Obama's budget has some singing booze blues

WASHINGTON (AFP) — US President Barack Obama enjoys cocktail hours as a way to court lawmakers, but his budget may give fans of wine or bourbon a pounding headache -- and a withered wallet.

With federal coffers thirsting for income, the tax and spending bill Obama decanted this week would repeal a cherished industry accounting provision and brew up an estimated 61 billion dollars in the process.

At issue is "last-in, first-out," or LIFO, which allows companies to assume that the last goods they produce are the first to sell. The provision has the effect of reducing tax liabilities for firms with large inventories or products that need to age.

The oil and gas industry is a major LIFO beneficiary, but attention focused this week on distillers of bourbon -- which is legally required to age at least two years -- because of a high-profile clash on the provision.

Republican Senator Jim Bunning of Kentucky, bourbon's home state, hammered US Treasury Secretary Timothy Geithner about the provision during a hearing, saying now was not the time to target liquid assets.

"Repealing LIFO would harm US companies and favor their foreign competitors at a time of economic distress when we are trying to encourage more US manufacturing," Bunning warned.

"I've heard a lot of concerns about the specific provision," Geithner allowed, saying the Obama administration would look to "mitigate" the provision.

Other repeal foes include some wine makers, car and truck dealers, sellers of sporting goods and gardening tools, and many others, according to the LIFO Coalition, an industry alliance dedicated to beating back any repeal effort.

"It's not just the beverage and alcohol industry," said Jerry Brown, a spokesman for the Wine and Spirits Wholesalers of America. There will be "a ripple effect at the consumer level" in the sector if the repeal goes through.

Obama's plan faces stiff opposition from beverage industry groups and others who warn it could spill over from hurting producers to affect hotels, restaurants and bars -- not to mention customers perhaps looking to quench recession fears.

Regarding bourbon, "the longer it sits in the barrel in the warehouse, the bigger the impact is likely to be," according to Mark Gorman, vice president of the Distilled Spirits Council of the United States.

Higher taxes could tempt producers to raise prices, so higher costs for consumers "could be an impact" of the repeal, said Gorman, whose group represents Brown-Forman, makers of Jack Daniels whiskey.

The Wine Institute, which represents 1,100 California wineries, says it is in the middle of canvassing members to see how may use LIFO and what they want to do about the possible repeal.

But Pernod-Ricard, owners of the Wild Turkey bourbon brand, use a different accounting standard and would therefore likely not be affected, said spokesman Jack Shea.

The latest round of LIFO debate comes after Obama took over on January 20 from George W. Bush, who famously quit drinking just after his 40th birthday after a life of carousing and what he has described as a problem with alcohol.

The new president drew attention by reviving social nights on Wednesdays, when he offers his guests -- often key congressional players he has been courting -- cocktails at the presidential mansion.

Some are immune to bottled charm: Senate Democratic Majority Leader Harry Reid, for instance, does not drink alcohol.

But other folks in Washington, where some bartenders are whipping up "Obamatinis" in honor of the new president, may not be so lucky.

At the comfortable Washington nightspot Bourbon, which boasts more than 50 kinds of the brown distilled spirit, manager Owen Thomson, 27, rated the alternatives if his favorite drink's price soars beyond affordability.

"I usually fall back on beer, I guess," he told AFP by telephone. "But the best thing to go to if you like sipping bourbon are the sipping rums," especially those from Jamaica.