today wisconsin is a fall preview. >> they look at wisconsin, and they see america's battleground between people who want to work together to solve problems and penal who want to divide and conquer. >> democratic challenger and milwaukee mayor tom barrett on his bid to oust the republican governor in a recall race. then battleground politics with virginia republican governor bob mcdonald, u.s. jobs and the bloodshed in syria. plus, unemployment is up, the dow is down, and the presidential election is 157 days away. analysis from mark zande of moody's analytics, stechen moore of the "wall street journal," and dan balz of the "washington post." i'm candy crowley. and this is "state of the union." 19 months after electing republican scott walker as governor, wisconsin voters decide tuesday whether to recall him. walker's critics were galvanized by his first budget designed to fix a $3.6 billion shortfall. it included stripping collective bargaining rights for most public workers and increasing their contributions to their pension and health care plans. the race is seen as a test run of things to come on the national scene pitting republicans and the tea party against democrats and organized labor. it has attracted mega millions from outside the state and lots of attention from party headliners, but as republicans like to note, not all the headliners. >> well, it's more obvious is that the president himself, the current president, is not in town, and that to me speaks volumes, his absence. >> joining me is milwaukee mayor tom barrett, the man who lost to governor scott in the 2010 election and looks to unseat him now in the recall. mr. mayor, thank you for being here this morning. let me start out with you asking whether you have asked the president to come and campaign on your behalf? >> no, because we understand that he's got a lot going on, and this actually started as a grassroots movement here in wisconsin because of governor walker's lack of integrity and his surprise attack on workers in the state. so integrity and a grassroots effort was how this started and it will be on those same two notes, that's how this campaign will end. >> you certainly have certainly the republicans have had more out of state money and more out of state help, but you have had some national figures come in as well from the party and also from the unions who have been fighting governor walker in particular based off this budget, and one of those folks, jer jerry, the president of asme, had this to say about the democratic party. we think there could have been more responsibility, more work on behalf of the national democratic party. we think they could and should have done more. as you look at these next couple of days moving forward, where do you think the momentum is and could you use more from the dnc and from some of these other folks to get in there and try to pull you over the finish line? >> well, candy, i traveled the state yesterday, i'm going to be traveling the state again today and tomorrow. yesterday it was just a phenomenal day. literally hundreds of people all throughout the state, people saying to me they have never seen the level of excitement they're seeing right now, and it's people from wisconsin. it's people who live here, and that's what this should be all about. it should be all about the people in the state of wisconsin because you've got a sitting governor, the only governor in this country who has a legal defense fund, all this outside money. this is wisconsin values versus outside influence. and again i want to be on the side of wisconsin values. >> do you think then that there is no national message in this? that win or lose, you don't see any national implications for november or any tea leaves coming out of this wisconsin race? >> again, scott walker wants to make this a national race because he wants to be on the national stage as the rock star of the far right, as the poster boy of the tea party. that's not what i'm interested in. i'm not going to be the rock star of the far right and frankly on the rock star of the far left. i'm focusing on this state because that's what's important to me. >> i want to talk to you a little bit about recall elections in general. the marquette law school poll, this was about the approval or d disapproval of scott walker and how he's handling his job. that was may 23rd to 36th, so very recently. 51% of those, you know, said, look, we think -- we approve of the job he's doing. 45% disapprove. the recall election itself in general seems to me to encourage in some ways timid leadership. here is a guy who is polling 51% in your state and yet you're trying to recall him because you're unhappy with what he did. >> well, i think it's important to understand the history of wisconsin here. scott walker actually became the milwaukee county executive following a recall that he was one of the leaders of, and as a state legislator, he says he does not remember whether he signed recall petitions against senator kohl and senator feingold. >> how do you feel about them though? >> i think they should be rare. i absolutely -- think should be rare but this is a rare instance. off governor who did not campaign at all about having an attack on workers, on workers in this state, and he came in in a very furtive fashion. he said, and these are his words, he said he was going to be dropping the bomb and he was going to divide and conquer. he set out on a strategy to pit people in this state against each other and he succeeded in pitting people against each other. >> again, it seems to me that if you use a recall election because a governor does something you don't like, you set up the stakes for timid leadership. they're always sort of putting their finger to the wind trying to figure out what people want so they don't get recalled. the president himself has said i need four more years in order to fix what's wrong with the economy and other things, and scott walker, that whole recall thing, began within months of his taking office. that's kind of what i wanted you to address. >> sure. well, it's important again to understand what happened. he said that he was require state employees to pay more towards their health care and their pensions, and quite honestly what happened was they agreed to do that. they agreed to do that. did they want to do it? of course not, but the leadership agreed to do that. this entire episode would have been avoided if he would have said, all right, i campaigned on that, you agree to it, let's move on, but it became clear very, very early that was not all that was going on here. he wanted to go after his political opponents around permanently disarm them. that's what this was all about, taking away their rights. he said it was the first step. and the next step obviously would be to go after people who are in the private sector and people who aren't in unions. so i believe that this is the first step towards taking away workers' rights throughout the state, and that's where the surprise attack came in. he never once mentioned that, but once he came in, he instead of focusing on jobs, which he said he was going to do, he took this road where he went after the rights of workers throughout the state of wisconsin. that's what got people up in arms. >> quickly, mr. mayor -- >> all of this would have been avoided if he would -- >> quickly if i can, are you going to win this thing? jim going to win it. we saw in the last tracking poll two nights ago, this is 800 samples, i was one vote behind. not one percentage vount behind, but one vote behind and we have literally thousands of people on the streets this weekend. so we are very, very positive. >> milwaukee mayor tom barrett, you have got a busy couple days ahead of you so we doubly appreciate your time this morning. >> thank you, candy. we invited governor walker to appear, but we were told his schedule was too tight. now, one state that president obama and mitt romney are fighting hard to win this november is virginia. governor bob mcdonald is here next. uh-oh. 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[ male announcer ] stop the uh-oh fast with kaopectate. joining me, virginia governor bob mcdonald. he heads the republican governor's association and you're a man that has been out to wisconsin to try to help governor walker stay in office. about $8.3 million you all have sent out to him to try -- >> about. >> about, but probably a little more by this point. >> yes. >> what do you think is at stake. we just heard from the mayor, the democratic challenger, that he doesn't think this has anything to do with the national scene. does it? >> i think it will, but it's certainly about wisconsin. it's about a governor campaigning saying elect me and i will do certain things to create more jobs and get our fiscal house in order. and this is a guy that's kept his word and i think the voters will reward him for his courage. >> and if he loses, what does it say? >> i'm not planning on that, candy. i think the tracking -- >> you must fear that though a little bit. >> of course, because it's all about the ground game, there's same-day registration in wisconsin which can change the dynamics. scott has worked incredibly hard. here is what at stake. he said we will get a $3.6 billion budget fixed. we will reduce property taxes. >> budget shortfall. >> and create jobs. and that's what he did. and this is about results. it's going to be the same thing with romney and obama. as you put policies in place, were they controversial? yes. does it take guts and leadership to tell people we can't afford to do these things jen more? sure. but he's done it. and now he's getting the results. >> but if they come back a year and a half later and say we don't like these reforms and they reject him, does that not say that you can go too far, that this is one republican who went too far and found himself out of office? >> ask me wednesday. i don't think that's going to happen. >> i'm going to hold you to that then. >> you can do that. this is what's happening in washington as well is people expected results. obama promised a couple years ago, if i don't have this deal done in three years, it's going to be a one-term proposition, meaning on spending, deficit, on debt, on jobs, and he hasn't delivered. that's why i think there will be a change in leadership in washington. people are tired of the rhetoric. >> let me talk to you about the swing state of virginia. >> yeah. >> i want to show our viewers your unemployment rate which has basically stayed two to three points below the national unemployment rate. it's a success story really. >> you can keep that up for a wile. >> you like this, i understand it. does it not make it difficult for mitt romney, who has the same problem in other swing states to come in and say the economy is terrible and, you know, you need to elect a new president because virginia is doing very well under president obama. >> yeah, i don't think it undermines his argument at all for two reasons. one is as well as we've been fortunate to do with the lowest unemployment in the southeast, i tell people, think how much better we'd do if we had president romney. number two, i think that there's something going on with republican governed states. seven out of the ten states that have the lowest unemployment rates, republican governed states. >> do you credit president obama at all for the good fortune virginia has had? >> what would you point to that would lead you to say that that unemployment -- the only thing i can say is he had a nearly a trillion dollars in stimulus, and that was one time spending. did it help news the short run with health care and education? sure. does it help news the long term to cut the unemployment rate, i'd say no but we have done a lot of things. republicans and democrats in virginia doing things i requested on economic development and targeted tax kuts and other things that i think have made a difference. so i'd say republican governors are doing some things that are making a difference and that's why i'm trying to get more of them this year. >> just a tiny bit of credit to the president? >> sure. i think there's national policy that is have had some impact but i can tell you this, if we didn't have all these attacks on virginia's energy industry we'd be in a lot better place. this president on coal, natural gas, nuclear, not letting us drill offshore, the environmental protection agen agency's overburdensome regulations on coal and gas has made it much more difficult for us. >> let me ask you about governor romney's record as governor of massachusetts. >> sure. >> when he -- during his four years there, the state was 47th in job creation. there quas was a net gain in payroll fob of 1%, which is well below the net gain nationwide. spending went up, the size of government went up. what kind of record is that for a republican to run on? >> i'd say it's better than that. he went from 47th down to 30th in job creation by the time he left office. he had a $3.6 billion deficit, too. was able to cut that and left office with a $2 billion rainy day fund. i'd say that's pretty good. >> but in the end, you know, he was 47th throughout that whole four-year period, and he is selling himself as a businessman who knows how to create jobs and yet really didn't do that very well when he was in massachusetts. you see the democrats going after this. what's his defense here? >> well, the numbers i have is it went down to 30th by the time he left office nationwide in job creation. more importantly than that, candy s what he did in the private sector. add democrat legislature. that's a deep blue state and i think managing the fiscal house and trying to create jobs during that time, he had to combat a democratic legislature, but look what he did at bain capital, as executive director of the olympics, over 100,000 new jobs with venture capital. he knows how to create jobs in the private sector. he understands the american dream because he's lived it. i'd say president obama had the kind of record mitt romney did, he'd be talking about it, but he can't run on it. >> two quick questions. donald trump staying on the birther issue seems to me a cynic would look at that and go, well, it helps keep a certain part of the base of the republican party happy. mitt romney has not condemned it. in fact, he campaigned and fund raised alongside donald trump. are you bothered by the kinds -- >> mitt romney and i both agree the president was born in america. it's not where he was born. it's his policies that are the issue in this race. 8% unemployment rate for 40 months, the largest debt in american history at $16 trillion and growing and no plan on debt reduction. that's the issue, not where he was born. >> has the romney campaign asked for any papers in the vp search for you. >> they have asked for my schedule to see where i can help them next. >> sounds like maybe he has. we'll talk to you later. virginia governor, bob mcdonald. amid new signs the recovery may be hitting the brakes. republicans and democrats are pointing fingers. >> instead of another campaign speech, the president might want to engage with democrats and republicans here on capitol hill. >> republicans are risking another deep recession. >> two senators who have reached across the aisle, republican dick lugar and republican mark warner are here next. there are a lot of warning lights and sounds vying for your attention. so we invented a warning.. you can feel. introducing the all new cadillac xts, available with the patented safety alert seat. when there is danger you might not see, you're warned by a pulse in the seat. it's technology you won't find in a mercedes e-class. the all new cadillac xts has arrived. and it's bringing the future forward. 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>> well, i didn't get the memo that we were actually supposed to take presidential election years off. you know, if we look around -- >> but has he? >> i think the president has laid out an agenda. >> did he push for it? >> well, i think he has pushed for it. i think there's been particularly in the house an almost knee-jerk reaction that anything the president could be for, they've got to be against. but even if you step back and say where can we find common ground, the senate worked together, we passed a two-year highway bill that would put people to work, give a little predictability. we recently passed a bill bipartisan. senator lugar and i, the overwhelming majority of the senate, to feed up the fda approval process. there are things we can do even in an selection year to get this economy going. >> you hear democrats privately, republicans publicly, this they don't hear from the president. that he hasn't said to congress, pick up the phone, i need you guys to really work on this. have you seen more or less presidential influence in the obama administration than previous administrations? >> in this particular year the president is campaigning for re-election. that's his total preoccupation and he's been criticized for that by some democrats who would say as a matter of fact you ought to be talking about how jobs are going to be created, how, in fact, you have more comprehensive view of the deficit, of the debt, of all of these sorts of things. this has not been something on the president's agenda except broadly. i would agree with mark that essentially members of congress still have tried to pick up in modest ways. we're working on a farm bill, for example, where we have a majority and we're hoping to get that to the floor. this is not the whole thing, but i would say simply there have been congressional initiatives quite apart from the president. >> let me ask you, and i don't mean to bring up a sore subject, but richard murdoch, who defelted you in the republican primary, was on fox news recently and talked about the idea of bipartisanship and here is what he said. >> i have a mindset that says bipartisanship ought to consist of democrats coming to the republican point of view. >> we are hearing this this election is going to solve things, that there will be a clear picture after this election of which way the country wants to go, the republican way or the democratic way. does that sound like to you, do you believe that the election is going to desight something or are we fundamentally a divided country that can't seem to get congress to work? >> well, respectfully, i think what mr. myrurdock said is wack. i don't know what constitution he wants to defend. the brilliance of the founding fathers were they set up a slightly dysfunctional government to start with, checks and balances, independent house, independent senate, independent president. you have to work together to find that common ground. that's what dick lugar has been about, that's what a whole lot of senators in both parties have been about and the motion that this election will be so overwhelming for one side or the other that there will be a clear picture and one party is going to be able to rule the roost, i just don't see that happening, and with the rest of the world moving ahead, we've got to find that common ground on particularly i believe that debt and deficit issue. nothing would do more to jump start our economy than to put that type of bipartisan plan in place to get this economy going. >> i want to ask you about the fiscal cliff after we come back. next up, it is about the crisis in syria. is the meter tipping away from military support? 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what happens to this $8 billion that will be taken out of the economy at the end of the year in tax increases and spending cuts? how is congress going to deal with that? >> well, essentially the congress leadership has decided not to deal with it until after the election which i think is a mistake fundamentally, but let's say after the election very quickly we have the debt ceiling problem. we have the sequester problem, the money for the armed forces quite apart from the rest of it will be taken away, plus all the end of the bush tax cuts which means tax increases for every american. you can say all of that could be postponed until two months, three months, six months down the trail -- >> romney says if he's elected he'd rather -- >> but that requires congress to come to that conclusion. on whatever the election is there is unlikely to be a 60-vote majority in the senate and unless you have a 60-vote majority and say my way or the highway, you're going to have to deal across the aisle. so it would be better to be doing some of that now, picking up the simpson/bowles language or various other gang of six or 12 or so forth. i would hope that might occur. i think the american people would be more relieved and their thoughts about the congress would be much better. >> i imagine you can agree with that. i want to move you on to syria because i know you have been on -- if you want to say something before that, feel free. but something that mitt romney said recently about the situation in syria. the united states should work with partners to organize and arm syrian opposition groups so they can defend themselves. good idea, bad idea? let's start with you. >> i want to address the economic issue still. that the idea that we're going to continue to punt this problem, which would be almost a european approach, we have watched this slow-motion train wreck take place in europe because they have not stepped up. i think there is the will in congress to take the simpson/bowles, the gang of six, to phase in a $5 trillion over ten-year deficit reduction plan that will raise some revenues, reform our entitlement programs. we have to do it. there will be nothing that would do more to jump start our economy and get the $2 trillion in private sector capital off the sidelines investing if we can make those permanent changes. now, in syria, i just came back from egypt and israel, a very dangerous neighborhood at this point. i think we need to continue to ratchet up the pressure on assad to get that regime out. i think it is different from libya though because there's not the kind of unanimity at the united nations or around the arab league to have the kind of military intervention it seems president -- or mr. romney is calling for. >> well, let me read you something. this came from the arab lead secretary-general yesterday who said more audacious steps are needed after the houla massacre in order to end the bloodshed. there's even some urgency coming from the arab league. does that help the u.s. make decisions about should we try to work with folks to get some arms into the syrian opposition that's being brutally crushed? >> it helps all of us, but i would say specifically we ought to work with the turks to set up some zones in turkey's territory guarded by turks that syrians can retreat to, so-called safe zones. we ought to increase the sanctions on the government of syria and the central bank sanctions as well as all others people can cooperate in. economic pressures. try to reinforce the diplomatic train instead of dismissing co-ni annan and the peace people, we ought to strengthen the hand so we get some talks going with the syrian government. the pressure would have to be increased, but i made two suggestions there as to how that might occur. there might be others. >> they don't have to be military pressure of arming. i know you were worried about the prenz of al qaeda and other terrorist groups. >> i'm worried about we don't really know who makes up the syrian opposition. >> the same could be said for labia though. we didn't know who they were either. >> we have seen some of the armed smuggling take place out of libya and into the lie. i think we need to continue to put the pressure on the russians. let's face it, syria is supported dramatically by the russians and we need to move the russians off of that support as well. >> senator lugar, i have less than a minute and i have to ask you, what's next for richard lugar after a long distinguished senate career. you are one of the president's favorite republicans which probably didn't help new your primary race. would you consider if the president is re-elected a position in his administration say in diplomacy or foreign policy? >> i think my role is going to be outside of government. i look forward to opportunities but i'm not going tole think about it for three or four months because essentially i have got work to do for seven months. we've been talking about what we ought to be doing back and forth across the aisle in the senate now to help americans, the people i want to serve. there's where my preoccupation is going to be. >> senator lugar, senator warner, thank you for -- >> we're going to lose a lot when we lose dick lugar. >> a lot of people have said that. >> thank you. up next, a dismal jobs report and what it could mean for the election. there are a lot of warning lights and sounds vying for your attention. so we invented a warning.. you can feel. introducing the all new cadillac xts, available with the patented safety alert seat. when there is danger you might not see, you're warned by a pulse in the seat. it's technology you won't find in a mercedes e-class. the all new cadillac xts has arrived. and it's bringing the future forward. but proven technologies allow natural gas producers to supply affordable, cleaner energy, while protecting our environment. across america, these technologies protect air - by monitoring air quality and reducing emissions... ...protect water - through conservation and self-contained recycling systems... ... and protect land - by reducing our footprint and respecting wildlife. america's natural gas... domestic, abundant, clean energy to power our lives... that's smarter power today. domestic, abundant, clean energy to power our lives... how did the nba become the hottest league on the planet? by building on the cisco intelligent network they're able to serve up live video, and instant replays, creating fans from berlin to beijing. what can we help you build? nice shot kid. the nba around the world built by the only company that could. cisco. the economy created 69,000 jobs in may, about half of what was predicted. the unemployment rate went up to 8.2%. and inside the overall picture the numbers are especially painful for people whose votes the president counts on. the growth rate of manufacturing jobs declined in may. for hispanics the unemployment rate rose to 11% from 10.3%. it rose as well for african-americans up more than half a percent to 13.6%. the president thinks the numbers should be seen from the vantage point of where we've been. >> we're still fighting our way back from the worst economic crisis since the great depression. the economy is growing again, but it's not growing as fast as we want it to grow. >> but mitt romney says the numbers are about where we are not. >> we should be well into a very robust recovery by now if the president's policies had worked, if he had been able to get america back on track. why, we'd be looking at what happened in europe as being a problem, but certainly not devastating. these numbers are devastating. >> not helpful at all, uncertainty in europe and the end of year fiscal cliff in the u.s. when nearly $8 trillion worth of tax hikes and spending cuts are scheduled to take affect. adding it all up with our panel next. at bank of america, we're lending and investing in communities across the country. from helping to revitalize a neighborhood in brooklyn... financing industries that are creating jobs in boston... providing funding for the expansion of a local business serving a diverse seattle community... and lending to ensure a north texas hospital continues to deliver quality care. because the more we can do in local neighborhoods and communities, the more we can help make opportunity possible. here to talk politics and the latest job numbers mark zandi, wauge columnist stechen moore, and "washington post" political correspondent dan bal z. i was only half kidding when i said analysts need to stop predicting what the job market is going to do. we were told 150,000 and it comes up less than 69,000. it just looks -- that's bad, but isn't it worse if -- since we were expecting twice as many? >> i'm on board with that if you can get me off the hook. >> what happened here? >> two things. one thing, the job market is not as weak as it looks. we have a lot of job growth in the winter, remember, back december, january, february, we got 250,000 jobs per month. so there's some payback and that's what we're seeing right now. we have 100,000 jobs, what is it march, april, may. we're somewhere in between these two numbers, somewhere around 150k. the second reason this is more fundamental, businesses are skittish, they're nervous, they have been through a lot, that great recession. that nightmare still in their psyche. if anything goes off script just a little bit, they stop hiring. it's not that they're laying off, that would be a real problem, i don't think that's happening. they just pause in their hiring. >> you know, stephen, i feel like every time there's some reason, there was a tsunami, there was a warm winter, there was this, does it actually change what's happening? it seems to me there's always some excuse. >> i think it's hard to put any lipstick on this pig. those were really lousy numbers. by the way, also we had a revision downward on the first quarter output numbers, less than 2%, those are kind of miserable numbers. i mean, the one thing i disagree a little bit about mark on, we should be accelerating on job creation. we had this very deep recession when we lost 6 million or 7 million jobs. this is a period when he should have a robust recovery. you should be seeing 400,000, 500,000 a jobs a month and we're nowhere near there. it's a drowning man that's treading water and that isn't good enough. >> we can't forget the severity of what we went through. think back four years ago, we were losing 800,000 jobs per month when the president took office. you just don't forget that as a business person. if anything goes wrong, a tsunami in japan or clearly europe, the fiscal cliff, all those things make people nervous. >> and the reagan era at this stage we were creating 500,000 jobs a month, growing three times faster. i think a lot of this is policy related and policy hmistakes we made in washington. >> so much was written after these numbers. we've had disappointing months before and it was sort of it's a month, don't worry about the month. now it seems to me the analysis has been this is not good news at the white house, it may be a turning point. what's your take? >> i think it was a wake-up call at the white house about the kind of campaign they've been running. we've seen all these distractions about this campaign, the attacks on bain which a number of democrats have been unhappy about, the donald trump birther issue which came back to the fore last week. friday's numbers reminded people of where the country really is and what the issue that most of the voters who are sitting out there trying to decide what to do are really worried about, and i think to some extent it may force both of the candidates to get back onto a message about why are we in this situation and what am i, romney or obama, going to do about it. >> let me ask something mark brought up and ask you all to kind of chime in on this. the president basically said, let's remember where we've been here and, you know, it's going to take us more than overnight to climb out of this pit that he inherited. and romney came back and said, you know what? 40 months isn't overnight, folks. it should be better than this. which is the winning argument? and is that just really the crux of the matter? >> of course, the president is going to say that, you know, this was a terrible crisis and it was a terrible crisis. there's no question about it. he inherited, you're right, an economy where we were losing 700,000 jobs a month but it's also been almost four years. >> 800,000. >> but the point is normally when you have a steep recession and deep recession, usually you boom out of these periods and you have very rapid growth and the problem is i think a lot of americans would say, wait a minute, where is the growth going to be. the problem isn't just that we've got such anemic growth right now in jobs and output, but a lot of economists, mark himself, is saying we're not going to see the rapid growth that americans are expecting. >> you expect this to be pretty yuck, right, through the rest of the year? we're not going to look and go woo-hoo, we've turned a corner. >> europe is a real problem and that could have significant implications. and our own fiscal policy, the fiscal cliff, treasury debt ceiling. remember back last summer, that was significant. that did a lot of damage to the collective psyche and we have another round of that coming up. we have to get past that. i think business people start to engage and start to hire more. >> dan, how is it playing? how are the two arguments playing? one is it should be a lot better than it is right now and the other is, whoo, it was a lot worse. >> it's playing about 50/50. we are seeing a very, very tight election, and given where the president is right now, he's highly vulnerable. we have said this for a long time and i think that there were times when democrats thought, mitt romney is not that strong a candidate, he had some tough times during the primary campaign, and i think a lot of democrats thought the president is going to be okay. i think what happened friday reminded people this is going to be a tight, tight, tight election as we go through the summer. >> i think the economy is in a fundamentally better place than it was a several years ago. we have come a long way. american countries have tremendous profits, margins ever wide, balance sheets -- >> nathey're not using any of i to hire people. >> they are. we have hired more than 4 million people -- >> they're not using enough of it. >> i agree. they've come a long way. the banking system is highly capitalized. they're not lending enough but they're lending more. we're starting to see activity pick up. even households, they've made a lot of progress. we as a nation, our economy is in a much better place fundamentally from where it was. >> i want to give you an amazing statistic that confounds me more than any statistic over the last 30 years. right now you have a ten-year treasury bill at about 1.5% -- >> less than. >> we have 2% to 3% inflation. people are giving the government money, paying them back a negative real interest rate. that's something you almost never see. now, why is that happening? i think because there's so much fear and uncertainty right now out there, people are just going to cook oon. they don't want to invest, and i think one of the things i would have fault president obama on, all of this attack against bane capital, against people getting rich, against wealth, i think it's just a negative thing for the stock market, and, of course, i entirely -- the one thing mark and i disagree with, but the one thing i think we both agree on is this fiscal cliff. the big tax increase is a big, big problem, and president obama should take that off the table. he should say we're not going to do it. >> that 1.5% treasury yield, that is fear. it's fwloebl fear. that means that we are the triple-a credit. if anyone is scared about anything, they come right back to the united states and they buy our treasury bonds. >> does it matter, dan, that we look at the battleground states and we see that their economies in most of them are better than the national economy, so the places where we think the election is going to be decided have actually pretty good looking economy comparatively speaking. does that matter? >> it may matter some, but there's an argument -- take ohio, for example. there is an argument underway in ohio. their unemployment rate is more than the national average. the administration says that's in part because of what we did to save the auto industry, and that auto industry is helping to revive the economy in ohio. the republicans say no. what's really going on is you have a republican governor who has taken on the fiscal issues in the state, so we're going to see that debate in some of these battleground states. >> let me ask you. a moody's electoral mogdz, the only swing state of the five that it looked at that they see moving from the obama column to the romney column is florida. >> right. >> why is that? >> well, florida is still a very good economy. again, unemployment rate is -- house prices still weak. of all the swing states it's workings than it has brooufd least. virginia, taurp us to the governor, that's doing quite well. ohio has had a tough time, but it's improving rapidly wrash ohio, new hampshire doing much better. >> let me get back to the fiscal cliff. let me try to put it in my sort of lamen's terms, and that is that about $8 trillion is about to get taken out of the economy over a course of time in both mandated spending cuts as well as tax rates -- or tax increases when the bush tax cuts go away. how is that -- a, is that right, and, b, how does that get fixed? because everyone says, well, after the election we'll have a clear path, and we all know that after the election we'll have the same path. we'll have a 50-50 split. >> i think it's as likely as anything that it will get fixed by pushed off months or a year. many some way just as congress has been want to do time and time again, tried to delay that moment of reckoning. now, you know, you all know and can articulate better than i the consequences of continuing to do that, but i think that is the inclination of politicians today to try to find the least solution that they can find and delay it. >> the tax issue, which to me is the big one. i think we should do the spending. we need more austerity in government and less austerity in the private sector. what we're talking about is on january 1, 2013 capital gains tax is going up, dividend tax is going up, small business tax is going up. that's one of the reasons there's no investment, and one of the reasons the stock market we haven't even talked about that, that's tumbled partly because capital gains tax are going up next year, and people are selling their stocks. >> you're going to hate this, but i have to look -- >> thank you. come back. you'll get the first word. how about that? >> up next, stories of u.s. military veterans and service members lost in the system. there are a lot of warning lights and sounds vying for your attention. so we invented a warning.. you can feel. introducing the all new cadillac xts, available with the patented safety alert seat. when there is danger you might not see, you're warned by a pulse in the seat. it's technology you won't find in a mercedes e-class. the all new cadillac xts has arrived. and it's bringing the future forward. or creates another laptop bag or hires another employee, it's not just good for business, it's good for the entire community. at bank of america, we know the impact that local businesses have on communities. that's why we extended $6.4 billion in new credit to small businesses across the country last year. because the more we help them, the more we help make opportunity possible. >> we heard from a lot of you last week after talking about the growing backlog of the v.a. for actions on veterans benefits and the average year-plus wait for discharge of those deemed unfit for service due to a variety of disabilities. unfortunately, waiting in any all of you know too well, including this wife of a 20-year army vet. >> my husband retired, and he keeps hearing that his claim is being processed and the v.a. says it will will be between september and january before his claim will be processed. >> we asked the v.a. about this, and some of the other emails we received. they told us they are aggressively working to transform the delivery of benefits and services to meet its 2015 goal of processing all veterans' claims in less than 125 days with 98% accuracy. those are unfortunately dates without meaning for those who wait now. we also heard stories of those still in the service often languishing in or confused by a bureaucratic or medical morasse. they've been trying to get him dismissed from active service after a traumatic brain injury. >> josh went to see his doctor for a physical before he was going to go to afghanistan, and his doctor told him there was no way that a soldier in his condition was fet for duty. after almost two years of sitting around and waiting, the army told my brother that he would no longer being -- >> med boarded is the term used when doctors are determining if you are fit for duty. in this case the -- we will continue to follow these and other stories and we'll pursue a time for veteran affairs secretary general to join us for a conversation. share your story with us via e-mail state of the union@very nn.com and use lost in the system in the subject line. join us for analysis and web exclusive at cnn the

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