Hungary Experiments With Food Tax to Coax Healthier Habits

Akos Stiller for The New York Times

Store owners say sales of some salty and sugary foods are down, but youths are still eating similar snacks, some with less salt or with cheaper ingredients, and drinking sugary beverages.

BUDAPEST — Gizella Beres Devenyi, who works behind the cash register at the delicatessen Zena in a working-class neighborhood here, says it is easy to see Hungary’s new salt tax at work.

“You see the kids come in after school and pick up the bags of potato chips, and then when we tell them the price, they put them right back,” Mrs. Devenyi said. “We are selling about 10 percent less of certain brands.”

While Mayor Michael R. Bloomberg has raised tobacco taxes and tried to ban 32-ounce sodas in New York City, neither he nor the rest of the United States has embraced taxes as a way to promote healthier diets. Europe, on the other hand, has become something of a petri dish for a variety of food tax strategies, with a handful of countries slapping taxes on items like sugary sodas, fatty cheeses and salty chips, and others considering it.

France, Finland, Denmark, Britain, Ireland and Romania have all either instituted food taxes or have been talking about it.

But perhaps no country is trying harder than Hungary, which has, in the past 18 months, imposed taxes on salt, sugar and the ingredients in energy drinks, hoping both to raise revenues and force those who are eating unhealthy foods to pay a little more toward the country’s underfinanced health system.

Visit the market halls of Budapest and it is not hard to see why. Sure, there are some vegetables. But they are far outnumbered by sweet pastries, fatty sausages and thick slabs of lard, eaten for breakfast with onions. Nearly two-thirds of Hungarians are overweight or obese, and the country has the highest per capita salt consumption in the European Union.

As a result, Hungary has one of the lowest life expectancy rates at birth in the European Union: in 2011 it was just 71.2 years for men and 78.7 for women. In 2009, the most recent statistics available for all 27 members of the bloc, life expectancy in the group averaged at 76.6 years for men and 82.6 years for women.

“We have a public health crisis,” said Miklos Szocska, the health minister, explaining the logic behind the new taxes, which raised about $77.8 million last year. “We are leading the charts in many kinds of diseases. So, those who follow a certain lifestyle should pay for it in a small way.”

Many nutrition experts say that taxation is a powerful tool that has been effective in campaigns to reduce smoking and alcohol consumption. But many questions remain about how to make it work when it comes to changing eating habits.

Should taxation be combined with subsidies making fruits, vegetables and lean meat especially cheap? Will it actually improve diet or simply change it? And who will be affected? The truly overweight? Or the poor?

“What you have is a search out there for the best mix of ways to alter behavior,” said Dr. João Breda, the program manager for nutrition, physical activity and obesity at the World Health Organization Regional Office for Europe, which will issue a report on the subject soon. “And you have it coming from governments of all kinds, governments from left to right to center.”

But critics point out that the new interest in food taxes just happens to coincide with tough economic times in Europe. Some say the taxes are as much about raising revenues in a politically acceptable manner as they are about promoting healthy habits. And they worry that the taxes do, in fact, hit the poor the hardest.

One effort to raise taxes on saturated fat has already failed spectacularly. In October 2011, Denmark became the first country to institute such a tax, raising the price of meat, dairy, edible oils and fats, margarine and other blended spreads, among other items. Fans of the effort thought Denmark was perfectly positioned to make such a tax work, because it already had rigorous labeling requirements, an efficient administration and companies used to making these kinds of adjustments.

But barely a year later, Denmark gave up on the tax. In the end, experts say, the effort was undermined by political battles, pressure from the food industry and a population that quickly learned to go over the border to Germany to buy the products it wanted.

Michael M. Grynbaum contributed reporting from New York, and Gabriella Horn from Budapest.

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Detroit Car Sales Climb Again

DETROIT – Sales of new vehicles in the United States rose modestly in February, as consumers continued to buy more fuel-efficient cars and as businesses replaced aging pickup trucks with newer models.

Auto executives said overall industry sales for the month would improve about 2 percent over the strong results reported in the same period a year ago.

The seasonally adjusted annual sales rate – a closely watched indicator for the industry – is expected to total about 15.5 million vehicles for February.

That seasonal rate bodes well for the industry going forward, as automakers ratchet up production to meet demand for their new products.

The Detroit auto companies all posted positive results during the month.

General Motors, the largest American automaker, said it sold 224,000 vehicles in February, a 7 percent increase from the same month in 2012.

All of G.M.'s domestic brands – Chevrolet, Cadillac, GMC and Buick – had higher year-over-year sales. Cadillac led the way with a 20 percent gain, primarily because of healthy sales of the new ATS compact sedan.

G.M. also reported increases in sales of its newest small cars, like the Buick Verano and the Chevrolet Spark. But its most prominent gains were in pickup trucks.

The company said that sales of the Chevrolet Silverado pickup rose 29 percent, and the GMC Sierra increased 25 percent. Executives attributed the performance to a surge in housing starts and the need for construction companies to replace older pickups.

“A significant tailwind for our industry is new home construction, which is creating jobs and fueling the demand for pickups,” said Kurt McNeil, G.M.'s vice president of United States sales operations.

The Ford Motor Company, the second-biggest Detroit auto company, said it sold 195,000 vehicles during the month, a 9 percent gain from a year ago.

Ford said that many of its gains came from sales of sport utilities such as the Escape and Explorer. The company’s redesigned midsize sedan, the Fusion, also had a good month, with a 28 percent improvement over last year.

Like G.M., Ford also benefitted from the surging demand for pickups. Ford said that it sold 54,000 F-series trucks during the month, a 15 percent increase from February of 2012.

Chrysler, the smallest of the Detroit automakers, saw its growth rate slow somewhat after several months of reporting double-digit increases.

The company said that it sold 139,000 vehicles in February, a 4 percent improvement over a year earlier. That is a smaller increase than Chrysler has reported in previous months.

“In spite of a cautious ramp-up of some of our most popular products, which limited inventory last month, we still managed to record our strongest February in five years,” said Reid Bigland, head of United States sales for Chrysler.

Chrysler’s best performers during the month were passenger cars such as the new Dodge Dart. Sales of its Ram pickup increased 3 percent, while sales of its Jeep SUVs dropped 16 percent.

The big Japanese automakers were to report results later Friday. Analysts expected Toyota and Honda to continue their steady comeback from inventory disruptions because of the earthquake and tsunami in Japan two years ago.

Volkswagen, the German automaker that is rapidly expanding its American operations, said it sold 31,000 vehicles in February, a 3 percent increase from a year earlier.

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DealBook: For S.E.C., a Setback in Bid for More Time in Fraud Cases

The Supreme Court on Wednesday delivered a swift and decisive rejection of the Securities and Exchange Commission’s argument that it should operate under a more forgiving statute of limitations in pursuing penalties in fraud cases.

As a result of the decision, the agency will have to find a long-term solution to give itself more time to investigate cases.

In Gabelli v. Securities and Exchange Commission, Chief Justice John G. Roberts Jr. wrote in the unanimous decision rejecting the S.E.C.’s argument that a federal statute that limits the government’s authority to pursue civil penalties should commence when a fraud is discovered, not when it occurred.

The S.E.C. was hoping that the court would apply what is known as the “discovery rule.” In 2010, the Supreme Court endorsed this rule in a private securities fraud class-action suit, Merck & Co. v. Reynolds, stating “that something different was needed in the case of fraud, where a defendant’s deceptive conduct may prevent a plaintiff from even knowing that he or she has been defrauded.”

The discovery rule is an exception to the protection afforded by a statute of limitations, which puts an endpoint on potential legal liability for conduct. Unlike most cases, when fraud is involved, it may not be apparent to the victims that they were harmed because the primary goal of deceptive conduct is to keep it from being exposed.

In the Gabelli case, the S.E.C. filed fraud charges in 2008 against the mutual fund manager Marc Gabelli and a colleague, Bruce Alpert, saying they had violated the Investment Advisers Act of 1940 for permitting an investor to engage in market timing. Ten years ago, a major scandal erupted when it came to light that some advisers had permitted select investors to buy shares at favorable prices to take advantage of pricing disparities in the securities held by mutual funds.

In its complaint, the S.E.C. sought civil monetary penalties based on market timing that it claimed had taken place from 1999 to 2002, and resulted in the preferred investor purportedly reaping significant profits while ordinary investors suffered large losses. The defendants denied the charges and filed a motion to dismiss the case because it was not brought in time.

A federal statute, 28 U.S.C. § 2462, provides that “an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued.” The provision dates to 1839, and applies to any government agency.

A decision by the United States Court of Appeals for the Second Circuit in Manhattan allowed the case to proceed by applying the discovery rule to a governmental action. Coincidentally, that decision was written by Judge Jed S. Rakoff, who despite being an occasional thorn in the S.E.C.’s side, accepted the agency’s argument to avoid a strict application of the five-year statute of limitations.

The Supreme Court, however, saw things differently. This week, it issued its opinion less than two months after it heard oral argument in the case in January, a clear sign the justices found no merit in the S.E.C.’s contention that the agency should be treated the same as private plaintiffs in trying to get around the statute of limitations.

According to the Supreme Court, victims in securities fraud cases should have a longer period to file a claim – from when the fraud was discovered. “Most of us do not live in a state of constant investigation,” the court wrote. “Absent any reason to think we have been injured, we do not typically spend our days looking for evidence that we were lied to or defrauded.”

Chief Justice Roberts explained that “the S.E.C. as enforcer is a far cry from the defrauded victim the discovery rule evolved to protect.” One of the reasons the agency exists is to detect and penalize violations, with tools that the ordinary investor simply does not have, like the authority to compel testimony and the production of documents. The message is simple. When it’s your job to investigate fraud, you cannot argue that your failure to do so is a justification for not meeting a statute of limitations.

The Supreme Court’s decision puts increased pressure on the S.E.C. to pursue its investigations with greater alacrity and not let them gather dust, which can occur as a result of staff turnover or other pressing issues. The market timing case is a good example of how an investigation might get lost in the shuffle as corporate accounting frauds at large companies like Enron and WorldCom, which also came to light in 2002, strained the S.E.C.’s investigative resources.

There are a couple of options to deal with this issue in the long run, apart from a substantial increase in the agency’s budget – an unlikely prospect in the face of the looming federal budget sequestration deadline.

The S.E.C. can obtain an agreement to stop the statute of limitations, known as tolling, from those it is investigating, something it has done in the past. For example, in its insider trading and securities fraud case against Samuel E. Wyly, his now deceased brother, Charles J. Wyly Jr., and two other defendants, the S.E.C. got an agreement that let it pursue claims beyond the normal five-year limitations period.

A permanent solution would be to seek legislation from Congress that would give the S.E.C. a longer window to complete its investigations. The statute of limitations is not a constitutional protection, so Congress can amend it as it sees fit, which it has done in other areas involving fraud.

The limitations period for banking crimes, for example, was extended to 10 years during the savings and loan crisis because of the crush of cases that made it difficult to finish investigations in the five-year window to initiate criminal prosecutions. The Fraud Enforcement and Recovery Act of 2009 added mail and wire fraud affecting a financial institution to the list of crimes that get the benefit of the 10-year limitations period, again because of fear that cases would be lost because of the number of investigations taking place after the financial crisis.

The issue of the statute of limitations may even come up at the confirmation hearings of Mary Jo White, who has been nominated to be chairwoman of the S.E.C. That could be an early indicator of whether she would be willing to push for relief from the effect of the Gabelli opinion to help out the enforcement division.

In the short run, the Supreme Court’s decision will cause defendants in government enforcement actions to examine whether they might be able to take advantage of the five-year limitations period. Given how slowly the government has been known to move on occasion, it may be that some cases will fall by the wayside because of the Gabelli decision.

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BP Executive Shares Blame With Contractors

NEW ORLEANS — On the second day of testimony in the Gulf of Mexico oil spill trial, BP’s top executive for North American operations at the time of the disaster insisted that his company was not solely to blame and shared responsibility for the accident with its contractors.

Lamar McKay, the former president of BP America and current chief executive in charge of global upstream operations, faced questioning on Wednesday from lawyers from Transocean, the Deepwater Horizon rig, and Halliburton, the cement provider, who insisted that BP was ultimately responsible for the accident.

“We agreed that we are part of the responsibility for this tragic accident,” Mr. McKay said on the stand. “We were part of the cause of the accident, yes.”

Don Godwin, Halliburton’s lawyer, argued that had tests that BP had misinterpreted shown that the cement that sealed the well was defective, the cement could have been fixed and the accident would not have happened.

“We agreed there were misinterpretations,” Mr. McKay said. “That was one of the causes.” But he added that BP depends on its contractors.

On Tuesday, Mr. McKay acknowledged that a well explosion had been identified as a risk before it happened.

“There was a risk identified for a blowout,” he said. “The blowout was an identified risk, and it was a big risk, yes.”

Robert Cunningham, a lawyer for private plaintiffs, tried to pin down Mr. McKay on BP’s responsibility for the 2010 disaster that killed 11 workers and dumped millions of barrels of oil into the gulf. Mr. Cunningham suggested that the British company’s cost-cutting and risk-taking culture were at the heart of the explosion and spill. He pressed Mr. McKay on the fact that a BP report on the accident held contractors responsible, but did not cite management failures.

Mr. McKay repeatedly responded that BP was responsible for designing the well, but that the rig, cement and other contractors shared responsibility for safety on the drilling operations.

“It’s a team effort,” he said. “It’s a shared responsibility to manage the safety and risk.” There was little, if anything, in his comments that diverged from what BP executives have said in the past.

The Federal District Court trial in New Orleans combines suits brought by the Justice Department, state governments, private businesses and individual claimants against BP and several of its contractors. Decisions on culpability and damages could be a year or more away, but they are likely to have profound effects on environmental law and on the viability of BP as a major oil company with global ambitions.

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Wall Street Sheds Morning Gains

Stocks mostly rose on Tuesday after the Federal Reserve chairman, Ben S. Bernanke, defended the Fed’s bond-buying stimulus before Congress, but warned that forced spending cuts that could be set in motion this week represented a headwind for the economy.

Gains in homebuilders and other consumer stocks, following strong economic data, kept the overall market nearly unchanged, while a 5 percent jump in Home Depot lifted the Dow industrials. The Philadelphia Stock Exchange housing sector index rose 2 percent.

Stocks hit session highs shortly after Mr. Bernanke, in testimony before the Senate Banking Committee, strongly defended the Fed’s bond-buying stimulus program that has been essential for the stock market’s recovery.

But he also urged lawmakers to avoid sharp spending cuts set to go into effect on Friday, which he warned could combine with earlier tax increases to create a “significant headwind” for the economic recovery.

“He really came down foursquare on the bearish camp with respect to the potential economic impact of these cuts,” said Michael Jones, chief investment officer of Riverfront Investment Group in Richmond, Va. “That’s a surprise, and that’s probably why the market’s a little nervous right now.”

In early afternoon trading, the Dow Jones industrial average rose 74.64 points or 0.54 percent to 13,858.81. The Standard & Poor’s 500-stock index gained 1.78 points or 0.12 percent to 1,489.63. The Nasdaq Composite dropped 5.84 points or 0.19 percent to 3,110.41.

The S.&P. 500 failed to move above 1,500, a closely watched level that was technical support until recently, but could now become a hurdle.

The cable programmer AMC Networks was the Nasdaq’s biggest percentage decliner after AMC, the home of popular shows such as “The Walking Dead” and “Mad Men,” reported a quarterly profit far below analysts’ estimates. Its stock fell 7.4 percent to $53.77.

Equities continued to be weighed by concerns about a stalemate in Italy after a general election failed to give any party a parliamentary majority, posing the threat of prolonged instability and European financial crisis.

The FTSEurofirst-300 index of top European shares unofficially closed down 1.3 percent at 1,150.58. The benchmark Italian index tumbled 4.9 percent.

Home Depot, the world’s largest home improvement chain, was the top gainer in both the Dow and the S.&P. 500 after it reported adjusted earnings and sales that beat expectations. Home Depot’s shares jumped 5.5 percent to $67.46.

Macy’s shares climbed 2.8 percent to $39.60 after the department-store chain said it expected full-year earnings to be above analysts’ forecasts because of strong holiday sales.

Economic reports that showed strength in housing and consumer confidence also supported stocks.

United States home prices rose more than expected in December, according to the S.&P./Case-Shiller index. Consumer confidence rebounded in February, rising more than expected, and new-home sales rose to their highest in four and a half years.

This article has been revised to reflect the following correction:

Correction: February 26, 2013

Because of an editing error, an earlier version of this article misidentified the Senate panel before which Ben S. Bernanke, the Federal Reserve chairman, was testifying Tuesday. It was the Banking Committee, not the Finance Committee.

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DealBook: Japan Plans to Sell $10 Billion Stake in Cigarette Firm

TOKYO – The Japanese government is set to loosen its grip on Japan Tobacco, the world’s third-largest tobacco company, by selling a third of its stake in a sale that will net the country about $10 billion.

The Finance Ministry, which owns just over 50 percent of the former state monopoly, will sell 333 million of its shares in the cigarette manufacturer, according to a company statement issued on Monday.

The deal will be priced next month, from March 11 to 13, the statement said. In the run-up to the sale, Japan Tobacco will buy back up to 250 billion yen ($2.7 billion) of its shares.

Under laws passed in 2011 after a devastating earthquake and tsunami hit Japan, proceeds of the sale of Japan Tobacco shares will go toward rebuilding the country’s battered northeast coast. The reconstruction costs have threatened to weigh on Japan’s public finances at a time when public debt is twice the size of its economy.

It is an opportune time for the Japanese government to sell. Japan’s stock market has rallied since mid-November, and Japan Tobacco’s shares have tracked the market’s ascent, climbing 20 percent in the last three months.

Shares in Japan Tobacco closed 1.43 percent higher on Monday, at 2,901 yen, before the planned sale was announced. At that price, the government’s share sale would be valued at roughly 967 billion yen.

Japan has already been reducing its stake and involvement in the cigarette maker, which traces its origins to a Finance Ministry bureau set up in 1898 to create a national tobacco monopoly that lasted until 1985.

Even after the company went public, the Finance Ministry held two-thirds of its shares until 2004, when it reduced its stake to 50.1 percent, or roughly one billion shares. Other investors in Japan Tobacco include Mizuho Trust & Banking, Goldman Sachs and the Children’s Investment Fund Management.

The position in Japan Tobacco has put the government in a controversial position.

The government has squeezed more funds from its smokers, raising the price of a pack of cigarettes about 40 percent in 2010, its single largest increase in tobacco taxes. Still, cigarettes remain relatively cheap in Japan, at about $4.30 a pack.

But antismoking advocates have blamed the Japanese government’s continued ownership of Japan Tobacco – whose brands include Camel, Winston and Mild Seven – for the country’s delay in passing laws to protect nonsmokers from cigarette smoke, for example, and more stringently regulating of tobacco-related marketing.

In a 2012 report, the Washington-based Global Business Group on Health said Japan’s ownership of Japan Tobacco shares “leads to a national conflict of interest, in which the government treats smoking as a behavioral issue rather than a health concern.”

Though smoking rates have started to decline in recent years, the Japanese remain heavy smokers, consuming about 1,841 cigarettes a person, according to data compiled last year by the World Lung Foundation and American Cancer Society. That compared with about 1,000 cigarettes a person in the United States.

To make up for declining cigarette consumption at home, Japan Tobacco has aggressively expanded overseas, acquiring Britain’s Gallaher Group in 2007 for $15 billion, and adding the Silk Cut and Benson & Hedges brands to its portfolio. The company has also made a push into packaged foods and soft drinks, as well as pharmaceuticals.

The government’s sale of Japan Tobacco shares is part of a wider effort to raise money to finance reconstruction from the country’s natural and nuclear disasters in 2011. The government also plans to sell shares of Japan Post Holdings, which runs the country’s postal system and also acts as its biggest bank.

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Major Banks Aid in Payday Loans Banned by States

Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.

With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.

While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.

“Without the assistance of the banks in processing and sending electronic funds, these lenders simply couldn’t operate,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

The banking industry says it is simply serving customers who have authorized the lenders to withdraw money from their accounts. “The industry is not in a position to monitor customer accounts to see where their payments are going,” said Virginia O’Neill, senior counsel with the American Bankers Association.

But state and federal officials are taking aim at the banks’ role at a time when authorities are increasing their efforts to clamp down on payday lending and its practice of providing quick money to borrowers who need cash.

The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are examining banks’ roles in the online loans, according to several people with direct knowledge of the matter. Benjamin M. Lawsky, who heads New York State’s Department of Financial Services, is investigating how banks enable the online lenders to skirt New York law and make loans to residents of the state, where interest rates are capped at 25 percent.

For the banks, it can be a lucrative partnership. At first blush, processing automatic withdrawals hardly seems like a source of profit. But many customers are already on shaky financial footing. The withdrawals often set off a cascade of fees from problems like overdrafts. Roughly 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts, according to a report released this month by the Pew Charitable Trusts. That fee income is coveted, given that financial regulations limiting fees on debit and credit cards have cost banks billions of dollars.

Some state and federal authorities say the banks’ role in enabling the lenders has frustrated government efforts to shield people from predatory loans — an issue that gained urgency after reckless mortgage lending helped precipitate the 2008 financial crisis.

Lawmakers, led by Senator Jeff Merkley, Democrat of Oregon, introduced a bill in July aimed at reining in the lenders, in part, by forcing them to abide by the laws of the state where the borrower lives, rather than where the lender is. The legislation, pending in Congress, would also allow borrowers to cancel automatic withdrawals more easily. “Technology has taken a lot of these scams online, and it’s time to crack down,” Mr. Merkley said in a statement when the bill was introduced.

While the loans are simple to obtain — some online lenders promise approval in minutes with no credit check — they are tough to get rid of. Customers who want to repay their loan in full typically must contact the online lender at least three days before the next withdrawal. Otherwise, the lender automatically renews the loans at least monthly and withdraws only the interest owed. Under federal law, customers are allowed to stop authorized withdrawals from their account. Still, some borrowers say their banks do not heed requests to stop the loans.

Ivy Brodsky, 37, thought she had figured out a way to stop six payday lenders from taking money from her account when she visited her Chase branch in Brighton Beach in Brooklyn in March to close it. But Chase kept the account open and between April and May, the six Internet lenders tried to withdraw money from Ms. Brodsky’s account 55 times, according to bank records reviewed by The New York Times. Chase charged her $1,523 in fees — a combination of 44 insufficient fund fees, extended overdraft fees and service fees.

For Subrina Baptiste, 33, an educational assistant in Brooklyn, the overdraft fees levied by Chase cannibalized her child support income. She said she applied for a $400 loan from Loanshoponline.com and a $700 loan from Advancemetoday.com in 2011. The loans, with annual interest rates of 730 percent and 584 percent respectively, skirt New York law.

Ms. Baptiste said she asked Chase to revoke the automatic withdrawals in October 2011, but was told that she had to ask the lenders instead. In one month, her bank records show, the lenders tried to take money from her account at least six times. Chase charged her $812 in fees and deducted over $600 from her child-support payments to cover them.

“I don’t understand why my own bank just wouldn’t listen to me,” Ms. Baptiste said, adding that Chase ultimately closed her account last January, three months after she asked.

A spokeswoman for Bank of America said the bank always honored requests to stop automatic withdrawals. Wells Fargo declined to comment. Kristin Lemkau, a spokeswoman for Chase, said: “We are working with the customers to resolve these cases.” Online lenders say they work to abide by state laws.

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Many States Say Cuts Would Burden Fragile Recovery

States are increasingly alarmed that they could become collateral damage in Washington’s latest fiscal battle, fearing that the impasse could saddle them with across-the-board spending cuts that threaten to slow their fragile recoveries or thrust them back into recession.

Some states, like Maryland and Virginia, are vulnerable because their economies are heavily dependent on federal workers, federal contracts and military spending, which will face steep reductions if Congress allows the automatic cuts, known as sequestration, to begin next Friday. Others, including Illinois and South Dakota, are at risk because of their reliance on the types of federal grants that are scheduled to be cut. And many states simply fear that a heavy dose of federal austerity could weaken their economies, costing them jobs and much-needed tax revenue.

So as state officials begin to draw up their budgets for next year, some say that the biggest risk they see is not the weak housing market or the troubled European economy but the federal government. While the threat of big federal cuts to states has become something of a semiannual occurrence in recent years, state officials said in interviews that they fear that this time the federal government might not be crying wolf — and their hopes are dimming that a deal will be struck in Washington in time to avert the cuts.

The impact would be widespread as the cuts ripple across the nation over the next year.

Texas expects to see its education aid slashed hundreds of millions of dollars, which could force local school districts to fire teachers, if the cuts are not averted. Michigan officials say they are in no position to replace the lost federal dollars with state dollars, but worry about cuts to federal programs like the one that helps people heat their homes. Maryland is bracing not only for a blow to its economy, which depends on federal workers and contractors and the many private businesses that support them, but also for cuts in federal aid for schools, Head Start programs, a nutrition program for pregnant women, mothers and children, and job training programs, among others.

Gov. Bob McDonnell of Virginia, a Republican, warned in a letter to President Obama on Monday that the automatic spending cuts would have a “potentially devastating impact” and could force Virginia and other states into a recession, noting that the planned cuts to military spending would be especially damaging to areas like Hampton Roads that have a big Navy presence. And he noted that the whole idea of the proposed cuts was that they were supposed to be so unpalatable that they would force officials in Washington to come up with a compromise.

“As we all know, the defense, and other, cuts in the sequester were designed to be a hammer, not a real policy,” Mr. McDonnell wrote. “Unfortunately, inaction by you and Congress now leaves states and localities to adjust to the looming threat of this haphazard idea.”

The looming cuts come just as many states feel they are turning the corner after the prolonged slump caused by the recession. Gov. Martin O’Malley of Maryland, a Democrat, said he was moving to increase the state’s cash reserves and rainy day funds as a hedge against federal cuts.

“I’d rather be spending those dollars on things that improve our business climate, that accelerate our recovery, that get more people back to work, or on needed infrastructure — transportation, roads, bridges and the like,” he said, adding that Maryland has eliminated 5,600 positions in recent years and that its government was smaller, on a per capita basis, than it had been in four decades. “But I can’t do that. I can’t responsibly do that as long as I have this hara-kiri Congress threatening to drive a long knife through our recovery.”

Federal spending on salaries, wages and procurement makes up close to 20 percent of the economies of Maryland and Virginia, according to an analysis by the Pew Center on the States.

But states are in a delicate position. While they fear the impact of the automatic cuts, they also fear that any deal to avert them might be even worse for their bottom lines. That is because many of the planned cuts would go to military spending and not just domestic programs, and some of the most important federal programs for states, including Medicaid and federal highway funds, would be exempt from the cuts.

States will see a reduction of $5.8 billion this year in the federal grant programs subject to the automatic cuts, according to an analysis by Federal Funds Information for States, a group created by the National Governors Association and the National Conference of State Legislatures that tracks the impact of federal actions on states. California, New York and Texas stand to lose the most money from the automatic cuts, and Puerto Rico, which is already facing serious fiscal distress, is threatened with the loss of more than $126 million in federal grant money, the analysis found.

Even with the automatic cuts, the analysis found, states are still expected to get more federal aid over all this year than they did last year, because of growth in some of the biggest programs that are exempt from the cuts, including Medicaid.

But the cuts still pose a real risk to states, officials said. State budget officials from around the country held a conference call last week to discuss the threatened cuts. “In almost every case the folks at the state level, the budget offices, are pretty much telling the agencies and departments that they’re not going to backfill — they’re not going to make up for the budget cuts,” said Scott D. Pattison, the executive director of the National Association of State Budget Officers, which arranged the call. “They don’t have enough state funds to make up for federal cuts.”

The cuts would not hit all states equally, the Pew Center on the States found. While the federal grants subject to the cuts make up more than 10 percent of South Dakota’s revenue, it found, they make up less than 5 percent of Delaware’s revenue.

Many state officials find themselves frustrated year after year by the uncertainty of what they can expect from Washington, which provides states with roughly a third of their revenues. There were threats of cuts when Congress balked at raising the debt limit in 2011, when a so-called super-committee tried and failed to reach a budget deal, and late last year when the nation faced the “fiscal cliff.”

John E. Nixon, the director of Michigan’s budget office, said that all the uncertainty made the state’s planning more difficult. “If it’s going to happen,” he said, “at some point we need to rip off the Band-Aid.”

Fernanda Santos contributed reporting.

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Common Sense: Mindful of Bubbles as Deal-Making Boom Begins

Warren E. Buffett has teamed up with 3G Capital to buy the venerable H. J. Heinz Company for $23 billion. But the famed value investor isn’t exactly buying low: when the deal was announced on Valentine’s Day, Heinz shares were trading at a record high of nearly $61. Had Mr. Buffett and his partners bought a year ago, shares were selling for $53, a 13 percent discount.

Mr. Buffett is hardly the only buyer pursuing deals now that the stock market is hitting levels last seen in 2007. The Wilshire 5000 index recently set a record, and the Dow Jones industrial average has pierced 14,000 several times in the last three weeks.

Thomson Reuters reports that during the first two months of 2013 there have been over a thousand deals valued at almost $163 billion in total. That’s more than double the amount for the same months in 2012. If this blistering pace continues, merger and buyout deals could surpass $2 trillion in 2013, far more than the $1.57 trillion in 2007.

We all know what happened after that. From its peak in October 2007, the Standard & Poor’s 500-stock index plunged 56 percent.

“Buy low and sell high” is probably the most common adage in investing. So why do so many highly paid chief executives of acquiring companies persist in doing the opposite?

Mr. Buffett, it should be said, may be the exception that proves the rule, since he’s been among the few willing to make big deals when stocks are cheap.

His company, Berkshire Hathaway, completed a $34 billion purchase of Burlington Northern in November 2009, when the S.& P. 500 hit an 11-year low. It surely ranks as one of the best deals ever, since stocks generally, and railroad stocks in particular, have surged since then.

Mr. Buffett kept busy throughout the downturn, buying profitable stakes in Goldman Sachs and General Electric in the depths of 2008 while also bolstering investor confidence.

But even Mr. Buffett can get swept up in a deal-making frenzy. He called his 2007 investment in the Texas utility TXU bonds a “huge mistake” and “unforced error.” The $45 billion TXU buyout, led by Kohlberg Kravis Roberts, a veteran deal maker and buyout firm, still ranks as the biggest leveraged buyout ever — and may turn out to be one of the worst.

“You always see a lot of M.& A. activity when the market is overvalued,” Matthew Rhodes-Kropf, an associate professor at Harvard Business School who has studied the phenomenon and also advises private equity and venture capital firms. “Of course, you only know a market peak with benefit of hindsight. But when you look back, you’ll see a lot of M.& A. activity.”

One reason is that there has to be two sides to every deal, and, “When prices are low, sellers don’t want to sell,” Professor Rhodes-Kropf said. “They know their stock will go up with even modest growth. All they have to do is hang on.”

The same thing happened after the recent real estate crash, when owners withdrew their homes from the market rather than sell at fire-sale prices, and the number of transactions plunged.

Conversely, as stock prices rise, some executives start to worry about their ability to meet investors’ growth expectations and whether their stocks are getting overvalued, Professor Rhodes-Kropf said. A merger or buyout may provide an attractive option, both for the seller, who can cash in at a premium, and the buyer, who gets immediate revenue gains and may benefit from the growth prospects at the newly acquired company.

Professor Rhodes-Kropf’s research suggests that mergers and buyouts occur disproportionally in overvalued industries and overvalued companies.

Still, that doesn’t explain why so many mergers and buyouts occur when the stock market is as overvalued as it turned out to be in both 2000 and 2007. You’d expect sellers to be plentiful, but not buyers.

Stephen A. Schwarzman, chairman and chief executive of Blackstone Group, one of Wall Street’s best-known and most successful deal makers, told me this week that early in the merger cycle: “You typically buy companies that are in the same industry or where there’s a fit. Those deals tend to be smart, pretty reasonable, and they usually work.”

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DealBook: Carlyle's Profit Fell in 4th Quarter as Growth Slowed

11:18 a.m. | Updated Most of the publicly traded private equity giants proudly reported glowing fourth-quarter earnings.

The Carlyle Group isn’t one of them.

On Thursday, the alternative investment giant disclosed a 28 percent drop in fourth-quarter profit from the period a year earlier, as the growth of its portfolio companies slowed. That sent the company’s stock down more than 8 percent by midmorning, to $33.70.

Carlyle reported fourth-quarter profit of $182 million, expressed as economic net income, compared with $254 million in the year-earlier period. That amounts to 47 cents per unit. Analysts surveyed by Capital IQ had expected about 66 cents per unit, on average.

And Carlyle’s distributable earnings, a measure the firm prefers because it tracks actual payouts to its limited partners, fell 24 percent, to $188 million. Using generally accepted accounting principles, Carlyle earned $12 million in net income.

The results fall short of those of rivals like the Blackstone Group and Kohlberg Kravis Roberts. Private equity firms in general have gained from improvements in the markets, which have lifted the valuations of their portfolios and bolstered their core business of buying and selling companies.

Carlyle attributed the decline in economic net income to a smaller appreciation in the value of its portfolio. It reported a 4 percent gain for the quarter, compared with a 7 percent increase in the period a year earlier.

The decision to delay reaping carried interest from its latest mainstay fund, Carlyle Partners V, weighed on distributable earnings. The company opted to hold off, given the relative freshness of the fund and the influx of new investments like the buyouts of the TCW Group and Getty Images.

Carlyle highlighted its strong fund-raising and gains from selling investments. The firm raised $4.6 billion in new money for the quarter and $14 billion for the year, compared with a total of $6.6 billion raised in all of 2011. It generated $6.8 billion in realized proceeds for the quarter and $18.7 billion for the year, compared with $17.6 billion in 2011.

“We had another excellent year,” David M. Rubenstein, one of Carlyle’s co-chief executives, said in a statement. “Our performance over the past two years was marked by steady, continuous progress across our business.”

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A Digital Shift on Health Data Swells Profits in an Industry

Jeff Swensen for The New York Times

Dr. Vivek Reddy, a neurologist at the University of Pittsburgh Medical Center, also works on its digital records effort.

It was a tantalizing pitch: come get a piece of a $19 billion government “giveaway.”

The approach came in 2009, in a presentation to doctors by Allscripts Healthcare Solutions of Chicago, a well-connected player in the lucrative business of digital medical records. That February, after years of behind-the-scenes lobbying by Allscripts and others, legislation to promote the use of electronic records was signed into law as part of President Obama’s economic stimulus bill. The rewards, Allscripts suggested, were at hand.

But today, as doctors and hospitals struggle to make new records systems work, the clear winners are big companies like Allscripts that lobbied for that legislation and pushed aside smaller competitors.

While proponents say new record-keeping technologies will one day reduce costs and improve care, profits and sales are soaring now across the records industry. At Allscripts, annual sales have more than doubled from $548 million in 2009 to an estimated $1.44 billion last year, partly reflecting daring acquisitions made on the bet that the legislation would be a boon for the industry. At the Cerner Corporation of Kansas City, Mo., sales rose 60 percent during that period. With money pouring in, top executives are enjoying Wall Street-style paydays.

None of that would have happened without the health records legislation that was included in the 2009 economic stimulus bill — and the lobbying that helped produce it. Along the way, the records industry made hundreds of thousands of dollars of political contributions to both Democrats and Republicans. In some cases, the ties went deeper. Glen E. Tullman, until recently the chief executive of Allscripts, was health technology adviser to the 2008 Obama campaign. As C.E.O. of Allscripts, he visited the White House no fewer than seven times after President Obama took office in 2009, according to White House records.

Mr. Tullman, who left Allscripts late last year after a boardroom power struggle, characterized his activities in Washington as an attempt to educate lawmakers and the administration.

“We really haven’t done any lobbying,” Mr. Tullman said in an interview. “I think it’s very common with every administration that when they want to talk about the automotive industry, they convene automotive executives, and when they want to talk about the Internet, they convene Internet executives.”

Between 2008 and 2012, a time of intense lobbying in the area around the passage of the legislation and how the rules for government incentives would be shaped, Mr. Tullman personally made $225,000 in political contributions. While tens of thousands of those dollars went to the Democratic Senatorial Campaign Committee, money was also being sprinkled toward Senator Max Baucus, the Democratic senator from Montana who is chairman of the Senate Finance Committee, and Jay D. Rockefeller, the Democrat from West Virginia who heads the Commerce Committee. Mr. Tullman said his recent personal contributions to various politicians had largely been driven by his interest in supporting President Obama and in seeing his re-election.

Cerner’s lobbying dollars doubled to nearly $400,000 between 2006 and last year, according to the Center for Responsive Politics. While its political action committee contributed a little to some Democrats in 2008, including Senator Baucus, its contributions last year went almost entirely to Republicans, with a large amount going to the Mitt Romney campaign.

Current and former industry executives say that big digital records companies like Cerner, Allscripts and Epic Systems of Verona, Wis., have reaped enormous rewards because of the legislation they pushed for. “Nothing that these companies did in my eyes was spectacular,” said John Gomez, the former head of technology at Allscripts. “They grew as a result of government incentives.”

Executives at smaller records companies say the legislation cemented the established companies’ leading positions in the field, making it difficult for others to break into the business and innovate. Until the 2009 legislation, growth at the leading records firms was steady; since then, it has been explosive. Annual sales growth at Cerner, for instance, has doubled to 20 percent from 10 percent.

“We called it the Sunny von Bülow bill. These companies that should have been dead were being put on machines and kept alive for another few years,” said Jonathan Bush, co-founder of the cloud-based firm Athenahealth and a first cousin to former President George W. Bush. “The biggest players drew this incredible huddle around the rule-makers and the rules are ridiculously favorable to these companies and ridiculously unfavorable to society.”

This article has been revised to reflect the following correction:

Correction: February 20, 2013

An earlier version of this article omitted part of the name of the institution that employs Michael Callaham and Michael Blum. It is the University of California, San Francisco Medical Center, not the San Francisco Medical Center.

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Today's Economist: Who Pays the Corporate Income Tax

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”

The United States has had a corporate income tax since 1909, but in all the years since there is a major question about it that economists haven’t been able to answer satisfactorily: who pays it? The possibility that Congress may act on corporate tax reform this year makes this a highly salient question.

The problem, of course, is that people must ultimately pay all taxes. Corporations, contrary to the views of some Republicans, are not people. They are legal entities that exist only because governments permit them to and are artificial vehicles through which sales, wages and profits flow. Hence, the actual burden of the corporate tax may fall on any of the groups that receive such flows; namely, customers, workers and shareholders, the ultimate owners of the corporation.

Probably most people assume that the corporate income tax is largely paid by consumers of its products or services. That is, they assume that although the tax is nominally levied on the corporation as a whole, in fact the burden of the tax is shifted onto customers in the form of higher prices.

All economists reject that idea. They point out that prices are set by market forces and the suppliers of goods and services aren’t only C-corporations, which pay taxes on the corporate tax schedule, but also sole proprietorships, partnerships and S-corporations that are taxed under the individual income tax. Other suppliers include foreign corporations and nonprofits.

Therefore, corporations cannot raise prices to compensate for the corporate income tax because they will be undercut by businesses to which the tax does not apply. It should also be noted that the states have substantially different corporate tax regimes, including some that do not tax corporations at all, and we do not observe that prices for goods and services vary from state to state depending on its taxation of corporations.

That leaves two remaining groups that may bear the burden of the corporate tax: workers and shareholders.

In 1962, the University of Chicago economist Arnold C. Harberger, published an important article arguing that the corporate tax was borne entirely by shareholders. This was unquestionably true in the first instance; that is, when the corporate income tax was first imposed. The tax simply reduced corporate profits and had to come out of the pockets of shareholders, given that it could not be shifted onto consumers.

But as time went by, some economists argued that a substantial portion of the corporate income tax was ultimately paid by workers in the form of lower wages. This resulted because the supply of capital would shrink in order to raise the rate of return on capital. A smaller capital stock would reduce the productivity of labor and cause real wages to be lower in the long run.

Most economists now agree that the burden of the corporate income tax falls on labor to some extent, but there is disagreement over the degree. This is important because the political prospects for cutting the statutory corporate tax rate, a goal shared by all tax reformers, may depend on the extent to which it can be shown that workers will benefit.

The just-published March 2013 issue of The National Tax Journal, the principal academic journal devoted to tax analysis, contains four articles by top scholars who have sought to clarify the incidence of the corporate income tax. Unfortunately, there is no consensus.

The first article, by a Reed College economist, Kimberly Clausing, supports the traditional idea that capital bears all of the corporate tax. She notes that large multinational corporations have a great deal of flexibility in determining where to locate production, incur costs and realize profits.

A company may borrow in one country and take the deduction for interest there, locate actual production facilities and employ workers in another country, and realize profits in a third country by transferring intellectual property such as patents there or by adjusting prices on internal sales among its foreign subsidiaries.

Moreover, Professor Clausing notes, corporate shareholders may live in many different countries, each facing a different tax regime with respect to the taxation of dividends and capital gains.

For these reasons, she argues that it is impossible for workers to bear any significant portion of the corporate tax in the form of lower wages. It all falls on capital. A second article, by Jennifer Gravelle, a Congressional Budget Office economist, agrees with this conclusion.

But a third article, by an Oxford University economist, Li Liu and a Rutgers economist, Rosanne Altshuler, argues in favor of the idea that labor bears most of the burden of the corporate tax.

They take advantage of the fact that different industries bear different tax burdens because of various provisions of the tax law, and also that concentration and competition varies among industries. They empirically examine wages among industries and conclude that labor bears about 60 percent of the corporate tax burden.

That is, a $1 increase in corporate taxes will reduce wages by about 60 cents.

Finally, four Treasury Department economists detail the method the Treasury uses to allocate the corporate tax in distribution tables. They have the advantage of access to actual corporate tax returns and far greater detail on corporate finances than available to private researchers.

The Treasury economists conclude that 82 percent of the corporate tax falls on capital and 18 percent on labor. This is very close to the methodology of the private Tax Policy Center, whose analyses are frequently cited in policy debates. It assumes that 80 percent of the corporate tax is borne by capital and 20 percent by labor.

Of course, all of these assumptions may be called into question when dealing with any specific tax reform proposal. For example, a change in depreciation allowances is mainly going to affect manufacturing companies, whereas a change in the taxes on foreign-source income will have an impact only on multinationals.

To build support for or opposition to particular changes in corporate taxation, many claims will be made about the constituencies that will benefit or be harmed. People should be aware that even the best academic economists disagree on the basics of who actually pays the corporate tax.

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Drug Makers Increasingly Join Fight Against Doping

Now, a growing number of pharmaceutical companies are trying to prevent their drugs from the same fate by joining with antidoping officials to develop tests to detect the illegal use of their drugs among athletes.

Two major drug makers, Roche and GlaxoSmithKline, have begun evaluating every new drug candidate for its potential to be abused by athletes and have agreed to share information about those products with the World Anti-Doping Agency, known as WADA, which polices drug use in international sports. Several other smaller companies have provided proprietary information about specific drugs. A conference in Paris in November dedicated to the topic drew 250 participants.

The development reflects a significant shift from the days when drug makers paid little attention to how their products could be abused by athletes, said David Howman, the director general of the antidoping agency. In the past, drug makers “felt that any publicity in relation to antidoping control would be negative,” he said. “But what they discovered is the opposite happened.”

Instead of shying away from such stories, Roche and Glaxo have promoted their involvement as an example of good corporate citizenship. Last year, Glaxo went so far as to sponsor the testing laboratories for the London Games, the first time in Olympic history that an antidoping laboratory had a named corporate sponsor.

Pauline Williams, who leads the team at Glaxo that runs the antidoping initiative, said the cooperation with WADA grew out of that sponsorship. “What the London 2012 involvement led to was a real pride and willingness, and a positive attitude toward this continued engagement,” she said. Since the start of the program, the company said it has shared information about four of its projects, and development of a test for one drug is under way.

Antidoping officials have long sought information from drug companies. For instance, Amgen, which developed EPO, helped develop a test for Aranesp, another of its drugs that has been used in doping, in advance of the 2002 Salt Lake Olympics. But such arrangements were ad hoc and fairly simple, said Olivier Rabin, the antidoping agency’s science director. “It was almost more by chance when it was happening,” he said.

Relationships between antidoping officials and pharmaceutical companies have sometimes been tense. In 2006, Amgen was criticized for sponsoring the Tour of California at a time when EPO abuse was rampant among cyclists. Although the company said it had sponsored the race to raise awareness about doping, it was later revealed that the organizers had failed to test for EPO, short for erythropoietin, a synthetic hormone that, like Aranesp, stimulates the production of red blood cells.

“They were associated with some things in the past which we felt were probably inappropriate,” Mr. Howman said. “What we had to do was start the conversation from scratch, and say let’s see how we can work together.”

Steven Elliott, the Amgen scientist who invented Aranesp, said the misperceptions went both ways. He said some believed, wrongly, that biotechnology companies were developing drugs that could be misused by athletes as a way to increase sales. “There was this uneasiness about that,” said Mr. Elliott, who recently retired but continues to work as a liaison between biotechnology companies and the antidoping agency. “There had to be this realization that it was a win-win for both sides.”

Antidoping officials began to work more closely with drug makers after 2004, when Dr. Rabin heard that athletes were talking about a new version of EPO, called CERA, that was being developed by Roche, and asked the company for help.

“We were shocked when they first contacted us,” recalled Barbara Leishman, who oversees the antidoping program there. She said company scientists had not realized that athletes were following the drug’s development so closely. “This is not the sort of thing we like to hear about our compounds.”

Roche then worked with the antidoping agency to develop a blood test for the new drug, turning over proprietary compounds, called reagents, that would help officials test for their drug. Because of the complex nature of the drug, which mimics the body’s own hormones, and the development of the test, the project took years.

In 2009, blood samples from six athletes taken during the Beijing Olympics tested positive for CERA. Other drug makers took note of the media attention Roche received for the collaboration, Mr. Howman said. “Once there’s a foot in the water, then you can follow and walk right in,” he said.

Roche broadened its agreement with WADA, expanding the project to screen all of its drugs in development. Glaxo followed suit and around the same time, two major industry groups representing biotechnology and pharmaceutical companies adopted policies encouraging their members to cooperate.

Halting the abuse of new prescription drugs is only part of the antidoping picture. Athletes today are believed to use a variety of methods to gain an advantage, from transfusing their own blood to taking tiny quantities of tried-and-true doping agents. And some performance-enhancing drugs gain life in illicit laboratories, as was the case with “the clear,” the designer steroid developed in the Bay Area Laboratory Co-operative that toppled star athletes like Marion Jones.

Still, pharmaceutical companies have an important role to play given how complex new drugs have become, and how athletes are increasingly using substances that closely mimic the body’s natural processes, officials said.

“Developing detection methods to show that the substance taken in a synthetic form is different than your natural substance is more challenging,” said Matthew Fedoruk, the science director for the United States Anti-Doping Agency.

Many pharmaceutical companies already have the tools to create a doping test for their products because the Food and Drug Administration and other regulatory bodies require them to show how the drug passes through the body. During the development process, the companies design reagents to help identify the drug. Amgen and other companies, like the biotechnology company Affymax — which makes a competing anemia drug called Omontys — have given WADA some of these reagents for use in developing tests.

Still, Dr. Rabin and others said some companies needed persuading and did not return his calls. In those cases, he said, he uses peer pressure, reminding them that other companies are also participating.

“We know the progress of their drugs, and we know that at some point collaboration will naturally come,” he said. “We are a bit stubborn.”

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A First Step on Continent for Google on Use of Content

PARIS — Publishers in France say they have struck an innovative agreement with Google on the use of their content online. Their counterparts elsewhere in Europe, however, say the French gave in too easily to the Internet giant.

The deal was signed this month by President François Hollande of France and Eric E. Schmidt, the executive chairman of Google, who called it a breakthrough in the tense relationship between publishers and Google, and as a possible model for other countries to follow.

Under the deal, Google agreed to set up a fund, worth €60 million, or $80 million, over three years, to help publishers develop their digital units. The two sides also pledged to deepen business ties, using Google’s online tools, in an effort to generate more online revenue for the publishers, who have struggled to counteract dwindling print revenue.

But the French group, representing newspaper and magazine publishers with an online presence, as well as a variety of other news-oriented Web sites, yielded on its most important demand: that Google and other search engines and “aggregators” of news should start paying for links to their content.

Google, which insists that its links provide a service to publishers by directing traffic to their sites, had fiercely resisted any change in the principle of free linking.

The agreement dismayed members of the European Publishers Council, a lobbying group in Brussels, which has been pushing for a fundamental change in the relationship between publishers and Google. The group criticized the French publishers for breaking ranks and striking a separate business agreement that has no statutory standing.

The deal “does not address the continuing problem of unauthorized reuse and monetization of content, and so does not provide the online press with the financial certainty or mechanisms for legal redress which it needs to build sustainable business models and ensure its continued investment in high-quality content,” Angela Mills Wade, executive director of the publishers council, said in a statement.

German publishers were also scornful, with Anja Pasquay, a spokeswoman for the German Newspaper Publishers’ Association, saying: “Obviously the French position isn’t one that we would favor. This is not the solution for Germany.”

Germany has been in the forefront of the push to get Google to share with online news publishers some of the billions of euros that the company earns from the sale of advertising. A proposed law, endorsed by the government of Chancellor Angela Merkel and working its way through the federal legislature, would grant a new form of copyright to digital publishers. If enacted, it could allow publishers to charge search engines or aggregators for displaying even snippets of news articles alongside links to other Web sites.

Mr. Hollande had vowed to introduce similar legislation this winter if Google and the publishers did not come to terms. It appears that Google, which had threatened to stop indexing French Web sites’ content if it had to pay for links, has sidelined the threat of legislation, at least for now; the agreement will be reviewed after three years, Mr. Hollande has said.

Under the deal, Google says it will help the publishers use several of its digital advertising services, including AdSense, AdMob and Ad Exchange, more effectively.

Publishers are already free to use these services, and it was not immediately clear how they would be able to generate more revenue from them; this part of the accord remains confidential, both sides say, because they are still negotiating the fine print.

“This agreement can help accelerate the move toward greater advertising revenues in the digital world,” said Marc Schwartz of Mazars, a consulting firm, who is serving as an independent mediator in the talks. “I’m not saying we have done everything, but it’s a first step in the right direction.”

More has been said about the planned innovation fund. Publishers will submit proposals to the fund, which will select ideas to finance and develop, with the involvement of Google engineers.

“The idea is that it would inject innovation into the sector in France,” said Simon Morrison, copyright policy manager at Google.

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Group of 20 Pledges to Let Markets Set Currency Values

MOSCOW — In a concerted move to quiet fears of a so-called currency war, finance officials from the world’s largest industrial and emerging economies expressed their commitment on Saturday to “market-determined exchange rate systems and exchange rate flexibility.”

In a statement issued at the conclusion of a conference here of the Group of 20, the finance ministers from the Group of 20 promised: “We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes.”

In its statement, the group also vowed to “take necessary collective actions” to discourage corporate tax evasion, particularly by preventing companies from shifting profits to avoid tax obligations. For instance, a number of big American companies, including Apple and Starbucks, have come under scrutiny recently for seeking out the friendliest tax jurisdictions.

Over all, the statement largely echoed one last week by seven top industrial nations pledging to let market exchange rates determine the value of their currencies. Currency devaluation can be used to gain competitive advantage because it makes a country’s exports cheaper.

“We all agreed on the fact that we refuse to enter any currency war,” the French finance minister, Pierre Moscovici, told reporters at the conference, which was held in a meeting center just a short walk from the Kremlin and Red Square.

In the statement on Saturday, the Group of 20 pointedly avoided any criticism of Japan, where stimulus programs backed by Prime Minister Shinzo Abe have kept interest rates near zero and flooded the economy with money — leading to a roughly 15 percent drop in the value of the yen against the dollar over the last three months.

The Japanese policies, which have reduced the cost of Japanese products around the world, were the primary cause of fears of a currency war.

In essence, the Group of 20 expressed a view that loose monetary policy, including steps that weaken currency values, are acceptable when used to stimulate domestic growth but should not be used to benefit in global trade.

Critics of that view say that it amounts to a distinction without a difference because loose monetary policies stimulate growth and bolster exports at the same time.

The United States has also used a loose monetary approach to aid in the economic recovery, in the form of “quantitative easing” by which the Federal Reserve buys tens of billions of dollars in bonds each month.

The chairman of the Federal Reserve, Ben S. Bernanke, who attended the conference in Moscow, gave brief remarks on Friday indicating support for Japan’s efforts.

Faster-growing, developing countries like Brazil and China have expressed concerns about the loose monetary policies of more established economies like Japan and the United States. The money created by policies like the Fed’s quantitative easing can prove destabilizing as it enters faster-growing economies.

The Group of 20 acknowledged this concern in its statement, saying: “Monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates. We commit to monitor and minimize the negative spillovers on other countries of policies implemented for domestic purposes.”

As the three-day conference drew to a close, participants did not reach any new agreement on debt-cutting targets. Efforts to reach such a pact will continue at the annual Group of 20 summit meeting to be attended by President Obama and other world leaders in St. Petersburg in September.

But while the debt agreement was elusive, the Group of 20 leaders reiterated efforts to work together, promising to “resist all forms of protections and keep our markets open.”

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DealBook: Confidence on Upswing, Mergers Make Comeback

The mega-merger is back.

For the corporate takeover business, the last half-decade was a fallow period. Wall Street deal makers and chief executives, brought low by the global financial crisis, lacked the confidence to strike the audacious multibillion-dollar acquisitions that had defined previous market booms.

Cycles, however, turn, and in the opening weeks of 2013, merger activity has suddenly roared back to life. On Thursday, Berkshire Hathaway, the conglomerate run by Warren E. Buffett, said it had teamed up with Brazilian investors to buy the ketchup maker H. J. Heinz for about $23 billion. And American Airlines and US Airways agreed to merge in a deal valued at $11 billion.

Those transactions come a week after a planned $24 billion buyout of the computer company Dell by its founder, Michael S. Dell, and private equity backers. And Liberty Global, the company controlled by the billionaire media magnate John C. Malone, struck a $16 billion deal to buy the British cable business Virgin Media.

“Since the crisis, one by one, the stars came into alignment, and it was only a matter of time before you had a week like we just had,” said James B. Lee Jr., the vice chairman of JPMorgan Chase.

Still, bankers and lawyers remain circumspect, warning that it is still too early to declare a mergers-and-acquisitions boom like those during the junk bond craze of 1989, the dot-com bubble of 1999 and the leveraged buyout bonanza of 2007. They also say that it is important to pay heed to the excesses that developed during these moments of merger mania, which all ended badly.

A confluence of factors has driven the recent deals. Most visibly, the stock market has been on a tear, with the Standard & Poor’s 500-stock index this week briefly hitting its highest levels since November 2007. Higher share prices have buoyed the confidence of chief executives, who now, instead of retrenching, are looking for ways to expand their businesses.

A number of clouds that hovered over the markets last year have also been removed, eliminating the uncertainty that hampered deal making. Mergers and acquisitions activity in 2012 remained tepid as companies took a wait-and-see approach over the outcome of the presidential election and negotiations over the fiscal cliff. The problems in Europe, which began in earnest in 2011, shut down a lot of potential transactions, but the region has since stabilized.

“When we talk to our corporate clients as well as the bankers, we keep hearing them talk about increased confidence,” said John A. Bick, a partner at the law firm Davis Polk & Wardwell, who advised Heinz on its acquisition by Mr. Buffett and his partners.

Mr. Bick said that mega-mergers had a psychological component, meaning that once transactions start happening, chief executives do not want to be left behind. “In the same way that success breeds success, deals breed more deals,” he said.

A central reason for the return of big transactions is the mountain of cash on corporate balance sheets. After the financial crisis, companies hunkered down, laying off employees and cutting costs. As a result, they generated savings. Today, corporations in the S.& P. 500 are sitting on more than $1 trillion in cash. With interest rates near zero, that money is earning very little in bank accounts, so executives are looking to put it to work by acquiring businesses.

The private equity deal-making machine is also revving up again. The world’s largest buyout firms have hundreds of billions of dollars of “dry powder” — money allotted to deals in Wall Street parlance — and they are on the hunt. The proposed leveraged buyout of Dell, led by Mr. Dell and the investment firm Silver Lake Partners, was the largest private equity transaction since July 2007, when the Blackstone Group acquired the hotel chain Hilton Worldwide for $26 billion just as the credit markets were seizing up.

But perhaps the single biggest factor driving the return of corporate takeovers is the banking system’s renewed health. Corporations often rely on bank loans for financing acquisitions, and the ability of private equity firms to strike multibillion-dollar transactions depends on the willingness of banks to lend them money.

For years, banks, saddled by the toxic mortgage assets weighing on their balance sheets, turned off the lending spigot. But with the housing crisis in the rearview mirror and economic conditions slowly improving, banks are again lining up to provide corporate loans at record-low interest rates to finance acquisitions.

The banks, of course, are major beneficiaries of megadeals, earning big fees from both advising on the transactions and lending money to finance them. Mergers and acquisitions in the United States total $158.7 billion so far this year, according to Thomson Reuters data, more than double the amount in the same period last year. JPMorgan, for example, has benefited from the surge, advising on four big deals in recent weeks, including the Dell bid and Comcast’s $16.7 billion offer for the rest of NBCUniversal that it did not already own.

Mr. Buffett, in a television interview last month, declared that the banks had repaired their businesses and no longer posed a threat to the economy. “The capital ratios are huge, the excesses on the asset aside have been largely cleared out,” said Mr. Buffett, whose acquisition of Heinz will be his second-largest acquisition, behind his $35.9 billion purchase of a majority stake in the railroad company Burlington Northern Santa Fe in 2009.

While Wall Street has an air of giddiness over the year’s start, most deal makers temper their comments about the current environment with warnings about undisciplined behavior like overpaying for deals and borrowing too much to pay for them.

Though private equity firms were battered by the financial crisis, they made it through the downturn on relatively solid ground. Many of their megadeals, like Hilton, looked destined for bankruptcy after the markets collapsed, but they have since recovered. The deals have benefited from an improving economy, as well as robust lending markets that allowed companies to push back the large amounts of debt that were to have come due in the next few years.

But there are still plenty of cautionary tales about the consequences of overpriced, overleveraged takeovers. Consider Energy Future Holdings, the biggest private equity deal in history. Struck at the peak of the merger boom in October 2007, the company has suffered from low natural gas prices and too much debt, and could be forced to restructure this year. Its owners, a group led by Kohlberg Kravis Roberts and TPG, are likely to lose billions.

Even Mr. Buffett made a mistake on Energy Future Holdings, having invested $2 billion in the company’s bonds. He admitted to shareholders last year that the investment was a blunder and would most likely be wiped out.

“In tennis parlance,” Mr. Buffett wrote, “this was a major unforced error.”

Michael J. de la Merced contributed reporting.

A version of this article appeared in print on 02/15/2013, on page A1 of the NewYork edition with the headline: Confidence on Upswing, Mergers Make Comeback.

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G.M., Hurt by Europe, Still Increases Profit

DETROIT – General Motors said its profit in the fourth quarter increased slightly as continued losses in Europe offset positive results in North America.

G.M., the nation’s biggest carmaker, said it had net income of $900 million in the quarter, compared to $500 million in the same period a year earlier. Revenue increased to $39.3 billion, up from $38 billion.

The company said strong sales in the surging United States market helped it post a $1.4 billion pretax profit in North America.

But in Europe, General Motors, like many other automakers, is continuing to absorb big losses from the worst sales environment in nearly 20 years. The company said it lost $700 million in the quarter.

The company had modest success in its other international operations, reporting a $500 million profit in Asia and a net income of $100 million in South America.

The fourth quarter capped a transitional 2012 for G.M., its third full year of operations since its bankruptcy and $49.5 billion government bailout in 2009.

While it is struggling to restructure in Europe, the company is in the process of introducing several new models in the United States, including revamped versions of its highly profitable pickup trucks.

G.M. also negotiated a sale of the Treasury Department’s ownership stake in the company.

For the full year, G.M. said it had net income of $4.9 billion compared with $7.6 billion in 2011. Executives said the 2011 profit included $1.2 billion in one-time gains on asset sales.

For the year, revenue grew to $152.3 billion, up from $150.3 billion in 2011.

G.M.'s chief executive, Daniel Akerson, said the company had a solid year in 2012, and said its future performance would depend on growing sales with new models.

“This year our priorities will be executing flawless new vehicle launches, controlling costs and delivering more vehicles to our customers at outstanding value,” Mr. Akerson said in a statement.

G.M.'s big profits in North America will directly benefit its 49,000 hourly workers in the United States, each of whom will receive profit-sharing checks of up to $6,750 for their work in 2012.

G.M. made several accounting changes in the fourth quarter, the largest of which was a one-time, non-cash gain of $34.9 billion to restore valuation allowances for deferred tax assets in the United States and Canada. The gain was balanced by a $26.4 million charge to erase goodwill tied to its North American operations, a $5.2 billlion charge for impairment of European assets and a $2.6 bilion charged related to its salaried pension plans.

The write-down of European assets reflected the troubled state of the company’s business on the Continent.

For 2012, G.M. had a pretax loss of $1.8 billion in Europe, which was more than double the $700 million lost the previous year. By comparison, the North American division earned a pretax profit of $7 billion in 2012, down from $7.2 billion the year before.

G.M. executives were cautious about predicting better overall results this year, particularly in Europe.

Dan Ammann, G.M.'s chief financial officer, said the European market would continue to deteriorate this year. However, the company is sticking with its prediction that it would break even there by mid-decade.

“We feel better and better about the things we can control,” Mr. Ammann said.

Mr. Akerson said that cost cuts will continue in Europe. He said G.M. eliminated about 2,500 jobs there last year and expects the same number of cuts in 2013. He declined to say whether the company might close any more plants beyond the announced shutdown of a factory in Germany by 2016.

“We’re going to be smart about how we cut costs, and not just close plants,” Mr. Akerson said.

G.M.'s profit in the beginning of the year may be thinner than last year because of the marketing and manufacturing costs associated with selling older truck inventory and introducing the new models.

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Tech Companies and Immigrant Advocates Press for Broad Changes in Law

SAN FRANCISCO — What do computer programmers and illegal immigrants have to do with each other?

When it comes to the sweeping overhaul of the nation’s immigration laws that Congress is considering this year, the answer is everything.

Silicon Valley executives, who have long pressed the government to provide more visas for foreign-born math and science brains, are joining forces with an array of immigration groups seeking comprehensive changes in the law. And as momentum builds in Washington for a broad revamping, the tech industry has more hope than ever that it will finally achieve its goal: the expanded access to visas that it says is critical to its own continued growth and that of the economy as a whole.

Signs of the industry’s stepped-up engagement on the issue are visible everywhere. Prominent executives met with President Obama last week. Start-up founders who rarely abandon their computers have flown across the country to meet with lawmakers.

This Tuesday, the Technology CEO Council, an advocacy organization representing companies like Dell, Intel and Motorola, had meetings on Capitol Hill. On Wednesday, Steve Case, a founder of AOL, is scheduled to testify at the first Senate hearing this year on immigration legislation, alongside the head of the deportation agents’ union and the leader of a Latino civil rights group.

“The odds of high-skilled passing without comprehensive is close to zero, and the odds of comprehensive passing without high-skilled passing is close to zero,” said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan research group based in Washington.

The push comes as a clutch of powerful Senate Republicans and Democrats have reached a long-elusive agreement on some basic principles of a “comprehensive” revamping of immigration law. Separately, a bipartisan bill introduced in the Senate in late January focuses directly on the visa issue.

The industry’s argument for more so-called high-skilled visas has already persuaded the president.

“Real reform means fixing the legal immigration system to cut waiting periods, reduce bureaucracy, and attract the highly-skilled entrepreneurs and engineers that will help create jobs and grow our economy,” Mr. Obama said in Tuesday’s State of the Union speech.

In a speech in Las Vegas in January in which he introduced his own blueprint for overhauling immigration law, Mr. Obama embraced the idea that granting more visas was essential to maintaining innovation and job growth. He talked about foreigners studying at American universities, figuring out how to turn their ideas into businesses.

In part, the new alliance between the tech industry and immigration groups was born out of the 2012 elections and the rising influence of Hispanic voters.

“The world has changed since the election,” said Peter J. Muller, director of government relations at Intel, pointing out that the defeat of many Republican candidates had led to a softening of the party’s position on broad changes to immigration law. “There is a focus on comprehensive. We’re thrilled by it.”

“At this point,” he added, “our best hope for immigration reform lies with comprehensive reform.”

Mr. Case, the AOL co-founder, who now runs an investment fund, echoed that sentiment after meeting with the president last Tuesday.

“I look forward to doing whatever I can to help pass comprehensive immigration reform in the months ahead,” he said, “and ensure it includes strong provisions regarding high-skilled immigration, so we are positioned to win the global battle for talent.”

That sort of sentiment delights immigrants’ rights advocates who have banged their heads against the wall for years to rally a majority of Congress around their agenda.

“The stars are aligning here,” said Ali Noorani, executive director of the National Immigration Forum. “You’ve got the politics of immigration reform changing. You’ve got tech leaders leaning in not just for high-skilled but for broader immigration reform.”

Senator Orrin G. Hatch, Republican of Utah, who is co-sponsoring the bill to increase the number of visas available for highly skilled immigrants, said the cooperation went both ways.

“All the talk about the STEM field — science, technology, engineering, mathematics — has awakened even those who aren’t all that interested in the high-tech world,” he said.

While the growing momentum has surprised many in Washington, comprehensive change is still not a sure thing, especially in the Republican-controlled House.

Mr. Hatch said he would push forward with his measure even if the broader efforts foundered. But his Democratic co-sponsor, Amy Klobuchar of Minnesota, said she would press for the bill to be part of the comprehensive package.

Last year, technology executives had a taste of what could happen with stand-alone legislation.

Julia Preston contributed reporting from New York.

This article has been revised to reflect the following correction:

Correction: February 13, 2013

An earlier version of this article misstated the current basic annual cap for H-1B visas. It is 65,000 a year, not 60,000.

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