newspaper until explicit reference to it was banned by the editor. that editor, apparently, andy coulson, who went on to become a top aide to prime minister cameron and has since been arrested in the case. it never made sense that top executives wouldn't know about a practice producing so many scoops. murdoch and his minions have some serious explaining to do. here's one i like. sometimes good reporting doesn't involve digging through dusty documents. an illinois farmer complained to the president yesterday about dust, noise, and water runoff. obama said call the usda. so politico reporter lee did just that and she got bounced around from are the feds to various state agriculture offices, all without getting a clear answer. with the usda press office ultimately saying the matter wasn't within the department's jurisdiction. lee took the president at his word and wound up in a bureaucratic maze that's all too familiar to anyone who's dealt with the government.

well, that's it for this edition of "reliable sources." i'm howard kurtz. we're off next sunday when cnn will be providing live coverage of the dedication of the martin luther king memorial on the mall in washington. we're back the following week with another critical look at the media. "state of the union" with candy crowley begins right now. an august of angst, at the battle of 2012 erode the president's support. today, the summer slump with obama senior campaign strategist david axelrod and then job creation in uncertain times with governors o'malley of maryland and mcdonnell of virginia. and congressman elijah cummings, former chair of the black caucus, and analysis from greg ip, an economic editor of "the economist," and chrystia freeland, editor of thomson reuters 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 is going to come back from this recession stronger than before. that i am convinced of. >> unemployment was above 9% in august of 2010, and a year later it still is. compared to last summer, fewer americans approve of the president's handling of economy, and more say the economy is getting worse. joining me from michigan, senior obama campaign strategist 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 some time, 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 patent 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 a $1,000 tax increase in the payroll tax in the middle of the

economic challenges we have but you 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 hearing from economists and from the white house is in the short term to spark the economy we need more stimulus, including unemployment benefits, but you are talking about the roads projects and other things that the economy may need to kind of jump-start itself and maybe start to cut into the jobless rate. at the same time we need long-term deficit cutting. >> yes. >> 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

arab spring and the impact on oil prices and the earthquake and what europe is experiencing now have 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 had to deal with it in a way that is smart and balanced and fair and everybody is in, and where we're protecting 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. nose ought to be protected. 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 bewildering to me. the only explanation is politics. >> a cynic might also suggest, and let me suggest it here, that you all are 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 partisan, so ideological that we can't come together and solve our problems. >> what 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 to today's beneficiaries and 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 me 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 or rifk unhorrific 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 even 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 needy students that want to go to college and several other things 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 effect 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 improving standards in our schools, making higher education more accessible, improving our 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. oisturizers with scientifically proven soy complex and natural minerals. give you sheer coverage instantly, then go on to even skin tone in four weeks. aveeno tinted moisturizers. then go on to even skin tone in four weeks. -woohoo! -yes! ♪ it was the best day ♪ it was the best day yeah! ♪ it was the best day ♪ because of you [echoing] we make a great pair. huh? progressive and the great outdoors. we make a great pair. right, totally. uh... that's what i was thinking. covering the things that make the outdoors great. call or click today.

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joining me now to give their 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 party's governors association, so welcome to you both. >> thank you. >> 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 that 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 billion 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 flow follow up on that, that you would be opposed to, say, an extension of unemployment benefits that go out at the end of this year, an extension of payroll tax cuts for employees, perhaps an extension of payroll tax cuts for employers. 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, we ought to consider it. >> extending unemployment benefits? >> i don't think that creates jobs. it lessens the pain. we're down to a 6% unemployment rate in virginia, but we have 250,000 unemployed. but 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. my colleague, governor mcdonnell

and i, both defend aaa 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 to pass bills that 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. >> 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? >> -- go 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 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 mcdonald, 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 area and airports -- >> but you disagree with all that? >> metro and other things. and he's a great irish-american, just like me. i disagree with him on that. we've tried that.

we tried stimulus spending. we put little into 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 absolutely 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 a democratic 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 could look at what the states are doing. i had a $4.2 billion 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. >> go ahead.

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 -- i think in retrospect -- >> no, i said it invested in the wrong things. >> and governor mcdonnell accepted every single dollar that the president courageously passed through recovery and reinvestment act. 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. but 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 we both need to 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.

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we're back with governors bob mcdonnell of virginia, and martin o'malley of maryland. first to you, governor o'malley. a graph from a reuters article that we saw sort of 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% next year, and unemployment 9.5% heading into the final days of the election season. what is the president's bumper sticker at this point? how does he campaign? give me more time? it's all the republicans' fault? it's a bad economic scenario. >> 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 -- >> does he have to be tougher? >> i think what he has to do is have that adult conversation with all of us as americans. look, 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.

what the president needs to do is 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 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, invest in innovation and rebuild the infrastructure of our country. you have been probably to communist china. they are outperforming 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. >> 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,

and they are not going to do any of the things that governor o'malley just talked about, they won't invest in education, will put granny on welfare and that kind of thing. how do you take the harsh edges in perception, at any rate, 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 disagree on policy, but we work well on regional issues. tea party says we want the same thing as middle-class america wants -- less spending, a balanced budget and to keep tax where is 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 the top 10 in the poll this week were republican governors in terms of the best business climate. three states with republican governors increased their bond ratings. martin is right to a degree. we need to increase in infrastructure. we can't do that by increasing spending overall. and that's a recipe for disaster when we're heading towards the trillions. you have to to the cut entitlements and discretionary spending. that's the conversation the president needs to have. we're broke in washington and cannot afford the level of spending. infrastructure, yes, and all the entitlements and discretionary spending, we can't afford it anymore. >> would you agree with that? doesn't an honest look in spending in washington include entitlements? medicare, social security? >> yeah, absolutely, i think we need a balanced approach. which is why it's so very disappointing, candy. >> but that includes cuts in these entitlement programs. >> it includes cuts, sure. and i think the president much to some of the ire 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 worked away because of their worship of tax cuts for millionaires and billionaires. we need a balanced approach here. i would disagree somewhat with some of the assertions of governor mcdonnell. if you look at some of the choices voters made 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 many the future of job creation in their states. >> let me 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 basis look, and anyone that isn't a threat to society and has not committed a criminal act should stay.

and they should just take them off the dockets. is that amnesty, governor mcdonnell? >> we are a nation of immigrants. we share the same heritage. we need more lawful immigration in this country. the prosecutor is, frankly for decades we have not secured the border, haven't enforced the laws we have in the states, and haven't come up with a reasonable path to citizenship for people that are -- >> is it okay these -- that anybody that's currently being looked at but hasn't committed a crime can be taken off and perhaps be given a work permit? that's okay with you? i just need a quick answer here. >> 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. >> as quickly as you can. >> as quickly as i can, we do need to create a path for citizenship. people do need to pay their taxes and obey the law. our system is broken.

i believe secretary napolitano has done a better job of deporting violent individuals, but we need to create a path to citizenship so great governors like andrew kcuomo and the one n vermont and colorado can build up their states and create jobs and opportunities for the future. >> you have great governors, as well. let's leave it at that. >> thank you. >> thank you so much, bob and martin. good to have you both back. up next, signs of tension between the nation's first black president and the lawmakers who represent many african-american communities. with diabetes, it's tough to keep life balanced.

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there is no more loyal group of democrats than african-american voters and no racial group has been more devastated by hard economic times. 15.9% of blacks are unemployed, double the rate of whites. 26% are living below the poverty level compared to 12% of whites.

and therein lies the dilemma for the 43-member congressional black caucus. 42 are democrats and many angry with the first african-american president for not doing more to help the black community. this week, while the president was touring the white midwest, members of the black caucus held jobs fairs in cities like atlanta and detroit, cities with overwhelmingly black populations and unemployment rates over 10%. point made. up next, the former chair of the cbc, congressman elijah cummings of maryland. ♪ [ female announcer ] we're throwing away misperceptions about natural gas vehicles. more of the vehicles that fuel our lives use clean american natural gas today. it costs about 40 percent less than gasoline, so why aren't we using it even more? start a conversation about using more natural gas vehicles in your community.

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[♪...] >> male announcer: now, for a limited time, your companion flies free, plus save up to 65%. call 1-800-sandals. conditions apply. joining me here in washington, congressman elijah cummings, former chair of the congressional black caucus and a current member of the congressional black caucus. the impression we got over the past couple weeks of things maxine waters have said is that black lawmakers are pulling their punches when it comes to president obama because so much of your community and so many of your constituents are so supportive of him. is that so? >> i think there's a lot of truth to that. all the polling data shows the african-american community is very protective of our president. and they see him as their son,

as their brother, and they see -- and have are very proud of him. something else is happening, candy. they see -- they believe that he is being beaten up every day by the tea partyers, by just about everybody. while in spite of all of his efforts, in spite of their efforts, he is still making tremendous progress. they're very protective. there's two parts. on one hand, they are protective and really care. on the other hand, almost every african-american i have talked to said then him to fight and fight harder, because they don't -- they believe that he sees the possibility of some bipartisanship from the republicans, but they don't see it. their attitude is if the republicans are not going to work with us, we'll have to go it alone and stand up to him, don't back down, period. they are not going to give you anything anyway. >> and so the commune in

general, your constituents, think he hasn't been tough enough, but we love him, he's our president so, we're sticking with him. we just want him to get out there and fight. >> and fight. >> but what about the tremendously high unemployment rates, which are not new in the african-american, but nonetheless, that's a community that's been hardest hit. >> no doubt about it. >> do you not feel as the representative and leader in your community that you need to be continuing to push him publicly to do something specifically for the community? >> no doubt about it, we have to do that. and i think in a way it's good for him. the president said -- by the way i am a big supporter of our president, but he said during the election process, he said i will not tell you what you want to hear, i will tell you what you need to hear. we need to do the same thing with this president. but i think he has done a lot already. >> what does he need to hear? >> he needs to hear that there are a lot of people suffering, and 40 miles from here, in baltimore, we probably have black males unemployment at 40%.

he needs to hear that. he needs to go back to the horse that brought him in. in other words, when he came in he talked about hope and jobs and talked about fairness and talked about addressing wall street effectively and efficiently and trying to make a difference. he has to go back to the basic points. that's what got him in. the other thing that he needs to do, and just like -- i kind of believe that there is a silent minority, candy, out there, and a silent majority, rather, and a lot of times they are not being heard. i think basically what maxine waters said will cause more of those folks to come out and give the president some backing, and i mean -- look at what is happening in some of the republican districts, where they are going to their town hall meetings and people are saying, wait a minute, you are going to cut my medicare and cut my social security, but give the richest of the rich tax cuts? what is up with that?

>> that's the kind of argument being had across all communities. >> what i am saying is for the african-american community, i think we need -- we are leading. we will lead that discussion. i think the more people that look and see what is happening with the african-american community the more impact it will have on those discussions in those republican districts. always remember, it's not just the president, candy. the buck doesn't just stop with the president. it also stops with the congress. we have to get a congress in there that will do the right thing. >> i want to play you a quick -- something your colleague john conyers said about lobbying the president. >> okay. >> i want him to know from this day forward, starting with the initiative of the outer poverty caucus, that we've had it. we want him to come out on our side. we're suffering. >> yeah. >> so just the sense that he is not on your side, and by that i mean i think he means the african-american community and those in poverty, which includes obviously more than

african-americans, so what does "we've had it" mean to you? >> i think meaning that we're totally frustrated and again, people need to -- they need to know the president feels their pain and is trying to create jobs. jobs has got to be number one -- >> you want something specific for the african-american community, correct? >> listen. we want -- in this country, where they are suffering, when we have major problems, and that's where we go, we go to rescue people to help them out. it just so happens, candy, in many of the african-american communities, the suffering is greatest. twice the number of the percentage of unemployed people. we want the president to go to iowa. we also want the president to come to detroit and los angeles and to stick with a jobs agenda. what the republicans have done, they argued this thing, taxes et cetera, but there are some tax cuts we simply can't afford. >> i need a quick yes or no

answer if i can get it. >> yes. >> do you think the president has taken the african-american vote and community for granted in terms of support? >> no, i do not. >> thank you so much for coming. we appreciate your time. >> thank you. when we come back, president obama says there's no danger of another economic recession. our democratic panel weighs in next. ♪ [ recorded voice ] onstar. we're looking for city hall. i'm sending directions to your car. [ recorded voice #2 ] turn right on hill street. go north for two miles. ♪ [ man ] this is onstar. i got a signal there's been a crash. do you need help? yes, please. i've got your gps location. i'm sending help. [ female announcer ] introducing onstar fmv. get it installed on your car at best buy or visit onstar.com for more stores.

joining me now to discuss recession worries, editor for thompson reuters original, chrystia freeland, and the economic editor for the economist, greg ip. i hardly know where to start. but let's start with what in the world is -- i hear so many reasons why businesses are not spending. they are worried about regulation and worried about, you know, what is going to happen with health care, or they are not selling anything, so they are hoarding their money. what gets the private sector to step in? start with you. >> i think the first thing we have to recognize is that the recovery, if you can call it that, that we're going through is somewhat unique and comes after a financial crisis. and what we know is that recoveries are difficult and slow because people have debt left over from the bubble years and they are trying to pay it down. >> and you don't mean corporations, but people?

>> yeah, people that have houses that are no longer worth as much as when they bought them. it's reality. >> i agree with greg. business has to make a really sort of cold-hearted assessment of the economic prospects, and that's assessment tells you right now if you are doing business in america or in western europe, the economic recovery is really, really sluggish, even if you don't believe there's going to be a double dip recession. the economy is growing slowly. in that kind of environment, it's the wrong decision to invest. >> we're looking, according to some of the folks, a year out to a very slow economic growth and very high unemployment, would you both agree with that out look for 12 or 18 months from now?

the events we've seen in the last week or two, people think the odds of going back to the recession are on the order of 35% to 40%. if you look at what's happened in the stock market the past few weeks, you would say we're in a recession right now. retail sales, all doing better than expected. the volatility, a lot of which isn't based on events in the united states but in europe, is scaring people. people are saying, hold it, i'm freezing for now. that becomes a self-fulfilling prophesy. >> not to be too much of a gloomster, candy, but the one area i think people are really worried and where we've had some data that reinforces those continued worries is housing.

if you think about the economy as a boa constructor, that rabbit of the housing crisis, that hasn't been digested yet. that's holding down u.s. households in all kinds of ways. it means there's less mobility in the labor market and people cannot sell their homes so they cannot move to a place where they can get a job, the construction industry is absolutely dead, and we have not seen that go away. in a lot of ways it's getting worse. >> so this brings me to two questions i wanted to ask. first to you, because you brought up europe. as long as there are huge problems in europe and they have not figured their way out of the huge debt, can the u.s. economy recover? >> yes, it can. in fact, we are replaying what happened a year ago when the greek crisis exploded. it created volatility in the markets and people stepped back and said hold on, i am going to take a break. and when they realized it wasn't ricochetting in the united states, it ramped up again. one of the big problems here is

not withstanding the outlook was going to be sluggish, we have a series of self-inflicted wounds. policymakers in europe and here in the united states are perceived not to just be able to unable to respond but unwilling respond, and that chips away confidence as well. >> to the housing part of the equation, has housing bottomed out or are we in for more bad news in the housing department? >> i think we're still in for more bad news. it's not a question of whether it's bottomed out or not. it's a question of whether we have dealt with the fact that a lot of people bought hows they couldn't afford and a lot of banks lentz more money than they should have been. >> we're still dealing with that. >> that foreclosure problem hasn't been worked through yet. so, yeah, i think there's still a little more bad news there. i don't want to be the big doomster here, but i think he may be a little too optimistic. >> i get that a lot.

>> how sad, eric. >> i think as long as what we see on europe is problems with then get fixed, then that isn't a break on a u.s. recovery. but it is possible that there is a real crisis in europe, and we haven't yet seen from europe, particularly from germany, a solution that solves the sovereign debt problems in the weaker european countries, not just like greece and portugal, but also now like spain and italy. until we see that solution, there is a real possibility of a full-blown financial crisis coming out of europe. >> let me move to what the president or congress or the fed might be able to do to at least ease the slowness or speed up -- whatever it is we need them to do. the fact of the matter is most people look and say, they've run out of ammo here. we're now kind of running on fumes in terms of what can be done by any of the policymakers. is that true? >> i think you would say, yeah, they're out of bullets and bazookas and down to broken pool cues and baseball bats.

>> great imagery. >> or any weaponry that they have left. there are some things, and the first thing you can do is do no harm. if you look at what's baked in the cake, we'll have a fiscal tightening worth 2% of gdp come january just as the temporary measures implemented last december run out. that's why he's pushing hard to continue some of those, like the payroll tax cut. politically and realistically it's hard to imagine we'll get a lot more than that. that would be helpful. it doesn't in some sense make matters worse than they already are. they give the economy a little breathing space. the fed has done as much as it can do, could probably do a little more. let's face it. now that you have ten-year bond yields at their lowest in i think like 60 years, it's not clear that the fed doing more will accomplish a lot. the final thing, we've been talking about housing. there's a lot we could do to help housing, to get people's unserviceable debts down, clear out that morass of debt-weight dead, and perhaps take a little break from all the litigation and regulation which i think is

making things worse in terms of the lending community. >> are we out of ammunition here? and as an adjunct to that question, can you have stimulus spending and deficit reduction in the same policy which is -- it seems to me that's where the president is going here. >> sure. i think that that would be the consensus view of mainstream economists, is that's what you actually need. it's not as contradictory -- >> force more money into the economy while cutting government spending. >> in the medium term. right. i think if you had economists as dictators of the world -- and that is not necessarily the ideal thing, we have lots of things to appoint them. if you wanted to appoint them as dictators of the world, what they would advocate is more stimulus. that's impossible only because of american politics. economically it's absolutely feasible to have a second stimulus. and do that in conjunction with a medium-term binding deficit reduction plan. the idea would be that then you would have the markets be really confident and investors be

confident, the medium term fiscal problems are going to be resolved. they're not immediately difficult. greg talked about the bond -- u.s. bonds. people aren't worried about the credit worthiness of the u.s. today. but you would have stimulus right now to get going the economy that we've been talking about is incredibly weak. >> thank you both so much for coming. >> thank you. up next, our "sound of sunday," highlights from the other sunday morning talk shows. that one day on the red hills of georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood. i have a dream today! [ male announcer ] chevrolet is honored to celebrate the unveiling of the washington, d.c., martin luther king jr. memorial. take your seat at the table on august 28th. but my data is doubling. and my servers are maxed out. [ male announcer ] with efficient i.t. solutions from dell, doug can shift up to 50% of his technology spend

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time for "sound for sunday," which today was a basic lesson in the politics. if you're in the bottom of the poll, aim up. looking for room, jon huntsman took his struggling campaign to the sunday airwaves. describing himself as center right, he suggested much of the republican presidential field is extremist, in particular, texas governor rick perry, who recently said it would be treasonous if federal reserve chairman ben bernanke tried to help the economy by printing more money between now and the election. >> i'm not sure the average voter is going to hear that treasonous remark and say that sounds like a presidential candidate. that sounds like someone who is serious on the issues. but it gets to a broader point of, you know, the fact that we've had so much hope and hype

in politics the last little while, we've found ourselves at the extreme ends of the political spectrum. >> do you think that governor perry is unelectable were he to get the republican nomination? would he lose to president obama? >> when you find yourself at an extreme end of the republican party, you make yourself unelectable. >> and rick santorum, himself a candidate of the right, took on perry from a slightly different angle. >> i'd be out of the race if i thought he was the best candidate. i think i'm the best candidate for this who has a record of accomplishment across the board, who's been a consistent conservative. i think you go back and look at the records of all the candidates in this race, the one who can accomplish things, who's been a consistent conservative, someone who can attract candidates. rick perry has won in texas. that's great. we're going to win in texas no matter who the nominee is. we have to win pennsylvania and ohio and florida. i've got the track record to win in those states. >> in a rare display of