THIS IS A RUSH TRANSCRIPT FOR "THIS WEEK" ON JULY 5, 2015.

(BEGIN VIDEOTAPE)

ANNOUNCER: Starting right now on ABC THIS WEEK: America on alert. Heightened security nationwide. Did we dodge a bullet on the fourth? Why authorities say we are not out of the woods yet.

System breakdown: a random murder in San Francisco. The feds and local officials now pointing fingers. Why would the suspect, a convicted felon deported five times still on the streets?

Breaking from the pack: massive crowd turning out for Bernie Sanders. Donald Trump under fire, but moving up in the polls. This morning, Rick Perry here live. Is he about to make a move?

RICK PERRY, FRM. GOVERNOR OF TEXAS: America is longing for leadership.

ANNOUNCER: And, World Cup fever.

UNIDENTIFIED MALE: The USA is going to the finals.

ANNOUNCER: The final match just hours away. Will the U.S. bring it home?

From ABC News, THIS WEEK with George Stephanopoulos begins now.

(END VIDEOTAPE)

GEORGE STEPHANOPOULOS, HOST: Good morning. We hope you had a great Fourth of July. Thank goodness it passed without the kind of incident that had officials so worried. Cities and towns across the country on high alert for a possible terror strike on Independence Day.

Here in New York, 7,000 police officers deployed to protect the fireworks. ABC senior justice correspondent Pierre Thomas has been tracking the threats. And Pierre, so far so good.

PIERRE THOMAS, ABC NEWS CORRESPONDENT: Good morning, George. That's right. Law enforcement is breathing a sigh of relief that we made it through Independence Day with no terror attack on U.S. soil.

The concern I can tell you was real. Authorities had high security throughout the country specifically concerned about ISIS and the threat of lone wolves. But unfortunately the concern did not end with the fireworks last night. The unprecedented social media campaign by ISIS, which is happening now as we speak, is urging its followers to carry out attacks including here in the U.S.

We're also at the one year anniversary of the formation of the so-called Islamic State. And a senior ISIS leader recently made a threat that authorities are paying attention to.

Right now, we're in the Islamic holy month of Ramadan, which does not end until July 17. The senior leader called on followers to make Ramadan, quote, a month of disasters for the infidels.

Those recent attacks in Tunisia, Kuwait and Egypt showed their followers are listening, so this will be a long, uneasy summer, George.

STEPHANOPOULOS: We know they will keep trying.

And Pierre, while I have you, you also cover homeland security and immigration. Let me ask you about that horrific case out of San Francisco where a young woman, Kate Steinle was shot and killed by a Mexican immigrant who was in the country illegally. And so shocking, because this immigrant, Francisco Sanchez, had seven prior felony convictions, been deported five times. A lot of people wondering how could someone like that be in the United States be free?

THOMAS: George, what a tragic case. And this may be a classic example that bureaucracy can kill. Federal immigration officials are pointing the finger squarely at local authorities. They say this criminal, as you say, deported five times should never have been released by the city. They say that Francisco Sanchez was handed over to the city because of an outstanding drug charge there. Prior to that, he had been in prison for being a repeat illegal immigration offender.

The feds say there was a specific request to be notified once the local case was resolved, but that did not happen.

San Francisco authorities claimed that one the drug charges were dropped, Mr. Sanchez was simply free to go.

San Francisco is a safe haven city that does not detain undocumented immigrants. George, who is right is a subject for debate. The feds say they did everything by the book and never wanted this man on the streets.

Should the locals have simply notified the feds when the case ended? Or should federal immigration officials have been more closely monitoring the case? A very sad story, George.

STEPHANOPOULOS: Boy, it sure is, Pierre. Thanks very much.

Let's get into this debate now with the chair of the House judiciary committee. That committee oversees immigration. Virginia Congressman Bob Goodlatte joins us now.

Congressman, what went wrong here? And what should be done about it?

REP. BOB GOODLATTE, (R) VIRGINIA: Well, both the government -- the federal government and San Francisco are wrong here. And George let me say at the outset what a tragedy for this family. My heart goes out to them, but quite frankly the federal government, ICE, knows about San Francisco's sanctuary policy. It's a bad policy, but they know about it. Why did they ever turn him over to them when they could have deported him, or they could have prosecuted him for illegally reentering the country four times and send him to prison. Either way, Kate Steinle would be safe.

The fact of the matter is, San Francisco, why would they release somebody back onto their streets who is illegally in the United States and has committed seven prior felonies when they could have contacted ICE and turned him back over to them for deportation. And again, she would have been safe. It's a real tragedy.

STEPHANOPOULOS: So, what's the answer here? Should the federal government -- should there be a law that requires cities like San Francisco to turn over those who have been charged in the past, those who have been deported in the past, those who have been charged with illegal crimes?

GOODLATTE: Well, that is the law and that was the law, the policy regarding detainers, which is the law of the United States, was enforced by the Bush administration as being mandatory.

The Obama administration has converted that into something voluntary. And in doing so, they have eliminated a program that was working called Secure Communities, where individuals like this would be detained and would be turned over to the immigration service.

Now, in addition to that, this administration is releasing criminals back onto the streets themselves. So there's fault to be borne by both...

STEPHANOPOULOS: But as you know...

GOODLATTE: -- but the fact of the matter is...

STEPHANOPOULOS: -- the Obama...

GOODLATTE: -- the laws need to be enforced.

STEPHANOPOULOS: -- the Obama administration points out that over the last six years, deportations of criminals are actually up 80 percent.

GOODLATTE: They are not deporting people in the numbers that have been deported in the past and they're counting people that they apprehend at the border and turn back around.

The Bush administration did not count those as deportations. They simply apprehended them at the border, sent them back into Mexico. That didn't count as deportation.

The Obama administration has started counting those and that has driven those numbers up. But the actual deportations from the interior of the country are way down. This administration is not enforcing our immigration laws and, quite frankly, I don't think they care. And this is -- this tragedy in San Francisco, which is repeated every day around the country and doesn't get this kind of notoriety is the product of that lack of caring about respect for the rule of law and enforcing our laws.

STEPHANOPOULOS: Mr. Chairman, thanks very much for your time this morning.

On the campaign trail, Donald Trump pounced on this story, saying it proves his points about the dangers of illegal immigration and he's been dominating the GOP race all week, long drawing fire from his former business partners and fellow presidential candidates.

ABC's Cecilia Vega here with more on that -- and Cecilia, Trump taking on all comers.

CECILIA VEGA, ABC CORRESPONDENT: He sure is. And the polls show that he's still doing well despite these controversial comments. You'll remember the me -- the real estate mogul saying that Mexicans are bringing drugs and crime. But the backlash has been fierce.

So far, Trump is not backing down. Now, networks like Univision and NBC are refusing to carry the Miss Universe pageant. Major companies like Macy's are backing away from him. Opponents quick to pounce. They are distancing themselves. Jeb Bush, whose wife is Mexican, saying that these comments -- he's taking these comments personally.

Take a listen.

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JEB BUSH (R), CANDIDATE FOR PRESIDENT: He's doing this to inflame and to incite and to give -- to draw attention, which is -- seems to be his organizing principle of his campaign. And it doesn't represent the Republican Party or its values.

(END VIDEO CLIP)

VEGA: And others are lashing out, too. We've heard candidates like Rick Perry or -- particularly Rick -- Rick Perry, Chris Christie, Marco Rubio, saying that this could prove, you know, lashing out against these, this could prove to be a real problem for Republicans, George.

And that it really illustrates exposing the party, how -- how divided the party is on immigration.

STEPHANOPOULOS: It sure does. And we're going to be talking to Rick Perry in just a minute.

Meanwhile, on the Democratic side, you've got Trump dominating the Republican side. Bernie Sanders drawing these huge crowds.

VEGA: Wow! If Trump is having a bad week, Bernie Sanders is having an excellent one, right?

People are just packing into his events. Last week in Wisconsin, more than 10,000 people filling a stadium to hear the Vermont senator speak. Thousands more in Iowa, the biggest event so far of any presidential contender this year.

Clinton said that this has always -- she always knew that this race was going to be competitive.

But look, here is the reality. In a poll of Iowa voters this week, Clinton still ahead by a landslide, 52 percent to 33 percenters. But Sanders is gaining ground. The Clinton campaign saying that they did have to change a venue this week to accommodate a larger crowd, 850 people she would up.

STEPHANOPOULOS: And they lit up Twitter yesterday, the Clinton campaign did, up in New Hampshire, by reigning in the press with a rope?

VEGA: Take a look at this photo. We have it. We want to show it to you. Reporters roped off as Clinton walked in a parade. This is not the image the candidate wants, as she is trying to show that she's more accessible than the last time she ran.

But, look, Clinton Campaign Spokesman Nick Merrill did have a really funny response out there, saying that while the GOP may want to spin a good yarn on this, let's not get tied up in knots. They say the move actually allowed reporters to have a little bit more flexibility on that parade route rather than being locked down in one location. So it's...

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VEGA: -- going viral, this photo.

STEPHANOPOULOS: OK, Cecilia, thanks very much.

That brings us to our next guest, the longest serving governor in Texas history, now candidate for president.

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GOV. RICK PERRY (R-TX), PRESIDENTIAL CANDIDATE: Today, I am running for the presidency of the United States of America.

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STEPHANOPOULOS: Rick Perry is back. But after that crash and burn last campaign...

(BEGIN VIDEO CLIP)

PERRY: I can't (INAUDIBLE) I can't. Sorry. Oops.

(END VIDEO CLIP)

STEPHANOPOULOS: -- can he be a real contender this time?

New glasses add a studious look. He's boned up on foreign policy.

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PERRY: The Duke of Wellington had in mind to keep those master tacticians...

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STEPHANOPOULOS: He's built up ground forces in key states.

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PERRY: It is good to be back in Iowa.

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STEPHANOPOULOS: And staked his claim with social conservatives.

(BEGIN VIDEO CLIP)

PERRY: Pro-abortion radical.

Defend the border.

Our rights come from God.

We need to return power to the states.

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STEPHANOPOULOS: Still, Perry is lagging in the polls and needs a breakout moment to qualify for those first debates.

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STEPHANOPOULOS: And Governor Rick Perry joins us now live.

Thank you for being here this morning.

PERRY: You're welcome, George.

STEPHANOPOULOS: You know, you've been pretty candid about your last campaign, saying you botched it last time around. But with so many other new choices for the Republicans, why should GOP voters give you a second chance?

PERRY: Well, I think the American people are taking a look at these candidates and they're really starting to focus on them now. And what I hear as I travel across the country is that people care about who's going to be able to to get this economy going, who's going to be able to keep this country safe, who can secure the border.

Being a former air force pilot -- and Lindsey Graham and I are the only two that have ever worn the uniform of the country, so I think as they look at who has the experience, who has the executive experience to run this country?

And having 14 years of the experience of being a very successful chief executive of the 12th largest economy in the world, I think Americans are going to look at us and see how we perform. And, obviously, I think they've seen the preparation and the work that we've done over the course of the last years and -- and I think we have a very good opportunity to impress the American people that that's the kind of mature leadership, proven leadership, with the military background and the results of our border work...

STEPHANOPOULOS: Well, you know...

PERRY: -- I think the American people are going to like that.

STEPHANOPOULOS: Donald Trump actually took -- he took aim at your work on the border yesterday. He said he should have done a better job protecting the border.

What do you make of that?

PERRY: Well, I don't think he understands the challenge, obviously. We've been there for 14 years. The governor of that state, with a 1,200 mile border. When it became abundantly clear that the president wasn't going to deal with this issue, we acted last summer. We surged our law enforcement and our National Guard there.

We had a 74 percent decrease of apprehensions in that region of the border where the real challenges were.

My beat is that Mr. Trump doesn't know that. So I think, again, executive experience really matters. Having run the 12th largest economy in the world is really going to matter to the American people.

STEPHANOPOULOS: Is he hurting your party?

You know, you saw Jeb Bush yesterday say that he's offended by the comments of Donald Trump. Your fellow Texan, Ted Cruz, said he salutes Donald Trump.

Where do you stand?

PERRY: Well, everybody gets to pick and choose who they want to be for. But the fact is I've said very clearly that Donald Trump does not represent the Republican Party. I was offended by his remarks.

Listen, Hispanics in America and Hispanics in Texas, from the Alamo to Afghanistan, have been extraordinary people, citizens of our country and of our state. They have served nobly.

And to paint with that broad a brush that Donald Trump did is -- I mean he's going to have to defend those remarks. I never will. And I will stand up and say that those are offensive, which they were.

STEPHANOPOULOS Let’s talk about the economy. You said last month that America’s on course to the failed policies of Detroit and Greece. President Obama’s team points out that the private sector’s added jobs 64 months in a row. We saw those unemployment figures, 5.5 percent.

PERRY: Thanks to Texas.

STEPHANOPOULOS Thanks to Texas?

PERRY: Thanks to Texas. Well, think about that. From ’07, the end of ‘07 through 2014, George, 1.5 million jobs were created in one place, one state. And that's Texas. While the rest of the country lost 400,000 jobs. If the president wants to be honest, what he should have said in his State of the Union address is I want to salute Texas for making sure that we have a positive job growth in this country, because without Texas this country would have been 1.1 million jobs below water.

STEPHANOPOULOS Well the rest of the country has caught up and gone beyond (ph) now, at this point, 12 million jobs created over the last six years. But can you promise, as president, that you would have an unemployment rate below 5.3 percent, where it is today?

PERRY: Listen, I think I can say, as president, what I would bring into this country is a positive view about how you get Americans back to work again. Tax-wise, regulatory-wise. We’ve got an EPA that’s job killing. This piece of executive order that he put into place to force overtime, that’s a job killer. This president has been putting job killing regulations into place through his agencies and through executive orders.

I know how to create jobs: you free people from over-taxation, over-regulation. You use the energy resources in North America; I think that you can drive down electricity costs. You couple that with corporate tax policy, lower the corporate tax rate. Does two things, George. Not only will it raise mid-level wages, but it’ll also give incentives to those companies to come back on shore, with the lower electricity prices with the incentive of a lower corporate tax rate, and you can have a renaissance in manufacturing in this country like we have never seen before.

STEPHANOPOULOS Let’s talk about national security. I know you’ve been critical of president’s negotiating stance with Iran over their nuclear program. If you’re commander in chief, do you expect to take military action against Iran?

PERRY: Well, I think that’s always a bad move by the media to say the only other option you’re going to have is --

STEPHANOPOULOS I’m just asking.

PERRY: -- military action. Well, I’m just saying, I hear that all too often, is that’s the first thing they go to, is say that, well, obviously if you don’t want to negotiate, then you’re going to go to war. And that’s just not correct. I think you can put a coalition together; you can use the sanctions. We had -- we had Iran at a very good position, from my perspective. They wanted to come to the negotiating table because of the sanctions. If we had left those sanctions into place, I would suggest to you that it would have been substantially better for America.

What we are seeing now is this country headed towards having a nuclear weapon. That is going to do nothing more than guaranteeing the development of a Sunni bomb. Those Gulf State countries are not going to sit back and say, oh, it’s fine, we’re going to let Iran have a bomb.

STEPHANOPOULOS But if the other -- if the other European nations don’t hold on to those sanctions, then what do you --

(CROSSTALK)

PERRY: I think -- I think the other -- other countries that are involved with this, the other countries that are going to be impacted by this, see the wisdom of having these sanctions into place and continuing with it.

STEPHANOPOULOS Let’s talk about gay marriage. You were critical of the Supreme Court ruling last week, but last time around you were also critical of the whole idea of gays in the military. Take a look.

(BEGIN VIDEO CLIP)

PERRY: I’m not ashamed to admit that I’m a Christian, but you don’t need to be in the pew every Sunday to know that there’s something wrong in this country when gays can serve openly in the military but our kids can’t openly celebrate Christmas, pray in school.

(END VIDEO CLIP)

STEPHANOPOULOS So if you were president, would you stand by that? Reverse the policy of having gays serving openly in the military today?

PERRY: Well, I agree with the four justices that were on the losing side of that decision. This is issues that needs to be decided by the states.

I think the bigger and broader issue, from my perspective, is the next President of the United States may choose up to three Supreme Court justices. You know, I'm very clear in my stand that I believe in traditional marriage. But that I think is the bigger issue here, that the next president of the United States may choose up to three Supreme Court justices.

STEPHANOPOULOS: And how about the issue of gays in the military. Would you bring back don't ask, don't tell?

PERRY: I'm -- you know, I have no reason to think that that's going to be able to be done. I think -- you know, that clearly has already...

STEPHANOPOULOS: So, we're beyond that.

PERRY: The horse is out of the barn.

STEPHANOPOULOS: Finally, what is your path to victory. As I said, you're lagging in the polls. You're not even qualifying for the debates just yet. How do you get in them?

PERRY: Well, I think the work that we're doing now clearly both on the issues that really care -- the American people care about, people are starting to tune this in the work that we're doing in Iowa and New Hampshire and South Carolina. It's paying great dividends.

I feel very comfortable not only that I'm going to be on the stage, but we're going to be able to perform in a way, and people have seen that already over the course of the last months, that this is an individual who has the executive experience, who has the vision, and I think Americans are really looking for an optimistic individual, somebody who has got a positive outlook for this country. That knows that the best years are ahead of us. And economically and security wise, I know how to lay that out, so I feel very comfortable not only am I going to be on the stage, but we're going to perform very well.

STEPHANOPOULOS: Governor Perry, thanks for coming back...

PERRY: Thank you, George, good to be with you.

STEPHANOPOULOS: Roundtable up next with all the latest on 2016. Plus, we'll look overseas to the two stories defining the week ahead: the nuclear talks with Iran and the economic crisis in Greece. And the U.S. women's soccer team hopes to win the World Cup tonight. We are live from Vancouver.

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STEPHANOPOULOS: Roundtable standing by to round up a week in politics defined by Donald Trump and Bernie Sanders. They're going to breakdown what it all means for both sides in just two minutes.

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BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I've lost count of how many Republicans are running.

(LAUGHTER)

OBAMA: They'll have enough for an actual hunger games.

(LAUGHTER)

OBAMA: That is an interesting bunch.

(END VIDEO CLIP)

STEPHANOPOULOS: President Obama having some fun in Wisconsin this week out on the campaign trail. We're going to talk about it on the roundtable now. We're joined by Congressman Tom Cole, Republican of Oklahoma; Congressman Joaquin Castro, Democrat from Texas; Anne Gearan of the Washington Post, covering Hillary Clinton; and Bill Kristol, editor of the Weekly Standard.

We've got to start out talking about Donald Trump. And Congressman Cole, you're a student of politics, a student of presidential campaigns. Does this help or hurt your party?

REP. TOM COLE, (R) OKLAHOMA: Oh, I think it probably helps. It's good...

STEPHANOPOULOS: It helps?

COLE: Yeah, it doesn't hurt.

Look, I look at this as -- this is somebody making a statement. He's got a certain following. I don't think he's anybody's second choice. I think that's his big problem in the race. Anything that draws attention to the stage is fine.

But I don't think most people think Donald Trump is the Republican Party. He's never held an office, never really, you know, been associated all that much directly with the party. So, at the end of the day it adds to the color, but I don't think it hurts.

He gave up any chance of getting Latino votes this week?

REP. JOAQUIN CASTRO, (D) TEXAS: Oh, absolutely. and he's energized the Latino community. In fact, America Ferrera wrote an incredible thank you note to Donald Trump this past week about him doing that.

The other thing is that he's put the other guys in a very pad position. Jeb Bush and Marco Rubio, for example, took about three weeks to come out and condemn Donald Trump, which was absolutely surprising that they wouldn't have the spine early on to stand up and say something.

STEPHANOPOULOS: I've got to believe, Bill Kristol, that Donald Trump hears Jeb Bush attack and Marco Rubio attack and Mitt Romney attack him and says fine.

BILL KRISTOL, WEEKLY STANDARD: Yeah, absolutely. I think Cecilia said when you were talking with her earlier about the race that Donald Trump had done well despite these controversial comments. He's doing well because of these controversial comments.

Now, I do think he has a limit on how well he will do, because, ultimately, you can't win a presidential nomination just saying outrageous things. But he has tapped into real sentiments and the Republican Party needs to channel those sentiments.

Rick Perry had a little (INAUDIBLE). I don't agree with him. (INAUDIBLE) has done fine handling Trump. Rick Perry, just said there talking to you, look, I don't agree with him, he shouldn't have said what he said, but then he got right back on his message.

(CROSSTALK)

UNIDENTIFIED MALE: -- they can incorporate the Trump message...

(CROSSTALK)

CASTRO: -- but you've had folks like Ted Cruz defend him, Bill.

KRISTOL: Fine. You know what...

(CROSSTALK)

CASTRO: -- it's a diverse party.

(CROSSTALK)

KRISTOL: Maybe it is a diverse party.

(CROSSTALK)

KRISTOL: You know what, some people are very upset about illegal immigration.

CASTRO: When your top -- when two of your ...

(CROSSTALK)

KRISTOL: -- do actually murder people...

(CROSSTALK)

CASTRO: -- top candidates...

KRISTOL: -- murder people.

CASTRO: -- take three weeks -- when -- when the head of NASCAR comes out before Jeb Bush and Marco Rubio, you've got a problem.

STEPHANOPOULOS: Meanwhile, Anne Gearan, we are probably going to see Donald Trump in the debates. He's clearly in the top 10 right now. He could dominate the stage.

GEARAN: Absolutely. I mean he -- he does an amazing thing, right?

He can just absolutely suck the oxygen away from other people. He can suck the attention away from other people. He's doing it right now. I think I have to disagree with you, Congressman. I think he's -- he's taking attention away from some of the candidates who are -- are saying things that eventually will probably be what the election is decided on.

And he'll be able to do that in debates. This -- presuming he lasts till that.

(CROSSTALK)

COLE: Well, I don't think so. And, look, he's actually providing a chance for these candidates to separate themselves finally and actually make the statements and reaction.

So, again, he's a foil in the debate, but I don't think that he's going to be a factor at the end of the day.

STEPHANOPOULOS: How long do you think he stays in the race?

COLE: You know, as long as he wants to, frankly. He's got enough money to stay in as long as he wants to. But he's got to balance off how much business he's losing with how much business he's gaining.

KRISTOL: Right.

STEPHANOPOULOS: And, Bill, you've pointed out that the big danger for Republicans could be if Donald Trump, after the primaries are over, decides to pull a Ross Perot.

KRISTOL: Yes. If he runs third party, that's very dangerous.

STEPHANOPOULOS: Right.

KRISTOL: Republicans need to incorporate what is healthy about the Trump message, which is an anti-establishment, anti-Washington message. The genuine concern about the surge of illegal immigrants and the fact that some of them are criminals. That's not a ridiculous thing to say. The way he said it was crude and reprehensible.

CASTRO: But -- but -- but I want to point out, George, that, you know, what happened in San Francisco is a tragedy, to the young woman, and, you know, it's clear that somewhere along the line, the system -- the immigration system failed in allowing this man to still be on the street.

But I think what's egregious about Donald Trump is that he tries to imply because one guy committed a crime, that all immigrants and all people from Mexico are like that. And that is incredibly offensive.

KRISTOL: Well, he didn't quite say that. And to the...

(CROSSTALK)

CASTRO: No, he did say that.

(CROSSTALK)

KRISTOL: -- that every responsible Republican has denounced that.

(CROSSTALK)

KRISTOL: So I -- I -- well, you can disagree, but Rick Perry sat here and just did it.

CASTRO: Look at the quotes. That's one guy. You've got about 20 people running.

KRISTOL: Jeb Bush did it. Now, maybe I -- look, you don't respond...

STEPHANOPOULOS: Jeb Bush...

(CROSSTALK)

KRISTOL: -- to everything everybody says in a campaign.

(CROSSTALK)

KRISTOL: -- I haven't noticed anybody embrace those remarks. Quite the opposite.

STEPHANOPOULOS: Bill Kristol says that the Republicans need Trump voters.

What is Hillary Clinton going to do about all those Bernie Sanders voters?

GEARAN: Bernie Sanders is giving Hillary Clinton a pretty serious headache on a couple of fronts right now. He's drawing much, much larger crowds than she is, much more enthusiastic crowds. People are saying things at Bernie Sanders rallies that you just don't hear people saying with the same level of enthusiasm and verve at Hillary Clinton rallies.

And he raised a respectable $15 million. Yes, she raised $45 million, which -- which squashes him, but he wasn't even really trying. I mean she went to nearly 60 fundraisers and he went to two or three.

It's a -- it's a very -- he is doing something that they knew was going to happen to a degree, but probably not by him and probably not now.

STEPHANOPOULOS: So how do they handle the threat?

CASTRO: Well, I mean I think that -- that Hillary Clinton is not taking this nomination for granted. And early on, before there was real competition, people were complaining about a coronation. Well, it's clear there's no coronation now, that there is a legitimate competition.

And I think she's going to take that in stride. And at the end of the day, I think this can only be good for Democrats, because you have more than one person energizing that base.

GEARAN: When does it stop being good for her, though?

I mean at -- at their -- a little j a little competition is -- is a good thing, you're right.

(CROSSTALK)

GEARAN: It takes away the coronation argument. It neutralizes it to some extent. It actually also probably helps her raise money, to an extent.

(CROSSTALK)

GEARAN: But at some point...

(CROSSTALK)

KRISTOL: -- she has -- Bernie Sanders has more individual voters at this stage than Barack Obama had in 2007. I mean, he's being underestimated and incidentally, aren’t there (ph) some Democratic debates. We've been talking about the Republican debates, which 10 will make it. I think the first debate is early August, isn't it?

Will Hillary Clinton not have to debate Bernie Sanders?

(CROSSTALK)

GEARAN: Oh, no, no.

(CROSSTALK)

COLE: -- Democratic debates...

(CROSSTALK)

CASTRO: I’m really looking forward to that first debate.

(CROSSTALK)

KRISTOL: And I’m looking forward to Bernie Sanders pointing out on the stage to Hillary Clinton that she defended the deregulation of the banks, she voted for the Iraq War...

COLE: Yes.

KRISTOL: -- she's very close to Goldman Sachs. This is going to be a fun Democratic debate.

CASTRO: She's -- she's still up by 22 points. I suspect that that will get within single digits, that it will be a competition. But I think ultimately Hillary Clinton will be the nominee.

(CROSSTALK)

COLE: But he’ll pull the entire Democratic Party well to the left.

(CROSSTALK)

CASTRO: And Trump is pulling them well to the right.

(CROSSTALK)

GEARAN: -- that's going there.

STEPHANOPOULOS: We've got to take a quick break.

When we come back, two major stories unfolding overseas, the nuclear negotiations with Iran, the financial crisis in Greece. We're going to analyze all the latest.

And we'll work ahead to tonight's finals in the Women's World Cup, which brings us to our Powerhouse Puzzler. The U.S. last won in 1999 with this penalty kick right here.

Who knocked it in and who did the U.S. beat?

Be right back with the answer.

(COMMERCIAL BREAK)

STEPHANOPOULOS: So who scored the game winning penalty kick in the 1999 Women's World Cup Final and which team did the U.S. beat?

Let's see what you guys came up with.

(CROSSTALK)

STEPHANOPOULOS: Jessica...

(CROSSTALK)

STEPHANOPOULOS: -- Mia Hamm, China. Brandy Chastain, Mexico. Brandy Chastain, some foreign country. You guys are both half right. Brandy Chastain and it was China. So you were half right...

(CROSSTALK)

STEPHANOPOULOS: -- as well. The game is tonight.

We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MOHAMMAD JAVAD ZARIF, IRANIAN FOREIGN MINISTER: At this 11th hour, despite some differences that remain we have never been closer to a lasting outcome. But there is no guarantee. Getting to yes requires the courage to compromise, the self-confidence to be flexible, the maturity to be reasonable, the wisdom to set aside illusions and the audacity to break old habits.

(END VIDEO CLIP)

STEPHANOPOULOS: That is the Iranian foreign minister echoing President Obama's signature phrase audacity of hope just days ahead of the latest deadline for a deal to reign in Iran's nuclear program in return for relief from sanctions.

And that optimism from the Iranian side likely unwelcome news to our next guest, the leading senate critic of a possible deal. Tom Cotton of Arkansas.

Senator, Cotton, welcome this morning. What do you make of that optimism from the foreign minister of Iran?

SEN. TOM COTTON, (R) ARKANSAS: George, it's good to be on with you.

Iran is an anti-American terrorist sponsoring outlaw regime that's killed thousands of Americans from Beirut to Iraq to Afghanistan. And that video that Javad Zarif, their foreign minister, posted over the weekend with his smug, condescending tone, shows just how far down the path we've gone towards Iran's position.

Iran was negotiating from a position of weakness. And this is not just two businesses negotiating together, this is not like Russell Wilson and the Seattle Seahawks trying to reach a contract that makes everyone happy. Iran should have faced a simple choice: they dismantle their nuclear program entirely, or they face economic devastation and military destruction of their nuclear facilities.

As that video shows, they think they're negotiating from a position of strength and that they hold all the cards.

STEPHANOPOULOS: He goes on to say that those like you who believe that Iran will submit to economic and military coercion are delusional?

COTTON: If that's the case, they wouldn't have come to the negotiating table to begin with in November. It was actually both the fact of sanctions in 2013 and the threat of even tighter sanctions that drove them to the negotiating table. That's why we shouldn't have let up those sanctions. We should have insisted on the very simple terms that President Obama himself proposed at the outset of this process.

Iran dismantles its nuclear program entirely and then they will get sanctions relief.

STEPHANOPOULOS: You know, some of President Obama's former advisers echoed at least some of your concerns, but they say that if you get a deal that actually provides for inspections of Iran's military sites that actually holds up on any sanctions relief until it proves that Iran is meeting the terms of the deal, that it will be a good deal, that it will give the United States and the world about 10 to 15 years of breathing space.

Why isn't that good enough?

COTTON: Well, George, it is very inevitable that some of President Obama's own former advisers have begun to walk away from the proposal that he's made. If, in fact, those terms were met, if we had any time, anywhere inspections, if there was no sanctions relief until there was long-term demonstrable performance on Iran's part, if they fully answered all the past work they've done to weaponize their nuclear program, then that might be a better deal, but that's not the deal we're going to reach and it also doesn't address the concessions that have already been made like letting them keep their underground fortified bunker, or letting them keep their centrifuges and a stockpile of uranium, letting them keep their ballistic missile program, letting them keep their American hostages and letting them continue to foment terrorism all around the world and destabilize the Middle East.

STEPHANOPOULOS: Finally, senator, you said that U.S. military strike against Iran could succeed in pretty short order like President Clinton's strike against Iraq back in 1998. But isn't Iran in a better position to retaliate than Saddam Hussein in 1998? And aren't you at all worried that striking out against Iran will actually strengthen our threat: ISIS.

COTTON: No, George. It's not the first choice, it's never the preferred choice, but military force does have to remain an option if our diplomacy is going to be credible. President Obama himself said in almost condescending tones just a few months ago that we spend $600 billion a year on our military, Iran only spends $30 billion a year. The clear implication is the fact of the matter that we have unique capabilities and we can destroy Iran's nuclear facilities and their command and control facilities, and all of our allies in the region wish we would take a more forceful position and keep that military option on the table because it would result in a better deal.

STEPHANOPOULOS: Senator Cotton, thanks very much for your time this morning.

COTTON: Thanks, George.

STEPHANOPOULOS: Turning now to the senior Democrat on the Senate foreign relations committee Ben Cardin. Senator, thank you for joining us this morning.

You just heard Senator Cotton right there saying he doesn't believe that the administration can reach an acceptable deal. Have you given up hope?

SEN. BEN CARDIN, (D) MARYLAND: George, first, it's good to be with you. The -- if they reach an agreement, and they're pretty close, it will be judged by the terms of the agreement. Our objective is to prevent Iran from becoming a nuclear weapon state.

The best option is a strong agreement. We'll have a chance I hope soon to see that agreement.

STEPHANOPOULOS: So what's our bottom line on what that agreement has to contain?

CARDIN: Well, it's got to give enough time that we can, through inspections, determine whether Iran is complying with the terms of the agreement. It's got to be comprehensive. It's got to prevent Iran from any steps towards producing a nuclear weapon. That means you have to have full inspections, you have to have inspections in the military sites. You have to be able to determine if they use covert activities in order to try to develop a nuclear weapon.

You have to be able to leverage the sanction relief to the actual progress that they are making. We need to know the history of their nuclear program, so that we have a baseline moving forward.

These are all critical terms that are -- must be in an acceptable agreement.

STEPHANOPOULOS: But as you know, Secretary Kerry has indicated, for example, on one of those terms that it may not be necessary to have a full look back at the Iranian nuclear program.

CARDIN: I think you have to have a look back, whether they have to acknowledge what they did in the past is what I thought Secretary Kerry was talking about.

But the inspectors need to know what has taken place in the past so they have a baseline moving forward.

So we need to interview, we need to know their military dimensions, that's going to be necessary in order to be able to have effective oversight on Iran's programs.

STEPHANOPOULOS: Depending on when and if this deal gets done, congress will have either 30 or 60 days to review the terms of this deal. Are you confident that the administration is going to be able to send a deal to you that will pass muster with the congress if, indeed, they do reach an agreement?

CARDIN: It depends what's in that agreement. The best option is a strong agreement, but congress will do an independent oversight, that's one of the reasons why I was very proud working with Senator Corker that we got unanimous support in our committee and near unanimous support in the congress for congressional oversight. So we'll have a chance to review this agreement. We'll be able to see the annexes. We'll be able to see whether in fact we have open inspection, whether the sanction relief is commensurate with the progress that Iran has made to give up their nuclear weapon program. What type of research is allowed to go forward. All that information will be available to congress so that we can properly evaluate and decide what actions, if any, will be appropriate for us to take.

STEPHANOPOULOS: Senator, thank you very much for your time this morning.

CARDIN: Thank you.

STEPHANOPOULOS: When we come back, the world watching Greece today, as voters struggle with an economic crisis that could hit home everywhere. We talk to the Greek finance minister and Nobel Prize winning economist, Paul Krugman, next.

(COMMERCIAL BREAK)

STEPHANOPOULOS: We're going to turn now to the crisis in Greece. Officials there warn that banks could run out of cash as early as tomorrow after the country defaulted this week on its massive debt load.

And voters at the polls right now to decide whether to accept tough conditions tied to an international bailout.

The future of the Greek government, a united Europe and U.S. and global stocks all at stake.

And ABC's Alex Marquardt is on the scene in Athens -- good morning, Alex.

ALEXANDER MARQUARDT, ABC NEWS CORRESPONDENT: Good morning, George.

Polling stations all across Greece like this one are filling up as the day goes on. Millions of Greeks expected to turn out to vote today.

The country could not be more divided over this historic referendum that could impact Greece's standing in the European Union, which currency it uses, and, of course, the global economy.

All week, we've seen desperate and chaotic scenes after the banks were closed, but if they didn't run out of money, there have been endless lines at ATMs, where customers were only allowed to take out $67 a day.

The government has encouraged citizens to vote no to the proposed international bailout plan, calling the increased austerity measures a humiliation and a form of economic terrorism.

But others are warning that a "no" vote could lead to financial chaos and collapse and might create ripple effects all around the world.

So a dramatic day here, George, and whichever way this vote goes, there will be a very bumpy road ahead -- George.

STEPHANOPOULOS: There certainly will.

OK, Alex, thanks very much.

We're joined now by the Greek finance minister, Yanis Varoufakis.

Welcome, Mr. Minister.

You've promised to resign if the Greek people vote "yes" to Europe's conditions.

Do you think you're going to have to follow through on that promise?

YANIS VAROUFAKIS, GREEK FINANCE MINISTER: We had a very radical idea -- ask the Greek people to deliver a verdict -- do they want us to implement this agreement, which we considered to be non-viable, or do they want us to carry on negotiating, to be empowered by them to do so? of course, if they say yes, we are unreconstructed democrats. So we are going to respect it. That doesn't mean that I am going to be the finance minister that signs on the dotted line of an agreement which I have told the Greek people is not viable.

STEPHANOPOULOS: But if there's a no, sir, the Europeans have warned they can't reach a deal with you and bank officials are saying there's not going to be any money left in the banks by late tomorrow or Tuesday if that's the case.

And how can you put together a deal after a "no" vote?

VAROUFAKIS: Oh, I believe that the only way of putting together a viable deal, a deal which is mutually beneficial for us and for Europe and for the rest of the -- the global economy, for that matter, is with a no.

The reason why the banks are running out is -- it has nothing to do with the situation facing the banks. This is a politically engineered liquidity crisis. The European Central Bank got its margin orders from the Euro group, from our negotiating partners, to switch off liquidity. And this is why there -- there is no money in the banks. The moment we have an agreement with our partners in the Euro group, the liquidity will be switched on again.

So the question is, are we going to establish common ground between ourselves and the institutions of the -- the Euro group -- in the interests of everyone?

And I'm saying that where there is a will, there is a way. There is so much to lose for both Greece and for its creditors if we fail, and so much to gain if we don't fail.

STEPHANOPOULOS: They're saying there's no way it can be done, that Greece will have, at least temporarily, have to leave the euro.

How do you expect to deal with people after you've called them terrorists?

VAROUFAKIS: Well, anybody who talks about a temporary withdrawal from the monetary union is either disingenuous on purpose or doesn't understand how a monetary union works. The moment you have any kind of departure from the monetary union, the monetary union ceases to be a monetary union.

STEPHANOPOULOS: Finally, sir, you're talking to an American audience.

Can you assure the people watching here today that whatever happens in Greece today is not going to rock the markets here and cause a worldwide financial crisis?

VAROUFAKIS: It may very well be that in the short run, the markets don't get rocked. But, George, let me say this to you. The Eurozone's approach to the 5-year-old crisis of the last five years has undermined the capacity of the global economy to recover post-2008. Indeed, I have no doubt that both the Federal Reserve in Washington, DC and the U.S. Treasury are looking at what Europe is doing with a great deal of trepidation, because the austerity drive that has begun in Greece and is spreading everywhere in Europe is turning the Eurozone into a mercantilist fiend, something far, far worse than China ever was, with a trade surplus which is gigantic, with a balance of payments surplus which is dynamite, a powder keg on -- in the foundations of the global economy.

And I think the United States have a great interest in seeing that the austerity drive that started here in Greece and saw that we have a rational economic policy, not just for the sake of Europe, but for the sake of the global economy.

STEPHANOPOULOS: Mr. Minister, thanks very much for your time this morning.

VAROUFAKIS: Thank you, George.

STEPHANOPOULOS: Let me bring in now Paul Krugman, Nobel Prize winning economist from the "New York Times" and our business correspondent, Rebecca Jarvis.

And, Paul, let me pick up where the minister left off right there, saying the United States has an interest in this. Bring it home to people here. Try to break down what's at stake with this Greek financial crisis.

PAUL KRUGMAN, "NEW YORK TIMES": OK. Greece is not a big economy. It's about the size of metropolitan Miami.

So if you asked how much direct spillover there is from whatever happens in Greece, not that much?

If you actually asked even what it does to the rest of the European economy, directly, not that much.

But if Greece falls out of the Eurozone, if Greece falls out of the European Union, God knows what happens, then we're saying that this -- the euro -- Europe, which is our main counterpart, is -- is an economy as big as America's, is coming apart, that everything that was supposed to be irreversible about the movement toward a closer union is, in fact, quite reversible.

So there's a lot at stake, mostly because of the example Greece may be setting.

STEPHANOPOULOS: So what does that mean?

If Greece falls out and your threat of Spain falling out, of Portugal falling out?

KRUGMAN: That's right. And also, this -- there's a general sort of delegitimization. I mean in the end, a lot of this is political. What you have is a European elite which has been able to say we know what we're doing, trust us, we're leading Europe to a future of prosperity and democracy. And instead, it's starting to look more and more like they have no idea what they're doing, that they are undermining governments that don't vote the way they like.

And that's got to be a terrible thing. It's hard to know, exactly, you know. But if -- if you like, the road from here, if everything goes wrong, is a road toward possibly a far right government in France. It's a road toward collapse of Italian -- the Italian political situation, although probably Spain would be the first country on the firing line, where they have a movement that's not that different from what -- from the Tspiras government (INAUDIBLE)...

STEPHANOPOULOS: And, Rebecca, you've seen some nervousness in markets this week, a big drop at the beginning of the week. But then at the end of the week, it seemed the markets said, oh, not a big deal at all.

Why the complacency so far?

JARVIS: Well, first of all, this has been going on for five years. So we've had five years to question what will happen this weekend. And it's been a kicking can down the road situation.

But ultimately, I think the market expects to see the vote today as a "yes" vote. That is why you saw, after that first start of last week, a very nervous start. You started to see the lines, the pressure that the Greek people are facing, how bad it is getting in the streets.

They’re running out medicine, they’re running out of money, they’re running out of gas. The people are, according the markets, going to vote in this yes.

STEPHANOPOULOS: What if they don’t?

JARVIS: And if they don’t, see, that’s where we see the gap lowered. The immediate gap lower 1-2 percent is what most Wall Street analysts are expecting, that the market tomorrow would be very uncertain. But this also brings up, as Paul pointed out, a much bigger question going forward, because you have Spain, Italy, Ireland, Portugal, all dealing with their debt scenarios.

And worldwide there’s $180 trillion in debt worldwide. That’s a question for the markets to consider, and it’s a much bigger question for the markets to consider going forward, because what does that debt mean for our future growth? It’s a claim on the future growth.

STEPHANOPOULOS: So lay it out here.

KRUGMAN: Wow. The problem is that the whole European strategy has been one -- do more austerity and things will solve themselves. And it keeps not working. In effect, Europe is saying this time it really will work if you accede to our demands.

In many ways, it would be a good thing or at least a possible way out if Greece does leave the euro. I mean, if Greece still had its own currency we would say for sure devalue it. Now we’re saying, well, you can’t do that because you don’t have your own currency. Maybe they should. Otherwise, god knows, this goes on forever and ever.

And by the way, I think that people are way too complacent about the ability of Europe to contain. Everybody thinks -- everybody thinks that Mario Draghi at the European Central Bank has infinite power to contain the effects of a Greek no vote, and I don’t think that’s actually true.

STEPHANOPOULOS: And the vote, polls close in just a few hours.

Thank you both very much.

KRUGMAN: Thank you.

STEPHANOPOULOS: Coming up, the U.S. women’s soccer team hoping to win its first World Cup since 1999. ESPN’s Julie Foudy was on the field that day. She’ll join us live after this from our ABC station.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It is Japan’s World Cup.

(END VIDEO CLIP)

STEPHANOPOULOS: And that was the moment that cost Team USA the World Cup against Japan back in 2011. Today, the U.S. women’s soccer team looking for payback. The World Cup final rematch just hours away in Vancouver, and ESPN’s Julie Foudy, a World Cup veteran, is here with a look ahead.

Julie, what do you expect tonight?

JULIE FOUDY, ESPN: Well, George, I think the U.S. is in good shape, actually, after a little bit rocky start to this tournament. They struggled a little bit offensively but they’ve been riding a really good defense. And everything is finally coming forward. They’re getting their offense in line; they’re looking good; they’re confident. We spoke to a lot of the teammates yesterday and they said, look, we’ve got one more game. This isn’t done yet. We know it’s been 16 years since our last World Cup. We got one more game to change that and bring home the World Cup title.

So I feel that, I think they’re very confident.

STEPHANOPOULOS: They seem confident. As you point out, their defense has been so solid all throughout this tournament, and of course the chance of a rematch against Japan, the chance for some sweet revenge.

FOUDY: Oh my gosh, and it’s all they talk about. Abby Wambach, of course, the star of the scene, the greatest goalscorer in the history of women’s soccer, she has said, look, the game happened on July 17, 2011. It was four years ago. I know the date. I know everything about it. She doesn’t remember another date she’s ever played in any other game, but she remembers that, and it’s because of the way they lost. Up twice against Japan in the last World Cup final. They lose the first lead with nine minutes to close it out. Lose the second lead three minutes away from hoisting that World Cup. And so they then go onto penalty kicks, of course to lose it.

So this is something that has burned and sat with them for four years. And they’re looking forward, very much so, to a rematch with Japan.

STEPHANOPOULOS: I know you’re looking forward to the game as well. Thanks for joining us this morning.

We’re back with more roundtable after this.

(COMMERCIAL BREAK)

STEPHANOPOULOS: And we are back now with the roundtable. I want to take a look at the week coming up.

I want to start with you, Congressman Tom Cole, the headline you're watching for?

COLE: I think the president is going to sign the deal with Iran, and I think congress is going to erupt in opposition.

STEPHANOPOULOS: Erupt in opposition?

COLE: Absolutely.

CASTRO: I think also whether we have a deal with Iran or not, I think there will be one, and I think hopefully congress will take some time to actually consider it.

STEPHANOPOULOS: The question is will they have 30 or 60 days.

Anne Gearan?

GEARAN: I think they will probably have 30, because I think they will get a deal. And I think that the Republicans are going to accuse Obama of putting legacy ahead of U.S. and Israeli security. You're right. It will erupt.

KRISTOL: That'll be the big story of the week, I think. Though, Greece getting out of -- voting no would be interesting also. And I do -- I think look at Ben Cardin just in your interview. The Democrats are not solid behind this deal. And the stipulations he's laying down about inspections, but I say the key objection is going to be that might swing the Cardins, the moderate Democrats, is the signing bonus, $100 billion right away released to Iran, a regime that Hillary Clinton just said yesterday continues to sponsor terrorism, has committed to the destruction of Israel.

STEPHANOPOULOS: You're saying that's going to come before any kind of interim period before...

KRISTOL: Right. That will happen in the next six months before we know whether they're complying with the deal, before a year or two or three years from now where we could give it out in a dole. They get a huge signing bonus, as its called, up front. And I think that will be a big problem for Democrats to vote for.

STEPHANOPUOLOS: Congressman, I was struck by Senator Cardin as well saying he's hoping there's going to be a good deal he can sign...

CASTRO: Yeah. I think, George, people are trying to be thoughtful about this, which is what we should be. And I'm confident that the president is not going to enter an agreement where you can't inspect military bases and other places of nuclear enrichment, for example, and also a bill -- an agreement that would list sanctions all at once. I'm confident that's not going to happen.

COLE: Well, this deal has been changing publicly since April in the direction of Iran. I think the president missed opportunities when should have literally walked away from the table. And if you look at where we're headed, the times just simply aren't hopeful. I mean, I would seriously doubt a majority in either house would favor it. And I think he has the chance if he vetoes a bill being overridden, certainly in the house.

CASTRO: But this is the problem with congress today is that people are saying no before they even see the terms of the agreement, that's what is so broken about congress.

STEPHANOPOULOS: But you don't even have Democrats saying yes.

KRISTOL: Yeah, I think we're allowed to discuss what has been publicly floated as the negotiating positions. We don't have to all be quiet until the agreement is signed and the administration says, OK, 30 days.

CASTRO: But at least keep an open mind as to what the agreement is going to be.

KRISTOL: Well, let's see what the agreement is. Let's see whether Iran doesn't get tens of billions of dollars right away...

CASTRO: Well, but there's much more to it than that, Bill. I mean, you're picking one piece of it. There's so much more to it than that.

COLE: Well, but you've got a president that has been consistently wrong. He was wrong about getting out of Iraq. He was wrong about what happened in Yemen. And he was wrong about Libya. So, you have a history here going into an agreement that's hard to believe he's suddenly going to get it right.

STEPHANOPOULOS: And again, what about this -- you covered the State Department for a long time as well, what about this line of thinking that Secretary Kerry is too eager for a deal?

GEARAN: I think Secretary Kerry has been the front line negotiator here. So whether it's going to be a good deal or a bad deal, he's going to get the credit or the blame as well as Obama. But I think the negotiating between he and the Iranian foreign minister, they know one another really well now. They've been doing this a long time. It -- to your point of whether the president through Kerry, should have walked away, I think that's something that we'll definitely be debating when we do see the final terms of the deal.

But, they're at the end. They know exactly how far the other one has to go. I think at this point it really is a question of whether the leaders back home are giving the negotiators are enough room to actually come to that agreement. They know how far they can go.

STEPHANOPOULOS: And the supreme leader in Iran, Mr. Khamenei, has laid out so many red lines that so far appear not to meet the bottom lines that the United States could accept.

GEARAN: But, they wouldn't still be at the table if there wasn't some room, right?

STEPHANOPOULOS: We will see. The first deadline is Tuesday. Who knows if that'll be met.

Thank you all for joining us this morning.

And now we honor our fellow Americans who serve and sacrifice.

In the month of June, two service members were killed supporting operations in Afghanistan and Iraq.

And that is all for us today. Thanks for sharing part of your Sunday with us. Check out World News Tonight. And I'll see you tomorrow on GMA.

END