Interview with George Stephanopoulos of ABC's "Good Morning America"

George Stephanopoulos: Mr. President, thanks for doing this.

The President: Thank you so much.

George Stephanopoulos: Looking at that clock, one year ago, you were just about to take the Oath of Office.

The President: Yes.

George Stephanopoulos: And now you get this anniversary present from the voters in Massachusetts.

The President: [Laughter]

George Stephanopoulos: Robert Gibbs was saying that you were surprised and frustrated by the vote. Is that accurate?

The President: Well, I think not last night, but certainly I think a lot of us were surprised about where this was going, about a week ago.

George Stephanopoulos: So you saw it coming by then?

The President: By that time, we did. And here's my assessment of not just the vote in Massachusetts, but the mood around the country.

The same thing that swept Scott Brown into office swept me into office.

People are angry, and they're frustrated. Not just because of what's happened in the last year or two years, but what's happened over the last eight years.

You've got really hard-working folks all across the country, who have seen their wages flat line and their incomes flat line.

They feel more secure than ever. Then suddenly you've got this bank crisis in which their 401Ks are evaporating, their home values -- their single-biggest investment -- is collapsing.

And here in Washington -- from their perspective -- the only thing that happens is that we bail out the banks.

George Stephanopoulos: But you're in charge, now.

The President: No -- well -- absolutely. No, keep in mind the point that I'm making here.

It was the right thing to do for us to salvage the financial system, and I make no apologies for that, at all. But we knew at the time how politically toxic that was.

What it gave people a sense of is, "We're spending all this money, but I'm not getting any help."

And, "Gosh -- I wanted Obama to come in there to start making sure that I was getting help; not the big special-interest and the institutions."

Now if I tell them, "Well, it turns out that we will actually have gotten TARP paid back and that we're going to make sure that a fee's imposed on the big banks, so that this thing will cost taxpayers not a dime," that's helpful. But it doesn't eliminate the sense that their voices aren't heard, and that institutions are betraying them.

And I think that's been expressing itself all year. And they've gotten increasingly frustrated over the course of the year.

So I take complete responsibility for the fact that -- A -- we had to salvage a financial system that could have made things much worse. We had to take the steps that we did at the beginning of the year, in order to stabilize the economy.

And I am actually glad to see that the economy's now growing again, and we have the prospect of a much better economy in 2010. But that doesn't negate the anger and the frustration that people are feeling.

George Stephanopoulos: But a lot of the Republicans say that the anger goes beyond the bailout. The financial bailout.

I was talking to Michael Steele this morning -- the Republican National Committee Chair. He says it's repudiation of your entire agenda.

The President: Well, I think if he's suggesting the people voted against credit-card reform, so that credit card companies can't take advantage of people, or prevention of housing fraud reform, or that they were voting against national service, or they were voting against the 4 million children who have health insurance now because of the steps that we've taken. . . I don't think that's a plausible point.

George Stephanopoulos: He's probably talking about healthcare.

The President: Well, and if he's talking about healthcare, then I think what I'd say is, "Talk to all those people out there right now who have lost their healthcare during the course of this year because they've lost their jobs." Or all the small businesses have seen the premiums that they're paying going up 20-25 percent.

The reason I tackled healthcare wasn't because this was my personal hobbyhorse. The reason I tackled it was during the course of the campaign, I traveled all across this country and I kept on hearing heart-breaking stories about families who were bankrupt because they got sick. If they had health insurance, suddenly insurance companies were doing things that were just plain wrong, and were leaving folks in an extremely vulnerable position.

And I was talking to businesses who said this was unsustainable. And, by the way, when I got here and I looked at how we were going to get control of our long-term debt, I realized that there was no way for us to control our long-term debt unless we reformed how our healthcare system works.

So there is no doubt that that is something that we had to do. Not because of what I hear in Washington, but because of what I've heard out in the country.

George Stephanopoulos: But even your allies are saying you're going to have to listen to the message of the voters in Massachusetts? Listen to Evan Bayh, yesterday.

He says, "If you lose Massachusetts," and that's not a -- and that's not a wakeup call, "there is no hope of waking up."

He says basically Democrats have to reach out -- especially independents and moderates. Slow down the agenda. Because Americans just aren't buying what the Democrats are selling."

The President: Well, look. I have tremendous respect for Evan, and he comes from a very tough state in Indiana.

George Stephanopoulos: He was on your short list for Vice President.

The President: Well, he was -- which is why I say I've got a lot of respect for him.

And what is absolutely true is, during the course of this year, what you have is a situation in which we've got to take a lot of steps quickly that we know are unpopular, but were necessary.

And if you ask the average person what was our stimulus package, they'll tell you, "The bank bailout."

And I can say, "Well, no -- actually that started before I was sworn in, and we've managed it very well." But it doesn't negate that sense on peoples' part that nobody is looking after them in an extremely tough situation.

So the reason I say that we are not surprised by what happened in Massachusetts is because I'm frustrated, too.

I'm frustrated by the fact that over the last decade, we have not seen the kind of progress for middle class families that are needed. That's what I promised to deliver in the campaign.

It's not something that I believe we can get done in a year. But it is something that I think we are starting to make progress on.

George Stephanopoulos: But you also made a fundamental decision in this first year, to push through the bulk of your agenda right away. Some would say, "Focus instead on the economy. Our system can't handle too much."

You took that on in your inaugural address. You said then, "There are some who question the scale of our ambitions -- who suggest that our system cannot tolerate too many big plans."

Looking back now, don't those critics have a point?

The President: Well, the question is, "What could we not have done?" And I think that a lot of people would say, "Health care's the one thing you didn't have to do."

Most of the other issues that we took on were not ones that I chose. I didn't campaign on saving the financial system.

Here's the problem, though. If we didn't take on healthcare, then when were we going to take it on? And if we don't take it on, then when are we going to say to families when -- 2 years from now; 3 years from now; 4 years from now -- their premiums have gone up 30-40%? And have eaten into their wages. And in some cases, their health care's been dropped altogether

What am I going to say to the small businesses who just decide, "We can't afford to provide healthcare to our employees?"

And what am I going to say to the American people when we start talking seriously about how we get our medium- and long-term deficits under control?

So we've got big challenges. Fundamental challenges. Not just around healthcare, but around the fact that we have an energy system that is archaic and involves us sending billions of dollars to other countries.

We've got an education system that's starting to lag behind. And we've got a financial regulatory system that is completely inadequate to control the excessive risks and irresponsible behavior of financial players all around the world. At some point, we've got to take those on.

Now part of the problem we've got is that a process in Washington to actually solve problems, to talk about them in honest ways, to think about people first and not the special interests and the lobbyists who have disproportionate power here. That system is broken and when people, during the course of us taking on one of these problems like health care locks this process, it doesn't make them feel -- it doesn't make them feel real optimistic.

George Stephanopoulos: But you're not on the campaign trail, now. You're right here in the White House. You're the head of this system. You promised transparency, putting the health care debates on C-span. It didn't happen. People said he promised to get rid of earmarks. They look at the health care bill and see all these carve outs for Nebraska, for Louisiana. They say you're not living up to your promises.

The President: Well, look, there's no doubt that when I look back in the course of this year, what I'm constantly balancing is how do I move on these big agendas and at the same time, try to reform a system that has a lot of bad habits built up into them. So am I satisfied with the progress that we've made on changing how Washington works, absolutely not.

George Stephanopoulos: Could you become complicit?

The President: Well, I think that if I had to make the same choices this year about do we have to get a strong economic recovery package passed, even though that means that there are going to be some things that people stick in there at the last minute that I don't like. Do we have to make sure that we are saving the financial system so it doesn't collapse, even though how it was originally structured was not my preference. Do we have to tackle health care and do I believe that the end product of insurance reforms that we've been fighting for for decades, essentially a patient's bill of rights on steroids, that makes sure that people don't lose their insurance when they get sick and make sure that kids can stay on their parents' health insurance until they get their own insurance. Was fighting for those things worth it, even though there are some compromises that have to be made along the way, then I would say yes.

George Stephanopoulos: But it sounds like you're saying -- no second thoughts on your fundamental strategy?

The President: Well look, what I would say is that first of all, I wish we had gotten it done faster because I think that if we had gotten health care done faster, people would have understood the degree to which every single day George, health care is part of a broader context of how am I going to be able to move the middle class forward in a more secure and stable way, and I think that what's happened is, is over the course of this year, there's been a fixation, an obsession in terms of the focus on the health care process in Congress that distracted from all the other things that we're trying to do to make sure that this economy is working for ordinary people.

George Stephanopoulos: Is that going to continue, though? You're now in a situation, coming out of Massachusetts, you don't have 60 votes in the Senate right now. What is the strategy on health care going forward?

The President: Well, here's my belief, that this is not a problem that's going to go away. This was a problem whether or not we did health care this year. If we hadn't taken on health care, then what people would be asking right now is, why is it having promised to do something about that during the campaign, that we're seeing millions of people who have lost their health care and their premiums go up.

George Stephanopoulos: But they're saying now, they want your health care plan to go away. It's just not popular; the majority are opposed.

The President: Well, here's what I know is that when they actually find out what's in the proposals for insurance reform, for making sure that we're making health care more affordable, those specific provisions are actually very popular.

George Stephanopoulos: You made that speech in August.

The President: Well, and one of the things that I have learned in Washington is you have to repeat yourself a lot because . . . because unfortunately it doesn't penetrate. But I am determined to make sure that the issues that are making middle class families, ordinary Americans, less secure and less stable, are fixed.

George Stephanopoulos: So how do you do it now? This strategy that a lot of people have talked about getting the House to pass the Senate bill. Speaker Pelosi yesterday seemed to say that this was kind of a non-starter.

The President: Well, here's , here's one thing I know and I just want to make sure that this is off the table. The Senate certainly shouldn't try to jam anything through until Scott Brown is seated. People in Massachusetts spoke. He's got to be part of that process. So . . .

George Stephanopoulos: Number one . . .

The President: That, that's point number one. I think point number two is that it is very important to look at the substance of this package and for the American people to understand that a lot of the fear mongering around this bill isn't true. I would advise that we try to move quickly to coalesce around those elements of the package that people agree on. We know that we need insurance reform, that the health insurance companies are taking advantage of people. We know that we have to have some form of cost containment because if we don't, then our budgets are going to blow up and we know that small businesses are going to need help so that they can provide health insurance to their families. Those are the core, some of the core elements of, to this bill. Now I think there's some things in there that people don't like and legitimately don't like. If they think for example that there's a carve out for just one or two particular groups or interests, I think some of that, clearing out some of that under brush, moving rapidly. . .

George Stephanopoulos: So start again with a smaller core package.

The President: Well, look, I'm not going to get into the legislative strategy. First of all, my job is to. . . as president, is to send a message in terms of where we need to go. It's not to navigate how Congress&

George Stephanopoulos: It's to set direction.

The President: It's to set direction and the direction I think that has to be set is to identify those core elements of this package and to get that done. At the same time as we recognize that what I've been doing since day one, I'm now here a year -- every day what I've been worrying about is how do I get this economy back on track? Now that hasn't always been publicized. It has sometimes&

George Stephanopoulos: Is that your fault?

The President: Well, what I would say is that in this environment, in this political environment, what I haven't always been successful at doing is breaking through the noise and speaking directly to the American people in a way that during the campaign you could do. You know I'd I'd just get, I wouldn't be here and I wouldn't be bogged down with how are we negotiating this provision or that provision of a bill. I could speak directly to people and hear from them about. . .

George Stephanopoulos: But that's going to happen as long as health care is still being negotiated.

The President: Which is which is why I think it's important to go ahead, get something done. I noticed that some of the Republicans are saying well, we actually wanted to do health care. We just didn't want. . .

George Stephanopoulos: Michael Steele said that to me this morning.

The President: Exactly. So now in fairness, I think it's important to remind everybody that part of this process was having conversations with Republicans for months and asking them what exactly they wanted to do and what their solutions were to these problems.

George Stephanopoulos: You going to call them back in?

The President: Well, I think that if they have clear plans, and clear ideas in terms of how to move forward on certain issues, I'm always open to that.

Look, I have every interest in seeing a unified country solving big problems. That is something that is very much in my interest because if that happens, not only do I have a successful presidency, but more importantly the country is successful.

George Stephanopoulos: But we're not there right now. How much of that is your fault that republicans and democrats haven't come together?

The President: You know, we have a political culture that has built up over time that has gotten more and more polarized. My hope was, a year ago today when I was being sworn in, that reversing that process was going to be easier partly because we were entering into a crisis situation and I thought that the urgency of the moment would allow us to join together and make common cause. That hasn't happened. Some of it, frankly, is I think a strategic decision that was made on the side of the opposition that. . .

George Stephanopoulos: But they say you made a strategic decision to hand over your agenda to democratic leaders in Congress.

The President: Well, let me finish -- let me finish the question. The -- I think that some of it had to do with a sense that the best political strategy was to simply say no. I think part of it had to do with the fact that you've got a lot of old habits and ideological baggage in Congress that have built up over time and people just aren't accustomed to working together. I mean, the Senate is a classic example of an institution that works only if people are talking, listening to each other, giving ground. . .

George Stephanopoulos: How do you make that happen?

The President: Well, you know, it is my responsibility to try to reset the tone. And I'm going to have a State of the Union speech and one of my goals, I think, I spoke about this on King's birthday, the fact that I felt disappointed that we had lost some of that sense of common cause that existed a year ago and, that I have not been able to change the tone here in Washington. I am going to keep on trying though. And the reason I'm going to keep on trying is, because if we can't do that, if all that's taken place back and forth between the parties is vitriol and accusations, then what's going to end up happening is that we're going to just keep on in a direction in which families are losing ground and they become further and further disenchanted with the possibilities of politics and government can solve any problems whatsoever.

Now, here's what I'm not going to do though, George, because I think this is very important and it goes to a lot of the questions that you've asked. What we can't do is simply say we're going to stand pat and avoid big problems because they're just too hard politically.

George Stephanopoulos: Stay the course.

The President: That -- that is part of the advice I think that was given last year to me. Was, look, Washington is too polarized, it's too hard, the special interests are too powerful. You can't get a health care bill through because the insurance companies will spend millions of dollars of advertising against it; you can't do energy because big oil is going to be opposed; you can't try to solve the education system because whether it's the teachers' unions or this group or that group, they're going to be disenchanted and you're just going to make your own base angry. I mean, on each of these issues, the conventional political wisdom is don't take it on. Because when you take it on, it gets ugly, people get mad, there's a lot of distortions in the system, and your poll numbers will go down.

George Stephanopoulos: So you'd you make all the same choices today?

The President: and, and. . .aI -- look, have I made mistakes through the course of the year? Absolutely. I mean, I don't think there's been an interview in which I didn't talk about some mistakes. . .

George Stephanopoulos: It's usually about communication though.

The President: . . . about . . .

George Stephanopoulos: It's not about policy.

The President: I don't know how we avoid taking on these big problems. Let me just give you a very simple example, just so you get a sense of why these things are so important.

If you ask the American people about health care, one of the things that drives them crazy is insurance companies denying people coverage because of preexisting conditions. Well, it turns out that if you don't -- if you don't make sure that everybody has health insurance, then you can't eliminate insurance companies -- you can't stop insurance companies from discriminating against people because of preexisting conditions. Well, if you're going to give everybody health insurance, you've got to make sure it's affordable. So it turns out that a lot of these things are interconnected.

Now, I could have said, well, we'll just do what's safe. We'll just take on those things that are completely noncontroversial. The problem is the things that are noncontroversial end up being the things that don't solve the problem. And this is true on every issue. The same thing is going to be true -- we're about to get into a big fight with the banks. Not only. . .

George Stephanopoulos: On that bank fee.

The President: Not only on the bank fee issue, but also because we think it's very important to have a consumer finance regulatory authority that is willing to actually enforce the law so that people aren't getting gauged on ATM withdrawals or they're not getting gouged on their credit cards or their mortgage doesn't have some fine print that comes up and bites them. The banks are adamantly opposed to it. Now the minute we decide to put forward a proposal like that, I guarantee you there are going to be a whole bunch of ads and a whole bunch of talking heads saying this is big government regulation. You know, part of the Obama agenda, et cetera. Well, yes. What we are saying is, is that banks shouldn't be able to take advantage of consumers and we should have somebody who can actually enforce that. But it's going to be a fight and it's going to be controversial

George Stephanopoulos: We're just about out of time, I just want to wrap up a couple things.

You're not advocating that the House pick up the Senate bill.

The President: I think it is very important for the House to make its determinations. I think, right now, they're feeling obviously unsettled and there were a bunch of provisions in the Senate bill that they didn't like, and so I can't force them to do that. Now I will tell you, and I've said this before, that the House and the Senate bill overlap about 90 percent.

George Stephanopoulos: Right.

The President: And so, it does seem to me that there should be a way of, after all this work and all this pain, there should be a way of taking what's best in both bills and going ahead and getting that done.

George Stephanopoulos: Let me ask you about Haiti . Our Martha Raddatz had a report yesterday, where she showed the U.S. military being greeted by shouts of joy on the ground in Haiti . And what was interesting about it, the people there thought the U.S. government had come to take over and they were really happy about it. Martha Raddatz described it as a "please occupy us" atmosphere.

Is that where we're headed?

The President: No. We are being very careful about working with the Haitian government. We're being very careful about working with, uh,  the United Nations, which already had peacekeeping forces on the ground, to deal with the immediate emergency, search and rescue, and relief. There's going to be a longer-term agenda, which is how do you reconstruct a nation that was already incredibly impoverished. . .

George Stephanopoulos: It's been flattened.

The President: . . . that's now been flattened, and a government that -- you know, basic records have been destroyed. I mean, imagine if suddenly Washington just collapsed. Now, there may be -- you know, some people would like that. . .

George Stephanopoulos: (INAUDIBLE)

The President: That's right. But the truth is, is that just the basic instruments of government in that country are gone. We've got to help Haiti stand back up.

George Stephanopoulos: Can we afford it?

The President: Well, I think we can't afford not to do it because Haiti is our neighbor. I think the world looks to us as the world's sole superpower, even though sometimes they complain about us, even though they snipe at us, deep down I think they understand that to those to whom much is given, much is expected. And I think the world understands that we have some unique capacities, in terms of helping out people. I want to make sure that when America projects its power around the world, it's not seen only when it's fighting a war. It's got to also be able to help people in desperate need. And ultimately that will be good for us. That will be good for our national security over the long term.

George Stephanopoulos: Finally, I assume this has been about the most packed year of your life.

The President: It has.

George Stephanopoulos: The most fulfilling?

The President: Yes. And let me just sort of share with you some general reflections about this year. When I was sworn in, we didn't know if the financial system was going to collapse. We weren't sure how bad the job losses were going to be. They turned out to be much worse than anybody had anticipated. There were reports of a possible terrorist attack the day of the inauguration.

The amount of uncertainty was enormous. And walking through that door, you know, we immediately were confronted with just stacks of tough decisions that had to be made. During the course of this year we've had to make some decisions that were unpopular. We've made some mistakes. I've personally made some mistakes.

But what I can tell you is, a year later, I've never been more optimistic about the possibilities of America. I'm certainly a lot more optimistic than I was a year ago. And the reason is, is this country's shown its resilience. It took a body blow, and yet people are out there still starting businesses, they're still raising families, they're still coaching little league.

And, you know, I get letters, 10 a day from families. And a lot of them are heartbreaking stories. But a lot of them are just saying, you know with all the problems that we have and maybe I disagree with you on something, I'm still praying for you, I'm still optimistic, I still think that we can come together.

If we can get through 2009, as tough a year as it was, where a pandemic flu ranked about eighth on my “to do list,” and ended with a attempted terrorist attack, and then a cataclysm in our neighborhood -- in Haiti . If we can come through 2009 and still not just be standing, but all kinds of good things happening out in the country, then I am very optimistic about where we can go.

What I haven't been able to do yet -- and this was, this was what I was hired to do -- is to close the gap between the values of the American people and the values of Washington, and the values of Wall Street. The values of our big institutions.

These values -- the American people's values are sound. They're right. You know, people take responsibility for their lives, they work hard. They're doing right by their families. Our institutions aren't matching up to those values. And my job over the course of this year has been to see A, if we can just solve the immediate crisis. But now I've got to spend a lot more time just focused on how do we get those things to align.

And, you know, If there's one thing that I regret this year, is that we were so busy just getting stuff done and dealing with the immediate crises that were in front of us, that I think we lost some of that sense of. . .of speaking directly to the American people about what their core values are and why we have to make sure those institutions are matching up with those values. And that, I do think, is a mistake of mine. I think the assumption was, if I just focus on policy, if I just focus on the, the, you know, this provision, or that law, or are we making a good, rational decision here --

George Stephanopoulos: That people would get it.

The President: That people will get it. And I think that, you know, what they've ended up seeing is this feeling of remoteness and detachment where, you know, there's these technocrats up here, these folks who are making decisions. Maybe some of them are good, maybe some aren't, but do they really get us and what we're going through? And I think that I can do a better job of that and partly because I do believe that we're in a stronger position now than we were in a year ago.

That also means, by the way, that we can spread out what we do so it's not so cram packed. It doesn't mean I back off the agenda of health care, or energy, or education, or financial regulatory reform, or dealing with our deficits. But it does mean that it doesn't have to be all on top of the other piled on. And we've got a lot more time to explain to people why we're doing what we're doing. We have a lot more time to answer critics who argue that we're not doing the right thing.

But the bottom line is this -- at the end of this year I can say honestly that not only has this been the busiest time of my life, but I also think that I've never been prouder of the country, and more optimistic about the direction that we can go in the future.

George Stephanopoulos: I'm getting signaled here but how about your family? How was the year for them?

The President: They've been great. That's been a constant that I am stunned by. Is how poised, cheerful, well-adjusted the girls have been. You know, they entered into a new school halfway in the year. They haven't missed a beat. They haven't gotten an attitude, they haven't started acting like any different than they were back in Chicago. And Michelle, I think, has been stellar. And the fact that I have dinner with them every night -- that's been the greatest blessing of the year.

George Stephanopoulos: Mr. President, thanks very much.