>> president obama and his 2008 rival are at it again. senator john mccain is here for an exclusive interview. plus, it is lethal and highly effective, but is the president's drone war making more enemies than it kills? congresswoman lynn woolsey and congressman peter king join me. then the shifting campaign terrain with cnn's senior congressional correspondent, dana bash and michael shear of the "new york times." i'm candy crowley, and this is "state of the union." to review the bidding, the president's last ten days include a bleak jobs report, off-message surrogates, a shellacking in the wisconsin recall, a $17 million fund-raising gap with mitt romney, and bipartisan outrage over security leaks. friday, the president held a news conference, pressing congress to pass his jobs bill, including more funding to states to ease layoffs of public workers. he noted 27 months of progress on jobs in the private sector. >> the private sector is doing fine. >> oops. >> it's an extraordinary miscalculation and misunderstanding. >> within hours, the president pressed reset. >> listen, it is absolutely clear that the economy is not doing fine. >> joining me from chicago, president obama's senior campaign adviser, david axelrod. david, thank you, as always, for being here. let's start out with a simple yes or no. do you agree with the president that the private sector is doing fine? >> i agree with the president, who called the press conference on friday, to say that we need to take a series of very urgent steps to accelerate job creation in this country because we have storm clouds rolling in from europe. so, candy, the press conference was called to press for hiring -- tax credits for small business, to press for clearing red tape away so families who have underwater homes can refinance under today's low interest rates and save thousands of dollars a year, and, yes, to push to give state and local governments help to rehire some of the hundreds and hundreds of thousands of teachers, firefighters, and police who have been laid off in this last couple of years. we've created 4.3 million private sector jobs in the last 27 months, but we've lost almost half a million public sector jobs and half of those are teachers. >> so bottom line, is the private sector doing fine? >> the private sector, we need to accelerate job creation in the private sector. one of the way that is we can do that is putting teachers and firefighters and police back to work because those are good middle class -- >> that's the public sector. >> but that will help accelerate the recovery. the private -- the small business tax cut will help the private sector. the refinancing will help the private sector because people will have more money in their pockets to spend. there are a series of steps that we can take right now that will help undergird the economy against the forces that are arrayed. you see what's going on in europe in particular. we had the first quarter of this year was the best in terms of private sector job creation was the best in six years. we've had a slowdown in the last three months largely because of global events. what the president has said is that we need to take some urgent action and he's called and congress to do that. they've sat on their hands thus far. they're more eager to have a debate over an out of context clause in his remarks than the substance of what he's saying. >> but i think we put it in context in the opening, you have put it in context in the open. i want to know whether the administration, whether you believe that the private sector is doing fine. is it doing better? >> i believe -- it's certainly doing better than the public sector. 4.3 million jobs created in the last 27 months. we need to accelerate that, candy, and we all agree on that. the question is how we do it. governor romney's response was to light on the notion that we should hire -- that we should help state and local governments keep teachers and firefighters and police on the job. he said we don't need any more teachers. we don't need any more teachers? 250,000 teachers have lost their jobs in the last couple of years. that is a dramatically bad news for the country. it's certainly not good news for our future. what planet is he living on where he thinks that we can take these kind of hits in our education system and progress as a country? >> let me move you on to something new jersey governor chris christie had to say, specifically about the president's remark that the private sector is doing fine. >> he has the audacity to stand up this morning and say that it's the nation's governors and the nation's mayors who are driving our economy down by not hiring enough people for government work? >> your response, david? >> well, that's not, of course, what the president said, and governor christie is doing his job as a kind of hitman out there for the republican party. what the president said is, among an array of proposals that he says we should move on right now to get -- to add momentum to the economy and undergird us against what's going on around the world is to put teachers and firefighters and police back to work and the states have been under tremendous pressure. there have been big cuts. it's noteworthy, candy, to look at governor romney's record when he was in massachusetts where public sector employment grew six times faster than private sector employment and he was 47th in the nation over those four years in job creation, even as he was growing government by 30% and growing the state workforce by 5%. so his record doesn't square with his words, and his vision is a disaster. $250,000 tax cuts for millionaire and keep cuts in education. that's not a prescription for a growing economy or a growing middle class. >> since you brought up the $250,000 tax cut, should they or should they not be extended for those making over that amount -- >> let me just clarify something. he wants $250,000 above and beyond the extension of the bush tax cuts, so let's make that clear, but go ahead. >> let me just read you something that claire mccaskill, democrat from missouri facing a tough re-election, had to say. "if you want to do something in the spirit of compromise, you don't start out by saying, 'i refuse to do this' or 'i refuse to do that.' it's not my preference to extend tax cuts to millionaires, but i want to keep every option open in the spirit of compromise." so it's not just republicans. as you know, there are others, bill nelson of florida, who have said i don't know, i don't know that we shouldn't go ahead and extend those tax cuts. you've got problems in the democratic party as well, correct? >> candy, first of all let me say i agree with senator mccaskill, that we ought to have a spirit of compromise -- >> but the president said he'd veto it. >> i watched governor romney on the stage saying that he wouldn't accept $1 of new revenue even for $10 of tax cuts. that's not the spirit of compromise. that's what is animating the republicans in congress. they share that view. let me ask you a question, if we want to compromise, why don't we compromise on the thing that we all agree on? we all agree that we should renew those tax cuts for the middle class. if they sent him a bill that would renew those tax cuts for 97% of the american people, the president would sign it today. if we want to -- >> sure they'd agree to it -- >> let's compromise on the things we can agree on. >> but obviously, they know they would then lose their leverage because you wouldn't go back to do it for those that they want to continue -- >> leverage for tax cuts for the wealthy? we have to make a choice as a country, candy. we do have deficit issues, we do have debt issues. are tax cuts for the wealthy more important than bringing down the deficits and investing in things like education and research and development and energy? the things that are going to grow our economy and grow the middle class. that's really what the debate is about. >> let me ask you a couple questions. first, one that concerns you. the attorney general, eric holder, has said that he has, in fact, because he's been under some fire on capitol hill for a couple of things, he said that he had spoken to you, that part of his job obviously has political implications. what did you talk to eric holder about and was it in your position in the campaign or was it in your position when you were at the white house? >> from time to time at the white house, i would see holder at meetings and so on, but i rarely spoke to him, and i didn't ever speak to him on issues of policy in the justice department. i didn't speak to him about personnel issues, other than at the beginning of the administration, i recommended a communications person to him -- >> so you didn't give political advice to him? >> i was very sensitive to the fact, candy, that in the last administration, the political arm of the white house was very active in the justice department, to the extent that they were picking u.s. attorneys and guiding policy there in ways that were inappropriate. i was very scrupulous about my interactions with the attorney general though he's a friend. >> so you didn't offer any political advice. >> no. >> thank you so much, david axelrod. always too short a time with you. i hope you'll come back. we'll see you over the next couple months. >> good to be with you. next up, senator john mccain on a kill list. cyberwar with iran and the bipartisan outrage over national security leaks. >> when allies become concerned, when an asset's life is in jeopardy or the asset's family's life is in jeopardy, that's a problem. >> it seems to be a pattern that is growing worse and more frequent. last season was the gulf's best tourism season in years. in florida we had more suntans... in alabama we had more beautiful blooms... in mississippi we had more good times... in louisiana we had more fun on the water. last season we broke all kinds of records on the gulf. this year we are out to do even better... and now is a great time to start. our beatches are even more relaxing... the fishing's great. so pick your favorite spot on the gulf... and come on down. brought to you by bp and all of us who call the gulf home. a lot of people aren't really aware of it. water alone isn't a solution. dry mouth can have a profound effect. it can lead to bad breath, to tooth decay. it can lead to just general discomfort. i recommend biotene because it contains supplemental enzymes. biotene works really, really well. they make an oral rinse, a mouth spray, and toothpastes. biotene is specially formulated to make the mouth moist and to really make your mouth feel comfortable. we have patients who really love biotene and who swear by it, which to me is the best recommendation. to your kids' wet skin. neutrogena® wet skin kids. ordinary sunblock drips and whitens. neutrogena® wet skin cuts through water. forms a broad spectrum barrier for full strength sun protection. wet skin. neutrogena®. for full strength sun protection. you see us, at the start of the day. on the company phone list that's a few names longer. you see us bank on busier highways. on once empty fields. everyday you see all the ways all of us at us bank are helping grow our economy. lending more so companies and communities can expand, grow stronger and get back to work. everyday you see all of us serving you, around the country, around the corner. us bank. 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[ male announcer ] stop the uh-oh fast with kaopectate. joining me is republican senator john mccain. i know you were out there in north dakota, senator. welcome and thanks for joining us. i want to first play -- remind our audience of something the president said friday, and just in case you hadn't heard it, because this sounds like a message with your name on it. >> the notion that my white house would purposely release classified national security information is offensive. it's wrong. >> senator mccain, you have been out front and very outspoken saying you believe these leaks are political. your reaction to what the president had to say? >> well, i think it's offensive what has happened. it's offensive to those who are doing the incredibly difficult work of intelligence. it's offensive to our allies who are terribly upset. it's offensive to the chairpersons of both republican and democrat of our intelligence committees who have expressed their anger and dissatisfaction, and so this is very offensive. our intelligence leaders in the administration say that this is the worst breach that they have ever seen. so that is what's really offensive about all this. >> but it sounds as though -- >> there are leaks in washington -- go ahead. >> it sounds as though the president certainly does share in your outrage over the leaks. what he finds offensive is that you and others are suggesting that these leaks are politically motivated and designed to make the president look good. >> well, let me just cite an anecdote from mr. sanger's book which is the subject of this controversy. after information was given to the public about the raid that took out bin laden, including naming s.e.a.l. team six, the most respected member of the cabinet, mr. gates, secretary of defense, went over to the white house and spoke to mr. donilon, the national security adviser and said i have a new communication strategy for you, and mr. donolon said what's that, and he said shut the "f" up. so it certainly is egregious what's already happened that they've made public. it's very clear that this information had to come from the administration. it couldn't have come from anywhere else. and americans should be deeply disturbed about this betrayal of two of our most important highly classified operations, not only the american people but our allies are upset about it. >> let me be very direct in this question. that is do you believe in any way, shape, or form that the president of the united states, who has been very tough on terrorism through the drone program, through a number of other things, would have anything to do with leaks of highly sensitive information that would help him in some political way? are you directly saying the president knows about this? or do you just mean someone somewhere in the administration is trying to make him look good? >> i have no idea whether the president knew or did not know. i have never alleged such a thing. but i have alleged that if you look at the information that's been leaked, again, that information in the book says that several officials said that they had to remain anonymous who gave this information because they would lose their jobs. well, why would they possibly lose their jobs if they weren't leaking information that has to do with national security? so, i mean, it's obvious on its face that this information came from individuals who are in the administration. the president may not have done it himself, but the president is certainly responsible as commander in chief. >> i know, as you know, that attorney general holder has appointed two u.s. attorneys to look into this, to find the source of these leaks, which the administration is outraged about. why isn't that good enough? >> well, first of all, mr. holder's credibility with congress is -- there is none. as you know, we've continued to have this problem with him withholding information on fast and furious, which resulted in the killing of a border patrol agent in arizona. he is close to being held in contempt. there is no credibility. and the valerie plame situation, they appointed a special counsel. this needs a special counsel, someone entirely independent of the justice department. i have great respect for the two individuals that were appointed, but this -- if it is, and it certainly is a most egregious breach of intelligence in anybody's memory, it certainly requires a special counsel who is completely independent, someone with credibility like mr. bob bennett. >> let me move you to the subject of syria, another area where you have been very outspoken about the need, you believe, for the u.s. to step in in the sense of help arm some of the opposition in syria and perhaps even be more forceful. this is from our secretary to the u.n., susan rice. >> there's not a unified command and control. it's a series of different groups in different cities. there's clearly also an extremist element that is trying to infiltrate elements of the opposition. so to argue that we ought to be arming the opposition is a very consequential statement, and i don't think that those that are advocating that have fully thought through the consequences. >> again, that was ambassador susan rice. have you fully thought through the consequences, senator, of helping to arm the syrians? >> when i hear a statement like that, i don't know whether to laugh or cry. a shipment of arms from may 26th from russia came in to syria. iranians are on the ground. they have artillery, tanks. they are massacring people in most horrendous fashion. meanwhile, members of the administration continue to run out of adverbs and adjectives in expressing their outrage. did you hear the president yesterday in his press conference ever mention syria? the rape and torture and murder that's going on now? this president way back in 2009 refused to stand up for the people who were demonstrating and begging for his support in tehran, and that has been the pattern ever since. these people ought to be able to defend themselves. i'm glad that some of the nations in the gulf and saudis are providing some weapons. this cries out for american leadership. american leadership and this president is missing in action, and the united states of america is now sitting by and watching people being killed, tortured, raped, and these people need our help, and it needs to be done on a multinational fashion and it can be done that way. it requires american leadership, which is absolutely missing. this idea of extremists taking over and all of that, the best way for extremists to take over is for this conflict to drag out and drag out. and by the way, i have seen the movie before. they said the same thing about libya. they said the same thing about other conflicts that have gone on. these people have the same hopes and dreams and aspirations that we do, and it is an abrogation of our leadership and, frankly, shameful that we're not helping them. >> senator, i can't let you go without a political question. something that governor romney said on thursday caught our ear. here is what he said. >> he says we need more firemen, more policemen, more teachers. did he not get the message of wisconsin? the american people did. it's time for us to cut back on government and help the american people. >> do you think that the message of wisconsin, senator, was that the american people don't want more firemen, more policemen, or more teachers? >> no, i think they want an adequate amount in order to fulfill their public service requirements and we all depend on them and love and respect them, but we also know that there is a significant problem with the unions and with pensions. there's cities in california, as you know, san diego and san jose, as well as others that are facing this crisis of the public sector unions which have to be addressed if they want to have some kind of fiscal stability. >> senator john mccain, thank you for joining us. >> i think the public -- to say the public sector is doing fine, i don't know what planet he's on. >> thank you, senator mccain. it's good to have you on. when we come back, president obama's top counterterrorism tool. is it doing more harm than good? 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