joseph R. Biden Jr. and Senator Mitch McConnell of Kentucky, the Republican leader, moved the Senate close to a deal to stave off hundreds of billions of dollars in tax increases and across-the-board spending cuts that would begin to kick in on Tuesday, according to people familiar with the talks.

T.J. Kirkpatrick for The New York Times

“It looks awful,” Senator Richard J. Durbin of Illinois, the second-ranking Democrat, said after tense negotiations on Sunday. More Photos »

But with almost no time on the clock and the Senate convening at 11 a.m. Monday, officials cautioned that optimism had risen in past days only to burst hours later. An objection by just one senator could derail a deal until the next Congress convenes on Thursday.

Representative Kevin McCarthy, a California Republican and the House majority whip, advised House members at 9 a.m. “to remain close to the Capitol as additional legislation and votes are possible pending action from the Senate.”

The last of a round of calls between Mr. Biden and Mr. McConnell ended around midnight, with both men promising to resume talks Monday morning.

“The leader and the V.P. continued their discussion late into the evening and will continue to work toward a solution,” Don Stewart, a spokesman for Mr. McConnell, said on Monday.

Both sides were already close Sunday on the central issue surrounding whether Congress would intervene before the nation careened off the so-called fiscal cliff: What would be the income threshold for the families that would absorb tax increases beginning Tuesday? Barely a week after House Republicans refused to vote to allow taxes to rise on income over $1 million, Senate Republicans proposed allowing tax rates to rise on income over $450,000 for individuals and $550,000 for couples. Democrats countered with a proposal to extend expiring Bush-era tax cuts for up to $360,000 for individuals and $450,000 for couples. For both sides, that meant major movement. Mr. Obama has been holding firm at a $250,000 threshold.

But Democrats were inching upward, possibly to $450,000 for all households. That had liberal Democrats nervous but centrists optimistic that a deal was in reach that could pass both the Senate and the House. The House Rules Committee on Sunday night was considering an emergency rules change that would suspend requirements that legislation be posted for at least 48 hours, so that a deal could be rushed to the floor.

The two sides are also getting closer on a new rate of taxation on inherited estates, one source said. The biggest stumbling block remains Democrats’ demand for a one-year “pause” on across-the-board spending cuts, which Republicans say can happen only with other up-front spending cuts.

In the balance are more than a half-trillion dollars in tax increases on virtually every working American and across-the-board spending cuts that are scheduled to begin Tuesday. Taken together, they threaten to push the economy back into recession.

The weekend saw a round of volatile negotiations as senators tried to reach a deal, only to be stalled for hours over a Republican demand that any accord must include a new way of calculating inflation that would mean smaller increases in payments to beneficiaries of programs like Social Security. Democrats halted the negotiations, which did not resume until Mr. McConnell made an emergency call to Mr. Biden and the White House sent the president’s chief legislative negotiator to meet with Senate Democrats. Soon after, Republicans withdrew their demand and discussions resumed, but little progress was made.

“It looks awful,” said Senator Richard J. Durbin of Illinois, the second-ranking Democrat. “I’m sure the American people are saying, with so much at stake why are they waiting so late to get this done?”

Senator Lindsey Graham, Republican of South Carolina, who had said early Sunday that he thought a deal was within reach, said later on his Twitter feed, “I think we’re going over the cliff.”

Weeks of negotiations between Mr. Obama and Speaker John A. Boehner inched toward a deal to avert the fiscal cliff, while locking in trillions of dollars in deficit reduction over 10 years and starting an effort to overhaul the tax code and entitlement programs like Medicare. But earlier this month, Mr. Boehner walked away from those talks.

Instead he tried to reach a much more modest deal to avoid a fiscal crisis by extending the expiring tax cuts for incomes under $1 million. When Mr. Boehner’s own Republican members revolted, he ceded negotiations to the Senate. But compromise has proved equally elusive in that chamber.

Absent a last-minute deal, Mr. Reid is expected to move on Monday to bring to a vote a stopgap measure pushed by Mr. Obama, which would retain lower tax rates for incomes below $250,000 and extend unemployment benefits. But it was not clear that would even get a vote. The objection of a single senator on Monday would run out the clock on the 112th Congress before a final tally could be taken.

Mr. Obama appeared on the NBC program “Meet the Press” on Sunday and implored Congress to act. “We have been talking to the Republicans ever since the election was over,” Mr. Obama said in the interview. “They have had trouble saying yes to a number of repeated offers.”

He added, “Now the pressure’s on Congress to produce.”

Robert Pear and John M. Broder contributed reporting.

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Obama blames GOP for 'fiscal cliff' brinksmanship

WASHINGTON -- President Obama blamed Republican leaders for the latest round of brinkmanship in Washington and said it was now up to lawmakers to find a way back from the so-called fiscal cliff.

In an interview with NBC’s “Meet the Press” aired Sunday, Obama said he had reached out to Republicans for weeks, but their refusal to raise taxes had blocked progress.

“They have had trouble saying yes to a number of repeated offers,” Obama said. In Friday’s meeting with congressional leaders at the White House, “I suggested to them if they can't do a comprehensive package of smart deficit reductions, let's at minimum make sure that people's taxes don't go up and that 2 million people don't lose their unemployment insurance.

“And I was modestly optimistic yesterday,” he added in the interview taped Saturday, referring to the aftermath of that meeting, “but we don't yet see an agreement. And now the pressure's on Congress to produce.”

PHOTOS: Notable moments of the 2012 presidential election

Senate leaders and their aides spent Saturday working on a deal that would protect most taxpayers from seeing their incomes taxes rise Jan. 1. The deal may also set new estate tax rates, prevent an expansion of the alternative minimum tax and extend unemployment insurance.

If the effort is successful, a final proposal is expected later Sunday, when senators are set to meet in party caucuses.

A spokesman for Senate Minority Leader Mitch McConnell responded to the president's criticism:

"While the president was taping those discordant remarks yesterday, Sen. McConnell was in the office working to bring Republicans and Democrats together on a solution," Don Stewart said. "Discussions continue today."

In the interview, Obama said he expected an “adverse reaction in the markets” and depressed consumer spending if lawmakers allow the tax increase to take effect as scheduled -- and he tried to lay the blame on Republicans. Economists have suggested the combination of the tax increases, along with nearly $65 billion in spending cuts, could knock the economy back into a recession.

Obama did not offer a clear plan to avoid those spending cuts, which Congress and the president agreed to in 2011 as a way to force themselves to act on a larger deficit reduction deal. That deal has remained elusive, and Obama said in the interview that Republicans have had trouble saying yes to his offers.

QUIZ: How much do you know about the fiscal cliff?

Pressed by host David Gregory on why that is, Obama answered:

“That's something you're probably going to have to ask them, because, David, you follow this stuff pretty carefully. The offers that I’ve made to them have been so fair that a lot of Democrats get mad at me. I mean, I offered to make some significant changes to our entitlement programs in order to reduce the deficit,” he said, referring specifically to a change in the way Social Security cost of living increases are calculated, which many liberal groups opposed.

“They say that their biggest priority is making sure that we deal with the deficit in a serious way, but the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected. That seems to be their only overriding, unifying theme.”

Obama has tried to frame the debate as a battle over taxes. One Republican acknowledged Sunday that the president appears poised to win the political battle on that front. If lawmakers agree on allowing taxes to rise on top earners, “it will accomplish a political victory for the president,” said Sen. Lindsey Graham of South Carolina

“Hats off to the president. He stood his ground; he’s going to get tax rate increases … on upper income Americans. And the sad news for the country is we’ve accomplished very little in terms of not becoming Greece or getting out of debt.… Hats off to the president -- he won.”

[For the Record, 8:05 a.m. PST  Dec. 30: This post has been updated to include reactions to Obama's comments from McConnell's office.]

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Wired Science Space Photo of the Day: Hidden Flames

This composite image combines EIT images from three wavelengths (171Å, 195Å and 284Å) into one that reveals solar features unique to each wavelength. Since the EIT images come to us from the spacecraft in black and white, they are color coded for easy identification. For this image, the nearly simultaneous images from May 1998 were each given a color code (red, yellow and blue) and merged into one.

Image: NASA/SOHO [high-resolution]

Caption: NASA

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Hot spots draw believers, but not doomsday

As the sun rose from time zone to time zone across the world on Friday, there was still no sign of the world’s end — but that didn’t stop those convinced that a 5,125-year Mayan calendar predicts the apocalypse from gathering at some of the world’s purported survival hot spots.

Many of the esoterically inclined expected a new age of consciousness — others wanted a party. But, in some places said to offer salvation from the end, fewer people showed up than officials had predicted — much to the disappointment of vendors hoping to sell souvenirs.

Here are some key places being marked by the fascination over doomsday rumors:

MEXICO

In an area of Mexico that was once the ancient Mayan heartland, spiritualists gathered in the darkness before dawn on Friday to prepare white clothes, drums, conch shells and incense. They believed the sunrise would herald the birth of a new and better age as a vast cycle in the Mayan calendar comes to an end.

Many people who came to Yucatan for the occasion were already calling it “a new sun” and “a new era.”

FRANCE

According to one rumor, a rocky mountain in the French Pyrenees will be the sole place on Earth to escape destruction. A giant UFO and aliens are said to be waiting under the mountain, ready to burst through and spirit those nearby to safety. But there is bad news for those seeking salvation: French gendarmes, some on horseback, blocked outsiders from reaching the Bugarach peak and its village of some 200 people.

Eric Freysselinard, head of local government, said the security forces had “partially stopped the new age enthusiasts as well as curious people from coming to the area.”

Meanwhile, some Bugarach residents dressed up like aliens, with tinfoil costumes and funnels and fake antenna on their heads, strolling around their village Friday to make light of the rumored UFO prophecy.

RUSSIA

Doomsday rumors have prompted some people across Russia to stock up on candles, water, canned foods and other non-perishable foods. The apocalypse has proven a good business, with some shops selling survival aid packages that include soap and vodka.

In Moscow, salvation has also been promised in the underground bunker for the former Soviet dictator Josef Stalin — with a 50 percent refund if nothing happens. An underground stay was originally priced at 50,000 rubles ($ 1,625) but dropped to 15,000 ($ 490) a week ahead of the feared end.

The bunker, located 65 meters (210 feet) below ground, was designed to withstand a nuclear attack. Now home to a small museum, it has an independent electricity supply, water and food — but no more room, because the museum has already sold out all 1,000 tickets.

BRITAIN

Hundreds of people have converged on Stonehenge for an “End of the World” party that coincides with the Winter Solstice.

Arthur Uther Pendragon, Britain’s best-known druid, said he was anticipating a much larger crowd than usual at Stonehenge this year. But he doesn’t agree that the world is ending, noting that he and fellow druids believe that things happen in cycles.

“We’re looking at it more as a new beginning than an end,” he said. “We’re looking at new hope.”

Meanwhile, end-of-days parties will be held across London on Friday. One event billed as a “last supper club” is offering a three-course meal served inside an “ark.”

SERBIA

Some Serbs are saying to forget that sacred mountain in the French Pyrenees. The place to be Friday is Mount Rtanj, a pyramid-shaped peak in Serbia already drawing cultists.

According to legend, the mountain once swallowed an evil sorcerer who will be released on doomsday in a ball of fire that will hit the mountain top. The inside of the mountain will then open up, becoming a safe place to hide as the sorcerer goes on to destroy the rest of the world. In the meantime, some old coal mine shafts have been opened up as safe rooms.

On Friday a New Age group called “The Spirit of Rtanj” was holding a conference there. Participants, however, said they expect not the end of time but the start of a new time cycle. Locals turned out to sell brandy and herbs.

“There will be no tragedy, no doomsday,” said resident Dalibor Jovic. “It was supposed to happen at 12:12 and I think that time has passed. So, we can now go on with our lives and be happy to be alive.”

TURKEY

A small Turkish village known for its wines, Sirince, has also been touted as the only place after Bugarach that would escape the world’s end. But on Friday journalists and security officials outnumbered cultists. This outcome disappointed local business people who had prepared a range of doomsday products to sell, including a specially labeled Doomsday wine and Turkish delight candy whose “best before” date was Dec. 21, 2012. One restaurant prepared a special “last meal” menu that included a “heaven kebab” and “forbidden fruit dessert.”

ITALY

Another spot said to be spared: Cisternino, a beautiful small town in southern Italy in an area of trulli, traditional dry stone huts with conical roofs. The notion that Cisternino could be a safe haven at world’s end derives from an Indian guru, Babaji, who said “Cisternino will become an island” at world’s end. His followers built a community in Cisternino centered on an ashram built in 1979. Hotel bookings are up this weekend.

Mayor Donato Baccaro told the AP that the beauty of the place has inspired many foreigners to live there. “This confirms that this place has a special energy,” he said.

CHINA

A fringe Christian group has been spreading rumors about the world’s impending end, prompting Chinese authorities to detain more than 500 people this week and seize leaflets, video discs, books and other material.

Those detained are reported to be members of the group Almighty God, also called Eastern Lightning, which preaches that Jesus has reappeared as a woman in central China. Authorities in the province of Qinghai say they are waging a “severe crackdown” on the group, accusing it of attacking the Communist Party and the government.

U.S.

Dozens of Michigan schools canceled classes for thousands of students to cool off rumored threats of violence and problems related to doomsday. The fears were exacerbated by the recent shooting at a Connecticut elementary school, which “changed all of us,” the school system in Genesee County said. “Canceling school is the right thing to do.”

___

Associated Press writers Florent Bajrami in Bugarach, France; Mansur Mirovalev in Moscow; Peppino Ciraci in Cisternino, Italy; Suzan Fraser in Ankara, Turkey; Paisley Dodds in London; and Dejan Mladenovic in Mount Rtanj, Serbia, contributed to this report.

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Well: Exercise and the Ever-Smarter Human Brain

Anyone whose resolve to exercise in 2013 is a bit shaky might want to consider an emerging scientific view of human evolution. It suggests that we are clever today in part because a million years ago, we could outrun and outwalk most other mammals over long distances. Our brains were shaped and sharpened by movement, the idea goes, and we continue to require regular physical activity in order for our brains to function optimally.

Phys Ed

Gretchen Reynolds on the science of fitness.

The role of physical endurance in shaping humankind has intrigued anthropologists and gripped the popular imagination for some time. In 2004, the evolutionary biologists Daniel E. Lieberman of Harvard and Dennis M. Bramble of the University of Utah published a seminal article in the journal Nature titled “Endurance Running and the Evolution of Homo,” in which they posited that our bipedal ancestors survived by becoming endurance athletes, able to bring down swifter prey through sheer doggedness, jogging and plodding along behind them until the animals dropped.

Endurance produced meals, which provided energy for mating, which meant that adept early joggers passed along their genes. In this way, natural selection drove early humans to become even more athletic, Dr. Lieberman and other scientists have written, their bodies developing longer legs, shorter toes, less hair and complicated inner-ear mechanisms to maintain balance and stability during upright ambulation. Movement shaped the human body.

But simultaneously, in a development that until recently many scientists viewed as unrelated, humans were becoming smarter. Their brains were increasing rapidly in size.

Today, humans have a brain that is about three times larger than would be expected, anthropologists say, given our species’ body size in comparison with that of other mammals.

To explain those outsized brains, evolutionary scientists have pointed to such occurrences as meat eating and, perhaps most determinatively, our early ancestors’ need for social interaction. Early humans had to plan and execute hunts as a group, which required complicated thinking patterns and, it’s been thought, rewarded the social and brainy with evolutionary success. According to that hypothesis, the evolution of the brain was driven by the need to think.

But now some scientists are suggesting that physical activity also played a critical role in making our brains larger.

To reach that conclusion, anthropologists began by looking at existing data about brain size and endurance capacity in a variety of mammals, including dogs, guinea pigs, foxes, mice, wolves, rats, civet cats, antelope, mongooses, goats, sheep and elands. They found a notable pattern. Species like dogs and rats that had a high innate endurance capacity, which presumably had evolved over millenniums, also had large brain volumes relative to their body size.

The researchers also looked at recent experiments in which mice and rats were systematically bred to be marathon runners. Lab animals that willingly put in the most miles on running wheels were interbred, resulting in the creation of a line of lab animals that excelled at running.

Interestingly, after multiple generations, these animals began to develop innately high levels of substances that promote tissue growth and health, including a protein called brain-derived neurotrophic factor, or BDNF. These substances are important for endurance performance. They also are known to drive brain growth.

What all of this means, says David A. Raichlen, an anthropologist at the University of Arizona and an author of a new article about the evolution of human brains appearing in the January issue of Proceedings of the Royal Society Biology, is that physical activity may have helped to make early humans smarter.

“We think that what happened” in our early hunter-gatherer ancestors, he says, is that the more athletic and active survived and, as with the lab mice, passed along physiological characteristics that improved their endurance, including elevated levels of BDNF. Eventually, these early athletes had enough BDNF coursing through their bodies that some could migrate from the muscles to the brain, where it nudged the growth of brain tissue.

Those particular early humans then applied their growing ability to think and reason toward better tracking prey, becoming the best-fed and most successful from an evolutionary standpoint. Being in motion made them smarter, and being smarter now allowed them to move more efficiently.

And out of all of this came, eventually, an ability to understand higher math and invent iPads. But that was some time later.

The broad point of this new notion is that if physical activity helped to mold the structure of our brains, then it most likely remains essential to brain health today, says John D. Polk, an associate professor of anthropology at the University of Illinois at Urbana-Champaign, and co-author, with Dr. Raichlen, of the new article.

And there is scientific support for that idea. Recent studies have shown, he says, that “regular exercise, even walking,” leads to more robust mental abilities, “beginning in childhood and continuing into old age.”

Of course, the hypothesis that jogging after prey helped to drive human brain evolution is just a hypothesis, Dr. Raichlen says, and almost unprovable.

But it is compelling, says Harvard’s Dr. Lieberman, who has worked with the authors of the new article. “I fundamentally agree that there is a deep evolutionary basis for the relationship between a healthy body and a healthy mind,” he says, a relationship that makes the term “jogging your memory” more literal than most of us might have expected and provides a powerful incentive to be active in 2013.

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Senate Leaders Racing to Beat Fiscal Deadline

WASHINGTON — Senate leaders and their aides spent Saturday searching for a formula to extend tax cuts for most Americans that could win bipartisan support in the Senate and final approval in the fractious House by the new year, hoping to prevent large tax increases and budget cuts that could threaten the fragile economy.

As part of the last-minute negotiations, the lawmakers were haggling over unemployment benefits, cuts in Medicare payments to doctors, taxes on large inheritances and how to limit the impact of the alternative minimum tax, a parallel income tax system that is intended to ensure the rich pay a fair share but that is increasingly encroaching on the middle class.

President Obama said that if talks between the Senate leaders broke down, he wanted the Senate to schedule an up-or-down vote on a narrower measure that would extend only the middle-class tax breaks and unemployment benefits. The Senate majority leader, Harry Reid of Nevada, said he would schedule such a vote on Monday absent a deal.

If Congress is unable to act before the new year, Washington will effectively usher in a series of automatic tax increases and a program of drastic spending cuts that economists say could pitch the country back into recession.

The president and lawmakers put those spending cuts in place this year as draconian incentives that would force them to confront the nation’s growing debt. Now, lawmakers are trying to keep them from happening, though it seemed most likely on Saturday that the cuts, known as sequestration, would be left for the next Congress, to be sworn in this week.

“We just can’t afford a politically self-inflicted wound to our economy,” Mr. Obama said Saturday in his weekly address. “The housing market is healing, but that could stall if folks are seeing smaller paychecks. The unemployment rate is the lowest it’s been since 2008, but already families and businesses are starting to hold back because of the dysfunction they see in Washington.”

The fear of another painful economic slowdown appears to have accelerated deal-making on Capitol Hill with just 48 hours left before the so-called fiscal cliff arrives. Weeks of public sniping between Mr. Reid, the Democratic leader, and Senator Mitch McConnell of Kentucky, the Republican leader, ebbed on Friday evening with pledges of cooperation and optimism from both.

On Saturday, though, that sentiment was put to the test as 98 senators waited for word whether their leaders had come up with a proposal that might pass muster with members of both parties. The first votes in the Senate, if needed, are scheduled for Sunday afternoon.

“It’s a little like playing Russian roulette with the economy,” said Senator Mark Warner, Democrat of Virginia. “The consequences could be enormous.”

Members of Congress were mostly absent from the Capitol on Saturday, after two days of Senate votes on other matters and a day before both chambers were to reconvene. However, senior aides were working on proposals in their offices or at their homes.

Speaker John A. Boehner stopped by the Capitol briefly to see his chief of staff on Saturday afternoon. Mr. McConnell spent much of the day in his office.

Aides to Mr. Reid were expecting to receive offers from Mr. McConnell’s staff, but no progress was reported by midday. Even if the talks took a positive turn, Senate aides said, no announcement was expected before the leaders briefed their caucuses on Sunday.

The chief sticking point among lawmakers and the president continued to be how to set tax rates for the next decade and beyond. With the Bush-era tax cuts expiring, Mr. Obama and Democrats have said they want tax rates to rise on income over $250,000 a year, while Republicans want a higher threshold, perhaps at $400,000.

Democrats and Republicans are also divided on the tax on inherited estates, which currently hits inheritances over $5 million at 35 percent. On Jan. 1, it is scheduled to rise to 55 percent beginning with inheritances exceeding $1 million.

The political drama in Washington over the weekend was given greater urgency by the fear that the economic gains of the past two years could be lost if no deal is reached.

Some of the consequences of Congressional inaction would be felt almost at once on Tuesday, in employee paychecks, doctors’ offices and financial markets. Analysts said the effect would be cumulative, building over time.

An early barometer would probably be the financial markets, where skittish investors, as they have during previous Congressional cliffhangers, could send the stock market lower on fears of another prolonged period of economic distress.

In 2011, the political battles over whether to raise the nation’s borrowing limit prompted Standard & Poor’s to downgrade its rating of American debt, suggesting a higher risk of default. The Dow Jones industrial average fell 635 points in a volatile day of trading after the downgrade.

This month, traders have again nervously watched the political maneuvering in Washington, and the markets have jumped or dropped at tidbits of news from the negotiations. Two weeks ago, Ben S. Bernanke, the chairman of the Federal Reserve Board, predicted that if lawmakers failed to reach a deal, “the economy will, I think, go off the cliff.”

Immediately — regardless of whether a deal is reached — every working American’s taxes will go up because neither party is fighting to extend a Social Security payroll tax cut that has been in place for two years.

Robert Pear and Jennifer Steinhauer contributed reporting.

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Fiscal standoff leaves U.S. payrolls in doubt

WASHINGTON — If the nation goes over the "fiscal cliff," some Americans will wake up Tuesday with financial headaches to rival a New Year's Eve hangover.

More than 2 million long-term jobless would receive their final unemployment benefit check within days. Millions of taxpayers would be unable to file their returns early, resulting in delayed refunds. Taxes would rise immediately on workers across the board. And although some of those increases may eventually be reversed, the first paychecks of the year would be smaller until any legislative fixes kick in.

Even if the crisis is resolved quickly after the new year as pressure mounts on President Obama and lawmakers, it poses a short-term administrative nightmare for businesses. And it would be a financial blow to millions of people struggling to make ends meet in the aftermath of the Great Recession.

"As a working-class person, I would miss any money taken out of my paycheck," said Stephanie Smith, an office administrator in Sacramento. "I just feel that we're already paying high taxes, and it feels like we're still in a recession. Everybody wants to take money out of our paychecks, but nobody wants to put more in."

As the White House and Congress try to avoid the large tax increases and federal spending cuts coming next week, taxpayers, businesses and even the Internal Revenue Service are scrambling to figure out the effects if an agreement is not reached.

The fiscal pain could be averted by a last-minute deal. And even if there is none by Tuesday, Washington policymakers could retroactively reduce tax rates if they ultimately make a deal. But the uncertainty and short-term loss of income could damage an already fragile economy.

Some effects:

Income taxes: Rates would rise on everyone as the George W. Bush-era tax cuts expire. Middle-income households would get hit hard, paying about $1,500 more a year in taxes.

Payroll taxes: Rates would increase by 2 percentage points with the lapse of a temporary, two-year tax cut designed to boost the economy. Workers making $50,000 annually would take home about $40 less every two weeks.

Long-term unemployment benefits: Checks would abruptly end for people receiving extra federal aid — as much as 47 additional weeks of benefits in states such as California. State benefits of up to 26 weeks would still be available, but workers would be out of luck once those run out.

Alternative minimum tax: The number of people facing the provision would skyrocket to about 33 million next year from 4 million this year. The tax, enacted in 1969, was designed to make sure the very wealthy paid some income tax. But it was not indexed to inflation and needs to be fixed each year to avoid ensnaring middle-income households.

Although Congress at some point is expected to spare most of those people from that tax, delays in doing so mean that as many as 100 million people might not be able to file their returns until the end of March or later, according to the IRS. Delays would come as the IRS has to reprogram its system, as well as for taxpayers who would have to do special calculations to determine whether they owe money because of the tax.

Business already are struggling to adjust. They've got to figure out how much in federal taxes to withhold from employee paychecks starting next week. But as of Thursday, the IRS still had not told employers what the 2013 withholding levels would be.

That limbo is particularly vexing for small firms as Golden State Magnetic & Penetrant. The Los Angeles company inspects, cleans and paints aircraft and aerospace components. The firm's president, Joanne Weinoe, does the payroll for herself and her 12 employees. At present, she doesn't know what the withholding should be for the next set of checks she cuts.

"I'm going to tear my hair out of my head and shoot myself," Weinoe joked, adding she'll wait until the morning of Jan. 4, her next payday, before she makes any changes.

"If I have to adjust them, it'll be additional work for me," she said. "Every time they change something, it becomes more work for employers."

The IRS said it continued "to closely monitor the situation" and would "issue guidance by the end of the year."

Workers might not see the new income tax rates immediately reflected in their paychecks. The American Payroll Assn. is advising its members to continue to use 2012 withholding tables until they hear differently from the IRS.

The payroll service Payality Inc., with headquarters in Fresno County, is urging its 700 clients with 25,000 employees throughout the state to hold off on issuing paychecks and making direct deposits for January as long as they can in hopes that lawmakers and the Obama administration will strike a deal.

"We should have some direction by Dec. 31," company President Chet Reilly said. "Then we'll have to scramble as fast as we can."

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Race Fan Builds F1 Car in His Garden Shed

Kevin Thomas has a bit more mechanical knowledge than the average Formula 1 fan, and he’s used it to cobble together an F1 racer using cast-off parts and eBay bits.

The enterprising Briton, not having the hectares of cash needed to buy a modern Formula 1 racer, decided to build one. In his garden shed. Using spare parts.

The idea came to him after seeeing an F1 car in a Renault showroom. He found the tub for a 2001 British American Racing 003 on eBay. Since then, he’s scoured eBay and pestered fellow F1 collectors, taking what he could find when he could find it. It isn’t as if parts for a BAR003 appear with any regularity. Hence the car’s somewhat, um, unusual appearance.

“It quickly became clear that it was very difficult, or even impossible, to get the right parts,” Thomas told Car and Driver. “I have to use what I can get.”

The side pods are an excellent example of his determination. He scored a pair from a Williams-BMW F1 car, taught himself how to handle carbon fiber, then chopped them up to fit the BAR engine cover.

He’s invested about $13,000 in the project so far, and still needs to find a 600-plus horsepower V-10. We’d suggest searching for a totaled BMW E60 M5, but Thomas has other ideas.

“I’ll probably go for a Formula Renault 3.5-liter engine,” he told C&D. “That will be plenty fast enough to scare the living daylights out of me.”

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Piano maker Steinway takes down “for sale” sign

NEW YORK (Reuters) – Steinway Musical Instruments Inc, the famous manufacturer of pianos, saxophones and trumpets, said on Wednesday it had decided not to sell itself following a 17-month-long exploration of strategic alternatives.

An American icon synonymous with handmade grand pianos, Steinway has struggled to keep its production margins competitive amid stagnant sales, and has seen its shares plunge 10 percent year-to-date. Still, its third-quarter earnings last month offered signs that cost-cutting was paying off.

In a statement on Wednesday, Steinway said it had received several non-binding indications of interest in buying the company, following talks with other companies in the sector as well as private equity, yet these did not offer more value than its own strategic plan.

“We will continue to focus management’s efforts on execution of that plan and we look forward to a prosperous 2013,” Steinway CEO Michael Sweeney said in the statement.

An in-principle agreement to sell its band instrument division to an investor group led by two of its board members, Dana Messina and John Stoner, was also scrapped in light of the current operating performance of the band division, Steinway said.

In July 2011, Messina, Stoner and other members of management made an offer for Steinway’s band instrument and online music divisions, prompting the company to set up a special committee in order to assess it.

Later that month, Steinway asked investment bank Allen & Company LLC to a assist the special committee on exploring strategic alternatives that could also include selling the whole company outright to other interested parties.

By October 2011, Messina had stepped down as CEO of the company after 15 years at the helm to pursue his bid, yet he remained a board member. He was replaced by Sweeney, a chairman of the board of Star Tribune Media Holdings and a former president of Starbucks Coffee Company (UK) Ltd.

Steinway said on Wednesday that it was continuing a separate process to sell its leasehold interest in New York’s Steinway Hall building, situated on Manhattan’s 57th Street, and was in talks with several parties.

According to its website, Steinway & Sons, the company’s piano unit, opened the first Steinway Hall on 14th Street in Manhattan in 1866.

With a main auditorium of 2,000 seats, it became New York City’s artistic and cultural center, housing the New York Philharmonic until Carnegie Hall opened in 1891. These days, Steinway Hall is a showroom for the company’s instruments.

The Waltham, Massachusetts-based company’s pianos have been used by legendary artists such as Cole Porter and Sergei Rachmaninoff and by contemporary ones like Chinese concert pianist Lang Lang.

(Reporting by Greg Roumeliotis in New York; Editing by M.D. Golan)

Music News Headlines – Yahoo! News

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