Depending on which account you read, last night Chris Christie announced that he either was going to enter the presidential race, or that he definitely wasn't. On Twitter, it was quickly dubbed "the Rashomon speech." I'm told that Sarah Palin also made noises. This is the comforting, familiar narrative of the 2012 election: it's about the candidates, and their ideas, and their records. But here's the increasingly undeniable truth: the 2012 election is likely to be decided by the actions a handful of European leaders take over the next couple of weeks.

A European Union flag waves above the ancient Parthenon temple, at the Acropolis Hill, in Athens July 11. (Petros Giannakouris/AP)

The European Union is a big economy. Bigger than ours, in fact. In 2010, we exported $240 billion worth of products to the EU, and imported $320 billion. And our other major trading partners -- Canada, Mexico, China, etc -- are similarly interlinked with the European economy. So just as a financial crisis that began in the United States was capable of creating an economic crisis across the rest of the world, a debt crisis that begins in the European Union has plenty of channels through which it can shatter an already fragile global economy. (For a primer on Europe's debt problems, head here.)

It doesn't have to happen, of course. Europe has the resources to get through this crisis. But it doesn't have the governance structures necessary to do so, nor is it clear that it has the political will needed to create them. At the moment, Greece is teetering on the edge, and so things could get very bad, very quick. And if they do, our economy is going to get very bad, very quick -- and so will President Obama's reelection chances. If Europe somehow vastly exceeds the market's expectations and emerges with the strong fiscal union that everyone knows they can form but no one thinks they will create, it could do more to restore global confidence and kickstart an economic recovery than any single piece of legislation we can pass here, and that could do more to secure Obama's reelection than any message David Plouffe can think up.

Top Stories

1) Europe is near a bailout fund deal that may not be enough, reports Steven Erlanger: "Mrs. Merkel talked once more of her 'confidence' that her wavering parliamentary coalition would vote on Thursday for an expansion of the European bailout fund, which was agreed to more than two months ago in Brussels. By the time the entire process is finished, about mid-October if all goes well, Europe’s leaders will have a newly expanded European Financial Stability Facility that most analysts say will be, at $600 billion, grossly inadequate to extinguish the crisis, since it lacks the means to cope with the larger economies of Italy and Spain. It seems another example of too little, too late on the part of the leaders of the 17-nation euro zone. But it is also another example of sharply differing analyses of the core problem of the euro, making a solution hard to reach."

2) The European Parliament is voting on new fiscal rules today, reports Stephen Castle: "Amid a debt crisis that threatens to engulf the global economy, the European Union this week will try again to address a serious flaw in the construction of the euro: the lack of fiscal rules tough enough to provide a foundation for the currency. While steering far clear of transferring actual authority over national budgets here, the revamped rules, scheduled for a vote Wednesday in the European Parliament, are described as tougher, more credible and more sophisticated than the original set, on paper at least. Laid out in six pieces of legislation and known as the six-pack, the rules contain the same targets for euro zone members as the old ones: budget deficits of no more than 3 percent of gross domestic product and a maximum debt level of 60 percent of gross domestic product. But this time, the drafters hope the policing system will be more credible."

3) Greece has pushed through a major austerity measure, report Michael Birnbaum and Neil Irwin: "The Greek government took a crucial step Tuesday to avoid default, winning parliamentary approval for a highly controversial property tax increase that could help the country meet international conditions for more bailout money. With global investors showing some optimism that debt problems in Greece and elsewhere in Europe could be resolved, financial markets rose. The German stock market was up 5.3 percent, and the French stock market gained 5.7 percent. U.S. stocks ended the day up 1.1 percent as measured by the Standard & Poor’s 500-stock index...Contributing to the burst of confidence were comments from German Chancellor Angela Merkel, who said in a television interview that she wants Greece to stay in the euro currency area despite the strains caused by the Greek debt crisis."

4) The Obama administration is stretching out FEMA money to avoid another shutdown scare, reports David Rogers: "The White House signaled Tuesday that it will take a very expansive view of the new spending authority promised to FEMA by Congress and won’t need to return for more disaster aid prior to mid-November, when the pending continuing resolution expires...For most federal accounts, FEMA’s disaster share would translate into about $345 million over the next seven weeks, since spending under a CR is typically apportioned according to the length of the resolution. But in a letter to House and Senate leaders Tuesday, Office of Management and Budget Director Jack Lew indicated a far more generous approach, and officials said later that the disaster relief funds would be apportioned on an 'as needed' basis rather than the standard 'pro rata' formula."

Top Op-eds

1) European leaders are trying to forestall the inevitable, writes Martin Feldstein: "The only way out is for Greece to default on its sovereign debt. When it does, it must write down the principal value of that debt by at least 50%. The current plan to reduce the present value of privately held bonds by 20% is just a first small step toward this outcome. If Greece leaves the euro after it defaults, it can devalue its new currency, thereby stimulating demand and shifting eventually to a trade surplus...Why, then, are political leaders in France and Germany trying so hard to prevent - or, more accurately, to postpone - the inevitable? There are two reasons. First, the banks and other financial institutions in Germany and France have large exposures to Greek government debt...The second, and more important, reason for the Franco-German struggle to postpone a Greek default is the risk that a Greek default would induce sovereign defaults in other countries and runs on other banking systems, particularly in Spain and Italy."

2) Ben Bernanke's latest move is smarter than he's gotten credit for, writes Alan Blinder: "The FOMC added a surprising new wrinkle that may prove to be the sleeper in the package. For more than a year now, the Fed has been allowing its portfolio of agency debt (e.g., Fannie Mae and Freddie Mac) and mortgage-backed securities (MBS) to shrink naturally as mortgages are paid off and securities mature. To maintain the size of its balance sheet, the Fed has been reinvesting the proceeds in Treasurys. But starting 'now' (the Fed's word), and continuing indefinitely, those proceeds will be reinvested in agency bonds and MBS instead. The objective here is exactly what it was for the first round of quantitative reduce spreads between MBS and Treasurys (which had widened a bit), and thereby to help the ailing housing market...The idea is, as they say, scalable. A future round of quantitative easing (QE4?) that concentrates on private-sector securities like MBS, rather than on Treasurys, is now imaginable."

3) Courts have never been particularly "activist", writes Clark Neily: "In principle, the Supreme Court's strike-down rate should equal the rate that the other branches of government exceed their constitutional authority. Given how often it is accused of activism, one might think the Supreme Court's strike-down rate must be off the charts. In fact, the opposite is true. Over the 50-year period from 1954 to 2003, Congress enacted 16,015 laws, of which the Supreme Court struck down 104--just two-thirds of 1%. The court struck down an even smaller proportion of federal administrative regulations--about 0.5%--and a still smaller proportion of state laws: 455 out of one million laws passed, or less than one-twentieth of 1%. In fact, on an annual basis, the Supreme Court struck down only three out of every 5,000 state and federal laws passed."

4) The Supreme Court may not even want to rule on health care reform, writes Dahlia Lithwick: "I remain unsure that there just are five justices at the high court eager to have the court itself become an election-year issue. I don't think Chief Justice John Roberts wants to borrow that kind of partisan trouble again so soon after Citizens United, the campaign-finance case that turned into an Obama talking point. And I am not certain that the short-term gain of striking down some or part of the ACA (embarrassing President Obama even to the point of affecting the election) is the kind of judicial end-game this court really cares about...If the justices opt to consider the technical question raised at the Fourth Circuit--about who has legal standing to challenge the mandate in the first place--the court could dodge the constitutional question altogether until 2015, when the first penalties will be paid."

Late night interlude: Radiohead plays "The National Anthem" on The Colbert Report.

Got tips, additions, or comments? E-mail me.

Still to come: Harry Reid is taking his time on Obama's jobs plan; employee health care premiums are going up; the White House won't rule out additional cuts targeting federal workers; new auto emissions rules' rollout is being delayed; and a puppy tries repeatedly to get through a door.


Harry Reid is taking his time bringing Obama's jobs plan to a vote, reports Rosalind Helderman: "Despite early and regular pleas from the White House, Senate Democrats say they will not move immediately to take up President Obama’s jobs bill when they return next week from a short recess. 'We’ll get to that,' Senate Majority Leader Harry M. Reid (D-Nev.) said Monday night when asked if the likely passage of a temporary spending bill to keep the government functioning meant the Senate could now consider the president’s package...Reid, who is sponsoring the package in the Senate, said Monday the Senate will first take up debate next week on a bill to punish China and other nations for currency ma­nipu­la­tion...Work on the Chinese trade ma­nipu­la­tion measure has been on the back burner for months, and it has strong bipartisan support in the Senate, where leaders see it as a jobs protection bill that has a good chance of passage."

But the White House doesn't like the China trade bill, reports Manu Raju: "The White House isn’t thrilled with the China measure, revealing the latest rift with congressional Democrats over the direction of a jobs agenda -- as Obama tries to walk a diplomatic tightrope with a powerful economic trading partner...With support growing even in some GOP circles, including the likes of conservative Sen. Jeff Sessions of Alabama and presidential hopeful Mitt Romney, Democrats believe the Obama administration is growing increasingly isolated politically and must cut a deal in order to save face in a raging populist fight...Critics in the business community said politicians are using China as a scapegoat for the country’s problems and the bill could prompt a damaging trade war...The measure would make it easier for the Commerce Department to investigate allegations over currency manipulation and would make it harder for the Treasury Department to avoid labeling the country a currency manipulator."

The supercommittee is doing the vast majority of its work in private, report Jake Sherman and Matt Dobias: "As 12 lawmakers tackle the historic task of slashing at least $1.2 trillion from the nation’s deficit, they have spent lots of time behind closed doors, speaking almost nothing of their proceedings while leaving behind little more than a trail of sandwich wrappers and unanswered questions. It’s a remarkable show of secrecy after an election year that ushered in nearly 90 new Republicans who rejected the idea that sweeping legislation would be authored outside the public view. Tuesday was the second straight closed-door day for the supercommittee. The panel met for roughly 6½ hours in the Capitol, and when its members left, they wouldn’t answer basic, innocuous questions about the policies they were discussing nor specify when the next meeting would take place."

New swipe fee rules aren't producing much savings, reports Josh Boak: "In a continuing big bank versus consumer battle, the lower fees that banks begin charging Saturday for debit card swipes might not in the end generate that much savings. Congress limited the so-called swipe fees under the argument that billions of dollars would trickle back to shoppers. But banks, facing the expected industrywide loss of $6.6 billion in swipe fees, are phasing out free checking and charging more for other bank services. And while retailers continue to tout how this should help consumers, they’re strapped by stagnating sales in a very fragile economy and may struggle to pass on meaningful benefits. The lower fees imposed by the Federal Reserve -- down from an average 44 cents to roughly 24 cents per transaction -- could actually mean that a greater percentage of the price of, say, a sandwich gets swallowed up by banks."

Party leaders would be in a bind should a member of the supercommittee resign, reports Sam Stein: "[Kyl's] departure would have created a major headache for his fellow Republicans. According to the committee's charter, if Kyl had left the committee, Senate Minority Leader Mitch McConnell (R-Ky.) would have 14 days to name a new person to fill the vacancy. After that, Kyl's spot would have gone unfilled and Democrats would have had a built in, one-vote majority. The quorum for the committee would have stayed at seven members, but the group's final plan would have needed only six votes for passage. A congressional aide familiar with the committee's charter confirmed these rules. In other words, had Kyl quit, McConnell would have had to persuade a fellow member to take his place or all the other Republicans would have had to quit along with him to deny Democrats a quorum."

House Democrats are meeting with Fannie and Freddie's regulator, reports Mike Lillis: "Following an outcry from congressional Democrats, the Obama administration has reversed course and will allow lawmakers to meet with a top housing official. House Democrats, already upset with the administration’s effort to help struggling homeowners, became infuriated earlier this month when their request for a briefing on the White House’s new housing plan was denied. Democrats had requested to meet with Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), which is an independent agency that oversees Fannie Mae and Freddie Mac. Instead, said Rep. Elijah Cummings (D-Md.), '[FHFA] sent us some career employees, and they were not able to answer the questions that we were most concerned about.'"

Adorable animals persevering interlude: A puppy tries valiantly to get through a doorway.

Health Care

Health insurance premiums are being shifted to employees, reports N.C. Aizenman: "Premiums for employer-sponsored health insurance continued to escalate this year even as the share of workers getting less generous coverage reached a new high, according to survey data released Tuesday. In 2011, for the first time, half of workers at small firms with individual policies faced annual deductibles of $1,000 or more. In 2006, that figure was 16 percent. At large firms, the share has grown from 6 percent to 22 percent over the same five years. At the same time, the survey by the Kaiser Family Foundation found that premiums for family plans rose 9 percent in 2011, after several years of slower annual growth...Both sources point to the same fundamental long-term shift: Faced with continually climbing premiums, a record share of employers have moved to plans that require workers to pay more out of pocket."

Paul Ryan wants to eliminate the employer health care tax exemption, reports Sahil Kapur: "House Budget Chair Paul Ryan (R-WI) is resurrecting an idea he proposed in 2009 to eliminate the tax exemption for employer-sponsored health insurance and replace it with a fixed credit for businesses and employees...Ryan excluded the provision from his House-passed budget plan, but he made a case for it in a speech Tuesday (Sept. 27), calling the current employer-based exemption 'additional fuel for runaway health care inflation.'...Ryan's proposal -- introduced in the 'Patients' Choice Act' in May 2009 alongside Rep. Nunes (R-CA), Sen. Tom Coburn (R-OK) and Sen. Richard Burr (R-NC) -- would end the employer-based insurance exemption in lieu of a tax credit of $2,300 per individual or $5,700 per family...Proposals to remove tax exemptions have been derided by some conservatives as tax hikes, and Ryan insists that's not the case with this plan."

Domestic Policy

Budget chief Jack Lew won't rule out further cuts to federal payrolls, reports Lisa Rein: "Federal workers could be asked to sacrifice more than they already have to help reduce the deficit, budget chief Jack J. Lew said Tuesday. 'I can’t say nothing else will happen regarding the federal workforce,' Lew said in remarks at the nonprofit Partnership for Public Service in Washington, where he was speaking to agency managers about how to cut the size of government. 'Federal workers are at the heart of what we do,' the head of the Office of Management and Budget said. 'We owe [them] gratitude.' But Lew said he could not rule out more cuts to the pay or benefits of civil servants beyond the pay freeze already in place and increases in pension contributions that President Obama has proposed. 'Everything is going to be under tight fiscal conditions,' Lew said."

Excellence in editing interlude: The Office recut as a thriller.


New auto emissions rules are being delayed a couple of months, reports Ben Geman: "The Environmental Protection Agency and the Transportation Department are delaying the release of proposed regulations establishing the next round of joint greenhouse gas and mileage standards for cars and light trucks. The agencies plan to issue rules for model years 2017-2025 that establish a standard of 54.5 miles per gallon by 2025, a plan that has won support from major automakers. The proposed rule was slated for release at the end of September, but is now expected to surface by mid-November, according to EPA. The agency cited factors including the time needed to coordinate with the state of California, which has authority to set its own standards but has again agreed to harmonize its rules with the Obama administration standards."

A false rumor about EPA spending is running rampant, reports Dan Berman: "It’s a story too good to be true for the anti-Obama and anti-regulation crowd: The hated Environmental Protection Agency is looking to spend $21 billion per year to hire an additional 230,000 people to enforce greenhouse gas regulations. One problem: It’s not true. Patient zero for this story is The Daily Caller, which on Monday wrote that the EPA is 'asking for taxpayers to shoulder the burden of up to 230,000 new bureaucrats -- at a cost of $21 billion -- to attempt to implement the rules.' To put that to scale: EPA currently has 17,000 employees at an annual budget of $8.7 billion. 'Much of what is said or written about EPA these days is entirely inaccurate -- but The Daily Caller's report is comically wrong,' EPA spokesman Brendan Gilfillan told POLITICO."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.