TRANSCRIPT:

CROWLEY: Another potential 2016er, Governor Martin O’Malley, gives his read on the Christie chronicles, his own push for a minimum wage hike and whether a progressive record in reliably Democratic Maryland could play nationwide.

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O’MALLEY: It’s not about whether we move left or whether we move right, it’s about whether we’re making the better choices that allow us to move forward.

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CROWLEY: Then, al Qaeda on the move in Iraq.

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MCCAIN: By fleeing Iraq and side-stepping Syria, has the administration helped empower terrorist forces in ways that have created long-term threats to U.S. national security?

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CROWLEY: A deadly instability in Iraq, a lousy jobs report in the U.S., and from a man who survived and thrived in the wake of his own political crisis, maybe some tips for Chris Christie. Senator John McCain joins us.

Plus, oh, my, that book — a man who worked for Republican and Democratic administrations uncorks on politics and politicians. He named names. Our panel dissects the political world according to former Defense secretary, Robert Gates.

This is STATE OF THE UNION.

Good morning from Washington.

I’m Candy Crowley.

If 2014 turns out to be the year of the progressive, count in Governor Martin O’Malley. During his seven years in office, he has championed a minimum wage hike, higher taxes for the wealthy, some of the strictest gun laws in the country, same-sex marriage and the president’s health care law.

Term-limited, O’Malley will be looking for work at the end of this year, right about the time the 2016 presidential race starts to take shape.

Joining me now, Maryland’s Democratic governor, Martin O’Malley.

It’s good to see you, Governor.

O’MALLEY: Hey, good to see you, too.

CROWLEY: So you’ve got a year and then you’re going to move on. And I want to get to that a little later.

But let’s talk about another 2016 presidential candidate, simply because he’s been in the news, Chris Christie. I’m sure you know him, because governors tend to know one another.

What is your takeaway from watching this crisis unfold?

Is he damaged goods?

O’MALLEY: Oh, I don’t know. I’m sure you’ll have another panel later on in the show about that. The governor of New Jersey and I differ greatly on policy choices. I believe we’ve been making better choices in Maryland.

And in terms of this incident, I don’t know that I can really shed more light on it. I think this is something for the people of New Jersey and the authorities up there to get to the bottom of.

CROWLEY: As a governor, can you conceive of something going on in your inner circle for four months as big as a four day traffic jam in one of your cities and not know about the involvement of your senior staff until four months later?

O’MALLEY: Well, the — there’s certainly no issue that bothers our citizens quite as much as traffic congestion.

CROWLEY: Amen.

O’MALLEY: And I certainly get reports on that all of the time.

And in terms of this matter, I mean I think it’s — I don’t know that I can shed a lot of light on it, Candy. I mean this is still early and the people of New Jersey and the authorities up there will get to the bottom of things.

CROWLEY: Well, let me talk to a couple of the things that are in the news right now. One of them is long — benefits for the long-term unemployed.

O’MALLEY: Right.

CROWLEY: You are a supporter of that, one of the governors that has written and said you’ve got to do this. Unemployment at 6….

O’MALLEY: In fact, I think 14 or 18 of us have written and urged an extension of unemployment benefits.

CROWLEY: I think the question here is your unemployment rate, 6.4 percent, so slightly below the current national number.

O’MALLEY: Right. The most it’s been in since the depths of the recession.

CROWLEY: Right. So at what point — I mean some portion of the unemployed are always going to be the long-term unemployed. Republicans are saying, in one sense, if we can pay for it, we’re good. But after six years, this is not emergency aid, this is something you have to factor in and pay for in the budget.

What’s wrong with that logic?

O’MALLEY: Well, a lot of the ideologues that now steer the Republican Party always seem to find money for continued tax cuts for the wealthiest 1 percent of Americans. But when it comes to those moms and dads that are still looking for work after a huge structural recession, they start squawking about fiscal responsibility.

So, look, the way you make an economy grow is from consumer demand. And every economist will tell you that if workers have less money, they will spend less and your consumer demand will go down and your economy will not grow.

So if only, Candy, from an economic growth standpoint, we should be extending unemployment benefits for those that are still out there searching for work.

CROWLEY: But isn’t that an argument for just continuing to do it?

I mean if it helps the economy, why not give benefits in — you know, forever to the long-term unemployed?

I think the Republicans, as I understand it, most of them are saying, we can — we’re not opposed to doing it, we’re opposed to doing it without paying for it.

O’MALLEY: Well, one of the ways you pay for it is to make your economy grow. So, in other words, these guys have had it backwards for a long time, about 30 years. They have believed that if you make the top 1 percent hyper wealthy, and wealthier and wealthier every year with tax cuts and other things, that somehow that will rain down upon the rest of us.

Their theory did not work. What we need is a more balanced approach. And we need to restore that balance with better choices, like some extension of unemployment benefits, increasing the minimum wage, maybe expanding the Earned Income Tax Credit, all of the things that actually grow your middle class so that consumer demand can can grow your economy.

CROWLEY: You are also championing this year in Maryland, as well as pushing the federal government, to raise the minimum wage.

Where is your mark for the federal government and your state?

Is it the same?

O’MALLEY: Well, it’s interesting, if you look at the minimum wage since 1968, and if it had merely kept pace with inflation, it would be a little above $10 an hour. If it had kept pace with productivity, it would be $20 an hour. And if it had kept pace with the earnings of the top 1 percent of Americans, it would be $28 an hour.

CROWLEY: So where — which one do you like?

O’MALLEY: I think we’re zeroing in on around a $10 an hour minimum wage in Maryland, where, over the last five years, our people have achieved the distinction of attaining the highest median income of any state in the nation, the best public schools of any state in the nation. And we went four years in a row without a penny’s increase to college tuition, because we believe in expanding opportunity to grow our middle class, to drive consumer demand. And that’s why we’re coming out of this recession better than other states.

CROWLEY: You are — well, you are also blessed where other states are not, which is that you have some fairly high income federal workers. I mean it’s Maryland. It’s around the District. And, obviously, a lot of federal workers work — live in Maryland and…

O’MALLEY: Sure. Geography…

CROWLEY: — bring that income.

O’MALLEY: — geography and those assets, especially in research and innovation, are clearly part of it. But the vast majority of our job creation, where we led the region in 2012, actually came from the private sector, over 80 percent with private sector job growth.

CROWLEY: Let me ask you about your — the Maryland rollout of your health care marketplace was disastrous by most accounts. You have said, yes, it didn’t work the way we thought it would work. There is now criticism that the senior leadership and your administration didn’t notice all along that there were signs of trouble.

Were you asleep at the switch?

You know, you had contractors that were suing and fighting with each other. You had people resigning. And so a lot of people said those were warning signs that something need to be done.

Did you miss it?

O’MALLEY: Oh, no. This complex IT challenge had ups and downs every step of the way. There were lots of cautionary lights, lots of red lights, but there were also green lights. And then the long article in “The Post” chronicled all of this. This was a very complicated endeavor.

But the bottom line is that we are more than half way to our enrollment goal now in Maryland, which was, albeit, an admittedly…

CROWLEY: Are you going to meet your goal?

O’MALLEY: I think we are going to make our goal. Right now, we’re at about 180,000 people who we’ve enrolled.

Our goal is 260,000. So that Web site is now functional for most citizens. And we’re still working through the problems.

It’s an — you know, this is an example of good week/bad week in “The Washington Post.” Two days earlier, “The Post” called our health care reforms, in terms of our Medicaid waiver, the most significant grab the bull by the horns in terms of controlling health care costs that has happened in our nation in 50 years.

But the shopping Web site, we squibbed the kickoff. But we’re making it better.

CROWLEY: Do you need — I know you’ve been offered federal help to kind of take over the Web site to correct the remaining problems.

Is that something — help you’ll accept?

O’MALLEY: Well, that’s something we’ve looked at since June. In other words, in the article today, they talked about, oh, the problems were there and the state people considered going to the federal Web site. The problem is, there was no assurance at that time that the federal Web site was going to work any better.

CROWLEY: And it didn’t so…

O’MALLEY: And it didn’t. And right now, in fact, our Web site is working a lot better for the majority of our citizens who are signing up for Medicaid than the federal site is. So I think the best time to evaluate that, Candy, will be after the enrollment process.

CROWLEY: So you don’t have to make a decision — that help is always out there if you want to turn it over to the Feds and say can you help with this?

O’MALLEY: They’ve been terrific. They’ve been very helpful. And it’s not only the benefits, but it’s also the risks of switching over in the middle of enrollment…

CROWLEY: Right.

O’MALLEY: — and diverting the IT assets and resources to this. Along — the most important thing, though, is not a single person in Maryland has been denied coverage because of a prior existing condition. And this Affordable Care Act is going to have long-term benefits for our children and grandchildren.

CROWLEY: I want to turn your attention to something Florida Senator Marco Rubio, a Republican, said. As you know, the earnings gap, the shrinking of the middle class…

O’MALLEY: It’s a huge problem.

CROWLEY: — certainly — and it’s also a political year thing that Democrats think favors them in terms of, wait a minute, this income disparity is nuts and the of poverty — we just celebrated — if you use that word — marks the 50th anniversary of Lyndon Johnson’s war of poverty.

Marco Rubio said this week that he thinks all the money being spent out of Washington for anti-poverty programs and the programs themselves should be turned over to the states. Here’s a little part of what he said.

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SEN. MARCO RUBIO, (R) FLORIDA: Washington continues to rule over the world of anti-poverty policy making with beltway bureaucrats picking and choosing rigid nationwide programs and forcing America’s elected state legislatures to watch from the sidelines.

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CROWLEY: What do you think?

O’MALLEY: One of those so-called rigid programs is feeding hungry children. I don’t think that there is anything rigid about a program where you feed hungry children.

CROWLEY: Sure. But I think his suggestion is we’ll give you, Governor O’Malley, the money that we are sending you anyway for this program and you manage it.

O’MALLEY: Actually what he’s saying is we’ll send you less money because this year we want to cut dollars to feed hungry children.

Look, I think he’s right to ask the question about poverty in our country and growing inequality, but I believe we have better answers. The answers to feeding hungry children is not fewer dollars to feed hungry children, it’s to do more. It is to raise the minimum wage. It is to increase, not dismantle, the earned income tax credit. It is to make college more affordable for more middle class families, not more expensive. These are the things that grow our middle class. These are the things that drive consumer demand and grow our economy and so we believe in doing more of the things that actually work, not in this cynical shell game of cap and block grant and then dismantle.

CROWLEY: But as a general rule, you — set the money aside. Let’s say you get reasonably what you’re getting now. What would be wrong with giving the money to state lawmakers and saying, you figure out how this is spent, use your own program.

You’ve experimented and gotten waivers and experimented in a lot of ways.

O’MALLEY: Hey, look. In some cases that can work. If your goal is to actually make government work, if instead your goal is to dismantle government for some ideological purpose, then it doesn’t work.

I think there might actually be some merit to having greater use of waivers, for example, in work force development and combining those programs with metrics and outcomes so you deliver results.

But this notion that somehow by capping the dollars that the federal government puts into feeding hungry children, that somehow that will miraculously multiply the bread and fishes is poppycock. That’s part of the ideology that we’ve been suffering from and our economy has been suffering from.

If workers have less money in their pockets to put food on the table, they will be spending less money, your economy will suffer. What we need to do is enact policies that actually help our middle class, rather than following this ideology of dismantling Washington and getting Washington out of everything that we do.

We’re all in this together. And we need our national government.

CROWLEY: Governor, when you look at your state budget, which had been on a downward trend in terms of the deficit, you’re now looking at a fairly large deficit. What happened there? And where are you going to find — well, where is the next governor going to find the money to make up the deficit you’re working with?

O’MALLEY: Yeah. We have been restoring fiscal responsibility for these last seven years. We inherited a $1.7 billion deficit from our predecessor. We’re on the verge of closing that. In the budget that I submit this week, we will close it without any new taxes.

What part of what drives our budget, of course, is the economy and the pace of this recession. And it has been an extended recession. However, I’ve cut more in spending than any governor in modern history, and yet we’ve also been able to make the record investments in education, to make the number one schools, now record investments in transportation infrastructure and innovation.

And what we also have been able to do is to maintain a AAA bond rating, one of only seven/eight states with a AAA bond rating from all three major rating agencies.

CROWLEY: But if I understand you, there will be no deficit in this year’s budget nor a way to project into a deficit for next year?

O’MALLEY: No, we balance the budget every year and every year there are forecasts. And those forecasts depend on what sort of rate of growth you put into the economy.

Look, the best way for every state to reduce its deficit is for our national economy to grow at a faster pace. So every year we cut spending. Every year we reduce and shrink the size of that structural deficit. We’re on the verge of eliminating it. We won’t be able to eliminate it entirely this year, but we are getting to a point where we will be able to eliminate it in the next year or two ahead without any need for new taxes. We’ve done a lot of the tough choices and the restructuring necessary in order to right our ship. We reduced income taxes for 85 percent of us. We asked the top 15 percent of us to pay more and we are headed in a much better direction.

CROWLEY: Governor, I want to ask you to stick with me. I have to take a quick break, but I want to talk to you a little bit about what you plan to do after your term ends in January.

CROWLEY: Thank you.

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CROWLEY: Welcome back. I am here with the governor of Maryland, Martin O’Malley. Before I get to your post governorship plans, I want to ask you about marijuana. You’ve said that you’re opposed actually to the legalization of marijuana for recreational use. Why?

O’MALLEY: I’m opposed to it for a number of reasons.

O’MALLEY: I mean, in our state, I actually have signed legislation that allows police officers to issue citations instead of arrests. We’ve made a, you know, a mandatory stay and a right of appeal to anybody that’s, you know, subjected to any sort of incarceration.

So I think there is something to be said for the proportionality. And I do think that all of that is important. There are fewer people incarcerated in Maryland today than when I was elected.

But for a number of reasons — you know, one of them, Candy, is purely economic. In our state, a lot of the new opportunities that are opening up for our kids in security and cyber security and other things, they require a background check and they require that kids have clean records and the best…

CROWLEY: But if you legalized it, there wouldn’t be a record.

O’MALLEY: Yes, but we can’t do that as a state. That would be something only the nation could do. And for us to go down that direction as a single state, I mean I don’t…

CROWLEY: Well, Colorado has.

O’MALLEY: Colorado has.

CROWLEY: (INAUDIBLE) legalized…

O’MALLEY: Yes, Colorado has.

CROWLEY: Yes.

O’MALLEY: And for Colorado…

CROWLEY: Yes.

O’MALLEY: — perhaps that’s a good choice and perhaps there’s things we can learn from their experiment as a laboratory in democracy.

From Maryland’s standpoint, I spend a lot of time in middle schools telling kids to keep a clean record so that they can get a good job and help their families.

CROWLEY: Let me take a look at your record over the last seven years. You’ve raised taxes on the top 15 percent, state income taxes. You’ve raised fees or taxes 24 times.

O’MALLEY: We’ve lowered them on the 85 percent.

CROWLEY: Right. I — the top 15 percent, the other 85 went down. You supported same-sex marriage, the Dream Act, gun control. Now, you’re looking at an increase in the minimum wage.

Can you sell that agenda nationwide, should you run for president?

O’MALLEY: Well, I believe that the people of our state and, also, the people of our country, want us to make choices on their behalf that yield results, results that make our economy grow by making…

CROWLEY: But that’s a…

O’MALLEY: — our middle class…

CROWLEY: — those are progressive…

O’MALLEY: — grow.

CROWLEY: — which we used to call liberal agenda. And there are far more conservatives and moderates in the country than there are those who self-identify as liberal or progressive.

O’MALLEY: Yes. And I’m proud of each of those things. I’m proud of the people of our state.

But, also, having a — being an inclusive people, respecting the dignity of every individual, these things are also good for an economy. These things are good for building an innovation economy and attracting the most talented workforce.

So, look, I think they all go together. What the people of our country want is not ideology, not trickle-down economics, but middle out economics, where we strengthen our middle class to grow our economy and to give our kids a better future.

CROWLEY: Governor, just straight up yes or no, are you going to run for president?

O’MALLEY: Oh, you know what, it’s an honor to be mentioned in the company of those that might lead our country forward after President Obama. And right now, I’m focused on the work at hand and the work of this general assembly session in Maryland.

CROWLEY: Sure. I understand that. But you must be thinking about next year.

Are you thinking about it still?

And when do you think you’ll make a decision?

O’MALLEY: Well, sure, I’ve said I’m thinking about it. CROWLEY: Right.

O’MALLEY: But right now, I’m primarily focused on what I need to do for the good people of our state.

CROWLEY: You’ve got that answer down pat.

Come…

O’MALLEY: I practiced it three times before.

CROWLEY: — come back. That’s — I bet you did.

O’MALLEY: Candy, thank you.

CROWLEY: Thank you so much, Governor

It’s a pleasure having you on.

O’MALLEY: Thanks a lot.

A pleasure being with you, as always.