virginia. and elijah cummings, the former chair of the black caucus and analysis, and chris jeff free lund of digital. i am candy crowley, and this is state of the union. what a difference a year makes, or not so much. last year at this time, president obama was vacationing on martha's vineyard, and that's where he is today. last year he said -- >> a year and a half ago the economy was shrinking rapidly, and the economy is now growing. >> this year he is saying -- >> america will come back from this recession stronger than before. that i am convinced of. >> unemployment was above 9% in 2010, and a year later it still is. more say the economy is getting worse. joining me from michigan, senior obama campaign strategists, david axelrod. thank you for being here. i want to ask you first -- >> sure, candy. >> the president is going to have the new jobs plan and a stimulus that is coming up in september, he's going to announce it. tell us what you know about that, and in particular when we talk about modest adjustments to entitlements, what is that? >> well, first of all, let me say, these are not all new ideas. some will be new and some we already talked about. there are things he has been asking congress to do for sometime, and some of them, for example, extending the unemployment -- the payroll tax cut that was passed in january for another year. that's something that is absolutely critical to do. there are basic things we need to do relative to infrastructure, rebuilding roads and bridges, and that needs to get done. so some of the things will be familiar because he has been talking about them. one of the things that was disturbing to me, candy, was in the last week i saw a spokesman for speaker boehner say we will only pass the new trade treaties and patten reform that the president has asked for, and we will not deal with anything else. how do you let 150 million working people in america get $1,000 tax increase in the payroll tax in the middle of the economic challenges we have but won't touch a penny of corporate tax loopholes or touch tax cuts for the wealthy? it doesn't make sense. i hope over the break they heard from the constituents and are ready to rethink this. >> it seems to me in a sense, what we are hear's from economists and from the white house is in the short term to spark the economy we need more stimulus, including unemployment benefits and you are talking about the roads projects and other things that the economy may need to jump-start itself and maybe start to cut into the jobless rate. at the same time we need long-term deficit cutting. you are trying to do deficit reduction and stimulus at the same time. is that a hard sell? >> well, you put it exactly right. in the short term we need to do things to accelerate -- to accelerate the economy. we have taken big hits in the last six months that nobody could have anticipated, the error spring and the impact on oil prices and the earthquake and what europe is experiencing now has all impacted on our economy and we need to take additional steps to accelerate the economy in the short run. everybody should be able to agree on that. in the long run we also ought to agree to deal with the debt issue. we had a long discussion about it. but we have to deal with it in a way that is smart and balanced and fair and everybody is in, and we're protecteding the things we know is good for the economy, and education and research and development, and yes, rebuilding our basic roads, bridges, waterways, and the things we need to move our goods across the country. we need to have a discussion on both issues and we ought to act. i think people are tired of the games in washington. the only thing that keeps us from acting on many of these things is pure politics. the fact that we can't agree to extend a payroll tax cut for working americans is bewilledering to me. >> you are all putting things out there that you know, particularly the house republicans will not go for so that you can then have that to run on. so you know, there's politics kind of at both ends of this spectrum, is there not? >> candy, i think what you will find when the president unveils the entire program is that there is nothing in there that reasonable people should not be able to agree on. if we make the house republicans and particularly the tea party faction, if we make them the standard, we're in deep trouble. this is the group that almost brought us to the brink of default. one of the problems that i have right now is too few republicans are willing to stand up and say to the group to back off and do what is good for the country and not be so ideology kul and not solve our problems. whachlt is meant by modest adjustments to entitlements which is said to have been included in the package. what does that mean? cuts in medicare? >> again, i am not going to get out in front of the president on this. he has been very clear and clear for months on the issue of medicare. medicare has financial problems and everybody knows it. we extended the life of medicare through the affordable health care act by eight years. but fast upon us is going to come the time when medicare is insolvent and in order to keep our commitment and to make sure medicare is there for american workers in the future when they reach their retirement, we will have to make some, as the president said, modest adjustments, and he will address that. >> let's go through demographics here, and i know you know them better than anybody else. i want to start with something that maxine waters had to say recently about the president. as you know the cbc and other african-american lawmakers complained for sometime that the president has not done something specifically to address unemployment rates in the black community. here is what she had to say. >> we're supportive of the president, but we are getting tired of it, the unemployment is unconscionable. we don't know what the strategy is. we don't know why on this trip that he is in the united states now and he is not in any black communities. we don't know that. >> you are taking some heat from african-americans, and some of the most loyal supporters you have got saying the president goes on the jobs trip and doesn't go to the minority community where the jobless rate is the worst. are you taking this constituency for granted? because that's what it looks like to them. >> absolutely not, and just because on one trip the president doesn't stop in every community doesn't reflect a policy judgment or a commitment judgment on his part. one of the major negotiations in this last debt discussion was how do we prevent those who are poor from being unfairly and unduly burdened by the cuts we have to make, and that's why medicaid and pell grants for students that want to go to college and several other things, and they were cordoned off. those programs are going to disproportionately help poor americans whether they are white, black, hispanic, so they are all geared toward helping people who are in the most vulnerable positions. obviously the whole array of things, when we have a surface transportation program, which is now stalled by politics in the house of representatives, roads and bridges, people are put to work and those jobs are going to be felt in the african-american community as well as other communities. we're fighting for things that will put people back to work. and the community, the african-american community will certainly feel the affect of those if and when we succeed. this is a battle that we have to win. not just for that community, but for every community. there are things we can do to get people back to work. but the other point, candy, as we also have to do things to prepare our kids so they are not mired in a cycle of poverty, and that has to do with education and proving standards in our schools and making higher education more accessible and improving community colleges and making them a training place for jobs and not just a next stop in a failed education pattern. those are the things we're working on as well. they go to the heart of the problem. >> david axelrod, it's always too short of a time for you, but we appreciate what time we could have this morning. >> thanks, candy. good to be with you. when we come back, two leading governors give advice to president obama on how to get the economy going. at exxonmobil we know the answer is yes. when we design any well, the groundwater's protected by multiple layers of steel and cement. most wells are over a mile and a half deep so there's a tremendous amount of protective rock between the fracking operation and the groundwater. natural gas is critical to our future. at exxonmobil we recognize the challenges and how important it is to do this right. a living, breathing intelligence that's helping drive the future of business. in here, inventory can be taught to learn. ♪ machines have a voice. ♪ medical history follows you. it's the at&t network -- a network of possibilities... committed to delivering the most advanced mobile broadband experience to help move business... forward. ♪ try this. bayer aspirin? 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[ whirring and beeping ] [ ding! ] and we give you a discount on both. great! did i mention no hands in the bundler? bundling and saving made easy. now, that's progressive. call or click today. joining me now to givetheir view of the economy, republican virginia governor, bob mcdonnell in the state capital of richmond, and here governor martin o'malley. both men are chair of their governor's association. welcome to you both. >> thanks, candy. >> let me start with you, governor mcdonnell, and ask you what you most need washington to do or not do in this upcoming battle over a jobs package and a deficit cutting package? >> i think it's crystal clear to every american frankly they have to have a course of sustainable spending cuts. we're in debt $14 trillion and heading towards more, and part of that is these crushing mandates on the states, whether it's in environmental areas or the federal health care reform or mental health. we have got 10 to $12 billion of unfunded mandates under virginia. what they need to do is cut spending and lessen the unfunded mandates on the states, because we can't afford it. >> does that mean, just to follow-up on that, you would be opposed to, say, an extension of unemployment benefits that go out the end of the year and an extension payroll tax cut, and all those things would cost money and those are not revenue enhancers, and those are revenue takers, and are you opposed to all three of those things? >> if they are short term things that are done they can demonstrate it will create jobs and promote economic activity -- >> excludeing unemployment benefits? >> i don't think that creates jobs. it lessens the pain. we're down to a 6% unemployment rate in virginia, and so short term assistance is fine. the problem is we need to have things that create jobs, not just promote benefits for people who are not working. people want work. >> governor o'malley, let me ask you the same question. what do you -- what would most help you in the state for congress and the president to do or not to? >> well, i think the most important truth that we need to recognize is democrats and republicans, candy, is that for a modern economy to create jobs a modern economy requires investments. being fiscally responsible is important and avoiding default is important. the governor and i both defend triple bond ratings, and the debacle of driving our country to the brink of default that all of us witnesses last month is not helpful to consumer confidence or investor confidence. what i hope the congress will come back to do is pass bills that make those investments in infrastructure and research and development and innovation, and yes, in the important work of educating the next generation for the jobs that are available. >> you are talking about spending money at a time when we're cutting the deficit? >> i think we need to do both. we need to be -- >> what about tax breaks for businesses? >> i think it depends on the nature of them. if it's something that actually creates and inspires investment and innovation, i would be for it. but, look, i think that we have to also recognize that this deficit is driven, fueled and caused primarily by bush era tax cuts that benefitted the most wealthy among us. that's 55% of the projected deficit by 2019. another 14% is these wars. so we have to be able both to balance our budget, but also make the investments required in a modern economy if we want to create jobs. >> governor mcdonnell would you agree to a short-term spending to try and pump up the economy. seems to me governor o'malley is talking about research and development and education to pump up jobs and some education funds and some infrastructure, road projects to put construction people back to work. any of those unacceptable to you? >> we tried that. martin and i get along great working on things around washington -- >> but you disagree with all that. >> he's a great irish american, just like me, but we tried that, we put little into infrastructu infrastructure, and we put a lot of other spending in that didn't create jobs, and we went from 7.8 to 9.1% unemployment. i disagree with the governor and he continues to blame bush. the president has been trying that for three years. he had two years with a democratic congress and president and did not address the deficit or the debt or a jobs program. here we are three years in the administration and starting to talk about jobs. here is what i suggest. we look at what the states are doing. i had a $4.2 deficit in virginia, and a $2 billion tax cut that governor kaine proposed, and we now have a $545 million surplus, and unemployment is down to 6%, and we're a right to work state and jobs are coming back to virginia. those are the things that will make a difference, not more taxation and regulation and spending. that's not the path to success. that's what this president continues to try and do. >> i won't even ask the question because i hear you starting a question here. >> i just wanted to say, candy, governor mcdonnell is right in one respect. you know, the stimulus did not go far enough. the governor just criticized it for not investing enough in infrastructure -- >> no, i said it invested in the wrong things. >> and that governor accepted every dollar. and we need to invest in infrastructure and the roads and bridges and things that actually get people back to work, and we can do that and balance budgets at the same time as we have on both sides of the potomac. we need virginia and maryland to be creating jobs. this last month maryland had a great month of job creation. on the year we ranked 20th, and virginia ranks 44th in job creation. we both need to be stronger and create jobs. all the states need to create jobs to get our country out of the recession. >> i will ask you both to stand by. we will be right back. up next we wanted to talk 2012 politics, so stick with us. 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[ male announcer ] with interactive learning solutions from dell, mrs. davis can make every student feel like her only student. dell. the power to do more. feel like her only student. any questions? no. you know... ♪ we're not magicians ♪ we can't read your mind ♪ ♪ read your mind ♪ we need your questions ♪ each and every kind ♪ every kind ♪ will this react with my other medicine? ♪ ♪ hey, what are all these tests even for? ♪ ♪ questions are the answer ♪ yeah ♪ oh we're back with governors bob mcdonnell of virginia, and martin o'malley of maryland. first to you, governor o'malley. there was an article that we saw that spells out the president's election year challenge. it says the white house's worse case scenario for the economy on election day next year has become wall street's baseline scenario. jp morgan sees gross domestic product growth at 1.5% this year and 1.3% this year, and 9.5% heading into the final days of the election season. how does he campaign? give me more time. it's all the republicans' fault? it's a bad economic scenario. >> what the president has to do is to articulate a concept for making our children winners rather than losers in the economy, and going to congress and fighting for it. there are some things -- >> does he have to be tougher? >> i think what he has to do is have an adult conversation with all of us as americans. we're all smart enough to know that there's a big change happening in our economy. we're smart enough to know when there are changes there are winners and losers. the president needs to articulate as he started to in the state of the union address that in order for our children to have a better shot at succeeding in the changing economy, we need to do what our parents have done in the past and that's to have the courage to invest in our children's education, and invest in innovation and rebuild the infrastructure of our country. you have been probably to communist china, they are out performing us and they are investing in the things that create jobs, and if we are not careful as a nation, and if we continue to engage in the dismantling of all of the things that we used to do together as a people, then we're not going to be able to look at our children with pride in the eyes during our golden years. >> i think you probably heard enough of the democratic response to the economy, and it seems to me that what the white house is going to do this year is the tea party is crazy, and they are not going to do any of the things that governor o'malley just talked about, and they won't invest in education, and will put granny on welfare and that kind of thing. how do you take the harsh edges in perception off of the republican party at this point? democrats are driving hard at republicans have been co-opted by the way conservative wing. >> i think that's very unfortunate rhetoric. we need more civility in politics. martin and i aadisagree on policy, but work well on other issues. we want less spending and a balanced budget and want to keep taxes where they are. that's a reasonable message. but words like dinosaur wing and extremist, it's not helpful to the civility in our country. if you want to look at what is working, i say you look at what republican governors are doing. 9 out of 10 were republicans in the best business climate. and three straiates invested in bonds. and that's a recipe for disaster when we're heading towards the trillions. we're broke in washington and cannot afford the level of spending. infrastructure, yes, and all the entitle