Since I've written many, many Wonkbooks on the threat that Europe poses to America's recovery, it's worth pointing out that there is an increasing number of smart observers downgrading -- if not entirely dismissing -- the continent's importance to the American economy.

A union members jacket is seen next to a banner for the euro during a demonstration outside of an E.U. summit in Brussels on Jan. 30, 2012. (Virginia Mayo/AP)

Slate's Matt Yglesias chimes in with some optimism on the financial channel. For one thing, Europe's series of half-solutions have bought the American financial system time to cut its exposure to European debt and insulate itself from catastrophe. For another, Europe's priorities in the crisis have, in certain ways, been favorable to our interests. "While Europe's leaders haven't hit upon a way to forestall a years-long span of catastrophically high unemployment and falling living standards," Yglesias writes, "they do appear to be really really really really committed to saving banks. This kind of 'bankers and rich people first' approach to coping with an emergency is terrible for the average European, but it does take care of our main concern from Europe, which was that we might get hit with a sudden credit crunch."

The Economists' Ryan Avent tried to look at the "animal spirits" side of the equation by graphing the Euro Stoxx 500 (an index of major European stock) against the S&P 500. He found both some good news and some bad news: "You can see that American equities outperformed European ones over this period, and that the gap between the two has grown over time. What is also obvious, however, is the high level of the correlation between the two indexes; they move in different magnitudes, but very rarely are out of step with each other entirely."

"The odds of euro-induced global recession have gone down, but the euro-zone crisis will be one of the biggest downside risks to American growth in 2012," Avent concludes. That may not sound like an optimistic statement, but compared to how the world looked six months ago, it is. And if you really want to feel good about Europe this morning -- which I don't particularly advise, but perhaps I'm just a pessimist -- you might note, as Business Insider's Joe Weisenthal does, that we're seeing some unexpected signs of growth across the continent.

Top stories

1) The building blocks for an eventual deal are emerging, report Peter Spiegel, Hugh Carnegy and Quentin Peel: "The concept of setting up a special escrow account for Greece, where resources from the country’s €130bn rescue fund would be used first to service the country’s debt before being handed over to Athens, would tie the hands of the Greek government without imposing Germany’s controversial plan for an external 'budget commissioner'...The latest proposal, coming from both France and Germany, may help to placate officials in European capitals who are looking for more supranational control over Greece’s budget and reform efforts. The escrow account could be run by the International Monetary Fund or by the Fund in conjunction with the EU...However, the scheme will not necessarily persuade Eurozone leaders to come up with the additional to pull Greece back from the brink of default yet again."

But that's not all: Greece also agreed to cut 15,000 public-sector jobs. They have not, however, come to a deal on wage cuts.

@JimPethokoukis: Citi: "We raise our estimate of the likelihood of Greek EA exit to 50% over the next 18 months, from 25-30% previously"

@WestWingReport: If #Greece had one #Euro for each time its fiscal crisis was at a "critical stage" (like today), Greece would not have a fiscal crisis

2) Payroll tax extension negotiations are looking bleak, report Seung Min-Kim and Jake Sherman: "House Ways and Means Committee Chairman Dave Camp’s private assessment of the payroll tax debate is pretty bleak. Late Monday afternoon in Speaker John Boehner’s office, the Michigan Republican told House GOP leadership that the negotiations to extend the tax holiday seem like a replay of the disastrous deficit supercommittee, according to several sources present. Democrats are dragging out negotiations because they think it helps them politically, and Senate Majority Leader Harry Reid (D-Nev.) won’t let Sen. Max Baucus (D-Mont.) cut a deal, Camp told GOP leaders, according to the sources. No one besides Baucus, Camp said, is willing to make the decisions necessary to move forward -- two assessments not shared by Democrats. The tax holiday expires at the end of this month."

GRAPH: All measures of unemployment are falling.

3) Wall Street says financial regulation is ruining their lives, reports Gabriel Sherman: "The crash four years ago was shocking enough to the financial class. But what is happening on Wall Street now is even more terrifying. No doubt the economy itself--the crisis in Europe, the effects of the tsunami in Japan, America’s sputtering recovery--has played a large part in the financial industry’s struggles. But even the most stubborn economies improve eventually. The bigger issues are structural. The Dodd-Frank financial-­reform act, much maligned, has already begun to change the shape of the financial system--even before a number of its major provisions are proposed to go into full effect this coming July. Banks are working hard to interpret Dodd-Frank’s provisions in a way most favorable to them--and repealing Dodd-Frank is a key piece of Mitt Romney’s campaign platform."

Suzy Khimm is skeptical:

4) Obama backed off his opposition to super PACs, report Jeff Zeleny and Jim Rutenberg: "President Obama is signaling to wealthy Democratic donors that he wants them to start contributing to an outside group supporting his re-election, reversing a long-held position as he confronts a deep financial disadvantage on a vital front in the campaign...The decision, which comes nine months before Election Day, escalates the money wars and is a milestone in Mr. Obama’s evolving stances on political fund-raising. The lines have increasingly blurred between presidential campaigns and super PACs, which have flourished since a 2010 Supreme Court ruling and other legal and regulatory decisions made it easier for outside groups to raise unlimited donations to promote candidates."

@RyanLizza: I for one am shocked that Obama, who all but killed the public financing system for pres. elections in 2008, has now relented on super PACs.

@brookejarvis: This bit is new news: Obama "favors action--by constitutional amendment, if necessary" to limit superPACs/ curb Citizens United

5) Obama's upcoming budget plan will look familiar, reports Laura Meckler: "President Barack Obama will release his budget plan next week, calling for $3 trillion in deficit reductions over 10 years, including $1.5 trillion in tax increases to fall mostly on the wealthiest Americans. If that sounds familiar, it's because the president essentially laid out his budget plan in September, following a failed bipartisan deficit-reduction deal. Mr. Obama's plan for fiscal year 2013, which starts Oct. 1, will mirror the September proposal, senior administration officials said. In presenting his plan, Mr. Obama will argue for new spending in targeted areas, tax cuts to spur manufacturing and new investments in education. He will build on his State of the Union message, saying his plan would foster an 'America built to last,' aides said."

Top op-eds

1) The Fed needs to give the economy another boost, writes Matthew Yglesias: "Under the circumstances, the best thing the Fed could do for economic confidence is to not be complacent. It’s great that the unemployment rate has fallen from over 10 percent to 8.3 percent, but, really, shouldn’t we consider even a single month of unemployment above 8 percent as evidence of catastrophic failure? If the Fed launched another round of QE just when people think it’s not needed, it would send exactly the right signal to the economy. The alternative of waiting for bad news to strike before delivering another boost only tells people that we’re aiming for mediocrity. What the jobs numbers are telling us, however, is that the doubters are wrong. The American economy still has the capacity to add jobs and American workers have the capacity to do them. What the economy needs most of all right now is a clear signal that the powers that be aren’t satisfied yet."

2) Obama is, confusing, both moderate and polarizing, writes Ezra Klein: "In 2011, Gallup’s polling showed that President Obama averaged an 80 percent approval rating among Democrats and 12 percent among Republicans, making his third year in office one of the most polarizing on record. For a candidate whose campaign promised an era of post-partisan unity, it must be a disappointing reality check. But on Friday, political scientist Keith Poole released a study that probably cheered the White House. According to his highly respected classification system, Obama is the most moderate Democratic president since World War II. Which raises a question: How can Obama simultaneously be one of the most divisive and most moderate presidents of the past century?"

3) 'Right to work' laws won't bring back manufacturing, writes Ron Klain: "For most policy problems, there is usually a simple answer and a correct answer; they are rarely the same thing. That dilemma is evident in the debate about what the U.S. can do to boost its manufacturing sector. One side was staked out by President Barack Obama in his State of the Union address. Building on the success of his rescue of the auto industry, the president set forth a multipronged approach toward a broader reinvigoration of manufacturing...The opposite approach is embodied by the Republican who delivered that party’s response to Obama’s speech, Indiana Governor Mitch Daniels. His single-minded and simple 'manufacturing plan' wasn’t a feature of his response -- a doom-and-gloom affair that offered little in the way of true alternatives -- but rather was contained in Daniels’ decision to sign a right-to-work law in the days that followed the speech...There are two problems with right-to-work laws as simple solutions for our manufacturing woes: They aren’t right and they don’t work."

4) The U.S. should move away from employer-based healthcare to avoid conscience conflicts, writes Ramesh Ponnuru: "Kathleen Sebelius, the secretary of Health and Human Services, says that a new health-care regulation 'strikes the appropriate balance between respecting religious freedom and increasing access to important preventive services.'...It’s a strange sort of balance. The Constitution provides specific protection to only the first of the two goods being balanced ('religious freedom' and 'increased access'). That protection contains no hint of a suggestion that it is up to federal regulators to strike whatever balance they consider appropriate between religious freedom and their other goals...The best solution would be for the federal government to stop encouraging people to get health coverage through their employers in the first place. If people bought their own health insurance with their own money -- rather than relying on their employer or other taxpayers -- they could pick the policies that best fit their expected needs and moral convictions."

5) Romney shouldn't accept dependency, writes Marc Thiessen: "In Reagan’s vision, conservatives should never accept a permanent underclass trapped in dependency and despair. But that is precisely what Romney described. Here is what Romney said: 'We have a very ample safety net, and we can talk about whether it needs to be strengthened or whether there are holes in it. But we have food stamps, we have Medicaid, we have housing vouchers, we have programs to help the poor.' So Romney is fine with an entire class of Americans being permanently on food stamps, Medicaid, housing vouchers and other government welfare programs? His solution for our fellow citizens trapped in poverty and dependency is to find holes in the safety net and repair them? That is not conservatism. That is liberalism."

Punk rock interlude: Fugazi plays "Merchandise" live at The Asylum.

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Still to come: A settlement on foreclosures may not go far enough; Congress can't agree on a doc fix; Congress passes long-term funding for the FAA; the House infrastructure bill moves forward despite revenue disagreements; and a cat tries to get a dog's tongue.


The housing market is showing wider signs of improvement, reports Vicki Needham: "The housing sector is showing improvement in a growing number of metropolitan areas. The list of housing markets showing measurable improvement expanded by 29 metros in February to 98 on the National Association of Home Builders/First American Improving Markets Index released on Monday. All today, 36 states are represented by at least one market on the list...Home builders have pointed out that while the overall market continues to struggle against a glut of foreclosures, tight lending standards and high unemployment, among other factors, there are steady improvements across the country that indicate the market has hit bottom and will gradually regain its health."

@mattyglesias: Will be ironic if GOP obstruction across 2009 produces a recovery perfectly timed for Obama's reelection.

Low skill workers are being left behind by the drop in unemployment, reports Michael Fletcher: "The nation’s jobless rate has declined to its lowest level in three years, a fact that has left Jamie Bean, an unemployed air-conditioner repairman, feeling more left out than ever...Bean’s predicament is not unlike that of many people who have a high school education or less. Not only were they hit especially hard by the recession but they have continued losing ground in the recovery that has followed. By disproportionate numbers, these Americans have given up looking for work, making the nation’s recovery appear better than it is. If the unemployment rate counted the 2.8 million people who want jobs but have stopped looking, it would sit at 9.9 percent rather than its current 8.3 percent."

Some say the foreclosure deal won't go far enough, reports Brady Dennis: "As state and federal officials near completion of a settlement with banks over shoddy foreclosure practices, a question that has loomed over the talks for months remains: Is it a good enough deal? After nearly 500 days of drawn-out negotiations, public infighting and private cajoling, the emerging settlement would force banks to overhaul their mortgage-servicing practices. It could also require the banks to pay as much as $25 billion in penalties that would be put toward helping struggling homeowners and borrowers who lost their homes to foreclosure in recent years...Some liberal groups and consumer advocates have argued that the expected terms amount to little more than a drop in the bucket, given the size of the housing crisis. Millions of homeowners remain either in foreclosure or are badly delinquent on their mortgages, and the pending deal would reach only a fraction of them."

Stop-motion interlude: An entomologist's nightmare.

Health Care

Lawmakers are deadlocked over Medicare provider payments, reports Robert Pear: "House and Senate negotiators are deadlocked over how to prevent a deep cut in Medicare payments to doctors who treat millions of Medicare beneficiaries, an impasse that could threaten broader legislation on a payroll tax cut. Lawmakers in both parties said they wanted to give doctors a small increase, but could not agree on how to cover the cost. The issue, which is being negotiated as part of the talks over maintaining a reduction in payroll taxes for 160 million Americans, pits health care providers against one another -- doctors versus hospitals -- in a type of conflict that is most likely to become more common as the federal government tries to throttle back the growth of Medicare costs. The payroll legislation would also continue jobless benefits for many of the nation’s unemployed. In the absence of agreement, doctors’ fees will be cut 27 percent next month, and many doctors say they could not continue treating Medicare patients under the lower payments."

Junk food remains widely available in schools, reports Dina ElBoghdady: "Nearly half of elementary school children can buy junk food at school, a trend that contributes to the childhood obesity epidemic and underscores the need for federal regulation of school snacks, according to a study published Monday in a pediatric journal. The study, funded by the Robert Wood Johnson Foundation, comes as federal regulators are crafting a proposal that would set new nutrition standards for foods and beverages sold in vending machines, snack bars and elsewhere in schools. The proposal will not cover foods that are part of the federally subsidized school meal program. That program was revamped recently by the Obama administration and requires participating school cafeterias to start serving twice as many fruits and vegetables, more whole grains and less sodium and fat when the next school year begins."

Should we regulate sugar like alcohol? Some researchers think so.

Domestic Policy

Congress passed a long-term funding bill for the FAA, reports Burgess Everett: "After 1,590 days and 23 short-term extensions, Congress finally gave the FAA a long-term funding bill. The Senate voted, 75-20, Monday evening to send the conference report to the White House, where President Barack Obama is expected to sign it. The House passed the bill Friday. The $64 billion, four-year bill should officially restore stability to the beleaguered FAA. In the past year, the agency has experienced both a two-week partial shutdown that put thousands out of work and the resignation of FAA Administrator Randy Babbitt in December after his arrest on suspicion of drunken driving. But the bipartisan compromise was not without critics. Many labor groups, including the Communication Workers Association, bashed the labor compromise. CWA President Larry Cohen said it amounted to 'a deliberate attack on workplace rights,' concerning Democrats, of whom only 24 voted for the bill in the House."

Congress' insider-trading legislation would crack down on the political intelligence industry, reports Kevin Bogardus: "The lucrative market for political intelligence that runs from Washington to Wall Street could be more fully exposed by insider-trading legislation that is moving quickly through Congress. Lobbyists and operatives are bristling at a provision in the Stop Trading on Congressional Knowledge (STOCK) Act that would require many traders of political intelligence to register for the first time under the Lobbying Disclosure Act (LDA). Observers say the intelligence trade is rapidly growing into a multimillion-dollar industry, powered by clients at hedge funds and other financial firms that can turn a tidy profit on the inside dope about the workings of Congress."

Interspecies friendship interlude: A cat tries to steal a dog's tongue..


The GOP infrastructure bill is moving forward despite revenue doubts, report Burgess Everett and Adam Snider: "The House’s surface transportation bill -- the GOP’s major job-creation initiative -- is off to an inauspicious start, but Republican leaders are pushing full speed ahead. Although several conservative groups have criticized the five-year, $260 billion measure for relying too much on nontraditional revenue sources like oil drilling, House leaders received a critical endorsement from Grover Norquist, the founder and president of Americans for Tax Reform...Last week, three committees passed major sections of the bill: Ways and Means approved the financing title; Natural Resources cleared three energy bills -- including oil drilling in the Arctic National Wildlife Refuge -- designed to cover some of a shortfall that estimates indicate could top $50 billion; and Transportation and Infrastructure spent 18 hours considering 103 amendments."

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.