European Union finance ministers said Thursday Greece would have to make even more austerity cuts to receive bailout money, even if there is a new government. Margaret Warner reports from Germany on how citizens of the continent's richest country feel about the EU's latest debt relief package for Greece.

RAY SUAREZ: Late today, E.U. finance ministers said Greece would have to make even more cuts to receive the bailout money, even if there is a new government. The E.U. nation pressing hardest for austerity is its richest, Germany.

Margaret Warner reports tonight on how that country's prosperous citizens are wary about paying bailout money to Greece and other debtor nations.

MARGARET WARNER: The aisles of Stuttgart's Markthalle are stocked full, French cheeses, Italian prosciutto di parma, hand-stuffed German sausage, fresh-baked bread and pastries. And on a weekday morning, people are buying.

CHRISTINA PAPADOPOULOU, gourmet shop: All the people who come here, they're doing well, so we don't feel the crisis here.

MARGARET WARNER: The crisis, of course, is the European financial one. It sent borrowing rates soaring for the region's most indebted countries, like Greece, Italy, and Spain. It threatens to drag down the European Union's economy even for its strongest member, Germany.

Fruit and vegetable seller Michael Mayer senses a cautious mood among his customers, his barometer, tropical fruit sales.

MICHAEL MAYER, fruit and vegetable seller (through translator): The crisis has meant people have less money to buy daily luxuries, so they buy less, two mangoes instead of four. You buy just what you need.

MARGARET WARNER: Even with record low unemployment and an envied manufacturing base, Germans remain ever-careful with their money. Cash, not credit, is the coin of the realm.

That financial prudence is complicating matters for Chancellor Angela Merkel. Her fellow E.U. members, the IMF and the U.S., are urging her to devote more German money to bolster the E.U. bailout fund. But she must also listen to her own public.

KLAUS BLUMENAUER, realtor (through translator): Three hundred and fifty thousand. This one's probably 450,000.

MARGARET WARNER: On a major purchase, like a home, Germans are especially prudent, says Klaus Blumenauer, a real estate agency owner in the Frankfurt suburb of Konigstein. Germany didn't experience the recent real estate bubble or crash, he said, because Germans and their banks are so careful. Mortgages require a 30 percent down payment.

KLAUS BLUMENAUER (through translator): The Germans are conservative in regards to home and debt. Of course, there are always people who don't have enough equity, or don't earn enough, and still would like to buy a home. But the banks don't play ball. They, in fact, protect the customers from wrong decisions.

MARGARET WARNER: And for those who do buy, their goal becomes to pay down the mortgage as quickly as possible.

KLAUS BLUMENAUER (through translator): The Germans don't like debt so much. In real estate especially, most Germans have the goal to have the home free from debt. That's more their philosophy than to say, let's borrow money.

MARGARET WARNER: So it's no wonder they bristle at being asked to bail out their freer-spending southern neighbors. Germans are still paying for the multitrillion-dollar reconstruction of East Germany over the past two decades.

And Germans note they voluntarily undertook painful austerity and economic reform more than a decade ago, while much of Europe embarked on a spending binge financed by the newly introduced euro.

Norbert Walter recently retired as chief economist at Deutsche Bank.

NORBERT WALTER, former chief economist, Deutsche Bank: We were characterized for a considerable period as the sick man of Europe. We were not the sick man of Europe. We were on therapy. The standard of living of Germans didn't increase at all for actually a decade at a time when everybody else enjoyed a wonderful increase of the standard of living.

MARGARET WARNER: Germany's therapy was a national project. Unions held down wage demands, industries retooled and political leaders tightened unemployment and other benefits.

It wasn't easy for a country built on a generous social welfare compact, said Nils Schmid, finance minister for the prosperous state of Baden-Wurttemberg.

NILS SCHMID, finance minister, Baden-Wurttemberg: We raised the retirement age, or it will be raised step by step to the age of 67. We had to push this reform through, although it was very unpopular and still is.

MARGARET WARNER: The tough medicine paid off for Germany with greater productivity in its industry and lower unemployment and government deficits.

Now, before agreeing to add more to the E.U.'s bailout coffers, Merkel is insisting that debt-ridden countries like Greece and Italy enact their own tough reforms. Finance Minister Schmid, despite being a member of the opposition party, said Merkel is right to demand a quid pro quo. But he'd like to see quicker German action on the bailout front to stave off further market turmoil.

NILS SCHMID: I think that we need both. We need European solidarity. That means fixing the euro and helping other member states such as Greece or Portugal. But we -- at the same time, we need very strict rules concerning budget discipline.

MARGARET WARNER: But public sentiment varies.

At the landmark Paulaner restaurant in Stuttgart, we found three young entrepreneurs who own and run small firms. Like most Germans, they say, they all took a hit in the '08-'09 global financial crisis, but lived modestly, kept investing in their businesses, and bounced back stronger than ever.

Now they're feeling anxious, and a bit ambivalent, about what Germany's being called on to do.

Does the euro crisis worry you?

CARSTEN THEURER, software developer: Yes, for sure, because you never know what will happen at the end.

MARGARET WARNER: Carsten Theurer is a software developer. He says he and his friends pay high taxes, and they're galled by reports that many wealthy Greeks, Italians and others don't.

CARSTEN THEURER: No one is happy about those little stories about Greece, how they are doing, that they are not paying their taxes, that they are a little bit corrupt. But we are just interested in a functional and a surviving euro.

JAN CURRLE, welding technology supplier (through translator): This euphoria about the euro which we had at the beginning, we now have to face all the errors that were made, which means spending money so this doesn't fall apart, because, if Greece falls, then maybe Portugal and Spain also fall. And then there's a big mess.

MARGARET WARNER: Their annoyance doesn't surprise Norbert Walter, but he says Germans should look to their own past before judging others as incapable of changing.

NORBERT WALTER: I believe if Germans have benefited so much from the Allied forces that accepted that the Germans could be different from what they were in the Third Reich, we shouldn't allow ourselves to argue, the Greek have always cheated, they will cheat in the indefinite future, and, therefore, it is not worthwhile and we cannot even think of helping them.

MARGARET WARNER: But try telling that to Magdalena Beulshausen. The 77-year-old pensioner started saving as a girl, and never stopped.

MAGDALENA BEULSHAUSEN, pensioner (through translator): It wasn't too hard for me or my husband, if you only limited yourself a bit.

MARGARET WARNER: Now she has little patience for, or confidence in, her indebted European siblings.

MAGDALENA BEULSHAUSEN (through translator): I think it's like with an alcoholic, who you try to save, but you can't until he's all the way at the bottom. Now they don't want to accept that they should save and reduce their spending, but they also don't want for someone from Germany to come and say, okay, that's how you have to do it.

MARGARET WARNER: Proving once again that, even in the 27-member European Union, all politics is local.

RAY SUAREZ: In her next report, Margaret looks at Italy's response to the debt crisis.

Greek political leaders reached a much-anticipated agreement Thursday on yet another round of austerity cuts. Jeffrey Brown and John Psaropolous of the blog The New Athenian discuss implications for Greeks, the country's economy and its relationship with the continent.

JEFFREY BROWN: A short time ago, I spoke to John Psaropoulos in Athens. He's a freelance reporter and writes the blog The New Athenian.

John Psaropoulos, welcome back to the program.

These talks over cuts had stalled even last night. What was the hardest issue to resolve?

JOHN PSAROPOULOS, The New Athenian: It turns out from the comments made by the party leaders after they emerged from those eight-hour-long talks on Wednesday that the sticking point was one sole issue.

It was whether more money was going to be cut from the pensions budget in 2012, an amount to the tune of $400 million, in addition to roughly that much again that had already been decided to be taken out. The conservative leader, Antonis Samaras, the junior partner in this coalition, but the one who is poised to win election over and above the socialists if an election were to be held in the coming days, is the one who held forth.

And in the comments he made earlier this evening, he said that it was one of the issues that he managed to save from the clutches of the troika of Greece's creditors, the other issues being salaries -- more salaries being cut from the private sector.

JEFFREY BROWN: So, give us a sense of how -- who will feel these austerity cuts and to what degree.

JOHN PSAROPOULOS: Well, the austerity is going to be felt by everyone, because 150,000 people now employed in the public sector won't have a job at the end of four years from now, 15,000 of those people will go this year.

The second thing that's going to happen in the public sector is that major utilities, the natural gas state monopoly, the state oil refiner, the state gaming monopoly and other utilities like the water sewage companies will all have to be privatized in the first six months of this year. Those are the -- some of the jewels in the Greek crown. Those are highly profitable state companies.

And so there will -- one will expect more layoffs there, because one of the things that is going into this austerity package is a legal amendment that will allow the state to dismiss people from state companies. That tenure immunity that they have had is going to be broken. They will be able to be dismissed.

In the private sector, the pain of course comes in the form of a dramatic lowering of minimum wage by 22 percent, and for those under 25 by 30 percent, which means that their take-home pay will be a little more than 400 euros, $550 or so. This is going to obviously severely depress the amount of disposable income in the marketplace.

The main argument of the unions against this austerity package is precisely that it is going to reinforce the recessionary spiral that Greece is already in, and if you count the amount by which the Greek economy has shrunk since the beginning of the crisis, it is now 13 points of GDP and rising.

JEFFREY BROWN: Well, now, of course, you do have pushback there from all sides, as we heard the German finance minister raising concerns that this doesn't go far enough.

Is there a sense among Greek officials that they have done all they can and that this is -- this should be enough for the international community?

JOHN PSAROPOULOS: Well, the politicians are already spinning this as an enormously difficult political berth, and they have already begun to massage and to spin the message to their respective constituencies as a necessary evil, particularly the two right-wing contingents of the coalition, the people who were not responsible for putting Greece on the path of European Union-IMF-sponsored bailouts in the first place.

That was done by the socialists who were elected to power in October of 2009. So, the conservatives and the right-wingers have a platform to at least argue that midway, in medias res, if you like, along this policy route, they were forced to agree to a necessary evil, because to opt out of the bailout system would simply have been an even worse, an almost catastrophic option for Greece.

JEFFREY BROWN: So, you do have the protesters in the streets. There's a strike called for tomorrow.

What can you gauge about -- and then, of course, there's the parliamentary -- parliament taking this up with an election on the weekend. What can you gauge about political opinion, through polls or other ways? And do we know whether this is all going to actually happen as they've said today?

JOHN PSAROPOULOS: Well, the plan is for this bailout agreement to be submitted to parliament and voted into law on Sunday night.

The debate is scheduled to begin on Saturday morning. However, the biggest unions in the land have organized a 48-hour strike partly coinciding with that debate. And they have organized a protest on Sunday night to coincide with the vote.

Even if these demonstrations fail to dissuade lawmakers, the fact is that the political ground is slipping very, very dramatically away from the present makeup of the Greek parliament -- 254 seats out of the 300 are included in the three parties that form the coalition, the socialists, the conservatives and the right-wing LAOS.

If you look at opinion polls now, however, fully 42 percent of voters would go to the communists and left-wing parties, parties left of the socialist PASOK. That is a dramatic shift never before seen in Greek politics. It represents a threat to the incumbent powers and suggests that, if an election is held in the spring, as is widely expected, the result may be the most unpredictable that we have seen in almost four decades.

JEFFREY BROWN: All right, John Psaropoulos in Athens once again, speaking to us from Athens, thanks so much.

JOHN PSAROPOULOS: Thank you.

After weeks of negotiations, Greece's political leaders wrapped up a controversial agreement Thursday on yet another round of austerity measures. Though the deal received some praise, Germany said it fell short while workers in Greece took to the streets to protest more spending cuts. Jeffrey Brown reports.

JEFFREY BROWN: Now, a political deal in Greece that may pull Europe back from the abyss of its two-year debt crisis.

After weeks of negotiations, the coalition government of Greek Prime Minister Lucas Papademos reported agreement on yet another round of austerity measures. Finance Minister Evangelos Venizelos, speaking in Brussels, said it would satisfy the European Union, the European Central Bank and the International Monetary Fund.

EVANGELOS VENIZELOS, Greek finance minister: After a long, tough period of negotiations, we have finally a staff-level agreement with the troika for a new, strong and credible program.

JEFFREY BROWN: The Greek goal was to win a new bailout of $170 billion and to prevent national default. Under the plan, Greece agreed to cut its minimum wage by more than 20 percent, fire 15,000 public sector employees and end dozens of job guarantee provisions.

Greek leaders also said that, instead of cutting pensions by as much as $400 million, they had found unspecified alternative cuts. The agreement won praise from some, including Christine Lagarde, managing director of the IMF, at a late-day meeting in Brussels.

CHRISTINE LAGARDE, managing director, International Monetary Fund: There's clearly some very encouraging news coming out of Athens, and after the very heavy-duty work that has been done lately, I think it's positive.

JEFFREY BROWN: And European markets reacted favorably. Stocks moved upward. The euro traded near two-month highs.

But Germany warned, the deal fell short. The German finance minister, Wolfgang Schaeuble, said the Greeks had not met a requirement to bring national debt down to 120 percent of economic output.

And on the streets in Greece, there was outrage.

MAN (through translator): We took to the streets to fight for our rights and for the future of our children.

JEFFREY BROWN: Electrical workers protested the austerity cuts, and Greek labor unions planned a 48-hour strike beginning tomorrow.

In the meantime, the Greek finance minister said the government also had the outlines of a separate agreement with private creditors. It could cut the country's private debt in half, with creditors accepting a 70 percent reduction in the value of their holdings.

Even as foreclosed homes -- casualties of the housing bubble -- still litter the American landscape, federal and state officials announced Thursday a $25 billion deal between 49 states and five mortgage giants designed to give relief to homeowners and hold banks accountable for abusive practices.

RAY SUAREZ: After long months of negotiating, 49 states joined an agreement today over foreclosure abuses.

U.S. Attorney General Eric Holder announced the deal in Washington.

ATTORNEY GENERAL ERIC HOLDER: It is the largest joint federal-state civil settlement in the history of this nation.

RAY SUAREZ: The news came even as foreclosed homes still litter the landscape, casualties of the housing bubble that burst in 2008. Many people could not make their payments and were forced out.

Many others have struggled to keep up, even as the value of their homes fell far below what they owe. But Attorney General Holder said the $25 billion deal is designed to give relief to homeowners and to hold banks accountable for abusive practices.

ERIC HOLDER: We saw that, far too often, servicers pushed borrowers into foreclosure, even though federal regulations require the servicers to try other alternatives first. These failures didn't just hurt borrowers who might have been able to afford modified mortgages. They fueled the downward spiral of our economy and of communities nationwide.

RAY SUAREZ: Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup and Ally Financial are the five major mortgage lenders who've agreed to reduce loan amounts for nearly one million households.

And they'll send $2,000 checks to 750,000 Americans who were improperly foreclosed on. Under the deal, the lenders are protected from many civil lawsuits tied to the foreclosure process. But states can still pursue criminal cases, including those tied to original lending practices.

The settlement was hashed out over the last year-and-a-half between the banks and state attorneys general.

TOM MILLER, Iowa attorney general: This agreement has more things to help homeowners than anything that we have seen before and probably ever will see again.

JOHN SUTHERS, Colorado attorney general: The attorney generals realize this settlement is very, very much in the interest of their state and the citizens of their states.

RAY SUAREZ: Between 2007 and early 2012, roughly four million American families lost their homes to foreclosure. And some housing activists say today's deal only scratches the surface.

Gordon Whitman is with PICO National Network, a faith-based group.

GORDON WHITMAN, PICO National Network: So, it's a start, but it's a drop in the bucket compared to what we need to get to. And we believe that we will over the next two to three years, one to two years, get to the point where we have that level of $300 billion in principal reduction.

RAY SUAREZ: President Obama acknowledged today the deal is just one step toward fixing the housing industry.

PRESIDENT BARACK OBAMA: No action, no matter how meaningful, is going to, by itself, entirely heal the housing market. But this settlement is a start.

And we're going to make sure that the banks live up to their end of bargain. If they don't, we've set up an independent inspector, a monitor that has the power to make sure they pay exactly what they agreed to pay, plus a penalty if they fail to act.

RAY SUAREZ: Oklahoma was the only state not to sign onto the deal. It reached a separate agreement with the banks.

JEFFREY BROWN:  We're joined now by two state attorneys general who became key players in this deal. Eric Schneiderman of New York is a Democrat, and Tom Horne of Arizona a Republican.

Eric Schneiderman, I will start with you.

We have seen a number of attempts to respond to the housing market crisis. How important do you think this one is?

ERIC SCHNEIDERMAN, New York attorney general: Oh, I think this is certainly the most significant step so far.

But as the president said today, and as you just replayed, this is just a step towards the kind of accountability for the folks who blew up the economy, the kind of meaningful relief for homeowners and investors that's required, and putting in place of a set of rules so this never happens again.

We're on a path to restore the housing market, to write down principal for homeowners and to ensure that there's one set of rules for everyone -- important step, but a step on a longer path.

JEFFREY BROWN:  Well, Tom Horne, let me -- yours has been a very hard-hit state, of course. Specifically, who do you see this helping and how?

TOM HORNE, Arizona attorney general: Well, the primary beneficiaries will be those who are in their homes and are current, have paid their payments for at least a year, but who face difficulty doing that in the future in the full amount, but they can pay less than the full amount.

And the largest component of the settlement would give money to reduce principal payments and some also to refinance and reduce interest payments for these people, so they'll be able to stay in their home. So that's very important for them. It's also better for the lenders, because the present value to them of those reduced payments is going to be a lot more than what they would get if they proceeded to foreclose.

So it's a win for the person who gets to stay in his home or her home. It's a win for the lender, and it's certainly a win for the economy. In the case of Arizona, $1.6 billion will come into our economy to prop up a very important part of our economy, the housing market.

JEFFREY BROWN:  Eric Schneiderman, just to help people, again, to try to make this very concrete, what does someone have to do or what kind of position do they have to be in to qualify for this help?

ERIC SCHNEIDERMAN: Well, there is a variety, and some of it varies from state to state.

The first relief we're going to see here in New York, where we have a smaller portion of folks who have underwater mortgages than General Horne does out in Arizona, first relief they're going to see is that we obtain $136 million that's going to go primarily towards legal services, housing counseling and programs to prevent people from being foreclosed on.

The second level of relief that's going to take longer to implement is that the banks are required to reach out to people with underwater mortgages, whose mortgages are more expensive than the value of the homes right now, which is what General Horne was referring to, and offer them a chance to either refinance or reduce the principal.

Not everyone is going to get a deal, but there's a requirement that we have put on the banks that they're going to make those solicitations. So people should be aware of that. We've set up contacts in all the regional offices at the New York state attorney general. I know some of my counterparts are doing the same thing.

We'll be providing the messages to the public. But the first step is to try and prevent foreclosures where they're not warranted. The second step is the program of principal reduction and loan modification that's going to be going into effect.

JEFFREY BROWN:  Now, Tom Horne, we heard the housing advocate -- and you're hearing it all over the place today -- refer to this as a -- quote -- "drop in the bucket."

I wonder, do you think he is wrong? If you look at $25 billion, quite small, compared to the $700 billion in negative equity out there, people getting $2,000 compared to the value of the homes that they have lost in many cases, is that fellow wrong in saying this is just a drop in the bucket?

TOM HORNE: Well, first of all, the $2,000, plus or minus, will go to people who have already been foreclosed on. They don't have to give up anything for that. They still have their rights to bring lawsuits if they were badly treated by the servicers at the time.

They don't have to give up those rights. All they have to do is say that they were badly treated by the servicer, and they get the $2,000. The other sums, we're talking about $25 billion. You will remember Everett Dirksen once said, a billion here, a billion there, pretty soon, it's real money.

This is very significant. If we had proceeded with the lawsuits, it would have been about four or five years before we go through the lawsuit and the appeals, and if we had done better, that would have been good, but we could have done worse, and that would have been a terrible thing, to have done worse and lost four or five years, when people were thrown out of their homes, where otherwise they would have been saved with their mortgages. So I think this was a very prudent agreement.

We in Arizona didn't actually agree until 11:00 last night on an agreement that was announced at 8:00 this morning because we had some special things we had to work out with Bank of America. So we negotiated very hard. But in the end, I think this is a very prudent agreement as a settlement of what otherwise would have been lawsuits that might have brought us more, but might have brought us less.

JEFFREY BROWN:  Now, Eric Schneiderman, you held out for a long time on this as well. Explain what your concerns were.

ERIC SCHNEIDERMAN: Well, my concern, really, is reflected in the comment that General Horne just made.

I was concerned about giving up claims. And it's very important to understand that homeowners still do have the right to go into court themselves. And part of the provision of legal services for people is that people -- individuals that were wronged still can seek damages. We have not given up their claims.

And my concern all along was that we not release claims that haven't been investigated and that the settlement be limited to issues like robo-signing, release of claims for misconduct and foreclosure proceedings.

When I got involved in the negotiations a year ago, the banks were really pushing for a release of the broad misconduct, the securities fraud and tax fraud and other conduct that actually melted down the American economy in 2008.

We have preserved all of those claims. And President Obama in the State of the Union announced that we are, in fact, going to have a joint state-federal working group to conduct a full investigation of those claims in a more comprehensive, coordinated way than we have ever done. And I'm one of the co-chairs.

So the important thing in evaluating a settlement is partly to look at how much money you get. And it's true this is a very small portion of the negative equity that's out there. It's a step, but just a step on the path. But, in evaluating it, you have to look at what claims you're giving up. What are you getting for what you're giving up?

And, in this case, I'm confident we held out for and fought to have the claims preserved that really give us the most leverage to go back to the folks that blew up the American economy and get more meaningful relief for both homeowners and investors that were hurt in that debacle.

JEFFREY BROWN:  And are you -- just to stay with you, are you confident as well that these practices, the very kinds of things you were just talking about and that caused the problem in the first place, are you confident now that those have ended?

ERIC SCHNEIDERMAN: Well, certainly in terms of what's going on in the securities market, those have ended. And there was a response to that with Dodd-Frank. The federal government has passed new rules.

We now have the Consumer Financial Protection Bureau being set up to deal with some of these problems. I'm confident that, if we continue to push forward with that, we can put into effect prudent regulations, so that the overwhelming majority of folks in the financial services sector who just want to play by the rules and make money for themselves and their clients can prosper.

But the race to the bottom that took place in 2005, 2006 and 2007, when there were packages of mortgages that just never should have been made and securities that never should have been sold, that kind of thing has to be prevented in the future. We preserved all our claims to go back after the folks who committed any breach of law, whether it's tax fraud, securities fraud, investment fraud or insurance fraud, during that era, and our working group is very aggressively pursuing those claims.

JEFFREY BROWN:  All right. All right, and let me . . .

TOM HORNE: If I could add to . . .

JEFFREY BROWN:  Yeah, go ahead.

TOM HORNE: May I add to that?

JEFFREY BROWN:  Yeah.

TOM HORNE: An important part of this settlement, which is dealing with misconduct by people who are servicing the mortgages, the five biggest banks, is a reform of the methods used by the servicers.

So, you had abuses such as one person from the bank worked out with the homeowner a modification. And so he was making reduced payments. And the homeowner was making the reduced payments, doing everything he was supposed to do, and then someone else from the bank would foreclose, and he'd come home and he'd find, even though he was doing everything he was supposed to do, his house was foreclosed on.

Those practices are being reformed, so that you have one person that you're dealing with, so that if they deny the modification, you can appeal it, a number of other reforms in the way these things are implemented. And that is going to be monitored. And there are strict penalties for not living up to the new guidelines.

So, in addition to the $25 billion, which I think is very significant and important for our economy, there are significant reforms in the way the loans are -- services, and it does away with a lot of abuses with teeth behind that.

JEFFREY BROWN:  All right, Attorney Generals Tom Horne of Arizona and Eric Schneiderman of New York, thank you both very much.

TOM HORNE: Thanks for having us.

ERIC SCHNEIDERMAN: Thanks, Jeff.

Graphic by the PBS NewsHour, based on the cover of "The Spirit Level."

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here's Thursday's query:

John Naghshineh: Mr. Solman, could you please talk to Richard Wilkinson or Kate Pickett about income inequality? They wrote the book, "The Spirit Level: Why Greater Equality Makes Societies Stronger." According to them, social mobility tends to be stronger in more equal societies, which contradicts Richard Epstein's views about inequality being an incentive for growth. They also show greater equality correlates with higher life expectancy rates, lower crime rates, fewer dropouts, teenage births, educational outcomes and much more. You can guess how the United States fares on these charts up against other economically advanced nations. Their research couldn't be more relevant to our times!

Paul Solman: But we did. We've run two segments from our interview with Richard Wilkinson:

Inequality Hurts: The Unhealthy Side Effects of Economic Disparity

In Ohio, How Two Counties' Economic Paths Diverged Over 30 Years

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.

Follow @PaulSolman

Zbigniew Brzezinski says that as American power declines relative to other countries, and China's influence grows, the United States can no longer dictate to the world, or be "the determining player of everything that is important on the global scene." Jeffrey Brown speaks with the author and former national security adviser.

JUDY WOODRUFF: And we turn to some thoughts about the U.S. role in the world as it shares power with new global players.

That's the topic of Jeffrey Brown's conversation with Zbigniew Brzezinski, who served as President Jimmy Carter's national security adviser.

JEFFREY BROWN: "America must promote a revitalized West and provide balance to a rising new East." So writes Zbigniew Brzezinski in his new book, "Strategic Vision: America and the Crisis of Global Power."

The former national security adviser casts a harsh eye on what he sees as this country's stagnation at home and unilateralism abroad and offers a corrective.

At his Northern Virginia home recently, we talked about what he calls a shift in the world's center of gravity from the West to the East.

How do you define this shift? Is it a slow rebalancing or is it a true tipping to power in Asia, specifically China?

ZBIGNIEW BRZEZINSKI, former U.S. National Security adviser: It means the end of global supremacy by the West.

The whole concept of global power, one power dominating the world eventually, is associated with the West. It started with the great explorations, and then the naval competition, Spain, Britain, France, then became a struggle for the control of Europe, or even Eurasia, with imperial Germany, then Nazi Germany, then eventually Stalinism.

That today is no longer attainable, because the West has declined in its influence. Simultaneously, Asia has risen. Asia is now composed of states that are increasing the dynamic, but also competitive, so we could have a period of instability in the Far East.

And all of that, furthermore, is complicated by the new reality of what I call global political awakening. That is to say that, for the first time in all of human history, the publics of the world, the population of the world is politically awakened, restless, stirring, resentful, in many parts, increasingly motivated by an anti-Western narrative.

JEFFREY BROWN: You're seeing this in the Arab spring, for example.

ZBIGNIEW BRZEZINSKI: Well, that's one extreme example.

JEFFREY BROWN: Russia.

ZBIGNIEW BRZEZINSKI: That's another example. And that's germinating. Something there is going to happen, I think, before too long.

JEFFREY BROWN: When you're talking about the shift to the East, specifically on China, so much talk about China, so much written about China. What are we not understanding? I mean, what vision do you have for China vis-a-vis the U.S.?

ZBIGNIEW BRZEZINSKI: The vision that I have is that we can avoid a head-on collision, which was always the case in the past, when one major power was ceasing to rise and another rival arose on the scene and aspired to replace the previous one.

That usually resulted in a major conflict and, in the last century-and-a-half, in world wars. I think we can avoid that with China, in part because of the new reality of interdependence, economically and financially. The fact of the matter is that, for the foreseeable future, we know and the Chinese know that, if one hurts the other, one will suffer oneself.

JEFFREY BROWN: When you're talking about a declining power in the West and a rising in the East, and you use the word partner, what does partner mean? Is just a partner no longer -- no longer a leader?

ZBIGNIEW BRZEZINSKI: Well, it means that, for one thing, we can't dictate. We can't really be the determining player of everything that is important on the global scene.

It also means that we have to learn from our own experience that the use of military power, first of all, sets in motion unpredictable consequences, and, secondly, is very, very expensive.

JEFFREY BROWN: We're not the global policemen.

ZBIGNIEW BRZEZINSKI: We cannot be the global policemen, because we'll just drive ourselves into bankruptcy, and then social resentments domestically, and loss of legitimacy internationally.

Global power is becoming diffuse and no longer concentrated in the West or in the hands of the United States. America has domestic and international problems. And on top of it, there is no larger organizing vision for a world that for the first time needs to address global problems.

And what I advocate is a strategic vision, not a specific blueprint, but a concept of how America ought to strive to create some sort of balance, global equilibrium, so that we can all collectively address the problems that the world faces.

JEFFREY BROWN: One of those is to, I think in your term, expand the West to include places like Russia and Turkey.

ZBIGNIEW BRZEZINSKI: Absolutely.

I think that it's in the vital interest of the West to do so. And I think drawing in Turkey, drawing in Russia would greatly increase the vitality of the West. And after all, the Turks in the course of the last 100 years have demonstrated a determination to be modern, secular and democratic. So they're really part of our value system.

In Russia today, we see for the first time the emergence of something we can call a civic society, not isolated dissenters who are heroic, whom we honor, but who are isolated, but a community, a society, that is to say, the younger, more cosmopolitan elements of the new middle class. And they feel themselves to be part of the West.

And I am convinced that if we're intelligent and patient and also persistent, then not long after Putin has gone, Russia will move much more rapidly towards the West. And, therefore, a coalition of America, Europe enlarged is something that will have weight in the world.

JEFFREY BROWN: Do you think the American people, the American political system is prepared to respond to this crisis you're talking about? You're talking about when you use words like diminishing power or a partner, rather than leader, balancer, these are sort of new terms that I wonder if people are prepared for or are able to respond to.

ZBIGNIEW BRZEZINSKI: I think you're really raising the fundamental question, because the part that's dealing with America focuses not only on our economic social problems, but very much on what you have just right now said.

We are a democracy. We can only have as good a foreign policy as the public's understanding of world affairs. And the tragedy is that the public's understanding of world affairs in America today is abysmal.

JEFFREY BROWN: Abysmal.

ZBIGNIEW BRZEZINSKI: It is ignorant. It is probably the least-informed public about the world among the developed countries in the world.

JEFFREY BROWN: What are the consequences -- you spend a fair amount of time in the book on this -- the consequences of not adjusting to the global shift, to the global crisis, as you describe it?

ZBIGNIEW BRZEZINSKI: I think the consequences are likely to involve more turmoil, in the sense that certain problems which could be avoided might the get out of hand. First on the list, obviously, is Iran, and the likely consequences, destructive consequences of military violence there.

The consequences are likely to be more regional crises. The consequences are likely to be the absence of collective responses to the new global problems that affect all of humanity.

JEFFREY BROWN: All right, the new book is "Strategic Vision: America and the Crisis of Global Power."

Zbigniew Brzezinski, thanks for talking to us.

ZBIGNIEW BRZEZINSKI: Well, thank you, as always.

As European debt crisis negotiations approach the 11th hour on yet another bailout for Greece, Margaret Warner reports on some of the people behind the economic success of Germany -- Europe's richest country.

JUDY WOODRUFF: And to Europe's debt crisis.

Negotiations are going down to the wire on yet another bailout for Greece, one that would require German help.

From Germany, Margaret Warner reports on some of the people who help make it Europe's richest country.

MARGARET WARNER: The Restaurant Dionysos was packed on a recent night, heaping plates of Greek fare flying from kitchen to table. But at this eatery named for the God of wine, the drink of choice is German beer.

The Greek-born owner spent years building this showcase of his homeland's cuisine for Frankfurt diners. But now the economic crisis in Greece and demands that Germany act as financial backstop to Europe has him wishing his old home behaved a little bit more like his new one.

CHRISTOS KEZETZIDIS, owner, Dionysos (through translator): In Greece, it's a totally different world. I came here to work. In Germany, there's just more order and they do more work.

MARGARET WARNER: That work ethic is forged at places like the Herrenknecht factory in Germany's booming Black Forest region. Owner and founder Martin Herrenknecht grew up in a tiny village here, the son of an upholsterer.

MARTIN HERRENKNECHT, chairman, Herrenknecht, A.G.: My dream was always to have more people employed than my father. My father had 12 people.

MARGARET WARNER: More than 4,000 people work for him, from young apprentices learning to shape metal to master craftsmen constructing the subterranean ground-eaters built here, tunnel-boring machines that can cost tens of millions of dollars.

The secret to Germany's success lies in small-to-medium-sized family firms like this one that manufacture some highly specialized and indispensable piece of equipment. The Germans like to say, we make the thing that goes inside the thing that goes inside the thing.

In Herrenknecht's case, it's a very big thing. Some weigh thousands of tons. Projects from the Beijing subway to New York's Second Avenue line to a train bed under the Alps all exploit Herrenknecht's indispensable feature cutting head that can readjust to any material on the spot.

The founder credits much of his success to the centuries-old mechanical aptitude and ingenuity of the workers of his region.

MARTIN HERRENKNECHT: Before, let's say 300 years, we built cuckoo clocks and, today, we build tunnel-boring machine. So we changed from the . . .

MARGARET WARNER: From cuckoo clocks to tunnel . . .

MARTIN HERRENKNECHT: To tunnel-boring machine.

MARGARET WARNER: . . . to tunnel-boring machines. That's quite an evolution.

(LAUGHTER)

MARGARET WARNER: Most of Herrenknecht's $1.25 billion in sales are worldwide, helping make Germany an export powerhouse.

With just a quarter of America's population and a quarter of its GDP, Germany exports more than the United States in total, notes Norbert Walter, the former chief economist of Deutsche Bank.

NORBERT WALTER, former chief cconomist, Deutsche Bank: We Germans have 1 percent of the labor force of the world, and we have 10 percent of the exports in the world. That gives you an idea of how successful and how oriented towards international markets we are.

MARGARET WARNER: The 10-year-old common European currency also helps. A third of Herrenknecht's sales go to other Eurozone countries, and pricing his machines in euros, rather than what economists say would be a far stronger deutsche mark, makes them more competitive abroad.

MARTIN HERRENKNECHT: If we were to have 17 different currencies, can you imagine every morning, I should study what is now, let's say, our relation to the Swiss -- to the French francs, to the peso, to the lira? I couldn't work like this.

MARGARET WARNER: We've come to Germany to find out why it's doing so much better than its European partners. And part of the reason can be found here, in the southwest state of Baden-Wurttemberg. The castle behind me may date from the 1700s, but the economic model they've developed here is 21st century-plus.

Just outside the state capital, Stuttgart, is another one of Baden-Wurttemberg's high performer, Trumpf. Customers from Harley-Davidson to Apple buy its laser-driven metal cutting machines, $2.7 billion worth last year.

The family-owned firm devotes 8 percent of revenues to R&D to keep its innovation edge. They invest even more in their 9,000-person work force, more than half here in Germany. Like most German industries, Trumpf hires them young, after the equivalent of 10th grade, for a rigorous three-year training and schooling program and a full-salary job afterward. Most stay far longer. And after college, paid for by the company, some go on to become managers.

Apprentice Simon Richter is 19.

SIMON RICHTER, Trumpf: I applied for being -- training because, yeah, I like the mechanical work, and not only the theoretical stuff at school. It's so always the same at school, and you don't know what do you need math for in your life later.

MARGARET WARNER: So do you think you have a good future ahead of you?

SIMON RICHTER: Yes, I have.

MARGARET WARNER: Trumpf keeps the apprentice program going even in hard times, as when the 2008 global financial crisis melted down the company's sales.

NICOLA LEIBINGER-KAMMULLER, CEO, Trumpf: It just hit us. Really went from one hour to the next, we didn't have any orders. At the same time, all over the world, no order. That was really cruel.

MARGARET WARNER: CEO Nicola Leibinger-Kammuller watched as sales plummeted 40 percent in two years, and she had to drastically cut production. For most firms, that would have meant layoffs, but not here.

NICOLA LEIBINGER-KAMMULLER: It's just a terrible thought having to lay off people, because we like our employees and we need them. And they are well-trained, and they're loyal. And they have been working for us for decades, some of them, or many of them have. And it's just a terrible thought to have to send them away.

MARGARET WARNER: Instead, Trumpf turned to a new German program called Kurzarbeit, or short work, cutting its employees' work hours and pay. The government made up part of the difference. And they got extra training on their off-days.

Judith Schonemeyer and Sebastian Frederick say they didn't mind reduced wages. At least they kept up their skills.

JUDITH SCHONEMEYER, Trumpf (through translator): We noticed that the financial figures were declining. Right from the beginning, it was clear. For me, it was one or two days a week I didn't work. We accept less money, so that once the situation improves, we won't have to start over again.

SEBASTIAN FREDERICK, Trumpf (through translator): It gave us a secure feeling, especially the people with families, that they have job security, that the company stands behind them and that you get to keep your job. So everybody was happy to do without the 5 percent or extra hours.

PETER LEIBINGER, vice chairman, Trumpf: The desire for security and safety is the most, so to speak, the strongest driver in German culture.

MARGARET WARNER: Nicola's brother, Peter Leibinger, vice chairman of Trumpf, said the short work program, readily accepted by the German workers, positioned industry to restart quickly after the downturn, and it paid off big-time for Trumpf.

PETER LEIBINGER: If we hadn't had this opportunity to use Kurzarbeit, we wouldn't have had the upswing that we saw, meaning 50 percent growth within one year for a company that makes a very difficult and complicated product and has to deliver that into the world. This wouldn't have been possible without us having our work force on board.

MARGARET WARNER: The Leibingers' financial caution also helped them weather the global credit crisis. Trumpf carries no major debt, they say, and in good times, they bank the extra profits to reinvest later.

NICOLA LEIBINGER-KAMMULLER: No yachting, no, no horses, no racing cars and stuff like that. And that's why usually we have enough money to reinvest with our money for research and development and buildings and acquisitions and so on and so forth.

MARGARET WARNER: But even Trumpf is feeling a chill wind now from other E.U. countries, who account for half its sales. Since the euro crisis hit big last summer, there's been a slowdown in orders from customers in Italy and Spain and even France.

PETER LEIBINGER: They said, we'd like to invest, we could use the extra capacity, but we're just so unsure about the future, we're going to wait for awhile.

MARGARET WARNER: Martin Herrenknecht, with his European customer base, is torn over what to do about the crisis. This self-made man is frustrated that Germany is being asked to bail out less prudent and hardworking neighbors.

MARTIN HERRENKNECHT: It's nonsense. They should control it in a better way. And it cannot be that we get retirement with 67 and the Greeks with 50.

MARGARET WARNER: But then there's economic reality.

Do you think that Germany is going to have to help support some of these countries?

MARTIN HERRENKNECHT: I would say that's quite clear.

MARGARET WARNER: That tension, how to shore up the euro zone on which Germany depends, without endangering its own hard-won prosperity is one the Germans haven't yet resolved.

GWEN IFILL: In her next report, Margaret looks at the roiling debate in Germany over whether and when to shore up its indebted neighbors.

Amid all the worry about how long it will take the economic recovery to kick into high gear, there's a little-noticed sector that's doing very well, thank you: American agriculture. Overlooked by many of us in the news media, probably in part because we spend most of our time in big cities, farm sector earnings hit a record last year, with farm income rising just above $100 billion.

I sat down with U.S. Secretary of Agriculture Tom Vilsack a few days ago to get an update on what his huge (90,000 employees) department is up to, and came away surprised by the successes in the American agri-economy. Much of this is being driven by farm exports, which reached a record high last year -- and as Vilsack, a former Governor of Iowa, likes to point out, helped support 1.15 million jobs here in the United States. These exports contributed to an overall U.S. trade surplus that also hit a record in 2011. (Did you know that every $1 billion in overseas trade generates 8,400 jobs in this country?)

The question is WHY is agriculture doing so well? Vilsack, whose grandfather owned a farm, says back in 1975, the most productive farmers planted an average of 12,000 seeds per acre. Today, thanks to science, it's closer to 30,000. After information technology, agriculture is the second most productive sector of the economy. Farm unemployment is dropping at a faster rate than the rest of the job specialties because of this, and because of what Vilsack calls "an extraordinary investment in infrastructure." He describes an extensive supply chain including storage, transport, and equipment manufacturing. Farmers are buying lots of new machinery, like large tractors with sophisticated GPS systems, leading to new hiring on the part of companies like John Deere, which recently added 250 people at a plant in Ankeny, Iowa, that manufactures cotton pickers.

There are many more facets to the success story, but two bright spots in particular stand out at this wide-ranging federal department: housing and food assistance. The U.S. Department of Agriculture helped arrange 456,000 home loans over the past three years, during perhaps the country's worst housing crisis ever. The homes they helped find mortgage backing for are principally in rural areas. Secretary Vilsack explained "it's our mission to do this; we've been working hard to improve the quality of life for people living in rural areas." Under that same heading, he threw in the assistance the department has provided for school construction, for small business (almost 50,000 loans) and for the expansion of broadband in rural areas -- some 80,000 miles-worth.

Finally, food stamps: a sensitive topic on the presidential campaign trail this year, as former House Speaker Newt Gingrich has referred to President Obama as "the food stamp president." Run by USDA, its real name is the Supplemental Nutrition Assistance Program, or SNAP. Vilsack reminded me that while there was a substantial increase in demand for SNAP benefits in the wake of the economic downturn, only 8 percent of recipients are on welfare. More than 50 percent are children and the elderly; the rest are people with disabilities and working men and women who don't earn enough to afford to keep food on the table for their families. "Payment accuracy" is up to 96 percent, in other words, less fraud, in the wake of stepped-up enforcement and investigations. Most impressive: in 2010, SNAP helped lift 3.9 million Americans -- including 1.7 million children -- out of poverty.

There's always something to criticize in government; after all, it's made up of people, and people make mistakes. But there are also some positive stories these days in the agricultural arena that deserve to be heard.

Photo by foreverdigital via Flickr.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here's Wednesday's query:

John Feuille: Most of us have played Monopoly. You set up the board, deal out the money, roll the dice and play until one person collects so much of the wealth that the other players can't buy anything, or pay rent, or pay utility bills. The game stops. The rich guy can't sell anything, or collect any rent, the poor people can't buy anything or pay rent, etc.

Let's say, you want to keep the game going. The rich guy, with his eye actually on collecting more wealth more quickly in the future, might suggest getting rid of all those onerous taxes and fees in Chance and Community Chest. But that won't get the game going again. Someone has to go into the bottom of the closet, find the old broken Monopoly game and deal out more money to the players. If you do that, the game can get going again. Kids can figure out what to do -- it's unfortunate that Congress seems unable to.

An inherent weakness of capitalism as a method to bring the most happiness, to the most people, most of the time, is that if too much wealth gets concentrated in too few hands, the game stops. The correct purpose of regulation is to keep the game going as long as possible.

Paul Solman: Provocative analogy, John. The game of Monopoly was actually invented to make your very point.

One question raised by your email, assuming for a moment that it's true: Why don't the rich understand this? To which a response might be: Many of them do. Hence the Buffett-Gates push for higher taxes on the wealthy. And what about the rich who resist arguments like yours? Could be they're short-sighted. Could be just too greedy to let go. Could be they just don't agree with you.

As to finding an old Monopoly game in the closet and using the money to keep the game going -- it just so happens that's what the Fed did after the Crash of '08 and what the European Central Bank is doing as I write.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.Follow @PaulSolman

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In an interview with Margaret Warner in Rome, Italy's Premier Mario Monti said now is the time to start focusing on "how collectively we can achieve more growth in Europe." Monti also said "old phantoms" of resentment between the North and South of Europe had reemerged in light of the euro zone crisis.

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MARGARET WARNER: Mr. Prime Minister. Thank you for having us.

PRIME MINISTER MARIO MONTI: Great pleasure.

MARGARET WARNER: As we sit here, Greece is undergoing yet another 24-hour strike. The financing situation hasn't been resolved. What are the consequences for Italy if Greece should default on its debt?

Mario Monti: The consequences would have been extremely serious for Italy, had a default of Greece happened a few months ago. Now - in fact -- of course, I hope that there is not a default for Greece, but I'm really confident that even in that case Italy is seen by the markets and by the E.U. institutions and by the global community as a country which, since a few months, has really taken some tough structural measures, both as regards the budgetary consolidation and as regards structural reforms for growth.

So I'm confident that we would be much less exposed to a Greek default risk than we would have been a few months ago.

MARGARET WARNER: Do you think Greece helps prove the point you've been making to European leaders, though, that austerity without growth can be a recipe for disaster?

Mario Monti: Yes, but Greece is really the extreme case, because of the excesses of deficit, of public deficit in the case of Greece had been over many years so high, so extreme that it would have been hard -- let's face realities -- to have a soft landing from those excesses of deficit without a recession.

But in more general terms, I think there is a valid point if we say that Europe needed to be put under a safe place as regards the public finances of each member state. Thanks to German and other pressures, we could say that most of us are there or nearly there. And now, without going back to fiscal indiscipline, that the time has come to focus more energies on how collectively we can achieve more growth in Europe.

MARGARET WARNER: Do you think that in fact there's a real danger of a backlash here in Italy against what they may see as E.U. imposed changes to their way of life that are very, very painful. What are you seeing?

MARIO MONTI: There was -- there was such a risk of backlash, and it is there more generally -- well, let me say a word about Italy.

I try to avoid that backlash by always presenting the necessary sacrifices that Italians have to go through not as an imposition from Brussels or Germany or the European Central Bank, but rather as a necessary step that Italians have to undertaking -- to undertake also at the suggestion of Europe, but basically for their own interests, for the interests of ourselves and of future generations of Italians. This is precisely meant to avoid backlashes.

Having said that, in a wider perspective, the euro zone crisis has indeed brought about quite a bit of misunderstandings and the re-emergence of old phantoms about prejudices between the North, the South of Europe, and a lot of mutual resentment.

And it is very, very important that we all take this with great attention in order to avoid that something that was meant to be the culminating point of the European construction -- namely, the single currency -- turns out to be, through psychological negative effects, a factor of disintegration of Europe.

MARGARET WARNER: The German government is arguing, however, that if the pressure is relieved too soon on the really indebted countries, the pressure of the interest rates in the market, that they won't even do the necessary reforms. Do they have a point about that?

MARIO MONTI: That point was certainly valid in the past, for the long years since the inception of the euro where the financial markets went to sleep, took a long siesta and did not exercise any market disciplining effect. Now, of course, after the recent financial crisis, markets woke up quite brutally and did exercise a lot of pressure for each of us to engage in a serious budgetary consolidation.

Now the role of the markets is there, but I don't think we have to rely basically and mainly on high interest rates for governments to continue the path of sound budgetary and reform policies.

On the other hand, one could also make the case that those countries and those populations -- like, since a few months, the Italians -- who definitely are embarking on all the necessary measures of budgetary consolidation and structure reforms, may be disenchanted and not ready to continue on this path unless they do see some recognition of their efforts through, in particular, a decline of interest rates.

MARGARET WARNER:  But you do want Germany to put up more money, do you not, to make this bailout fund, the firewall, bigger, as Treasury Secretary Tim Geithner's been urging, as the IMF has been urging?

MARIO MONTI: Yes. That goes for Germany, but for all member states. And of course, Germany happens to be the largest one. But one can also make the point that the higher the overall amount of money put in the firewalls, the smaller the probability that it will ever have to be disbursed, because the markets will be impressed by the credibility of the -- of the fire brigades.

MARGARET WARNER: What can President Obama do to help you?

MARIO MONTI: To help me, or to help the E.U.?

MARGARET WARNER: Both.

MARIO MONTI: I think he can help us all through a sound management of the U.S. economy, which he's trying hard to achieve, just as we can help him by avoiding the explosion of tensions to the world economy out of the euro zone. And I think on both sides of the Atlantic, we are working well in the desired direction.

MARGARET WARNER: Back to what you're trying to do here at home, do you think that by calling for more competition in the economy, as well as budget cuts, you are asking the Italian people to really change their central character or culture?

MARIO MONTI: To some extent, yes. I am fully aware of this, and basically our mission and my wish is to have the Italian people value more and more some strong qualities they have in their genes and traditions -- that is, a strong entrepreneurial spirit and a sense of -- and a sense of solidarity in society.

But I definitely think that Italy can become a more competitive place only if we introduce in our system much more meritocracy, which means much more competition and accountability in all decision points of corporate, as well as the public administration.

So you can say what you probably think, that this is a tall order for a government which, at most, will be in place until the spring of 2013. But we will be happy if we accompany Italy with a gentle pressure towards achieving at least the first mile of this long road.

MARGARET WARNER: Mr. Prime Minister, thank you so much.

MARIO MONTI: Thank you very much.

Protesters in Greece took to the streets again Tuesday, expressing anger over Europe's demands for more spending cuts and tax increases. James Mates of Independent Television News reports on the unpopular new round of austerity measures then Margaret Warner sets up her interview with Italian Prime Minister Mario Monti.

JUDY WOODRUFF: Next, a two-part look at Europe's debt crisis.

First, more protests in Greece against austerity measures in the country where the troubles began two years ago.

We have a report from James Mates of Independent Television News in Athens.

JAMES MATES: It is 20 years to the day since the Maastricht Treaty was signed to bring the continent every closer under the euro.

This afternoon, this was a German flag being burned in Athens. Before long, riot police were swinging batons and firing tear gas. Greeks believe they are being driven into poverty on orders from abroad. This is a country is seething with anger.

Inside the parliament, politicians seem to be on the verge of accepting Europe's demands for another round of cuts to wages, pensions and health care. It's designed to reduce Greece's massive debt. But as anyone in this crowd will tell you, they have been cutting for two years now, and the debts have simply got bigger.

EVA KAILI, socialist member of Parliament: I don't think they can take anymore. And I think it's the wrong recipe. That's why. They could take it if they knew that it was a way out. But from what it seems, it's not a way out. It leads us to deeper recession.

JAMES MATES: What the Greek government is having to do today is choose between two appalling options: to take the medicine that Europe has prescribed and with it years more of austerity and recession, no guarantee of success at the end of it; or to forget Europe's money, to go it alone, leave the euro, knowing that in the short term, at least, that would be even more painful. One or the other, they have to choose.

A storm swept through Athens this afternoon, driving many of the protesters home. It was also enough to rip the European flag from its pole, where it flies beneath the Acropolis. Many Greeks, though, are simply too angry to notice the symbolism.

JUDY WOODRUFF: Now Italy, another European country and a much larger economy under financial pressure.

On the eve of his visit to Washington and meetings with President Obama, Italy's premier talked today in Rome with our Margaret Warner.

MARGARET WARNER: Amid protests in the streets and pressure from abroad, a new face came on to the Italian political scene three months ago.

Prime Minister Mario Monti's mission: try to rescue the country's stagnant economy and unwind its massive national debt.

MARIO MONTI, Italian prime minister (through translator): If we will be able to take advantage of this opportunity altogether to start a constructive dialogue on general goals and decisions, we will be able to redeem the country and to rebuild the confidence in its institutions. Thank you.

MARGARET WARNER: Italy had not fallen to the same depths as Greece, Portugal and Ireland, needing bailouts by the European Union, but the economy was stalled. The markets were hammering Italian debt. And Prime Minister Silvio Berlusconi was facing sex and corruption charges. He resigned after he lost his working majority in parliament over austerity measures the E.U. had demanded.

With that, the Italian president turned to Monti. The former professor served as an E.U. commissioner for nearly 10 years, but has never held elected office. Now he leads a government composed mostly of other technocrats. They must try to ensure that Italy can continue to borrow on international credit markets and keep paying off a national debt that equals 120 percent of its gross domestic product.

Among E.U. countries, only Greece has a larger debt load. Monti has pushed through budget and social welfare cuts. But he also has warned his European partners, especially Germany, that austerity must be accompanied by growth.

At the same time, his moves to modernize the Italian economy have run up against longtime traditions, such as the protective hold that guilds have over everything from taxicabs to lawyers. So far, his proposals have been endorsed by parliament, but more tests loom.

The Arsos container ship is unloaded at the Port of Miami in Florida; Photo by Andrew Harrer/Bloomberg via Getty Images.

Marc Whitehead sends the follow-up question below after reading Paul's thoughts on tariffs from early January: If we put a 15 percent tariff on all imported goods, how much money would that tax generate each year?

Question: Paul, I don't think you are calculating 15 percent on all imports, only an increase on goods that are currently taxed. I believe that almost all imports are currently un-tariffed. What do you say?

Paul Solman: Good point, Marc. But it doesn't much affect my withering conclusion in the post of Jan. 5: that wiping out the federal debt and "entitlement" obligations by hiking import duties (aka tariffs) is a non-starter.

After reading your question I went online, and have now seen estimates as high as 67 percent for the share of imports that's tax-free. That might require a tripling of the numbers I estimated on Jan. 5. But even if we were to do so, the U.S. would still fall hundreds of billions of dollars short of covering our annual budget deficit with tariffs. Not to mention looming Social Security and Medicare shortfalls. To rid us of all our obligations? I stand by my recent bottom line: "we're surely talking tariffs that would be many multiples of the price."

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.

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Standard & Poor's Headquarters in Lower Manhattan. Photo by B64 via Wikimedia Commons.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here are a trio of queries for Monday:

Peter Steiner asks: Who rates the raters?

Paul Solman: Rater raters? No one. Still.

Warren Rottmann asks: Are the stock exchanges of today more of a casino for traders rather than an exchange for investors? Is options trading and ultra-short trading at the heart of it?

Paul Solman: Sure seems like it.

Demos Kazanas asks: A solution to the Greek debt problem I have not seen discussed is Greece paying its internal obligations (its budget is 50 percent of its GDP) in low interest (1 percent) euro denominated bonds. These will be worth 50 percent-70 percent of nominal value and could serve as currency substitute while injecting much needed liquidity in its economy. There are many benefits of such a move, not least of which that it will force moving away from cash and into electronic transactions across the economy, thus reducing tax avoidance. I would value your view on this notion.

Paul Solman: So you mean every government worker would take an immediate pay cut of up to 50 percent? I can certainly believe that, as you say, "There are many benefits of a such a move," but unless I'm missing something, domestic tranquility is not likely to be one of them.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.

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European Union and Greek national flags fly near the Parthenon temple in Athens. File photo by Angelos Tzortzinis/Bloomberg via Getty Images.

ATHENS | The Greek government declared Saturday that it had reached partial agreement with its euro area creditors on a $170 billion bailout package. But a gulf of differences remains, with only a day of talks to go.

"We've effectively agreed on how to refinance and restructure the Greek banking system, the course of the privatization program, and a number of institutional and structural changes," Finance Minister Evangelos Venizelos said. He called the talks "extremely difficult and delicate".

"The distance between a successful outcome and a dead end ... is very, very small," he said.

If Greece fails to agree to a series of austerity and reform measures by Sunday night, it may not be technically possible for governments to produce the money and for banks to carry out a bond swap before March 20. That is when Greece faces $19 billion in bond maturities it cannot afford. Non-payment would then create the eurozone's first default.

The two biggest areas of remaining disagreement, Venizelos said, were over creditor's demands that Greece reduce its private sector salaries and make further cuts in public spending this year.

Greece's so-called troika of creditors (European Central Bank, European Commission and International Monetary Fund) wants the minimum wage of $988 a month gross to fall by at least 10 percent. It wants bonuses amounting to another 15 percent of salary to go.

Talks between unions and employers on a voluntary reduction in salaries reached an impasse yesterday, meaning that the government will now have to circumvent union talks with an act of parliament. If that happens, say the unions, they will respond ferociously. "There will be a legal challenge in court, strikes, demonstrations and protests," said an official from the General Confederation of Greek Labour involved in the talks.

That would place further pressure on the already strained governing coalition of socialists, conservatives and right-wingers. Prime Minister Loukas Papademos met with the leaders of the three coalition parties on Saturday. They will have to sign written commitments to stick to a list of austerity and reform measures by Sunday. The commitment would bind them even after an election, perhaps the most contentious condition of the bailout.

The center-right parties are already taking an anti-austerity line as Greece enters its fourth year of recession and unemployment stands at 19.2 percent.

Greece's recession last year may have been 6.5 percent of GDP, half a point higher than thought, estimated the Centre of Planning and Economic Research (KEPE), a respected think tank, earlier this week. That would mean a 13-point total shrinkage of the economy over the past three years, with KEPE estimating an additional 3.42 percent recession this year and zero growth in 2013.

Conservative shadow finance minister Christos Staikouras said Friday that Greece's inability to hit deficit tax revenue targets and reduction targets "have made more urgent than ever the re-evaluation and modification of certain policies that have proven economically ineffective."

Greece faces an almost impossibly tight timetable before a Feb. 13 deadline. During the week the European Commission and euro area national governments must begin the process of releasing money to finance a $130 billion writedown of privately held Greek debt. By Feb. 13, Greece must begin to exchange privately held bonds it cannot honor with new bonds that carry longer maturity terms and lower interest.

New job numbers released Friday showed the U.S. job market surged in January as the unemployment rate dropped to its lowest level in three years. Jeffrey Brown, Macroeconomic Advisers' Joel Prakken and Georgetown University's Harry Holzer examine the numbers and assess what some good news means for the longer-term U.S. recovery.

JEFFREY BROWN: Payrolls were up and unemployment was down in the January jobs report.

The president hailed the news today, while Republicans insisted it could've been better still.

PRESIDENT BARACK OBAMA: The economy is growing stronger. The recovery is speeding up. And we've got to do everything in our power to keep it going.

JEFFREY BROWN: President Obama wasted no time this morning at a fire station in Arlington, Va., touting the best job creation numbers in nine months.

In fact, the Labor Department report exceeded economists' hopes, with 243,000 jobs added in January, about 90,000 more than expected. The unemployment rate dropped to 8.3 percent, the lowest in three years. The rate has been down for five months in a row.

And there were other positives: 50,000 new jobs in manufacturing and 21,000 in construction.

In Nevada, though, Republicans campaigning for the president's job said the increases could have been seen a long time ago.

MITT ROMNEY (R): The policies of this administration have not been helpful. They, in fact, have been harmful. They have slowed down the recovery, made it more difficult.

NEWT GINGRICH (R): Obama raises taxes, increases regulation, is anti-American energy, and engages in class warfare, sort of the anti-jobs presidency.

JEFFREY BROWN: Republicans in Congress pointed to nearly 13 million people still out of work and nearly 24 million considered underemployed.

But at his event this morning, the president warned against repeating what he called mistakes of the past, when Republicans ran the government.

BARACK OBAMA: We can't go back to the policies that led to the recession. And we can't let Washington stand in the way of our recovery.

So I want to send a clear message to Congress: Do not slow down the recovery that we're on. Don't muck it up. Keep it moving in the right direction.

(APPLAUSE)

JEFFREY BROWN: The president also outlined a program to hire veterans for conservation work on public lands.

At the same time, he cautioned that employment figures may fluctuate. The Congressional Budget Office issued a similar warning this week. It projected that unemployment could return to near 9 percent later this year.

We'll get to the politics of the jobs situation later, but, first, we look at the numbers themselves.

Joel Prakken is co-founder and senior managing director of Macroeconomic Advisers, an economic analysis firm in Saint Louis. Harry Holzer, a former chief economist for the Labor Department, now teaches at Georgetown University.

And, Harry Holzer, I'll start with you.

A nice surprise, for a change. What are the key positives you see here?

HARRY HOLZER, Georgetown University: Well, the payroll growth number of over 240,000 was really much larger than most of us expected it to be.

We had had a couple of good months already. Last couple of months came in at about 150,000 and then about 200,000. We expected possibly some sliding back, as has often happened in this recovery. The fact that we came in at 240,000 growth across most sectors of the economy, the dip in unemployment, all of that was positive news.

JEFFREY BROWN: You said most sectors. Fill that in a little bit. Where did you see things that looked particularly good?

HARRY HOLZER: You saw it in manufacturing, also in construction, which we haven't seen much of any recovery so far. You saw it at the high end in professional services. But you also saw it at the low end in leisure and hospitality, health care which, of course, has been strong throughout, so really spread quite nicely across most parts of the economy.

JEFFREY BROWN: Joel Prakken, I want to ask you about some of the reservations. But, first, stay on the good news here. What would you add to that? What jumped out at you?

JOEL PRAKKEN, Macroeconomic Advisers: Well, better than expected.

And in this economy, we like the upside surprises. I agree with the previous comments. And as your viewers almost certainly know, this report today actually has two surveys on employment, the establishment employment, the numbers for which you just reported. But it also polls households to see what their employment statistics are.

And that separate survey of employment actually grew in excess of 300,000 for the month. So there was corroborating evidence in the companion survey that employment is on the uptick.

JEFFREY BROWN: Now, staying with you, Joel Prakken, this has all been so up and down. Give us the continuing concerns here, or start that out. What reservations do you want to throw out there when we look at what we see today?

JOEL PRAKKEN: First thing to remember is that employment is generally considered to be a lagging indicator of the economy. So the uptick we're seeing here could just be a reflection of the strengthening in GDP growth that occurred in the last part of 2011.

In the first half of 2012, there are some legitimate concerns about how fast the recovery will proceed. First, we've got the constant drag from housing. We built too many houses. We have to work off that physical inventory. We have a lot of houses that could go into foreclosure, gumming up the works.

And of course there's the ongoing constipation in the mortgage finance market. Fiscal policy is in contractionary mode. The Obama stimulus is winding down. The spending caps that were passed as part of the Budget Control Act of 2011 are starting to bite. And state and local governments face ongoing pressures that are forcing them to raise taxes and trim.

In addition, there are uncertainties emanating out of the debt crisis in Europe. If a -- quote -- "Lehman event" -- unquote -- happens in Europe during 2012, it could send financial shockwaves around the globe without regard to economic borders.

And all of these risks and uncertainties occur at a time when the Federal Reserve, having already pushed interest rates very low, is not very well poised to try to offset any negative surprises.

JEFFREY BROWN: Harry Holzer, pick up on the -- where we started, was the -- how do you view the unemployment number, as a lagging indicator, as a helpful indicator for how strong the economy really is?

HARRY HOLZER: It is a lagging indicator. It does usually lag by at least a few months.

What's interesting is that at the end of last year, we had GDP growth, economic growth of a little under 3 percent. That's a good number, relative to what it's been. It's not a spectacular number. And -- and we're not even sure that that's going to survive going into the future. Some of that was just businesses restocking their inventories.

So there was concern about whether that kind of production will continue. And yet it does seem to be enough to have lead to some job growth over the last several months. On the plus side, population growth has slowed. Productivity growth has slowed. So even a modest amount of economic growth does seem to be translating into some job growth, at least for now.

And, again, whether or not it continues is anybody's guess.

JEFFREY BROWN: And, Joel Prakken, of course, the president himself warned that the numbers may bounce around. That's what you're suggesting, is that we may well see things go down for a few more months before perhaps they go -- continue -- I'm sorry -- go up again, the unemployment number go up for a few months before it continues down.

JOEL PRAKKEN: Yes. As pleased as I am with today's number, it's far too early to know whether this is an inflection point or some kind of breakout report on the employment side.

There are enough economic uncertainties facing us in 2012 that it is simply premature to do handstands over today's number, as encouraging as it, in fact, was.

JEFFREY BROWN: And bring in the Fed, Joel Prakken, the Fed saying this week as it said the week before that they're just going to keep the interest rates very, very low through 2014, suggesting continuing real fears about the economy, right?

JOEL PRAKKEN: That's correct.

The Federal Reserve is interested in promoting a healthy recovery. It has said now that interest rates will be maintained at a low level for the next several years, extraordinarily low levels. And that is a stimulus to the economy.

Whether it is enough of a stimulus in combination with the other risks and uncertainties facing us to promote very strong job growth in the coming months is anybody's guess. But let's put this in some perspective. We're still five million or so jobs below the previous peak, and even further below the level of jobs that would be necessary to get us back to a full employment rate of, say, 5 percent if the participation rate was as high as it was three or four years ago.

And one of the things that Harry noted that is very interesting here, the unemployment rate is falling with very slow economic growth.

JEFFREY BROWN: Well, what does -- expand on that, Harry Holzer. What does that mean? What does that tell us?

HARRY HOLZER: It tells us that, at least for now -- there used to be a rule of thumb that said you need about at least 3 percent economic growth to lower the unemployment rate, because you need about 1 percent to absorb extra population growth, and you need about 2 percent to absorb higher productivity growth.

In the last year, productivity growth has slowed down. Over the long term, that's not great. But in the short term, it helps you. Population growth, on the immigration side especially, has slowed down. So even a smaller amount of GDP growth is translating into some drop in unemployment.

That is a good thing. Also, part of the unemployment drop has also been just some people who have stopped looking for work. That's not such a good thing.

JEFFREY BROWN: That has been a long-term problem.

HARRY HOLZER: That's right. If they come back in, in the next six to 12 months, you can could see the unemployment rate tick back up, even if jobs are being created.

JEFFREY BROWN: But we've had so many months and even years of bad news. Give us a little good news, since it is a good news day, just to end this. For people that have suffered for a long time, does this suggest some hope?

HARRY HOLZER: This suggests hope.

And if you look at some specific groups, the unemployment rate among men has dropped pretty significantly the last two or three months. Unemployment rate for African-Americans is down significantly. We hope that lasts.

But these are some the groups that got hit really hard. So they're starting to see some relief. And we now have four or five straight months of improvement in the job numbers. I don't know if that's a trend or not. It is too early to celebrate, but it's nice see that trend so far.

JEFFREY BROWN: All right. We will all, of course, watch.

Harry Holzer and Joel Prakken, thank you both very much.

HARRY HOLZER: Thank you.

JUDY WOODRUFF: For more on the jobs numbers online, we have Paul Solman's own measure of unemployment, which includes the underemployed and those out of work so long, the government no longer counts them. That's on our Making Sense page.

As European countries continue to struggle with how to resolve the region's financial crisis, one of the key voices in that effort is set to make an appearance on Tuesday's NewsHour. Italian Prime Minister Mario Monti plans to sit down with Margaret Warner in a rare interview with U.S. media.

Monti took over as prime minister in November after Silvio Berlusconi resigned in the shadow of personal scandals and Italy's debt crisis. With his economic and academic background, Monti was considered above the political fray and a departure from the colorful and controversial Berlusconi.

Monti's government has passed a 33 billion euro ($43.5 billion) package of spending cuts and tax increases. But he leads an unelected government mainly composed of technocrats and is getting pushback from trade unions and professional guilds such as lawyers against changing Italy's labor-market rules.

Warner and a NewsHour team are in Europe this month, covering high-level talks at the EU summit in Brussels (watch their video below) and preparing reports from German and Italian cities on the differing attitudes to austerity and debt.

See all of our coverage from Europe and follow us on Twitter.

Recruiter Esther Aranza reviews job seeker Andrew Jack Jr.'s resume during a career fair in Texas. Photo by Aaron M. Sprecher/Bloomberg via Getty Images.

By Paul Solman and Elizabeth Shell.

The unemployment rate continued to trend downward Friday, reaching 8.3 percent, the lowest rate in three years. We calculate U-7, our own more inclusive statistic that adds the underemployed and those who want a job but have been out of work so long the government no longer counts them. U-7 is down to 16.9 percent for January. That's the lowest we've seen since we started tracking the figure in January 2010.

With a very healthy 243,000 new jobs added in January, the picture is certainly brightening. The last time the unemployment situation figures were this good was back in February 2009, President Obama's first full month in office. See The New York Times for more detail.

Note: "New Jobs Added, Revised" and "New Jobs Added Since Jan, 2012, Revised" will return in March.

But despite today's cheery numbers, a historically high level of unemployment persists. And as we explained yesterday, the Gallup organization has a competing estimate for January, which turns out to be considerably more downbeat. Gallup estimates an underemployment rate of 18.7 percent and our U-7 total of the un- and underemployed still hovers above 27 million Americans. With that in mind we present an audacious proposal, backed up with some truly sobering historical justification, from our friend at Duke, economist William Sandy Darity. The professor first broached the idea of a federally guaranteed jobs program for every American two years ago at the annual economics meetings. We featured a video with his explanation here on Making Sen$e, asking him tough questions about the proposal.

The essay, which you can read here, is forthcoming in the Review of Black Political Economy. For the skeptical, you might want to take a look at Darity's video explanation from 2009, above.

We're interested to know what you think of Darity's proposal. Let us know in the comments below.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow Paul on Twitter.

Presidential candidates have loaded recent stump speeches with references to wealth, taxes and "the very poor." Jeffrey Brown explores the role of poverty this election year with Lawrence Mead of New York University, Angela Glover Blackwell of the advocacy group PolicyLink and Barbara Perry of the University of Virginia.

JEFFREY BROWN: Now, wealth, poverty and politics today.

For several weeks, much of the Republican presidential campaign seemed to focus on the subject of wealth, specifically that of Mitt Romney and the taxes he did or didn't pay.

MITT ROMNEY (R): Will there will discussion? Sure. Will it be an article? Yeah. But is it entirely legal and fair? Absolutely. I'm proud of the fact that I pay a lot of taxes.

JEFFREY BROWN: The wealth focus came amid a national conversation prompted in part by the Occupy protest movement, which put a spotlight on economic inequality.

President Obama took up the theme in his State of the Union address last week.

PRESIDENT BARACK OBAMA: We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules.

(CHEERING AND APPLAUSE)

JEFFREY BROWN: Now the dialogue may be shifting from wealth to poverty.

Romney drew fire yesterday after he said this on CNN, explaining his focus on the middle class.

MITT ROMNEY: I'm not concerned about the very poor. We have a safety net there. If it needs repair, I'll fix it. I'm not concerned about the very rich. They're doing just fine. I'm concerned about the very heart of America, the 90, 95 percent of Americans who right now are struggling.

JEFFREY BROWN: In Las Vegas today, Romney's Republican rival, Newt Gingrich, accused him of dismissing the poor.

NEWT GINGRICH (R): I really believe that we should care about the very poor, unlike Gov. Romney.

(LAUGHTER)

NEWT GINGRICH: But I believe we should care differently than Barack Obama. Both Gov. Romney and Barack Obama seem to believe that a -- quote -- "safety net" is all the poor need. I don't believe that. What the poor need a trampoline, so they can spring up and quit being poor.

(CHEERING AND APPLAUSE)

JEFFREY BROWN: And the president worked the issue into remarks at the annual National Prayer Breakfast in Washington.

BARACK OBAMA: It's also about the biblical call to care for the least of these, for the poor, for those at the margins of our society, to answer the responsibility we're given in Proverbs to speak up for those who cannot speak for themselves, for the rights of all who are destitute.

JEFFREY BROWN: The issue may resonate this election year more than most, as poverty numbers rise and millions of Americans remain unemployed.

And we explore some of these issues now with Angela Glover Blackwell. She's the founder and CEO of the advocacy group PolicyLink. Lawrence Mead is professor of politics and public policy at New York University. And Barbara Perry, a senior fellow in the Presidential Oral History Program at the University of Virginia's Miller Center.

Angela Glover Blackwell, I will start with you. A general question first: How serious a problem is poverty in America today?

ANGELA GLOVER BLACKWELL, PolicyLink: Poverty is a huge problem. It's a problem for the people who are in it and it's a problem for the nation -- 15 percent of Americans live below the poverty level, highest number since 1993.

And 44 percent of those live below half of the poverty level. That means for a woman with two children, that's less than $9,000 a year. On top of that, we have millions and millions of Americans, 127 million, who in three months of no job would live in poverty.

Poverty is a huge issue, it's getting worse, and it should be very troubling to all of the American people, not just those who are living in poverty.

JEFFREY BROWN: All right, well, Lawrence Mead, you were an opponent of the welfare reform in the '90s. You don't hear much about poverty in our politics today. How would you frame the problem?

LAWRENCE MEAD, New York University: Well, poverty is a different problem from those that have gotten most of the attention. It's not primarily due to unemployment or inequality.

Those are concerns that affect the bulk of the population and they affect some poor people. Poverty has grown largely due to economic conditions, but it doesn't follow that most of poverty is due to the economy. That's really not true. Most poor adults are outside the economy.

They're simply detached. And they don't say that the fact that they're not working is due to the fact that they can't find a job. That's seldom the case. It's usually other factors in their private lives that make it difficult for them to work.

Now, I don't give up. I think we should take steps to make sure that they, in fact, go to work. And that's what we did in welfare reform. I think we should also do it for non-working men of low income. Most of them are not employed either, and we need to do something about that. And certainly the economy makes it harder to do, but it's still quite possible.

Jobs are usually available. The main problem is to mobilize people to actually get up and work regularly.

JEFFREY BROWN: All right, so, Barbara Perry, there was that remark from Gov. Romney yesterday starting to bubble up into the political conversation. As someone who studies presidential history here, what strikes you about this moment as we think about poverty and politics?

BARBARA PERRY, University of Virginia: Well, I think it's a moment that in many ways repeats a cycle in our country's history that goes back to our very founding.

And that is that the founding fathers were aware of economic inequalities even at that time. And it has followed through and has often been kicked off, these various cycles, by traumatic upheavals. And certainly 2008 was a traumatic upheaval in our economy. And so I think the disparities that people see -- and I think the hearts are in the right place of both Lawrence and Angela -- they may have different approaches to the problem or see different political issues related to it.

But I think that it's certainly bubbled up into the conversation of our politics because of the upheaval of 2008, for sure.

JEFFREY BROWN: Well, Angela Glover Blackwell, I want to ask you, because you started by giving some very large numbers of people.

Do most Americans -- when a Mitt Romney or a politician talks about the great middle, because that's what we hear most often -- do most Americans feel themselves to be in the middle and not in poverty?

ANGELA GLOVER BLACKWELL: Most Americans like to think of themselves as being in the middle.

Many Americans understand that they're in a very vulnerable place right now. The notion that people in poverty really have a safety net is just wrong. And it's smacks of a "let them eat cake" posture, not really understanding the depth of the problem, not understanding how to get out of it, but not understanding the impacts on society.

The people who are being left behind now, white people in rural communities, Latinos, African-Americans, will make up the future population. Almost half of all children now are children of color -- they will be half by the end of this decade.

With high levels of poverty -- 39 percent of all black children are poor -- with high levels of poverty, the future is not right for America if we don't deal with poverty and the people who are being left behind. The American people think of themselves as being middle class, but they know they're vulnerable and they certainly don't want to fall into a needy position, and have the leaders not understand that the safety net is not broad enough, it's not strong enough, and it's not thoughtful enough about how to get people get out of poverty and stay out of poverty.

JEFFREY BROWN: Lawrence Mead, what do you think of this question, of the great middle, of the question of the safety net, of how people, how American voters see themselves and therefore how our politicians talk about these things?

LAWRENCE MEAD: Most Americans don't think they're poor, and they don't think they're at risk of poverty, but they are concerned about the poor.

We do have the safety net. There are about 46 million people on food stamps currently. That's a huge number. We're doing a lot to help people who are low-income. And we should do that. That isn't where we're failing, really. It has to do more with making sure that employment levels rise.

We have to make sure poor adults are regularly involved in the economy. We did that substantially for welfare mothers in the '90s. We need to do it again today, particularly for low-working men. That's the main thing we need to add to the safety net that we have.

JEFFREY BROWN: Well, Barbara Perry, what do we know about what resonates with voters as we watch politicians talking about these issues, a lot of concern, a lot of resentfulness about -- towards the wealthy, or still aspirational about getting out of poverty and out of middle class?

BARBARA PERRY: Well, Jeffrey, I think you've hit the nail squarely on the head. And that is indeed people want to have aspirations.

And that, I think, has been the beauty of our system and of our capitalistic system in this country for all of its history. And that is the great American dream, that each generation thought it could do better than the last.

And I know -- here I sit at the University of Virginia , where I did a Ph.D., and my parents, because they came up in the Depression, the Great Depression, could not get beyond high school. And their parents in turn, who were very working-class, couldn't get beyond sixth- or seventh-grade education.

But I think that what we see now and what will resonate with people is that politicians talk to them about the fear of losing those aspirations of the great American dream and the possibility that it's turning into the great American nightmare.

JEFFREY BROWN: Well, Angela Glover Blackwell, do you think the subject is getting enough attention? What encourages or discourages you about what you're hearing now?

ANGELA GLOVER BLACKWELL: I am so encouraged that we are talking about inequality in America. I'm pleased that we're now talking about poverty.

We need to stay on this topic, because this mobility that we have been so proud of in this nation is in jeopardy -- 47 percent of daughters who are poor will remain there, 35 percent of sons -- 45 percent of African-American children born into the middle class will end up poor, 16 percent of white children.

We need to restore this notion that you can move up, that children can do better than their parents. We need to stay on topic. This is a serious problem. We need to come to some conclusions about how to move forward.

JEFFREY BROWN: Are you hopeful about hearing those conclusions among -- from the . . .

ANGELA GLOVER BLACKWELL: I am.

JEFFREY BROWN: Yes?

ANGELA GLOVER BLACKWELL: I am hopeful. I'm hopeful because the conversation has opened up.

When the president did the State of the Union and he emphasized early education, K-12, strong community colleges, infrastructure investments, those were the right things to talk about. We need to really make sure that everything we do, including infrastructure investments, really can benefit those who are poor, they can get the jobs, their communities can be improved.

I am hopeful because the conversation we need to have is finally on the table.

JEFFREY BROWN: Lawrence Mead, are you hopeful about what we may hear on this, and is it getting -- is the subject getting as much attention as it deserves?

LAWRENCE MEAD: I think it needs even more attention. I agree that improving opportunity is absolutely crucial. We need to make sure that people who are less well-off now will be able to improve their lot.

I see that as a joint enterprise. Government has to do things to help people, but people also have to help themselves. And that is what we should focus on. We need to have a situation where there's a safety net, but also people go to work and they stay working, and they do other steps to advance themselves.

The ability to do that is still there in America, and we need to make sure that that's the case in the future.

JEFFREY BROWN: Barbara Perry, I just think back to some periods in our history where poverty was an intensely felt part of the political conversation. It seemed to fall off the map for a while there. What do you think about now and going forward?

BARBARA PERRY: Well, I think it'd be great if, as we say, we carry on this conversation and we continue to talk about some of these disparities and we have people from all sides of the spectrum, experts in the field giving us different possibilities of how to address it.

But I think that I maintain that positive outlook that we can do this, but I do believe that the situation since 2008 has caused people to feel personally that they're in a downward spiral, and we don't want a situation where we have the different political parties just coming at each other and feeling -- making people feel like the parties are spiraling downward as well on this particular topic, and not offering constructive possibilities.

JEFFREY BROWN: All right, we'll leave it there.

Barbara Perry, Lawrence Mead, Angela Glover Blackwell, thank you, all three, very much.

ANGELA GLOVER BLACKWELL: Thank you.

BARBARA PERRY: Thank you.

LAWRENCE MEAD: Thank you.

Photo by Matthew Staver/Bloomberg via Getty Images.

More signs that the U.S. economy may not be headed into a strong recovery just yet: unemployment was at 8.6 percent in January, with underemployment up to 18.7 percent.

But wait a minute. Those of you that watch unemployment numbers (and this page) closely will surely note that we're a day ahead of ourselves: the government's official unemployment reckoning, as compiled by the Bureau of Labor Statistics, will be announced Friday morning at 8:30 a.m. ET. So what's the deal?

The figures above come from Gallup, the research and polling group. It turns out Gallup has been tracking U.S. unemployment and underemployment rates as long as we have here on Making Sen$e. We just discovered that, since January 2010 (the same month we unveiled U-7), they've been doing their own polling -- separate from the government -- to try and assess the jobs situation.

Why create a new measure?

"The way unemployment is measured is very important for policy reasons and otherwise," says Dennis Jacobe, Gallup's chief economist. But underemployment -- part time work for those who want full time jobs -- Jacobe thinks the number is being under-reported.

To get what Gallup calls its "Underemployment Rate," Gallup adds to those who've told them they're unemployed all those working part time because they say they can't find a full-time job. The total, Jacobe said, as a percentage of everyone polled, 18 and higher, is usually a few percentage points above even the government's expanded measure, so-called U-6. (Official or "headline" unemployment is known as U-3.)

For December, Gallup calculated an "Underemployment Rate" of 18.3 percent, more than a percentage point higher than our U-7 of 17.12 percent. (We'll have January U-7 figures for you Friday.)

To determine U-7, we add to the officially unemployed of U-3 all those who currently want a job but don't have one and those who are part time for economic reasons. We divide that by a larger workforce number than the government uses, adding those who want a job but currently don't have one and the part-timers.

We were alerted to Gallup's figure by a soon-to-be published paper proposing a federal jobs program (more on that Friday). Why is it higher than U-7?

Partially, it's due to different methods and parameters. For example, our U-7 is based on Bureau of Labor Statistics data. Gallup samples 30,000 individuals per month, while BLS interviews 60,000 households. Gallup neither seasonally adjusts their data nor removes farm payrolls, both of which BLS does for the official unemployment rate.

But Jabobe says Gallup's numbers are more indicative of the true un- and underemployment situations.

"We have modern survey techniques," Jacobe said, such as including cell phone numbers rather than just land lines. "We have the most up to date, modern techniques that exist."

From here on, expect to see Gallup's figures highlighted, along with our own and the government's, each month.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow Paul on Twitter.

Facebook, the world's leading social media service, filed papers with the SEC Wednesday to raise $5 billion and take the company public. Jeffrey Brown discusses its business model, its growth potential and some interesting revelations in the IPO paperwork with Nate Elliott of Forrester Research and Wired magazine's Steven Levy.

JUDY WOODRUFF: Next: putting a value on the social media giant Facebook.

Jeffrey Brown has our story.

JEFFREY BROWN: From its founding in 2004, that recently, Facebook has grown into a worldwide phenomenon, now with more than 800 million users.

It's the place to gather online friends, share your photos, likes and dislikes. It's been seen as a potent tool for democratic change and slammed for making too much of our private lives public.

Now what started as a small social hangout conceived in a Harvard dorm could become one of the largest public offerings of a company in history. Today, Facebook filed papers with the Securities and Exchange Commission to raise some $5 billion and take the company public.

To walk us through all that, we turn to Nate Elliott, principal analyst for interactive marketing at Forrester Research. He joins us from the Nasdaq market site studios in New York. And Steven Levy is a senior writer at Wired magazine.

Steven, I will start with you. Today's filing finally offers a kind of window inside Facebook's business. I know it just came out. You have got just a quick look, but what jumps out at you right away?

STEVEN LEVY, Wired: Well, a couple of things.

The revenues were pretty much in line with what people were thinking. They had somewhere south of $400 million of annual revenues and a profit of $1 billion, which is pretty nice. One thing is that all the money they have is in advertising, except for about 15 percent, and almost all of that is they have a payment system which is dependent on one company, the game company Zynga. And that was kind of interesting there.

The other thing that struck me was the very striking letter from Mark Zuckerberg, the letter to potential investors, where he talked about how the company's mission is more important than making money to him. The money comes -- enabled him of fulfill the mission of putting the world in contact with each other, and doing it by the hacker way, as he describes it. That was pretty interesting.

JEFFREY BROWN: I want to come back to that letter in a moment.

But, first, Nate Elliott, fill in a little bit more of the business model, the advertising. How does Facebook make its money? You look at a moment like this, when everybody is trying to figure out how much it's worth. How does it, to use that ugly word, monetize all this information that it gathers?

NATE ELLIOTT, Forrester Research: Yeah.

Well, what they're doing right now is selling advertisements against the people who visit their website. So, it's what I would call a nice little business. It's a pretty basic revenue model. But they're selling ad badges to advertisers. And the good news for Facebook is they have got 800-plus million people who come to their site every month, 400 million-plus per day.

And so even a nice little business like that across 800 million people turns into several billion dollars in revenues.

JEFFREY BROWN: You say it's a nice little business. So, what -- is there a plan that jumps out now as a way to make it into an even bigger business as a public company?

NATE ELLIOTT: Yeah, I think there are two steps there.

And the first one, Facebook clearly sees, and the second one, we have to hope that they see. The first one -- and they talk about this in the filing today -- is that they know they need to make the ad platform on their own website better. They need to provide more value to the marketers who are spending money on Facebook.com right now.

But, again, that's a revenue model that's been around for a while, selling ads on your own website. And what Facebook needs to do to really transform its business and to become the company it wants to be is find other and better ways to use its data and to transform advertising elsewhere online, to power ad targeting and make advertising more effective, not just on its own website, but on lots of other online properties.

JEFFREY BROWN: Well, Steven Levy, what would you add to that, about how it uses the money that it now raises, that $5 billion? And does that inevitably sort of butt up against a lot of the questions that people have asked about it from the beginning, how it uses information that many people, 800 million people, give it for free?

STEVEN LEVY: That's right.

It really hasn't cracked the problem that Google cracked in its early days, which was a novel way to make money which was really in sync with what the users wanted there. Facebook is unique in that it could really micro-target advertisers -- or customers for advertisers.

If you are living in Memphis, Tenn., and you just got engaged, Facebook knows that, and can sell an ad to the bridal shop in Memphis. And, you know, they also could sell to a broad audience of the 800 million people there.

But what they haven't done is done it in a way where users hunger to see those ads and want to see them. And the one time it tried to go outside of Facebook to the Web for the advertising was when it had a program called Beacon, and that didn't work out too well. So they still have a ways to go there, particularly in the mobile space, which they note in the IPO.

JEFFREY BROWN: Now, Nate Elliott, set up a little bit more of the context here. I know the filing mentions a lot of the potential risks to the company going forward.

It says, for example, that they're fighting off a challenge from Google, which the world watches. It talks about problems in China. It talks about being hounded still by privacy concerns. What -- spell that out a little bit more for us. What kind of risk do they face?

NATE ELLIOTT: Yes. Well, I don't know if they have problems in China, because they're not in China.

(LAUGHTER)

JEFFREY BROWN: Yes, that's what I meant.

NATE ELLIOTT: The problem is, they need to figure out whether they want to be there and find out if there's sort of a halfway solution, where they can operate out of Hong Kong, perhaps, in the way that Google has been doing for the past couple of years.

When you look at their user growth, it's slowed down quite a lot. They announced 800 million users many months ago, and they're only at 800 million and change right now. The good news for them is the users are becoming more and more active.

And daily user growth is outgrowing or outperforming monthly user growth. So they're doing a great job of getting the users who are on the site more actively engaged and coming back more often. But if they want to keep the overall user numbers going up, they need emerging markets.

And they note in the filing that a lot of the growth is coming from markets like India and Brazil. China is the untapped market for them. And we already see millions of people in China using Facebook, even though it's illegal to do so.

And we know if they flip the switch, that there will be many, many millions of people in China who want to use Facebook. So they need to make a decision. Are they willing to play by the Chinese government's rules in order to take advantage of potentially hundreds of millions of new users in that market?

JEFFREY BROWN: Now, Steven Levy, come back to that letter from Mark Zuckerberg, and a lot of language that I saw about the mission. It says it wasn't originally built as a company, but -- quote -- "built to accomplish a social mission, to make the world more open and connected."

We saw this with Google with its famous model, do no evil. Is there a point where these companies, the idealism, original idealism kind of runs up against, well, the demands of the marketplace and shareholders?

STEVEN LEVY: Right.

Well, that's a definite danger of any company as it get bigger there. And do I think that -- before we jump to the cynical side and point fingers at Zuckerberg and Facebook, we are on the cusp of something different here. This social networking -- and Facebook is the flagship of that -- has changed our world.

And that's really where it's positioning itself -- and Zuckerberg is very explicit about this -- in the center, of changing the way we communicate with each other, changing the way we communicate with our governments -- he says that in the IPO -- and doing it in this idealistic, hackerish way, and hacker not in the break-in sense, but in the best sense, like I wrote in a book 27 years ago.

And I think that there's something to that, that it has changed it. And before we start pointing fingers and saying, oh, my God, you've turned your back on that, you're violating our privacy, it is something that could be of benefit to people there.

So I think, on their IPO, at least, we shouldn't stomp on them.

JEFFREY BROWN: All right. We'll watch what happens. This takes place over the next few months.

Steven Levy, Nate Elliott, thanks so much.

NATE ELLIOTT: Thank you.

STEVEN LEVY: Thank you.

President Obama called the housing crisis "massive in size and scope" Wednesday as he described his latest proposal that would let homeowners with private mortgages refinance into government-backed loans. Judy Woodruff discusses the $5 billion to $10 billion plan with Secretary of Housing and Urban Development Shaun Donovan.

JUDY WOODRUFF: Next, President Obama lays out a new plan for tackling the housing crisis, but will it be more successful than prior efforts?

The president had only to cross the Potomac River to Falls Church, Va., to find plenty of foreclosures.

PRESIDENT BARACK OBAMA: This housing crisis struck right at the heart of what it means to be middle class in America: our homes.

JUDY WOODRUFF: In fact, he said the crisis remains massive in size and scope, and he described his latest attempt to attack the problem, first by letting homeowners with private mortgages refinance into government-backed loans at record-low interest rates, even if they owe more than the home is worth.

The administration says the plan could help 3.5 million borrowers and save families about $3,000 a year. It would cost $5 billion to $10 billion, paid for by a fee on big banks. The president also called for a homeowners bill of rights and a program to rent out foreclosed properties.

Congress has already balked at the bank tax idea, but Mr. Obama insisted it's time to try again.

BARACK OBAMA: It is wrong for anybody to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom.

REP. JOHN BOEHNER, R-Ohio: Morning, everyone.

JUDY WOODRUFF: At the Capitol, Republican House Speaker John Boehner dismissed the proposals.

REP. JOHN BOEHNER: None of these programs have worked, and I don't know why anyone would think that this next idea is going to work. And all they've done is delay the clearing of the market. The sooner the market clears and we understand where the prices really are will be the most important thing we can do in order to improve home values around the country.

JUDY WOODRUFF: An existing program already allows those with government-backed mortgages to secure lower interest rates.

About one million homeowners have used it, but President Obama conceded today that is well short of the goal of four million to five million.

For a closer look at the president's plan, we turn to Shaun Donovan, secretary of housing and urban development.

I spoke with him a short time ago.

Secretary Shaun Donovan, thank you very much for talking with us.

HOUSING AND URBAN DEVELOPMENT SECRETARY SHAUN DONOVAN: Great to be with you, Judy.

JUDY WOODRUFF: Now, we just heard Speaker John Boehner say that none of the administration's housing help plans in the past have had, in his words, any effect. The president himself acknowledged today they haven't had the effect that he had hoped.

What gives you hope this one's going to be any different?

SHAUN DONOVAN: Well, first of all, Speaker Boehner should talk to the million families that have been able to refinance their mortgages to record-low interest rates, even though they're underwater, or the five million families who have been able to stay in their homes thanks to modifications.

The number of people falling into foreclosure today is down by about half since when the president took office. So we have made progress, but as the president said, and as I think you just recognized, we need to do more, and we need to go farther.

Specifically today, this proposal to expand the number of families that can refinance their mortgages, even though they're underwater, this is something we know can work because it is working for Fannie Mae and Freddie Mac borrowers.

Last fall, the president asked us to expand the number of folks that we could reach by knocking down a bunch of the barriers that we'd found in the private market to refinancing. We did that. We brought together the private sector and others. And we were able to change things, like getting those who hold second mortgages that were standing in the way to reduce those, knocking down fees for appraisals and other things.

And that had bipartisan support. Sen. Boxer and Sen. Isakson put a bill together to support what we were doing. And we've seen broad support across the political spectrum from economists who say broader refinancing is one of the most important things that we can do, not just to help homeowners -- it's an average of $3,000 a year that they would save -- but also to boost consumer spending.

That's like a major tax cut, and it keeps going on every year that that family is paying the mortgage. So these are important steps that have broad support to move forward.

JUDY WOODRUFF: But the principal part of what you're talking about is making people with -- letting people with privately held mortgages get government-backed mortgage assistance.

Even your supporters are saying that is not going to pass the Congress. It was certainly the implication of what the speaker and other Republicans are saying. So what are homeowners to believe?

SHAUN DONOVAN: Well, Judy, let's let folks look at the proposal and evaluate it.

And, again, the idea that somebody who's done all the right things, a family that's paid their mortgage, despite the fact that they're underwater, for years through this crisis, the idea that they couldn't benefit from record-low interest rates today is inherently unfair.

And we have made these changes. They have been broadly supported for families that have Fannie Mae and Freddie Mac or FHA mortgages. We ought to do the same thing as a simple matter of fairness for others who haven't. And I think when folks in Congress take a look at this, they will support it, as have a broad range of economists across the board, who believe this is one of the most important steps that we can take for the housing market and for the economy more broadly.

JUDY WOODRUFF: Mr. Secretary, what do you say to the argument from not only the speaker, but other Republicans, including those running for president, that in the -- when it comes to the housing crisis in this country, the market ought to be allowed, in essence, to just bottom out, and find out what the prices truly are of these housing properties?

SHAUN DONOVAN: Well, Judy, let's be clear about what that means.

If you have a family whose entire net worth is tied up in their home, who is going to be able to start a small business because of the equity they had in their home or send their kids to college, bottoming out means telling those families they can't send their kids to college, they can't start that business.

It's a little bit like saying, well, if you have got a fire in somebody's house, you ought to let nature run its course, even if that means burning down the whole neighborhood. And if you're a family where you have done everything right, you have paid your mortgage, and just because a foreclosure sign goes up next door, your own home loses $10,000 in value, it doesn't make a lot of sense to me or the president to say to that family, oh, well, let nature take its course.

This is something we can make a difference on, we have made a difference on. And I will tell you, the president and I are not going to sit by and sit on our hands while we let those families, middle-class families who have done the right thing, suffer. This is a very clear divide between us, and I think it's a very simple one for the American people to understand.

JUDY WOODRUFF: On the other hand, many of your supporters ask even up until today, why didn't the administration push the banks, the lenders, the institutions that hold these mortgages harder earlier on to work with homeowners?

There is still lingering criticism of the administration that you didn't push the banks when there was more clout, frankly, to get them to do something.

SHAUN DONOVAN: Judy, two things I would say to that. One is, on the refinancing program that we put out, we immediately took steps to make it available, and what we found over time is that there were a series of barriers in the market that stood in the way.

And those were things that we couldn't just force the banks to do. We had to sit down and really work through the issues, things like, well, how could we create a mechanism so that second liens would be re-subordinated? Was there a new technology that we could use to do automated appraisals?

Those are things that we have done that have allowed us to open up refinancing to many more people, and those weren't things that were simply a question of pushing. It was a question of sitting down, working collaboratively, and making it happen.

On the other hand, there are examples where we do have to push the banks much harder, and I would use as an example the work that we have been doing with 50 state attorneys general around the country on the foreclosure abuses that we saw, just horrendous problems with foreclosing on families while they were trying to get help, robo-signing of documents.

That's an area where we are holding the institutions accountable with tens of billions of dollars of penalties and also help directly to homeowners that is mandatory. It's not something that the banks will choose to sign up for. It's something that's mandatory as a result of our coordinated enforcement actions with states and with the federal government.

JUDY WOODRUFF: Secretary Shaun Donovan, thank you very much for talking with us.

SHAUN DONOVAN: Great to be with you, Judy.

NewsHour image by Vanessa Dennis. Sources: State Department, USAID.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here's Wednesdays query:

John E. Tucker asks: Could reducing U.S foreign aid be used to help the Department of Defense reduce military spending?

Paul Solman Thanks for the question, John. Recently, an educated friend brought up this same shibboleth. In fact, foreign aid represents, by the most generous estimate, about 1 percent of the U.S. budget. And by the way, much of it is defense spending: it's simply for the direct defense of countries other than the United States. For example, we give more than $1 billion a year in "foreign aid" to the Egyptian military.

By contrast, official U.S. defense spending amounts to nearly 20 percent of the U.S. budget. Reducing foreign aid even to the vanishing point, in other words, wouldn't go very far in reducing military spending.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow Paul on Twitter.

A new Standard & Poor's Case-Shiller Home Price Index showed U.S. home prices fell for a third straight month in two Florida cities, Miami and Tampa. Jeffrey Brown discusses the housing market's role this election season with The Wall Street Journal's Arian Campo-Flores and Jed Kolko of the real estate website Trulia.

JUDY WOODRUFF: Now, we look at one of the major economic problems on the minds of voters this year, including in Florida: housing.

Jeffrey Brown has the story.

JEFFREY BROWN: Florida may be known as the Sunshine State, but like much of the country, conditions remain poor when it comes to the housing market.

A national report out today, the so-called Case-Shiller index, shows U.S. home prices fell for a third straight month in major metropolitan markets, including Miami and Tampa. In Florida, home values have dropped by 40 percent or more in some areas since the housing bust. Nationwide, prices have dropped by more than a third.

And the foreclosure crisis continues, with nearly 2.7 million foreclosure filings last year. Several states have been particularly hard-hit, including California, Nevada, Arizona, and indeed the site of today's primary election, Florida.

Some voters in Tampa today said they wanted the candidates to offer more solutions to the problem.

SHARRY STEINER, Florida voter: I'm not thrilled with the reactions from them talking about it. I think they have kind of just gone past it. I really don't think they want to talk about it.

JEFFREY BROWN: A map from the NewsHour's Vote 2012 Center helps tell the story.

The Tampa area is one of nearly 30 counties in the state where foreclosure rates have risen substantially, in some cases even doubling, tripling or quadrupling since 2007. The darker the color, the worse shape the county is in.

To date, Republican presidential candidates have largely avoided spelling out specific policies on housing, mainly arguing that fixing the broader economy is the most logical solution. In October, Mitt Romney said in an interview in Las Vegas that it was best to -- quote -- "let the foreclosure process run its course and hit the bottom." More recently, in Florida, he's talked generally about taking measures to turn around the problem.

Most of the focus of the last week, though, has been on the government-owned mortgage giants, Fannie Mae and Freddie Mac. At last week's debate in Jacksonville, Romney took aim at Newt Gingrich's consultancy work with Freddie Mac.

MITT ROMNEY (R): He should have stood up and said, look, these things are a disaster; this is a crisis. He should have been anxiously telling the American people that these entities were causing a housing bubble that would cause a collapse that we've seen here in Florida and around the country.

JEFFREY BROWN: Gingrich attacked Romney in return.

NEWT GINGRICH (R): Gov, Romney owns shares of both Fannie Mae and Freddie Mac. Governor Romney made a million dollars off of selling some of that. Governor Romney owns share -- has an investment in Goldman Sachs, which is today foreclosing on Floridians.

JEFFREY BROWN: In that same debate, Texas Representative Ron Paul and former Senator Rick Santorum both said Fannie and Freddie should be phased out.

For his part, the president used his State of the Union address to call for new legislation aimed at helping those unable to make their mortgage payments.

PRESIDENT BARACK OBAMA: Responsible homeowners shouldn't have to sit and wait for the housing market to hit bottom to get some relief. And that's why I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates.

JEFFREY BROWN: The president's principal program for working with lenders to reduce foreclosures has far helped more than 900,000 homeowners get a permanent modification on their mortgage. But that's far short of the original goals of the program. Tomorrow, the president is expected to spell out further details of his newest plan.

More now on housing and the campaign from Jed Kolko, chief economist with Trulia, an online residential real estate site that provides information for buyers, sellers, renters, and agents. And Arian Campo-Flores is a reporter for The Wall Street Journal who's been reporting on housing in Florida. He joins us from Miami.

Jed Kolko, before we get to Florida and the campaign, fill in the national picture for us a bit. What do today's numbers tell us?

JED KOLKO, Chief Economist, Trulia: The housing market is still struggling in most parts of the country, even though we have seen some good news in the past few months. Both sales and construction appear to be picking up a bit, but home prices are still falling, not as much as they did at the worst part of the housing bust, but they are still falling.

And a lot of people have wondered, how can that be? We thought that, if you fixed the economy, the housing market would follow. And we've seen employment growing each month for more than the last year. But the problem is, even with more jobs and growing housing demand, there is so much inventory, so much supply, so many vacancies that's hanging over the housing market that makes it hard for prices to rise.

You may have more people who are demanding housing and are looking to buy, but there are so many homes that are available and could come to market if prices started to rise, that there's nothing to push prices upward until we get rid of some of this inventory.

JEFFREY BROWN: All right, so, Arian Campo-Flores, take us -- that national picture and translate it to what you've been seeing in counties in Florida. What do you -- tell us -- give us a little flavor of the current state of the market there.

ARIAN CAMPO-FLORES, The Wall Street Journal: Yeah.

Well, I spent some time reporting in Volusia County, which is in Central Florida at the eastern end of the I-4 Corridor. The western part of that county in particular, cities like Deltona, De Bary and DeLand, have been especially hard-hit. The prices there have come down 54 percent from their peak.

I saw blocks with four or five, six homes that were in foreclosure, "for sale" signs all over the place. And it has -- I spoke to a lot of people who either faced foreclosure or went through it. And they just uniformly describe this incredibly excruciating, maddening process that takes years of negotiating with banks and, in the course, ruins their credit, and just -- it creates immense frustration.

And I also spoke to those who were their neighbors and feel trapped in their homes because they have seen the property values plummet in their areas, and they just don't really have a way out.

JEFFREY BROWN: So -- just to stay with you, so there you were all week while the campaign was going on. How did this issue play out? What did people tell you they wanted from the candidates, and what were they hearing from the candidates?

ARIAN CAMPO-FLORES: Well, what they said they want is more help for homeowners who are underwater.

They -- folks want the principals on their loans to be written down. They would like these refinancing programs and loan modification programs to reach them. You know, there are -- figures were cited earlier that the administration has put out -- and it's true -- in fact, you know, more than 900,000 people have had permanent modifications.

But none of the people that I spoke to had been able to benefit from any of those programs. And so there's this sense that those -- you know, folks in Washington who have put forth solutions, those have not worked thus far. And what they're hearing so far from the candidates on the campaign trail, on the GOP side are a lot of generalities, but no specific proposals that, you know, would suggest a way out.

JEFFREY BROWN: Well, Jed Kolko, what would you add to that? I mean, it sort of presents an interesting dilemma for some of the Republican candidates, because, for the most part, on economic issues, they're pushing for free market policies. How does that translate into the particulars of the housing market?

JED KOLKO: I think the Republican candidates are in a tough position when it comes to housing policy.

When it comes to voters, housing really is a bipartisan issue. We at Trulia did a survey of consumers, and we found that even a majority of Republicans want the government to support homeownership. And they're actually in favor of most of the types of proposals that are on the table.

The problem for the candidates, though, is almost any policy that you might come up with, such as refinancing, or reducing principal, loan modification, will either cost somebody some money -- and that somebody is probably going to be the government or the banks, or both -- and it's very hard to separate people who are underwater or might lose their homes and it's entirely not their fault from people who might have taken risks or made bad decisions that maybe they shouldn't be bailed out for.

Democrats are a lot more willing to accept that some people who may be less deserving could be helped than Republicans are. And Republicans are a lot less willing to burden either the government or banks with more money. So, it means that even though Republican voters want to hear from their candidates some kinds of policies that might help the housing market, Republican candidates face these land mines of the challenge of spending more money and the reluctance among lots of Republicans to help undeserving homeowners.

JEFFREY BROWN: Of course, at the same time, Jed Kolko, the Obama administration, with a more interventionist approach, is still finding this a very tough nut to crack, right? It's still a big problem.

JED KOLKO: That's right.

What Obama proposed in the State of the Union address probably needs congressional approval. And we know how that usually goes. But another irony of the whole debate over housing policy is that some of the most innovative and daring ideas have actually come from advisers and economists and other policy wonks who traditionally advise Republicans.

So the ideas are there. It's just that -- current politics that make it hard for the government to spend money. And to have to deal with this question of separating the deserving from the undeserving homeowners make it very hard for Republican candidates to talk about these policies in the campaign.

JEFFREY BROWN: Arian Campo-Flores, bringing it back to Florida, I'm just wondering if you see any bright spots there. Florida still being a very desirable destination for so many people around the country, is there some hope of more people coming in, picking up some of these houses? Are there some signs that people point to?

ARIAN CAMPO-FLORES: There are some.

I mean, you know, in the Miami area, for instance, there's been a lot of international buyers that have come in that are scooping up properties that were -- and all these condominiums that were overbuilt during the boom period, and paying all cash. And so they're starting to eat up some of that inventory.

In Volusia County, where I spent time reporting, you're seeing, again, people taking advantage of the really low prices, buying up properties that they're then renting out or using them sort of as investments. So that is starting to happen and it is helping.

I spoke to the property appraiser in Volusia County, who felt that the market was probably pretty much at the bottom. But there is just still so much inventory left, that it's just going to take a long time for that to really have a noticeable impact in these neighborhoods.

JEFFREY BROWN: Jed Kolko, just 30 seconds or so here, but does that fit into the national -- any part of the national picture?

JED KOLKO: Yes.

On Trulia, we see many more people from outside of Florida searching for homes in Florida than people in Florida looking to leave. Florida's long been the retirement community for so much of the U.S., and baby boomers will still be retiring. And now that homes are more affordable in Florida, some of those baby boomers who thought they'd have to look for cheaper locations in the South can now consider Florida again for their retirement.

JEFFREY BROWN: All right, Jed Kolko, Arian Campo-Flores, thank you both very much.

ARIAN CAMPO-FLORES: My pleasure.

As European Union member states attempt to tackle their financial woes with a fiscal discipline deal, Gwen Ifill discusses the details with Margaret Warner, reporting from Stuttgart, Germany.

GWEN IFILL: Next tonight, as European leaders attempt to tackle their fiscal woes, Margaret Warner is examining repercussions on the ground.

Tonight, she reports from Stuttgart, Germany. I spoke with her a short time ago.

So, Margaret, you were in Belgium for us last night. Tonight, you're in Germany meeting with those -- or covering the meeting of those European leaders. What did they agree to in the end?

MARGARET WARNER: Gwen, the one concrete thing they did agree to was a new kind of budgetary or fiscal pact, they're calling it. Some call it a treaty -- 25 of the 27 members of the European Union agreed in principle to this.

And the idea is that they're going to have a tighter mechanism to ensure fiscal discipline on its member countries and punish those in some fashion who don't meet their obligations. So, as Angela Merkel, the chancellor of Germany, explained it to us last night, it sounded very tough, that if any country exceeds more than half-a-percentage of GDP in an annual deficit, it can be referred by the European Commission to some sort of European court of justice, and some automatic fines will go into effect.

But, today, as people have looked at it more closely, there are a lot of caveats. One is, it's not clear really how airtight this mechanism is. The actual language hasn't been written -- or finalized -- and won't be signed until March. And, secondly, even though these E.U. leaders, most of them, agreed to it last night, even if most of them come back in March and sign it, it has to be ratified by at least 12 E.U. member parliaments.

So, there's a lot to be done between what happened last night and this coming into effect.

GWEN IFILL: So, Angela Merkel, as you mentioned, was the driving force behind this agreement. And you're now in Germany tonight. How is it being received away from these inner sanctums where the leaders meet?

MARGARET WARNER: Gwen, we came here to Germany and we're going to Italy next week to try to see, understand why this euro crisis is so hard to resolve.

And we got a flavor of that today. First of all, the opposition parties, all the opposition parties immediately were critical saying, as they have throughout this crisis, that she's trying to drive Europe into the kind of austerity measures that will just starve Europe of growth.

However, then we went down. We were actually south of Stuttgart going to this very, very productive manufacturing area. And the few kind of ordinary Germans we talked to, they liked her tough talk, because she is expressing their values, German values, which is you don't take on debt you can't pay.

So, for instance, we were at this factory that makes gigantic tunnel-boring equipment. And I was talking to the work site manager, a man with a 10th grade education. And he said -- he was pointing to this big piece of machinery they were about to ship to Spain. And he said, the euro has been very good for us. But he said, Greece, that's a problem.

And I said, do you think that Germany, as the wealthiest country in the E.U., and other wealthy countries really just need to put in more money and rescue these countries that are having a hard time? And he said no. Then he said, but what can we do? He said, if we don't and if Greece goes, as he said, meaning default, he said, then will Spain and Portugal fall?

And so he got the whole connection. And he said that would be very bad for us. He said, we in Europe need to have a strong, united Europe to compete against the United States, he said, and China. And he said, so we really can't afford to have the euro come apart.

But he did say about Merkel, he said he liked the way she talked. And he said, I think that the other leaders respect her. And her personal popularity ratings are in fact off the charts, higher than her party's.

GWEN IFILL: And, finally, Margaret, one of the -- you mentioned the big elephant in the room is Greece and who's going to be able to fix that or turn that around, which wasn't resolved in Brussels. But I wonder whether it even matters, because there have been rules in place against what happens in Greece, saying that the debt limit has to be enforced, but nobody has ever done anything about those rules in the past.

MARGARET WARNER: That's right, Gwen. As one commentator said to me tonight, one noted television commentator, Claus Kleber here in Germany, he said, you know, it is really hard for Germans to believe that this time they really mean it.

Some of the same budget limits that were in -- that are in this new compact were in the original Maastricht Treaty. And as he said, those were violated early and regularly by many countries, he said, including Germany.

GWEN IFILL: Well, Margaret, safe travels to you, and thank you for your reports.

MARGARET WARNER: Thanks, Gwen.

In other news Tuesday, the death toll neared 60 in a sub-zero cold wave across Central and Eastern Europe as temperatures dropped to -17 degrees Fahrenheit in some places. Also, the Food and Drug Administration approved a drug called Kalydeco for use by 1,200 patients with a rare form of cystic fibrosis.

KWAME HOLMAN: The latest estimate of the federal deficit puts it at $1.1 trillion for this fiscal year. The Congressional Budget Office released the new number today. It's less than last year's deficit of $1.33 trillion, but up from an estimate last summer.

Republicans, such as Senate Minority Leader Mitch McConnell, said it's more evidence the president's policies have failed.

SEN. MITCH MCCONNELL, R-Ky.: CBO has indicated that we will run a trillion-dollar, at least, deficit again, making it every single year of this administration we have had at least a trillion-dollar-a-year deficit. It's important to remember the president got everything he wanted the first two years. We're living in the Obama economy.

KWAME HOLMAN: At the White House, spokesman Jay Carney argued the president has done his part to cut spending. He said the real problem is the other side steadfastly rules out tax hikes.

JAY CARNEY, White House press secretary: What has been lacking thus far is any willingness to deal with revenue in any meaningful way by the Republicans. And that is just not the approach that the broad base of the American public feels is the right way to go.

KWAME HOLMAN: The Congressional Budget Office study said, if the Bush era tax cuts were allowed to lapse, the deficits would drop sharply.

Consumer confidence fell in January, after two months of gains. The Conference Board, a business research group, blamed worries about higher gasoline prices and overall business conditions. That was enough to slow Wall Street some. The Dow Jones industrial average lost more than 20 points to close below 12,633. The Nasdaq rose about two points to close above 2,813. Overall, the Dow and the S&P 500 had their best January in 15 years. The Nasdaq was up by the most in 11 years.

The president moved to revive a small business tax break plan today. He said he wants Congress to eliminate capital gains taxes for investments in small businesses and to grant deductions that help smaller firms grow.

At a Cabinet meeting, Mr. Obama said it was a priority for him, and one Democrats and Republicans have endorsed.

PRESIDENT BARACK OBAMA: My expectation and hope is, is that they will get a bill together quickly, that they will pass it and get it on my desk. I will sign it right away. And I would like to see that bill signed this year.

KWAME HOLMAN: The small business ideas are part of the president's budget package, to be unveiled next month.

The death toll neared 60 today in a subzero cold wave across Central and Eastern Europe. Temperatures plunged to minus-17 degrees Fahrenheit in some places. Ukraine was among the hardest hit. Heating centers inside tents were set up across Kiev for homeless people. The number of people being treated for frostbite also was on the rise. In Poland, five people died of hypothermia in the last 24 hours alone.

For the first time, Americans who suffer from cystic fibrosis will have access to a drug that treats the root cause. The Food and Drug Administration approved Kalydeco today for use by 1,200 patients with a rare form of the disease. In all, about 30,000 Americans have cystic fibrosis. It causes mucus buildup in the lungs and other organs and generally causes death by young adulthood.

Those are some of the day's major stories.

Photo by Ethan Miller/Getty Images.

By Paul Solman and Elizabeth Shell

The monthly housing data released Tuesday by Standard and Poor's Case-Shiller Index came with sparse good news. Home prices have declined yet again, continuing their wobbly down-up-down decline after the market bubble burst in 2006. Of the 20 metropolitan areas the Index watches, the composite was down nearly 0.7 percent from October and down 3.7 percent from November 2010.

"The bell has not yet tolled for a sign that the market is recovering," Susan Wachter, professor of real estate and finance at University of Pennsylvania's Wharton School, told us. "And it is not surprising. We're seeing a continuation of a downward trend."

Exploring our interactive below, you can see how prices have changed since 2000 in these 20 metro areas, and that overall, prices are back to their mid-2003 levels.

The Case-Shiller Index is based on a value of 100 in January 2000; in other words, an index of 150 means a home's value is 50 percent greater than in January 2000.

Oh, and the good news, relatively speaking -- Detroit and Washington, D.C.'s prices are up compared to November of last year. But if you live outside the Beltway or Motown, what does all this mean? Why are housing prices so low?

The key, according to Wachter, is unemployment. That's important when we look at being able to pay for a place to live, especially a home of one's own. New households form when people separate from family living arrangements -- when children move out and buy a house, for example. But if unemployment stays high, those kids that can't find jobs might be sticking around with their parents longer, and Wachter says not a lot of new households will form.

"We have households forming at historic lows," she said. "This is reflective of people doubling up because they can't afford to go off and form their own households."

But there are other factors at play. Even though, given the so-called fundamentals, this should be a buyer's market, psychology is key. So while mortgage interest rates are literally at an all-time low, housing prices are back in line with income levels and the gap between the cost of owning vs. renting has closed substantially in many areas, there's still a general lack of confidence.

"Buyers who are on the sidelines are concerned about the market, and understandably so," Wachter added. "They're concerned their $20,000 down payment could be lost" if prices continue to fall.

Prices not adjusted for inflation.

Further fueling the fear is a huge inventory of homes plus a glut of potential houses coming on the market from foreclosures, distressed sales and the like -- a "shadow" inventory. Wachter says these factors might cause prices to overshoot the fundamentals again, as they did during the real estate boom, but this time, overshoot on the downside.

Which might be all very well and good for the potential buyer -- she's acting rationally. Why buy a house now and potentially lose money if you think you can get a better deal in a few months? But her rational behavior feeds a negative feedback loop. "I'll wait for a better, lower price," she thinks, betting prices will continue to drop. Her not buying keeps prices low and causes others to not buy as they see no one's buying.

According Wachter, the loop has been looping for some time.

"What's really indicative is that we're down year over year. We're seeing the air continue to slowly hiss out of the housing balloon after it popped."

For housing, at least, today's numbers suggest we have further to wait for the hissing to stop, the balloon to finish deflating.

Interactives by Justin Myers.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow Paul on Twitter.

Margaret Warner speaks with Jeffrey Brown from the European Union summit in Brussels, where there's a new emphasis on the need for growth, not just austerity measures, to keep the continent from facing another recession.

JEFFREY BROWN: I talked with Margaret a short time ago after she filed that report.

Margaret, the pattern we have watched has been an agreement and a sigh of relief followed by a new realization of just how bad things are. So, where are we now? What kind of urgency do you sense at this meeting?

MARGARET WARNER: Well, there's a great sense of urgency at this meeting.

The European leaders know that, as you said, they seem to try to solve this crisis at every summit, and the markets don't see it that way. Credit ratings not only of the countries really in trouble, but most European countries, have been steadily knocked downward.

And what's worse -- which costs them more to borrow -- and then what's worse is that in this year-and-a-half of budget cuts and tax hikes, that growth has really slowed dramatically, from about 2 percent Europe-wide in 2010 to a percentage-and-a-half last year, projected to only be half-a-percent next year. So they know something has to be done.

JEFFREY BROWN: And as you said in your report, Greece, which we have talked about so many times on the program and seemed to be some resolution, well, it's still there right in the midst of all the problems, right?

MARGARET WARNER: Right, Jeff.

I mean, one, these negotiations with the private creditors are grinding on. But the deeper thing that's in the air here is this mistrust of the Greek government's ability and commitment to actually carry out reforms. There's a so-called troika down there observing what Greece is doing now from the European Central Bank, the E.U., and the IMF.

And what they are finding, I'm told, is that even the reforms they do are really more sleight of hand. One example. They're supposed to cut their state work force. Well, the people they let go were all within a year of retirement and about to go on generous pensions. And that's apparently quite typical.

The sense here is that the other political parties are biding their time until the next election. They're not really letting anything happen. And I just came from a press conference by Angela Merkel, the German chancellor, who said all the political parties have to do their part and all these countries -- I mean, everybody in Greece has to live up to these promises.

But there was a story floated in The Financial Times last Friday that Germany was circulating a document to make Greece have to agree to have some sort of E.U. super commissioner who could veto its budget decisions as a price for getting the next bailout fund. And one Western diplomat to me, you know, the days of Greeks promising to reform and us promising to believe them is over.

JEFFREY BROWN: Now, austerity, of course, is still the name of the game.

But you're -- you're sensing a new emphasis on and a new awareness of the need for growth. Tell us what you're hearing. Tell us what they're talking about there.

MARGARET WARNER: Well, the Europeans realize that it's not only that they can't -- if they don't start growing, they can never cut their way out of debt.

But as one diplomat said to me here, we hear in the U.S. and elsewhere in the world this sense that Europeans are so obsessed with austerity that they're about to use, austerity measures are going to kill the patient. So they wanted to send a signal really to the world and to investors that they're taking growth seriously.

That said, some of the measures they talked about today and that they are going to sign off -- that they signed off on to use some existing funds within the European Union to help apprentice programs get going or help small- and medium-sized businesses, they're not insignificant, but they aren't, as I said in my piece, really going to have -- be able to jump-start economic growth.

JEFFREY BROWN: And in the meantime, Margaret, this still unresolved question -- and this goes back to where we started of the urgency here -- the unresolved question of the overall size of the bailout, of any bailout.

MARGARET WARNER: Absolutely, Jeff.

And this was actually a huge issue, really erupted at the Davos World Economic forum last week, where really the international community ganged up on Germany over this. Everybody from the French and British finance ministers, to Christine Lagarde, head of the IMF, to Timothy Geithner, the U.S. treasury secretary, all said, the firewall which -- as they call it, this sort of bailout fund that's supposed to signal to the world that you can go after Italy and Spain all you want, we're going to protect them, we're going to stand behind them, it's currently set at about 550 billion euros, that that needs to increase at least up to 750 billion.

But, Germany, which, of course, has most of the money, is resisting. And Angela Merkel last week in Davos and her finance minister made clear they think if the bailout fund is bigger, then it removes the incentive for the debtor countries to really do the tough stuff.

So, that was sidestepped here today. And it will go back to their finance ministers, but that has not really come to terms with. I have to say, too, that Merkel is reflecting her own population, her own public. There was a poll last week by a major German network said that only -- three-quarters of Germans do not want the bailout fund increased.

JEFFREY BROWN: Well, Margaret, of course, it's an E.U. meeting, but it's much watched here in Washington and beyond because of the stakes for the U.S. and the global economy.

MARGARET WARNER: Absolutely, Jeff. Think of it this way. The E.U. is the United States' greatest trading partner. A quarter of all U.S. exports go to the E.U.

And so if the E.U. slips into recession, it stops buying goods, the U.S. is going to have a very hard time boosting its own economic growth.

JEFFREY BROWN: All right, Margaret Warner in Brussels, thanks so much.

MARGARET WARNER: Thanks, Jeff.

In their 17th meeting in two years, leaders of 27 member states of the European Union reconvened in hopes of taming an economic crisis that threatens to entangle the continent in another recession. Margaret Warner reports from Belgium's capital on disagreement over austerity measures, both on the street and in the summit.

JEFFREY BROWN: And now to Europe, where, on the streets and in a high-level summit, there's pushback against the bite of austerity measures.

Margaret Warner reports from Brussels.

MARGARET WARNER: It's their 17th meeting in two years, trying to tame an economic crisis that threatens to ensnare Europe in another recession.

Leaders of the 27 E.U. member states arrived in a Belgian capital nearly paralyzed by a general strike. The union-led protests targeted austerity measures in Belgium and elsewhere in Europe, like raising taxes and retirement ages and slashing government spending to reduce deficits and crushing debt.

But now, with unemployment rates rising and growth rates declining in many countries, E.U. leaders are reaching beyond the idea that austerity alone is the answer. Today's summit credo instead was jobs and growth.

British Prime Minister David Cameron instituted a cuts-only agenda at home, but the British economy has been reeling.

DAVID CAMERON, British prime minister: We need to get really serious about the growth agenda in Europe. That means completing the single market. It means signing trade deals with the fastest-growing parts of the world. And it means a serious effort at deregulation, particularly for small businesses, so they can create the jobs and the growth that we need.

MARGARET WARNER: Which may be easier said than done.

With large debt loads in many countries, the economic arsenals available to European nations are severely depleted. And many of the measures discussed today, like funding apprenticeships and training for unemployed youth, would do little to improve growth in the short term.

At the same time, austerity remained part of the picture. The leaders today signed off on a fiscal pact first outlined in December that would impose much stricter budget discipline and potential sanctions on those who sign up. Today, all 17 Eurozone countries did and eight of the 10 outside the common currency.

There was no action on the euro nation in most serious jeopardy, Greece. It remains in talks to restructure its private debt, a precondition to get the next installment of E.U. bailout funds. And doubts about the Greek effort to reform had some leaders echoing a mandate from another era of summits -- trust, but verify.

FREDRIK REINFELDT, Swedish prime minister: They're not delivering on their own promises when it comes to reforms. We're all in this together, but we need to ensure that we all do what we promise others.

MARGARET WARNER: What also wasn't agreed today was increasing the size of the European-backed bailout fund for countries that do get in trouble. But that is sure to be on the agenda at the next E.U. summit in March.

Photo by Chip Somodevilla/Getty Images.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here is Friday's query:

William Carr: I discovered your page following a reference from the show. You're just the man I've been looking for. Question: If the stimulus program of 2009 was included in the federal budget and the budget was not subsequently reduced, did we in effect get an equivalent stimulus program, or more, in 2010 and 2011?

Paul Solman: I am happy to be your man, if only for the duration of answering your question.

If you count all federal spending as "stimulus," then by definition the answer is yes, assuming that when you write a "budget not subsequently reduced," you're taking inflation into account. "Real" -- which is to say, inflation-adjusted -- spending is the only real way to compare one year's numbers to another's.

But if you mean something a tad more nuanced -- or should I say more accurate -- then no, absolutely not. Are you suggesting that were we to spend more on defense, in real dollars, that should count as "stimulus"? A rise in the number of retirees hitting Medicare? What about built-in raises to federal employees? What about a rise in interest payments on our federal debt as we borrow more money to balance our budget? We could, in short, wind up spending a lot more money without it being in any way categorizable as "stimulus" spending.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow Paul on Twitter.

Image by Yagi Studio/Getty Images.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here is Monday's query:

Doug Clymer asks: What is the benefit -- if any -- of our free trade agreements? We seem to have lost jobs and industries while our balance of trade remains negative. Meanwhile, other countries are gaming the system to our detriment.

Paul Solman: As I periodically ask in response to questions like yours, Doug, what's the alternative to more rather than less "free" trade? Higher prices on imports, plus protection (from international competition) of U.S. companies. Think those are good ideas in the long run? Likely to maintain our international competitiveness? Adam Smith explained the benefits of borderless trade 236 years ago: we get richer by competing with each other through specialization, because specializing enables us to produce more with less. I.e., we get better at producing what others will buy. The greater the number of competitors, the more specialization, the more innovation, the more technological progress and thus the better we get. The more any country limits that competition, the less specialization in that country and thus in the world overall. Therefore, the less for everyone in the long run and especially for the country setting the limits.

True, there are now legitimate concerns about the ultimate effects of what Smith so devoutly wished for back when: more and more growth, at a sometimes blistering pace. And granted, no one in America lives anywhere nearly as desperately as some Chinese did back then.

"In all great towns," Smith wrote in his 'Inquiry into the Nature and Causes of the Wealth of Nations,' Chinese children "are every night exposed in the street, or drowned like puppies in the water" for lack of food. And he quotes a French travel book on China in which Christian missionary nuns are described as 'baptizing' newborn Chinese girls and "by this means these sad victims of family indigence find eternal life in these same waters in which their short life is snatched from them." Baptizing the babies to death, in other words, so they wouldn't starve.

So granted, the global economy is a whole lot richer today. But do you really want a future in which the rest of the world keeps growing while the U.S. falls behind?

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow Paul on Twitter.

Paul Solman frequently answers questions from the NewsHour audience on business and economic news on his Making Sen$e page. Here's Monday's query:

Doug Clymer asks: What is the benefit -- if any -- of our free trade agreements? We seem to have lost jobs and industries while our balance of trade remains negative. Meanwhile, other countries are gaming the system to our detriment.

Paul Solman: As I periodically ask in response to questions like yours, Doug, what's the alternative to more rather than less "free" trade? Higher prices on imports, plus protection (from international competition) of U.S. companies. Think those are good ideas in the long run? Likely to maintain our international competitiveness? Adam Smith explained the benefits of borderless trade 236 years ago: we get richer by competing with each other through specialization, because specializing enables us to produce more with less. I.e., we get better at producing what others will buy. The greater the number of competitors, the more specialization, the more innovation, the more technological progress and thus the better we get. The more any country limits that competition, the less specialization in that country and thus in the world overall. Therefor, the less for everyone in the long run and especially for the country setting the limits.

True, there are now legitimate concerns about the ultimate effects of what Smith so devoutly wished for back when: more and more growth, at a sometimes blistering pace. And granted, no one in America lives anywhere nearly as desperately as some Chinese did back then.

"In all great towns," Smith wrote in his 'Inquiry into the Nature and Causes of the Wealth of Nations,' Chinese children "are every night exposed in the street, or drowned like puppies in the water" for lack of food. And he quotes a French travel book on China in which Christian missionary nuns are described as 'baptizing' newborn Chinese girls and "by this means these sad victims of family indigence find eternal life in these same waters in which their short life is snatched from them." Baptizing the babies to death, in other words, so they wouldn't starve.

So granted, the global economy is a whole lot richer today. But do you really want a future in which the rest of the world keeps growing while the U.S. falls behind?

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions. Follow Paul on Twitter.