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CNN "State of the Union with Candy Crowley" - Transcript


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CROWLEY: Joining me now to give their view of the economy, Republican Virginia Governor Bob McDonnell in the state capital of Richmond, and here in Washington, Democratic Maryland Governor Martin O'Malley. Both men are chair of their party's governors association.

So welcome to you both.



CROWLEY: 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?

MCDONNELL: I think it's crystal clear to every American, frankly, that they have got to have a course of sustainable spending cuts. We're in debt $14 trillion and heading towards 20-plus, largest deficit in American history, $1.65 trillion.

And part of that is these crushing mandates on the states, whether it's in environmental areas, the federal health care reform, mental health. We have got $10 billion to $12 billion of unfunded mandates on Virginia.

So what they need to do is they've got to cut spending and they've got to lessen the unfunded mandates on the states, because we can't afford it.

CROWLEY: Now does that mean, just to follow-up on that, that you would be opposed to, say, an extension of unemployment benefits that go out at the end of the year, an extension payroll tax cuts for employees, perhaps a payroll tax cut for employers, all of those things would cost money, those are not revenue enhancers, those are revenue takers, are you opposed to all three of those things?

MCDONNELL: Well, I think if they are short term things that are done that can really demonstrate that it's going to create jobs and promote economic activity, we ought to consider it. The problem was this...

CROWLEY: Extending unemployment benefits?

MCDONNELL: Well, I don't think that creates jobs. It lessens the pain. Look, there are a lot of people hurting. We're down to a 6 percent unemployment rate in Virginia. But we've got 250,000 people unemployed. That's really painful. So short term assistance is fine.

The problem is we need to have things that create jobs, not just promote benefits for people that are not working. People want work.

CROWLEY: Governor O'Malley, let me ask you the same question. What do you most -- what would most help you in the state for Congress and the president to do or not to?

O'MALLEY: Well, I think the most important truth that we need to recognize as Democrats and Republicans, Candy, is that for a modern economy to create jobs a modern economy requires investments. Being fiscally responsible is important, avoiding default is important.

You know, my colleague, Governor McDonnell, and I both defend triple-A bond ratings, and that debacle of driving our country to the brink of default that all of us witnessed last month is not helpful to consumer confidence or investor confidence.

What I hope the Congress will come back to do is to pass bills that actually make those investments in infrastructure, in research and development, in innovation, and, yes, in the important work of educating the next generation for the jobs that are available.

CROWLEY: But you are talking about spending money at a time when we're cutting the deficit?

O'MALLEY: Well, I think we need to do both. You know, we need to be able to balance...

CROWLEY: What about tax breaks for businesses?

O'MALLEY: ... and pedal forward at the same time. 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 benefited the most wealthy among us. That's 55 percent of the projected deficit by 2019. Another 14 percent 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 are going to create jobs.

CROWLEY: Governor McDonnell, would you agree to some kind of short-term spending to try and pump up the economy? It seems to me that Governor O'Malley is talking about research and development and some education, you know, 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?

MCDONNELL: Well, you know, Candy, we've tried that. And, look, Martin and I get along great working on things around the Washington area...

CROWLEY: But you disagree with all of that.

MCDONNELL: ... on airports, on Metro and other things. And he's a great Irish-American, just like me. No, I disagree with him on that. We've tried that. We've tried stimulus spending. We put very little into infrastructure. We put it into a lot of other spending that didn't create jobs. And now we've gone from 7.8 to 9.1 percent unemployment.

And I absolutely disagree with the governor that he continues to blame Bush. You know, the president has been trying that for three years. He had two years with a Democratic Congress and a Democratic president, 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 could look at what the states are doing. I had a $4.2 deficit in Virginia, a $2 billion tax cut that Governor Kaine proposed. We killed that. We invested in job- creating activities. We now have a $545 million surplus.

Unemployment is down to 6 percent. We're a "right to work" state. And jobs are coming back to Virginia. I mean, those are the things that will make a difference, not more taxation and regulation and spending. That's not the path to success. And that's what this president continues to try to do.

CROWLEY: Go ahead. I won't even ask the question because I hear you starting a question here, so.

O'MALLEY: No. I just wanted to say, Candy, that, you know, 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. I think in retrospect, that's probably true.

MCDONNELL: No, I said it invested in the wrong things.

O'MALLEY: And Governor McDonnell accepted every single dollar that the president courageously passed through the Recovery and Reinvestment Act. We need to invest in our infrastructure, our roads, our bridges, the 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. But we need Virginia and Maryland both to be creating jobs. This last month Maryland had a great year -- had a great month of job creation.

On the year we ranked 20th. Virginia ranks 44th in job creation. We both need to be stronger and we both need to create jobs. All the states need to create jobs to get our country out of this recession.

CROWLEY: I'm going to ask you both to stand by. We will be right back. Up next, we wanted to talk 2012 politics with the governors, so stick with us.


CROWLEY: We are back with governors Bob McDonnell of Virginia, and Martin O'Malley of Maryland.

First, Governor O'Malley to you. Something that -- a graph from a Reuters article that we saw sort of spells out the president's election year challenge. And it says 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 just 1.5 percent this year, 1.3 percent next year, with unemployment at 9.5 percent heading into the final days of the election season. How does the -- what is the president's bumper sticker at this point? How does he campaign? Give me more time. It's all the Republicans' fault? I mean, this is a very bad economic scenario.

O'MALLEY: Well, I think what the president has to do is to articulate a concept for making our children winners rather than losers in this economy, and going to congress and fighting for it. There are some things...

CROWLEY: Does he have to be tougher?

O'MALLEY: I think what he has to do is to have that 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 that when there are changes there are winners and losers.

And what the president needs to do is to more clearly 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 this changing economy, we need to do what our parents have done in the past and that is to have the courage to invest in our children's education, invest in innovation and rebuild the infrastructure of our country.

I mean, you have heard -- you've been probably to Communist China, they are outperforming us as capitalists. They are investing in their country. They are investing in bridges, high speed rail, the things that create jobs, R&D. And if we are not careful as a nation, if we continue to engage in the sort of 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 in our golden years.

CROWLEY: Governor McDonnell, I think you probably heard enough of the Democratic response sometimes 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, they are not going to do any of the things that Governor O'Malley just talked about, they won't invest in education, they're going to put granny on welfare, that kind of thing.

How do you take the harsh edges in perception anyway off of the Republican Party at this point? Because the Democrats are driving hard at Republicans have been co-opted by the way conservative wing.

MCDONNELL: I think that's very unfortunate rhetoric. You know, we need more civility in politics. Martin and I disagree on policy issues, we work well on regional issues. Tea Party says, look, we want same things middle class America wants. We want less spending. We want 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 would say you look at what Republican governors are doing, 9 out of 10 in the Polina (ph) poll this week were Republicans in terms of the best business climate, three states with Republican governors increased their bond rating.

So I think Martin is right to a degree. We need to invest in infrastructure. But you can't do that but just increasing spending overall, that's a recipe for disaster when we're heading towards $20 trillions. You've got to cut entitlements. You've got to cut discretionary spending. That's the honest conversation the president needs to have.

We're broke in Washington. We can't afford this level of spending. Infrastructure, yes, all these entitlements and discretionary spending, can't afford it any more.

CROWLEY: Would you agree with that? Doesn't an honest look in spending in Washington include entitlements?

O'MALLEY: Yes, absolutely. I think we need a balanced approach which is why it's so very disappointing, Candy.

CROWLEY: But that includes cuts in these entitlement programs.

O'MALLEY: Yeah, sure. And I think the president much to ire of some in his own party has shown a willingness to engage in that conversation, but three different times members of the new era Republican Party have walked away because of their worship of tax cuts for millionaires and billionaires.

We need a balanced approach here. And I would disagree somewhat with some of the assertions of Governor McDonnell. If you look at the choices voters made like in places like Florida, Governor Scott, Governor Kasich in Ohio, Governor Christie whose bond rating was just downgraded in New Jersey, these are not successful governors that are inspiring on the Republican side that confidence and the future of job creation in their states.

CROWLEY: Let me just turn you quickly in our final minutes to the subject of illegal immigration. The president has said of the 300,000 or so deportation cases now in front of immigration he wants a case by case look, and anybody that isn't a threat to society and that has not committed a criminal act should stay, they should just take them of the dockets.

Is that amnesty, Governor McDonnell?

MCDONNELL: I correct Martin on one thing. Ohio, Michigan and Florida just had their bond ratings increased because they had the guts to lead and cut spending. So those are the facts on that.

Look, I think -- we are a nation of immigrants. Martin and I share the same heritage. About 100 years ago, I think Irish-American. We need to have more lawful immigration in the country. The problem is, this president -- frankly for decades we have not secured the border. We haven't enforced the laws that we have got in the states. And we haven't come up with a reasonable path to citizenship for people that are here so...

CROWLEY: Is it OK with you that these folks are being taken off -- anybody that is currently being looked at that has not committed a crime be taken off, and then perhaps given a work permit. That's OK with you? I just need a quick answer?

MCDONNELL: Well, as long as we tie lawful immigration to economic activity, and the economic needs of America so we don't compete with Americans who are unemployed, I think we ought to look at pursuing that.

CROWLEY: As quickly as you can.

O'MALLEY: As quickly as I can, I think we do need to create a path for citizenship. I think people do need to pay their taxes and obey the law. Our immigration system is broken. I believe that the president's administration, Secretary Napolitano has done a better job of deporting violent individuals, but we need to create a path to citizenship so that great governors like Andrew Cuomo, and Pete Shumlin in Vermont, and John Hickenlooper in Colorado, can build up their states and create jobs and opportunities for the future.

CROWLEY: And you have great governors as well, let's just put it there and leave it at that. Thank you so much.

MCDONNELL: Thank you.

CROWLEY: Bob McDonnell, thank you so much. Martin O'Malley, thanks for being here. Great to have you both back.

O'MALLEY: Thank you, Candy.

CROWLEY: Up next, signs of tension between the nation's first black president and the lawmakers who represent many African-American communities.


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