>> today on "face the nation," the economy slumps even further as the 2012 presidential campaign takes off. president obama had his own campaign-style bus tour through the midwest this week, but it was the shaky stock market and the long jobless lines that held the nation's attention. >> i don't think we're in danger of another recession, but we are in danger of not having a recovery that's fast enough to deal with what is a genuine unemployment crisis for a whole lot of folks out there. >> reporter: as the president prepares yet another plan to create jobs, we'll ask senator john mccain what he thinks might work, and also get his take on the breaking news out of libya

this morning. then, we'll get some insights from mark zandi, chief economist of moody's analytics, about what could be done to help the economy. and we'll host a reunion of sorts of two party chairmen who butted heads during the former bush administration-- former democratic party chairman terry mcaulliffe and former republican party chairman ed gillespie. it's all ahead on "face the nation." captioning sponsored by cbs "face the nation" with cbs news chief washington correspondent bob schieffer. and now, substituting for bob schieffer, cbs news chief white house correspondent norah o'donnell. >> good morning. and welcome to "face the nation." republican senator john mccain is here with us on capitol hill. we're going to start with the breaking news out of libya this morning. rebel forces appear to have surrounded the capital city of tripoli and the city is under siege. we're seeing the heaviest fighting in six months of this

conflict as forces loyal to moammar qaddafi are resisting the rebel advances. qaddafi addressed his followers last night by radio, but his whereabouts remain unknown. joining us now is senator mccain. senator, thank you so much for joining us. you have been to libya twice this year. you were one of the original proponents of military action. is this qaddafi's last stand? >> absolutely. it's a matter of hours, if not days. once our u.n.... our nato forces, under the leadership of the british and the french and others, became more heavily engaged with the use of air power, i think it was something that was going to happen. so i believe that it's nearing the end. it's going to be a big challenge forming a new government, uniting a country that has never known democracy. we've seen the difficulties with other countries who made this transition, but we will be rid of a guy who the blood of americans on his hands. we will be rid of a guy who has practiced the worst kind of

brutalities. now, it's going to be up to us and the europeans. but i'd like to say that i grieve a bit because this conflict didn't have to last this long. united states air power could have shortened this conflict dramatically. unfortunately, we chose not to. we led from behind. >> reporter: you have met with some of the rebels. what would a new government look like? and can we trust them? >> i'm sure we can trust them to the degree that they're people who want their democracy, freedom. there are many former american libyans who are there in the government. it's very difficult. there's tribal rivalries from a long time ago. they've never known democracy. they do have access to a lot of money. there's a lot of oil and a lot of assets there. so, i think they can succeed. but our european friends and we are going to have to help out a lot.

let me just say, this will send a message to bashir assad. and to yemen and to other dictators that their time is nearing the end. this arab spring is echoing all over the world, from russia to china to israel to... and being manifested in a lot of different ways. but since, that young man burned himself to death in tunisia, we are seeing a vastly changed world. we are going to have to make some adjustments. >> let's turn now to the economy, which seems to have gone from bad to worse this week. president obama announced that he will be unveiling a new jobs plan after labor day. it will likely include some new spending, perhaps some stimulus. given the brinksmanship that happened on capitol hill over the debt ceiling debate, what's the likelihood anything with any new spending could pass through congress, or is this thing dead on arrival? >> i would look forward to seeing the president's plan. i'd love to see it now so we could have a chance to digest it

and see where we agree and disagree. but i look forward to it. but spending has been really proven not to be a solution. number one, we passed the stimulus. the prediction was 8% unemployment. we need to.... >> reporter: many say had they not done the stimulus, it would have been much worse. >> to say things could have been worse really isn't of much comfort to my constituents in arizona, who are coming to town hall meetings to express their frustration. 10% of the american people, i understand, approve of congress. not one of that 10% has attended my town hall meetings. >> reporter: you are hearing it from people in your town hall meetings. >> let me say what we really need to do is to create an environment for business to reinvest. the difference between the president's views and ours is we believe that business creates jobs. overseas... there's a trillion dollars sitting overseas. why don't we cut the corporate tax rate, give them a holiday and bring that money back? corporations in america are sitting on a trillion-and-a-half

that they're not investing and spending. why not give them a climate where they can? stop the issuance of new federal regulations. cut the corporate tax rate from 25% to 15%. close the loopholes that are so egregious and outrageous to all of us, and get into ways that we can eliminate the deficit, which is our long-term problem, and create jobs, which is our short- term problem. only unless business will invest and create jobs. finally, one other thing that's most frustrating to me about this whole situation is it was the housing collapse that started this crisis. we took care of wall street. mr. zandi will tell you and others-- they're doing fine. they're very liquid. tens of millions in salaries. the housing market is still in a situation of crisis. we have to put americans in their homes in mortgages that they can afford. that i think is one of the largest failures we've had. >> reporter: a big debate certainly on capitol hill about' this.

let's turn to the republican race for president. karl rove said just this morning that he'd put money on sarah palin running. but he says she's got to get in next week as he says, "you can only tease so many times in this cycle." do you think sarah palin will run? has she asked your advice? >> she has not asked my advice. i do not know. i certainly put some credence to karl rove. he's one of the guys who beat me. >> reporter: do you think she should run? do you think she should be president? >> that's a decision that is so personal. it has to do with your family and all of these things. it's hard for me to know where sarah should run or not. i think she would be very formidable. by the way, we have all these frontrunners. i remind you that, in 2007, at this time i was done. if you might recall. my campaign was doomed. a lot of things are going to happen. i hear, for example, maybe rudy giuliani is going to get in the race. i think he would be very formidable.

by the way, congratulations to tim pawlenty for running a hard race. he's a good person. >> reporter: let's turn to the other republicans who have announced they're running for president: mitt romney, michele bachmann, rick perry. they all opposed the debt ceiling deal. you were on the senate floor during the debate. you criticized republicans who opposed the deal. you called them "tea party hobbits." would you call romney, bachmann and perry tea party "hobbits?" >> what i was talking about, quoting from a "wall street journal" editorial was there was a segment of the republican senators that said we cannot raise the debt limit until we pass a balanced budget amendment to the constitution. the senate would not pass... would not get 67 votes. so in my view, it was unrealistic to tell... you've got to tell the american people the truth. that's one of the reasons why people are mad at town hall meetings. they don't think they're being told the truth. tell them the truth. we could not have passed it. that was unrealistic. hobbits are unrealistic. it was unrealistic to say we

could raise a balanced budget amendment. by the way, i have always supported a balanced budget amendment. >> reporter: governor rick perry just entered the field. do you believe him when he says there's not a lot of science behind global warming? listen to what he said. >> i do believe that the issue of global warming has been politicized. i think there are a substantial number of scientists who have manipulated data so that they will have dollars rolling in to their projects. >> reporter: you believe in global warming. rick perry does not. can you elect someone president or can the republican party elect someone president who doesn't believe in global warming? >> i think people judge the candidates by their overall strengths and weaknesses. he brings a lot of strengths to the table because of the texas economy and his experience as a

governor. i don't expect to agree with every candidate on every issue. i'm going to take a while before i support one. >> reporter: what about his comments about ben bernanke that his actions have bordered on treasonous? is that a presidential comment? >> i can't critique... >> reporter: you're the original straight talker. >> but for me to... i know the pressures of being on the campaign trail. very honestly, i also know what the experience of having a few of your words plucked out. remember when i said the "fundamentals of america's economy are strong." >> reporter: what did that do to the state of your campaign when you said that? >> i know, but these are the things you go through. this is why campaigns are tough. it's not bean bag. my sympathy is with all of you. i'm glad i'm not with you. >> reporter: on that note, senator john mccain, welcome back. i know you're just back from pakistan and overseas. we appreciate it. thank you so much. >> thanks for having me on. >> reporter: thank you. philadelphia, mark zandi who is joining us now from philadelphia, mark zandi who is the chief economist for moody's analytics. thank you so much for joining us. >> good morning. >> reporter: i want to ask you about something that president

obama told cbs-- he said he doesn't think america is in danger of a second recession. do you agree with that? >> yeah, i do. i think clearly the risks are very high. people are extremely nervous. businesses are shell-shocked, but i think with good policy making, we'll be able to avoid a recession. you know, we've made some significant progress righting the wrongs that got us into this mess in the first place. the most important fundamental reason for optimism is that american businesses have done a very good job getting their cost structures down, getting their profitability up, getting their balance sheets in order. not all businesses. you know, small businesses aren't doing quite as well as the larger companies, but in aggregate, they're doing very well. given that, it's hard for me... it's not a reason for them to go out and hire people, which is what we need. but i think that is a reason for them not to lay off workers. that's what we would have to occur for a recession to ensue. >> let's take a look specifically at the stock market, which is down 11% in august, down 4% just this week. we've had some wild swings in the past two weeks.

what's going on here? what happened to the recovery? >> well, we got hit by a string of unfortunate events. everything from $4 for a gallon of regular unleaded to the japanese quake effects and the impact on our vehicle sector. but most significantly, it's the debt ceiling drama, the spectacle in washington, and of course the s&p downgrade. i think completely undermined confidence. we were already very nervous coming out of the great recession. and this just was too much for us to get our minds around. i think we've all frozen. that's reflected in these wild swings and the declines in the stock market over the last couple, three weeks. >> reporter: i've read your most recent macro forecast. you talk about policy makers need to do something to instill confidence in the economy. the president is going to announce this new jobs plan after labor day. what specifically do you think could help jump-start this economy? >> well, you know, policy makers have to do two things at the same time. the first is they've got to follow through on the debt ceiling deal. they've got to come to terms over the next several months with respect to some further

future deficit reduction about $1.5 trillion worth. they have to execute on that in a reasonably graceful way. if they don't, then we will be more downgrades, turmoil in the stock market and we're back in recession. the second thing we have to do though is provide additional support to the economy in is very near term. this gets to the president's jobs package. there's no magic bullet here. but there are a number of things that can be done that would be helpful. i'll just name one. we can talk about others. that is extending the payroll tax holiday. as you know, we all have a holiday for this year. we need to extend that in 2012. otherwise, the drag on the economy will be too great. >> that is something the president has talked about multiple times, extending the payroll tax holiday. he also talks about extending employment insurance. if congress does not pass that, how many jobs could that cost the economy? >> well, if we don't extend the payroll tax holiday and if we do not extend the emergency

unemployment insurance benefits which also expire at the end of the year, that will cost the economy in 2012 calendar year 2012 about a percentage point of g.d.p. growth. that translates into about a million jobs by the end of 2012. so if we don't do those things, then the number of people employed will be a million less than otherwise would be the case. >> reporter: mark, given what we just saw, the brinksmanship on capitol hill-- there's a lot of things congress has to do when they get back from august vacation. you're saying that if congress does not move forward, this will be terrible for our economy. >> yeah, we're done. i mean, the spectacle in washington completely eviscerated confidence. we can see what damage that has done. we can't go through that again. they have to get it together. they have to come to terms and do it by the end of november. >> reporter: all right. mark zandi, thank you so much. and we'll be right back with a debate on president obama's record on the economy, plus the latest from the campaign trail. stay with us.

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whether it can be done safely and responsibly. at exxonmobil we know the answer is yes. when we design any well, the groundwater's protected by multiple layers of steel and cement. most wells are over a mile and a half deep so there's a tremendous amount of protective rock between the fracking operation and the groundwater. natural gas is critical to our future. at exxonmobil we recognize the challenges and how important it is to d do this right. >> reporter: back with our round table. a reunion of sorts for terry mcaulliffe and former republican national committee chairman ed gillespie. thank you both for coming in this morning. ed, let me start with you. a number of republicans have criticized president obama because he's talked about the urgency for creating jobs, and yet he's on vacation in martha's vineyard. should he have postponed his vacation and called congress back to work?

>> i don't begrudge the president for taking some time with his family and taking a vacation. i'm sure it's got to be exhausting "wrecking" an economy as big as the united states is. he should take a little time. i think two weeks, the optics of it is not great. going to "the vineyard," as the democrat elite call it is probably not the right signal. following after a taxpayer- funded campaign swing through the midwest and at $1.1 million bus i find myself thinking i wish i had started a web site which is "if bush had done that.com." if president bush had done something like this, there would have been a big outcry. >> reporter: we have three quarters of americans disapproving of president obama's handling of the economy. how do you get elected when three-quarters of americans don't approve of your handling of the economy? >> what's important is when president lays out his plan in

september, job creation. people are frustrated. i've talked about this many times. i am so sick and tired of the political speeches. everybody talks about jobs. we need a plan to create jobs. i'm in a business. i'm creating thousands of jobs now. i'm selling clean green automobiles all over the world. i know what it is to create jobs. all these folks up here-- not one of them have probably ever met a payroll. we have to have a plan for a long-term strategic goal to get our manufacturing going. we need to sell products. we need to make sure that our children are getting the education so we can compete globally. that's what the president... i don't want to call it a speech. it is laying out his plan and his vision about how we get this economy moving. we need jobs in this country. and we've got to work with the republicans. i thought the disgrace in congress the last six months was an embarrassment to our nation. all this fighting over raising our debt limit, which is basically saying we're paying our bills, i think did a tragedy to our country, to our image. we have to get it back and we have to work together to do it. >> reporter: terry, it's not like the president hasn't talked about the need to create jobs. we actually looked back at our cbs records. and the president has talked

about and made a pitch for creating jobs in 171 speeches just this year. six of those speeches had "jobs" in the title. now, he's going to have another jobs speech in september. is there some truth to republican claims that there is a lot of talk but not a lot of action by the president. >> i think he's had a very difficult time getting anything through the republican house of representatives. they have not passed any legislation on job creation since speaker boehner came in. >> reporter: you just said yourself you're sick of the speech making. >> by everybody. you bet. but we need legislation to get this done and the congress won't do it. all the republicans in congress have done is many bills to roll back financial reform, to allow the banks to go back and write their own rules. that's all you can say has come out of the republicans in congress. the president said he's going to come out with a plan. already, republicans are saying we don't want anything to do with it. you have the speaker, the head of the republicans in the senate, mitch mcconnell, saying my goal is to defeat barack obama. the public is sick of it. we need our children... we need jobs for them.

we need to create manufacturing in this country. we're losing it to china and india and brazil, germany. we can't go from a nation where we're importing oil from kuwait and saudi arabia to buy wind turbines and solar panels from germany and china. we have to buy american, make them in america. >> another speech is not going to help. you can't talk about jobs and the need for job creation when your policies are killing jobs. that's what's been going on. the president can, you know, complain about bad luck. the reality is it's bad policy. and in terms of republicans in congress, they're trying to repeal the policies that are resulting in the 9.1% unemployment that we're seeing, today ending all this wasteful spending. the regulatory onslaught that's going on in terms of stifling job creation starting with the employer mandate in the employers' health care bill, which the cbo estimates will cost 800,000 jobs in our economy. we've lost 2.4 million jobs since president obama took office. the unemployment rate has gone up from 7.8% to 9.1%.

the president promised it wouldn't go above 8%. it's been above 8% for 30 months. the problem is his policies, and republicans trying to correct that by killing the job killing policies of this administration. >> reporter: i want to play for both of you something that congresswoman maxine waters said this week about the president and connecting with voters on the very issue of jobs. listen. >> we're supportive of the president, but what we want to do is we want to give the president every opportunity. >> how long? how long? >> to show what he can do and what he's prepared to lead on. we want to give him every opportunity. but our people are hurting. >> yes, they are. >> the unemployment is unconscionable. >> that's right. >> we don't know what the strategy is. >> reporter: terry, do you know what the strategy is? >> clearly, we're going find out when the president comes back september. i wish that the president and the congress had taken this up

in january when they all came back. >> reporter: the president had a tour through the midwest. in areas in iowa, where unemployment is 6%, in minnesota where it's 6.7%. those are not the hard hit areas. should he have gone to the places that congresswoman maxine waters was talking about? >> sure. in fairness to president, he has traveled extensively to all parts of the country. listen, we can go back and look historically. it doesn't do any good taking our time. bill clinton passed the deficit reduction act in '93, which cut benefits from important programs to the core constituencies of our party who were mad, but also raised revenues. it led to the greatest economic expansion in the history of our country. 23 million new jobs. everybody benefitted. we went through eight years with president bush. they drove the economy off the cliff. president obama is now trying to get it back moving again. it takes time. it took eight years for them to do what they did to the economy. it's taking time for the president to get going. >> you can't let that go unaddressed.

under president bush, we had 52 months of uninterrupted job creation, the longest stretch in the history of our country. the fact is the housing crisis that was at the center of the economic meltdown in the fall of 2008 was due largely to the policies affecting fannie mae and freddie mac that president obama as senator the biggest beneficiary of their contributions supported. so we can argue that round and the blame game, which president obama plays constantly, but the american people know things have not gotten better under this president's leadership. there's a failure of leadership. the fact is there's a growing sense out there, the biggest threat to his re-election is the growing sense that this president may be in over his head. you're starting to see that take root with voters and especially independent voters setting aside the policies, a concern about the failure of leadership is very threatening to his re-election. >> reporter: let's turn to the republican presidential race. ed, let me start with you. do you think the republican field is set? do you think chris christie gets in? >> i thought a while ago the field was set. i'm not so sure now. i think there were... >> are you hearing that chris christie wants to get in, the governor of new jersey? >> i put credence in rumblings

to that effect. i think if you're him, if you're paul ryan, if you're sarah palin and you're looking at the dynamics right now, of course you're weighing the possibility of getting in. one of the things that factors in is 39% approval rating. if you're a republican you're probably thinking in 2016, i can't wait because there will be a republican in the white house and i don't want to run in a primary. if you're going to run for president, it kind of speeds things up a little bit. >> reporter: let me ask you about some of the controversial comments that have been made by the newest entrants into the field, the texas governor rick perry. he's made some comments especially in his book fed up. he referred to social security in his book as, "a crumbling monument to the failure of the new deal." he compared social security to a, "bad disease" and that it was set up like a "illegal ponzi scheme." can you elect a republican to the white house who thinks social security is a bad disease? >> well, i'm not read the book. i know this. >> reporter: that's okay. we gave you the excerpts. >> right.

social security is going to be one of the most significant issues. i think entitlement reform as a whole will be a major issue in this presidential election. the fact that president obama has failed to embrace any kind of significant entitlement reforms, that's part of the problem. that's why we have a a-plus bond rating as opposed to the triple- a bond rating because of the unwillingness to tackle entitlement reform at all. >> your friend karl rove said governor perry should cut the cowboy talk. >> the governor will run on his record. that's the thing to do. i'm neutral in the primary. i'm not in the business of giving advice to any of the candidates. the fact is that rick perry has a strong record of job creation, which is the most important issue in the electorate, in the election today. he should focus on that. i suspect he will. >> ed gillespie, terry mcaulliffe, the debate will continue. great to see both of you this sunday. >> good to be back. >> good to be here. >> reporter: we'll be back in a minute. stay with us.

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>> that's all for today but be sure to tune in next week when bob's guest will be general colin powell and congressman john lewis as we honor the dedication of the martin luther king memorial on face the nation. we'd also like to thank the law firm for the view of the capital. i'm nora o'donnell, thanks for watching. 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. and clean for our communities and the environment or creates another laptop bag or hires another employee,

it's not just good for business -- it's good for the entire community. at bank of america, we know the impact that local businesses have on communities, so we're helping them with advice from local business experts and extending $18 billion in credit last year. that's how we're helping set opportunity in motion. captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org ,,,,,,,,