Transcript: David Axelrod and Sen. Charles Grassley

So this is going to have to be paid for. Two-thirds of the expenses -- two-thirds of the expense of it under the president's plan and proposal would be done by transferring money within the health care system from Medicare on wasteful spending, giveaways to insurance and drug companies, and so on.

And so we're talking about the final third. He has proposed a plan that would be in keeping with the promise that he made, to cap deductions for the wealthiest Americans on their taxes.

He still believes that's the way to go. And he has made a strong case to the House and the Senate on it.

STEPHANOPOULOS: But he also said this week he was open to compromise on this. And as you know, the Senate is looking especially at this issue of capping the deductions for health care that employers and employees now get. That would get -- would be a tax increase for many families earning under $250,000.

But the president said he was open to it. So that means that the tax pledge he made back in September is no longer operative?

AXELROD: Well, George, first of all, there are a lot of different formulations of that plan. The president had said in the past that he doesn't believe taxing health care benefits at any level is necessarily the best way to go here. He still believes that.

But there are a number of formulations and we'll wait and see. The important thing at this point is to keep the process moving, to keep people at the table, to the keep the discussions going.

We've gotten a long way down the road and we want to finish that journey.

STEPHANOPOULOS: But if you're open to tax increases for people under $250,000, that means that the pledge he made last September in Dover is no longer operative.

AXELROD: George, I think the president has made clear the way he feels this should be funded. And certainly is consistent with what he said during...

STEPHANOPOULOS: But he's not drawing a line in the sand.

AXELROD: ... the campaign.


AXELROD: Well, you know what? The -- one of the problems we've had in this town is that people draw lines in the sand and they stop talking to each other. And you don't get anything done. That's not the way the president approaches us.

He is very cognizant of protecting people -- middle class people, hard-working people who are trying to get along in a very difficult economy. And he will continue to represent them in these talks.

But they're also dealing with punishing health care costs, and that's something that we have to deal with

STEPHANOPOULOS: One of the Republicans who is both drawing lines in the sand and still talking is our next guest, Charles Grassley of Iowa. And he has made it very, very clear what he believes has to be in a plan.

One of the things he said is, absolutely no public health insurance plan in the bill. The president has said he has made a very strong case for that this week. And Senator Grassley has also said that we're probably going to have to have some taxation of benefits.

And I guess what I'm trying to get at, is that a price that the president is willing to pay? I know you're saying that the president has laid out his preferences, but what price is he willing to pay to get Republican votes, to get a bipartisan bill?

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