this debate could have real consequences, as darren gersh explains. >> reporter: next month, the u.s.government will owe $38 billion in interest payments on the debt it's sold to investors here and overseas. but the u.s. government will take in about $210 billion in tax revenues in february. a vocal minority in washington now argues those figures show it is possible for the u.s. government to avoid defaulting on its debts even if the debt ceiling is not raised. >> and there is no reason for the government to default unless president obama and the democrats want us to. it's just a scare tactic to continue the spending that they don't want to address. that's why they keep saying, "oh, we're going to default. we're going to default. we're going to default." it's just not true. >> reporter: but talk like that scares many budget analysts in washington. they argue markets will see a failure by the unit ed states to pay any of its bills as a threat it could one day stop paying some or all of its bills, including terest on its debt. if we pay the chinese the interest we owe them on their sove

darren gersh, "n.b.r.," washington. >> well, job growth here in the u.s. is best described as modest. there are at least new jobs being created each month. the same cannot be said in europe. another 113,000 people lost jobs in november, pushing the unemployment rate up to a new high. new figures have the e.u.'s jobless rate hitting 11.8%, 18.8 million people going without work. the highest is in spain, where a quarter of its working population is unemployed. youth unemployment is at a record high, and exports from germany and france are falling. it is among the top risks for investors here. ian, happy new year. we have seen u.s. stock prices climb to five-year heights, despite the risks in europe. are the risks getting more pronounced for global investors? >> no. the risks are overplayed. people have been concerned about the likelihood the eurozone was going to fall apart. you only had to have a economist description last year. i think they ran eight different cover stories, showing the euro either blowing up or breaking apart or bursting into flames. not

darren gersh reports. >> reporter: the debt ceiling suspension came with a couple strings attached. if senate democrats don't pass a budget-- something they haven't done for four years-- members of congress won't get paid until they do. >> this bill simply says, "congress, do your job." when i grew up in wisconsin, if you had a job and you did the work, then you got paid. if you didn't do the work, you didn't get paid. it's that simple. >> house democrats called the pay ploy a gimmicknd saia 90 day reprieve from default simply moves the crisis back. >> for the last two years, we've heard from our republican colleagues economic uncertainty is bad for the economy. guess what? it is. and yet that's exactly what you are doing. another big dose of economic uncertainty. >> reporter: republicans shifted gears on the debt ceiling after a strategy session last week. worried that they have lost the public debate, republicans were clearly trying out a new message tod. >> balancing the budget over the next ten years means we save the future for our kids and our grandkids. it also means that we

darren gersh, "n.b.r.," washington. >> susie: the federal reserve today kicked off its first meeting of the year and will announce its interest rate policy decision tomorrow. investors will be listening for any changes. the fed has said it will keep interest rates near zero until the unemployment rate dips below 6.5%. right now, that number is 7.8%, and inflation stays below 2.5%. and it is committed to spending $85 billion a month in buying bonds to keep borrowing costs down. joining us now with a preview of what to expect: tom porcelli, chief u.s. economist at r.b.c. capital markets. >> susie: so, tom, what do you think? do you think that the fed is going to stick to this policy? we know there is a lot of debate within fed policy-makers. could we see any changes this year? >> well, you know, we don't expect any changes tomorrow. we expect it will be stat toe quo. over the course of the year, we expect that the $85 billion will remain roughly in place towards the end of the year. we could see some scaling back, but we don't think the federal stop, as suggested, would be the case and

darren gersh reports. >> reporter: the senators-- four republicans and four democrats-- argue we have already granted a kind of amnesty to the 11 million undocumented workers who live in the shadows of american society. >> we have been too content for too long to allow individuals to mow our lawns, serve our food, clean our homes, and even watch our children while not affording them any of the benefits that make our country so great. >> reporter: the "framework" the senators released today calls for tighter enforcement at the border and of existing immigration laws in return for granting immediate legal status for the 11 million undocumented workers now in the country. in the future, the number of new immigrants would be tied to the availability of jobs. >> we are going to enshrine in here the principle that americans get the first grab at it. americans get the first opportunity and that's the way it should be. >> reporter: critics say they've heard this all before. the federation for american immigration reform blasted the bipartisan proposals, saying "it is legislation that provides

darren gersh has more on this pivotal player. >> reporter: the president introduced his pick for treasury secretary as a man who gets tough jobs done. and one of those jobs will be protecting programs the president supports. >> as the son of a polish immigrant, as a man of deep and devout faith, jack knows every number on a page, every dollar we budget, every decision we make, has to be an expression of who we wish to be as a nation. >> reporter: the two men enjoy an easy rapport that was clearly on display today. >> thank you mr. president for your trust, your confidence and friendship. serving in your administration has allowed me to live out those values my parents instilled in me. >> reporter: lew has been involved with almost every important budget agreement of the last quarter century and his promotion to treasury secretary is taken as a signal the president plans to focus the early part of his second term on taming the deficit. >> jack's been around for a long time. he's a tough dude and i think he is there because there's a knowledge that we're going to have a lot of these debates

darren gersh reports. >> reporter: boeing has spent more than $30 billion developing the 787 dreamliner. one reason for the high cost is boeing's decision to upgrade the hydraulics and other mechanical systems with next-generation technology that runs on electricity. >> you've got generators on board the aircraft that are powering the systems directly with electricity. that, of course, means a lot more juice is flowing through the plane. it also means you need more powerful batteries as backup systems. >> reporter: investigators from the federal aviation administration and national transportation safety board are working with their counterparts in japan to try to determine whether a manufacturing defect caused the battery in an all nippon airways 787 to burn up. if that proves to be the case, boeing may find the fix is straight forward. but if the problem is the lithium battery technology itself, boeing faces a more difficult engineering challenge. >> lithium ion batteries have a lot of power and of course there are many types of batteries out there and hopefully a substitute can be fou

darren gersh reports from washington. >> reporter: it was not just the united staá?háhat sweltered through last summer. nasaonfirms 2012 was one of the hottest years on record for the entire globe. 2012 was one degree warmer than normal for the 20th century, and, compared to records dating back to 1880, the globe has warmed by 1.4 degrees. nasa scientists also believe the warming trend is accelerating, just as analysts see the political will for climate change hitting new lows. but that doesn't mean the issue has gone away; it's just taking a different form. for example, the house or representatives debated relief from superstorm sandy today. ergy analyst kevibook expects governments will increasingly be forced to spend money to mitigate or adapt to climate change. >> with every storm, with every flood, we're getting closer and closer to talking about how he handle climate change rather than how we stop it. >> reporter: pressure to address climate change may also come from outside the united states. the european union is threatening to slap trade the u.s. refuses to

darren gersh, "n.b.r.," washington >> tom: the u.s. housing market had a quiet end to its best year since 2007. sales of existing homes fell unexpectedly in december by 1% down to a 4.94 million annual rate. analysts note the drop in sales is not entirely bad news because there were fewer homes on the market. inventories are at their lowest level in seven and a half years. sales were up in the northeast and western u.s. while they fell in the midwest and south. for the entire year, existing home sales saw their best year since 2007. >> tom: julia coronado is the chief economist of north america, and she joins us from new york. julia, how much more do you think housing can continue to improve without real significant increases in job gains? >> well, i think that what we're expecting is more pretty decent but moderate improvement in housing, and that will come with some job gains. but this is a housing recovery that is going to look a little bit different from the ones in the past. people are more cautious in their view of housing. nobod

darren gersh reports. >> reporter: boeing has spent more than $30 billion developing the 787 dreamliner. one reason for the high cost is boeing's decision to upgrade the hydraulics and other mechanical systems with next-generation technology that runs on electricity. >> you've got generators on board the aircraft that are powering the systems directly with electricity. that, of course, means a lot more juice is flowing through the plane. it also means you need more powerful batteries as backup systems. >> reporter: investigators from the federal aviation administration and national transportation safety board are working with their counterparts in japan to try to determine whether a manufacturing defect caused the battery in an all nippon airways 787 to burn up. if that proves to be the case, boeing may find the fix is straight forward. but if the problem is the lithium battery technology itself, boeing faces a more difficult engineering challenge. >> lithium ion batteries have a lot of power and of course there are many types of batteries out there and hopefully a substitute can be fou

. >> susie: darren gersh begins our coverage with that weak reading on the economy. >> reporter: last quarter, defense spending fell off the fiscal cliff. as lawmakers bickered, manufacturers who make things for the pentagon cut back production sharply-- defense spending fell 22% in the latest g.d.p. report, tipping the economy into the red. >> certainly manufacturers are pulling back and i think this is a bit of a wake up call that these cuts are real and that they have real effects on the economy. >> reporter: economists and markets did not panic over the drop into the red, because the economy is still showing signs of solid growth. businesses are still buying equipment and software. housing continues to bounce back. and consumer spending held up well, expanding at an annual rate of 2.2%. >> so if you look through some of the volatile components, demand underneath was solid and it doesn't suggest the economy is losing momentum. so a scary headline number isn't as bad as it seems when you look underneath. >> reporter: and that's what economists say federal reserve policy makers did.

darren gersh reports from washington. >> reporter: it was not just the united staá?háhat sweltered through last summer. nasa confirms 2012 was one of the hottest years on record for the entire globe. 2012 was one degree warmer than normal for the 20th century, and, compared to records dating back to 1880, the globe has warmed by 1.4 degrees. nasa scientists also believe the warming trend is accelerating, just as analysts see the political will for climate change hitting new lows. but that doesn't mean the issue has gone away; it's just taking a different form. for example, the house or representatives debated relief from superstorm sandy today. energy analyst kevin book expects governments will increasingly be forced to spend moy toitigate or adapt to clmatehange. >> with every storm, with every flood, we're getting closer and closer to talking about how he handle climate change rather than how we stop it. >> reporter: pressure to address climate change may also come from outside the united states. the european union is threatening to slap trade the u.s. refuses to b

darren gersh reports. >> reporter: assuming he wins senate confirmation, jacob "jack" lew will take over a treasury that is rapidly running out of cash. the federal government has already hit the debt ceiling. and the only way the government can pay its bills is by using accounting gimmicks to move money around. those tricks will only get the government through mid-february. at that point lew might have to take the unprecedented step of deciding he has the legal authority to pick and choose which bills the feds will pay. >> even if it were clear that the treasury secretary could do that, pick and choose, the ability, the real ability to reprogram all of the software in treasury's computers which connect to all of the computer software in the various agencies is not something that can be done in ten minutes or ten days or ten weeks. so you have the right to do it, but you don't have the ability to do it. >> reporter: the treasury uses a separate computer system to make interest payments on the federal debt so it is possible investors would get what they are owed. but what happens with soc

our bureau chief, darren gersh. >> thanks. >> susie: what's in your portfolio? still ahead, the importance of how to allocate assets when it comes to your investing strategy. on wall street, stocks broke a two-day losing streak, rising modestly. investors were feeling a bit of optimism about earnings season after alcoa's positive report last night that we told you about. the dow rose 61 points, the nasdaq added 14, and the s&p gained almost four points. >> tom: a.i.g. will not being suing the u.s. government after all. the insurance company's board of directors decided against joining a controversial shareholder lawsuit against the government. former c.e.o. hank greenberg and his company starr international claim the terms of the government's bailout of a.i.g. were unfair. but even without a.i.g.'s support, the suit will proceed. erika miller reports. >> reporter: maybe it was the outrage by the public and politicians, or perhaps it was simply a business and legal decision. a.i.g.'s board did not explain why it decided not to join a shareholder lawsuit against t

darren gersh reports. >> reporter: the senators-- four republicans and four democrats-- argue we have already granted a kind of amnesty to the 11 million undocumented workers who live in the shadows of american society. >> we have been too content for too long to allow individuals to mow our lawns, serve our food, clean our homes, and even watch our children while not affording them any of the benefits that make our country so great. >> reporter: the "framework" the senators released today calls for tighter enforcement at the border and of existing immigration laws in return for granting immediate legal status for the 11 million undocumented workers now in the country. in the future, the number of new immigrants would be tied to the availability of jobs. >> we are going to enshrine in here the principle that americans get the first grab at it. americans get the first opportunity and that's the way it should be. >> reporter: critics say they've heard this all before. the federation for american immigration reform blasted the bipartisan proposals, saying "it is legislation that provides

as darren gersh reports, the fight could be a sign more mergers will face a tougher time in washington. >> reporter: the justice department is not quite ready for a two-pack of brewers to control almost half the american beer market. in a statement announcing a lawsuit to block anheuser-bush inbev's $20 billion deal for mexican brewer modelo, assistant attorney general bill baer says >> if abi fully owned and controlled modelo, a.b.i. would be able to increase beer prices to american consumers. this lawsuit seeks to prevent a.b.i. from eliminating modelo as an important competitive force in the beer industry. anheuser-busch was not deterred, saying: >> we remain confident in our position, and we intend to vigorously contest the justice department's action in federal court. >> reporter: the proposed merger between the largest and third largest beer makers would create a company with 46% of the market in the united states. millercoors would be a distant third at 29%. antitrust expert barry lynn hopes the suit means the obama administration is finally willing to fight a broader trend towa