know it's hot out there. >> fishing, no offense for the fishermen, for a layman like me, you cast the line out there and sit and wait, so has to be hot. today, the threat of adouble dip rerecession, with larry summers, and steve forbes. and then washington from afar with california governor, jerry brown. >> the washington of today is suffering and experiencing a crisis. >> and then plus, retired

admiral, mike mcconnell, on the looming dangers of international cyber attacks. i am candy crowley, and this is state of the union. a better than expected jobs report was the only upbeat economic note this week, and it was downgraded. that's the first time that ever happened. >> it's a matter of the medium and long-term budget position of the united states that needs to be brought under control, not the immediate fiscal position, it's the one that centers on entitlements and its entitlement reform or having the matching revenues to match the

entitlements. >> we have treasury secretary under president lynn clinton, and steve forbes, the president and ceo of forbes ing, and a former presidential candidate. thank you both. i cannot think of two men better to try and explain to me what to make of the downgrading of the u.s. government's credit rating. let's start with you, steve. >> i think in a narrow sense, it's a political move, and i think it will sound strange for me to say an outrageous move. the government is legally aub lay gatd to pay its debts, and a larger sense about the economy, i think the u.s. economy is in a paralus state. i am surprised s&p would play politics, and the u.s. government can pay the interest and principle on the bounds, but we do have severe economic troubles but will be able to pay the interest and the principle on the bounds. >> larry, i will have to believe

you will agree with him, because i hushd this weekend from a number of administrative officials pushing back hard against this, and talking about how immaturish it was talking about how s&p was looking for its 15 minutes of fame. give me your take on why you think s&p did this and do you agree with that? >> look, s&p's track record has been terrible, and as we have seen this weekend, its arithmetic is worst. that's not the large issue here. the large issue here is the house majority played chicken with america's credit worthiness, and america's families are going to be the losers, losers in terms of higher interest rates on mortgages and losers in what this will mean for employment, and we have critical economic problems, and the critical economic problem of slow growth

and lack of jobs, and the critical economic problem of a long-run budget situation that needs to be adjusted and needs to be adjusted in a rational way, and we have to find balanced approached going forward, balanced approached to focus on the jobs deficit. >> if i could, larry, and if this was an unjeffed move by s&p, and a political move and an attempt to get them to get out in front and into the headlines, how can you then blame republicans for it? >> look, candy, the -- steve is right, the united states is going to pay its debts. the united states -- look, s&p said to sell and warren buffett set to buy. that should tell you something about the quality of u.s. bonds. at the same time, this happened

because s&p was seeing what most americans are feeling, which is unhappiness with the solutions that are coming out of congress for critical economic problems, and to say that s&p is suspect is fought in any way to say that all is well, and the productive thing here is not to bash on s&p, even if they deserve some of that, but the productive thing is to focus on what we can do going forward. >> steve, do you agree -- >> what we have just been through -- >> i just want to bring steve in here on this. do you agree that this was brought -- i saw you shaking your head, so i know you don't agree. do you think this has something to do with the republicans and their refusal to go ahead and come up with a broader deal or agree to some kind of tax increases? >> no, i think the republicans were elected precisely to try

and undo the fiscal damage this administration has been doing to the country. what is holding this economy back is a weak dollar, you never get a comeback, and massive new regular legs coming from finance. the board is doing things it never has done before, telling companies where it can move and not move, and all of the regulations are hurting, and banks are not lending because of the uncertainty, and that's because the recovery is so weak. if the administration would change policies we would start to see real recovery. >> and to wrap up the credit worthiness of the downgrade, how do you think the markets will react to this? >> i think the markets are going to be a little uncertain. the key thing is two of the rating agencies are going to follow s&p, and i don't think they will and if they don't the reaction will be minimal. you will have a fallout because of the uncertainty.

states don't know what they are going to do, and s&p may downgrade major insurance companies and that means they will have to raise more capital. >> and do you think interest rates will go up and this will have a practical affect on americans? >> well, the key thing is, on interest rates, the federal reserve is punishing savers by the zero interest rates policy, and you don't get liquidity going to where it is needed. the weak dollar is the real disaster. i think it was a political move, a market move, but the broader thing about the economy, weak dollar, and massive new regulations, that's what is holding this economy back. >> i know you will want to pick up and argue with steve about what is going on with the economy since you were present and accounted for in the administration when some of the

policies were put into affect. the question that has shown up in a number of headlines, are we looking at another recession, a double dip recession as it's described, and if so doesn't that speak to a failure of current administration policies? >> there's certainly a risk of recession, but god knows if we had not pursued these policies, we would be looking at another version of what happened in the 1930s. steve's thinking about raising interest rates, and cutting liquidity in the midst of an economic downturn is the thing that made the depression great. if you look at what happened in the first six months, the winter of 2009, various indicators were falling faster than they had after 1929. what we are living with is completely unacceptable but it's very difficult from what happened during the depression, and that's attribute to the

policies that were pursued. that's a tribute to the decision to inject funds on a substantial scale into the economy, and to stress test, and to make transparent what was happening in the banks, and to provide liquidity. without that the situation would be far worst than it is. >> and yet, larry -- >> we need to know -- we need to do more of that, and unfortunately, at a time when, you know, the state of nevada has a manual at looking for infrastructure, and it says if you delay repairing a highway, the cost of doing that repair costs five times as much. we are not making those investments to pay off five times in two years at a time when the interest rate is at a near record low, and one in five constructtions workers are not working. it makes no sense not to be

investing and putting people to work -- >> you are talking about a second stimulus here in some -- a more infusion of government money into the economy, to stave this off. let me ask you, and can you answer that, but the economic recovery such as it is at the moment, the growth is slower than you all thought it would be and you all predicted, meaning the obama administration, and unemployment is higher at this point than you all predicted it would be, so doesn't that speak to some kind of failure within the administration? >> i don't think so. forecasts have enormous uncertainties. nobody in or outside the administration foresaw the kind of european financial crisis we have had in the last couple of years, and nobody foresaw how high energy prices would rise. these have been adverse shocks to the economy.

look, the president saw this coming at the end of 2009, and the president proposed and then the democratic house of representatives passed legislation that would have extended unemployment insurance faster, and done more for state and local governments and made necessary public investments and the infrastructure. but congress was not willing to go along with that legislation. so you can't judge simply by saying that the economy is not where we would like it to be. it would be much better if all of the president's suggestions would have been followed and it would be much worst if his early measures would have been blocked. >> let me bring steve in on this. basically, what is being argued here is that more was needed to kind of prime the pump of the economy, that had the president gotten his way, more money -- and the people around him, more money needs to be put in. we are looking at 9.1%

unemployment rates, and that's a huge number of economists say that's exactly what you need, you need more money for construction work and to get people at work. >> the reaction is to get a good upturn. the question is why aren't we doing better? stimulus money. where does it come from? it comes from we the people, either through borrowing or taxing or printing of money which is another form of taxation. japan has been on this path for 20 years, and low-interest rate policy, and art fishily kicked down rates, and it does not work. that's why the recovery, we're like an automobile going 25 miles per hour, when at this stage we should be going 70, and 75 miles per hour. again, you never get a sustained recovery when you trash your money. you never get a sustained recovery when you have a massive bing in spending or massive

taxes, and people hold back. that's why private capital in this country is fleeing overseas. they don't see productive investment opportunities here at home. and that has to be laid at the feet of the obama administration, and they are the ones that put in the massive spending and the health care and all of these other regulations. you can't blame that on george bush. >> and first, steve, if i could get a quick answer. if i had $1,000 to vest right now where would you put that money? >> in a stock market in a broad-based index, because in a year and a half, this country will turn around, and it turned around in the '80s and '90s, and this is the time to get in, when everybody else is fleeing. >> $1,000, what would you do with that, larry? >> you will have to use your best judgment, but if you think that washington will come together on a balanced approach

to growth and the deficit, then certainly the united states is the place to put your money. >> larry summers, and steve forbes, can't thank you enough. hope you will come back. a dire warning from the west coast. my interview with california governor, jerry brown. >> this is real peril, and i don't think i ever thought that about the united states before. r before you begin an aspirin regimen. [ mike ] listen to the doctor. take it seriously. no, it's just for new people. hey ! chocolate, vanilla or strawberry ? chocolate ! chocolate it is ! yeah, but i'm new, too. umm... he's new... er... than you. even kids know it's wrong to treat new friends better than old friends. at ally bank, we treat all our customers fairly, with no teaser rates

and no minimum deposit to open. it's just the right thing to do. but for some of us with overactive bladder, our pipes just don't work as well as they should. sometimes, i worry my pipes might leak. but i learned there's something more i can do. now, i take care with vesicare. once-daily vesicare can help control your bladder muscle and is proven to treat overactive bladder with symptoms of frequent urges and leaks day and night. if you have certain stomach or glaucoma problems, or trouble emptying your bladder, do not take vesicare. vesicare may cause allergic reactions that may be serious. if you experience swelling of the face, lips, throat or tongue, stop taking vesicare and get emergency help. tell your doctor right away if you have severe abdominal pain, or become constipated for three or more days. vesicare may cause blurred vision, so use caution while driving or doing unsafe tasks. common side effects are dry mouth, constipation, and indigestion. so why wait ? ask your doctor today...

... about taking care with vesicare. the u.s. economy, the world's largest, has been rocked in the past several years, and so has the world's eighth largest economy, california. at 11.8% it has the second highest unemployment rate in the country and the third highest foreclosure rate and ranks second to the nevada on the stress index. last november california went back to elect jerry brown, and

he first served as governor 36 years ago, and he was one of the youngest governors in california, and now is the oldest, tougher and wiser. >> choices have to be made and difficult decisions taken. at this stage in my life, i have not come here to embrace, delay and denial. >> unable to convince republican state lawmakers to even let voters consider tax hikes, brown signed a state budget this summer with steep cuts in education and state services for the poor, the elderly and the mentally ill. my conversation with democratic governor, jerry brown, next. every day, all around the world, energy is being produced to power our lives. while energy developement comes with some risk, north america's natural gas producers are committed to safely and responsibly providing decades of cleaner burning energy for our country,

drilling thousands of feet below fresh water sources within self contained well systems and using state of the art monitoring technologies, rigorous practices help ensure our operations are safe and clean for our communities and the environment we are america's natural gas. excuse me? my grandfather was born in this village. [ automated voice speaks foreign language ] [ male announcer ] in here, everyone speaks the same language. ♪ in here, forklifts drive themselves. no, he doesn't have it. yeah, we'll look on that. [ male announcer ] in here, friends leave you messages written in the air. that's it right there. [ male announcer ] it's the at&t network. and what's possible in here is almost impossible to say.

personal pricing now on brakes. tell us what you want to pay. we do our best to make that work. deal! my money. my choice. my meineke. governor, first of aushlgs thank you so much for joining us. i wanted you to take a california look at what has been going on in washington. we have just finished up a very grueling debt debate. from your perspective, what did that tell you about washington? >> well, the obvious is that it's dysfunctional, but more than that, that the washington of today is suffering and experiencing a governorability crisis. america can't govern when you have two parties so opposed, and

i think that's an ominous sign going forward. >> do you have a solution for that? i think you are right, people look and say they are on different planets, and it's no wonder they can't come to an agreement. what do you think would help? >> i will tell you, we are at a crossroads that if the republicans cannot give up some of their ideology package, and if the democrats can't find a way to create common grounds, the country is going to face some decline, and i think the only way out of that would be a very vigorous election where people layout the stark alternatives, not muffle it like politicians like to do, and kind of smooth out the rough edges. we need a very clear and decisive election. i would say the republicans are gearing up to destroy the president, and the president will have to respond in a very powerful way, and the result for the country could be calamitous.

>> what does his response have to be? >> he has to be authentic and powerful and layout a clear a alternati alternative, and run a risk that may not work out for him, because the society is in the mood where it wants a lot of things, but is not willing to pay for them. >> you think the president needs to say, folks, we need to raise taxes? >> i would not put it in those terms, because that we know from mr. mundell is a big fat loser. >> i know, but we are talking about stark contrast? >> the contrast is what the choice is. if you don't want to pay the taxes, you have to cut social security and the military and research and highways and hospitals and schools and universities. you have to retrack from being a great super power. and i think there is a bill at the end of that that people might be willing to pay. if they don't pay it america will never be the same.

so there is the tax reform, and there is the deductions, and the loopholes. there are a lot of ways that the president can present it, but it may be that because of the propaganda or the state of indulgence where we are, maybe the truth cannot be spoken in a way that makes it a successful campaign. if that's true, then we are really in for it. >> let me ask you on the specifics of the debt crisis, and some of these confrontations that the republican has h-- the president has had with the republicans. >> the trouble is with the loss of the house, he's in a defensive position. i support him in what he is trying to do. i just think that he has to dig down into his own soul and connect with the people of america at this hour of peril.

this is real peril, and i don't think i have thought that about the united states before, but if we are going to be a divided government, our add vau saries and the rest of the world and the dollar and the market and the global economy, this is not good. today it appears the ideology kul obsessions, the tax identity is so strong that compromise is no longer a viable concept. now, it would be better if we had more accommodating political parties, and it's not the democrats are free from blame, they will have to look at the entitlements and do something about it. >> i was going to ask you about that. clearly, you're a democrat and i understand that you come at it from that position, but i think republicans would argue that this whole idea that you can't touch medicare and you can't touch medicaid or social security, that kind of thinking also needs to be dropped?

>> well, it's good to score points off the republicans by saying they are going to get rid of medicare, which in many cases is true, however, given the over commitment and under finance of where we are, we're going to have to reshape all these programs. in california, we're trying to get a waiver right now from the obama administration to cut our medicaid costs and so far we are not getting anywhere. the democrats have to wake up and we have to constrain costs, and we have to find some tax loopholes to close or other revenue, and, yeah, it's not pleasant. >> i want you to ask me to stick with me and we will take a break. when we come back we will talk about california particular problems, and they are mammoth, as you know. we'll be right back. 's part of . [ male announcer ] be sure to talk to your doctor before you begin an aspirin regimen. go see your doctor now.

sure, but let me get a little information first. for broccoli, say one. for toys, say two. toys ! the system can't process your response at this time. what ? please call back between 8 and 5 central standard time. he's in control. goodbye. even kids know it's wrong to give someone the run around. at ally bank you never have to deal with an endless automated system. you can talk to a real person 24/7. it's just the right thing to do. [ martin luther king jr. ] i still have a dream 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.

handle more than 165 billion letters and packages a year. that's about 34 million pounds of mail every day. ever wonder what this costs you as a taxpayer? millions? tens of millions? hundreds of millions? not a single cent. the united states postal service doesn't run on your tax dollars. it's funded solely by stamps and postage. brought to you by the men and women of the american postal workers union. ♪ i don't even know anymore. [ tapping ] well, know this -- for a good deal on car insurance, progressive snapshot uses this to track my good driving habits. the better i drive, the more i save. it's crystal-clear savings and only progressive has it. nice. this has been a public savings announcement. out there with a better way. now, that's progressive.

and all we need to do is change the way we're thinking about them. a couple decades ago, we didn't even realize just how much natural gas was trapped in rocks thousands of feet below us. technology has made it possible to safely unlock this cleanly burning natural gas. this deposits can provide us with fuel for a hundred years, providing energy security and economic growth all across this country. it just takes somebody having the idea, and that's where the discovery comes from. while i took refuge from the pollen that made me sneeze. but with 24-hour zyrtec®, i get prescription strength relief from my worst allergy symptoms. so lily and i are back on the road again. with zyrtec® i can love the air®. welcome back. we're sitting here with california governor, jerry brown. thank you again for joining us. i was really struck by an

l.a. -- a paragraphing in the ""los angeles times"" description of the budget that you signed. in part it said the plan contains severe cuts including reductions of about 23% to public universe tease, raising the price of medical care for the poor, and closing senior seniors and cutting welfare grants and cash aid for the eldaughterly and disabled and 70 state parks slated foreclosure and community college fees on the rise, and family programs will be trimmed efly. >> well, there's another aspect here, and that is we're to live within our means. i propose that we did half cuts, painful cuts, and mainly the ones that you just read, and also half continuing the tax revenues that my republican predecessor put in place, but which expired. the republicans wouldn't give me one vote in order to have that balanced program, so we have to

cut. i will continue. we are not going to borrow, but we are going to put our books in order and it's going to be painful and we're going to do things i don't think are things we ought to do. >> it's a strategy to force the public or republicans into saying let's raise taxes rather than to cut this bone? >> that's not the intention, but it is a consequence. i do think as a state, as wealthy as almost all over the country of the world, the gross domestic product is $2 trillion, and it seems like it makes a lot of sense, at some point i would hope that people are willing to pay more money, and ifness, i hope there will be on the ballot next november opportunities for the people who say, yeah, i am willing to pay a little more money. if they don't, we will continue to retrench, and we will the

university, and the roads and the fire fighting and prisons and jails, and so i will engage with a dialogue with california to forge another path that is more positive. >> you are a fiscal conservative? >> i am willing to spend and invest, but i don't think you can borrow all the time. i don't like borrowing or debts. we are way beyond the ledge of responsible fiscal management, and i amplin 6 pulling us back. >> the folks in washington can't make up their minds, and the republicans say cut government and spend less, and the liberals say spend more in the rooseveltian way of putting american back to work. >> you have no stimulus funds?

>> we have bond funds, and we're spending money on a massive, multi-billion dollar renewable program, and that's stage two. the short term is the federal reserve, the congress. >> in the short term, and let's define that as two or three years, you see california, if there is no help forthcoming from the government, and there seems to be no money left for a second stimulus. >> and maybe people might look at themselves in the mirror, and they will ask, is this what we want for america? >> do you see any help in the near term -- >> well, last time it got up to 11%. this happens. there's no magic bullet other than stimulus, and the stimulus has been stigmatized by the republican leadership and they want america to go through this,

you know, straight jacket, and this is where it is, that's the gamble. i think come november, the american people will have a better understanding of the choices, and it really is a stark choice, i think, that we are facing. >> i sense that you are angry? >> i am not angry. i am just alarmed at where america is. so i would just say, we better be very careful where we're going, and i hope we watch it, we being the congress and the president. the president is the one that really has the most opportunity to turn this around. >> thank you so much. appreciate it. >> okay, good. this weekend, texas governor rick perry is in the national spotlight with his day of prayer. is he the republican that could shake up the presidential race? we will ask our political panel next. 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.

[ indistinct conversations ] [ hissing ] agents, what did we learn here today? that lint balls are extremely flammable! well, yeah. and that 15,000 dryer fires happen every year! that's why it's important to regularly clean and inspect your vents! correct. where did you get that?! i built it. [ male announcer ] we are insurance. ♪ we are farmers ♪ bum, ba-da-bum, bum, bum, bum ♪

try capzasin-hp. it penetrates deep to block pain signals for hours of relief. capzasin-hp. take the pain out of arthritis. and started earning loads of points. you got a weather balloon with points? yes i did. [ man ] points i could use for just about anything. ♪ ♪ there it is. [ man ] so i used mine to get a whole new perspective. ♪ [ male announcer ] the new citi thankyou premier card gives you more ways to earn points. what's your story? citi can help you write it.

joining me now, former white house communications director, anita dunn, and former republican congressman, tom davis, of virginia. rick perry, the governor of texas waiting on the sidelines and everybody expect he will get in. let's assume he does. was he start to wait?

does she shake up the race? >> well, he is flavor of the month. there's a long way to play. his record will be skrult nized. he will find out on the right, michele bachmann has been out there and it will be hard to shake some of those people away. it's tough getting in this late actually. >> it does remind me a little bit about fred thompson last time around, and it was going to be him and he was going to save the party and he tanked from almost the first day. >> people who want to be president generally start running, and they don't wait for everything to be perfectly in place. i think iowa will be very interesting this week. obviously, i think you guys have something going on out there. it will be very interesting to see how these candidates all react to each other given the fact they have not been together for a couple of months now. so much has happened since then. i think the winner of this kind of period since the last debate has been michele bachmann. rick perry getting in on paper

appears to hurt her the most, but we will see in terms of who is the alternative to mitt romney and who is the frontrunner. >>. >> we have a debate coming in this week in iowa, and the aims poll, and to your experience, how much as the aims straw poll, how many of your supporters can you get to aims, iowa, in august to vote for you? how much has it every shaped a race? >> huckabee won it last time and did not win the state. i am not -- >> no, actually, mitt romney won -- >> but the reality is i don't think much and i am not sure how much iowa matters now except it will take some people out of the pack. it's different from new hampshire. these are republican activists, and this is not a primary but a convention. >> right, right. >> and one thing the straw poll

can tell us is whether any of the candidates are being successful of doing what obama did in 2008, which is to enlarge the university of people that attend the caucuses. let's not forget pat robinson with his supporters coming, and everybody was like, who are those people? there are a few candidates in this field that can poe ten shuly do that and obviously, you know, getting outside of the mainstream usual activists, give somebody a much better shot at winning that caucus. this caucus will be a contest to see who really is an alternative, and who gets to go on to new hampshire. >> who is not mitt romney? >> right. a lot are not mitt romney, actually. >> yeah, and there could only be one is the theory goes. let's switch gears and give you something from late-night tv here. >> yesterday a man jumped the white house fence. did you hear that? yeah, but after a brief chase,

secret service was able to talk president obama to come back and continue his time. >> that was o'brien joking about a fence jumper, but only it was the president trying to get out of the white house. pretty bad week for the president? >> a pretty bad week for congress, which according to the new york times poll released on thursday has its lowest rating ever from the american people in 82% unfavorable, and, you know, there is nothing to say can't go lower, and they certainly seem to be trying to do that. a bad week for the country and for everybody. the president who started the week, you know, by a compromise debt ceiling deal that, you know, we never should have had -- fundamentally, it's smaller than he would have liked and did not represent the kind of bipartisan work that the problems of this economy suggests we should be having.

candy, i was reminded this week of 2008 in september, and when layman collapsed and the stock market dropped by 800 points. these are leadership tests moments. back then, obama, who was the democratic nominee, and mccain, and everybody kind of worked together, because it was an economic crisis, and contrast that to this week with the republican candidates out there all saying they would have voted against the debt ceiling, which would have been a crisis in and of itself. and using the downgrade to take cheap shots at the president, and these are leadership tests and i think he passed it this week and they did not. >> at the end of the week, can the president run saying i am the adult, and i am not, you know, taking cheap shots, and if i could just have a more democratic congress we could get stuff done. >> we tried that and the voters rejected that. you have 20% of the homes under

water at this point and 9% unemployment, and downgrade, and a bad narrative. it hit on the whole political establishment of both parties and who is going to take the plame at the end of the day, and we tried one-rule party, and the voters came back. i think they will both take hits. >> i totally agree. if you are an incumbent, this was a bad week for you to be sitting in washington claiming -- >> you better fix it. right now they continue to point fingers at each other and saying it's the other guy's fault. >> right. if you look at the tone deafness of people saying it's your fault, your fault, your fault, and what people want in the country is who is going to work together, and who will help my family and what is relevant to me, and washington and congress has never seen more tone deafness, and if i am a incumbent i am thinking for a

different path for the future. >> be a consultant for the democrats at this point, and what is the president's slogan going forward? >> his slogan right now is they are worst than i am. you have to go back to 1948 and hairy truman when he ran against the congress. he has to come up with a program, send it up. right now he bears the responsibility for voters of what is on the ground, he may not have caused it but has not fixed it. right now they don't see solutions coming out. >> i will let you advise him as i know you still do. what is the president's pitch to voters when they are looking at currently 9.1% unemployment, and all of the houses under water, and things that really matter to people when they sit around their kitchen table are bad? >> that's exactly right. the president's pitch to voters, and the choice that voters are going to have in 2012 is going to be who actually is going to to have a solution to this, and

what you have seen from the republican candidates across the board, the people who would be president right now, the men and women who are running are people who will not stand up to the most extreme elements of their own political party, and people like mitt romney, who likes to tout his business background who said he would have been against the debt ceiling agreement and turns around to duty cheap shots. no solutions. the republican congress has not offered any solutions and their programs have been rejected from the paul ryan budget that would have been eliminating medicare. >> we're running out of time, and we have one more guests. but i am going to assume, tom, you would say, but the republicans can argue the president's solutions didn't work? >> well, they didn't work. he had two years. with everything else going on, what is on the ground matters. right now, the people are suffering. unemployment is high. houses are under water.

lost our credit rating with one of the major houses, and the wars are not going well, and they look to the president and blaming right wing narratives is not going to fly. up next, the danger of cyber attacks on the united states. >> if the nation went to war today in a cyber war, we would lose. we would lose. we are the most honorable and most connected and we have the most to lose. [ man ] i got this new citi thankyou card

and started earning loads of points. you got a weather balloon with points? yes i did. [ man ] points i could use for just about anything. ♪ ♪ there it is. [ man ] so i used mine to get a whole new perspective. ♪ [ male announcer ] the new citi thankyou premier card gives you more ways to earn points. what's your story? citi can help you write it.

joining me now, retired vice admiral, mike mcconnell, former director of intelligence. i know this is a subject you are interested in, and we were struck this week by a report from mcafee that said that over the past five years, over -- there have been over 70 victims of cyber spying, countries, the u.n., was also included in this, and that the spying was done by a state actor, which the same one, which everybody assumes to be china. when you looked at this report, what worried you the most?

>> when i saw the report, i was glad to see it. it's now making the information available to the public. and, candy, the way i would describe the report is the tip of the iceberg, much worst than what is included in the m china. let's assume this is a state. what are they looking for when they -- i'm assuming they can hack in to the u.s. government at many levels. what are they looking for? >> all governments, sophisticated governments, run an electronic espionage effort. the g8 are the most sophisticated. the united states has a policy of looking for adversaries who might wish us harm, military secrets, military capabilities and so on. we have a policy of not doing economic espionage. not all those g8 countries have the same policy. in fact they focus on economic

espionage. >> economic espionage would be, for instance, hacking into the treasury department to see -- internet to see what's going on there? >> could be treasury. could be an ill company. it could be a silicone valley startup. it could be aerospace, anything that would allow the country to have their competing economic activities, have an economic advantage. >> so we could do it to others on an economic basis. >> we could. >> we confine it to the military. but do we have a defense? isn't there some way to kind of -- security walls, right? >> we should. it is not nearly as sophisticated as it needs to be. as a matter of fact, the nation does not even practice good -- what i would call cyber security hygiene. we could eliminate most of it if we just did the basic things, be aware, change passwords, configure our systems appropriately, but we don't, and we're in a situation now where

this nation state is liss rally bleeding the intellectual capital and innovation engine out of this country. if that persists for a long time, it's going to take away a significant economic advantage that we have. >> so presumably they can get company secrets. >> and do. think of it like patent information or a new product or a new software or a new idea. if you can go into a company's computer systems and extract it, particularly if you have a labor force that works at a lower rate and you can turn quickly, then you can take it to market and cost jobs in this country. >> now, i want to just tell our viewers, you're an exec vice president of booze allen which is involved in internet security and makes money by offering internet security, and there's been some criticism that you're overstating this case, that the u.s. is -- the obama administration has made it a priority that, in fact, they are

on top of this. what makes you feel that they aren't? >> just look at the mcafee report. i still maintain clearances. i became concerned about this issue when i served as the director of the national security agency in the early '90s in the clinton administration. i felt then i had a responsibility to continue to remind senior officials just how severe this is. i had the opportunity serving as the dni to have a discussion with president bush and later president elect, now president obama. each of them realized the severity of this issue. this administration has done many good things. they have an international policy, they've sent legislation to the congress for consideration. but it's not nearly enough. it has to be significantly more enhanced than it is because as a nation, we are vulnerable. let me give you two examples. a terrorist group that had cyber skills could attack the critical infrastructure of this country,

particularly in the heat of summer or the cold of winter and cause chaos. it could disrupt banking, electric power. >> it could shut down power grids. >> indeed. remember there was a blackout in about 2003 in the northeast. we were without power for several days. it put us on the brink of chaos. it's possible for a relatively small group to be able to do that to the country today. now, if you go to cyber war where we were mad at someone, we were exchanging hostilities in some way, some of these nation states have penetrated our systems, not only to gain information advantage, but to leave capability that can be used -- >> later on. >> later on when there's a crisis of some sort. at one level we're losing our economic advantage of our innovation engine. at one level, we haven't

adequately addressed the potential for a terrorist group, someone that would not be deterred from inflicting major damage on what i call the soft underwelly of the country. >> admiral mike mcconnell, thank you for coming on. scary stuff. i imagine this will come up again. thank you for being with us. up next, a check of today's top stories, then fareed zakaria gps at the top of the hour. he ls in the world. a large part of that is oil sands. this resource has the ability to create hundreds of thousands of jobs. at our kearl project in canada, we'll be able to produce these oil sands with the same emissions as many other oils and that's a huge breakthrough. that's good for our country's energy security and our economy.

7 [ man ] i got this new citi thankyou card

and started earning loads of points.

you got a weather balloon with points? yes i did. [ man ] points i could use for just about anything. ♪ ♪ there it is. [ man ] so i used mine to get a whole new perspective. ♪ [ male announcer ] the new citi thankyou premier card gives you more ways to earn points. what's your story? citi can help you write it.

top stories. we're expecting a verdict soon in the trial of two u.s. hikers accused of spying. josh fattal and shane bauer have been in prison for two years after allegedly crossing iran's border with iraq. last sunday their lawyer said the courts would issue a verdict within a week. at least 26 police officers injured, 42 people arrested after violent protests in north london. demonstrators set police cars and building on fire overnight to protest the death of a man allegedly shot by police. four nato soldiers were killed in two separate insurgent attacks. among those killed with navy