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JEFFREY BROWN: 2012 ended with another month of steady, but unspectacular job growth. That was the main takeaway from today's numbers out of the Labor Department.

The weeks of will they or won't they go over the fiscal cliff in Washington had raised fears that businesses would cut back hiring. Instead, the December jobs report suggests that neither employers nor job seekers were rattled, but that there had also been no big pickup in job growth. The U.S. economy added 155,000 jobs, slightly down from November, but in line with analyst expectations.

Overall, an average of 153,000 jobs were added each month in 2012, roughly the same pace as the year before. And in a sign of growing confidence, more people entered the job market last month.

JEFF MACKE, Yahoo! Finance: One hundred and eighty-two thousand Americans got into the labor force. That means that they went out there looking for jobs. That means people are getting more optimistic out in the streets.

JEFFREY BROWN: One area where that optimism was justified is construction. It added 30,000 jobs, the best performance in 15 months. Much of that was due to reconstruction from Hurricane Sandy.

Other bright spots were health care, which added another 55,000 workers, restaurants and bars, which gained 38,000 more employees, and manufacturing, with 25,000 new positions.

Alan Krueger is chairman of the president's Council of Economic Advisers.

ALAN KRUEGER, White House Council of Economic Advisers: I think we're seeing the job market is continuing to heal. The economy's continuing to heal from the very deep damage that was caused by the financial crisis.

JEFFREY BROWN: Even so, there were also indications of continued sluggishness in December. The unemployment rate was 7.8 percent. That's up a 10th from the initial reading in November, which was revised upward today. And the number of unemployed rose 164,000 to 12.2 million.

That number rises to nearly 23 million once part-time workers and those who've given up looking for work are added in. Most economists expect modest growth, but little overall improvement this year, as the pace of job growth remains too low to make much of a dent in the unemployment rate.

And we get an economic snapshot of different regions of the country from three public broadcasting reporters. Erik Anderson is a business reporter and anchor on KPBS in San Diego, Calif. Cathy Lewis is an anchor and host of her own show, "HearSay" on WHRO in Norfolk, Va. And Stan Jastrzebski is news director for WFIU in Bloomington, Ind.

Well, Erik Anderson, let's start out West with you. Do the new numbers jibe with what you are seeing in your area and in California, steady but not spectacular hiring?

ERIK ANDERSON, KPBS Public Radio: That's exactly right.

California has been tracking in that steady way. We have been seeing growth for now probably the past 18 months or so. But it hasn't been that spectacular growth. It's not that recovery growth. A lot of economists here are talking about how the economy is showing good, healthy signs and the job market is reflecting that. But it's not showing the kind of signs you need for the economy to recover completely.

So we're not quite at a complete recovery, but certainly the job market is picking up here.

JEFFREY BROWN: Any particular sectors that you would look at or point to?

ERIK ANDERSON: Yes, there are a couple out here, in fact.

Leisure and hospitality industry gained significantly, about 62,000 jobs there. Construction picked up here, not because of Hurricane Sandy on the West Coast. That's mostly I think due to the optimism in the business arena and the rebound in some of the housing market. And also the information industry has picked up about 26,000 jobs here.

JEFFREY BROWN: Stan Jastrzebski in Bloomington, what do you see in your area?

STAN JASTRZEBSKI, WFIU: Well, I think in Bloomington and Indiana generally, what we may be seeing is sort of a delayed reaction.

I have talked to some economists who say that maybe business owners were a little late to pick up on, for instance, how bad the fiscal cliff could be for them.

And so there's a little bit of worry, I think, still here. And the state is kind of now getting to the point where people are beginning to figure out what the fiscal cliff negotiations meant for them.

And so the state's manufacturing sector, for instance, had been growing at three times the national rate. And now I guess we will kind of watch and see where it goes going forward, especially in such a manufacturing-heavy state as this.

JEFFREY BROWN: Well, so how has that affected manufacturing and other sectors? Or you are saying it is more of a wait-and-see at this moment?

STAN JASTRZEBSKI: That's exactly right. Wait and see is probably a very good way to put it.

The slowdown has been felt here in Indiana and as in California. It's been slow and steady. But now here in Indiana, we need to see going into the first couple of months of 2013 where the numbers go from here. I think this is kind of potentially a little bit of a tipping point. And could we -- if we continue on in the way we have been going, then I think we will have gotten past the worries of the cliff, but I think that is still a little too soon to tell.

JEFFREY BROWN: Cathy Lewis, we have talked to you in the past, a really military area in Norfolk. But give us a sense of overview of what you are seeing.

CATHY LEWIS, WHRO: Sure.

Well, while Stan suggests that there is a little worry in Indiana, I can tell you there is a lot of worry here. That is especially true because the Hampton Roads region has rested comfortably between the state's unemployment rate and the national unemployment rate. But that could change pretty quickly here as a result of the delay of sequestration now to March 27.

In fact, just today one of the state's leading economists, Christine Chmura, told the Virginia Chamber of Commerce that the state will definitely move into recession if sequestration occurs on March 27 and that that will particularly be felt in the Northern Virginia region, the Washington suburbs, and right here in Hampton Roads, which has the largest military concentration in the country.

JEFFREY BROWN: Well, Cathy, give us a little bit more of the other industries. I don't know if you can set aside all this sequestration and uncertainty over that. But where had things been headed in the past couple of months?

CATHY LEWIS: I think things had been holding pretty steady in the region.

This particular conversation about the degree of dependence this community has on defense has really brought into -- has been brought into sharp relief in these last couple of months.

And I think there is a growing sense of awareness on the leaders here in this region. That the fact that one of every two dollars in the economy comes from defense is a challenging place to be on the brink of what may happen on March 27.

I talked with a CEO that today who told me that the fact of the matter is they are at what they are calling a nervous parade rest. There's very great concern because, as the year moves on, if the fiscal -- if the sequestration comes through, there will be a shorter period of time, and so the cuts will be bigger and more painful.

JEFFREY BROWN: Erik Anderson in San Diego, what does your -- I mean, we hear so much about this uncertainty of the economy and then uncertainty based on what is going on here in Washington.

What is your sense of how that plays out in the economy there?

ERIK ANDERSON: Well, just like in Virginia, there is a keen awareness about the uncertainty over federal funding here.

Sequestration hits the active-duty military personnel that are stationed in San Diego, big naval installations here, Marine installations. It hits the defense contractors that are centered here in San Diego.

A lot of research and development goes on in this area and in the Los Angeles area. And it also hits the researchers who are working in life sciences who rely on federal funding for their research dollars as well.

So there's a lot of concern because it reaches a lot of areas that really buoyed the area up during the economic downturn, that kept that economic downturn from being as severe, which was the military and life sciences.

JEFFREY BROWN: So, your sense is people were watching carefully the fiscal cliff doings, and even more so now. We have been talking about on the program that this is going to continue for months.

ERIK ANDERSON: Yes, they're -- it's really kind of seen as more of a swerve, instead of careening over this fiscal cliff.

People realize that, you know, that the vehicle is still moving, and there is still the potential to have a serious impact in jobs and in dollars that come in and out of the San Diego economy. And so that has them worried as well.

JEFFREY BROWN: Stan Jastrzebski, I wonder, also thinking about what is going on in Washington, and that would be the Federal Reserve, which has kept interest rates at close to zero for quite a long time now.

Can you tell whether that's having some impact in terms of businesses willing to invest or consumers willing to borrow?

STAN JASTRZEBSKI: I think one of the consumer markets might be the housing sector, which has been particularly positive in Indianapolis and in Indiana in general.

New housing starts for all of 2012 were up in Indiana. So people seem to be ready to take out those loans, ready to get new houses built.

But now we're hearing from mayors around the state who say that there is the opposite problem, where, even though the state's got a $2 billion surplus, we're looking at assessed values of homes going down.

And so the consumers who are buying the houses that are new are not the same, obviously, as the people who have the homes and are seeing those home values go down. And, as those home values go down, of course so does property tax revenue.

And so you have kind of a two-sided argument here. People are willing to invest themselves, but, when they invest, they're worried, I think, that their investment is going to potentially lose value over time more quickly than it might otherwise.

JEFFREY BROWN: Cathy Lewis, what about that, the interest rates and the housing sector in particular?

CATHY LEWIS: You know, it's an interesting time here, because the prices are starting to come up a little bit. We are starting to see some more sales activity.

But you have a lot of people who are sort of stuck for the moment. Their houses are -- they owe more than their houses are worth. This frequently happens with military families who have been transferred out of the area. So you have a lot of folks who have been in that situation, who are renting homes and can't afford necessarily to buy somewhere else.

But things are moving. And the real estate community is saying the prices are starting to come up, and they're feeling more optimistic.

JEFFREY BROWN: Well, since we're at the beginning of the year, Cathy, let me just ask you what -- first -- what are you looking for? I mean, what is -- it sounds as though the most important things for your area is what happens here in Washington.

CATHY LEWIS: Boy, is there no question about that. All eyes are on March 27. I have to be honest and say I'm not hearing much enthusiasm about the prospects of coming up with a deal that will do away with the sequestration. There's great concern about that, because if managers are required to find this-year dollars, about the only place they can do that is personnel and maintenance contracts, service contracts, that sort of thing.

So that means you're going to have -- be hitting buildings and grounds folks, personnel. They're the very real prospect of furloughs and layoffs. You might have less steaming time, less aircraft hours. So there are a lot of small and midsized contractors that serve the defense industry who are very, very anxious.

And I'm talking to folks who are saying they're anxious because the federal folks who are usually buying their services are sitting on the fence for the moment and won't do anything until after March 27.

JEFFREY BROWN: And, Erik Anderson, just a brief last word from you. What are you look -- what are you most focused on for 2013?

ERIK ANDERSON: Well, if you take the sequestration out of the equation and you look just at the economy as it is now, I think what economists here are saying is most hopeful is the rebounding of the housing industry out here.

They're starting to see some activity in terms of prices. The shadow inventory of distressed housing has shrunken quite a bit. There are still a lot of people who are underwater on their mortgages. But, overall, the supply is tight. There's buyer interest, and there's hope that it will become an engine again for the region.

JEFFREY BROWN: All right, Erik Anderson, Stan Jastrzebski and Cathy Lewis, thank you, all three.

CATHY LEWIS: Thank you.

STAN JASTRZEBSKI: Thank you.

JUDY WOODRUFF: Online, find our monthly unemployment calculations on our Making Sense page, where we also look back at a year of labor data.

This post, then, begins with Larry's bitter denunciation of the fiscal cliff deal and ends with a sparring match in which I question his argument, he questions my questions, etc. Let's begin with the denunciation:

Larry Kotlikoff: The "grand" bargain forged by Congress and the Administration to keep us from falling off the so-called fiscal cliff -- a conveniently manufactured crisis if ever there was one -- represents the latest victory in the war on our children.

Although the budget fight has been posed as one between the rich and the poor, this has been a sideshow to divert attention from the real fight - the fight between the old and the young. In this fight, both Republicans and Democrats are on the same side, joining forces, as they have for decades, to gang up on our kids.

According to the Congressional Budget Office's most recent long-term projection, there is a $222 trillion present value gap separating all projected future expenditures and all projected future taxes. Eliminating this gap requires cutting spending or raising taxes to the tune of 12 percent of GDP this year and every year in the future.

In terms of greenbacks, that's $2 trillion this year, $2 trillion times 1.05 (the sum of the inflation rate plus growth rate) next year, $2 trillion times 1.05 squared in 2015, etc.

Over the next decade, these adjustments, which are essential to remove the fiscal sword of Damocles suspended over our children's slender necks, total $25 trillion. Yet the tax changes just enacted raise only $600 billion over this period!

Furthermore, Congress and the Administration will likely take steps to permanently reduce the automatic spending cuts that are now scheduled to kick in. Indeed, the midnight fiscal "rescue" includes a two-month postponement of these cuts. If that happens, the 10-year savings will be even smaller.

The intergenerational blinders with which Washington is choosing to operate are as thick as they get. The fiscal gap -- the standard measure economists use to analyze fiscal sustainability and intergenerational equity -- is just one of many inconvenient truths Washington is ignoring. Here are some more.

Generational policy is a zero-sum game. Waiting to get our fiscal house in order lets more current generations off the hook and puts our kids further on the hook.

The $222-trillion fiscal gap is, in effect, our nation's credit card bill. If we don't pay at least interest on it, it gets bigger.

The $222-trillion fiscal gap grew by $11 trillion over the last year, an amount that equals the size of all the official debt in the hands of the public.

Washington's artful "accounting" has put only $11 trillion of our nation's fiscal gap on the books and kept $211 trillion, represented primarily by entitlement obligations, off the books. Yes, entitlement commitments aren't legal obligations, but try telling that to an 80-year old collecting "her" benefits.

When the 78 million baby boomers are fully retired they will collect, on average, $40,000 measured in today's dollars, in Social Security, Medicare, and Medicaid benefits. This bill will total over $3 trillion per year.

Expenditures on Social Security, Medicare, and Medicaid, measured as a share of GDP, grew 20 percent over the past four years. And the baby boomers are just starting to retire.

Entitlement spending is not the only problem. We are spending more on our military than the next 10 countries combined and still hear calls for more.

Our six-decade long policy of take-as-you-go -- letting each older generation take from the young while promising the young their own turn, when old, to expropriate their children -- has financed a fantastic spending spree by oldsters? This spending has driven our national saving rate from 14 percent in the fifties to 1 percent now.

Countries that don't save, don't invest. Our country is now investing a paltry 5 percent of its national income (down from 14 percent in the fifties), with 4 of those 5 percentage points representing investment not by Americans, but foreigners?

Our sustained low rate of domestic investment has had its own generational impact. Real weekly take-home pay per worker hasn't risen for decades?

Countries that get overcommitted resort to printing money. And the Federal Reserve has been printing money at mind-boggling rates to pay Uncle Sam's bills. Twelve cents of every dollar spent these days is simply printed, either physically or electronically. The monetary base, which measures all the money the government has ever printed, has grown $2 trillion -- by a factor of 3.5 -- since 2007. This has set the stage for a more than tripling of the price level.

Maybe no one in Washington knows these things. Or maybe the war on our children is being waged on purpose? Maybe America's oldsters, who do a lot of the voting, don't care about America's youngsters for a reason. Maybe they don't see them as their children. Maybe they see them as someone else's children and ripe for the picking.

Whatever the reason for our immoral generational policy, there is one thing everyone should know. We are on a course of fiscal and economic ruin, which will destroy not only our children's futures, but ours as well.

Larry Kotlikoff of Boston University is a noted economist, prolific author and frequent contributor to Bloomberg and Forbes.com, among other venues.

Paul Solman: Larry advanced a draft of the above to friends for comment. I responded with the questions which he then parried, below. If I knew anything about fencing, it might be appropriate to say that I riposted, he counter-riposted -- and maybe one of us scored a palpable hit -- or maybe not. You be the judge.

Anyway, here's what I wrote as a response, conjuring up ten possible mitigating factors to Larry's doomsday scenario and asking one final question. Our exchange is included after each.

Editor's note: Here is Paul's excerpted correspondence with Larry:

I was reading one Ed Dolan, quoting one L. Randall Wray: "Wray compares the discussion of unstable debt dynamics to speculation about what would happen to a person who constantly consumes more calories than he burns. Mathematically, such a person would eventually 'explode,' yet we have never seen an exploding person. Something else always happens first."

Imagine many if not all of the following things "happening first," though in no particular order:

1) The Social Security age is again, as in '83, extended, as suggested by Bowles-Simpson;

LK: Very small potatoes.

PS: Depends on how much, when.

LK: Yes, but they will phase in any such age increase and it won't matter much in present value. SS is in worse shape -- scaled by the economy -- then in 1983. So '83 is not a good reference for you to use.

2) The payroll tax ceiling is lifted to again encompass 90 percent of national income (also in Bowles-Simpson);

LK: Very small potatoes.

PS: Sounds like Glenn Hubbard,* who told me that Bush tax cuts didn't matter because they only represented 10 percent of future liabilities.

LK: Glenn speaks with forked tongue. This might save $5 trillion in present value. We need $222 trillion.

3) The chained Consumer Price Index adjustment is made, lowering the Social Security inflation adjustment;

LK: Very small potatoes.

PS: Every little bit helps.

LK: Yes.

4) All Social Security benefits are fully taxed;

LK: Very small potatoes.

PS: See, 3, above.

LK: Yes.

5) Gradually, Medicare (and Medicaid) payments become more and more limited with regard to new procedures and medications;

LK: My Purple Health Plan, in effect,. You support vouchers. Good to hear. Yes, big potatoes if done right.

PS: Color me purple if you wish, but do not take this as support for vouchers. I simply think we'll stop paying for fancy stuff. See 6, below.

LK: You support vouchers, just not the use of the word. [Larry was a mule in a former reincarnation.]

6) Gradually, America moves toward single-payer economies of scale, thus lowering health care administrative and marketing costs;

LK: Very small potatoes.

PS: Not by my reckoning. I've done a lot of reading on this. Estimates vary enormously, but given that the US per capita health bill is double that of other OECD countries, I think a 25% reduction isn't outlandish. Small potatoes? Stupendous spuds, I'd say.

LK: I think it's 20 percent and, yes, I was off. This is big spuds. I agree.

7) Taxes are raised further on higher incomes;

LK: Pretty small potatoes.

PS: Let me amend this one: "Taxes are raised on all incomes above the median, in a variety of subtle ways."

LK: [No answer.]

8) Spending cuts are enacted;

LK: Not big enough by a mile.

PS: Depends on the size of the cuts.

LK: Was thinking about the cuts now going into effect.

More significantly [I concluded]:

9) The U.S. inflation rate continues to outpace the cost of borrowing money -- at the moment, 1.8 percent per year versus .17 percent per year;

LK: Can't help much. Most liabilities are inflation indexed. Eventually we get hyperinflation.

PS: 1.8 percent per year is hyperinflation?

LK: Eventually is not right now. Patience, my boy.

10) GDP continues to grow (nominally) faster than the cost of borrowing money;

LK: It's not the explicit debt. It's the implicit debt that's the problem.

PS: But we would then have more to spend on future liabilities.

LK: The liabilities are explicitly indexed to real growth in wages in the case of SS and implicitly in the case of Medicare and Medicaid and the Health Exchanges. And don't forget defense. Soldiers' salaries are connected to real wages in the economy.

Final question: Have no steps been taken? Does this deal preclude all others?

LK: This deal is a cop out, plain and simple. To think they will raise taxes even more or cut spending for real, when they are now postponing the minor spending cuts is something only a true optimist of your ilk could conceive. No offense. I find your delusions a powerful antidote to reality.

PS: And I find your forecasting confidence, if not delusional, then at the very least presumptuous.

*Glenn Hubbard is the Dean of the Columbia Business School. He served as the head of President George W. Bush's Council of Economic Advisors.

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

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Paul Solman: "Ask Larry" Kotlikoff is a hot commodity here on Making Sense, not only as our (and your) Social Security sherpa, but as a sometime commentator on economics, which is how he's known to the rest of the world, especially for his writing on what he has called "the coming generational storm." Though a member of Ronald Reagan's Council of Economic Advisors early in his career, Larry eludes political categorization. I try to elude it as well. I am not sold by his "War on Our Children" argument. Neither, however, do I think it ridiculous.

This post, then, begins with Larry's bitter denunciation of the fiscal cliff deal and ends with a sparring match in which I question his argument, he questions my questions, etc. Let's begin with the denunciation:

Larry Kotlikoff: The "grand" bargain forged by Congress and the Administration to keep us from falling off the so-called fiscal cliff -- a conveniently manufactured crisis if ever there was one -- represents the latest victory in the war on our children.

Although the budget fight has been posed as one between the rich and the poor, this has been a sideshow to divert attention from the real fight - the fight between the old and the young. In this fight, both Republicans and Democrats are on the same side, joining forces, as they have for decades, to gang up on our kids.

According to the Congressional Budget Office's most recent long-term projection, there is a $222 trillion present value gap separating all projected future expenditures and all projected future taxes. Eliminating this gap requires cutting spending or raising taxes to the tune of 12 percent of GDP this year and every year in the future.

In terms of greenbacks, that's $2 trillion this year, $2 trillion times 1.05 (the sum of the inflation rate plus growth rate) next year, $2 trillion times 1.05 squared in 2015, etc.

Over the next decade, these adjustments, which are essential to remove the fiscal sword of Damocles suspended over our children's slender necks, total $25 trillion. Yet the tax changes just enacted raise only $600 billion over this period!

Furthermore, Congress and the Administration will likely take steps to permanently reduce the automatic spending cuts that are now scheduled to kick in. Indeed, the midnight fiscal "rescue" includes a two-month postponement of these cuts. If that happens, the 10-year savings will be even smaller.

The intergenerational blinders with which Washington is choosing to operate are as thick as they get. The fiscal gap -- the standard measure economists use to analyze fiscal sustainability and intergenerational equity -- is just one of many inconvenient truths Washington is ignoring. Here are some more.

Generational policy is a zero-sum game. Waiting to get our fiscal house in order lets more current generations off the hook and puts our kids further on the hook.

The $222-trillion fiscal gap is, in effect, our nation's credit card bill. If we don't pay at least interest on it, it gets bigger.

The $222-trillion fiscal gap grew by $11 trillion over the last year, an amount that equals the size of all the official debt in the hands of the public.

Washington's artful "accounting" has put only $11 trillion of our nation's fiscal gap on the books and kept $211 trillion, represented primarily by entitlement obligations, off the books. Yes, entitlement commitments aren't legal obligations, but try telling that to an 80-year old collecting "her" benefits.

When the 78 million baby boomers are fully retired they will collect, on average, $40,000 measured in today's dollars, in Social Security, Medicare, and Medicaid benefits. This bill will total over $3 trillion per year.

Expenditures on Social Security, Medicare, and Medicaid, measured as a share of GDP, grew 20 percent over the past four years. And the baby boomers are just starting to retire.

Entitlement spending is not the only problem. We are spending more on our military than the next 10 countries combined and still hear calls for more.

Our six-decade long policy of take-as-you-go -- letting each older generation take from the young while promising the young their own turn, when old, to expropriate their children -- has financed a fantastic spending spree by oldsters? This spending has driven our national saving rate from 14 percent in the fifties to 1 percent now.

Countries that don't save, don't invest. Our country is now investing a paltry 5 percent of its national income (down from 14 percent in the fifties), with 4 of those 5 percentage points representing investment not by Americans, but foreigners?

Our sustained low rate of domestic investment has had its own generational impact. Real weekly take-home pay per worker hasn't risen for decades?

Countries that get overcommitted resort to printing money. And the Federal Reserve has been printing money at mind-boggling rates to pay Uncle Sam's bills. Twelve cents of every dollar spent these days is simply printed, either physically or electronically. The monetary base, which measures all the money the government has ever printed, has grown $2 trillion -- by a factor of 3.5 -- since 2007. This has set the stage for a more than tripling of the price level.

Maybe no one in Washington knows these things. Or maybe the war on our children is being waged on purpose? Maybe America's oldsters, who do a lot of the voting, don't care about America's youngsters for a reason. Maybe they don't see them as their children. Maybe they see them as someone else's children and ripe for the picking.

Whatever the reason for our immoral generational policy, there is one thing everyone should know. We are on a course of fiscal and economic ruin, which will destroy not only our children's futures, but ours as well.

Larry Kotlikoff of Boston University is a noted economist, prolific author and frequent contributor to Bloomberg and Forbes.com, among other venues.

Paul Solman: Larry advanced a draft of the above to friends for comment. I responded with the questions which he then parried, below. If I knew anything about fencing, it might be appropriate to say that I riposted, he counter-riposted -- and maybe one of us scored a palpable hit -- or maybe not. You be the judge.

Anyway, here's what I wrote as a response, conjuring up ten possible mitigating factors to Larry's doomsday scenario and asking one final question. Our exchange is included after each.

Editor's note: Here is Paul's excerpted correspondence with Larry:

I was reading one Ed Dolan, quoting one L. Randall Wray: "Wray compares the discussion of unstable debt dynamics to speculation about what would happen to a person who constantly consumes more calories than he burns. Mathematically, such a person would eventually 'explode,' yet we have never seen an exploding person. Something else always happens first."

Imagine many if not all of the following things "happening first," though in no particular order:

1) The Social Security age is again, as in '83, extended, as suggested by Bowles-Simpson;

LK: Very small potatoes.

PS: Depends on how much, when.

LK: Yes, but they will phase in any such age increase and it won't matter much in present value. SS is in worse shape -- scaled by the economy -- then in 1983. So '83 is not a good reference for you to use.

2) The payroll tax ceiling is lifted to again encompass 90 percent of national income (also in Bowles-Simpson);

LK: Very small potatoes.

PS: Sounds like Glenn Hubbard,* who told me that Bush tax cuts didn't matter because they only represented 10 percent of future liabilities.

LK: Glenn speaks with forked tongue. This might save $5 trillion in present value. We need $222 trillion.

3) The chained Consumer Price Index adjustment is made, lowering the Social Security inflation adjustment;

LK: Very small potatoes.

PS: Every little bit helps.

LK: Yes.

4) All Social Security benefits are fully taxed;

LK: Very small potatoes.

PS: See, 3, above.

LK: Yes.

5) Gradually, Medicare (and Medicaid) payments become more and more limited with regard to new procedures and medications;

LK: My Purple Health Plan, in effect,. You support vouchers. Good to hear. Yes, big potatoes if done right.

PS: Color me purple if you wish, but do not take this as support for vouchers. I simply think we'll stop paying for fancy stuff. See 6, below.

LK: You support vouchers, just not the use of the word. [Larry was a mule in a former reincarnation.]

6) Gradually, America moves toward single-payer economies of scale, thus lowering health care administrative and marketing costs;

LK: Very small potatoes.

PS: Not by my reckoning. I've done a lot of reading on this. Estimates vary enormously, but given that the US per capita health bill is double that of other OECD countries, I think a 25 precent reduction isn't outlandish. Small potatoes? Stupendous spuds, I'd say.

LK: I think it's 20 percent and, yes, I was off. This is big spuds. I agree.

7) Taxes are raised further on higher incomes;

LK: Pretty small potatoes.

PS: Let me amend this one: "Taxes are raised on all incomes above the median, in a variety of subtle ways."

LK: [No answer.]

8) Spending cuts are enacted;

LK: Not big enough by a mile.

PS: Depends on the size of the cuts.

LK: Was thinking about the cuts now going into effect.

More significantly [I concluded]:

9) The U.S. inflation rate continues to outpace the cost of borrowing money -- at the moment, 1.8 percent per year versus .17 percent per year;

LK: Can't help much. Most liabilities are inflation indexed. Eventually we get hyperinflation.

PS: 1.8 percent per year is hyperinflation?

LK: Eventually is not right now. Patience, my boy.

10) GDP continues to grow (nominally) faster than the cost of borrowing money;

LK: It's not the explicit debt. It's the implicit debt that's the problem.

PS: But we would then have more to spend on future liabilities.

LK: The liabilities are explicitly indexed to real growth in wages in the case of SS and implicitly in the case of Medicare and Medicaid and the Health Exchanges. And don't forget defense. Soldiers' salaries are connected to real wages in the economy.

Final question: Have no steps been taken? Does this deal preclude all others?

LK: This deal is a cop out, plain and simple. To think they will raise taxes even more or cut spending for real, when they are now postponing the minor spending cuts is something only a true optimist of your ilk could conceive. No offense. I find your delusions a powerful antidote to reality.

PS: And I find your forecasting confidence, if not delusional, then at the very least presumptuous.

*Glenn Hubbard is the Dean of the Columbia Business School. He served as the head of President George W. Bush's Council of Economic Advisors.

You can see the changes were mostly in step with each other, but that U-7 is consistently higher, usually more than double, the official release. As we explain here each month, our gauge includes those who work part-time for economic reasons (they need a full time job but have to settle) and those the government no longer includes in looking for work. For a quick view on a particular month's unemployment rate, mouse over the chart lines.

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A job seeker looks over material during a HIREvent job fair in San Jose, Calif. Photo by David Paul Morris/Bloomberg via Getty Images.

Nothing dramatic on the jobs front this month. December's unemployment rate held steady at 7.8 percent. The U.S. added 155,000 new jobs during the month, bringing the grand total of net new jobs for 2012 to more than 1.8 million.

The U-7 figure, our all-inclusive measure of the un- and underemployed, dropped from 16.60 to 16.50 percent. The short story seems to be: a couple of hundred thousand more Americans in the workforce; a couple of hundred thousand more with jobs.

Here's the view from elsewhere:

From the Wall Street Journal's Eric Morath and Jeffrey Sparshott: "U.S. job growth slowed slightly in December, showing that the economy muddled along as Congress fought over tax increases and spending cuts. U.S. nonfarm payrolls increased by a seasonally adjusted 155,000 jobs last month, the Labor Department said Friday. The unemployment rate, obtained by a separate survey of U.S. households, was 7.8 percent, the same as the prior month, after an upward revision to the November figure. Both readings were slightly worse than expected. Economists surveyed by Dow Jones Newswires expected a gain of 160,000 jobs and a 7.7 percent unemployment rate."

At the New York Times, Catherine Rampell writes:

"Despite their concerns about looming tax increases and government spending cuts, American employers added 155,000 jobs in December, about apace with job growth over the last year, the Labor Department reported on Friday.

The biggest gains were in health care, food services, construction and manufacturing, with the latter two probably helped by rebuilding after Hurricane Sandy. Government payrolls fell modestly once again, the report said."

London's Financial Times headlined "US Adds 155,000 Jobs in December" and called it "a sign that the economy shrugged off concerns about the fiscal cliff and continued to grow at a modest pace."

From Bloomberg:

"Employers added workers in December at about the same pace as the prior month, and the unemployment rate matched a four-year low, showing sustained gains in the U.S. labor market even as lawmakers were struggling to reach a budget deal."

And finally, here's a link to the monthly "Jobs Byte" post from economist Dean Baker,. Baker follows these data as closely as anyone I know and has helped me make sense of them in the past. His bottom line?

"There is little in this report to suggest any divergence from the modest growth path that the economy has been following the last two years. The 155,000 pace of job growth is consistent with a declining unemployment rate, but will not return us to full employment until the next decade."

By Jonathan Masters, online writer/editor for the Council on Foreign Relations

Introduction

The U.S. Treasury has borrowed trillions of dollars over the past decade, much of it from foreign investors, to help finance two long wars, rescue its financial system, and promote economic growth via fiscal stimulus.

The country's ability to borrow is restricted by statute, and Congress has perennially been called upon to authorize the issuance of new debt space. However, the federal government reached its borrowing capacity of $16.39 trillion in December 2012, and, in the absence of new borrowing authority from Congress, Treasury is taking extraordinary measures to meet its financial obligations.

The United States has always been able to raise its debt limit in a timely fashion, and many economists assert that a failure to do so in early 2013 would plunge the government into default and precipitate an acute fiscal crisis.

What Is the U.S. Federal Debt Limit?

The government must be able to issue new debt as long as it continues to run a budget deficit. The debt limit, or "ceiling," sets the maximum amount of outstanding federal debt the U.S. government can incur by law. As of January 2012, this number stands at $16.39 trillion. Increasing the debt limit does not enlarge the nation's financial commitments, but allows the government to fund obligations already legislated by Congress.

Hitting the debt ceiling would hamstring the government's ability to finance its operations, like providing for the national defense or funding entitlements such as Medicare or Social Security. Under normal circumstances, the government is able to auction off new debt (typically in the form of U.S. Treasury securities) in order to finance annual deficits. However, the debt limit places an absolute cap on this borrowing, requiring congressional approval for any increase (or decrease) from this statutory level.

A debt limit was instituted with the Second Liberty Bond Act of 1917, and Congress has raised the cap more than seventy times since 1962. Some analysts contend that by requiring legislative consent, the debt limit affords Congress some oversight authority and engenders some fiscal accountability. Historically, opposition parties have often used debt-limit negotiations to protest existing policies.

How Was the Limit Last Raised?

The debt ceiling was last raised as part of the Budget Control Act of 2011, a bill signed by President Obama in August of that year, just hours before a government default. The last-minute legislative compromise set forth a process by which Treasury's borrowing capacity would be increased by a total of $2.1 trillion in three increments: by $400 billion in August 2011, $500 billion in September, and $1.2 trillion in January 2012.

The deal also placed caps on all discretionary spending through FY 2021 and created an ill-fated bipartisan group of lawmakers known as the "supercommittee" tasked with identifying more than a trillion dollars in additional reductions. However, Congress failed to achieve the mandated savings and triggered automatic budget cuts at the end of 2012. A last-minute budget deal reached by Congress in January 2013 delayed the onset these cuts for two months.

When Will the U.S. Hit Its Debt Ceiling?

The federal government reached its capacity to issue debt on Dec. 31, 2012. However, Secretary Timothy Geithner said Treasury will begin taking certain "extraordinary measures" (discussed below) that will create or conserve roughly $200 billion in additional headroom in order to stave off a default for several weeks. "Under normal circumstances," wrote Geithner in a letter to Congress, "the amount of headroom would last approximately two months. However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures."

The Bipartisan Policy Center in Washington, DC, estimates the debt ceiling would have to be raised between $730 billion and $1.25 trillion, in order to extend the government's ability to borrow through 2013. This increase would need to be between $1.3 trillion and $2.2 trillion to extend borrowing through 2014, according to projections.

What Can the Government Do if the Debt Limit Isn't Raised?

The U.S. Treasury has the power take extraordinary measures to forestall a default--the point at which the government fails to meet principal or interest payments on the national debt. These include under-investing in certain government funds, suspending the sales of nonmarketable debt, and trimming or delaying auctions of securities. Congressional delay in raising the debt ceiling forced Treasury to begin taking some of these measures in May 2011 and again in January 2013.

If Congress is does not act to raise the debt limit despite such emergency measures, federal spending would have to plummet or taxes would have to rise significantly (or a combination thereof). However, Geithner has warned in the past that because the government's obligations are so great, "immediate cuts in spending or tax increases cannot make the necessary cash available."

If Treasury is unable to issue new debt or take further actions to bridge the deficit, the government would be forced to default on some of its financial commitments, limiting or delaying payments to creditors, beneficiaries, vendors, and other entities. Among other things, these payments could include military salaries, Social Security and Medicare payments, and unemployment benefits.

What Are the Implications for Financial Markets?

Most economists, including those in the White House and from former administrations, agree that the impact of an outright government default would be severe. Federal Reserve Chairman Ben Bernanke has said a U.S. default could be a "recovery-ending event" that would likely spark another financial crisis. Short of default, officials warn that legislative delays in raising the debt ceiling could also inflict significant harm on the economy.

Many analysts say congressional gridlock over the debt limit will likely sow significant uncertainty in the bond markets and place upward pressure on interest rates. Rate increases would not only hike future borrowing costs of the federal government, but would also raise capital costs for struggling U.S. businesses and cash-strapped homebuyers. In addition, rising rates could divert future taxpayer money away from much-needed federal investments in such areas as infrastructure, education, and health care.

The protracted and politically acrimonious debt limit showdown in the summer 2011 prompted Standard and Poor's to take the unprecedented step of downgrading the U.S. credit rating from its triple-A status, and analysts fear such brinksmanship in early 2013 could bring about similar moves from other rating agencies.

A 2012 study by the non-partisan Government Accountability Office estimated that delays in raising the debt ceiling in 2011 cost taxpayers approximately $1.3 billion for FY 2011. BPC estimated the ten-year costs of the prolonged fight at roughly $19 billion.

The stock market also was thrown into frenzy in the lead-up to and aftermath of the 2011 debt limit debate, with the Dow Jones Industrial Average plunging roughly 2,000 points from the final days of July through the first days of August. Indeed, the Dow recorded one of its worst single-day drops in history on August 8, the day after the S&P downgrade, tumbling 635 points.

Speaking to the Economic Club of New York in November 2012, Fed Chairman Ben Bernanke warned that congressional inaction with regard to the fiscal cliff, the raising of the debt ceiling, and the longer-term budget situation was creating uncertainty that "appears already to be affecting private spending and investment decisions and may be contributing to an increased sense of caution in financial markets, with adverse effects on the economy."

What Are the Implications for the Dollar?

Historically, the U.S. Treasury market has been driven by huge investments from surplus countries like Japan and China, which view the United States as the safest place to store their savings. A 2011 Congressional Research Service report suggests that a loss of confidence in the debt market could prompt foreign creditors to unload large portions of their holdings, thus inducing others to do so, and causing a run on the dollar in international markets. However, others claim that a sudden sell-off would run counter to foreign economic interests, as far as those interests run parallel to a robust U.S. economy.

While many U.S. exporters would benefit from dollar depreciation because it would increase foreign demand for their goods (effectively making them cheaper), the same firms would also bear higher borrowing costs from rising interest rates.

A potential long-term concern of some U.S. officials is that persistent volatility of the dollar will add force to recent calls by the international community for an end to its status as the world's reserve currency. A 2010 survey performed by the McKinsey Global Institute found fewer than 20 percent of business executives surveyed expected the dollar to be the dominant global reserve currency by 2025.

Does a Federal Debt Limit Still Make Good Policy Sense?

Many experts contend the federal debt ceiling is anathema to sound fiscal policy, suggesting it unwise to inhibit the government's ability to meet financial obligations already legislated. "It serves no useful purpose to allow members of Congress to vote for vast cuts in taxation and increases in spending and then tell the Treasury it is not permitted to sell bonds to cover the deficits," writes budget expert Bruce Bartlett. Bartlett has held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Reps. Jack Kemp, R-N.Y., and Ron Paul, R-Texas. "No other nation has such a screwy system," he notes.

A GAO analysis of the 2011 debt ceiling crisis recommended "that Congress should consider ways to better link decisions about the debt limit with decisions about spending and revenue to avoid potential disruptions to the Treasury market and to help inform the fiscal policy debate in a timely way."

In December 2012, the White House proposed amending the law in order to grant the president greater freedom to raise the debt ceiling as needed. Under the proposal rejected by the GOP leadership, the president would have been empowered to effectively raise the limit unilaterally unless a two-thirds majority of Congress voted in opposition.

Chairman of the Senate Republican Policy Committee John Barrosso, R-Wyo., says Congress should not relinquish its control over the issuance of federal debt. "By exercising its constitutional authority through a debt limit, Congress allows itself a moment of reflection to consider the policies that have led to the current debt and consider reforms that will decrease future debt trajectory." He adds that ending the limit "would remove the last action-forcing mechanism to address our nation's runaway debt."

How Does a Debt Limit Crisis Differ From a Government Shutdown?

A shutdown takes place when Congress fails to appropriate funds for the current fiscal year, as last occurred in October 1995. In such a case, a specific set of procedures is enacted. A large portion of the federal government -- work deemed "non-essential" -- is suspended indefinitely and workers are furloughed without pay until funding is reestablished. A shutdown does not impede the government's ability to pay interest or principal on its debt as long as Treasury has appropriate headroom under the ceiling. In other words, a shutdown does not precipitate a federal default.

On the other hand, if Congress fails to raise the debt limit, the government can no longer borrow funds, but federal operations may continue for the period that Treasury is able to use existing revenue or secure additional resources through special measures. Therefore, most employees will continue to be paid, at least in the short term. However, Treasury's continuing inability to borrow further capital would eventually lead to a default, assuming radical revenue increases or spending decreases are not instituted.

Most experts agree that the potential negative consequences of a debt-limit debacle are much greater and far-reaching than that of a shutdown -- particularly given the risk of a government default that would jeopardize the full faith and credit of the United States. The impact of a shutdown, while painful to the workers who are furloughed and the citizens who are temporarily denied certain government services, is limited to the symbolic message of political paralysis it presents to markets.

Suggested Further Reading

The bipartisan Congressional Research Service provides a brief history of the federal debt ceiling, with a special focus on the budget debate over the last decade.

A CFR backgrounder outlines the competing policy paths on fiscal reforms and the global consequences for failing to bring down U.S. debt.

The U.S. Treasury attempts to separate fact from fiction with regard to the debt limit, including dispelling the notion that a federal default would bring consequences no worse than a government shutdown.

This backgrounder was originally published by the Council on Foreign Relations.

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JUDY WOODRUFF: Now: a Massachusetts company that has found the road to profitability lies with an underemployed group of workers.

Economics correspondent Paul Solman reports on this rare hiring policy. It's part of his ongoing reporting Making Sense of financial news.

PAUL SOLMAN: Since losing her husband 16 years ago, retired waitress Rosa Finnegan has been coming to work at Vita Needle in Needham, Mass.

ROSA FINNEGAN, Vita Needle worker: I can still walk up the stairs as long as I have a little support. I don't want to fall backwards.

PAUL SOLMAN: No surprise that, at 100, Rosa is the oldest worker at this needle and tube manufacturer. The next oldest, Bill Ferson, is just 94.

BILL FERSON, Vita Needle worker: I'm in.

So, I go home, I said to my wife, "I think I got a part-time job."

"Oh, good," she said, "get you out of my hair."

(LAUGHTER)

PAUL SOLMAN: In fact, the average age of the workers at Vita Needle is 74.

BILL FERSON: I was only going to come for five or six months, something like that. I have been here 24 years. I'm never going to quit working.

PAUL SOLMAN: Now, the data on American workers over 55 is that they're unemployed far longer than younger ones -- the anecdata, that age discrimination abounds. But age discrimination here means, the older the better.

FRED HARTMAN, Vita Needle president: Attention to detail is excellent, attention to quality, loyalty.

PAUL SOLMAN: There are a host of reasons, says company president Fred Hartman, for employing the elderly.

FRED HARTMAN: Our turnover, believe it or not, is very low. We probably bury more people than have people leave in a given year.

PAUL SOLMAN: Hartman's family has owned Vita Needle for 80 years. But the company he took over in the 1980s was struggling.

FRED HARTMAN: At the time, all we could find was people that had been downsized, laid off, that were senior citizens, and we could only afford part-time help at the time. And so that's who we hired. And then the epiphany and the light bulb went on and said, this is a good arrangement for everybody.

PAUL SOLMAN: Vita Needle says it's earned record profits 18 of the last 20 years, thanks in large part to its geriatric labor force, most of which works part-time for $10 to $20 an hour.

BILL FERSON: Mr. Hartman's been very good to me. How many places would keep a man my age, even hire me?

PAUL SOLMAN: How much do you make?

BILL FERSON: Well, I think that's personal. I will never get rich here. Let me put it that way.

PAUL SOLMAN: Bill Ferson, whose wall art was put up by a former colleague, he says, won't get rich, but he does have total flex time.

Anthropologist CAITRIN LYNCH:

CAITRIN LYNCH, "Retirement on the Line": It's very surprising that a manufacturing facility can be set up in a way that's very flexible. So you will hear from workers here who say, I can have it all. I can have work during my retirement, but I can also clock out at 2:00 and baby-sit.

PAUL SOLMAN: Lynch herself worked here for a summer while researching a book on Vita Needle, "Retirement on the Line."

CAITRIN LYNCH: People will acknowledge that this wouldn't have worked for them at an earlier stage of life, when they had children who they were raising, saving for college, paying off mortgages. It wouldn't have worked then.

PAUL SOLMAN: But it works now. Employees are also cross-trained, so they can pitch in where needed, packing needles with syringes, for example.

This is like a syringe for a cow or something. I mean, that's huge.

ROSA FINNEGAN: Right. Yes. Yes. This isn't huge.

(LAUGHTER)

PAUL SOLMAN: Well, I sure as hell hope nobody is going to put that in me.

ROSA FINNEGAN: You should see the undertaker needles.

(LAUGHTER)

PAUL SOLMAN: The undertaker needles? No, I don't think I want to see them, thank you.

But, at age 100, why not kick back and smell the roses and every other flower in the garden?

ROSA FINNEGAN: Well, I think coming here keeps me going as something to look forward to. And I -- everybody greets each other in the morning, and how did you sleep, and tell each other your aches and pains. And that means a lot.

MAN: Someone landed on him going into the end zone.

PAUL SOLMAN: Break time in what's called the clubhouse, where the guys gather to gab and nosh before it's back to the grind.

MAN: Well, we have got to go make money for Fred.

MAN: Absolutely. Absolutely.

BILL FERSON: My friends are all in the ground. These are all new friends. I got a place to come, people to talk to. I'm not alone, and keep my upstairs going.

PAUL SOLMAN: Do you think that this job really keeps you in mental shape or sharp?

BILL FERSON: Let me put it this way. If it wasn't for this job, I might be six feet under. A lot of people a lot younger than me are in tough shape, I know. I have seen them. I don't want to be like that.

WOMAN: Oh!

MAN: New chairs.

WOMAN: New chairs.

WOMAN: I tried it out. They're going to have to get a different kind of a chair for me.

MAN: Yes.

PAUL SOLMAN: Camaraderie and flexibility are obvious reasons older folks like it here.

WOMAN (singing): They're writing songs of love, but not for me.

(LAUGHTER)

PAUL SOLMAN: But another reason is being of use.

Is work at this age, then, redemptive? Yes, says Caitrin Lynch.

CAITRIN LYNCH: It's through the process of working, through knowing you're doing something productive that's contributing to a very successful business, that people feel like there's still a reason for me to be here, be here in the world, where, in American society, unfortunately, people feel invisible as they get older.

PAUL SOLMAN: And what's it like for a younger worker? Twenty-nine-year-old A.J. Coffey says he appreciates co-workers his grandparents' age.

A.J. COFFEY, Vita Needle worker: They always show up for work. You don't have to worry about, someone called in today, like, kids my age, or younger.

PAUL SOLMAN: The company and its aged artisans have attracted attention near and far. German and Dutch filmmakers made documentaries about it.

WOMAN: Do you have these kind of cards over in Germany?

WOMAN: We do.

WOMAN: Oh, good.

PAUL SOLMAN: Closer to home, Lynch and long-toothed laborers like 83-year-old Joe Reddington give talks on the firm.

CAITRIN LYNCH: Joe...

JOE REDDINGTON, Vita Needle worker: Yes?

CAITRIN LYNCH: ... have you ever heard of the word retirement?

JOE REDDINGTON: I think about it when it gets bright in the morning and I have to get up. I think about it. And then I say, ah, no.

(LAUGHTER)

PAUL SOLMAN: Seventy-six-year-old retired engineer Bob Omara has worked at Vita Needle for 11 years.

BOB OMARA, Vita Needle worker: Retirement isn't death. It shouldn't be anyway. You have got all this investment in people's knowledge. Why throw it away?

PAUL SOLMAN: Some keep working because they don't have a choice.

Seventy-eight-year-old Howard Ring started here six years ago.

HOWARD RING, Vita Needle worker: I was doing it for the money.

PAUL SOLMAN: Ring was laid off from his job as a mechanical engineer and had struggled to find other work.

HOWARD RING: I felt awkward about leaving the house, because I didn't have a job. I was able to work, looking to work, and there was nobody to hire me. So, it was -- I felt sort of ashamed.

PAUL SOLMAN: Most of Vita Needle's press has been positive, though some wonder if the company hires the elderly as a costly act of kindness.

Nonsense, says Fred Hartman.

FRED HARTMAN: We get it back in spades as far as the company is concerned with the loyalty, the effort that's put forward.

Perhaps our folks aren't as fast as some of the younger, but we have more than enough people so that we can, ironically enough, be one of the fastest in our industry in responding to our customers' requirements.

PAUL SOLMAN: An opposite critique, that because the older workers receive Social Security and Medicare, the company is exploiting cheap labor, paying low wages while government picks up the tab for benefits.

FRED HARTMAN: That's not true at all. We have young people that are 21 years old that work here. We pay competitive wages for our market, and then on top of that have an annual profit-sharing where, if the company wins, everybody wins.

PAUL SOLMAN: So you're offended by the question?

FRED HARTMAN: I am. We don't pay full-time benefits to people that are part-time. Our work force, by and large, is part-time, so we have more than enough help to cover our daily needs.

PAUL SOLMAN: But don't the workers sometimes feel exploited? We put the question to Rosa Finnegan.

ROSA FINNEGAN: My goodness, there isn't -- you don't see anyone telling me, get going here. Hurry up. You're not doing enough. You know, no one ever says that to you here. You work at your own pace. I think this is the most wonderful place on Earth. That's the truth.

(LAUGHTER)

PAUL SOLMAN: Come on. I mean, there's got to be some places better than this.

ROSA FINNEGAN: Maybe they have better restrooms, that's about it.

(LAUGHTER)

PAUL SOLMAN: Well, restrooms aside, this place certainly has its virtues.

ROSA FINNEGAN: These are very sharp.

PAUL SOLMAN: But as more and more Americans approach Finnegan's age, or hope to at any rate, could a quirky firm like Vita Needle actually serve as a model for others?

CAITRIN LYNCH: I haven't found another manufacturing facility that -- with a median age of 74, but it is possible that there could be, you know, little parts of this lesson that help us to think in a new way about, you know, those 75-year-olds, they're not useless.

Let's think about how to bring them in for the benefit of our company and for them.

PAUL SOLMAN: And why not, asks Howard Ring?

HOWARD RING: Look, the Supreme Court has got people over 80 in it, and we don't think much about that. So why can't we do this with other people?

PAUL SOLMAN: Well, nobody on the Supreme Court has made it Rosa Finnegan's age, not yet. But if they did, would you have a problem with it?

And who wouldn't want meaningful work in their 101st year of life, even if there weren't an elevator?

JUDY WOODRUFF: Wonder if they have any openings?

Paul has an extended conversation with 100-year-old Rosa Finnegan. You can watch that on our website.

While reporting on needle and tubing manufacturing firm Vita Needle in Needham, Mass., recently, the NewsHour team met Rosa Finnegan. The company is known for its elderly workforce with its average worker 74 years old.

But at 100, Finnegan is the oldest. She has been working since she was a teenager and has worked at Vita Needle for 16 years. And she still punches in five days a week and has no plans to retire. Watch this web extra above, in which Finnegan, who turns 101 in February, explains why she continues to work decades after reaching the retirement age.

Rosa Finnegan was such a treat to meet. Here is another outtake in which she discusses her days waiting tables at a Howard Johnson.

Finnegan then described what it is like to get to work when you are, as she puts it, too old to drive. Even though she knows it's better that she is not on the road, she thinks it was the "worst thing in the world" to hand in her driver's license.

Watch PBS NewsHour Wednesday evening's segment online for an inside look at Vita Needle and their unique approach to turn a profit by employing an unusual workforce. You can tune in via live stream at 6 p.m. ET or on your local PBS station.

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

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While reporting on needle and tubing manufacturing firm Vita Needle in Needham, Mass., the NewsHour team met Rosa Finnegan.

The company is known for its elderly workforce with its average worker 74 years old. But at 100, Finnegan is the oldest. She has been working since she was a teenager and has been at Vita Needle for 16 years. She still punches in five days a week and has no plans to retire. Watch this web extra above, in which Finnegan, who turns 101 in February, explains why she continues to work, decades after reaching retirement age.

Rosa Finnegan was such a treat to meet that we thought you'd enjoy a couple more outtakes. Here she discusses her days waiting tables at a Howard Johnson's.

Finnegan then described what it is like to get to work when you are, as she puts it, too old to drive. Even though she knows it's better that she is not on the road, she thinks it was the "worst thing in the world" to hand in her driver's license.

Watch the NewsHour story from Jan. 2 online for an inside look at Vita Needle and their unique approach to turn a profit by employing an unusual workforce.

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

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JEFFREY BROWN: Now, higher education, jobs, and, yes, fine wine.

Leaders in business and politics are increasingly looking to community colleges to help train students and, in some cases, even connect them directly with potential employers.

Special correspondent John Tulenko of Learning Matters has a story about the unusual path that one college in Washington state is taking.

JOHN TULENKO: The 2012 Seattle Wine Awards, showcasing the best in Washington state wines.

JOEL BUTLER, wine judge: We have over 700 wineries. And we make some of the best Cabernet, Serrat, Riesling, and Merlot. So, we're one of the top places in the world now for making fine wine.

JOHN TULENKO: One champion receiving three double gold medals was an entry few had ever heard of, College Cellars.

WOMAN: It's very full-bodied, but it's very chocolaty. I like it.

JOHN TULENKO: Made by students learning winemaking at their local community college.

TIM DONAHUE, wine instructor: We entered six wines. And we went six for six.

JOHN TULENKO: Wine instructor Tim Donahue.

TIM DONAHUE: That was the goal from day one. I wanted to teach them how to make good wine. Then we get the medals. And it's like wow, we did it. This happened.

JOHN TULENKO: The wine was made here, 270 miles southeast of Seattle in Walla Walla, Wash., best known for its fertile farmlands, for sweet onions and apples. It was here 12 years that the community college launched its wine school, the first of its kind in the nation.

TIM DONAHUE: So what you want to do is always have a bottle ready to go, because, if you don't, these can drip a little bit.

JOHN TULENKO: The two-year degree program covers everything from grape growing and pressing to barreling, blending and tasting, taught hands on at the college's vineyard.

TIM DONAHUE: It's hard, hard work. A lot of people think it's sitting in the vine, sipping wine. It's not. You're cold. You're wet. You're in a cellar. You're lifting heavy things.

There's a -- definitely a solid blue-collar job.

TYLER TENNYSON, student: I was impressed with how much they're able to cram in to two years.

JOHN TULENKO: The program attracts students from across the country, many of whom, like Tyler Tennyson, come to winemaking from other careers.

TYLER TENNYSON: I was a commercial appraiser. And I got laid off. And so, I called my wife and I said, so I have good news and I have bad news. The bad news is, I got laid off. The good news is, we can move to Walla Walla. Six weeks later, I was starting the program and doing a harvest.

JOHN TULENKO: After graduating, Tyler was hired as a cellar master, overseeing all aspects of production at Seven Hills Vintners, a premier winemaker in Walla Walla.

TYLER TENNYSON: I felt totally competent coming out of the program in terms of totally competent to step into a winery and play an active role in winemaking.

JOHN TULENKO: A recent survey of graduates found 80 percent are working in the wine industry as vineyard managers, winemakers, cellar workers, and wine sellers.

Most earn between $25,000 and $55,000 a year. As much as this is a story about winemaking, it's also a story about Walla Walla, a small town like many others that was hit hard, and what happened when the community college decided to play a part in helping to turn things around.

Before making wine, Walla Walla was famous for wheat and other crops that brought prosperity to the valley for more than 100 years. But in the 1990s, free trade agreements flooded the market with cheap imported produce.

STEVEN VANAUSDLE, Walla Walla Community College: We started losing our food processing industry, which provided hundreds of jobs for people.

JOHN TULENKO: Steven VanAusdle is the college president.

STEVEN VANAUSDLE: Quality of life diminished. And we saw more storefronts that were vacant. Companies basically went out of business and closed.

JOHN TULENKO: Bad as things were, they were about to get better. Sensing potential in the soil and climate here, a small group of pioneering winemakers had started growing grapes.

STEVEN VANAUSDLE: Some of here at the college in our planning thought, gee, is there something we could do maybe to help what could be an emerging industry and opportunity?

JOHN TULENKO: Their answer, the wine school, to supply the trained work force the industry needed to grow.

MYLES ANDERSON, Walla Walla Community College: The industry was the one that dictated the curriculum. It helped us design the building.

This is Cabernet Franc.

JOHN TULENKO: Myles Anderson, who founded one of the region's first vineyards while teaching psychology at the college, was tapped to run the program.

MYLES ANDERSON: They said we want practical, concrete, hands on. So that's what we have done.

JOHN TULENKO: Over the next 12 years, wineries in the valley took off, growing from a total of 19 to 174. A town that had been in decline saw its fortunes reversed.

MYLES ANDERSON: We have 29 tasting rooms downtown. And we have great restaurants again. And we have great places for people to visit. So it's flourishing.

STEVEN VANAUSDLE: A wine tourist spends about two-and-a-half times as much at their destination as the average tourist. So, attracting tourists and keeping them here became an objective.

JOHN TULENKO: Along with winemaking, the course offerings include programs in culinary arts and golf course management.

Is that the proper role of a community college, to foster a hospitality business?

STEVEN VANAUSDLE: For students, their primary interest in life is preparing for work, having a secure job. So, it's all about jobs and quality of life and standard of living and wages today, I think.

JOHN TULENKO: But some are hungry for more.

Jody Middleton already had a job at a juice processing plant. So did Jeremy Petty. Born and raised in Walla Walla, they had been friends for years.

JODY MIDDLETON, Walla Walla, Wash.: We met in middle school, played football together side by side on the offensive line. We protected our quarterback. And we're working together again.

JOHN TULENKO: Dreaming of a vineyard of their own, together, they enrolled in wine school and took hands-on learning to a whole other level.

One assignment was to create the layout for a vineyard.

MAN: What have we got here?

JOHN TULENKO: First, they drew it. Then?

All this, you guys built.

JEREMY PETTY, Walla Walla, Wash.: From the ground up.

JODY MIDDLETON: Absolutely.

JOHN TULENKO: They planted their vineyard in an empty field beside Jeremy's house. And while it was taking root, they gave themselves another challenge.

JEREMY PETTY: We just kind of said, well, let's just make some wine. Why not -- how are you going to understand better than actually doing it?

TIM DONAHUE: They said, well, you know, what if we want to make wine at home? I said, you know, there's a secret in the wine industry. And I might get in trouble for letting this out.

But every year, there's always fruit hanging around somewhere. And it's not good. It's stuff that got rejected because it's moldy or wrong, but it's your first time making wine. You're going to screw it up anyway. So do what you can.

JEREMY PETTY: We drove out to the vineyard in the semi. And I had my kids and his kids and all the family. And we all picked everything.

TIM DONAHUE: And the next thing you know, they found some used barrels. And they found little things here and there. And they just went for it. Their investment for the wine industry is unheard of, how small it is. And they have made some pretty good wine.

JODY MIDDLETON: Little bit of Cab Franc, little bit of Malbec. We're going to have about 300 cases from our first vintage. And we are going to be bottling here shortly.

JOHN TULENKO: The harvest from their backyard vineyard will yield another 85 cases. Then they will start selling.

Does the wine have a name?

JEREMY PETTY: We're going with J&J Vintners, so Jeremy, Jody.

JODY MIDDLETON: The dream is to have a successful winery, to build a business that is going to sustain our families. It will be great, be our own bosses, be able to have something, a legacy to pass down to our children.

JOHN TULENKO: If J&J vintners succeeds, they will add to a growing list of wineries the college has launched.

MYLES ANDERSON: We have 25 that have graduated with degrees and have their own wineries here in Walla Walla.

JOHN TULENKO: The college believes tomorrow's opportunities lie close to Walla Walla's roots, training water resource managers to protect streams that feed the vineyards and above them technicians for some 5,000 wind turbines that power the area.

STEVEN VANAUSDLE: And they're still installing them. Every eight to 10 turbines requires a technician. The mission is for economic, environmental and cultural sustainability here.

MYLES ANDERSON: What we have done here is, we have done creative risk-taking. At times, we did -- we were going places that no one knew where we were going.

And, so, I call that leadership. Leadership is going places that you have never gone before and taking people with you.

JOHN TULENKO: For J&J Vintners, the journey starts this fall. They launch with plans to sell their first 400 cases.

JEFFREY BROWN: The Walla Walla program is getting national recognition for its work. For the past two years, it's been rated as one of the top 10 community colleges by the Aspen Institute's College Excellence Program. The honors are given for efforts to significantly improve student outcomes in the classroom and in the job market.

Watch Video | Listen to the Audio

JUDY WOODRUFF: Now we return to one of the biggest stories of last year, Hurricane Sandy and its devastating impact on New York and New Jersey.

Jeffrey Brown has our update on where things stand today.

JEFFREY BROWN: As winter storms bore down on parts of the Midwest and Northeast last week, floodwaters again rose in the small coastal town of Sea Bright, N.J.

MAN: We went through the previous storm. And it was bad. I didn't expect another one that quickly.

READ MURPHY, Sea Bright Office of Emergency Management: Winds were very strong last night. Plus, we're more vulnerable now because we don't have any sand out on the beach.

JEFFREY BROWN: Those sands were washed away some two months ago when Hurricane Sandy battered New Jersey, New York, and Connecticut, killing at least 125 people in the U.S. and causing a minimum of $62 billion in damage.

Left behind are daily reminders of the storm's impact. Just an hour from Sea Bright, another small town, Mantoloking, New Jersey, was badly damaged by Sandy. Of the community's 520 homes, 60 were washed away and 139 remain uninhabitable. It's still without electricity, gas, sewers or water.

MARK WRIGHT, Mantoloking, N.J., police chief: We're the smallest town with the most amount of damage. We have to take it one step at a time. We can't expect anything to happen overnight. It's baby steps.

JEFFREY BROWN: On New York's Staten Island, some of those who lost their homes spent Christmas in shelters.

KERRI MULLEN, New York Resident: This is actually the first time ever since 1916 there won't be a member of my family in my home on Christmas morning.

JEFFREY BROWN: Meanwhile, others have left New York for temporary homes in places like New Milford, Conn.

CONNIE DONG, former Staten Island resident: Right now, I'm just taking it all in. Just to even have my own little personal space is such a luxury. You change your goals. You change your priorities, your basic -- everything changes.

JEFFREY BROWN: Yet, some areas are showing signs of life again. In recent weeks, businesses in Seaside Heights, New Jersey, have been reopening to very grateful customers.

SAL PICCOLI, Customer: This is very good. I was hoping this one and then the pizza place down the street, hoping they would be there too, but not yet.

JIM SMITH, Ryan's Deli's Catering: Refreshing. We're happy to be here. We're trying to serve the people of our community and just resume business as usual in a very uncomfortable circumstance.

JEFFREY BROWN: To help victims across the region, there have been ongoing relief efforts, like this concert in Madison Square Garden on Dec. 12. And Mayor Michael Bloomberg has pledged to rebuild New York's devastated coastal areas.

MAYOR MICHAEL BLOOMBERG, I-New York: Let me be clear. We are not going to abandon the waterfront. We're not going to leave the Rockaways or Coney Island or Staten Island's South Shore. But we can't just rebuild what was there and hope for the best. We have to build smarter and stronger and more sustainably.

JEFFREY BROWN: To do so, the governors of New York, New Jersey and Connecticut have asked for $82 billion in federal disaster relief aid.

We get a further update from two reporters covering the post-Sandy situation, Sarah Maslin Nir of The New York Times, and Mike Schneider, managing editor and anchor of "New Jersey Today" on public television.

Well, Sarah, start with the areas you have been looking at. What major problems persist weeks after the storm?

SARAH MASLIN NIR, The New York Times: Well, it depends where you look.

In New Jersey, some towns are still on lockdown. So they're really at a standstill. People have been able to maybe cart out drywall, clean up some mold, but they can't progress. They can't figure out if they want to raise up their houses, do some mitigation to prevent this from happening it again, or just build it the way it was. They're really prevented from moving forward at all.

Then, when you go to places like the Rockaways, while there's been tremendous cleanup, again these same issues. People don't know, are they going to get insurance money to fix the way they need to? Are they going to get extra subsidies in order to do these mitigating factors?

So the problems that persist are how to rebuild and when.

JEFFREY BROWN: Mike Schneider, how would you characterize it? And is it really different in different areas?

MIKE SCHNEIDER, NJTV: Very much so.

It depends on what part of the coast you're on. It depends on whether you're on the coast or you're inland right now. There's a growing sense here in the state of New Jersey that people are starting to get to the point where the storm has passed, the recovery has been promised. Now where is my check? When can I go back home?

There are thousands of people in this state who still can't go home. Many of them now are starting to raise questions about how come the FEMA process, which was promised to be so smooth, hasn't turned out that way? They have addressed these issues directly to governor.

And some municipalities as well are asking questions about, how come things haven't worked out quite as well as they had hoped? If you cover disasters, this is not unusual. But what is I guess unusual right now is that here we are this far out, and still no promise of that congressional aid which has been supposedly in the works for a while coming to help make things better a little more quickly, and to raise people's hopes as well.

JEFFREY BROWN: Well, Mike, tell us a little bit more about that aid process, whether it's government, whether it's FEMA, whether it's insurance coverage and claims. You're saying that it's not running as smoothly as people had hoped?

MIKE SCHNEIDER: Well, if you talk to a lot of the insurance companies here, they will tell you that they have handled a record number of claims for record amounts of money in record time.

And the statistics tend to bear that out. But that can't take care of all people in all places at all time. And if your neighbor is back home, that's fine and dandy for your neighbor. If you're not back home, that still doesn't make things quite so nice for you.

The FEMA process -- we have talked to people from FEMA on the set here. And they have been very, very aggressive about wanting to get out there in the field and take care of things.

But Gov. Christie held a town meeting just a few days ago in which for the first time -- and the governor has had a really remarkable relationship with the people of his state ever since this storm hit. He was out in the field. The pictures have become part of the legend of Chris Christie in this state about his empathy and sympathy for those around him.

But we're starting to see now in town meetings that some people are standing up and saying, we expected this to work out this way. We had these numbers we were supposed to call.

But, suddenly, you know what? We're getting the runaround, because FEMA says we can't do it way. We have to talk to somebody else. Our insurance companies say, no, you have to talk to FEMA.

So, there are some people out there who are just a little -- and with some justification, we might add, if you're out of your home as long as they have been -- they're getting a little bit frustrated.

JEFFREY BROWN: Sarah, pick up on that. Do you hear similar such things? And is there -- is there even a neighborhood or even a building that kind of crystallizes the situation for you?

SARAH MASLIN NIR: Well, I have actually been covering pretty extensively one housing complex called Ocean Village in the Rockaways.

When we think of the storm, we think of it hitting people in the floodwaters' path, people on the ground. But, actually, people were stuck on the 19th floor of this housing complex in the dark, no running water, no working toilets, no way to get up and down, especially if they were elderly.

And I have been watching this place rebuild. And they're still on generator power. Their transformers, deluged with seawater, are not going to be up any time soon. And it's really emblematic of a lot of places out there.

There are people sitting right now with no heat. And there are scores of people -- excuse me -- thousands of scores of people without electricity still. And, as we were just saying, if one place is illuminated and cozy and warm, the building next to it can be ice cold and completely powerless. And that still persists.

JEFFREY BROWN: So, Mike, you know, going back to what both of you talked about, many people are still trying to make this decision about whether to rebuild, how to do it.

I mean, we're even seeing recent -- you know, the vulnerability is there even we see in recent storms. And that must complicate these -- these decisions even more.

MIKE SCHNEIDER: Absolutely. It does. It raises that whole sense of vulnerability once again.

People in this part of the country for a long time heard about bad storms, watched bad storms, sympathized with the people who were being victimized. And now they are the victims. And it's an entirely different sort of situation.

And right now, you have this growing, nagging question about, what do we do to rebuild? Gov. Christie has said, the shore is coming back. It won't be the same as it was in our mind's eye, but it's coming back.

But I have spoken to Governor -- former Gov. Whitman, former Gov. Florio, and others as well. And they're starting to say, you know what? We need to rebuild, but we need to rebuild smart. Do we want to go back and try to replicate what was there in our mind's eye? Is that something we're capable of doing?

And even if we were, is that something that's advisable to do? We have heard all the climatology reports about what is coming our way. Can we afford to go back and put that kind of money to rebuild that kind of infrastructure in an area that many say is likely to suffer the same fate time and time again in the not-too-distant future?

JEFFREY BROWN: Well, you know, Sarah, that's something that -- something we have heard from Mayor Bloomberg as well: We're going to rebuild, but we're going to try to rebuild smart.

I'm just wondering, at ground level, when you're covering this, do you hear much about that kind of long-term discussion, or is it too early for that?

SARAH MASLIN NIR: Well, look, being able to rebuild smart is a luxury. You have to have the money to do that.

And there are people who are knitted into these communities who probably inherited a house from a grandma or great-grandma. And they do not have the luxury to rebuild smart. They can barely rebuild at all.

I met a woman whose house is what's called red-tagged. It's coming down. She has no flood insurance. She has no homeowner's insurance. The mortgage has been paid off forever.

She's going to be relying on the charity of her neighbors. She is in Breezy Point, which was a very hard-hit community -- 110 or more houses burnt down during the storm. But others are knocked off their foundation. And she can't rebuild smart.

Even with the money that she's going to get from FEMA for mitigation to prop it up a little or to put in a breakaway wall so that, when the water comes through again, as we have discussed, climatologists say it inevitably will, she doesn't have that luxury.

She is going to rebuild again and she's going to cross her fingers that this was a storm of the century.

JEFFREY BROWN: Let me just -- in our closing minutes here, let me just ask you both about -- I will start with you, Mike -- what we heard when all this happened, that, you know, it showed some of the divisions, some of the class divisions in the area, but it also brought people together in some unusual ways.

These couple months later, where do you think things -- where do things stand?

MIKE SCHNEIDER: New Jersey right now is still a rather tightly-knit state on this issue.

You know, one of the things that came up during some of these benefit concerts, Springsteen has talked about it, the governor has talked about it as well, is that the shore has all these unique places. There are places on the Jersey Shore where rich people have lived and will continue to live.

There are places down the Jersey Shore where the truck driver, where the garbage collector, where the schoolteacher, where all sorts of people of all sorts of different socioeconomic levels have lived for decades now.

And that's the big question. And that's -- the kernel of doubt that is starting to creep into this, to the extent that it does exist, is whether or not -- we know the rich areas probably will be able to sustain themselves, because they have the money to do so.

But for these other folks who are waiting for insurance checks, who are hoping to be able to put together the dollars and cents that they have in their savings accounts or investments to be ale to put this back on the face of the earth the way it was, or at least the way they would like it to be, can they afford to do it?

That's a big question. And the commitment of this state to see that through will probably tell us a lot about who we are as a state.

JEFFREY BROWN: Sarah, last word from you?

SARAH MASLIN NIR: Sure.

Right after the storm, there was this incredible onslaught of people from all over New York City and elsewhere into these what are essentially very impoverished areas that happen to coincide with where the storm hit hardest.

And there was a group of people, hipsters who were helping -- they called them "helpsters," because they had just transformed into this squad of skinny jeans, helpful people.

I haven't seen them very much in the numbers that I saw in the very beginning. It has sort of lost its trendiness. It's not on the forefront of people's minds.

Another way that divisions are going to reinsert themselves again is that, with people getting out of their houses, the real estate market is incredibly depressed in many waterside areas, where people don't know what the future is going to be of these places.

So people are selling their houses to the first taker. And you have what can be sort of predatory purchases. And that's going to change the demographics of these areas, because you have working-class areas that can't afford to rebuild and the people with money are going to be able to come in and purchase these homes and really change the socioeconomic landscape of what were working-class storefront homes.

JEFFREY BROWN: All right, Sarah Maslin Nir of The New York Times and Mike Schneider of "New Jersey Today," thank you both very much.

SARAH MASLIN NIR: Thank you.

Watch Video | Listen to the Audio

Transcript will be made available as soon as possible.

This photo from 1938, pictures a transitory cooking course for unemployed men who used to work in mines, shipyards and factories in Kent, England. Photo by Fred Morley/Fox Photos/Getty Images.

Nick Corcodilos is an expert on how to get a job. We ran into him while doing a story on the relative futility of Internet job boards and asked him to post his own job search secrets. It became a palpable hit, so we asked Nick if he wouldn't mind taking some questions from our readers. It turns out that in addition to giving interviews to PBS, Nick hosts a website called asktheheadhunter.com, and publishes a free weekly -- the Ask The Headhunter© Newsletter.

Peter Bro -- Portland, Ore.: I just watched your piece on finding a job online. I am an owner of two restaurants in Portland, Ore., and I rely on hiring from online resources. As a result, I ended up creating a site specifically for hiring in the service industry: Poachedjobs.com. I realize the restaurant industry is perceived as transitory by nature, but for those who are struggling to find work, the service industry can be a good interim position that can teach skills that are transferable to the corporate world.

Nick Corcodilos: Everyone who reads my columns knows I'm not a fan of job boards. But like most things, there's a spectrum of players in the job board world. Surveys suggest that two kinds of online jobs sources seem to do a better job than the big job boards: niche job boards that cater to specific fields or industries, and employers' own websites.

Your food-industry *job board *, is an example of what a niche board can offer. It's nicely broken down into categories of jobs so that a user doesn't have to rely only on a search function, and the application page is very simple.

Another niche board, in the software development industry, is actually run by a software development company called 37signals that piggybacks the board on top of its own business. It's highly focused on a particular set of employers, job hunters, and jobs.

(Neither NewsHour nor I can vouch for these job boards. Use your good own judgment when visiting job boards.)

A niche board is unlikely to attract tire-kickers, either from the job hunter or employer side, so the competition is bearable. The employers that post are more likely to respond faster and with more enthusiasm to job hunters.

Employers' own websites tend to be kept more up-to-date with their listings because, well, it's their own turf! They want to look good. Elsewhere in these columns, I've mentioned LinkUp before. (LinkUp is not connected to LinkedIn.) It's a job search engine, which is different from a job board. It works like Google, and lets you search employers' own websites for jobs.

For more about this topic, check this audio program I did with WNYC public radio on this topic: The Work Search: Job Boards.

Nina Sherman -- San Francisco, Calif.: I've been unemployed for 2 years. I'm looking for an administrative or reception position. I have a Bachelor of Arts degree in interior design but I've never worked in the industry. Should I have it on my resume? Is it disqualifying me for some of the more basic opportunities? Another question: I go to job fairs and I never get any results. The people at the stalls direct you to their websites.

Nick Corcodilos: Any college degree is an advantage on your resume. I would include it, even if it's not relevant to the field you want to work in. There's nothing wrong with listing your degree as "B.A., Lovely State College, 1999." There's no need to mention that your degree is in interior design. But trust me, you learned things in college that you will use in any job you do. Analytical thinking, research skills, writing and communication skills are benefits of a college education that you will apply to your job.

Job fairs are largely a waste of time. Employers use them partly to fulfill equal opportunity hiring obligations, but they usually deploy only personnel clerks, not hiring managers. That is, they're doing nothing but paying lip service to the law. As you note, when you walk up to an employer's booth, they have laptop computers at the ready, so you can submit your application online. So, what's the point of going to the fair when you can do this at home?

Job fairs will accomplish little but give you a headache from personnel-jockey overload, and remind you that there are a lot of unemployed people in the world. I think the federal government should require employers that conduct job fairs to disclose how many applications they gathered, and how many jobs they filled at the fair. Job fairs would quickly vanish, and rightly so.

The only exception might be job fairs conducted by colleges for their students. Because the success of these fairs is more closely scrutinized by both students and faculty, I believe colleges work pretty hard to ensure that employers that attend actually hire people! Maybe that's why colleges call these events "on-campus recruiting" because that's what they really are.

For more advice about what to actually put on your resume, please see Resume Blasphemy, a contrarian approach to that age-old document.

Ann Cartier -- Berkeley, Calif.: If software is such a roadblock, and I don't know anyone in Philadelphia (being on the West Coast), how do I go about networking on the other side of the country?

Nick Corcodilos: You can network anywhere, and even make it worth your while to buy your own airline tickets to go interview across the country.

Much networking is done online nowadays, and you can be very successful at it. Most job boards don't let you network. LinkedIn, which has turned into a job board, can help you network if you look up the people you want to meet, so take advantage of that. My caution to you is, don't rely only on LinkedIn's job listings. They're no better than a job board. All you're doing is diving into a sea of competition, because tons of people are responding to these.

Instead, decide which companies in Philadelphia you'd like to work for. That's right: Decide. Don't take "what comes along." Research the industries you're interested in, and focus on specific companies. Then search for people connected to those companies on LinkedIn, and join relevant discussion groups. You can do this on other forums, too, by using Google to find people and relevant online communities. Then, participate actively. This takes time and effort, and you must establish your credibility with these folks. The next step is to casually ask for advice about their companies, either online or via e-mail. Don't ask for job leads; people tend to react negatively to that. Instead, engage in discussions about their work. This is how referrals and introductions get made. This is how healthy networking develops.

As for the distance issue, if you can establish connections with a few companies in the Philadelphia area, it may be worth a trip. Let each one know that you will be in town on business -- and you will be, though you don't need to disclose that you're exploring job opportunities. I've found that when a company in a distant city knows you'll be in town anyway, they're more likely to schedule an exploratory meeting with you, because it's costing them nothing. Check this article for more about Long-distance Job Search.

Nick Corcodilos: I started headhunting in Silicon Valley in 1979, and I've answered over 30,000 questions from the Ask The Headhunter community over the past decade -- and I'm glad to share what I know with you. I offer no guarantees -- but I'll do my best to offer you useful advice -- so please feel free to post your questions about your personal challenges with job hunting, interviewing, resumes, job boards, or salary negotiations. I am the author of three "how to" PDF books, available on my website: How to Work With Headhunters...and how to make headhunters work for you, How Can I Change Careers?, and Keep Your Salary Under Wraps

Questions will be collected from here and we'll post my advice on a series of Ask The Headhunter columns here on Making Sen$e. You'll also find my comments sprinkled throughout this discussion forum about various topics. Thanks for participating!

Copyright© 2012 Nick Corcodilos. All rights reserved in all media. Ask The Headhunter® is a registered trademark.

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

Despite President Obama's earlier optimistic message that a deal had been reached, Congress won't vote on a bill before midnight New Year's Eve, to avert the so called fiscal cliff.

According to news reports, negotiations are stuck on how to avoid about $109 billion in defense and domestic program cuts set to take place on Jan. 2.

Speaking to a friendly crowd at the White House this afternoon, the president announced that lawmakers were close to making a deal that would prevent tax increases for most of Americans.

"It appears that an agreement to prevent this New Year's tax hike is within sight, but it is not done," Obama said. "There are still issues to be resolved, but we are hopeful that Congress can get it done. But it's not done."

Obama says the plan involves raising taxes on high-income earners. Rather than a "grand bargain," that would feature a mix of spending reductions and revenue increases toward aggressively cutting the nation's $16 trillion debt over the next decade, Obama told the audience of supporters that efforts to reduce the nation's debt would come in stages.

"My preference would have been to solve all these problems in the context of a larger agreement...that solves our deficit problems in a balanced and responsible way...so that we can put all of this behind us and just focus on growing our economy," he said. "But with this Congress that was obviously a little too much to hope for at this time....We're going to solve this problem instead in several steps."

On tonight's NewsHour Senior Correspondent Judy Woodruff will dissect the day's negotiations and discuss the latest developments with Todd Zwillich, Washington correspondent for PRI's The Takeaway.

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Blank Social Security checks are run through a printer at the U.S. Treasury printing facility. Photo by William Thomas Cain via Getty Images

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday. We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available here, for free, in its "basic" version.

Robert Mesa -- Arizona: I am 63 and do not plan to file at least until I reach full retirement age (66). My wife is 60 and started receiving disability benefits four years ago due to a health condition. Her benefit amount is approximately one third of which I will be eligible for at full retirement. Is there a strategy by which we can increase her benefit while I delay taking my benefit?

Larry Kotlikoff: When you reach full retirement age, you can file for, but then suspend collection of, your retirement benefit. You can then activate your retirement benefit at age 70, when it will be set to its largest value. This will enable her to collect a spousal benefit starting at age 62. But it will be a reduced one unless she waits until full retirement age.

Thamara Stephenson -- Gainesville, Fla: At 62 I was told that if I wait until 66 I can get my ex-husband's Social Security. If he is dead at that time, I would get the full amount. Is that whether or not his present wife is alive? Through his, I can get more than on my Social Security.

Larry Kotlikoff: Yes, his present wife doesn't affect your rights to spousal and survivor benefits. If you wait until 66 -- i.e., you don't apply for your own retirement benefit before 66 (your full retirement age) -- you'll get half of his full retirement benefit. Once he dies (now don't kill him!), you'll get 100 percent of the benefit he was collecting at the time he died if he was collecting. If he wasn't collecting when he died, you'll get his full retirement benefit if he dies before full retirement age. Or you'll get his full retirement benefit, augmented for the delayed retirement credit, if he dies after his full retirement age.

Donna Hagen -- Minnesota: My husband of eight years died of cancer in 2004. My first husband and father of my children and I were married 31 years. Can I collect off my first husband also? I worked outside the home while he played around in his truck. (Hence, a divorce after 31 years.) Would I be eligible to collect off of him?

Larry Kotloikoff: Very sorry for your loss. You can collect based on either deceased spouse, as far as I understand, but only one of them. Which one will depend on which one's earnings record provides you the highest benefits. On the other hand, if you earned much more than either, your total check may not be higher if you take your retirement benefits at the same time you apply for your survivor benefits. The best strategy may be to wait until you reach full retirement, apply just for your survivor benefit, and then at 70 apply for your highest possible retirement benefit. Our $40 software program can help sort out what's best to do here.

George -- Honolulu: For most of my adult life, I have lived and worked for non-U.S. companies in foreign countries. As a result, I have paid little into the Social Security system and, according to a letter I recently received from the Social Security Administration, I have 32-plus credits but need 40 credits to receive benefits. Is there any way that I can accrue the required credits before I retire (I am 62 now and hope to retire in the next few years)?

Larry Kotlikoff: Yes, work for two more years and get the extra 8 quarters of credits.

Carolyn -- Flower Mound, Texas: How can I find out how much is awarded for SSDI? My husband is about to apply.

Larry: Your local Social Security office should be able to help you with this.

Nathan Bothell -- Washington: When mom and stepfather got divorced after 12 years of marriage, she signed the divorce papers that she would not claim any of his money. But from what I understand, if you are married for at least 10 years, you are entitled to Social Security from that marriage.

Larry Kotlikoff: They were married for 10 years, so she's eligible for spousal benefits as an ex as well as survivor benefits once your stepfather dies.

Joyce Davis -- Riverside, Calif: I am six years older than my ex-husband. We were married seventeen years. I started receiving Social Security when I reached 65 in 2010. My question is, will I be able to claim on his Social Security when he retires and how can I find out when he retires which will probably not be until 2019 (presuming I am still alive)?

Larry Kotlikoff: You can collect spousal benefits right now and, I presume, Social Security is already providing them to you if you qualify for them, so long as your full retirement benefit is less than half of his. When he chooses to retire has nothing to do with your eligibility to collect spousal benefits right now, provided he is over age 62. Once he dies, you'll also be eligible to collect survivor benefits.

Joe -- Lakewood, Colo.: I am 62, and I was married for 12 years. My ex spouse is 54. I lost my job making $120,000 per year however I think I can get by on savings plus social security. Is it possible to claim a Social Security benefit on my ex wife's work history? She is still working and makes about $90,000 per year. If yes, do I have to wait until she retires?

Larry Kotlikoff: Yes, you can collect a spousal benefit on your ex, but you have to wait, not until she retires, but until she reaches age 62. If she passes away, you can collect a survivor benefit starting immediately.

Jan Van -- Snowflake, Ariz: My brother recently passed due to an accident. His only survivor is my sister and myself. Is there a survivor benefit toward his burial?

Larry Kotlikoff: There is a small funeral benefit that Social Security should provide.

Joan Brownstein -- Greenbrae, Calif: How do I apply to get excess spousal Social Security?

Larry Kotlikoff: Go to the local Social Security office.

Joe F -- Portland, Ore.: I am single. I retired at 50 and stopped working completely. I am living off my pension, IRA, 403(b) for past 10 years. I noticed I no longer qualify for disability. That's OK, but if I've maxed out on contributions, will my Social Security be hurt by not contributing for 10 years?

Larry Kotlikoff: Not necessarily, because a different benefit formula is used for disability insurance benefits. Your DI benefit becomes your retirement benefit when you reach full retirement age.

Happy New Year, everyone.

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

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KWAME HOLMAN: The U.S. economy has dodged a potentially crippling strike at ports up and down the East Coast and Gulf Coast, at least for now. The longshoremen's union agreed today to extend its existing contract by another month.

That word came after the union and shipping lines worked out a deal on royalty payments for unloading containers. The contract extension gives the two sides time to resolve their remaining issues.

Wall Street finished the week with its fifth straight losing session. Stocks have been falling as concern mounts that Washington will fail to get a budget deal. The Dow Jones industrial average lost 158 points today to close at 12,938. The Nasdaq fell 25 points to close at 2,960. For the week, both the Dow and the Nasdaq fell 2 percent.

Sectarian tensions flared across Iraq today, as tens of thousands of Sunnis staged mass protests against the Shiite-led government. There were rallies in Fallujah and Ramadi, where protests already had erupted earlier this week.

Today, Mosul, Tikrit and Samarra had demonstrations as well. Protesters took to the streets waving flags and signs. They chanted slogans demanding fair treatment from the Baghdad regime and the release of Sunni prisoners. Shiite Prime Minister Nouri al-Maliki said the demonstrations were not acceptable.

The government of China imposed tighter controls on Internet usage today. Now China's 500 million Web users will have to provide their real names when they register for Internet service. And providers must delete any Web content deemed illegal, and report it to authorities.

Leading writers and bloggers insisted it's a new way for China's communist leaders to censor their critics.

ZHU RUIFENG, Chines blogger (through translator): Since the Internet came to China, the Chinese government has been repeatedly imposing restrictive measures, such as shielding, blocking and banning. It has even spent billions of dollars to build a firewall against overseas sites. They just don't want to see any freedom of speech, which is provided by the constitution, because it will hurt their vested interest.

KWAME HOLMAN: The new curbs come in the wake of a series of online discussions that have helped expose corruption scandals.

Russian President Vladimir Putin signed a bill into law today banning Americans from adopting Russian children. The move terminated more than 50 adoptions that already were under way. The measure came in reaction to a U.S. sanctions law targeting Russians accused of human rights abuses.

Former President George H.W. Bush was said to be alert and improving today. A family spokesman said he's even singing with doctors and nurses. Mr. Bush is 88 years old. He's been hospitalized in Houston with complications from bronchitis. This week, he was placed in intensive care, but in an e-mail yesterday, his chief of staff said the former president wants people to put the harps back in the closet.

Those are some of the day's major stories.

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JEFFREY BROWN: The final weekend has now arrived before the fiscal cliff hits on New Year's Day, and, with it, more than $600 million in tax hikes and spending cuts.

In a last bid for a deal, President Obama stated his terms face to face to top Republicans and Democrats.

Congressional leaders arrived at the White House this afternoon for their first group meeting with the president since Nov. 16. Vice President Biden and Treasury Secretary Timothy Geithner also attended. But there was little to suggest the makings of an 11th-hour bargain.

Instead, a source familiar with the meeting told the NewsHour the president is sticking with his offer from last Friday. It included keeping the Bush era tax break for the middle class, but raising tax rates on incomes over $250,000 a year. The president also wants to extend unemployment benefits for some two million Americans who will lose them in the new year.

And the proposal would delay any spending cuts. The president asked for an up-or-down vote on his plan unless there is a counterproposal that will pass both the House and Senate. A little more than an hour after the meeting began, several participants were seen leaving.

And back at the Capitol, the Senate's Democratic majority leader, Harry Reid, and Republican Minority Leader Mitch McConnell offered their takes on the meeting.

SEN. MITCH MCCONNELL, R-Ky.: We had a good meeting down at the White House. We are engaged in discussions, the majority leader, myself and the White House, in the hopes that we can come forward as early as Sunday and have a recommendation that I can make to my conference and the majority leader can make to his conference.

And so we will be working hard to try to see if we can get there in the next 24 hours. And so I'm hopeful and optimistic.

SEN. HARRY REID, D-Nev.: This is -- whatever we come up with is going to be imperfect. And some people aren't going to like it. Some people will like it less. But that's where we are. And I feel confident that we have an obligation to do the best we can and that was made very clear.

JEFFREY BROWN: An aide to House Speaker John Boehner said, if the Senate passes a bill, the House will take it up and either accept or amend it.

And a short time ago, President Obama appeared in the White House Briefing Room with a statement. Here is some of what he said.

PRESIDENT BARACK OBAMA: We had a constructive meeting today.

Sens. Reid and McConnell are discussing a potential agreement where we can get a bipartisan bill out of the Senate over to the House and done in a timely fashion, so that we met the Dec. 31 deadline.

But, given how things have been working in this town, we always have to wait and see until it actually happens.

The one thing that the American people shouldn't have to wait and see is some sort of action. So, if we don't see an agreement between the two leaders in the Senate, I expect a bill to go on the floor.

And I have asked Sen. Reid to do this. Put a bill on the floor that makes sure that taxes on middle-class families don't go up, that unemployment insurance is still available for two million people, and that lays the groundwork then for additional deficit reduction and economic growth steps that we can take in the new year.

JEFFREY BROWN: All of this still developing. And we will have more on all of it with Mark Shields and David Brooks later in the program.

Left, Paul Krugman (Photo by NewsHour). Right, Greg Mankiw (Photo by Bloomberg via Getty Images).

Paul Solman: Both Paul Krugman, of MIT, and Greg Mankiw, of Harvard, were teaching economics locally during my formative years as an economics correspondent. I came to know them long ago. Relations between us have seemed cordial enough, as best I could tell.

Krugman has been on the left, relatively speaking; Mankiw, generally on the right. They have been reliable and clear spokespeople for their respective points of view.

But to describe their relationship, at least intellectually, cordiality would not be the word of choice. I was reminded of this by a post on Greg's blog on Christmas Eve entitled "A Krugman Puzzler."

"I often disagree with Paul Krugman," it began, "but I usually understand him. Lately, however, I have been puzzled about his view of the bond market." That was because Krugman had dismissed, in a post of his own, the fear of "bond vigilantes" intent on punishing the US for mounting deficits and debt by demanding higher and higher interest rates to lend us money -- i.e., buy our Treasury bonds.

Krugman wrote:

America...can't experience an interest rate spike unless people see an increased chance of economic recovery and hence a rise in short-term rates. And the people who have been predicting an interest rate spike any day now for four years shouldn't have any credibility at this point.

But in 2003, added the puzzled Mankiw, Krugman had written just the opposite:

[L]ast week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits...my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.

And as that temptation becomes obvious, interest rates will soar. It won't happen right away... But unless we slide into Japanese-style deflation, there are much higher interest rates in our future.

And here's Mankiw in conclusion:

I am having trouble reconciling these points of views. Has Paul changed his mind since 2003 about how the bond market works? Or are circumstances different now? If anything, I would have thought that the fiscal situation is more dire now and so the logic from 2003 would apply with more force. I am puzzled.

Well, he probably shouldn't be. In 2003, Krugman was explicitly writing in opposition to the costs of a new war in Iraq, coupled with the substantial tax cuts of George W. Bush, which Mankiw, as head of the President's Council of Economic Advisors, championed. Mankiw presumably finds Krugman two-faced with regard to bond vigilantism, based on his politics, but "puzzled" would presumably mean that he never checked with Krugman who, when I emailed him, referred me to his archives, which include a September 2010 column on "Mistakes" he'd made over the years.

In the column, Krugman wrote the following:

I wrongly believed that markets would look at [the Bush tax cuts, war efforts and Medicare drug expansion, and]... lose faith in American governance, driving up interest rates on our debt. Instead, bond investors discounted the politics, and acted as if they believed that America would eventually pull itself together and start behaving responsibly. The jury's still out on that, but clearly my short-run prediction proved wrong.

Also easy to find was a citation from BusinessInsider.com back in July, where Krugman was also unequivocal:

My thinking has evolved. If you haven't updated your views in the face of new experiences, you're not doing your job.

What I like about this story is that even Paul Krugman, known for his tenacity or, detractors would say, blind stubbornness, is sometimes wrong, knows it, and is willing to acknowledge it.

I would like to take this end-of-the-year occasion, then, to admit to mistakes I can remember, despite my unconscious' valiant efforts to bury them:

On the local PBS news in Boston in the late '70s, in a story of foreign exchange trading, I reported that one of the on-camera trades being consummated was with the "Dresdner Bank," a remarkable fact, I observed, since Dresden was in Communist East Germany. In fact, the bank had moved its headquarters from Dresden to Berlin in 1884. As East Germany had no private banks from the end of World War II until 1990, a trade with the Dresdner Bank in Dresden would have been remarkable indeed;

On the MacNeil/Lehrer NewsHour in 1987, not long after the Dow had plunged more than 22 percent in a day or so (from 2246 to 1738), I presented a story called "How Low Can It Go?" I explained that, as measured by the "book value" of U.S. companies -- the value of what they actually owned -- the stock market might conceivably be overvalued. It has since risen more than six-fold.

In 2003, I reported that General Motors has borrowed $200 million dollars, investing the money in stocks in order to shore up its pension fund. The actual amount was $13.5 billion.

Also in 2003, I interviewed Silicon Valley libertarian entrepreneur T.J. Rodgers, who defended the non-expensing of stock options and denounced Fed Chairman Alan Greenspan for opposing him.

"Alan Greenspan has never started a company, never created a job. He's been an academic all of his life."

Not so. In fact, Greenspan ran his own consulting firm for years. The show made the correction, on air.

No he didn't. Actually, the quote turns out to be "You cannot help the poor by destroying the rich" and was coined, it seems, by a conservative Presbyterian minister, William John Henry Boetcker (1873-1962), whose "The Ten Cannots," first published in 1916, included this one ("Cannot" #5).

Republished as a leaflet by a conservative organization in 1942 with Lincoln quotes on the reverse side, the quote has often been mis-attributed to the president. Most famously, it was used by a later president, Ronald Reagan, at the 1992 Republican convention, inveighing against his misguided Democratic opponents. But you'd never have known if you had just seen the Epstein interview.

Longtime viewers are encouraged to send in gotchas I've missed.

Meanwhile, it seems only fitting that, having triggered this round of mea culpas, Greg Mankiw should be allowed to conclude it.

In 1990, he published a paper called "The Baby Boom, The Baby Bust, and the Housing Market," in which he and a co-author found "the major cause of the increase in real housing prices in the 1970s," when they roughly doubled, to be "the entry of the Baby Boom generation into its house-buying years. Since the Baby Bust generation is now entering its house-buying years, housing demand will grow more slowly in the 1990s than in any time in the past forty years.

"If the historical relation between housing demand and housing prices continues into the future, real housing prices will fall substantially over the next two decades."

Since real housing prices actually rose again by more than half, even including the crash, I emailed Mankiw to ask if he had ever corrected his wrong-way call or, if not, if he wished to now. He wrote back that he and co-author David Weil "have not revisited that paper."

As for Krugman and his admission of error with respect to the bond vigilantes, Mankiw wrote: "I am not sure this really resolves my Krugman puzzler. It is not so much that his short-run prediction from 2003 proved wrong but that he now says that scenario is impossible."

"By the way," he added, "the reason I started thinking about this issue of bond vigilantes is that I refer to this possibility in my column in Sunday's NY Times. I don't think the interest rate spike is imminent, but I don't understand how Paul can now believe it is unthinkable, as he appears to. In other words, what puzzles me is not that Paul made a wrong forecast but that he now seems to be invoking some kind of logical argument that purports to rule out the possibility unequivocally."

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

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JUDY WOODRUFF: Finally tonight: The world's fastest sailboats and best sailors will compete for the America's Cup trophy a year from now. But the host city of San Francisco is already gearing up.

NewsHour correspondent Spencer Michels has our story.

SPENCER MICHELS: Ever since 1851, sailors and well-heeled skippers have raced through the water in ever more expensive, ever more high-tech sailboats, in pursuit of the coveted America's Cup. To the victor go the spoils, and in 2010, Larry Ellison, founder of software giant Oracle, won the Cup for America.

Ellison's prize, besides bragging rights, was to get to choose where the race would be held next. His choice was to bring the contest to his home waters, San FranciscoBay.

Ellison concocted a series of regattas all around the world for competing teams from 11 countries designed to build enthusiasm and excitement for the main event, America's Cup 2013, where 72-foot boats will plow through the bay.

These preliminary races featured boats that measured about 45-feet long, with carbon fiber hulls and wing sails, as described by racing announcer Andy Green.

ANDY GREEN, America's Cup announcer: They're the same sailors, they're the same teams. The boats are just a little smaller. So, essentially, it's their practice race. This is just to get everyone excited and passionate about the sailing.

SPENCER MICHELS: The prelims going on now, with the showdown next year, are the first time spectators can easily view the races from the land. Usually, these events were far enough out to sea that watching them was much easier from a boat, and that limited who could attend.

Announcer Green's job is to clue the audience into what is going on.

ANDY GREEN: The format of the America's Cup has been tweaked considerably over the last few years. Basically, very simple now. You can see the boats racing. You can see them right in front of the shore, and it is very clear who is winning and who is losing.

SPENCER MICHELS: And to help Green and TV viewers, Cup officials are employing a graphic system to make the televised regatta races understandable, somewhat like the virtual first down line for television broadcast of football games.

Adam Fisher wrote about the system for "Wired" magazine.

ADAM FISHER, "Wired": The TV coverage is crystal clear. You know who is winning. A lot of people looking at the coverage seem to think there is actually dye in the water, it is so lifelike. But it is all digital.

SPENCER MICHELS: The design of the 72-foot boats is continuously being tweaked, but nobody is talking much about details as the work goes on in secure locations, like this old San Francisco pier.

But the beauty of the boats, big or small, is only part of the story.

As spectacular and graceful as these boats are, the process of arranging these races in San Francisco was clumsy and contentious.

SPENCER MICHELS: To get the races, San Francisco had to agree to Ellison's demands that he get development rights to some old piers along the bay in return to renovating those piers for the city. The city was eager to go along because, as America's Cup CEO Steven Barclay said, the rewards in jobs and money would be substantial.

STEVEN BARCLAY, America's Cup: The America's Cup coming to a city is all about the economics. And San Francisco did its own numbers, and they said it was going to bring $1.4 billion worth of economic benefit here and 9,000 jobs.

SPENCER MICHELS: But a disappointed San Francisco Mayor Ed Lee announced that the agreement and the promises of many of those jobs was going by the board after Cup organizers decided that developing the pier would cost too much.

Still, the city and Oracle went ahead with race plans. Others were relieved. They saw the arrangement with Ellison as a giveaway of city property. And still others feared environmental consequences of too many visitors and non-recreational uses of waterfront land.

And then there was the matter of boats. Originally, organizers thought up to 15 72-foot boats could compete, but they cost millions. And in the midst of a worldwide recession, only four of them, plus Ellison's, decided to take part. Nobody is suggesting the race will be a bust, but the prospects for the city and the Cup itself are not as bright as they had been.

ADAM FISHER: The event is going to be bigger and better than it's been in a generation. However, in other cities in the past where the America's Cup has taken place, there has been a huge amount of property development along the waterfront, kind of like say an Olympics. That is not going to happen in San Francisco.

SPENCER MICHELS: Still, for sailing fans, and some who are not, the prospects of international competition and just the chance to watch the big boats glide through the fog and into the wind is reason enough to support the race.

WOMAN: I like to see them keel up.

SPENCER MICHELS: Why?

WOMAN: It is exciting.

SPENCER MICHELS: So, it is kind of graceful, I think, the whole thing, huh?

WOMAN: Yes. Majestic.

WOMAN: Yes.

SPENCER MICHELS: Majestic?

WOMAN: Mm-hmm.

SPENCER MICHELS: But some people say, well, with a lot of money, you can make it majestic. This is a rich man's sport.

WOMAN: That's OK. I look watching rich men sail.

WOMAN: It is, admittedly, yes.

SPENCER MICHELS: What were going to say?

WOMAN: Is. It is a rich man's sport.

SPENCER MICHELS: The practice races in 45-foot catamarans continue on and off through May of next year, followed by the finals in the America's Cup in September of 2013, the time of year when the fog usually lifts in San FranciscoBay.

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JEFFREY BROWN: For nearly two decades, Stelios Karagilanis, a father of two, headed a family-owned construction company. Today, his business closed, he is forced to accept free medical care and food from an aid clinic.

STELIOS KARAGILANIS (through translator): We never imagined it. We were never wanting for work, and we had a very dignified lifestyle.

JEFFREY BROWN: Is it hard to have to come here?

STELIOS KARAGILANIS (through translator): It is very, very difficult. We are not used to this way of life.

JEFFREY BROWN: Karagilanis and others we met in Athens recently put faces to grim statistics: a stunning 26 percent unemployment rate, 58 percent for young people like George Georgopoulos, a college graduate who's decided he must leave the country for now.

GEORGE GEORGOPOULOS,Greece: I hope to move abroad for a master's degree. I was thinking about it even before crisis. It was my dream. But now I have to do it.

JEFFREY BROWN: Greece's economy is entering its sixth year of recession and has shrunk by a fifth in just the last three years, paralyzing businessmen like shipbuilder Vassilis Halkitis, who had to lay off half his workers.

VASSILIS HALKITIS,Greece (through translator): We're talking to a major client about building six new ships of 60 meters in length. However, the client is holding back on the contract until he is convinced that Greece will not go bankrupt.

JEFFREY BROWN: For individuals, it all adds up to a reduced standard of living and an uncertain future. For Greece as a whole, it means that and more.

The headlines are about finance ministers, debt deals, austerity measures. But it's become clear that the problem here in Greece now goes well beyond just the economy. As a recent European commission report put, it after years of weak growth, the crisis is now having severe social consequences.

Look up and you still see the ancient Acropolis, a symbol of a glorious past. And some parts of the city bustle with holiday energy, but not far away, closed-up storefronts, and further below the surface, this, a health clinic set up by the Greek branch of the international aid group Doctors of the World to serve the country's newly poor.

Dr. Nikitas Kanakis is its director.

DR. NIKITAS KANAKIS, Doctors of the World: It's the beginning of a humanitarian crisis, even if it sounds as a strong word, because we have the pictures of Africa when we talk about humanitarian crises. This is the reality. We see more and more Greeks to come here, a humanitarian organization, to find the basics.

JEFFREY BROWN: Kanakis' group, in fact, had to cut back some of its work in Africa because of the needs at home.

Here in Perama, unemployment tops 50 percent, as the shrinking economy has crippled much of the local shipping industry. At the same time, the deeply indebted Greek government has made dramatic budget cuts, including to health benefits. The combination has left many here without access to private or public care. And that's meant a stunning rise in disease.

DR. NIKITAS KANAKIS: We see two things. The one is diseases that we have forgotten in Greece, like tuberculosis. It's back. Also, we see people with chronic disease that cannot find any help. Think of a diabetic patient that he needs to take his insulin every day. Where will he find his medicine?

JEFFREY BROWN: Economists, of course, speak of a different kind of necessary medicine, the kind a deeply indebted nation must take, the price for living and consuming well beyond its means for far too long.

GIKAS HARDOUVELIS, Eurobank: The medicine is necessary. It was, though, delivered very abruptly.

JEFFREY BROWN: As a government economic adviser, Gikas Hardouvelis helped negotiate some of the budget cuts and austerity measures that Greece agreed to in order to get international bailouts. Now, with the private Eurobank, he says the swift fall, however necessary, is bringing pain at historic levels.

GIKAS HARDOUVELIS: By the end of 2013, Greece would have a worse depression than the Great Depression in the U.S.

JEFFREY BROWN: Worse than the Great Depression?

GIKAS HARDOUVELIS: Yes. This -- and this depression is affecting everyone. I would say the middle class is carrying the burden. And it is carrying the burden because the state sector is unable to distribute the burden in an equal way.

JEFFREY BROWN: And that has Hardouvelis worried about a further consequence, the tearing of the social fabric.

GIKAS HARDOUVELIS: They simply lost their living standard and they're trying to find a scapegoat for it. It's very important in this period for Greeks to see the positive side of things, and not eat each other up.

JEFFREY BROWN: Not eat each other up. The scapegoating, so far, has centered on immigrants from Africa, Afghanistan and elsewhere. By boat or across the Turkish border, Greece has functioned for years as an easy-to-enter gateway into the rest of Europe and one that by all accounts has made a mess of its immigration system.

Many migrants are illegal, largely tolerated in good times, but increasingly for Greeks, no more.

MAN (through translator): I don't have a problem with immigrants in general, but I have a problem with those who come here and don't find work and they resort to crime.

JEFFREY BROWN: And has this been getting worse?

MAN: Every day, it's getting worse, much worse.

JEFFREY BROWN: This man said he opposes violence against immigrants. But others clearly feel differently, and the anti-immigrant sentiment helps explain the rise of the Golden Dawn Party, which won 18 seats in parliament in the last election and has seen its popularity grow further in more recent polls to third among all parties.

Golden Dawn describes itself as Greek nationalists. But with its swastika-like symbol, its rhetoric and street tactics, it's widely seen as neo-Nazi. And its supporters have become more brazen in carrying out physical attacks on migrants, including this one caught on camera in a market in Rafina in August.

Underneath the joy of a recent Sunday service at the FaithApostolicChurch in central Athens, the poisonous atmosphere has shocked parishioners, mostly from Nigeria and elsewhere in Africa.

Reverend Jimoh Adebayo says members of his congregation have been beaten by Golden Dawn sympathizers, while the police seem to look the other way.

REV. JIMOH ADEBAYO, FaithApostolicChurch: Some have been stabbed, I mean, literally attacked, physically manhandled. And they have come to me to show me their wounds. And some of them have reported it to the police and the police say they will investigate.

JEFFREY BROWN: And do they?

REV. JIMOH ADEBAYO: Well, it is a big question mark.

JEFFREY BROWN: Abigail Linus, who earns some money as a nanny, plays and sings in the church choir.

ABIGAIL LINUS, Greece: You have to be afraid. When you hear things going around in the whole of Greece, in the country of Ellada, you have to very, very scared to go out.

JEFFREY BROWN: The question for many here now, how deep are these angry, even violent currents in the society?

Yannis Lagoudakos, a former mayor of Perama who's planning to reenter politics, predicts things will get much worse.

YANNIS LAGOUDAKOS, former mayor of Perama, Greece (through translator): There is an anger against the national government which hasn't yet expressed itself, and it's building up like water behind a dam, waiting to break out. They're going to start smashing shop windows and grabbing things, and ultimately I wouldn't put it past the Greek society to storm parliament.

JEFFREY BROWN: Others, though, insist the majority of Greeks will continue to show great patience amid the austerity, frustrated by their politicians and angry at what's seen as the haughtiness of richer European partners such as Germany, but understanding that things have to change.

Economist Hardouvelis says Greeks just need to believe that what's happening now really is leading toward a better future.

GIKAS HARDOUVELIS: Once the recession stops, once the depression stops, and once people start seeing the light at the end of the tunnel, then things will turn around.

JEFFREY BROWN: Is that a hope, or is this a forecast?

GIKAS HARDOUVELIS: I think that, in a year and a half, we will see stability. And the big question is whether the political system will be able to accommodate that time period.

JEFFREY BROWN: A year and a half more -- at best. Small comfort for Stelios Karagilanis and his family, facing the onset of winter -- it's too expensive to turn on the heat, he told us -- and a Christmas unlike any he'd ever imagined.

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KWAME HOLMAN: Wall Street was down much of the day, but trimmed its losses after news that the House will convene Sunday to focus on the fiscal cliff. In the end, the Dow Jones industrial average shed 18 points to close at 13,096. The Nasdaq fell four points to close under 2,986.

Also today, the Labor Department reported the number of new claims for unemployment benefits fell this week to the lowest level since March of 2008.

President Obama is urging dockworkers and shippers to avoid a crippling strike at Atlantic and Gulf Coast ports. It would be the first since 1977. The workers union contract expires this weekend. The White House spokesman said today the two sides need to agree on a contract extension as soon as possible. Talks broke down last week in a dispute over wages and royalties.

The Christmas season storm that blasted the South and Midwest swept across the Upper Northeast and New England today, and the death count climbed to 16. The system dumped a foot or more of snow in parts of Pennsylvania, Upstate New York and New Hampshire. In some places, snow brought road travel to a standstill. At the same time, operations at major airports improved, with far fewer delays than earlier this week.

In India, the embattled prime minister remained under pressure to take action against sexual assaults after a gang rape this month triggered violent protests. Manmohan Singh promised a thorough review of India's rape laws and efforts to expedite trials.

Meanwhile, police moved to quell a rally by about 500 students protesting the treatment of women as they moved toward a monument in New Delhi. The students complained officials had declared the site off-limits.

AABHA PANDEY, protester (through translator): We are taking out this peaceful protest. We don't have any conflict with the police. We have just come here to express our stand. All the students are expressing their opinions here, as you can see, so the police should just allow us to pass through to the place. This is our only demand, and nothing else.

KWAME HOLMAN: The rape that ignited the protests was that of a 23-year-old woman attacked by six men, then thrown from a moving bus. Overnight, she arrived in Singapore via air ambulance for treatment of severe internal injuries. Doctors described her condition as extremely critical.

The top prosecutor in Egypt has ordered an investigation of major opposition leaders for allegedly inciting revolt. An official in the prosecutor's office said today the probe will focus on Nobel peace laureate Mohamed ElBaradei, former Foreign Minister Amr Moussa, and former presidential candidate Hamdeen Sabahi. All three oppose Islamist President Mohammed Morsi and the country's new constitution.

The new U.S. senator from Hawaii, Democrat Brian Schatz, was sworn in today. He'd been lieutenant governor for the last two years. Now he replaces fellow Democrat Daniel Inouye, who died this month at the age of 88.

Schatz took the oath of office on the Senate floor after being tapped by Hawaii's governor. The new senator said he will seek election in his own right in 2014. Inouye wanted Hawaii Congresswoman Colleen Hanabusa to take his seat. She said today she respects the governor's choice.

Those are some of the day's major stories.

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MARGARET WARNER: Five days and counting with plenty of tit-for-tat charges, but no agreement in sight, that, in short, summed up the state of affairs in Washington today as the fiscal cliff deadline loomed, Jan. 1. It would mean more than $600 billion in across-the-board tax increases and automatic spending cuts.

SEN. HARRY REID, D-Nev.: Come the 1st of this year, Americans will have less income than they have today, if we go over the cliff, and it looks like that's where we're headed.

MARGARET WARNER: This morning, the Senate's Democratic majority leader, Harry Reid, was blunt about the chances for a deal. And he blamed House Speaker John Boehner.

Just before Christmas, Boehner floated his so-called plan B, letting taxes rise on millionaires. But faced with opposition in Republican ranks, he pulled it, and sent the House home for the holiday. Reid charged today politics explained why the speaker had not yet called the House back.

HARRY REID: John Boehner seems to care more about keeping his speakership than keeping the nation on firm financial footing. It's obvious, Mr. President, what's going on. He's waiting until Jan. 3 to get reelected as speaker before he gets serious with negotiations.

MARGARET WARNER: A Boehner spokesman shot back, "Harry Reid should talk less and legislate more."

But late today, Republican leaders put out word that the House will reconvene on Sunday. Yesterday, they challenged the Senate to take the next step by extending the Bush-era tax cuts for all income groups.

In a joint statement, they said, "The House will take action on whatever the Senate can pass, but the Senate first must act."

President Obama returned early from Hawaii today, still pushing to extend tax cuts for the middle class, but raise rates on the well-off. Aides said he made phone calls last night to Speaker Boehner and to House Minority Leader Nancy Pelosi, as well as Sen. Reid and his opposite number, Minority Leader Mitch McConnell.

But late today, McConnell gave no indication of movement.

SEN. MITCH MCCONNELL, R-Ky.: Last night, I told the president we'd be happy to look at whatever he proposes, but the truth is we're coming up against a hard deadline here and, as I said, this is a conversation we should have had months ago.

And Republicans aren't about to write a blank check or anything Senate Democrats put forward just because we find ourselves at the edge of the cliff.

MARGARET WARNER: Adding to the urgency, Treasury Sec. Timothy Geithner warned he will have to begin taking extraordinary measures to postpone a government default.

The government is on track to hit its borrowing limit next Monday, he said, with no prospect of congressional action to raise the limit.

And here now to help us unravel what's going on Todd Zwillich. He's Washington correspondent for "The Takeaway" on Public Radio International.

Todd, welcome back.

So, decode this for us. Are the players privately as bleak about the prospects as their public statements suggest?

TODD ZWILLICH, WNYC Radio: Not as bleak, Margaret, but bleaker than they were even a week ago. And that's not terribly encouraging.

The president, as you reported there, flying back to Washington last night, and some members of Congress coming back earlier than others, there will be some meetings here. There have to be some meetings here between the principals that you described there and the president.

There are a couple of options even in these last couple of days, even though it seems like five days is terribly, terribly short. There are some bills floating out there to keep tax rates where they're at for people making $250,000 and below. That could slide around. There's a Senate bill that floats around. There's the president's offer which could still be amended. Option three, of course, is to go over the cliff and fight this out on Jan. 1.

MARGARET WARNER: Are there any meaningful back-channel negotiations going on?

TODD ZWILLICH: There have been discussions. Leadership aides on both sides say the channels have been open even during the Christmas break.

When the president called Sen. McConnell and others last night, Sen. McConnell made clear to say that's the first time he's talked to a Democrat since Thanksgiving.

Now, that sounds like they haven't been talking at all, but that's not true, because we all know that the president and the speaker have been engaged in close negotiations and their staffs even closer. Even when the speaker and the president don't talk, the negotiators do.

MARGARET WARNER: Now, why late today did Speaker Boehner call for the House to reconvene on Sunday?

TODD ZWILLICH: Because he knows that there is going to be something probably to vote on, and even if there's not, the president has flown back, the Senate is here, the country is watching.

If you were the speaker of the House, would you want your members to be seen as him on vacation sipping champagne on New Year's Eve, and everybody else is in Washington working?

It's a combination of optics, for sure, not wanting to be seen as off on vacation, but there is likely to be something that Democrats muster to try to get voted on. It would have to probably get through the Senate first, but John Boehner may need his members here.

MARGARET WARNER: Now, what did -- you heard Mitch McConnell refer to, we're happy to look at anything the president proposes.

What is the president's role right now?

TODD ZWILLICH: Well, the president ran on tax rates. The president right now, his role is knee-deep, Margaret. There have been other iterations of debt talks, super committee, Biden talks, where you saw the president try to really keep arm's length from a dysfunctional Congress.

The Congress, the House -- the Democratic House and the Republican Senate have proved that they don't have any common ground on taxes. There's nothing that one side can agree to that the other side will agree to without a lot of strife.

That's the president's role here. Having run on tax increases for people making $250,000 and above, not to mention all that entitlement talk, he ran on it and he won.

He is going to have to fight this out next year for sure. He would like to get some of the math off of the table here if he can.

MARGARET WARNER: Briefly, are there schools of thought in both parties, though, now that they may be -- each may think he's going to be in the stronger position after going over the cliff?

TODD ZWILLICH: Certainly, people on both sides who think that.

Liberal Democrats in particular say this Republican orthodoxy, no tax increases at all, remember, those Bush tax rates all expire on New Year's Eve, and they say if we go over the so-called fiscal cliff after Jan. 1, take all the tax votes you want. They will all be tax cut votes -- tax cut votes.

And there are conservative Republicans who believe that their bargaining position improves. You reported on the debt limit there, which isn't a concern right now, but becomes more of a concern as February approaches. They think they have leverage there to combine the debt limit with the debate over more spending cuts and more leverage on what they want from taxes.

So there are strong voices on both sides here who say, go over.

MARGARET WARNER: So, we better fasten our seat belts.

Todd Zwillich of PRI, thank you.

TODD ZWILLICH: My pleasure.

Photo by Dan Brownsword via Getty Images.

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

Barbara Pendergrast -- Germantown, Tenn.: Mr. Solman, Do you think short-term bonds are too much of a risk when interest rates are this low?

Paul Solman: No, Ms. Pendergrast, short-terms bonds are in fact no risk when rates are this low and that's precisely because they're short-term. If you are only lending money for a week or month, say, and interest rates rise, you will get back your principle soon enough and reinvest it at the new higher rate. It is long-term bonds that are vulnerable to interest rate rises, since your money is tied up for a substantial period of time.

But thanks for the question, because it affords me to revisit an investment idea this page has raised over the years. Ever since I began answering questions in 2007, readers have sought investment counsel. I make no claim to unusual perspicacity but I have, as viewers may have noticed, been around, and tend to know of options that others may not. So I've tried to provide what answers I can.

I also have a host of sources and friends in the world of business and economics. Among them are true investment experts like Boston University's Zvi Bodie, who has appeared on this page pretty regularly from its earliest incarnation. Zvi has long been a champion of "TIPS" -- Treasury Inflation-Protected Securites - and of I-Bonds. Indeed, he persuaded me to invest in a TIPS mutual fund back in 1997 when one was first created by my retirement trustee of that era, TIAA-CREF.

When I began answering questions here, I figured the most honest answer I could give to investment queries was to share my own choices. At the least, I was putting my mouth where my money was. And so, with the eternal caveat that past performance is a godawful guide to future results, I have explained the advantages of TIPS and I-bonds as I understood them, assisted from time to time by Zvi. The main plus: they protect against inflation by promising a cost-of-living adjustment, tied to the Consumer Price Index. Historically, TIPS and I-bonds have paid an additional interest rate that varies depending on what investors bid -- what they bid, that is, in order to buy the bonds. In 1997, this "base rate" (before inflation adjustment) was 3.7 percent for bonds that would mature in 30 years.

As I neared so-called retirement age, my investment mantra became: preserve capital, not make a killing. The way I figured it, getting a "real" (ie, inflation-adjusted) return of nearly 4 percent was one sweet deal for the aging and risk averse.

I had an additional reason for liking TIPS. If I had become so enamored of decent-yield safety, why wouldn't the same be true for a vast number of investors in the sonic Baby Boom coming in my wake as they too neared their supposedly golden years, fearing an alchemical reversion to lead.

Admittedly, TIPS interest is only paid when the bond matures while in the interim, one is obliged to pay taxes on the interest. But if TIPS are held in a tax-deferred retirement account like an IRA, so what? No taxes until withdrawal. TIAA-CREF, the pension manager for my employer, Boston's WGBH Educational Foundation, offered a TIPS mutual fund, which made the investment trivially easy. I seized the day.

And yet, when I talked to friends and family alike, none were invested in TIPS. Indeed, not a one had ever heard of them. Why? I asked Zvi, their stalwart champion. Because brokers never push them, he explained, and private pension plans rarely offered them. There was no money in it. In 2004, when I left WGBH and went to work directly for the NewsHour, I called my new plan advisor. Nope, no TIPS offered by the new pension management firm. Why not?

"If I had to guess, there is no spread where the vendor can make money on those assets," said the NewsHour's own plan consultant. (I took notes.) "They're not going to put anything into their program that does not have some possibility of profit. They have to cover their costs. If not, the prices of their other products would have to go up."

That was 2004. Seven years after the advent of TIPS, that is, the investment remained something of a secret. But look, I thought, Baby Boom investors will find out eventually. And as they do, little by little, they'll buy more and more TIPS. As a result, the government will be able to offer a lower and lower interest rate - in addition to the inflation adjustment - to find new buyers. That should mean, I divined, that those of us who bought in early - at the higher interest rate - would do very well indeed as our old, high interest bonds increased in value, relative to newer ones paying less interest. (This is why bond prices go up when yields go down, and vice versa. Mainly long-term bond prices, as I explained at the outset, above.)

Whether by luck or foresight, my bet, it turns out, has paid off. Had readers followed my own investment trajectory, they would have more than held their own against the markets with TIPS, which have performed admirably - an annualized return of better than 7 percent since I first alerted readers to them online for the NewsHour in early 2008; slightly better even than a non-inflation-protected US government bond fund; considerably better than stocks, real estate or even an index of commodities (though not gold, which has compounded at 12 percent a year). I have explained that TIPS have remained my asset of choice ever since, e.g., here.

But the past is never more than prelude and in recent months, as faithful readers will know, I have become more and more nervous about TIPS as they have risen in value. Today, they are at an even more vertiginous high in price; low, in yield.

"Markets are driven by fear and greed." My particular psyche proves that saying at least a half-truth. As an investor, I am a devout coward. And so, when an investment or asset class reaches unprecendently lofty heights, I quiver. Have I been smart or lucky to date? No one will ever know. And even if "smart," how often has yesterday's genius proved tomorrow's dunderpate?

In moments of temporary hubris, I think of Sir Isaac Newton, mathematician, alchemist and investor. Newton was England's Master of the Mint in the early 1700s and, history records, a good one. Yet for all his monetary sophistication, here is a picture of his participation in the most famous investment bust of the 18th century, the South Sea Bubble.

Photo by Jeremy Grantham via The Mess That Greenspan Made.

You can read a bit more here.

By contrast, as we've reported on the NewsHour, George Friedric "Messiah" Handel invested wisely in South Sea stock, though luck seems to have been, as usual, a major factor.

But back down from the sublime to the more nearly ridiculous: my investment portfolio. It is about to undergo a major shift. That is, I am on the verge of selling much of my TIPS bond fund -- Vanguard's very low cost VAIPX -- in an attempt to protect my retirement with some less volatile investment. Having shared my portfolio in the past, I feel obliged to report any changes to it. Plus, I'm trying to protect myself. A fusillade of email blame should TIPS tank would be demoralizing; had I myself "gotten out" of the investment and failed to say so, wrath would be warranted.

Right now, lending money to the Treasury for 30 years by purchasing a TIPS that matures in December of 2042 carries a "base rate" of .35 percent. Compared to 3.7 percent 15 years ago. Yes, you would still get the inflation rate, which is running at roughly 1.8 percent a year these days. Yes, that inflation rate could conceivably soar, as it did in the '70s, and you would be protected. But all else equal, buying a 30-year TIPS today is lending Tim Geithner or his successor money at a net interest rate of about 2.15 percent, a rate that seems more likely to go up than down, in which case the value of the bond is more likely to go down than up.

So where will the money go? Here, I confess to being, as my father once said about my job at the NewsHour, "absurdly fortunate." I happen to retain a guaranteed annuity retirement account at TIAA-CREF via my former employer, WGBH. It pays a floor of 3 percent a year and is fully liquid. Once upon a time, the annuity didn't seem especially attractive, as I never imagined long-term rates would sink so low. Remember: I was worried about inflation.

Unfortunately for most readers, only previous account holders can access this 3 percent floor rate, which was discontinued as of 2010. But, with five grandchildren, I am appropriately grandfathered in. And even those of you without grandkids will be grandfathered - or grandmothered -- so long as you have an existing TIAA-CREF "Group Supplemental Retirement Annuity."

Presumably, few of you will be so lucky. If not, then, what should you do? What would I have done if I hadn't lucked out with my old TIAA-CREF account?

Well, I was about to transfer a modest chunk -- maybe a fifth -- of my TIPS money into some form of "cash." Those who have bothered to look at my portfolio pie chart will have seen that the ratio of TIPS to "everything else" is the same as Republicans over Democrats in South Carolina: about 55-45. Until I heard of the 3 percent TIAA-CREF option, I was aiming for something like 45-55, with more of the money in "cash."

And this brings us back to your question, Ms. Pendergrast. Because "cash," practically speaking, is just a form of short-term bond. [See Jon Shayne's comment, below.] I was looking at a short-term corporate bond mutual fund when I learned of my better option. I was thinking of putting some more money in stocks and still am. In any case, I would still have chosen a fund managed by Vanguard, since it boasts the lowest management rates of any money management firm I know. But bottom line, most of my money would have remained in my Vanguard TIPS fund, because of my inveterate cravenness.

Last words. I'm practicing full disclosure here, not peddling investment advice. All I firmly believe in is diversification -- across firms, asset classes, even currencies. I don't think anyone has a sure way of making genius returns, unless they're cheating. I admit that I don't know that for sure. What I do know for sure is that if there were genius investors, I wouldn't be able to distinguish them from the lucky ones before the fact. And if, after the fact, you somehow convinced me they had been geniuses, I would remember that past performance has so often proved a godawful guide to future results.

But I do know one thing. If you're worried that interest rates are going up, short-term bonds are a safer approach than pretty much anything else. If they're going up because of inflation, than a TIPS fund should provide safety too.

ps: Zvi Bodie has just read this and weighs in:

Zvi Bodie: IMHO you did the right thing for the right reasons. But perhaps you should remind folks that I Bonds do not pose the same risk as TIPS, despite the fact that they have a 30-year maturity. The reason is that the US Treasury will cash in I Bonds at their full value plus accrued interest at any time after 1 year. With 30-year TIPS, however, the Treasury does not pay back the principal until their final maturity date.

pps: Money manager/economics songster Jon "Merle Hazard" Shayne, featured on the Business Desk the other day, also weighs in, this time with a correction, proving that I get by with more than a little help from my friends:

Jon Shayne: In your post today, you made it clear that by short-term bond, YOU meant things that mature in a few weeks.

However, in the mutual fund industry, "short-term" generally means 2 or 3 years. So these would in fact get hurt a bit if interest rates rose.

The mutual fund industry uses other terms to describe what you were thinking about. "Money market funds" hold paper that mature in 90 days or less (I have looked at many and that's where they always seem to be). "Short-duration" bond funds hold paper that matures in about a year. So "short-term" funds, at 2 or 3 years, are actually the third way-stop out on the maturity curve, not the first. In industry parlance...which is probably what the questioner had in mind, after talking to her broker or what have you. (She is a fellow Tennessean so, I have to look out for her.)

Here is an example from a very plain-vanilla product, the Vanguard Short-Term Bond ETF: https://personal.vanguard.com/us/funds/snapshot?FundId=0924&FundIntExt=INT

Note the average maturity of what they hold is 2.8 years. (And duration is 2.7 years...there is a somewhat subtle difference between those two measures, but you can use maturity.)

Always looking out for you...

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

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MARGARET WARNER: Finally tonight, another in our series of conversations with retiring lawmakers -- tonight, Massachusetts Democrat Barney Frank.

The congressman, who's served for 32 years, is known for his sharp intellect and blunt style. As chairman of the Financial Services Committee, he co-authored the Dodd-Frank reform law regulating banks in the wake of the financial crisis. He was the first openly gay member of Congress, and recently married his longtime partner.

Before that, in the 1980s, his career was marred by scandal involving his relationship with a male prostitute.

But Frank weathered that and went on to win reelection by wide margins.

NewsHour economics correspondent Paul Solman sat down with him last week.

PAUL SOLMAN: Congressman Frank, welcome.

Why Congress? What did you hope to accomplish when you came here first?

REP. BARNEY FRANK, D-Mass.: To make this a fairer country.

I had always been interested in politics. I had assumed, for a variety of -- well, for two reasons, being Jewish and being gay back in the late '50s, early '60s -- that I would never be elected or anything, but I would participate as an activist.

And it's to make it fairer, fairness in the sense of people not going hungry and being deprived through no fault of their own, or even it was their fault, but not letting people sink to that level of misery, ending discrimination, not interfering with people's personal freedom.

And then when the congressional seat opened up, it was a natural forum to kind of increase my scope of activities to make this a better country.

PAUL SOLMAN: What grade do you give yourself one to 10?

REP. BARNEY FRANK: Oh, I give myself a 10 for being smart enough not to answer that question.

Either you sound humble in a way that is literally incredible, not credible, or you sound arrogant. I will say none of the above.

PAUL SOLMAN: What do you consider your successes?

REP. BARNEY FRANK: The financial reform bill, I believe, will hold up very well. I had a major role in that, with some others.

I am very proud of the role I played in getting legal equality for people who are lesbian, gay, bisexual and transgender, and in helping get rid of the prejudice by being visible about it, helping to block the conviction of Bill Clinton of impeachment.

I have done a lot of work for affordable housing, rental housing. I understand the rap on me and other liberals is, oh, we push poor people into homeownership. And it's exactly the opposite of the case. We were trying to prevent those kinds of bad loans.

And I'm beginning to see a substantial reduction in America's military budget and doing away with this notion that, 65 years after World War II, we continue to have to protect the whole world.

PAUL SOLMAN: No concern that Dodd-Frank, on the one hand, goes too far, as some people say, and on the other hand, as others say, doesn't go far enough?

REP. BARNEY FRANK: No, I don't think that in any area it goes too far.

As to the regulators, I would have been worried if Mitt Romney had been elected, because he would have appointed non-regulators. But I think the people in place under President Obama who helped write the law believe in it. And much -- the common theme in the bill, as I saw it, was to say to, a great extent, people who make decisions that are risky, which should be done in the business community, will not be able to escape the consequences of poor decisions because, that way, they will make better ones.

PAUL SOLMAN: Failures, regrets.

REP. BARNEY FRANK: Yes.

I should have voted for the first Iraq war. George Bush did that one very well. I had been skeptical. I was afraid that George Bush was going to treat the first Iraq war the way his son treated the second. In the housing area, I was late, along with a lot of others, to see the housing bubble, but that didn't affect the action.

PAUL SOLMAN: You told me once when I asked you this question that you had a regret about when you came out, I think it was, or your general posture with respect to homosexuality and the timing of it.

REP. BARNEY FRANK: No, I wish I could have come out earlier. I don't think it would have been possible.

Look, I regret that, while the time I was closeted, I behaved irresponsibly and got hooked up with a hustler and made myself vulnerable to a guy who turned out to be a shakedown artist, and got scammed by him into thinking that there was something personal there. That wasn't part of my governmental duties.

I came out in '87. I now think, if I had come out a couple of years earlier, it would have been better. There was a problem there, because my colleague Gerry Studds. . .

PAUL SOLMAN: Right.

REP. BARNEY FRANK: . . . was brought out in '83. And we represented adjoining districts in Bristol County, Mass.

The notion that there would only be two gay members of national parliaments in the world, and they would represent adjoining districts, people would have been checking the water.

PAUL SOLMAN: Are you amazed at the extent to which this country has turned around on this issue?

REP. BARNEY FRANK: Not amazed. Pleasantly surprised.

There's a pattern here that I have said before. I filed the first gay rights bill in Massachusetts history in 1972 in the legislature, one of the first in the country. In the 40 years since then, I have consistently underestimated the pace of reform. But, yes, it's gone a little faster than I thought it would.

PAUL SOLMAN: And yet we're in an institution here which is more toxic than ever, at least to all appearances.

REP. BARNEY FRANK: It got toxic when the Tea Party won.

What happened was, the American people were in a bad mood because of the crisis, because of the bailouts for a whole lot of reasons, and they elected in 2010 wildly irresponsible extremists. And that caused the dysfunction. I don't think it's permanent and institutionalized.

I think it was the result of one election, and I think, as a result of the 2012 election, it's already beginning to recede.

PAUL SOLMAN: So fiscal cliff will be resolved?

REP. BARNEY FRANK: Not right away. It will be resolved ultimately.

The entrenchment of people who don't believe in government and the damage they have been able to cause because of that is diminishing.

PAUL SOLMAN: You haven't been particularly pugnacious today, but has it cost you, do you think, to have been as pugnacious as you have been over all these years?

REP. BARNEY FRANK: No.

This is probably the media stereotyping. I can't think of any achievement I tried to accomplish -- I guess people aren't as hypersensitive as that question would assume, that -- by which I mean the notion that people wouldn't go along with an important public policy because I hurt their feelings, I don't think that's true.

PAUL SOLMAN: What are you going to do next?

REP. BARNEY FRANK: I'm going to write two books, I hope, one on liberalism, one on the history of the gay rights movement, give lectures for pay, do some TV commentary, and, I hope, teach.

PAUL SOLMAN: Stand-up comedy? We once talked many years ago about your fantasizing about that.

REP. BARNEY FRANK: No, that's too hard. That's too hard.

Going before an audience of people who expect you to be funny is tough. Going before an audience that expect you to be boring, and then being a little funny, is much easier. I prefer easier.

PAUL SOLMAN: Barney Frank, thank you very much.

REP. BARNEY FRANK: You're welcome.

MARGARET WARNER: Barney Frank may just stick around the Capitol Hill a little longer. Shortly after Paul finished that interview, there were reports that Frank may be appointed to temporarily fill John Kerry's seat if the Massachusetts senator is confirmed as secretary of state.

Warehouse manager at operations desk on computer. Photo courtesy of John McBride & Company Inc.

Paul Solman: Jon Shayne is not just the world's No. 1 econo-crooner, belting out economics tunes of his own invention under the stage name Merle Hazard at his own website and for the PBS NewsHour audience on inflation, on the Greek debt crisis, on the euro crisis in general, on too-big-to-fail banks, and most recently, on the fiscal cliff.

No, Shayne/Hazard is no one-trick pony. He is also a noted money manager, recently highlighted by Forbes magazine for his perspicacity in stock-picking. Wrote Forbes: "If you follow the stock market, Jon Shayne is worth a good, long listen. Especially now."

Having listened to Jon plenty over the past few years, I agree, especially with his emphasis on the increasing share of national income commanded by the owners of capital, in contrast to labor. This angle is the focus of Forbes' story as well.

So I asked Jon to elaborate for the Making Sen$e audience. He has done so by interviewing the person who inspired his thoughts on the subject, British economist Andrew Smithers, who formerly ran the asset management business of S.G. Warburg, and now heads up his own consulting firm, Smithers & Co., in London and has produced this chart:

The chart shows the relative shares of national income captured by labor and capital in the U.S. from 1929 to the middle of 2012. As you can see, the last couple of decades have not been as kind to those who work for companies as to those who own them. Not nearly. Here's Smithers' explanation to Jon:

ANDREW SMITHERS: All output is for somebody's benefit, either those who work for the firm (the labor share) or those who provide the capital (the profit share). Labor's share has never been lower or the profit share higher. These shares of course add up to 100 percent, before the government has taxed both labor and capital.

JON SHAYNE: What do you think has caused labor's share to fall below its average to a new historical low, and capital's share to rise to the higher highest peak ever?

ANDREW SMITHERS: The change in the way company managements are remunerated has been dramatic in this century. Salaries have ceased to be the main source of income to senior management, with bonuses and options taking over. There has been major change in management incentives and it should not cause surprise, though it evidently has to most economists, that management behavior has changed. The current incentives discourage investment and encourage high profit margins.

This is dangerous for companies' long-term prospects as it increases their risk of losing market share and reduces their ability to reduce costs. It is very damaging for the economy, but it maximizes the income of managements. Senior management positions change frequently, so if management wish to get rich, they have to get rich quickly. I am not alone in this diagnosis. A recent report from the Federal Reserve Bank of New York comes to the same conclusion from a theoretical analysis as I have come from data analysis.

JON SHAYNE: How do bonuses today encourage profitability above investment? I guess you mean that they are tied to changes in earnings per share, or return on capital, rather than to the growth of companies' output?

ANDREW SMITHERS: Yes, the current way in which managements are rewarded is perverse from an economic viewpoint. Adam Smith pointed out that some characteristics of human beings such as greed, which are often unpleasant at a personal level, can nonetheless bring social benefits. But this is not necessarily the case under current remuneration systems; greed is increasingly the cause of harm rather than help to the economy.

JON SHAYNE: On the graph, do we know how much of labor's share represents what managers earn? If their share has gone up over the decades, through stock options and the like, which I believe is the case, then the average worker is getting even a bit less than it looks, correct?

ANDREW SMITHERS: Yes, there have been two major changes. First, the share of output which goes to all employees has fallen to its lowest recorded level. Second, the proportion of total remuneration that goes to the higher paid has shot up. Both of these changes have been bad from the viewpoint of the average worker. The result is that current management reward systems are producing both economic damage and social disquiet.

JON SHAYNE: What is the role of changes in technology that, for example, allow a credit card company to put an English-language call center in India? There is greater ability to send jobs abroad now than there ever was before. Are you saying that boardroom bonus culture explains all of the reduction in labor's share?

ANDREW SMITHERS: Not necessarily, but for the most part. Changes in economies often have multiple causes; however, two common explanations do not fit the facts. (1) The fall in labor's bargaining power. As the following chart shows, labor's bargaining power, in so far as it can be measured by trade union power, has fallen steadily since the end of the war. However, in the first 30 years profit margins fell and only then rose. (2) Technology applies everywhere but while profit margins have risen in the UK and U.S., they have fallen, for example, in Japan and France. If technology had been a factor then margins would have risen in all G5 countries.

JON SHAYNE: What is your expectation about how the pie will be divided in the years ahead?

ANDREW SMITHERS: The long-term averages appear to be stable. In other words, the shares will tend to revert back to normal. Profit margins will therefore fall and employees' incomes should rise relative to output.

JON SHAYNE: You devote yourself to close analysis of economic data from all of the world's major economies. What are the biggest insights you have had from this work -- things that are not apparent to most policy makers and investors?

ANDREW SMITHERS: My wife calls this my "smug bucket" bit, i.e., I explain why I am right and most people wrong. I am, however, aware that it is possible, though of course unlikely, that I am not always right. The things that in my view are most often misunderstood are:

(1) That U.S. corporate balance sheets are not "in good shape" as many and perhaps most investment banks claim. The data published by the Federal Reserve in the Flow of Funds Accounts of the United States ("Z1") show that non-financial corporate debt (Z1 Table B.102) is near its all-time high and the same conclusion comes from comparing debt with corporate output.

(2) At the same time as claiming that corporations have low leverage, it is commonly claimed that the economy is suffering from companies' wish to deleverage. This example of cognitive dissonance comes from both assumptions being wrong. Balance sheets are highly leveraged but companies are not seeking to deleverage. U.S. companies are currently buying back equity at an annual rate of $400 billion a year, which serves to increase debt ratios and is clearly incompatible with the assumption that they are seeking to deleverage.

Policymakers need to recognize that the problem is not deleveraging but the perverse incentives of current management remuneration contracts. These need to be changed. Otherwise bringing the fiscal deficit under control is highly likely to produce another recession.

JON SHAYNE: How is bringing the deficit down likely to produce another recession?

ANDREW SMITHERS: The standard assumption of most Keynesian and monetary economists is that the current imbalance in the economy which results in the large cash flow surplus of the corporate sector is cyclical and will change when entrepreneurs recover their animal spirits, either naturally or because there is so much money around. The data suggest otherwise. They point to the current imbalance being structural, not cyclical, and needing a structural change in management remuneration contracts for it to change.

As the problem is unlikely to be solved quickly it poses two risks to the economy. The first is that premature fiscal tightening will push the economy back into recession. The second is that too much delay will cause people to expect inflation to rise and this will probably cause actual inflation to pick up.

Unfortunately this matter is seldom if ever discussed and I hope your efforts will help to change this. I cannot see much hope of changing policy to address this complex problem unless it is first widely discussed.

Andrew provides research to over 100 money managers around the world (including me), and is the author of books such as Japan's Key Problems for the 21st Century (with David Asher) (Diamond Press in Japanese 1999), Valuing Wall Street (with Stephen Wright) (McGraw-Hill, 2000) and Wall Street Revalued -- Imperfect Markets and Inept Central Bankers (Wiley, 2009).

On YouTube, there is video of Andrew being interviewed by John Authers of the Financial Times in August 2012 on the bonus culture, and on CNBC and elsewhere. He wrote a chapter entitled "Can We Identify Bubbles and Stabilize the System?" in "The Future of Finance: The LSE Report", published by the London School of Economics and Political Science in September 2010.

By the way, while this piece was in production, Paul Krugman wrote an interesting New York Times column on the same topic. In Krugman's view, the cause of the decline in labor's share is less than clear, but he thinks that technology and weakening antitrust enforcement are both factors. I'll ask Andrew about it, next chance I get.

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

Photo by Stockbyte via Getty Images.

Nick Corcodilos is an expert on how to get a job. We ran into him while doing a story on the relative futility of Internet job boards and asked him to post his own job search secrets.

It became a palpable hit, so we asked Nick if he wouldn't mind taking some questions from our readers. It turns out that in addition to giving interviews to PBS, Nick hosts a website called asktheheadhunter.com, and publishes a free weekly -- the Ask the Headhunter© Newsletter.

John Galt -- Baltimore: I receive a number of calls per week from recruiters/executive search firms -- it has gotten to the point that I don't answer my phone if I don't recognize the number. For various reasons, I absolutely am not looking for a new position, and I don't have people to recommend. That being said, I do recognize the value that headhunters can have (I'm in my current position because of one). How can I head them off without being rude?

Nick Corcodilos: Wow -- John Galt, right out of Ayn Rand's Atlas Shrugged!

Think about it this way: If a telemarketer calls, how do you know she's worth talking to? Odds are, she's not. So it is with headhunters. Most are looking for a quick referral or a quick placement. Few so-called headhunters (or recruiters) are worth dealing with. The good ones are worth their weight in gold -- and you should cultivate them.

How do you know a recruiter is legit? It's simple: Find out who recommended you to them, and then call that person to find out whether the headhunter is reputable. The best headhunters don't cold-call. They will get your name from a trusted source and they have no problem telling you who recommended you. Those are the good guys. The worst will find your name online or in a database, and they're merely fishing. They're not really recruiting you for a job.

There are some tips about judging headhunters in my PDF book, "How to Work with Headhunters ... and How to Make Headhunters Work for You":

If you establish yourself as someone headhunters go to for insight, advice and introductions, you will join their inner circle. You will earn a place on their list.

At times I have referred people to companies for which I was not even doing a search -- as a courtesy. I didn't make a dime. But I made new friends. That's the reason why you should invest time to help a headhunter. However, you should judge the headhunter first and decide which headhunters are worth your effort.

Judge a headhunter by how much she appreciates your help. Does she share useful industry information with you? Does she make casual introductions that might help your career (even if these are not job interviews)? Does she return your calls?

Working with headhunters is like working with anyone else in business: It takes time to build trust. The rule of thumb is simple: Don't trust your valuable contacts to someone you don't know, but do invest those contacts in headhunters you trust.

If you disregard headhunters until you need them, that's not going to work. You must invest in their success if you want them to help with yours. Learn to identify the good ones, and cultivate them.

Ava Bowdler -- London, England: I went for an interview and was told I didn't get the job but was next in line. I was then asked if I would take the job if the other candidate did not accept their offer. What should I read into this?

Nick Corcodilos: It depends on how sneaky the employer is. The question posed to you is actually used by some employers to test candidates. In other words, there may not be another candidate, and if you hesitate to accept the offer as their number two, you've failed the test and they won't hire you. I don't think this is an ethical test of applicants and I wish employers would not do it.

But more likely, the employer is asking an honest question. If you're not offended at being the No. 2 candidate, then tell them you'd take the job. If it turns out they're playing games with you and this is a test question, saying yes won't hurt, either. If their tactics turn out to be questionable, you can always change your mind.

My policy in such matters is to be yourself and to be honest. There's altogether too much game-playing in the hiring process already.

Dale Anderson -- New Rochelle, N.Y.: Online job search is a waste of time. Once you have given up as I have, how is one expected to go out and try to put on a positive face when all one faces is no positive direction? Everything in the Unites States is a scam.

Nick Corcodilos: No, everything is not a scam. There are a lot of companies that are hiring, but there are more that are nervous about investing in more personnel in a volatile economy. It's understandable: So much is in flux today that companies hesitate to spend money, and they over-compensate by insisting on "perfect hires." That's as big a mistake for employers as thinking everything is a scam is for you.

Getting angry about it won't help you. Figuring out how to make companies say yes to you, will. So let's step back and consider what you can do.

First, we already know that applying for jobs online is largely a waste of time. The competition is just too big, and employers simply cannot process all the applicants they solicit. It's a self-defeating system. Your challenge is to help employers meet you outside of that numskull system. Help them see what you can do for them.

Second, we know that employers tend to hire through personal contacts. So you must face that reality and learn how to apply for jobs through people a company knows and trusts. This is awkward for most, but it's a skill that's as important as any work skill. Rather than search the job postings, devote yourself to meeting people who do business (or work for) the companies you want to work for.

Third, there is no way to pursue hundreds or even dozens of jobs through personal contacts, because no one can cultivate so many genuine relationships at once. You must pick your target companies carefully and focus your energies on a small handful. The nice thing about this is that it's easier to make the relationships that lead to jobs when you're focusing on just a few companies.

So get to work picking the right companies. This article will help: Due Diligence: Don't Take a Job Without It.

I started headhunting in Silicon Valley in 1979, and I've answered over 30,000 questions from the Ask the Headhunter community over the past decade -- and I'm glad to share what I know with you. I offer no guarantees -- but I'll do my best to offer you useful advice -- so please feel free to post your questions about your personal challenges with job hunting, interviewing, resumes, job boards, or salary negotiations. I am the author of three how-to PDF books, available on my website: "How to Work with Headhunters ... and How to Make Headhunters Work for You", "How Can I Change Careers?" and "Keep Your Salary Under Wraps".

Questions will be collected from here and we'll post my advice on a series of Ask the Headhunter columns here on Making Sen$e. You'll also find my comments sprinkled throughout this discussion forum about various topics. Thanks for participating!

Copyright © 2012 Nick Corcodilos. All rights reserved in all media. Ask the Headhunter® is a registered trademark.

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

Photo by Flikr User seen by tobfl via Getty Images.

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday. We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available here, for free, in its "basic" version.

Carol -- Albuquerque, N.M.: Just curious. When someone dies, what happens to their unused Social Security earnings if they don't go to a spouse or kids?

Larry Kotlikoff: They vanish into thin air. That's the nature of an insurance scheme. If your house doesn't burn down, your premiums have, ex post, been wasted. With longevity insurance, if you die early, you don't get paid off. On the other hand, you're in heaven, where God, not cash, is king.

George -- Athens, Ga.: I turned 59 four months after my wife turned 62. She is drawing Social Security benefits based on her work record. I have been the higher earning spouse. If I die before I begin drawing benefits and before my full retirement age of 66, and even before she turns 66, will she (if she waits until she is 66 to apply for survivor benefits) receive what I would have received at age 66, based on my work record at the point of my death? Or is it based on what I would have received if I had begun receiving benefits at the age I would have been -- i.e., 62 years and eight months -- at the point of her application?

Larry Kotlikoff: Yes, to your first question. If you die before full retirement age, having never taken benefits, she will receive what you would have. If you die after full retirement age, having never taken benefits, she'll give your full retirement benefit augmented by the Delayed Retirement Credit. If you take benefits early, however, she'll receive your reduced benefit as a survivor benefit and it will be further reduced if she herself takes this survivor benefit early.

I don't mean to be grisly, but if you know for sure you will die in the near term, I would not take benefits early because it will mean permanently reduced survivor benefits for your wife.

Suzanne Sullivan -- Denver: Can someone get the ex-husband pension? Divorced after 22 years of marriage when he died.

Larry Kotlikoff: You can collect survivor benefits based on you divorced husband's earnings record. You can start collecting them as early as 60. But if you collect your survivor benefits early -- before your full retirement age -- they will be permanently and significantly reduced.

Linda G. -- Troy, Mo.: In 1992, after a brain tumor left me with disabilities (the hidden, but equally devastating kind), I filed for disability insurance that I had purchased through self employment. It paid me a fixed income til this past October when I turned 65. As part of the claim process, I had to file for government Social Security Disability Insurance (SSDI). I now have no income. A few years ago, a phone call from someone called Social Security advocates (generically) suggested I might be able to apply again and possibly even get money retroactively, though I'm not holding my breath. I have had no time to really get informed about all this until now.

As for health insurance, double digit increases twice a year plus co-pays etc. were too expensive. I can't afford flu shot, haven't had an MRI since 2001. Private insurance disability excludes me from Medicare that would have helped had I received SS disability, is that right? Do I have to wait til I apply for retirement before getting Medicare help? Many thanks.

Larry Kotlikoff: You can join Medicare starting at 65 and you may be able to collect Social Security retirement benefits as early as 62 if you worked for more than 40 quarters before becoming incapacitated.

[Paul Solman: So sorry for your trials and tribulations, as is Larry, I'm sure. He answers questions here out of the goodness of his heart. I would only add that when critics deride the "safety net" and the disincentives to work that it supposedly provides, they often forget about life's cruelties and that many Americans, like yourself, literally live on the edge.]

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

James Livingston loves consumption, is skeptical of private investment. Paul Solman pushes him further on positions Livingston raised in a story on the NewsHour Thursday.

James Livingston makes three economic arguments in favor of consumption over private investment/greater production. 1) Without enough buying, a consumer-driven economy like ours swoons; 2) Growing inequality in America exacerbates the problem of too little consumption -- in economese: "insufficient aggregate demand"; 3) private investment hasn't driven the US economy for nearly a century.

This third argument is Livingston's contribution to the current tax-and-spending debate. Because if it has merit, it undermines the argument in favor of lower taxation on the well-off: that lower taxes will lead to more private investment which will inevitably, in John F. Kennedy's phrase, "lift all boats."

Livingston's argument has already stirred comment in cyberspace. Here's a fuller version of what he said when I interviewed him. (Both my questions and his answers have been cleaned up to make for easier reading.)

Paul Solman: So what's wrong with the argument that it's not consumption, but production and productivity that makes us richer and richer?

James Livingston: The problem is that they assume that private investment drives growth and that private investment derives from savings. In fact, for 100 years now, growth has been driven by consumption. So to say that we need to increase productivity by more savings and more investment is to violate, it seems to me, the historical evidence, which is clear for the last 100 years.

PS: But it makes intuitive sense, no, that we invest, we build newer and better things and we're all better off?

JL: Yes, it does make sense. It just doesn't work that way anymore. It hasn't since about 1919. After 1919, what happened was something remarkable and for the first time in human history you could increase productivity, you could increase output without greater inputs of either labor or capital. The 1920s was the watershed decade in that. So, after 1919, all bets are off. And when Hayek and others argue that what we need to do is increase savings and that's going to take us into recovery or provide for long term growth, again the problem is the historical evidence says something else altogether. So if it isn't more labor and it isn't more capital, what makes us richer?

More consumption. More demand. If we allow consumer demand to drive growth, we're safer and we're going to have more balanced growth than if we allow it to be driven by savings.

PS: But you save money; you invest it in a new drug process, for example, or a new hi-tech product which makes everybody better off -- it's intuitively obvious.

JL: Yes, it's intuitively obvious, but let's break down what you said about saving. You save -- who saves? Does the corporation save? It has profits, right? Does it need those profits to innovate? Probably not. Depreciation funds are enough to improve the productivity of most capital stock -- again, that's been happening since 1919. So what are those savings? They come in the form of profits.

PS: Yes. Rich people and corporations save, reinvest their profits in new, better things that make us all more prosperous.

JL: Do they? Do they reinvest? It seems to me the evidence of the last 4 years is that these banks and these corporations are awash in money. I don't see any investment activity; therefore, I don't see any growth. But on the other hand, if they withhold all of those savings, all those profits from circulation, then we're going to have continued stagnation. I guess the question is: What do they invest in? The typical scenario is a corporation gets profits, reinvests in plant and equipment and therefore produces more with less labor; with less input. But corporations don't need those profits to improve productivity or outputs -- so what do they do with them? They park them with the banks, or they invest on their own in speculative channels.

PS: But all the startups that are happening; all the drugs that need clinical trials; this is investment, isn't it?

JL: Most of those medical trials, most of that kind of investment, is a public/private partnership. Public investment, public spending, is driving the research and development. We have to talk about that as opposed to simply private investment. The other thing about the startups is that most startups die off within 18 months. That's their lifespan. Most small businesses don't pay very good wages, and most small businesses don't provide health benefits either. So I think our fetish about helping small business doesn't help us when it comes to employment and it doesn't help us, I don't think, when it comes to growth, because, let's say, that 60 percent of the jobs are created by small business. Those jobs disappear in 18 months.

PS: Are you suggesting that less and less investment is needed in order to get what we now understand to be productivity?

JL: Precisely. Yes. In fact, I would say that private investment is a shrinking part of the larger pool, shall we say, of investment. The growth pattern looks like this since 1919; there's more public investment, on the one hand, and there's more residential investment on the other, which I treat as a form of consumer spending. So in that sense, net private investment has been shrinking; has been declining, absolutely, since 1919. It's a shrinking part of this puzzle. Why then do we have this idea that we have to reward private investors, the so-called job creators? We don't need to. What you said to begin with was, yes, private investment is a small part of this. Why then fetishize it?

PS: So when young entrepreneurs I know who are starting businesses tell me that they don't even take any money from venture capitalists, for example, because they just don't need it; that's the latest stage in a trend you say has been happening for almost 100 years.

JL: Yes. In fact, corporations don't need the savings that banks are supposed to be providing them. They don't need it. They can finance their growth out of retained earnings, depreciation funds, whatever. So yes, that's interesting, because that's the completion of the trend that begins in 1919.

PS: So productivity is going to grow on its own? That's what "total factor productivity growth" is: just technology generating more technology, more insights, putting together different elements of growth and you grow willy-nilly?

JL: Yeah; that's certainly how it's happened, again, since the 1920s. Except that I think the linchpin here, the keystone, might be the research and development provided by government spending; public spending. And then the public spending that validates, or affirms, this technological kind of innovation.

We can do all the research and development in the world; we can develop all kinds of technologies; if there's not sufficient consumer demand to buy the goods, then what? Then what happens? Then we have stagnation; we have economic crisis, which is what we've got on our hands now.

The theory that Hayek and others have brought to us, as against, say, Keynes or Marx or whoever you want to choose -- what it does, it reinstates the investment function of private enterprise, private investors - we used to call them capitalists. It magnifies that role in the modern world in ways that are very satisfying to people who believe that the way we do things now is the way we should always do them.

The problem with it is that these private investors, these so-called job creators, don't, in fact, drive the economy. They just don't.

PS: They don't create jobs?

JL: They do not, and they haven't for the last four years, and for that matter, they haven't for the last 80.

PS: Well, there have been a lot of jobs created in the last 80 years.

JL: Yes, but consumer demand has driven that growth and it seems to me that the key to it -- the explanation that you need -- is to look at the 1930s and '40s and '50s. That's the heyday of consumer culture -- the New Deal first, then the Second World War and then the decade of the 1950s.

PS: But military spending wasn't consumption spending, was it?

JL: No, but it created enough jobs to promote consumer spending and then especially in the 1950s with the conversion of military spending to regular private spending. The whole era between 1933 and 1973 -- if you look at it minus 1941-45 -- it's driven by consumer spending. The fastest growth rates of the 20th century are recorded 1933-37, when net private investment not only declined, there was net capital consumption in the '30s.

PS: But if government spends, then there's enough demand to draw producers to make the things that will make us rich.

JL: Yes. Demand drives everything and the question is: What kind of demand do we promote? What kind of demand do we want? What kind of growth, in effect, do we want? In the post-war world -- that is to say, the beginning of the 1950s and '60s -- the economic debate worldwide was between: Shall we have extensive growth -- capital stock driven, investment driven -- or shall we have intensive growth? The most far reaching theories that we know of came here with the development of Keynes' theories, but also in Eastern Europe, where people said: Up until now we've had extensive growth, driven by industrial investment "by the plan." What we need to do is make the transition to intensive consumer driven growth, because if we don't, Eastern Europe will stagnate. They were making these arguments in the 1960s and everything they said came true in the '70s and 80s. That's what led to the fall of the Berlin Wall.

PS: We beat the Soviet Union by consuming better?

JL: Yes. We beat them by shifting from extensive capital stock investment -- private investment-driven growth -- to consumer demand.

PS: And so that old cliche about how the Russians loved our jeans and Beatles records is an accurate account of how we won the Cold War?

JL: It's one of the arguments I make in the book "Against Thrift," yes, that consumer culture was a political piece of dynamite in Eastern Europe.

PS: The transition to modern consumer culture.

JL: Yes.

Photo by Marc Grimberg via Getty Images.

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

Ashok Rao -- Chennai, India: I recently came across this Wall Street Journal article that argued that our $16 trillion dollars in debt is actually just the tip of the iceberg -- that our real debt (measured by entitlement liabilities) was in the ballpark of $87 trillion dollars. Suffice to say, I was sufficiently scared if the argument is fair. They argue that even if we tax at 100 percent AGI (adjusted gross income) of all income over $65,000 (which reminds me of the Laffer Curve), we wouldn't even be able to stabilize the growth in these liabilities.

I really hope there is something you can tell me to put me at ease... This is actually scaring me much more than anything else of financial concern to the United States of America.

Paul Solman: Dear Ashok, do not be scared. It is not good for you. Yes, our so-called "unfunded liabilities" are a lot greater than $16 trillion, as our own Ask Larry Kotlikoff, the Social Security guru, has for years insisted and as former Treasury Secretary Pete Peterson explained to me a dozen years ago and again during the 2004 Presidential campaign.

But the liabilities mainly consist of retirement promises we have made, as a nation, to seniors like myself in the form of Social Security and Medicare benefits. If you have been paying attention to similar pension promises to workers in Europe and here at home, you may have noticed that many of those promises are being trimmed.

That's just what will happen here. Indeed, the Obama Administration let it be known this week that it was willing to begin altering the terms of those promises. The famous Bowles-Simpson fiscal compromise plan makes even more adjustments. Nobel laureate economist Peter Diamond of MIT laid out a prudent, non-drastic course of adjustment on this page back in the summer.

As for Medicare, America will tussle with what pills and procedures to pay for -- and how much to pay -- for the rest of my born days, and well beyond. The pull and tug will probably continue forever. But rest assured -- or fidget anxiously: when government can no longer afford to cover certain expenses, it simply won't.

So whenever you hear about how "broke" America is, as Larry Kotlikoff loudly declared on this page a week ago, realize that the looming liabilities are not necessarily as they seem.

Realize too that another of those liabilities, the debts we owe to creditors -- and the interest on that debt -- will be diminished by inflation. Borrowing money today and paying it back in devalued dollars years from now means the debt is less onerous than it seems. Yet another reason to think the sky may not be falling as fast as forecast.

You want to worry, Ashok? Then worry about continuing income and wealth inequality and what that might do to America's social fabric. I doubt it will destroy us, but it's a scarier prospect, to me, than the bankrupting of America.

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

Watch Video | Listen to the Audio

RAY SUAREZ: Retailers are hoping to finish the holiday shopping season strong, particularly given some forecasts warning of a slowing economy in 2013.

As we reported earlier, consumer spending helped spike better growth this fall. But in light of the last recession, some are asking whether less personal debt and perhaps some more austerity might be a better approach.

NewsHour economics correspondent Paul Solman has been exploring that question, part of his ongoing reporting on Making Sense of financial news.

ACTRESS: The economy is just terrible. I'm really worried about our future, honey.

ACTOR: I'm spending just as fast as I can to stimulate the economy. Uh-oh. I just maxed out my credit card.

ACTRESS: Here, use mine. The economy can use all the spending it can get.

NARRATOR: Stop right there.

PAUL SOLMAN: Just in time for the holidays, a new video from the folks who created the Keynes-Hayek rap, which we have featured in the past. This may look like a Keynesian Christmas carol, pushing consumption to boost the economy, as English economist John Maynard Keynes long ago advised.

MAN (singing): If you want a recovery, buy toys, mountains of toys.

PAUL SOLMAN: In fact, it pitches the exact opposite: saving as the path to prosperity, as sung by Keynes' conservative rival, Friedrich Hayek.

MAN (singing): Delaying consumption of goods today, a better tomorrow we pave. If growing prosperity is our goal, the best thing we can do is save.

PAUL SOLMAN: In real life, Hayek's Austrian austerity is much in vogue these days. Spending is suspect, especially if it means going into debt. Savings are our salvation, since they are invested and will thus grow the economy, to which Rutgers economic historian James Livingston says, bah, humbug; such Scrooge-like logic belongs mainly to Christmas past.

JAMES LIVINGSTON,RutgersUniversity: For 100 years now, growth has been driven by consumption. So, to say that we need to increase productivity by more savings and more investment is to violate, it seems to me, the historical evidence.

PAUL SOLMAN: In fact, Livingston says, consumer spending represents some 70 percent of all economic activity, and it is thus the key to commerce.

At New York's Grand Central Terminal, the holiday fair, where the vendors corroborated the economist.

ANASTASSIA GONYE, Tuff Cookie Clothing Co.: You cannot grow an economy without, you know, good consumerism, you know?

PAUL SOLMAN: As an immigrant from the former Soviet Union, Anastassia Gonye has lived the alternative.

ANASTASSIA GONYE: I stood in line for bread, so there wasn't enough of things that are necessary to survive. You know, I had to make things for myself. That's how I started my -- that's how I learned that skill, because I had to make clothes myself, if I wanted to look halfway decent. So, it's different, you know?

PAUL SOLMAN: But this is better than...

ANASTASSIA GONYE: Of course it's better, way better.

(LAUGHTER)

NARRATOR: Russia, October 1917.

PAUL SOLMAN: The Soviet planned economy grew out of the Communist Revolution of 1917. But in the U.S. back then, the market reigned, channeling wealth to its most productive uses. The new infomercial thinks that that should still be the model.

NARRATOR: Increasing productivity needs more savings and investment, the true engine of economic growth. Now, hear Friedrich Hayek sing a song of savings.

MAN (singing): Your savings are borrowed by businessmen. Production's structure is changed. They invest in workers and capital goods, our economy rearranged.

PAUL SOLMAN: But, in a recent book, "Against Thrift," Livingston shows that private investment, as a percentage of the economy, has actually been dropping, steadily, since the 1920s.

JAMES LIVINGSTON: I wouldn't say we don't need private investment at all, but we have to acknowledge that private investment doesn't drive growth.

PAUL SOLMAN: But the new drug that requires all this money for clinical trials, what I have got in my pocket, this amazing device, that doesn't require investment?

JAMES LIVINGSTON: Most of those clinical trials, most of that kind of investment is a public-private partnership. What you're holding in your hand, it seems to me, is a perfect example.

That is, government spending, public spending has driven the research and development that allow for the development of this smartphone. We should acknowledge that. It's created jobs, and it's created growth as well.

PAUL SOLMAN: Yet, says Livingston, we scorn government and glorify the private sector, extolling productivity and hard work. Yet, we live in a country where productivity makes work hard, all right, hard to come by.

JAMES LIVINGSTON: We can develop all kinds of technologies. If there's not sufficient consumer demand to buy the goods, then what? Then what happens? Then we have stagnation. Then we have economic crisis, which is what we have got on our hands now.

PAUL SOLMAN: But we're borrowing more in order to spend. Isn't borrowing a problem?

JAMES LIVINGSTON: Who's we, consumers or the government?

PAUL SOLMAN: The government.

JAMES LIVINGSTON: OK. The government is borrowing more and more. Why? Because there's not enough growth, right? There's not enough taxes coming into the coffers, so it has to borrow more.

If we can reinstate growth -- and everybody agrees on this -- if we can reinstate growth, we're going to be fine, fiscally speaking. The question is how to reinstate growth. If you believe Hayek, it means more saving, more investment. If you believe me, along with Keynes and a few others, no, that's not what we need.

PAUL SOLMAN: We need to spend more.

JAMES LIVINGSTON: We need to spend more. And that's why we're here.

PAUL SOLMAN: But consumer stimulus isn't the only reason Livingston pits himself against thrift. He also thinks buying something is liberating.

JAMES LIVINGSTON: It's the idea of freedom that stands behind it. It's, what can I do with this thing, what can I do with this good? That's what people buy things for. Or they're buying gifts to cement social bonds and create an emotional climate.

PAUL SOLMAN: So you think of shopping as a form of self- actualization?

JAMES LIVINGSTON: Yes. Shopping, consuming, that is at least as self-actualizing as producing or working, yes.

PAUL SOLMAN: Retail therapy, in theory, and here in practice.

Do you get genuine pleasure, joy out of shopping, or do you feel guilty because it's consumerism?

CARMEN TRIPETO, shopper: Oh, no.

WOMAN: Enjoy it. She definitely enjoys it. I enjoy it as well.

CARMEN TRIPETO: I definitely enjoy.

PAUL SOLMAN: How do you enjoy it? What do you enjoy about it?

CARMEN TRIPETO: Because I buy some present for the rest of my family, my girls, and make me happy when I give something new.

PAUL SOLMAN: The sellers often seemed as self-actualized as the buyers. Elissa Ehlin makes copper and enamel jewelry with her husband, Jay.

ELISSA EHLIN, Owner, Kiln Design Studio: I do not sell online. I do not sell in stores. I sell my work in person, through museum shows and fine art and craft shows.

PAUL SOLMAN: How important a part of your business is that, or are you just an artist?

ELISSA EHLIN: No. The actual interaction with the person who is buying a piece of work from Jay and I, you can't even put a price on it.

JAMES LIVINGSTON: This is creating social bonds, right? It's about creating an emotional climate. It's not about the exchange of goods only, right? For me, that's what consumer culture is about.

PAUL SOLMAN: To many, if not most, Americans, though, this is what it's about, at least come the holidays. And this is what it looks like year-round.

Verizon ads popping up all over the place, Baileys Irish Cream whiskey, advertisers trying to manipulate us, to make us buy now, to think we want something that we will later be unhappy with. That isn't all true?

JAMES LIVINGSTON: I think it's actually mostly untrue. Most consumers know perfectly well what's going on with advertising. They realize that what they're buying when they pay attention to advertising is not the thing itself. It's the idea of freedom that goes with the thing. Consumers are very, very savvy in that respect.

PAUL SOLMAN: You sound like my marketing professor at HarvardBusinessSchool in 1976, literally.

(LAUGHTER)

PAUL SOLMAN: That's what he said, that it's not the product you're buying. It's the aura of the product.

JAMES LIVINGSTON: Right.

PAUL SOLMAN: It's the status that you think is being conferred on you by the product.

JAMES LIVINGSTON: Right. Right.

PAUL SOLMAN: You actually buy all that?

JAMES LIVINGSTON: Most definitely.

PAUL SOLMAN: But even if your answer is, most definitely not, you might still buy Livingston's Keynesian prescription, that when unemployment is high, consumption is the only antidote.

On the other hand, you might instead be swayed by the anti-spending, pro-saving message of the libertarian Christmas video. Its young protagonists certainly were, as are many Americans these days.

ACTOR: If we save more today, we can have an even better holiday tomorrow.

ACTRESS: And maybe we can even pay for my college tuition.

PAUL SOLMAN: Who could disagree with that? James Livingston.

JAMES LIVINGSTON: They're making a mistake not only at the level of the family. It's also bad for the economy.

PAUL SOLMAN: We, of course, take no sides. But we don't mind if you thank us, should you be splurging this season, for providing you with a possible excuse.

MAN (singing): If you want a sound recovery, buy toys.

RAY SUAREZ: Who knew Keynes could carry a tune?

Online, you can watch the entire economists' Christmas carols video. That's on the Business Desk.

Photo by Science Source via Getty Images.

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

Eric Forbis: In "Communism, Capitalism and the Third Thanksgiving" you state that Bob Faulkner and Mark Kleiman believe that the Republic is 'one long reductio ad absurdum'. I'm very interested in this -- can you point me to any references, articles, or books? Great article!

Paul Solman: Thanks, Eric. Sorry it's taken nearly 'til Christmas to respond to a Thanksgiving question, but here's Boston College political science professor Robert Faulkner, once a student of the political philosopher Leo Strauss, whom he cites at the end of his comment.

Robert Faulker:

[T]he gist of a general answer to your questioner: the Republic proposes an order that is both impossible and unjust. It is impossible for many reasons, the most obvious being that the condition for this great reforming is that all children above a certain age (ten, as I recall) must be expelled from the city, something the parents (including the armed guardians) would not allow. It's unjust for many reasons, the most obvious being that the philosophers are to rule rather than have what is due their intelligence: leisure for inquiry.

More generally, there are signs from the start and along the way. The characters include serious young men, serious about justice, who were nonetheless, in real life, victims of very unjust men -- including friends of Socrates. As to those friends, Socrates' teaching did not take. Besides, the book shows from the start many signs of an abstraction from love and especially love of one's own, an impossible abstraction from the self that suffuses the famous proposals for communism of property, women, and children, and for compulsion of the philosophers. And then there is the problem of succession and inheritance, symbolized in that crazy requirement of the "marital number."

More generally, as to justice, the book's topic on its face is whether justice is good. The new order of rule exhibits what politics would have to be in order for true justice to exist -- in order that others get their due. It would have to rely on a degree of selflessness -- a degree of giving others their due -- that is unjust (consider philosophers and the parents) as well as based on an impossible abstraction. It would also require a degree of compulsion impossible to get: what makes the armed guardians obey the philosophers? Note that the discussion itself begins with a mix of compulsion and persuasion: the philosopher Socrates is forced in this way to go to a particular party & discussion.

While this thesis is old as the hills, Leo Strauss was its chief exponent in recent times. See his general account of "Plato," in Leo Strauss and Joseph Cropsey, History of Political Philosophy (3rd edition), 33-89, and his particular arguments as to the "Republic," in The City and Man (pp. 50-137). The Republic is a cure for "extreme political ambition"; indeed, "the most magnificent cure ever devised for political ambition" (65).

-- Robert Faulkner

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

Paul Solman: On Thursday's NewsHour, a cerebral celebration of holiday shopping, courtesy of Rutgers University economic and intellectual historian James Livingston, author of the fascinating pro-consumption book "Against Thrift." Pitted against Livingston as counter-point is an anti-spending video from old friend John Papola, the libertarian filmmaker behind the wildly popular Keynes-Hayek rap video that also debuted on the NewsHour in 2009.

Papola's latest, "Deck the Halls with Macro Follies," can be seen in excerpts tonight on the program, and in its entirety on YouTube. Or you can watch it below:

Watch Video | Listen to the Audio

HARI SREENIVASAN: President Obama urged Republicans today to "peel off the partisan war paint" and avoid the fiscal cliff at year's end.

At his White House appearance, the president said he and House Speaker John Boehner are "pretty close" to an agreement. He said he's come at least halfway in a bid to avert mandatory spending cuts and across-the-board tax increases. He said Republicans should take the deal.

PRESIDENT BARACK OBAMA: They will be able to claim that they have worked with me over the last two years to reduce the deficit more than any other deficit reduction package, that we will have stabilized it for 10 years. That is a significant achievement for them. They should be proud of it. But they keep on finding ways to say no, as opposed to finding ways to say yes.

HARI SREENIVASAN: The president's plan would raise taxes on those making more than $400,000 a year. White House officials said he'd veto what House Republicans call plan B. It would raise taxes on those making $1 million a year and keep tax cuts for everyone else.

But Speaker Boehner said he's going ahead with the bill anyway.

REP. JOHN BOEHNER, R-Ohio: Tomorrow, the House will pass legislation to make permanent tax relief for nearly every American, 99.81 percent of the American people.

And then the president will have a decision to make. He can call on the Senate Democrats to pass that bill or he can be responsible for the largest tax increase in American history.

HARI SREENIVASAN: Boehner and the president have been negotiating in private. But administration officials said there's been no progress since Monday.

Wall Street had been rising this week on hopes for a deal in Washington, but today's talk doused the optimism. The Dow Jones industrial average lost nearly 99 points to close below 13,252. The Nasdaq fell 10 points to close at 3,044.

The Federal Trade Commission moved today to stiffen online privacy rules for children. The new standards require parental consent before online companies may collect personal information from preteens. The FTC said the rules will include new methods for verifying a parent's consent using scanned forms, video conference and e-mail.

The Swiss bank UBS has agreed to plead guilty to wire fraud and pay more than $1.5 billion in fines in the U.S., Britain and Switzerland. The U.S. Justice Department formally announced the deal today. The charges stem from the bank's attempt to manipulate a key interest rate known as LIBOR.

Attorney General Eric Holder said two former UBS traders will face criminal charges.

ATTORNEY GENERAL ERIC HOLDER: These alleged conspirators and others at UBS manipulated the benchmark interest rate, upon which many consumer financial products, including credit cards, student loans and mortgages, are frequently based. They defrauded the company's counterparties of millions of dollars.

HARI SREENIVASAN: The two traders are currently in Britain and Switzerland. Justice Department officials said they will seek extradition for both.

The U.S. Army will pursue the death penalty for a soldier accused of killing 16 Afghan villagers last march. The announcement came today in the case of Staff Sergeant Robert Bales. He was in his fourth deployment to a war zone when he allegedly attacked a pair of Afghan villages. Bales faces a court martial at Joint Base Lewis-McChord near Seattle. No member of the U.S. military has been executed since 1961.

The United Nations suspended its polio vaccination campaign in Pakistan today, after two more workers were killed. Six other volunteers were shot dead earlier in the week. Suspicion fell on the Taliban. The militant group accuses the health workers of acting as U.S. spies, and it claims the vaccine makes children sterile.

Senior officials at the BBC were absolved today of covering up claims of sex crimes committed by longtime star Jimmy Savile. He died last year, and the BBC later shelved an expose that he abused and raped scores of underage girls for decades. The scandal erupted anyway, and the public broadcaster was widely criticized.

Today, an independent review blamed incompetence, but not bad faith.

NICK POLLARD, BBC report author: When the full force of the affair broke in October this year, the BBC's management system proved completely incapable of dealing with it.

The level of chaos and confusion was even greater than was apparent at the time. Several individuals and departments were making considerable efforts to get to the truth behind the Savile story,but leadership and organization seemed to be in short supply.

HARI SREENIVASAN: A criminal investigation continues in the Savile scandal. So far, eight suspects have been arrested.

South Korea has elected its first female president, Park Geun-hye. The conservative ruling party candidate beat her liberal challenger in a tight race. And, late today, supporters braved freezing temperatures to celebrate the historic victory outside party headquarters in Seoul. Their candidate will take office in February. Park's father was the late Park Chung-hee, who ruled as dictator for 18 years, until he was killed by his intelligence chief in 1979.

Those are some of the day's major stories.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here is Wednesday's query, a comment sent by a viewer from Kansas:

Barbara Penn: Hello Paul. I believe there was a mistake in your reporting. Charitable deductions, itemized deductions and exclusions don't cost the government anything. It isn't the government's money in the first place. Will you please consider this when reporting on this topic again? Thank you.

Paul Solman: Sure, Barbara, happy to consider this. Indeed, after reading about my "mistake," I felt obliged to.

The mistake, if I understand you, is that tax breaks in general do not "cost the government" because taxes in general do not belong to the government "in the first place." Instead, they belong to you and me, among others.

But by that logic, the services supported by that tax money do not belong to us, but to "the government"? So let me get this straight: there's an entity called "the government" that exists independently of us? It takes our money. And then it does what with that money? Play PowerBall? Burn it in effigy? Give it to aliens?

Actually, doesn't it give the money BACK to the people it taxes? Not always efficiently, I've noticed, as I'm sure you have. Corruptly, even, every once in awhile. But you there in Kansas get nothing for your taxes? No Medicare? No storm warnings? No disaster aid? If Canada should invade, will the army not come to your defense?

In researching a response to your email, I discovered that, according to data from the IRS and Census Bureau, as compiled by The Economist magazine, Kansas paid $307.1 billion in federal taxes in the years 1990-2009. How much did the federal government spend on goods and services provided to Kansas? I wondered. $331.7 billion.

By contrast, those of us here in Massachusetts (where I reside) paid in $1.065 trillion and got back $917.9 billion over that same period. So some of my tax money has been going to you. Borrowing from Paul to pay Barbara, you could say.

It may surprise you to learn that this does not upset me. In fact, it conforms to my understanding of how the U.S. is supposed to work. You and I vote for people to represent us in "the government." We delegate to them the responsibility for making rules and enforcing them, for keeping us together -- no easy task -- as a functioning society.

Some of us pay more; some, less. An imperfect system, to be sure, filled with details that annoy some people, infuriate others. But you would agree, wouldn't you, that humankind has been hard-pressed, historically, to come up with anything better?

I guess there is a fundamental unfairness: you in Kansas have less than half the number of Americans living there than we do here in Massachusetts, yet you have the same number of senators. But that's part of a compromise on which the country was established -- an attempt to make sure that minorities like Kansans were protected from the potential tyranny of a central government.

So I have, as you can see, considered your correction. But I don't buy it. In fact -- and I don't mean to sound hostile here or defensive -- I consider it something of a slight, not so much to me, but to the very concept of American democracy.

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

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JUDY WOODRUFF: The White House had a new proposal on the table today in the fiscal cliff negotiations. House Republicans said it fell well short, but the two sides kept at it, hoping to avert across-the-board tax hikes and steep mandatory spending cuts in 2013.

REP. WALLY HERGER, R-Calif.: We're moving closer. Let me say that. It looks more encouraging today than it did yesterday.

JUDY WOODRUFF: There were some voices today, like California Republican Congressman Wally Herger, who saw signs of a deal in the works. President Obama offered Monday to lower his target for new revenue to $1.2 trillion over 10 years, down $400 billion from his first offer. He also raised the threshold for higher tax rates to households making $400,000 a year, instead of $250,000.

And he proposed spending cuts of $1.2 trillion from health programs and cost of living hikes for Social Security.

White House press secretary Jay Carney:

JAY CARNEY, White House: In the details that have come out about the president's proposal, I think it is clear that he has demonstrated good faith and a willingness to meet Speaker Boehner and the Republicans halfway.

JUDY WOODRUFF: But Republicans dispute the president's numbers. They contend the plan would raise $1.3 trillion in revenue when accounting for a new inflation index. They also insist savings from lower payments on the debt shouldn't be tallied as spending cuts. This was House Speaker John Boehner after meeting with his caucus members.

REP. JOHN BOEHNER, R-Ohio: What the White House offered yesterday was essentially $1.3 trillion in new revenues for only $850 billion in net spending reductions. That's not balanced, in my opinion.

JUDY WOODRUFF: Boehner said he's ready to put a backup plan before the House. It sets the threshold for raising tax rates much higher than the president wants.

JOHN BOEHNER: Our plan B would protect American taxpayers who make $1 million or less and have all of their current rates extended. I continue to have hope that we can reach a broader agreement with the White House that would reduce spending, as well as have revenues on the table.

JUDY WOODRUFF: But the plan appeared to be doomed in the Democratic-controlled Senate, where Majority Leader Harry Reid accused Republicans of threatening to abandon negotiations.

SEN. HARRY REID, D-Nev.: Plan B, as I understand it, plan B calls for sending out a bill that the only thing that will be in it is raising taxes on people who make over $1 million. If that's not walking away, I don't know what walking away is.

JUDY WOODRUFF: Indeed, Boehner also faces the challenge of selling an agreement to members of his own party, resistant to tax hikes of any kind. After today's party caucus, Arizona Congressman Jeff Flake, about to move to the Senate, said he is withholding judgment until he sees more specifics.

SEN.-ELECT JEFF FLAKE, R-Ariz.: We have got to have more cuts than the president is proposing or has been discussed here.

JUDY WOODRUFF: But retiring Ohio Congressman Steve LaTourette predicted that in the end most could live with higher tax rates if they are part of a broader package.

REP. STEVEN LATOURETTE, R-Ohio: If I had to say where most of the votes are today, most will accept an increase in tax rates, but they really want a way forward on how we're going to get the rest of the government under control.

JUDY WOODRUFF: But the only real certainty appeared to be that lawmakers will be back in Washington right after Christmas if there's to be any deal before the New Year's deadline.

And to two reporters who've been closely watching this story. Todd Zwillich covers Congress for Public Radio International's "The Takeaway" ON WNYC. And Carol Lee of The Wall Street Journal joins us from the White House.

Thank you both for talking to us.

Carol, I'm going to start with you. So, from the White House perspective, where do things stand?

CAROL LEE, The Wall Street Journal: Well, I think, from the White House perspective, the ball is essentially in the House Speaker John Boehner's court.

I think the president and his senior advisers feel that they have positioned him fairly well, that he's in a very defensible position in terms of his latest offer that he put forward yesterday to the speaker. But if you step back and think about where we were four days ago vs. where we are now, it's pretty remarkable how much the two sides have come to -- very close to reaching an actual deal.

And now the two sides are in this position where the job is to sell it to their different caucuses and make sure that the seams don't come unraveled in the coming days. But once Speaker Boehner on Friday decided that he was going to retreat on Republican opposition to raising tax rates, it became a matter of what you dial up and what you dial down, as opposed to this philosophical debate that we have been seeing since the election.

And so now that's what they're doing. And their staff is meeting and they're deciding how much goes up in spending cuts, where does that from? They're deciding on how much revenue the package should have and where the threshold is for income in terms of raising tax rates.

JUDY WOODRUFF: So, Todd Zwillich, from the Speaker Boehner side of all of this, how does it work?

TODD ZWILLICH, WNYC Radio: Well, Speaker Boehner's staff and Republicans in Congress, despite some of the bluster today in Congress, are actually still feeling OK about the talks between the speaker and the president.

In reality, they're actually pretty close. They're having a counting dispute over whether this thing counts as a tax increase or whether interest actually counts, saving on interest counts as real savings. They're having an arithmetic dispute. But really in the end, Judy, they're really only $40 billion or $50 billion apart.

And over 10 years, in relation to GDP, that's really not much.

JUDY WOODRUFF: Only $40 or $50 billion, in the scheme of things.

TODD ZWILLICH: In the scheme of -- which is a gigantic number, of course, but we're in Washington, aren't we And over 10 years, it's really not that much.

So, they're very close right now. There are some disputes, as Carol says, on dialing things up and dialing things down. What you're seeing in Congress though is a different game. And I think it important for people to realize that right now we're on a two-track kind of inside game/outside game scenario.

The speaker and the president are actually quite close. They're on substance and they're not speaking past each other anymore. They're actually talking about numbers on the same page.

Meanwhile, in Congress, Speaker Boehner and Harry Reid are both setting up fallback scenarios, ways to give political cover to their own side and make sure the other side gets blamed if those inside talks fall apart or if Speaker Boehner can't sell it to his people after a deal is made.

JUDY WOODRUFF: Carol, how does the White House view this other track that Todd is describing? Do they see that as something necessary that the speaker needs to do, or do they see it as a problem?

CAROL LEE: Sure, they do. Privately, they do. Publicly, they dismiss it and say that it's not a nonstarter, which it is.

The speaker has two problems with it. One, Democrats won't vote for it. And, two, there are members of his own party who aren't going to vote to raise tax rates under any circumstances, but particularly if you're not going to get anything for it, meaning this plan doesn't call -- if they pass this plan, the plan B, there wouldn't be any spending cuts attached to it.

But you will remember the White House has its own plan B on its own separate track. The president has just been talking about it a lot longer. And that's the Senate bill where they passed -- they extended the Bush tax rates for under $250,000, people making under $250,000.

And the president has been saying since the election that the House could easily take care of part of this fiscal problem by immediately passing that bill.

So both sides have this -- as Todd mentioned, these backup plans that are more tactical maneuvers. They're designed to keep their parties in line and to give them a fallback position and also to give them cover politically if one side backs out.

JUDY WOODRUFF: And, meanwhile, Todd, you're saying that the real talks are really continuing. I saw a tweet today from an associate, a former aide to Eric Cantor, who is, of course, a close associate, the majority leader in the House, saying Republicans only have a third of the power, conservatives do. They need to get on board with the most conservative deal possible, rather than waiting for utopian purity, saying, let's be practical.

TODD ZWILLICH: The very nature of John Boehner's dilemma, not just now, but since 2010, the Tea Party election, is there -- and we have said this all along with the Cantor-Biden talks, the super committee, Simpson-Bowles -- is there a deal that Speaker Boehner can make with this president, that he can shake hands on, that he can also sell to this decidedly conservative Republican House?

Is there? That remains to be seen. That is the very nature of Speaker Boehner's dilemma. And that operative in those tweets which we all saw go to the very heart. That operative is telling conservatives the best way to get things done is not to have your druthers, not to have your greatest scenario, but get the very best conservative deal you can, given the fact that President Obama just won the election and actually ran on these tax increases. The public has spoken. And that does mean something.

JUDY WOODRUFF: So, Carol Lee, at the White House, do they think this can get done, whether it's done before Christmas, but can it be done by the end of the year?

CAROL LEE: They do.

I had spoken with someone in the White House who said they see an over 50 percent -- they put the odds over 50 percent that they can get a deal done. But it's very delicate. And they're having to -- their main concern right now is having to keep Democrats in line as the president concedes on some of these entitlement programs like Social Security and Medicare cuts.

And so that's what you see them working on doing today behind the scenes.

JUDY WOODRUFF: And, Todd, from the speaker's perspective, what is he working on? What does he need to get?

TODD ZWILLICH: He needs to -- well, he's going to have a tax increase. That is inevitable. And you have seen through his actions, finally saying that he would accept a millionaire's tax. That's a pretty far place from where he was just a couple of months ago.

He needs to take the reality of a tax increase, get that threshold number, whether it's $400,000 or $500,000, get that as high as possible and then get spending cuts as high as possible through changes to Social Security and other things they have been talking about to convince his conservative members, yes, this goes against our very core philosophy, but we're getting something big for it, not just now, but any likely deal that we're looking at also has ramifications for tax reform next year. We will get a lot of deficit reduction there, a lot of debt reduction there. This is the very best we were going to get.

That's his charge.

JUDY WOODRUFF: So, they're not there yet, but they're working on it.

Todd Zwillich, Carol Lee, thank you both.

CAROL LEE: Thank you.

TODD ZWILLICH: Pleasure.

Image by Robin Jareaux/Getty Images.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here is Wednesday's query, a comment sent by a viewer from Kansas:

Barbara Penn: Hello Paul. I believe there was a mistake in your reporting. Charitable deductions, itemized deductions and exclusions don't cost the government anything. It isn't the government's money in the first place. Will you please consider this when reporting on this topic again? Thank you.

Paul Solman: Sure, Barbara, happy to consider this. Indeed, after reading about my "mistake," I felt obliged to.

The mistake, if I understand you, is that tax breaks in general do not "cost the government" because taxes in general do not belong to the government "in the first place." Instead, they belong to you and me, among others.

But by that logic, the services supported by that tax money do not belong to us, but to "the government"? So let me get this straight: there's an entity called "the government" that exists independently of us? It takes our money. And then it does what with that money? Play PowerBall? Burn it in effigy? Give it to aliens?

Actually, doesn't it give the money BACK to the people it taxes? Not always efficiently, I've noticed, as I'm sure you have. Corruptly, even, every once in awhile. But you there in Kansas get nothing for your taxes? No Medicare? No storm warnings? No disaster aid? If Canada should invade, will the army not come to your defense?

In researching a response to your email, I discovered that, according to data from the IRS and Census Bureau, as compiled by The Economist magazine, Kansas paid $307.1 billion in federal taxes in the years 1990-2009. How much did the federal government spend on goods and services provided to Kansas? I wondered. $331.7 billion.

By contrast, those of us here in Massachusetts (where I reside) paid in $1.065 trillion and got back $917.9 billion over that same period. So some of my tax money has been going to you. Borrowing from Paul to pay Barbara, you could say.

It may surprise you to learn that this does not upset me. In fact, it conforms to my understanding of how the U.S. is supposed to work. You and I vote for people to represent us in "the government." We delegate to them the responsibility for making rules and enforcing them, for keeping us together -- no easy task -- as a functioning society.

Some of us pay more; some, less. An imperfect system, to be sure, filled with details that annoy some people, infuriate others. But you would agree, wouldn't you, that humankind has been hard-pressed, historically, to come up with anything better?

I guess there is a fundamental unfairness: you in Kansas have less than half the number of Americans living there than we do here in Massachusetts, yet you have the same number of senators. But that's part of a compromise on which the country was established -- an attempt to make sure that minorities like Kansans were protected from the potential tyranny of a central government.

So I have, as you can see, considered your correction. But I don't buy it. In fact -- and I don't mean to sound hostile here or defensive -- I consider it something of a slight, not so much to me, but to the very concept of American democracy.

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

Photo by CSA Images via Getty Images.

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday. We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available here, for free, in its "basic" version.

Loretta: I was married for 25-plus years. My ex makes a ton of money and is still working at 72. I receive a little more than $1,000 per month with no retirement. He will be getting the maximum Social Security. Will I receive more Social Security when he retires?

Larry Kotlikoff: If you told the Social Security Administration that you are divorced, you should be getting the sum of your own retirement benefit plus a spousal benefit based on your ex's account. I would check to make sure they know you are divorced. As long as he's over 62, which he is, you can collect a spousal benefit (starting as early as 62) regardless of whether he does or doesn't start to collect his own retirement benefit.

Jorge Villar: I am 64, retired from the federal government and missing six quarters to qualify for Social Security. Can I use my ex-wife's work to meet requirement?

Larry Kotlikoff: No, you have to have 40 quarters on your own account to receive retirement benefits. So go to work for someone for a low wage, if need be, to get the extra six quarters. But you can receive a spousal benefit based on your wife's earnings record.

Martin Weiss: I recently divorced after 25 years of marriage. My ex-wife is seven years older than me. She is currently 65. I am going to be 58. At age 62, may I receive her Social Security benefit? Is it advisable to do so?

Larry Kotlikoff: You can start collecting reduced spousal benefits at 62. But you will also be forced to take your retirement benefit early. A better strategy may be to a) wait until you reach full retirement age -- 66 in your case -- and take just your spousal benefit and then b) wait until 70 to take your own retirement benefit, when it will be as much as 76 percent higher than if you take it at 62.

The problem with your approach is that the spousal benefit you'll receive starting at 66 will be half of your ex's full retirement benefit (not necessarily half of what she actually collects as a retirement benefit, since she may take her retirement benefit early or late). If you take your spousal benefit before full retirement age -- even a month before -- it will be calculated at a lower rate for your entire life. It won't be half of her full retirement benefit but instead what's called your "excess spousal benefit" and be calculated as half of her full retirement benefit less your full retirement benefit. This amount could, in your case, be zero or even negative (in which case they set the excess spousal benefit to zero). Our software, which costs $40, can help you see the trade-offs her and precisely what you'll get under different scenarios.

Carol Moore: My husband passed away in June of 2010 and the person at the Social Security office tells me I can't get any of his benefits because I make too much money. She told me to quit my job in order to collect them.

Larry Kotlikoff: Don't quit your job. Jobs are hard to come by these days. Work as long as you can. Once you reach full retirement age, which is currently 66, the earnings test goes away. At that point you can start collecting just your survivor benefit and postpone collecting your own retirement benefit until age 70. This may be the best strategy. There is a huge reward for waiting unless you are absolutely sure you will die at a young age.

Jane Stewart: I was married for 31 years to a now retired man. He remarried and had a child at 55. He now collects more per month for her than I collect from his work years. Doesn't seem right. Is it?

Larry Kotlikoff: Social Security rules can be inequitable and capricious, not to mention ridiculously complex. The more I learn about the details of the system, the more I believe in my own alternative, spelled out at The Purple Social Security Plan. You are free to endorse it if you'd like.

Diane M. Smith: I was married for 15 years (1966-1981) and have never remarried. I'm told I can claim benefits on my ex's Social Security. I am 65 and will reach full retirement age in April 2013.

Larry Kotlikoff: This is true. But if you haven't taken your own retirement benefit up until now, consider waiting until 70 to do this. At 66, when you'll reach full retirement age, you should apply for your spousal benefit and you'll get half of your ex's full retirement benefit. Even if you have already taken your own retirement benefit, you should still wait until 66 to apply for a spousal benefit. That way, it won't be permanently reduced. But a warning: what you'll get will be less than half of his full retirement benefit. It will equal a) half of his full retirement benefit less b) your full retirement benefit. This "excess spousal benefit" will be zero if your own full retirement benefit exceeds half of his.

Judy: I was born in 1951. At what age can I start taking Social Security benefits? I am still working full time. My husband is 70 and receiving Social Security benefits and is working full time. Am I eligible for spousal benefits as well?

Larry Kotlikoff: You can start receiving retirement benefits at age 62. Be forewarned: there is an "earnings test." If you earn more than $14,640 this year, your benefits will be reduced, potentially to zero. But -- any reduction in benefits will be recorded and used to raise your benefits after full retirement. So the earnings test is not really something to worry about. If you haven't reached full retirement age, however, think twice (or many times) before taking benefits early. You'll be forced to take both your spousal and your retirement benefits early and both will be permanently reduced. Our software, which costs $40, can tell you what strategy will get you the highest lifetime benefits.

Lawrence: I am a widower who was and is a stay-at-home dad. I have been dependent on my wife's income since our first and only child was born. This was the best and only way we had to care for our child. My wife was the bread winner of the family. My wife passed away six years ago of cancer at age 50. I was 51 and our child was 10. I and my child got survivors' benefits through the last six years. When my child turned 16 last year, my benefit was stopped. My child still gets the benefit until finishing high school, as you know. My question is: Am I still eligible for benefits since I was dependent on my wife's income? The Social Security Administration did not let me know if I was since they weren't aware of my dependency from 1995 to the present.

Larry Kotlikoff: You will be eligible for a survivor benefit when you reach 60, but you should consider waiting to full retirement age to collect it because it will then be about 30 percent higher each year for the rest of your life. Very sorry for your loss.

Deborah: I am a second wife with a third after me. As far as Social Security goes from my ex, who among us has a claim? Of the three wives, I was married the longest at 14 years. Just wondering.

Larry Kotlikoff: All three ex wives can collect spousal and survivor benefits provided they were married ten years and 1 second prior to getting divorced. So, yes, you can collect benefits -- spousal, while your ex is still kicking -- and survivor benefits after he dies.

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

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:

Paul Hyland: Please discuss the merits of one- or two-year CDs versus low-cost bond funds. I'm afraid rising interest rates will decrease even bond fund asset values. Thank you, Paul.

Paul Solman: You're welcome, Paul. Look, the principle is simple and forever the same: the longer you lock up your money, the more vulnerable you are to interest rate change. That's why interest rates tend to be higher, the longer the maturity (duration) of an investment. It's because of the higher odds that inflation will occur between the time you loaned someone your money and the time you get it back. The higher interest rate is meant to compensate you for the risk that the amount owed to you will lose value in the interim.

A one- or two-year CD (certificate of deposit) is simply a loan that locks up your money for either one or two years. You forego the interest if you withdraw the money beforehand, a penalty for breaking the lock-up agreement.

A bond fund, by contrast, is a pool of loans of which you buy a share. If the loans are municipal bonds, it's a municipal bond fund. A government bond fund invests in treasuries; a corporate bond fund, in bonds issued by corporations, aka "commercial paper." And so on.

How to compare the interest rate risk of a CD with that of a bond fund? It all depends on the average "maturity" of the bonds in the fund; again, for how long are you tying up your money? In the case of a fund, there's no penalty for early withdrawal. Instead, the value of your share in the fund drops if interest rates rise before the bonds come due.

The logic is counter intuitive, but essential if you're going to invest in bonds, and understand what you're doing.

If you buy a one-year CD, you're taking little risk. How much are interest rates likely to spike in just one year? After the year is up, you collect your interest, get back your principle, and you can reinvest at the new, higher rate.

A fund which owns bonds that all mature in one year would be no different, except that you'd pay a management fee, a fee deducted from your total return.

But most bond funds own bonds of varying maturities. So you have to research the fund and find out what its average maturity is. That's the way to tell if you're investing in bonds that won't be paid back for a while, and are thus more vulnerable to interest rate spikes, and bonds for money lent short-term, which are less vulnerable.

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

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Photo by Peter Dazeley via 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:

Paul Hyland: Please discuss the merits of one- or two-year CDs versus low-cost bond funds. I'm afraid rising interest rates will decrease even bond fund asset values. Thank you, Paul.

Paul Solman: You're welcome, Paul. Look, the principle is simple and forever the same: the longer you lock up your money, the more vulnerable you are to interest rate change. That's why interest rates tend to be higher, the longer the maturity (duration) of an investment. It's because of the higher odds that inflation will occur between the time you loaned someone your money and the time you get it back. The higher interest rate is meant to compensate you for the risk that the amount owed to you will lose value in the interim.

A one- or two-year CD (certificate of deposit) is simply a loan that locks up your money for either one or two years. You forego the interest if you withdraw the money beforehand, a penalty for breaking the lock-up agreement.

A bond fund, by contrast, is a pool of loans of which you buy a share. If the loans are municipal bonds, it's a municipal bond fund. A government bond fund invests in treasuries; a corporate bond fund, in bonds issued by corporations, aka "commercial paper." And so on.

How to compare the interest rate risk of a CD with that of a bond fund? It all depends on the average "maturity" of the bonds in the fund; again, for how long are you tying up your money? In the case of a fund, there's no penalty for early withdrawal. Instead, the value of your share in the fund drops if interest rates rise before the bonds come due.

The logic is counter intuitive, but essential if you're going to invest in bonds, and understand what you're doing.

If you buy a one-year CD, you're taking little risk. How much are interest rates likely to spike in just one year? After the year is up, you collect your interest, get back your principle, and you can reinvest at the new, higher rate.

A fund which owns bonds that all mature in one year would be no different, except that you'd pay a management fee, a fee deducted from your total return.

But most bond funds own bonds of varying maturities. So you have to research the fund and find out what its average maturity is. That's the way to tell if you're investing in bonds that won't be paid back for a while, and are thus more vulnerable to interest rate spikes, and bonds for money lent short-term, which are less vulnerable.

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

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MARGARET WARNER: Eighteen days and counting until the end of the year, when the government reaches the edge of the so-called fiscal cliff.

Congressional correspondent Kwame Holman kicks off our coverage tonight.

KWAME HOLMAN: Late in the day, House Speaker John Boehner left Capitol Hill to meet privately with President Obama at the White House, their second face-to-face meeting in a week, after a day of heated rhetoric that began on Capitol Hill, when Boehner was blunt again rejecting the president's demand for power to raise the country's debt ceiling.

REP. JOHN BOEHNER, R-Ohio: Congress is never going to give up our ability to control the purse. And the fact is, is that the debt limit ought to be used to bring fiscal sanity to Washington, D.C.

KWAME HOLMAN: As the deadline to reach a deal to avert the fiscal cliff draws ever closer, Republicans say the real issue is spending cuts.

JOHN BOEHNER: Republicans want to solve this problem by getting the spending line down. The president wants to pretend that spending isn't the problem. That's why we don't have an agreement.

KWAME HOLMAN: A claim the White House denies.

Spokesman Jay Carney:

JAY CARNEY, White House: Let's just be clear. There is one party to these negotiations who has put forward a specific proposal for revenue and a specific proposal for spending cuts. Even when the Republicans -- and I saw Speaker Boehner do this earlier today -- insist that the president hasn't put forward spending cuts, one, it begs the question, what spending cuts have the Republicans put forward?

KWAME HOLMAN: The president was asked if he was optimistic about reaching a deal.

PRESIDENT BARACK OBAMA: Still a work in progress.

KWAME HOLMAN: But Senate Majority Leader Harry Reid said Republicans in Congress should yield to public opinion about tax increases.

SEN. HARRY REID, D-Nev.: Speaker Boehner knows or should know that the middle-class tax help that we have to pass would sail through the House of Representatives. Democrats would overwhelmingly vote for it. I would doubt there could be any Democrat that would vote against it. And, as we know from the chorus of Republicans that are added to every day, more Republicans join every day.

KWAME HOLMAN: In fact, new polls show Americans do want compromise, and it's the Democrats who hold the edge. An NBC/Wall Street Journal poll released yesterday shows a majority, 65 percent, say President Obama has a mandate on both increasing taxes on the wealthy and reducing federal spending.

A similar two-thirds are willing to accept tax increases or cuts in federal government programs to reach a deal. But while public support on taxes is overwhelming, opinion on proposed cuts is less so.

A new Pew Research Center poll out today shows three-quarters said deficit reduction should come from cutting major programs and increasing taxes.

Majorities disapprove of specific cuts to education, infrastructure, defense and anti-poverty programs. And just more than half oppose raising the eligibility age for Social Security and Medicare.

While both sides have proposed cuts and changes to Medicare, only limited specifics have been released.

JUDY WOODRUFF: Now, for more on what the public thinks about how the leaders are handling the negotiations and the debate over cuts to Medicare, we turn to Ray Suarez.

He begins with the Pew Research Center poll. He talked about it a short time ago with the center's Andrew Kohut.

RAY SUAREZ: Andy Kohut, welcome.

You have been measuring public attitudes since Election Day. Is it shifting in a way that gives President Obama a stronger hand in dealing with Republican leaders as we approach the fiscal cliff?

ANDREW KOHUT, Pew Research Center: No question. He's gotten a lot of -- he has a lot of capital with the public. His approval ratings have surged to 55 percent. A point of comparison, President Bush in December 2004 was at 48 percent.

And when we ask people, is Obama trying to make a serious effort to negotiate a deal or to get a deal, 55 percent say yes. When we say the same thing about Republican leaders, just 32 percent say yes. The Democrats are better regarded in this negotiation than the Republicans by a lot.

RAY SUAREZ: Did you ask people what they would be willing to put up with in order to get some sort of solution? For instance, do they support raising taxes on the wealthiest Americans?

ANDREW KOHUT: Well, they have a very mixed view of things. They support raising taxes on those who earn more than $250,000, 69 percent, I believe, the statistic.

They believe in raising taxes on investment income. They believe in limiting the number of deductions that can be taken. Things that are in the realm of rich people or more wealthy people making sacrifices are strongly endorsed by the public or accepted by the public. I won't say strongly endorsed.

But when we get to sacrifices that involve a broader part of the American public, personally and with respect to important programs, they say no. Well, 77 percent say, no, let's not reduce funds for education; 58 percent said let's not cut funding to help lower-income people.

There is very little give on raising the retirement age for -- either for Social Security or for Medicare. The public opposes this. So it's one of these deals where the public thinks something has to be done, and they are reluctant themselves to accept sacrifices in cuts in programs.

RAY SUAREZ: So, by a very small margin, if I recall your numbers, they would support means-testing for Medicare, that is, cutting back on the benefits for wealthy people, but not raising the age at which everyone would become eligible.

ANDREW KOHUT: That's quite right.

Again, it's a funny thing here, Ray. The fairness issue, which looms so large and rose so large over the past year and over the past few years, is playing out in the way people think about how to deal with the fiscal cliff crisis.

RAY SUAREZ: Andy Kohut of the Pew Research Center, thanks a lot.

ANDREW KOHUT: You're welcome, Ray.

President Obama during a walk back to the White House on Dec. 13. Photo by Mandel Ngan/AFP.

A new poll by Pew Research Center for the People & the Press finds that President Obama and congressional Democrats lead their Republican counterparts by a wide margin in job approval ratings, and are seen by a majority of respondents as more willing to work on a compromise for a budget agreement than GOP leaders.

Find the full report here.

The poll, conducted last week with 1,503 adult respondents, showed that 55 percent of Americans perceive the president as being serious about brokering a deal, whereas 32 percent say the Republicans are.

And when comparing the two parties on willingness to embrace bipartisanship, 53 percent said Democrats were "more willing to work with leaders from the other party," whereas Republicans got nearly half that number, 27 percent. Eighty percent of Americans say that the country is more politically divided today, a record number in the history of Pew.

Pew compared job ratings between Mr. Obama and Republican House Speaker John Boehner. Whereas the president received favorable marks of 55 percent, the GOP's chief negotiator for the budget talks had the approval of 28 percent of Americans. Congressional Republican leaders' job performances were reviewed favorable by a quarter of Americans, while Democratic leaders saw positive ratings of 40 percent.

While 74 percent of Americans say they advocate for a balanced approach that combines spending cuts with tax revenue increases, the poll found that when asked about specific ways to balance the budget, more people oppose making cuts to education (77 percent) and assistance programs for people of low-incomes (58 percent), and also disapproved of measures that would raise eligibility age for Medicare and Social Security (56 percent each).

Responding to a proposal for raising taxes for people earning more than $250,000, 69 percent said they were in favor -- the highest rating of any option posed in the poll, beating out alternative ideas to put limits on tax deductions (54 percent) or raise the tax rate on investment income (52 percent).

In the report Pew released Thursday, the authors wrote, "the current problems for the GOP run deep," stressing that there is overall more public support for Mr. Obama's policy approach to the fiscal crisis, as well as general approval.

On the NewsHour broadcast Thursday, Andrew Kohut of Pew Research Center analyzes the latest poll numbers.

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

Martin Sawma: I recently looked at the Bureau of Labor Statistics website for the U-7 figure only to find that it was not being reported. Where is U-7 reported? I have been using the U-6 figures for my Ph.D. course work.

Paul Solman: U-7 is our own attempt at an inclusive tally of the under- and unemployed, distinguished from BLS categories by the modest title, "The Solman Scale." As I wrote a couple of months ago, on the first Friday of every month, the government's Bureau of Labor Statistics reports the unemployment data for the month before, based on two surveys. One is a mail-in survey of organizations that have employees on their payrolls and is thus called "the payroll survey." That's where the estimate of net jobs added (or lost) comes from.

The other is the one we use for our U-7 number, which we post that same morning as soon as I can perform what one Twitter follower recently called a "geek data dive." The household survey is, well, a survey of American households -- 60,000 of them -- as BLS workers go door-to-door to administer in-person questions about work status. The government reports six different unemployment numbers, from U-1 to U-6 here. The U-3 figure -- "Total unemployed, as a percent of the civilian labor force" -- is the official unemployment rate as reported by the BLS. The U-4 and U-5 numbers are more inclusive, adding "marginally attached" and "discouraged" workers who haven't looked for work in the past four weeks but have looked in the past year. And U-6 adds in "those who want and are available for full-time work but have had to settle for a part-time schedule."

So why did I feel we needed a U-7? Because so many workers have stopped looking for a year or more, say they want a job, as reported on the 9th line of the very first Table of data. There were about seven million such people in the month of August, millions more than the total for "marginal and discouraged" in U-5 or U-6.

In other words, U-7 is simply a reckoning of all Americans who say they want a full-time job, but do not have one. That total is now 27.4 million -- just about 17 percent of the total potential workforce.

Conservative skeptics often ask if the number isn't overstated. Might not many of these people be lying to the survey taker? Might they not really want a job? Might they be doing work under the table?

Liberal skeptics ask just the opposite question: Aren't those without jobs often the hardest to find and thus excluded from the survey?

Both sides are surely right. How the numbers net out is anyone's guess. But let's never forget that, in historical terms, unemployment today is a lot higher than it has been for decades, higher even than the post-WWII peak of 1982 (10.8 percent). That's because so many more Americans -- as may as seven million -- are now on Social Security disability or in prison. As we reported in 2003 and again in 2009, if those folks were beating the pavements for work, even the official U-3 number might rival 1982.

Look for our next U-7 the first Friday in January.

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

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Job seekers wait in line to meet with recruiters during a job fair in South San Francisco, California. Photo by Justin Sullivan via Getty Images.

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

Martin Sawma: I recently looked at the Bureau of Labor Statistics website for the U-7 figure only to find that it was not being reported. Where is U-7 reported? I have been using the U-6 figures for my Ph.D. course work.

Paul Solman: U-7 is our own attempt at an inclusive tally of the under- and unemployed, distinguished from BLS categories by the modest title, "The Solman Scale." As I wrote a couple of months ago, on the first Friday of every month, the government's Bureau of Labor Statistics reports the unemployment data for the month before, based on two surveys. One is a mail-in survey of organizations that have employees on their payrolls and is thus called "the payroll survey." That's where the estimate of net jobs added (or lost) comes from.

The other is the one we use for our U-7 number, which we post that same morning as soon as I can perform what one Twitter follower recently called a "geek data dive." The household survey is, well, a survey of American households -- 60,000 of them -- as BLS workers go door-to-door to administer in-person questions about work status. The government reports six different unemployment numbers, from U-1 to U-6 here. The U-3 figure -- "Total unemployed, as a percent of the civilian labor force" -- is the official unemployment rate as reported by the BLS. The U-4 and U-5 numbers are more inclusive, adding "marginally attached" and "discouraged" workers who haven't looked for work in the past four weeks but have looked in the past year. And U-6 adds in "those who want and are available for full-time work but have had to settle for a part-time schedule."

So why did I feel we needed a U-7? Because so many workers have stopped looking for a year or more, say they want a job, as reported on the 9th line of the very first Table of data. There were about seven million such people in the month of August, millions more than the total for "marginal and discouraged" in U-5 or U-6.

In other words, U-7 is simply a reckoning of all Americans who say they want a full-time job, but do not have one. That total is now 27.4 million -- just about 17 percent of the total potential workforce.

Conservative skeptics often ask if the number isn't overstated. Might not many of these people be lying to the survey taker? Might they not really want a job? Might they be doing work under the table?

Liberal skeptics ask just the opposite question: Aren't those without jobs often the hardest to find and thus excluded from the survey?

Both sides are surely right. How the numbers net out is anyone's guess. But let's never forget that, in historical terms, unemployment today is a lot higher than it has been for decades, higher even than the post-WWII peak of 1982 (10.8 percent). That's because so many more Americans -- as may as seven million -- are now on Social Security disability or in prison. As we reported in 2003 and again in 2009, if those folks were beating the pavements for work, even the official U-3 number might rival 1982.

Look for our next U-7 the first Friday in January.

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

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JUDY WOODRUFF: Negotiators in Washington signaled publicly today that there had been little progress in reaching a deal to avert the fiscal cliff with 19 days to go until a year-end deadline.

REP. JOHN BOEHNER, R-Ohio: I remain the most optimistic person in this town. But we have got some serious differences.

JUDY WOODRUFF: That downbeat assessment from House Speaker John Boehner came after he and President Obama traded fresh offers this week.

JOHN BOEHNER: We spoke honestly and openly about the differences that we face. But the president's called for $1.4 trillion worth of revenue. That cannot pass the House or the Senate.

JUDY WOODRUFF: The president originally sought $1.6 trillion in revenue over 10 years, before lowering his target to $1.4 trillion. The money would come from raising rates on the top 2 percent of wage earners and curbing loopholes.

Boehner's counter was little changed, $800 billion in revenues from closing loopholes and capping deductions, but no rate hikes.

Republicans have also demanded entitlement reform, and in a Tuesday interview, the president wouldn't rule out raising the Medicare eligibility age by two years, to 67.

Today, his White House spokesman, Jay Carney, summed up.

JAY CARNEY, White House: He is willing to make tough choices. And he has made clear and specified the spending cuts that he is willing to make. And he has said that he is willing to go further as part of a broader deficit reduction plan. But he will not extend the tax cuts for the wealthiest Americans.

JUDY WOODRUFF: Despite the apparent stalemate, House Republicans pledged to keep at it.

REP. ERIC CANTOR R-Va.: We're going to stay here right up until Christmas Eve, throughout the time and period before the new year, because we want to make sure that we resolve this in an acceptable way for the American people.

JUDY WOODRUFF: But House Minority Leader Nancy Pelosi fired back that Republicans are the ones holding everything up.

REP. NANCY PELOSI, D-Calif.: If we were waiting for something, you could say it's well worth the wait. But we're just -- the Republicans are just delaying.

JUDY WOODRUFF: And Federal Reserve Chairman Ben Bernanke warned again that delay is dangerous.

BEN BERNANKE, Federal Reserve chairman: Even though we're not yet even reached the point of the fiscal cliff potentially kicking in, it's already affecting business investment and hiring decisions by creating uncertainty or creating pessimism.

JUDY WOODRUFF: All of which threatened to cast a pall over the holidays, at the Capitol, and just about everywhere else.

And that brings us to our continuing series of conversations on this topic -- tonight, one of the more outspoken voices against raising taxes.

Grover Norquist is a conservative lobbyist and the president of Americans for Tax Reform. Most famously, he's known for getting many elected Republicans to sign a pledge not to raise taxes. But now some lawmakers are suggesting they may be willing to change their position.

Grover Norquist, welcome to the program.

GROVER NORQUIST, Americans for Tax Reform: Good to be with you.

JUDY WOODRUFF: And, in fact, there are a growing number of Republicans who are saying either they have renounced that pledge or they may be prepared to renounce it in order to deal with the serious fiscal problem facing the country.

GROVER NORQUIST: Well, interestingly, the problem we have is too much spending. And so the only solution to spending too much is spending less.

We don't have a problem with not enough in terms of tax revenue coming in. The problem is government spends too much. So raising taxes is what politicians do, instead of reducing spending. That's the argument Boehner's having with the president of the United States. The president wants higher taxes. Boehner would like less spending.

JUDY WOODRUFF: Well, I'm sure you know a number of economists talk about the importance of a balanced approach. It was what was in the Bowles-Simpson commission report.

But let me ask you about not only the exit polls on Election Day, but poll after poll since the election shows distinct majority -- of elections -- say they believe that it's the right thing to raise taxes on income over $250,000 a year if that's what it takes to deal with the deficit. Why are those people wrong?

GROVER NORQUIST: Well, the actual exit poll, the question of should we raise taxes to reduce the deficit on Election Day, was 63 percent no.

So people said no to raising taxes to reduce the deficit. Why? Well, if you look at other polls over the course of years, 75 percent of the American people understand that if you start a conversation with we're going to raise taxes on the rich, it ends with raising taxes on everyone, like the AMT, the Alternative Minimum Tax. Supposed to hit 150 people in January. It hits 30 million American families.

So -- and then the other part of that is, if you raise taxes to reduce the deficit, will they spend the money or will they reduce the deficit? Over 60 percent of Americans point out they will just spend the money. So the argument for raising taxes, the American people see through that.

It's not a tax on the rich. It will hit everyone. The income tax was only supposed to hit people who made $11 million or more when they put it in. Now half of Americans get hit by it.

JUDY WOODRUFF: Well, the polls I'm seeing do show that a majority of Americans say they're prepared to go along with higher taxes for people making over $250,000 a year.

But let me ask you, Grover Norquist, about what happened in the past when tax rates went up under President Clinton and under previous eras. Tax rates went up, and there was still strong economic growth.

GROVER NORQUIST: Well, you can go to the Clinton years. The first two years of the Clinton administration had slow growth and not much job creation. And he raised taxes and he planned to spend every dollar that came in, in terms of a tax revenue, plus $200 billion.

His five-year plan was $200 billion every year out because he was going to spend every penny that the tax increases brought in, plus $200 billion.

However, he lost the House and the Senate because the American people objected to his tax increase. For six years, you had a Republican House and Senate. They didn't let him spend the money he wanted to spend. So the budget went into balance. They cut the capital gains tax, which gave you growth.

So, the last six years, there were pro-growth tax cuts, and they didn't spend the money he wanted to. So it is true that, if you elect a Republican House and Senate as a result of tax increases, it helps with growth.

JUDY WOODRUFF: Well, we can debate that at another time.

But let me come back to what we talked about at the outset. And that is Republicans -- more and more Republicans now saying they believe, OK, President Obama won reelection. In order to get a balanced plan to reduce the deficit, each side is going to have to give.

For example, you have Sen. Tom Coburn, strong conservative from the state of Oklahoma, saying -- quote -- "I don't care which way we do it. I would rather see rates go up than do it the other way, because it gives us greater chance to reform the tax code and broaden the base in the future.”

GROVER NORQUIST: Well, you have always had some Republicans who say maybe we could raise taxes as part of a deal. Coburn did two years ago.

But, as I argued to Senator Coburn then, that if you put taxes on the table , you never get spending restraint. And in point of fact, the only time we actually got spending restraint out of one of these deals was two years ago, when we had the Budget Control Act for the debt ceiling. We cut spending $2.5 trillion, not a dollar of tax increase. Coburn was wrong that you had to raise taxes to get the agreement.

JUDY WOODRUFF: But there are other Republicans that are talking about this now who have not said this in the past.

GROVER NORQUIST: Well, not too many. Actually, there have been a number that come out each time who say, maybe we could do this.

But, in point of fact, if you raise taxes, you don't get the spending restraint just historically. It happened in '82, happened in '90.

JUDY WOODRUFF: Well, let me ask you about cutting spending. You keep saying that you don't get the spending restraint. But if there were a guarantee, a commitment from the administration, from Democrats in the Congress they are going to vote and support reductions in spending, would you then favor a balanced plan that would include higher taxes?

GROVER NORQUIST: If there were such things as pink unicorns, what would I trade for them?

The challenge is that the administration has been there for four years and done none of this. Every time they have entered into a negotiation, they have only wanted to talk about tax increases. Is it possible that the president changes his mind? That would be a good idea. We just haven't seen it before.

JUDY WOODRUFF: The administration -- the president has already talked about changes in Medicare. Just yesterday, he left open the possibility of raising the retirement age, which would lower the cost for Medicare -- I'm sorry -- not the retirement age, but the eligibility age for Medicare. That would cut the costs of Medicare, a significant entitlement.

GROVER NORQUIST: The spending restraint in his budget, what he put forward and every Democrat voted against in the House and the Senate, was to save a trillion dollars by not occupying Iraq for the next decade. That's not a serious effort. The Iraqis kicked us out of the country.

It's not a real budget cut. He also wants to save a trillion dollars by counting tax cuts that have already -- spending cuts that have already been put into law as part of the previous agreement.

That's selling the same horse again. So that's $2 trillion of what he called spending cuts. One's phony. The other's already in law. He hasn't yet gotten serious about spending restraint.

JUDY WOODRUFF: So are you prepared to see -- to have the Congress go over the fiscal cliff, in other words? I mean...

GROVER NORQUIST: That's the question people asked when the president threatened to default two years ago. And people said, would the Republicans cause the default? No, only the president can cause the default, because only the president decides whether or not to pay interest bills.

The president, I think, has decided to go over the fiscal cliff for a number of reasons, because he thinks he can blame other people for it. I hope he doesn't do that. But it's up to him. Two years ago, he extended all the Bush tax cuts without all this drama for two years. He could do it again tomorrow. He may decide to push us over a cliff.

JUDY WOODRUFF: And, finally, Grover Norquist, will there be a political price to pay for Republicans who vote to raise taxes, if that is what it comes down to?

GROVER NORQUIST: Well, I think Republicans will take a look. Most Republicans have committed, not to me, but to their constituents, that they won't raise taxes and they will fight against tax increases.

They have to -- whatever they vote for, they have to go to their constituents and say, this wasn't a tax increase or let me explain to you what I did. But they have to talk to their constituents. Most Republicans have made it very clear they're not interested in raising taxes. They want to reform government.

JUDY WOODRUFF: Grover Norquist, thank you very much for talking with us.

GROVER NORQUIST: Thank you.

JUDY WOODRUFF: Online, we profile two lawmakers who oppose Norquist's pledge. Plus, you can watch other interview from our series.

But the veterinarian and small business owner chose not to follow dozens of other conservative lawmakers before him in signing a pledge that would prevent him from voting to raise taxes.

"Signing an anti-tax pledge is not going to solve our problems and probably one of the biggest things is, it puts a handcuff on you because you are saying, 'Well, I can't raise taxes under any circumstances because I gave my word.' I don't want to have that kind of limitation," Yoho told the NewsHour three weeks before he arrives in Washington for a Jan. 3 swearing-in ceremony.

The "Taxpayer Protection Pledge," a signature project of Grover Norquist's Americans for Tax Reform, is a plainly written statement that has taken a starring role in the end-of-the-year Capitol Hill drama that could determine America's fiscal health.

"That pledge is making it impossible for reasonable people to have a reasonable discussion about taxes in the Congress," Bill Gale of the Brookings Institution said during a Politico tax policy briefing Monday. "If you've taken tax increases off the table, you have nothing to offer."

Norquist and ATR first introduced the pledge in support of President Reagan's Tax Reform Act of 1986, a law that experts say broadened the tax base and reduced marginal tax rates on some upper income taxpayers.

ATR spokesman John Kartch said it was " to protect taxpayers from a net tax increase and bracket hikes."

And every election year since, Norquist's group asks members of Congress and candidates to take the pledge. Over the past 26 years, 238 House members and 41 Senators have taken it. ATR bills it as a binding contract between a lawmaker and its constituents that they won't support tax increases for the duration of their time in office.

But that's not the case for the lone Democrat in Congress who currently appears on ATR's list of pledgers.

Rep. Robert Andrews, who represents New Jersey's 1st district, has changed his viewpoint since signing 20 years ago.

"Congressman Andrews signed a pledge not to raise taxes in the new term he was running for in 1992," Fran Tagmire, Andrews's chief of staff, told the NewsHour Tuesday.

While Andrews has honored it over two decades, he no longer supports its principles. "The Congressman has not signed the pledge in subsequent terms and believes in the present context a no tax pledge is the wrong policy," Tagmire said.

In the next Congress, Andrews will be co-chairman of a committee that aims to develop a plan to create jobs and strengthen the middle class.

Under the pledge, lawmakers can trade one deduction or credit for another as long as it doesn't result in a tax increase. "A pledge signer could endorse and sign legislation eliminating a particular tax credit or deduction as long as the same piece of legislation contained a reduction in taxes by the same amount or more," Kartch says.

Even as ATR officials say the group doesn't enforce the pledge, its website features a list of members of Congress who have signed the document at some point in their political careers. ATR also says voters use this pledge to decide whether to support a candidate and that it is binding as long as an individual holds the office.

Norquist offered a similar message in an interview Wednesday with NewsHour's Judy Woodruff.

"Most Republicans have committed not to me, but to their constituents," he said. "They have to talk to their constituents."

Yoho said that his campaign messages, which included opposition to tax increases, were enough to satisfy his constituents and that signing such a pledge to him wouldn't be the smartest idea.

"Say for instance that -- God forbid -- this country ever went through a major world war and the only way you could raise revenue to fund that would be to raise taxes, you'd have to go back to your district and say 'Hey, we've got this war, but I've signed that pledge, I can't vote for that.' That would be ridiculous," he said.

According to ATR, 219 House members and 39 Senators in the next Congress support the pledge. That list includes House Speaker John Boehner and Senate Minority Leader Mitch McConnell. But it's not clear if everyone on the list still maintains an allegiance to its principles -- especially those who've been in office for a while.

With Americans twice electing a president who has campaigned on a policy of higher tax rates for the wealthiest Americans to fix the country's fiscal issues, recent reports indicate that support among other lawmakers on the list may be shifting.

By ATR's own count, the number of newly elected members who have taken the pledge has decreased. In the current Congress, six House Republicans declined to sign the pledge. In the next Congress, that number has grown to 16.

Norquist told Woodruff he isn't concerned about the pledge signers. "Most Republicans have made it clear they are not interested in raising taxes, they want to reform government," he said.

His argument is that there are always some Republicans who are open to raising taxes, but, "[I]f you put taxes on the table you never get spending restraint."

Watch the full interview on the NewsHour Wednesday night.

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Jodie Wu's path to helping people in Tanzania started when she was nine years old.

At that young age, the Conyers, Ga., native started working as a cashier and hostess in her parents' Chinese restaurant. She watched them go to work every day (no weekends off for restaurant owners) and cancel plans at the last minute to fill in for sick employees.

That ethic of personal sacrifice for a shared goal stayed with her. When she got to MIT and started an internship at a major medical equipment manufacturer, something didn't feel right. "There were so many people, you didn't feel like you were doing anything for the company," she said.

So in 2009, she left the land of cubicles for Arusha, Tanzania -- about nine hours from the country's capital Dar es Salaam -- and started Global Cycle Solutions with a product she engineered. The bicycle-mounted maize sheller removes corn kernels from their husks to later be ground down or otherwise eaten or sold.

Designed to be powered by the rider, it was the foundation for what would become a profit-driven, socially conscious startup, with two primary goals: provide useful, affordable products for a rural, East African market, and create badly needed jobs for local Tanzanians.

With one brand new, briefly tested product, the 23-year-old, non-Swahili-speaking American began to build her business. She had experience working with an international non-governmental organization and was not impressed.

"It was awful," she said. "The organization gave out donated bikes to local kids, which would arrive in regular deliveries. When the container of bikes didn't arrive, they couldn't do any projects or operate their business."

For Wu, this NGO (and others that collected and dispensed foreign donations) supported a culture of dependency. Instead, she hoped to shape her growing business to provide stable, well-paying jobs, allowing Tanzanians to support themselves.

That first year was busy -- she recruited a management team and found a local manufacturing partner -- but rough. Without steady revenue, she saved money by staying with a host family and "took bucket showers everyday."

The bigger challenges were business-related. "My first breakdown was when I was told that GCS couldn't operate because we were not registered as a business." Basically, the Tanzanian government wanted $4,000 a month to secure Wu's residence permit which would allow her to run GCS as a foreigner.

The news was not all bad, however. In 2010, a year after she arrived, an investor offered $50,000. She also was named an Echoing Green fellow, which comes with an additional investment. By the end of 2010, she had deployable resources and an executive team experienced with international startups.

She also faced some key decisions. Notably, in response to the maize sheller's success, should she continue developing one product, or begin researching other products in a bid to diversify?

Wu's idea early on was to develop several products, initially based around bicycle power (as the company's name suggests). To that end, she hired local inventor Bernard Kiwia as GCS' chief of technology, and he began developing a bicycle-powered cell phone charger, meeting two of her goals: hiring Tanzanians in positions of responsibility and developing a suite of products appropriate for the local population.

Robert Fogler, an adjunct professor at the University of Denver who runs a venture fund that invests exclusively in Africa, shares Wu's priority of hiring local employees: "They know the market much better. In addition, [hiring local people] helps to vest the community in the success of the company."

But there is a potential downside, he said. "That same provinciality can also mean that they lack experience or exposure to best practices in a particular industry."

In the past few years, GCS has begun offering a solar-powered lantern, the company's new top seller, and a solar-powered cell phone charger. With several proven products, Wu has switched her focus to improving sales and distribution.

Whatever the daily challenge, though, she said her long-term strategy is community-based. "My goal is to make the company completely run by Tanzanians and leave and go set up in another country."

The NewsHour's Agents for Change series highlights individuals helping communities solve problems, build businesses and create jobs. We'll feature 10 of these social entrepreneurs just starting to make their mark, and invite your recommendations for others -- tweet us @NewsHourWorld and use hashtag #AgentsforChange. Or you can post them in the below comments section.

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