>> from nbc news in washington, "meet the press" with david gregory. >> good morning. big news developing overseas this weekend in libya. muammar gadhafi has survived a nato air strike on a tripoli house that reportedly claimed the lives of his youngest son and three grandchildren. this according to a government spokesperson. u.s. security officials say they believe such attacks may be the only way to force gadhafi from power. and in rome, the late pope john paul ii moved a step closer to sainthood as he was celebrated during a joyous ceremony that drew more than a million people to st. peters square. back in washington, the congress returns from a two-week spring recess. i'm joined by mayor michael bloomberg. david axelrod, white house

adviser and strategist of the 2012 bid, and also bob mcdonnell. welcome to all of you. i want to start with mayor bloomberg to talk about some crucial matters that are really determining the reelection fight, but also the debate here in washington, and that is the economy. here is the cover of "the economist" magazine that caught my eye this week with the statue of liberty on the cover. here's what they say. the economy is recovering, yet american confidence remines mired at levels more commonly seen in recessions. for that blame unemployment, petrol prices and a deeper, nagging feeling that america is in decline. a gal, up poll in february asked americans to name the world's leading power, and they said china. this is obama's presidency from 2009, high point in october, 10.1%, now we're at 8%.

what kind of recovery is this, mayor? >> when you come out of a recession, the first thing people do is tighten their belt and try to do more with less. it's not surprising that corporate prices are going up and governments are finding ways to provide services with fewer people. it is only a little further into the recovery that you start to add more people, companies are willing to take risks, governments think their tax base is going to be better and start expanding services and hiring people to provide that. like anything else, some parts of the country are doing poorly, some are doing well. new york city, for example, is doing better. we're not back to where we were before, but we're doing better. i think what's happening here in this country is petroleum prices. the industry is less dependent on petroleum than it used to be, but if you drive a car, you're very dependent on petroleum, and four-plus dollars for gas is

something americans find very difficult to work into their budget and they don't have a lot of choice. the price of food has gone up dramatically, and statistics don't show the impact on individual families because they cover a lot of different costs. having said all that, there are some bright spots. i think if you want to go buy a house, and if you can afford it, you're secure in your job, mortgage rates are low, housing prices continue to fall, you can get great bargains and you shouldn't wait until the end. the most important thing, however, is jobs. we have a great mismatch in this country between the skill sets of those that are unemployed and the demand in industry and in government for people with a very different set of abilities. and it's a function of years and years, decades, of poor schools and not training people. >> well, this disconnect where we hear that the economy is getting better, stock market is improving, so much has gone on on wall street to get healthy again, with the major banks getting healthy again, and yet we're in this state where you have stubbornly high unemployment. >> well, there's a couple

different things here. one, there is a crisis of confidence, and the one that really is worrisome is not just when you go out and say, do you feel better or worse about the economy, it is a crisis of confidence among business people. they look at washington and they say, you can't run something this way. no company would survive if you ran it the way washington runs where they focus on small issues that have nothing to do with the real america, on issues they ka can't come together on. the most obvious one is immigration. this is a company that was built on immigrants, this is a company that became a superpower because of its immigrant population, and unless we continue to have immigrants, we cannot maintain as a superpower. i give you an example of how you can fix some of the problems in america. take a look at the big, old, industrial cities, detroit, for example. they have a great mayor, mayor bing, but the population has left. you have to do something about that, and if i were the federal government, assuming you could wave a magic wand and pull everyone together, you pass a

law letting immigrants come in as long as they agreed to go to detroit and live there five or ten years. start businesses, take jobs, whatever. you would populate detroit overnight because half the world wants to come here. we whip ourselves a little bit too much. we still have the world's greatest democracy, we still have hope that if you want to have a better life for yourself and your kids, this is where you want to come, and you could use something like immigration policy at no cost for the federal government to fix a lot of the problems that we have. >> let me ask you about taxes. big debate in washington over the future of taxes for the wealthy, for the middle class. do you think it's possible to bring the budget into balance? >> if you don't just raise taxes on wealthy americans but also on those so-called middle class making $250,000. >> last week they said the bush cuts should expire for everyone. >> what democrats have to understand is you can never balance the budget unless you make meaningful changes in

entitlemen entitlements. we used to have 30-odd people supporting every retiree, now it's 3 people supporting every retiree. the government has to understand we can't get through this with the same entitlements we had with benefits, and expect people to pay those benefits. you also can't balance the budget just with cuts. the american people, whether they vote republican or democrat, in the end they don't want their programs cut back, particularly the big ones, medicare, medicaid, social security, those kinds of things. i thought the alan simpson and erskin bowles came up in their committee with exactly the right answer. you can tweak it, you can change some small things. i assume the gang of six will come up with something similar. you have to have some combination of cuts and expenses and some revenue enhancements, call it taxes, whatever you want, and i was talking to erskin yesterday. his idea is 25% increasing revenue and three-quarters in terms of cutting expenses and some ratio like that is the

solution. how much chaos and destruction to our economy we have to do before everybody in washington starts acting like an adult, coming together and not pandering to small voting blocks but saying, hey, this is in the interest of the country. i'm not going to do a poll, find out where my constituents are and follow them. we need leadership from the front. that's true in congress, it's true to the other end of pennsylvania avenue, it's true on both sides of the aisle, it's true in states. the governor is very proactive and he's steered virginia through some very tough times, but he's done it by making decisions and pulling together, and people know where they stand with this government in virginia, and that's what we need to have in america. >> let me widen this discussion out to all of us here at the table and we'll get back to the economy. i want to touch on some other issues, though, that are part of the political dialogue, for sure. the economy is certainly the backdrop. governor mcdonnell, the tornado damage has just been horrific throughout the south. we have a map here that shows just how devastating it's been

throughout alabama, georgia, tennessee, mississippi, and virginia as well had significant damage. 342 deaths, 288 tornadoes. this kind of outbreak has not been seen in this country. as much as $5 billion in insured losses. the president and the first lady were touring the damage in alabama on friday, getting down there with folks. both in terms of what you've gone through in virginia and assessing the president's response, how would you rate it? >> it's been heartbreaking. we've had three weeks in a row with catastrophic damage and loss of life in virginia. over 25 tornadoes reported. i've been there as recently as friday to view the damage. we're not used to that in virginia. but i tell you what i see. if the plans from the first responder works like it's supposed to, while the american people might disagree on some things, when we're attacked or have a catastrophe like this, we bind together and work together

better than any other country on earth. the president called me on thursday saying the federal government will do anything they could to help. secretary napolitano followed up, and we've declared a state emergency, and now we're asking for some federal help for isolated counties that have been particularly affected. i think the system is working as good as they can, but it is going to be a long road back for some of these communities, particularly alabama and mississippi. but weaver g've got some people hurting in virginia now. >> david axelrod, you're inside the white house, outside the white house, but certainly top adviser to the president, still, as he campaigns for reelection. i mentioned at the top of the program the strange twists and turns of the presidential race. we're talking about the economy and jobs. there are huge distractions, and we saw that play out this week. the president released his long form birth certificate to try to quiet people who actually still believed he was -- >> he released earlier the short form birth certificate. >> right, and he had to get a special waiver to release the whole thing. this came about in part because donald trump, who may be a

presidential candidate, was talking about the need to do this. this was the scene that played out on wednesday, a kind of split screen america between donald trump and president obama. watch this exchange. >> today i'm very proud of myself because i've accomplished something that nobody else has been able to accomplish. i was just informed, while on the helicopter, that our president has finally released a birth certificate. >> we're not going to be able to solve our problems if we get distracted by side shows and carnival barkers. >> why did the white house wait this long to do this? >> let me say i'm happy that we could contribute to mr. trump's self-image, that he feels good about himself, proud. he needs that little ego boost. >> yeah. >> the reality is, it isn't -- you say it became a distraction. donald trump didn't make the decision to put himself on a

split screen. donald trump didn't make the decision to cover this over and over and over again once he raised the issue, and the president's point was the day after he made a speech on this issue that the mayor was talking about that's so important to our country, which is how do we solve this debt problem in a way that is balanced and fair and serves our future, the president did an interview, answered a lot of questions about it, got one question on the birther issue, and on the evening news that night, that led the news. at that moment the president said, you know what, we've got to put a stop to this. he wanted to make the point we have more important issues in this country and we ought to move on. the point was, frankly, david, to your industry as much as anything else. >> if republicans ever have a chance of getting into the white house, they have to get off issues like the birther issue. we need to talk about the economy and the deficit and immigration and health care and lots of social problems here and not waste our time talking about frivolousness. >> governor mcdonnell, why is it republican leaders have not stood up while this was going on

and said, this is nonsense. speaker boehner was on this program and said, look, i can't tell people what to believe. can't he? >> i've said that. i thought it was a waste of time. the problem with the president, it's not where he was born, it's some of the policies he's advocating. the feeble attempt, i think, to get our debt in control with the proposal in the president's budget really are at issue in this campaign. we're $14 trillion, and under the president's proposal, we'll be under 20. that's the crisis in america. until we have serious dialogue about that and reduce r do you say -- reducing spending, including entitlements, like the president said. i think that's a side issue. >> the president said this himself in the white house, standing up. the president gets out there and does it. was this motivated by a sense of, hey, i am going to raise donald trump up to beat him down and say, hey, this is the republican party. >> it wasn't about donald trump,

it was about the media fascination with this, and because we agree, we ought to have the debate the governor is talking about. both the president and the republican party say we have to deal with this issue. we both have proposals. the difference is the president thinks we have to do this in a balanced way that's fair. if you essentially do away with medicare, as it true under the republican proposal, and at the same time give $200,000 tax breaks, a trillion one in new tax breaks to millionaires and the wealthy, that is not a prescription for a better america. if you slash education by 25%, if you slash research and development and clean energy activities by 70%, this is a prescription for economic failure and an imbalance in our country, and that's what we should be talking about. and so that's why he spoke out on that. >> one more thing on this birther issue. is racism involved? does the president believe that? >> i'm not going to -- i've not

had that discussion with him, and frankly, i'm not going to entertain that question. i don't think that's a worthy question. because -- >> you may not think so, but there are a lot of african-americans who think it's offensive the president has to go up there and defend this. >> i don't think it was just african-americans, i think a lot of americans were offended by it of all stripes. we're a country, and the mayor can speak to this. he has the most diverse city in the country. we're a nation of immigrants. we come from all over the world. there are americans of every stripe and every background who have built this country, and that whole episode was offensive to a lot of people. but the point is, we've got big challenges in this country. we've got big problems. we have a big debate of how we build a better future and we ought to get through it. >> mayor, on the cover of "bloomberg businessweek" is donald trump. not on this issue but with a simple question. does he have a real voice in this campaign if he gets to issues of what he has

contributed in business? >> anyone can run. he has a right to run. he is a new york icon, bigger than life in a lot of things, and he can put himself into the mix. there are an awful lot of people whose names surface looking to potential ly be the republican candidate in 2012. some will fall by the wayside really quickly when they realize what they have to do in terms of disclosure, raising criticism from the press and raising money. >> you call him an icon. is he worth serious consideration? >> that's up to the voters. i'm not going to pick any one candidate and say they are or they aren't. the nice thing about america is you get a chance to go out there and make your case. i will say, however, and it talks to david's point and the governor's. when you talk about the problems facing this country, and they both talked about the deficit going forward, i've always thought we do this wrong. we take a look at the deficits and say we've got to cut. we should stop and say, what do we need to keep this country

going? whether it's education or research or defense or a variety of other services. these are the services we absolutely need if we're going to keep america, the great country that it is and the land of opportunity. then try to find out what it's going to cost to do it efficiently and then go and have a debate about how you raise the money. you can spend less, you can get more coming in, but you don't start with -- there's nothing magical about deficit as opposed to making sure the streets are safe. there's nothing magical about a deficit as making sure we're protected from terrorists. there is nothing magical in the deficit in the context of if we don't educate our kids, they don't have a future and we don't have a tax base down the road. so we're all looking at this the wrong way. the debate should be whether or not government should provide this kind of education, that kind of education, this kind of defense policy, that kind of defense policy, not let the money drive it. we're spending money we don't have, we shouldn't be doing it,

but the first and most important thing is what are we going to do to keep this country safe and growing. >> i think we're a lot closer to that thinking than you suggest. that's exactly what the president is saying. we have certain responsibilities. one is to be fiscally responsible, but we also have a responsibility to our future, we have a social contact that we have to keep with our senior citizens, with our children to educate them and give them the tools to compete. there are certain things we know what we have to do. that ought to guide our decision making here. it's not just an exercise. >> governor, what about the pessimism in the country? what do you see in virginia as people struggle in a state that still has unemployment so high? >> it's a business. we're down to 6.3% unemployment. we've gone from 9% unemployment in the last six months. i think we're there because we made a lot of tough decisions in the last year, david. we cut the balance to a $6

million deficit. it included education, it included health care. yeah, there was some short term pain, but we ran a surplus in six months and we're coming back. the government has a balanced budget amendment. we can't make excuses, we can't form committees, we can't kick the can down the road, we can't increase the deficit willy-nilly, we have to make tough decisions. that's what i think the congress and the president need to do. most of this deficit has been run up by republican presidents in the last 30 years. it's a bipartisan congress and we need bipartisan cooperation to get it fixed. >> you're a good guy, and i commend you for this operation. your predecessor made a huge deficit, but you also borrowed money in the recovery act, you balanced your budget by borrowing $3 billion against future receipts on transportation to fund your transportation program.

you borrowed money from your pension plan that you're going to have to return, and you did it because you were managing through difficult times, and you didn't want to burden the taxpayers of your state through these difficult times, but those bills are going to have to be paid. so you are wrestling with the same problems that the president, governor and marthe mayors are wrestling with and there are no easy answers. >> the federal government for the longest time, 30 years after the second world war, we cut the deficit every year. the last 30 we, for the most part, ratcheted it up. 70% of the gdp ran it up. for most people they don't get why congress can't find a way to cut the deficit and balance the budget. >> when you borrow millions of dollars from future receipts and you borrow money from your pension system and you say the budget is balanced, the next governor has to wrestle with that. i know you only have one more term there, but the next

governor has to work with that. >> handling the economy, if you look at recent polling on this, that's still an area of considerable weakness for him. 57% disapprove of his handling of the economy. you have something of a pulse on independent voters around the country. particularly as it talks about surging gas prices. a lot of independent voters say in polling they will not support obama, particularly because of this issue. this hits them particularly hard. >> number one, it's a long time from now to the election and who knows what gasoline prices will be or what the issues, the debates will be about. i think the president has to show that he understands the pain, that he understands that we need businesses to come here and thrive. he has to give people confidence that he's not going to support policies that will stop job creation, that government can't be the solution to everything. in the end it is the private sector economy that really does

give us the hand up rather than the hand out that america needs, skpe and he's just got to get out there. i've said this a thousand times, he needs more contact with the business community and not just by calling in a thousand well-known business personalities and talking to them around a table and leaving. that doesn't get things done. it's small business that's going to create the jobs, it is people's confidence that will get them to buy a car so that general motors will go hire more people. it is an intelligent tax policy that people not only can understand, and it doesn't cost them a fortune just to fill out the forms, but a tax policy they think is going to be consistent going forward. unless you know that government is going to have labor policies taxed, policies regulations that are predictable and consistent, businesses can't adapt and plan for the future and make the kind of investments. we have banks with a lot of money. they're scared to make loans. why? because every time they turn around, they get attacked. now, whether they should or shouldn't get attacked is not the issue here.

the issue is it does not leave them, when they go back home and sit around the table and say, what are we going to do? well, you know, everybody is after us, let's not run any risks. in fact, we want banks to take the risks. we vilified banks for giving mortgages, but that's what we want them to do. we want them to take risks. unless they do that, nobody will get anywhere. >> the governor sounds pessimistic that the president should be up for reelections. >> the president is a great campaigner. we'll have great candidates. we have three or four in already. i think we'll probably have two or three more. >> you'd like to see a governor. >> i'd like to see a governor because governors can balance the budget, they've got to be decisive, they can't make excuses, they've got to lead. >> we had a governor the previous eight years and we started with record surpluses

and we ended up with record deficits. >> being a governor is no guarantee of anything. >> no. but that's what we need right now is decisiveness and getting confidence back into the economy. i think the mayor is right, to some degree we've had attacking wall street and business in this white house. we need pro growth, pro economic policies, we need to keep taxes in check and have to have the fortitude to cut spending and that's what i think a governor will bring to the table. i think we've got some good candidates, they'll get stronger, and for the crucible of these debates, i think you'll see good candidates. >> david, i have two questions for you in our remaining moments. the first has to do with campaign financing. a new expenditure group called 527 started by bill burden who worked in the press shop at the white house. back in 2007, then-candidate obama was critical, decried all of these independent expenditures. it's thought that he might spend a billion dollars on his reelection campaign.

>> that's a speculative number. >> is president obama ultimately going to represent the death of campaign finance reform in this country after being a champion for -- >> this independent group that was performed was formed in response to the ones that spent hundreds of millions of dollars in the lars campaign to defeat democratic candidates with lanch contributions. we tried to pass a law that would force all groups to disclose who was giving them the money so the public could see. it got 59 democratic votes in the united states and 41 republicans blocked it. so of course, now there is a reaction to it because the democrats are saying, we can't play with two sets of rules. the governor and i should walk down to capitol hill, urge them to pass the law and then people will see -- >> democrats have a huge financial advantage going into 2012, do they not? >> i don't know because the campaign is just begun. we won't have a huge financial

advantage if people like the coke brothers who funded tens of billions of dollars to these organizations, carl rove and his group and others spend up to billions of dollars they say they're going to spend. we don't really know who is going to spend what. i don't think this is healthy, yorng iti don't think it's good, but it's the system we have and you can't expect one side to operate under one set of rules and the other side to operate under another. >> what if iraq says they want troops to stay beyond the predicted date. is that something president obama will do? >> i want to be careful, i don't want to misrepresent, but the president feels strongly that our mission needs to be wrapped up in iraq. i've seen no change in that. >> he wants to keep that promise and not have it go beyond? >> yes. >> i'm going to leave it there. thanks to all of and you the debate will continue on all fronts. coming up, how will the tea party influence 2012 and what

habits impact on this congress? plus, budget battles, raising the debt limits and america's role in the mideast. we'll talk live to senator of florida, mark arubio. plus, a break from the seriousness of the week because sometimes you just got to laugh. inside political comedy and its role in politics. from the host of last night's correspondents dinner, head writer for saturday night live, seth meyers. opportunity can start anywhere. and go everywhere. to help revitalize a neighborhood in massachusetts. restore a historic landmark in harlem. fund a local business in chicago. expand green energy initiatives in seattle. because when you're giving, lending, and investing in more communities across the country,

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