Transcript: David Axelrod and Sen. Charles Grassley

So I think it's done an awful lot of good. The fact is that we're in the teeth of one of the worst recessions that we've had since the Great Depression, perhaps the worst, and we're going to have to work our way through that. And I think the American people understand that at some level, and that -- and so we're not sitting there -- the numbers we're worried about are not poll numbers. It's how many people can we get back to work, how do we get this economy moving again in the long run, and mostly how do we build a solid foundation so we're not in this bubble-and-burst kind of economy that we've seen over the last decade that leaves both our country and our families and businesses in jeopardy.

STEPHANOPOULOS: Some economists look at that, including Paul Krugman, who's going to be on this show later in the program, he says you're looking at 9, 10 percent unemployment coming in September. That's going to necessitate a second stimulus package. Is that still on the table for the president right now? And what would that mean for your other plans on energy and health care?

AXELROD: Well, first of all, I don't want to prejudge that at all. You know, as you said earlier, there's still -- most of the stimulus money, the economic recovery money is yet to be spent. Let's see what impact that has. I'm not going to make any judgment as to whether we need more. We have confidence that the things we're doing are going to help, but we've said repeatedly, it's going to take time, and it will take time. It took years to get into the mess we're in. It's not going to take months to get out of it.

STEPHANOPOULOS: Let me turn to the crisis in Iran. The crackdown appears to be working for now. The streets have gone quiet. A huge security presence in the streets. Mir-Hossein Mousavi, the chief opposition leader, has not called for new protests. And President Ahmadinejad is striking back at President Obama and the comments that President Obama made on Friday. He has said -- he's calling on the United State to stop meddling, and then he's gone on and said, "without a doubt, Iran's new government will have a more decisive and firmer approach toward the West. This time, the Iranian nation's reply will be harsh and more decisive to make the West regret its meddlesome stance."

It does appear that the prospects for engagement are diminishing, that Iran is taking a harder line.

AXELROD: Well, first of all, you know, let's be clear that we didn't meddle in the election in Iran. The dispute in Iran is between the leadership in Iran and their own people, and plainly, Mr. Ahmadinejad thinks that by -- by fingering the United States, that he can create a political diversion. So I'm not going to entertain his bloviations that are politically motivated.

STEPHANOPOULOS: Well, (inaudible) entertaining them.

AXELROD: It's just an opportunity to say "bloviate."

(LAUGHTER)

AXELROD: No, I'm not -- the point is this. We are going to continue to work through the P5, through the multilateral group of nations that are engaging Iran, and they have to make a decision, George, whether they want to further isolate themselves in every way from the community of nations, or whether they are going to embrace that. And understand that whatever Mr. Ahmadinejad says, everyone understands that in Iran, he is not the person who makes decisions on foreign policy, on defense policy. So this is political theater.

STEPHANOPOULOS: But the invitation is still open. If the Iranians want to come to Paris and sit down with the United States and the Europeans on the nuclear program, that invitation is still open.

AXELROD: Well, yes. And understand, you say it's an invitation. It is not a reward. We are not looking to reward Iran. We are looking to -- the nations of the P5, the five-plus-one, they want to sit down and talk to the Iranians and offer them two paths. And one brings them back into the community of nations, and the other has some very stark consequences.

STEPHANOPOULOS: Final question. I was talking to an ambassador from the region this week, who said now, if you sit down with the Iranians after everything we've seen in the last couple of weeks, you're going to be crushing the hopes of the young people in Iran and across the region, who listened hard to the president's Cairo speech and thought he was striking out in a new direction.

AXELROD: I think the president's sense of solicitude with those young people has been very, very clear, and we're very mindful of that. We are also mindful of the fact that the nuclear weapons in Iran and the nuclearization of that whole region is a threat to that country, all countries in the region, and the world. And we have to address that. We can't let that lie.

STEPHANOPOULOS: David Axelrod, thanks very much.

AXELROD: Good to be with you.

STEPHANOPOULOS: And as we bring in Senator Grassley, here is a look at how supporters of the president's plan are trying to pressure the senator in his home state of Iowa.

(BEGIN VIDEO CLIP)

(UNKNOWN): That's the president's plan -- keep the coverage you have now or choose from a range of plans, including a public health insurance option to lower costs and keep insurance companies honest. Why is Senator Grassley opposed to giving you a choice? Tell Senator Grassley it's your health, it should be your choice.

STEPHANOPOULOS: And Senator Grassley joins us now from Waterloo, Iowa.

Thanks for joining us this morning, Senator.

You heard that commercial, the president's supporters trying to pressure you in your home state. You also heard David Axelrod on the president's preferences for what should be in the plan.

Bottom line, is there any kind of public health insurance option you can accept?

And will the plan you negotiate meet the president's pledge not to raise taxes on people earning under $250,000 a year?

GRASSLEY: Well, a Democratic senator has come forth with a co-op plan, that, if it's along the lines of what we have known co-ops in this country for 150 years, and that would definitely bring additional competition into the insurance industry, I think that, if it's structured along those lines, that we could have, yet, a different option than what we presently have.

And we're looking at that and we're trying to get a bipartisan agreement on that. And if it doesn't touch the concerns that we have about federal control of health and leading toward a Canadian-style single-payer system, then I think it can get bipartisan support.

But let me assure you that we're trying to find a bipartisan compromise in this area, as well as every other area. And I'm not so sure that the competition is a major thing that we have to deal with in order to get a bipartisan compromise.

George, if I could say what the overall view of my party and most everybody in Congress is, is to make health insurance affordable and accessible.