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STATE OF THE UNION WITH CANDY CROWLEY

Interview With Governors McDonnell, Granholm; Interview With Admiral Thad Allen

Aired August 8, 2010 - 09:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CANDY CROWLEY, HOST: New unemployment figures come down to this. The economy is not creating enough jobs. For the second month in a row the economy actually lost jobs. Nearly half of the unemployed, that would be 6.6 million people, have been out of work for more than six months.

In Washington, the message war rages.

(BEGIN VIDEOTAPE)

SEN. JOHN MCCAIN (R), ARIZONA: Instead of recovering, this economy is stagnating.

TIMOTHY GEITHNER, TREASURY SECRETARY: The American economy is growing. It's growing at a moderate pace. It has been growing for 12 months.

REP. KEVIN MCCARTHY (R), CALIFORNIA: If you take the polling today, more people in America believe Elvis Presley is alive than the stimulus actually created jobs.

REP. NANCY PELOSI (D-CA), SPEAKER: The fact is that without the Recovery Act, I fear to think of what the condition would be of our economy.

CROWLEY: There are 4.7 job seekers for every one job opening, better on than at the height of the recession, but not good.

(voice-over): Today, a painful recovery through the eyes of two governors in very different states. Michigan's Jennifer Granholm and Virginia's Bob McDonnell.

GRANHOLM: We have hit bottom and we're starting to emerge.

MCDONNELL: We cannot continue to have all of the states rely on the federal government.

CROWLEY: And the Gulf disaster. Where from here, with Admiral Thad Allen.

ALLEN: I think we can all breathe a little easier regarding the potential that we will have oil in the Gulf ever again.

CROWLEY: Then, politics with Jackie Calmes of The New York Times and Karen Tumulty of The Washington Post. I am Candy Crowley, and this is STATE OF THE UNION.

(END VIDEOTAPE)

CROWLEY: Almost 19 months after President Obama took the oath of office, and less than three months before the mid-term elections, Democrats are running nervous. These are not the kind of headlines that make for winning campaigns. Still, after Friday's disappointing unemployment figures, the president argues for patience and persistence.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: Climbing out of any recession, much less a hole as deep as this one, takes some time. The road to recovery doesn't follow a straight line. Some sectors bounce back faster than others. So what we need to do is keep pushing forward. We can't go backwards.

(END VIDEO CLIP)

CROWLEY: In a sign of still distressed times, Congress is set to approve this week an additional $26 billion in federal aid to state and local governments who have already shed almost 170,000 jobs this year. Even with the additional aid, thousands more state and local job losses are expected.

Earlier I talked with Democratic Governor Jennifer Granholm of Michigan and Republican Governor Bob McDonnell of Virginia.

(BEGIN VIDEOTAPE)

CROWLEY: Thank you both so much for coming. First to you, Governor McDonnell. The administration has sent out the president as well as other members of his cabinet for what they are calling "recovery summer." Does it feel like that in Virginia?

MCDONNELL: Well, we are making some progress. In the last six months, Virginia has been third in the country in job creation, about 72,000 new jobs. We're trying to keep a good tax, regulatory, litigation climate, right-to-work climate, so we can help this recovery. We had major incentives pass there in the General Assembly to aid with that. Yesterday ranked us--

CROWLEY: Credit the president with any of this?

MCDONNELL: Well, I think there is plenty of credit to go around. We've got some good fundamentals in Virginia. We're at about 7 percent unemployment. But I think the stimulus probably helped a little bit. Our strong economic development initiatives have helped a lot. It was probably a team effort. But we are glad to be well ahead of some other states and hopefully in the right direction.

CROWLEY: Governor Granholm, you are still struggling in Michigan. If you told Michiganders this is "recovery summer," would they believe you? GRANHOLM: Well, I can tell you this, Candy, that they are seeing progress in really significant areas. The president was here last week talking about the vehicle industry, and how it has rebounded. So clearly we are not out of the woods, but there is progress. And for that, we are very grateful.

And I must say it would not have happened but for the Obama administration stepping in to say it's important for the nation to have a vibrant auto industry.

CROWLEY: After the Senate passed a $26 billion bill that will send more aid to states, primarily to be used to help keep teachers in their jobs -- or to re-hire teachers and firefighters, here is what Mitch McConnell had to say about that bill.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The single biggest source of revenue for state governments is the borrowed money that is coming down from Washington. They are getting more from us than they are from their sales taxes, from their income taxes, from their property taxes. The states are simply being -- becoming completely dependent upon us. When does it end?

(END VIDEO CLIP)

CROWLEY: Governor McDonnell, first to you, is that -- as you see it, is that true? Are you getting most of your money from some of these emergency bills sending money to states, and could you do without it?

MCDONNELL: I think it has to end soon because the federal government is running out of money. I mean, $14 trillion, which is $42,000 for every American, Candy, it's an unsustainable level of spending. We cannot continue to be a debtor nation. We've got to do what we've done here in Virginia. We've cut $10 billion in the last two years. Spending is out of control at a lot of levels of government. We have to live within our means. So Mitch is right to--

CROWLEY: Well, would your economic picture have been as good as you paint it now had it not been for the fact that the federal government stepped in and sent money to states?

MCDONNELL: Well, look, I think in the short run some of the stimulus funding has helped us in some of the areas, although we've turned some of it down and made the decisions to make the cuts that are necessary. But we cannot continue to have all of the states rely on the federal government.

CROWLEY: Governor Granholm, could you have done without the money that the federal government has been pouring into the state of Michigan?

GRANHOLM: I -- Candy, there is no doubt that this has been critically important money for us as we make our way through this recession. Bob is right that governments have to cut. And, believe me, I have cut more out of government that any state in the country as a percentage during the time that I have been governor.

But like Bob and I and 45 other governors signed a letter to Congress asking for the extension of this Medicaid money, which is part of the emergency money that Mitch McConnell was referring to, so that we would not have to cut senior citizens or people with disabilities or children off of Medicaid. I mean, that's what this is for. This is not for bureaucracy. This is for people -- real people who need real help out here. And this bill was entirely funded. Let me say that again. This bill was entirely off-set. Everything was paid for. So this does not add to the deficit.

The Congress found a shrewd way of paying for it, and therefore it allows states to continue serve the most vulnerable populations, which is exactly what this is for.

CROWLEY: Well, it doesn't add to the deficit, but it certainly doesn't cut the deficit. And I think that was Senator McConnell's point here, was that at some point you have to start. There are always going to be needy people, are there not?

GRANHOLM: I mean, I guess the question is, how much do you cut? I mean, if you -- if we slash more people off of Medicaid, that means they show up at the emergency rooms. If you slash more teachers from the classrooms, they go on unemployment.

And there is another public system that is -- you know, I mean, to suggest that it doesn't have consequences out there when you cut the means of support in a tough economy, which, by the way, we are, in states, counter-cyclical, which means obviously that people need more help at a time when the economy is contracting, and therefore there is a demand for greater services rather than fewer.

CROWLEY: Governor McDonnell, it seems to me that we are in the middle of a -- basically a new-fashioned civil war. You have got federal government jurisdiction, and state jurisdiction. It's playing out in same-sex marriage. It's playing out in immigration. And it's playing out in health care.

So let me start first with same-sex marriage. We have seen a federal judge overturn a proposition that the people of California had voted to ban -- basically ban same-sex marriage in California. A judge has overturned that. What are the implications for Virginia in that ruling?

MCDONNELL: Well, none. Because, first of all, with both this ruling in California, and frankly the other rulings around the country on both health care and immigration, these are initial rulings made by a federal district court judge.

Obviously I think there is a great likelihood it goes to a circuit court of appeals and then perhaps the United States Supreme Court, because they involve very important constitutional questions.

Every state that has taken up a constitutional amendment on same- sex marriage has passed it. The people of California by 53 or so percent said that that was their desire to have marriage be between one man and one woman.

We've done that in Virginia. So I think the court was wrong to overturn the will of the people. And I'm hoping that ultimately, if it gets to the U.S. Supreme Court, they will agree. And so right now it has no impact on us in Virginia.

CROWLEY: Governor, let me ask you this, first of all, do you think the people of Michigan would be ready to allow same-sex marriage? And do you, from a political standpoint, believe this is a federal -- an issue that will ultimately be something that the federal government will have to decide, or is this a state issue?

GRANHOLM: Well, all of these states have adopted these constitutional prohibitions, including Michigan in 2004, by, you know, a pretty significant majority. But this is what the Constitution and the interpretation of the Constitution by the courts is for.

I mean, the judicial branch is not supposed to be a branch that simply ratifies the will of the majority if, in fact, it violates the Constitution. And that's what exactly the judge in the district court in California decided.

And the court, I think, went through very clearly, and the evidence, the facts, very long opinion, but decided that the law, as applied to these facts, clearly demonstrated that it was unconstitutional.

And so that's, I think, the appropriate place for it. And I think the court was courageous. And I am glad -- for Michigan's sake, I'm glad that it actually happened, because I would like to see this move to a higher level and affect more states.

CROWLEY: Governor Granholm, would you be willing to go up against a vote in Michigan that would -- that would ban same-sex marriage -- I mean, if you were to stay in office and that should come up? GRANHOLM: Well, I opposed it when it was on the ballot in Michigan in 2004. And I think, just, today, too, I would oppose it, even though a majority of people would disagree with me.

CROWLEY: Stay with me, Governors. We will be right back. Up next, we will turn to immigration and health care, and two very different approaches.

(COMMERCIAL BREAK)

CROWLEY: This week, a double whammy, political and legal, to the president's overhaul of a health care system. Shortly after reform was enacted, a number of states, including Virginia under Governor McDonnell, challenged the constitutionality of a federal law that forces nearly every American to buy health insurance. The suits were given short shrift by the White House.

(BEGIN VIDEO CLIP)

QUESTION: You don't think their -- their suits will be very successful? GIBBS: (OFF-MIKE)

QUESTION: OK.

GIBBS: My advice from counsel is that we'll win these -- we'll win these lawsuits.

(END VIDEO CLIP)

CROWLEY: This week, a federal judge refused the Obama administration's request to dismiss Virginia's lawsuit. And the next day, Missouri voters went to the polls in a primary that included a referendum against mandated health insurance and fines for anyone who doesn't comply. It passed overwhelmingly, 71 percent to 29 percent.

The vote caries little practical meaning but delivers a huge political wallop to reform from a bellwether state.

The legal challenges are ongoing, and Virginia is not alone in contesting elements of the overhaul. Twenty states are involved in a similar suit. Michigan is one of them, putting Governor Granholm at odds with her Republican attorney general, who joined the suit.

We'll talk with Governors Granholm and McDonnell about health care reform next.

(COMMERCIAL BREAK)

CROWLEY: We are back with Democratic Governor Jennifer Granholm of Michigan and Republican Governor Bob McDonnell of Virginia.

Governor McDonnell, let me move you to health care because you won a preliminary battle in the legal system, allowing your suit against mandatory health care insurance, as laid out in the Obama health care reform. If the state of Virginia, in the form of the legislature, passed a bill saying you must pass -- you must have health insurance, would that be all right?

MCDONNELL: It might be, under the state constitution. But this goes to the heart and soul of our federal system, what the 10th amendment means. Obviously, in Virginia, the home of Madison and Jefferson and others, we take these things pretty seriously.

But if the federal government can use the commerce clause to tell the citizens of Virginia or Michigan or any other state that they must buy a good or a service, and if they don't, they're going to get fined, then there's virtually no limits to federal power.

I think this is -- this is really -- this has more to do with constitutional authority of the federal government than it does with -- with health care. And I think it's wrong to have this kind of mandate, apart from the policy issues of billions of unfunded mandates on the state. But I don't think the commerce clause was intended by our founders to mandate buying a product of insurance. And that's what the case is all about. CROWLEY: Governor Granholm, the overarching picture here is that the president's health care reform remains pretty controversial, more people than not disliking it. But it's pretty even. We have seen, in Missouri, they had had a ballot initiative; 71 percent of Missourians said, no, don't -- you can't mandate that we have to have health insurance.

If you were running, and you are retiring, but if you were running and you are any Democrat across the country, would you run on the president's health care reform?

GRANHOLM: I would. Because I would want to explain it to people. I think people are listening to...

CROWLEY: But it would be risky, wouldn't it?

GRANHOLM: ... an echo chamber on the right.

Well, I mean, is it risky to say that it's important as a nation that we don't eliminate the ability for people to get insurance if they have preexisting conditions? I don't think that's risky. I think that's good policy. CROWLEY: Governor McDonnell, I want to move you to immigration. Because you have said some things recently that are Arizona-esque in their reach, talking about how you would like to fight illegal immigration in the state of Virginia.

As I understand it, you have asked the federal government to help train your state troopers so that they might, if they were so inclined, talk to anyone that's been arrested about their papers, ask for their papers, that kind of thing.

What has been the response of the federal government to your reaching out to them, saying help train my state troopers on this?

MCDONNELL: I think what we've -- we've got a bipartisan failure, frankly, at the federal level, on border security, enforcement within the states. We've just got to do -- got to do a better job.

So what I've asked is, under Section 287(g) of the federal law, there's a provision that allows Virginia law enforcement officers to be trained as ICE agents -- Immigration Customs Enforcement agents -- to be able to assist with the immigration enforcement.

They're not funded enough; they're not staffed enough. So we want to use federal law to be able to have state troopers do it. It's something that I urged Governor Kaine to do.

CROWLEY: And have you heard from the feds?

MCDONNELL: We've been talking to them for months. We're still working through some issues on this and other things. We are trying to cooperate, or have ICE cooperate with us, as I did when I was attorney general, where they came in and helped to clean up about 500 sex offenders who were illegal that they took over for deportation. So we're working through some -- some issues. CROWLEY: Governor Granholm, I know that Michigan also has its fair share of illegal immigration problems. When you look at some of these border states and you see what Arizona felt it had to do to try to control its borders, do you have sympathy for that?

GRANHOLM: Oh, sure. I think that everybody is looking at what is happening along the border, and recognizing that something needs to be done. The question is, what and who? And I think that everybody who has been calling for comprehensive immigration reform, that is exactly the answer.

You know, I appreciate the fact that Bob McDonnell is trying to get some additional help for Virginia. Any time a Republican governor is going to Washington and asking for more resources, I think that it's an interesting thing. And I think he is being creative.

It's a whole package and I think that's exactly what is necessary to ensure that these states along the borders are -- you know, are satisfied.

CROWLEY: It sounds great, except for, by my count, we have been talking about this for a decade, since the last time we reformed illegal immigration, which was Ronald Reagan. So in the absence of that, don't states have a duty to do something to try to protect their citizens, in the absence of the federal government doing very little?

GRANHOLM: Well, certainly. Yes, I mean, there is no doubt that's what law enforcement in the states is for. Obviously you want to protect your citizens from crime, and clearly is it a crime if these illegal immigrants come in and take jobs away, or are in fact committing crimes, et cetera, that's what local law enforcement is about.

Everybody has sympathy for the states that are seeing an increase in crime as a result of the illegal immigration.

CROWLEY: Let me turn you to politics now. We are very close to the fall, which, of course, is the kick-off of the mid-terms. We see a president whose approval ratings have drifted below the 50 percent mark for approval on his job in various elements of his job, including the economy.

Are there places in Michigan where the president showing up might hurt a Democratic candidate?

GRANHOLM: No, I don't think so. Not where it would hurt a Democratic candidate. I mean, we are a little unique, Candy, because of this auto industry and what he has done to help save the auto industry. And therefore that spider, that ripple affect across our state is so pervasive.

CROWLEY: So it sounds like you don't expect the Democrats are going to take a bath this November.

GRANHOLM: Well, I certainly am not Pollyanna about it. This is going to be a tough slog, because the situation on the ground of the country is so hard. So there is a lot of anger. There is a lot of anxiety. But the question is, do the people want to go back to the Bush kind of policies which, of course, started this whole recession to begin with, or do they feel a sense of progress and momentum, and that things have turned around -- you know, turned the corner?

We are on an upswing. Yes, we are not there as fast as we would like, but, boy, if you revert to the old policies, then you will be heading downhill very quickly. And I think that's the story that Democrats need to tell.

CROWLEY: Governor McDonnell, I want to ask you a couple of political questions. The Republicans on Capitol Hill, which basically is how most people view the Republican Party, that's what's the most visible, at any rate, have in recent days rejected the state aid that you said that you welcome that helped keep teachers employed and firefighters.

They have also stood in the way, unsuccessfully eventually, of extending employment benefits for the long-term unemployed, saying that it needed to be paid for. Do you worry -- when you watch the Republican Party from your perch in the state capital, do you worry that the Republican Party looks too harsh, too uncaring?

MCDONNELL: No, because what people are concerned about, Candy, and while I was fortunate to win last year and Chris Christie, is we ran on a platform of fiscal responsibility and getting results.

Families and businesses hurting in this down economy, they are having to make tough decisions in their personal and businesses budgets, they want to see government to do the same, spend less, (AUDIO GAP), create jobs, don't trample on business and the free enterprise system that are the magnets for entrepreneurship and economic growth.

And yet we see just the opposite policies coming out of the Democrat Congress in Washington. So when we have Republicans in Congress standing up for less spending and less government control, one-size-fits-all policies out of Washington, I think they are on the right track. And I think they will be rewarded at the polls in November.

CROWLEY: Thank you so much, Republican Governor Bob McDonnell of Virginia, and Democratic Governor Jennifer Granholm of Michigan, appreciate it.

(END VIDEOTAPE)

CROWLEY: Up next, we watched oil gush into the Gulf of Mexico for more than 100 days, where did it all go? We'll ask Thad Allen, the point man for the administration in the Gulf, right after this.

(COMMERCIAL BREAK) CROWLEY: More than 100 days after the oil rig explosion in the Gulf of Mexico, and with the BP gusher now smothered in concrete, there was definitive word Monday that the oil spill was the worst in history, at least seven times bigger than the Exxon Valdez. And then two days later, some carefully vetted and surprising clean-up statistics from the Obama administration.

(BEGIN VIDEO CLIP)

JANE LUBCHENCO, NOAA ADMINISTRATOR: The conclusions -- key conclusions of the report is that the vast majority of the oil has either evaporated or been burned, skimmed, and recovered from the well head, or dispersed, and much of the dispersed oil is in the process of relatively rapid degradation.

(END VIDEO CLIP)

CROWLEY: Which is pretty amazing, but not an "all clear." Government scientists figure about 52 million gallons of oil are still in the water, on or just below the surface as a light sheen and weathered tar balls.

The National Oceanic and Atmospheric Administration concedes the stats could be off by 10 percent. Outside scientists are also uncomfortable with such precise percentages. And along the coast, struggling residents worry the federal government will pick up and go home.

Up next, we will ask Admiral Thad Allen to add this all up and tell us what it means for the people of the Gulf.

(COMMERCIAL BREAK)

CROWLEY: Joining me now for the latest on the situation in the Gulf of Mexico is National Incident Commander, Retired Admiral Thad Allen -- although it doesn't feel much like a retirement, I don't think.

Listen, I have been listening to you for the past couple of weeks. You seem fairly confident, almost 100 percent confident, that, as far as the gusher is concerned, it's been stopped. What's your nightmare scenario?

ALLEN: Well, the nightmare scenario has always been total loss of well control, and I think we're well beyond that at this point, and that's the reason I think there is basis for optimism, moving forward.

CROWLEY: So you -- you think it's -- it's sealed, at any rate?

ALLEN: Well, it needs to be sealed from the bottom. We've sealed the casing pipe from the top. We need to drill into the area outside the casing pipe and the well bore and do that with the relief well, and that will be happening this week.

CROWLEY: So I want to play you some sort of things from April and June, when we were trying to get a grip on what you were dealing with here.

(BEGIN VIDEO CLIP)

LISA JACKSON, ADMINISTRATOR, ENVIRONMENTAL PROTECTION AGENCY: It has evolved into an environmental challenge of the first order.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: Already, this oil spill is the worst environmental disaster America has ever faced.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SECRETARY OF HOMELAND SECURITY JANET NAPOLITANO: As we all know, there is no precedent for a leak of this size and at this depth.

(END VIDEO CLIP)

CROWLEY: So it was basically environmental Armageddon, from -- almost from the beginning, and now we get this report that says, well, three-quarters of it is pretty much gone; there's another quarter in there that microbes will take care of. And it doesn't sound like the environmental disaster that we were told it was.

ALLEN: Well, if you're sitting in Barataria Bay, it's still an environmental disaster. And if the folks haven't come back to the panhandle of Florida, it's still a disaster.

I think what we need to understand is there's a lot of oil that's been taken care of. There's a lot of oil that's still out there. There's a lot of shoreline that needs to be cleaned. You need to keep a steady hand at the tiller here, keep this cleanup going. It is a catastrophe. It's a catastrophe for the people of the Gulf. And it requires our attention until we get the job done.

CROWLEY: So when are we going to get to that point, do you think, looking forward months, years, where fishermen can fish anywhere, where tourists can come and find clean beaches anywhere, at least as clean as they were before the oil spill? When is that happening?

ALLEN: Well, it's starting to happen already, but it's happening incrementally, where the oil is not there now; where we've cleaned it up. Some beaches are reopening. Fisheries are reopening. And that will happen as soon as we can, either by cleaning up the oil or having the areas tested through NOAA and FDA for the -- the seafood safety and so forth.

But they're moving as rapidly as they can to reopen this, but we need to understand that different parts of the coast were impacted in very different ways.

But it's been a remarkable response. There has not been a response like this in this country's history for an environmental issue and I think that's something we should pause and reflect on as we move toward our ability to kill this well. CROWLEY: And yet we are hearing from government officials, well, the impact will be decades, I mean, that we will be feeling this impact for decades. What does that mean?

Does that mean, OK, some of the seafood won't be edible; some of the shores will always have oil?

What does it mean that we'll be feeling the impact for decades?

ALLEN: What we have to do now is what's called a Natural Resources Damage Assessment. What was permanently done to the marshes and the beaches, what was permanently done to the juvenile fish and seafood stocks -- how does that relate to future losses?

We've got to -- we have to quantify that somehow. That takes a lot of study. It involves the people that are responsible for those resources. And that's the process that we've been moving into now.

CROWLEY: When -- we talked about the report a little bit earlier. Let me read you something that an outside oceanographer had to say. And it reflects a lot of what we heard about this report.

"This is a shaky report" -- the one that said 75 percent of the oil has been taken care of. "The more I read it, the less satisfied I am with the thoroughness of the presentation. There are sweeping assumptions here."

How do you feel about the report? When we read, OK, we're just going to have to deal with this quarter that's left, are you confident that that's -- that what this report encompasses is true?

ALLEN: I go back to flow rate. Early on, there were huge questions about how much oil was actually coming out of the well. And as you know, it went from one to 5,000 to 12,000 to 25,000. We finally got a range that was developed by a government team of the 35,000 to 65,000 barrels a day.

Just in the last few weeks, we've been able, through pressure readings on the well and better information, have been able to bring that down to 53,000 barrels a day with a 10 percent error rate on either side.

Well, once you know the flow rate and you know the well is capped, then you know there's an approximate total amount of oil that was discharged in this event. That then raises the question, what oil went where and what was done with it?

And this is the first attempt to, kind of, lay that out there and start to have that conversation.

I don't think it's the end-all, be-all; I think it should evolve; it should be an (inaudible) process. But it's more information than we had before.

CROWLEY: B.P. said it learned a lot during this whole process. I am assuming you learned a lot as well. Personally speaking, from what you've seen from the cleanup that this has involved, from the lives lost to the careers ruined or at least put on hold, how do you feel personally about deep-water drilling?

ALLEN: Well, that's a policy issue that will be taken way above my pay grade.

But I think what we have found out about deepwater drilling, just from the technical side of the response, is that oil production in the Gulf of Mexico was done by wells that were on the bottom of the ocean, with all the technology on the bottom of the ocean, where there was no human access and all the oil was moved by pipes.

We've had to bring in technology from the North Sea and off the coast of Africa to build these floating risers to create a production system that's able to dealing with the spill. I think what everybody has learned, moving through this, is that there's going to have to be a different type of production method out there that includes the type of technology that they used to cap the well and capture the oil, and that needs to be a permanent part, moving forward.

CROWLEY: And can that be done by November, when the moratorium is lifted?

ALLEN: Well, it's already been built around this well. I think the oil companies are already starting to talk about putting together a consortium to take this type of equipment and take a look at it. And that's going to have to be a fundamental part of this.

CROWLEY: I have less than a minute left with you, but I wanted to ask you, a grade from A to F, how did B.P. do handling this?

ALLEN: Well, I think I'd have to break it into parts. I think, at the well head, I'm not sure there's any oil company that could have done anything more than they did. The technology that was needed to be brought in from other parts of the world was. It took a long time to engineer it. It took a long time to install it. But ultimately, it helped us put the cap on and it controlled the well.

So I give them fairly good marks there.

What B.P. is not good at -- they're a large, global oil production company. They don't do retail sales or deal with individuals on a transactional basis. Anything that's involved, that has been a real struggle for them. And I've had these conversations with Tony Hayward and Bob Dudley and the other folks. It's something they don't naturally have as a capacity or a competency in their company, and it's been very, very hard for them to understand. And that's the lens by which the American people view them. And that's where they need to improve the most.

CROWLEY: Sort of an F on dealing with people?

ALLEN: Well, much room for improvement.

CROWLEY: OK...

(LAUGHTER)

CROWLEY: ... thanks.

Admiral Thad Allen, thank you so much. I appreciate your coming by.

ALLEN: Thank you.

CROWLEY: When we return, the politics of the economic recovery. It's President Obama's policy, and yet he's still invoking President Bush.

(COMMERCIAL BREAK)

CROWLEY: Joining me now here in Washington, Karen Tumulty, political reporter for The Washington Post; and Jackie Calmes, White House correspondent for The New York Times.

Thank you all for coming. It was a good week for politics. And I was sort of struck when talking to the governors earlier, we had the issue in California with same-sex marriage, we have been talking about immigration for sometime, but it all comes back this fall to the economy, doesn't it?

CALMES: Absolutely. And that's what -- you know, in 2004 presidential election season, when the gay marriage was such a big issue and Republicans were making a big issue of it, that was a time when the economy was doing fine, more or less.

And now the economy, obviously, still isn't doing fine, and so the social issues tend to be sort of a luxury. They become prominent when people are not worried about other things.

CROWLEY: And, you -- reading your piece today in The Washington Post, they are worried about the economy.

TUMULTY: Right. Yes, I spent a couple days this week in southern Virginia, going with Congressman Tom Perriello, a very endangered House Democratic freshman, and listening to him listen to his constituents.

And it was interesting, because last August, the town halls were all about health care and socialism and death panels and outrage. And I think the right word for it now is anxiety. And essentially people know how deep their problems and they really don't have a sense that Washington is really fixing it.

CROWLEY: Let me read you something that Timothy Geithner wrote in a -- actually an op-ed in The New York Times. And this is just a part of it, me explaining, and it was about how the recovery really is ongoing. And he wrote: "This recession was even deeper than previously estimated. The plunge in economic activity started an entire year before President Obama took office and was accelerating at the end of 2008." Does this -- I mean, it's what they have got to sell, basically, which was, oh my goodness, it's a lot worse than we thought it was going to be and also it's not our fault. Is he -- is the administration running out that string, do you get that feeling or not?

CALMES: I think, like you say, it's an argument they have to make and it has the benefit of being absolutely true. If you go back and you look at everything that was written at the -- even before George Bush left office, the predictions were, this was going to be a very long recession.

The last two recessions were long in terms of a recovery taking hold. So this is not really surprising. It is -- it did turn out to be worse. But we now have the data, it's worse than was projected when Obama's administration first took office.

But it's a balance politically that they have to strike, because they -- you know, people see they've been in office 18 months, they want to see real progress. And they don't want to hear that we are recovering when they don't feel like we are recovering.

CROWLEY: Right, I mean, it's a double sell, isn't it? Because you have got to get people going and sell -- and buying and stuff, except for that you have to say, but I recognize that you are really hurting.

TUMULTY: And, you know, it's -- I think the most important number that we are seeing now in polls is the fact that almost four in 10 Americans are now telling pollsters that they or someone in their family has lost a job in the past year.

And so to tell people the disaster that they avoided is worse -- would have been worse than the disaster that they are living, that is a pretty hard sell with Americans.

CROWLEY: And isn't it a hard sell to say, oh, this is worse than we thought? I mean, I realize the figures, but I well remember in the middle of the campaign all of these sort of ashen-faced senators coming out after a meeting with then-Treasury Secretary Paulson, going, if we don't do something tonight, if we don't do something right now, the economy is going to collapse.

I mean, how much -- I don't know, to me it just sounds a hollow to say, gee, we really did not know it was going to be this bad.

CALMES: Well, they did know it was going to be bad, just not as bad. I mean, it is -- when you go back and you look, I hate to say it, but I spent part of my vacation going back and reading some of the books that have been written about...

(CROSSTALK)

CROWLEY: Well, that is a little twisted, but continue.

(LAUGHTER) CALMES: And it's -- you know, even though I lived through it at the time, I had forgotten just how bad it had gotten. And so it's -- and they do have some victories. I mean, frankly, very few people thought that the auto bailout would turn out as well as it did. They are now getting money back from the car companies. And the financial bailout has been paid with interest.

It was interesting that one of the voters quoted in Karen's story this morning in The Washington Post said something like, me and my children and grandchildren are going to be paying for these bailouts for the rest of their lives, and, no, that's not true. But it has not broken through to voters.

CROWLEY: It hasn't. And also it brings up another sort of interesting question, which is, don't the Democrats also, in addition to the other tight wire walking that they are doing, have to say, we need to spend more money, $28 billion to states and local governments next week probably, but we are watching the deficit? I mean, they just have so many competing messages out there.

TUMULTY: That's going to be a difficult sell, I think, for both parties. Because the Republicans are trying to say we need to bring the deficit under control, but we also need to extend these tax cuts that, you know, contribute to the deficit.

So it's a tough sell. And I think one of the things that really bothers people, and you hear it in their questions, is that they really don't feel that Washington is functioning. That, you know, what they sort of resent about the bailouts is they see sort of there is stuff for other people, but when it comes time to do stuff for them, whether it's unemployment benefits or the kinds of votes that we are going to be seeing this fall, it feels as that's where the bickering starts, and that's where people can't sort of get together and just address their problems.

CALMES: And it's interesting, because you see these reports coming out now by non-partisan people saying the entire package did work, did keep things from getting better (sic), whether it was the stimulus, that was actually the least of it, maybe, what the Federal Reserve has done.

And -- but they are not persuaded and they're not going to be persuaded until the recovery really takes hold. And for all of this talk about the trouble that Democrats are in, the wonder would be if they weren't in this much trouble, with unemployment hovering at 10 percent, real unemployment, counting those who have just quit looking, at 15, 16 percent, more in some states, and it's a mid-term election year, where the party in power, the party that has the White House generally does suffer losses.

CROWLEY: Are Republicans going to help themselves or hurt themselves in arguing this fall, as I suspect many of them will, that the Bush tax cuts ought to be renewed in January? Is that a plus or a minus for them?

TUMULTY: Well, I think there is pretty broad agreement that the tax cuts for people who earn under $250,000 are going to be renewed, because that -- you know, everybody is on board that one.

But I do think that as long as people out in the country are feeling that, again, that all of this aid is going to somebody who is not me, I think this is going to be a difficult thing for Republicans in some parts...

(CROSSTALK)

CROWLEY: For the -- to hold the tax cuts for the wealthy?

TUMULTY: Right.

CALMES: Right.

CROWLEY: Is it -- the $250,000 per couple or household.

Let me ask you this, looking at what you just talked about, looking at the -- sort of the karma around this election for Democrats and all of the things running against them. There seems to be two scenarios out there now. The Democrats lose some seats and the Democrats lose a whole lot of seats. What do you see coming?

CALMES: Oh, my gosh. I mean, I a lot -- I think a lot of voters' minds have been made up, but I see big losses. Generally, people are saying they still expect Democrats to hold the House and the Senate, but the House is -- you know, I could just as easily imagine waking up on the day after the election and having Republicans back in control.

CROWLEY: If Democrats held the House, that would be an enormous victory, right, because those expectations have been so built by this time.

TUMULTY: But even if they hold the House, it is going to be a very different environment after this election, because they essentially are going to have no margin, no cushion to work with. And so I think that the big victories that they have been able to achieve in this Congress, they are not going to be able to do in the next.

CROWLEY: And lots of times, isn't it, that a president in the second half, particularly of a first term, can't do that many big things?

CALMES: Well, you know, the day after the mid-term elections, we see presidential elections starting these days. So -- and, you know, we are going to be hearing a lot more from the many Republican candidates who now want to run against him.

And he's going -- the Republicans will be emboldened. That much we can count on.

CROWLEY: A very different second half of his first term.

CALMES: Yes.

CROWLEY: Jackie Calmes, Karen Tumulty, thank you so much for coming. I really appreciate it.

TUMULTY: Thank you, Candy.

CALMES: Thank you. CROWLEY: When we return, an update on the latest headlines. And then, the origins of an enduring ballad, from the depths of the Kennedy assassination, one songwriter found inspiration.

(COMMERCIAL BREAK)

CROWLEY: Time for a check of today's top stories. NATO is reporting that three U.S. service members were killed in southern Afghanistan Saturday. Two died in an insurgent attack; the third was killed by a bomb blast. That brings the death toll for NATO coalition troops to 11 for August.

North Korean officials have seized a South Korean fishing boat with seven people aboard in the East Sea. That's according to South Korean state media. The announcement came amid tension between the divided Koreas over the South's naval drills and the March sinking of a South Korean warship.

In northwest China, more than 100 people are dead, some 2,000 are missing after heavy rains triggered massive landslides. Residents sought higher ground on their roofs as they waited to be evacuated.

Heavy downpours are hampering rescue efforts in Pakistan, where massive flooding has caused some 1,600 deaths. 12 million people across the country have now been affected by the floods. Meanwhile, many Pakistanis are outraged that their president was in England for talks with the British prime minister during the worst of the crisis.

A string of tornadoes touched down in southeastern North Dakota and into west-central Minnesota Saturday night, causing property damage but no serious injuries. The National Weather Service says one of the tornadoes was on the ground for at least 30 minutes.

Two escaped prisoners remain at large today. Forensic evidence has linked them to a double homicide in New Mexico. The fugitives, described as armed and dangerous, have been on the run for eight days since escaping from an Arizona prison. A nationwide manhunt continues for suspects John McClusky and Tracy Province.

U.S. forces in Iraq formally handed over control of combat operations to Iraqi security forces Saturday. The remaining U.S. troops will provide support to Iraqi soldiers and police. CNN's Arwa Damon sat down with top U.S. commander in Iraq, General Raymond Odierno, to talk about the transition.

(BEGIN VIDEO CLIP)

GEN. RAY ODIERNO, COMMANDER, U.S. FORCES IN IRAQ: We're still here. We have not -- we're not leaving completely. We're still very committed to Iraq. And we're still going to have 50,000 troops on the ground for a significant period of time.

(END VIDEO CLIP)

CROWLEY: All U.S. combat forces in Iraq are scheduled to leave by August 31st.

Those are your top stories here on "State of the Union." Up next, we remember the songwriter whose sorrow became the lyrics for a national standard.

(COMMERCIAL BREAK)

CROWLEY: We close with our own blast from the past, number 25 on an industry list of top songs in the last century.

(MUSIC)

Singer/songwriter Bobby Hebb wrote "Sunny" in the wake of the assassination of President John F. Kennedy, a national tragedy followed within days by the death of Hebb's brother, Hal, killed outside a nightclub. The two brothers had performed together.

(BEGIN VIDEOTAPE)

(MUSIC)

CROWLEY (voice-over): It was so sad, Hebb once said, such a loss. I needed to pick myself up. I needed an upper. It all goes back to feeling the music.

His inspiration, the smile of a woman.

It would become one of the most recorded pop songs in history. Some of music's biggest stars made it their own. Frank Sinatra.

(MUSIC)

CROWLEY: Ella Fitzgerald.

(MUSIC)

CROWLEY: Cher.

(MUSIC)

CROWLEY: Hebb said the song was therapy, his search for a brighter day.

(END VIDEOTAPE)

CROWLEY: Bobby Hebb died this week, was buried yesterday in Nashville. He was 72.

Thank you for watching "State of the Union." I'm Candy Crowley in Washington. For our international viewers, "World Report" is next. For everyone else, "Fareed Zakaria: GPS" starts right now.