Transcript: HHS Secretary Kathleen Sebelius and Mitt Romney

STEPHANOPOULOS: I believe the administration has said that they believe that Iran could have the right to nuclear power with appropriate safeguards, but not a nuclear weapon.

But what would you do now then? If you were president -- you know, it's not just President Ahmadinejad in Iran who said that he believes Iran should have a right to nuclear power. It's the supreme leader. It was -- every candidate in the race said that Iran should have a right to pursue nuclear power.

ROMNEY: We don't have any question about nuclear power, and that was not the statement that the president made that was most offensive. It was his statement that no single nation should have the ability to deny another nation the right to nuclear weaponry.

Now, of course with regards to nuclear power, we have no problem under the Nuclear Nonproliferation Treaty for nations to pursue nuclear power. And in the case of Iran, it's pretty clear that's not what they're doing. When you sit on a lake of oil, you're not looking for a new source of energy. They're obviously developing this technology for military purposes. And offers were made, including by Russia, to provide the necessary nuclear material for nuclear power, and the Iranians turned that down. So let's not pretend or give into the Iranian way of thinking, that somehow this is about nuclear power. It's very clearly about nuclear weaponry. And you also see, of course, the same kind of outrage coming from North Korea.

STEPHANOPOULOS: Let's talk some politics right now. There was a Gallup poll this week, polling Republicans about the leadership of the Republican Party and asking who speaks for the Republican Party. And none of the above got more votes than anyone else, but Rush Limbaugh 10 percent, Newt Gingrich 10 percent, Dick Cheney 9 percent. Is it healthy that these three are seen as, by Republicans, the top spokespeople for the Republican Party today?

ROMNEY: Well, I think it's very helpful to have a lot of voices as we do. As you know, when you have the White House, you've got one single voice that speaks for your party. When you don't have the White House, you got a lot of people coming forward that speak and express their views. We have a lot of people with views that are very consistent on a number of issues. It's a good thing. You're seeing great senators come forward, congressmen, governors. Some new faces. I was just with Chris Christie in New Jersey, running for governor there. Bob McDonnell in Virginia. I think you're going to see some more voices come forward, and that gives our party the kind of energy and passion I think we're going to need to pick up some seats in the 2010 elections.

STEPHANOPOULOS: But you're also facing a demographic option. Mike Murphy, the Republican strategist, points this out in Time magazine this week. He says the Republicans are facing an ice age. And what he points to is the fact that in the last election and if you look at polling today, the Republican Party is losing young people. It is losing Latinos. It is losing well-educated Americans. That this really is a time, that if the Republican Party doesn't reform, Mike Murphy says, it will die.

How specifically should the Republican Party expand its outreach right now, become a more inclusive party for those voter groups that it is now losing?

ROMNEY: Well, what you don't do is try and change your principles. But what you do is make sure that you're communicating your principles in an effective way to the audiences of America that are listening. Hispanic-Americans ought to be voting Republican. We're the party of opportunity. We're the party of keeping taxes down. We're the party that want people to have choice in their schools and choice in their health care.

STEPHANOPOULOS: But as you know, over the last couple of years -- let me just interrupt right there on Hispanic-Americans -- a lot of Hispanics saw the Republican Party as the party trying to keep Hispanics out of the country. Whether it was fair or not, that was the impression. How do you counter that?

ROMNEY: You got to make sure that you fight very hard to get your message through. And you're right, George, in many cases, the people on the opposition said that Republicans were anti-immigrant, which -- nothing could be further from the truth. Republicans celebrate immigrants coming legally into this country, even becoming citizens. I was at a big rally in Iowa, someone stood up there and said I just got sworn in as a U.S. citizen. The crowd stood up and cheered. We're a party that loves legal immigration.

But like most Americans, we're not wild about illegal immigration. We want to cut back on illegal immigration so we can keep legal immigration thriving and robust. So those are messages we have to make sure that we communicate effectively, and recognize our opposition will try and muddy the waters and make us look like we're something we're not. But we need to do a better job, and that's one of the advantages of having so many voices out there right now. We an find people who can get that message across.

STEPHANOPOULOS: And how about you personally, looking back at your own campaign? And it certainly seems like you're keeping the option open to run again. Looking back at your last campaign, one of your top New Hampshire supporters, Tom Rath (ph), suggested to National Journal that your problem was you lost what was your strongest selling point, the ability to be the economy's Mr. Fix-it. Do you agree with that analysis? And do you think it's something you have to fix if you're going to run again?

ROMNEY: Well, you know what, there are a lot of times that I can sit back and look back to my last campaign and say, what could I have done better. And I'm sure Tom Rath makes a good point there. I wouldn't argue with him. There are a number of things I probably would have done differently if I had the chance to do it again. But that's not the way life works. You look forward.

STEPHANOPOULOS: OK. ROMNEY: And I'm spending my time looking forward. I think it's critical at a time like this that we bring more balance to Washington. With an issue like health care on the docket, for instance. In Massachusetts, when we dealt with that issue, we spent two years, Republicans and Democrats, coming together. We got -- In the vote of the legislature, it was 198-2 to pass our plan. Senator Kennedy and I were there at the celebration of our plan. We did something on a deliberate and comprehensive basis that involved both parties.

We're not doing that in Washington. Republicans have been pushed aside. We need to see if we can't bring more balance to Washington. And I'm going to fight to do that in the coming year or two.

STEPHANOPOULOS: OK, Governor Romney, thanks a lot. We look forward to having you back.

ROMNEY: Thanks, George.

(BEGIN VIDEOTAPE)

DAVID LETTERMAN, HOST, CBS'S "THE LATE SHOW WITH DAVID LETTERMAN": An awkward moment for Sarah Palin at the Yankee game. During the seventh inning, her daughter was knocked up by Alex Rodriguez.

GOV. SARAH PALIN (R), ALASKA: Statutory rape is what this is, because a 14-year-old would not consent to being "knocked up," quote/unquote.

LETTERMAN: I would never, never make jokes about raping or having sex of any description with a 14-year-old girl.

PALIN: He doesn't have to apologize to me. I would like to see him apologize to young women across the country.

LETTERMAN: I think everything's going to be great, because she called today and invited to take me hunting.

(END VIDEOTAPE)

STEPHANOPOULOS: The Palin/Letterman feud. Neither side backed down. We'll get to that in a little bit.

First let me bring in our "Roundtable." We're joined, as always, by George Will; Kim Strassel, columnist with "The Wall Street Journal"; Wayne Johnson from "The National Journal"; and of course, Donna Brazile. We'll get to that later. Let's talk about the Iranian elections.

Let's just begin with health care. We saw that debate with Governor Romney and Secretary Sebelius, and the president trying to maintain this above the fray. He is laying out the principles that he wants. Doesn't want to lay down any bottom lines yet, even though he has preferences. Is that approach going to work?

GEORGE WILL, ABC NEWS ANALYST: No, because this is now a single issue argument about whether or not we're on a slippery slope to a single-payer system. That is, it's about the so-called public option. And the president has said, "If you are starting from scratch" -- he said this very recently -- he would go to a single payer. That is, government as the single provider of health care.

Now, there are four arguments for the public option. One is, in the president's words, it will keep them honest, to try to preserve the government as a lagoon of honesty, you can argue, refuted by anybody who reads any budget of any administration.

Second, he says, it will play by the same rules as the private insurers, and therefore, won't drive them out of business. If you play by the same rules, as you said to the secretary, what's the point?

Third, it's necessary to give what Secretary Sebelius said a choice to the consumers. There are 1,300 entities offering health-care plans in this country. Another one isn't going to change that.

Finally, there's the argument that the American people are not smart enough to handle something as complicated as health care and have a competitive market. They've done rather well in computers.

DONNA BRAZILE, ABC NEWS CONTRIBUTOR: I believe the president has laid out a set of principles that will clearly help Congress through this very contentious debate this summer.

Of course, the president has said the current system is broken, and he intends to fix it. But if you like your current insurance, keep it. But he's also adamant that we reduce costs, and we provide some option for those Americans without health insurance. Now 46 million Americans, 20 million Americans are under insured. There should be some option that competes with private insurers to reduce costs and provide the quality.

RON BROWNSTEIN, "NATIONAL JOURNAL": George, if the Democrats in the White House allow the public option to become the single or even the defining issue in this, it would be a case of political malfeasance, for two reasons. First, it is not essential to making this plan work. And second, to the extent we are focusing on this, as understandably we are, you can miss the larger picture of the extent to which consensus has been achieved on broad -- on the fundamental issue of how you expand coverage and how you cover those under insured.

There's actually outstandingly broad agreement. The idea of trading a mandate on all individuals to purchase insurance, an individual mandate, in turn for sweeping reform of the insurance industry that would eliminate their ability to deny coverage based on preexisting condition and have community ratings, comparable prices, regardless of your health condition or age. The insurance industry has now accepted that trade.

And Barack Obama, after opposing it as a candidate has accepted that. Two years ago, when Arnold Schwarzenegger tried to do something almost exactly like that, the left in California killed the universal coverage plan. Ted Kennedy is now endorsing that trade. And so is Chuck Grassley.

STEPHANOPOULOS: And Ted Kennedy is not giving up on the Republicans (ph). I want to get to that in a second, but let me bring Kim in here on what you were saying, Ron, is the consensus, because I think you are right about the consensus.

There is a consensus, it seems, for an individual mandate and insurance reform which, as Mitt Romney just pointed out, that's kind of the Massachusetts plan.

KIMBERLY STRASSEL, "WALL STREET JOURNAL": One of the very intriguing possibilities, there may be something that out of it.

I would argue, though, the bigger problem the administration is facing -- and you saw it this week -- was a question of how you pay for this. I think this is even a bigger question of what goes in the plan. And you saw this -- what they have done is you have this series of proposals they have floated for tax increases. You talked about some of them with Mrs. Sebelius.

STEPHANOPOULOS: None of them are making it through...

STRASSEL: None of them. None of them are getting to get through. So now what you're seeing is the president saying, "Here's what we're going to get savings." Because "savings" is code for "we're going to cut things. We're going to cut things that are currently handed out," mostly Medicare.

But this raises a whole bunch of other problems. One is, are they actually going to get those -- those costs? Because no one actually believes that this is something -- I mean, these are optimistic ideas.

But also the question is, this is robbing Peter to pay Paul. Fundamentally, you cut services (ph) -- this is to hospitals. They're already taking a loss when dealing with Medicare and uninsured. So the way they get by is to raise their prices for the health-insurance industries. That's just going to raise prices more, if you're cutting out of that.

WILL: Insuring the uninsured. Easiest thing in the world. Essentially (ph) easy. Give them a debit card, a health debit card to pay for it. Mandate that they come in and subsidize their health care. Simple. There's consensus on that. But not consensus, because the left knows what it really wants is a slippery slope to single payer.

Donna, you talk about the 46, 47 million uninsured. Fourteen million of them are already eligible for other government programs and haven't signed up. Ten million are in households with household incomes of $75,000 a year and could afford it if they wanted to.

Furthermore, an enormous number in that 47 million who are not American citizens. Sixty percent of the uninsured in San Francisco are not citizens.

BRAZILE: We're still paying, George, for their costs, and perhaps we're paying for some of these fees that the hospitals are charging. The president said yesterday in his radio address that he -- he would like to reduce these out-of-pocket fees.

STEPHANOPOULOS: It caused a lot of pain. A lot of hospitals and a lot of constituencies screaming over that.

BRAZILE: Well, George, people are going to scream one way or another, because it's been 15 years since the last time we had a national debate. And what has happened in the last 15 years? We've seen premiums rise and wages stay the same.

So this is a real serious debate. And, George, I think the only way to get to making sure that we insure all Americans is to have this public option.

BROWNSTEIN: Well, you know, George, there's no doubt that there are elements on the left who see this, in fact, in the way that conservatives believe, that that idea is to move towards a slippery slope.

If the goal, however, is to create competition in the system, in some ways, whether or not you have the public option is not the most important question, whether or not you're going to have payments on...

STEPHANOPOULOS: Let me stop you right there. Because that may be your analysis, and I don't -- I don't dispute the analysis. But it's not where the politics are, right now, particularly in the House of Representatives. Speaker Pelosi saying it is an absolute. It must be that.

BROWNSTEIN: It will be a very difficult issue to resolve in the end. But George, I was at an event on Friday with a group of health-care executives for health-care reform, health-care CEOs for health-care reform.

There's a guy there named Scott Armstrong who runs the big co-op in the Seattle area that Kent Conrad talks about as the model for what he wants to do. And he said at the end of the day, it isn't important -- isn't as important who is writing the check, whether it's a private plan or a private insurance company, or for that matter, the government and Medicare. But what they're writing the check for. Are they going to continue to have kind of fee for service medicine that incentivizes more activity, you know, kind of churning (ph). Or are we going to have more integrated care, bundling, paying for results.

In a way, in a sense, the best argument for the public plan is that it can be alloyed with Medicare and other government efforts to try to encourage this kind of payment reform. But the payment reform is probably more important in the long run than whether or not you have the public plan.

STRASSEL: I'm not sure where anyone gets the idea that you can have payment reform and reduce costs. We have had Medicare now for how many decades? It has run at 3 percent higher than growth of the economy the entire time.

Every effort to reform payment growth has failed. So this is just -- it is a matter of fact that a government program grows fast. Costs grow exponentially.

And as George was saying earlier, one of the only ways you fundamentally make this public option attractive to people is by keeping the costs lower than you have in the private industry. And you do that by cutting down on service providers or cutting down on services.

BROWNSTEIN: The problem I with the advocacy (ph) I have is, the version of the public plan that would do that, that would set -- that would use Medicare pricing, is almost -- it's almost impossible to imagine passing that.

So as George was saying before, what you could pass probably would have less impact on the market than the advocates want. And in a way, that argues again for not allowing this to become the center piece of the debate. I mean, there are -- I think there are -- look, the nature of Washington is to focus on the point of conflict. And you do have the left digging in, and you do have this becoming a red line for Republicans. But, you know, it doesn't -- it doesn't have to be that way.

STEPHANOPOULOS: But I think that means the question would depend on whether or not -- I think Kent Conrad can actually build some support for this co-op deal, which could split the difference.

But let's move on to the Iranian elections over the weekend. We've seen protests in the streets for the last couple of days, after these elections, you know. What we can't tell is exactly how rigged the elections were. Ahmadinejad wound up with more than 60 percent of the vote, despite the fact that his lead opponent, Hossein Mousavi, was -- had a lot of support in the streets just before the elections.

So setting that question aside, which is hard for us to know, how big a crisis is this for the Iranian regime?

WILL: Hard to say. Ferdinand Marcos held an election improvidently in 1986. And four days later, he was gone because it was widely considered rigged.

The difference is that the Catholic Church in the Philippines said it was rigged, and there was an enormous moral authority there.

Ahmadinejad is such a repellant figure, part Zedong, part Joseph Goebbels. And he has a clear base in the country. So the fact that we can't tell this was rigged or not is a disaster for the Obama administration, because you can hardly engage this man now when his legitimacy, such as it ever was, seems much diminished.

STEPHANOPOULOS: You know what's weird, George, to see them call the election before all the votes had been counted. And at one vote, they said he won an overwhelming mandate, you know, less than 20 percent of the ballots coming in.

I think democracy has been unleashed. And regardless of what happens going forward in Iran, there is now a new democracy movement.

And you notice that during the middle of the campaign, they'd turn off the computers. They shut down Twitter and Facebook, the main tools used by the opposition to try to unseat the president. Now that the supreme leader has basically said that the president won re-election, I don't know if there's going to be a recount.

STEPHANOPOULOS: Mousavi this morning has now filed an official appeal. And the election is not official until the guardian of elders, all of them on the set, come out and certify. The administration (ph) of Iran is waiting for that to happen before they make their plea for reengagement.

And I guess this is -- picking up on George's point, going forward, the administration was ready to deal with Ahmadinejad before. Should they continue that policy of engagement? Or should there be a rethinking in order to resolve it?

BROWNSTEIN: Well, whether or not there should be, they are -- they are certainly keeping -- as they made clear yesterday, they are committed to moving forward. And we'll deal with Iran as the way it is, basically.

But there's no doubt, it makes it more -- much more complicated. If you did a ledger on this from the U.S. point of view, I think you would say that this election has clearly shown that that there is a substantial constituency with Iran for reform within and perhaps a different relationship with the outside world.

But it also shows you, perhaps even more clearly, that those who have their hands on the lever of power are not going to concede very much to that constituency. And those two forces are going to be in tension and in play. And clearly, the U.S. goal has got to be to speak to the first and strengthen it. And hopefully, that provide the leverage on those who are now and remain in power.

STEPHANOPOULOS: There has been no change in power, because Ayatollah Khameini is the supreme leader, will be the supreme leader. He calls the shots on U.S. policy.

STRASSEL: And, you know, he made very clear -- I mean, bear in mind, because you're right, Mousavi had said, he's filed this complaint. He said, you know, coming to take another look at this.

Remember, the supreme leader did come out this last week, and while he did not endorse a candidate, what he did do was describe his ideal candidate, who sounded very much like Mr. Ahmadinejad. So he -- I think there's obvious that he would like it to be this way.

And I think this shows the pressure that was felt up and down the regime about this new democracy movement, which by the way, might I dare say, might have having to do with the neighbor nearby, Iraq, that now has democracy itself?

WILL: One of the ways that the regime tried to disrupt the selection was disrupting texting between people. Now, the median age in Iran is 25. Half the country is under 25. Now, they're not going to be governed forever by these medievalists in an age (ph) of the Internet, satellite dishes, cell phones. Intellectual oligarchy is impossible to...

STEPHANOPOULOS: Clearly true. Ron, in the short run, though, because -- and we're seeing through a glass darkly here, but how does the Iranian regime respond to this? Do they -- is the thought that there are -- does this pressure inside, moderate pressure, lead them to moderate their stance toward the United States, or does it embolden it?

BROWNSTEIN: I think that is the big question, because clearly, this has demonstrated there is a substantial constituency for a different way in Iran, and a substantial constituency that would presumably be a different relationship with the outside world.

But again, they have underscored their willingness to do whatever it takes to maintain their hold on power. And I think going forward, it would be -- I think we're just going to have to wait and see. I don't think we can safely predict whether they will become more flexible to respond to this internal constituency, or whether this is a sign of a hard-line response that will continue indefinitely.

STRASSEL: An initial response from Ahmadinejad was, you know, this is a sign that we need to move even bolder and more bravely ahead. I think he's going to double his efforts as a way of trying to put down internal dissent within the country.

But that is going to further complicate the efforts of the Obama administration. Also, further antagonize tensions with Israel, which is another question. This right now, though, does not look very good.

STEPHANOPOULOS: But in some ways this ACTUALLY could be welcome news, in a strange way, to Netanyahu, the Israeli prime minister, who now will have a clear path for making his argument for taking on the Iranian regime, militarily.

But Donna, I wonder, going back to the president and President Obama. I think Ron's right. I think the administration feels they have no choice but to continue engagement, regardless of the outcome, unless there's a Tiananmen-Square-style crackdown...

BRAZILE: Well, we'll see, because I don't think you can put these young people back in the little box and expect them to go on and act like nothing happened.

But Mr. Netanyahu is giving a major speech today to respond to the president's Cairo address and to outline the steps that Israel will take to not just secure its future, but also the steps that it's willing to take to begin whatever two-state process towards engaging the Palestinians. So this is a crucial moment for President Obama, not just with Iran and the destabilizing efforts in the Middle East. But more importantly, how the peace process will go forward.

STEPHANOPOULOS: You know what I guess (ph), George? Netanyahu splits the difference. He comes out for a two-state solution and kind of holds the line on settlements.

WILL: Well, he holds the line on settlements, but also the state is going to be an odd-looking state. It will have certain -- not have certain rights that are inherent, like sovereignty, such as the right to have armed forces, such as control of the air space. So it will be the beginning of protracted agonizing situations such as we've had for 40 years.

STEPHANOPOULOS: Let me go bring us back to our politics here at home with that series -- series of exchange that I showed up at the beginning, David Letterman and Sarah Palin going toe to toe for most of the week. It also comes during the week when Sarah Palin was making a little bit more of an entrance on the national stage by going to that big Republican dinner and not speaking.

And Kim, can we just begin with you here? Because I see some commentary in the blogosphere about this. Do you think that David Letterman got away with murder?

STRASSEL: Well, if you' going to pick a fight with Sarah Palin, she just draws so such emotion from so many people in America. So he shouldn't have been surprised this is what he'd gotten. And she's proved herself pretty feisty, in particular when it comes to her children. So I think that this could have been expected.

And we'll see how -- he's backed away from this some. And this will probably disappear, as other political flaps do.

STEPHANOPOULOS: See, I'm surprised -- I think he was going to get pressure back away more than he did.

BRAZILE: He should have backed away. It was over -- over the line and tasteless. He should have apologize. He sort of apologized.

Look, Sarah Palin enjoys this type of public discourse with someone like David Letterman, because it allows her to rally her base, increase her profile, and to take a stand on something that she believes strongly, with children. And of course, connect with women.

BROWNSTEIN: She had every reason to be offended. And like Donna said, what he said was over the line. But I still think, in the long run, it was a mistake for Sarah Palin to get into an extended argument with a late-night comedian. When the election ended, our biggest problem was that 60 percent of voters said she was not prepared to be president.

Ultimately, she needs to be defining herself on the national stage by weighing in on things like the health-care bill that we're debating, or cap and trade, which is coming up. She is being covered now -- I think her profile in the media as of a celebrity than of a political leader. And that is just fundamentally not a good place for her to be. Even though, in this case, she has every reason to be offended. Maybe it's time to move on.

STEPHANOPOULOS: The other thing is that the polling numbers during the election thought she wasn't qualified. But she came out of the elections very popular among the Republican base. Do you think she squandered that?

WILL: I don't think she squandered it, but I don't think she's built on it. And I think she's a lagging indicator. All of these people are lagging indicators. There's a rising generation of Republicans coming along, and they will be the conversation beginning in 2010 and certainly after.

STEPHANOPOULOS: Can she get back into this conversation?

STRASSEL: Well, I mean, I think she's got to do what that rising generation of Republicans George is talking about is doing. All the hard work out there right now. You've got Newt Gingrich; you've Rush Limbaugh. They're out talking. They have the time and the platform.

The hard work is being done out in the states in the governorships, where this new generation of people is coming up. It's being done in Congress where a new breed of generation -- generation of Republicans is coming through.

Sarah Palin needs to go back and do in Alaska what first gained her the notice of John McCain, which was actually some very pragmatic work that resonated on both sides of the aisles. And that is as a reformer. And that's something that she just needs to go back and continue the record.

BRAZILE: The USS GOP is still without a captain. It's still without a leader, still without a plan of action, and still without a message that will resonate in this new century. So I think they're a long way from coming out of the wilderness.

STEPHANOPOULOS: Donna has teed up the big debate for the green room. You guys are going to continue this. You all can watch it right on ABCNews.com.