GEORGE STEPHANOPOULOS: Mr. President, thank you for doing this. PRESIDENT BARACK OBAMA: Great to see you. GEORGE STEPHANOPOULOS: So just about two weeks ago, exactly at this moment– it looked like you were poised to strike Syria. Took that walk with Dennis McDonough, your chief of staff, went to Congress. And now, two weeks later, you're in negotiations with the Russians. Is that what you imagined then? And are you confident the U.S. is in a better position now? PRESIDENT BARACK OBAMA: Well, we're definitely in d– better position. GEORGE STEPHANOPOULOS: Why? PRESIDENT BARACK OBAMA: Keep in mind that my entire goal throughout this exercise is to make sure that what happened on August 21st does not happen again, that we do not see over 1,000 people, over 400 children– subjected to poison gas– something that is a violation of international law, and is a violation of– GEORGE STEPHANOPOULOS: Are you confident that won't happen again? PRESIDENT BARACK OBAMA: –common decency. Well, I think we have the possibility of making sure that it doesn't happen again. Think about where we were. This event happens, and the initial response is the Syrians act as if they don't know anything about it. At that point, they're not even acknowledging that they've got chemical weapons. The Russians are protecting the Syrians, suggesting that there's no possibility that the Assad regime might have done this. And the inspectors weren't even in yet. And as a consequence of the pressure that we've applied over the last couple of weeks, we have Syria first– for the first time acknowledging that it has chemical weapons, agreeing to join– the convention that prohibits the use of chemical weapons. And the Russians– they're primary sponsors, saying that they will push Syria to get all of their chemical weapons out– out of– out– GEORGE STEPHANOPOULOS: But aren't they still– PRESIDENT BARACK OBAMA: –of the country. So– look, we're not there yet. We don't have– a actual, verifiable deal that will begin that process. But the distance that we've traveled over these couple of weeks is remarkable. And my position, and the United States' position, has been consistent throughout. Which is that– the underlying civil conflict in Syria is terrible. I believe that because of Assad's actions, his response to peaceful protests– we've created a civil war in Syria that has led to 100,000 people being k**ed and six million people being displaced. But what I've also said is that the United States can't get in the middle of somebody else's civil war. We're not gonna put troops on the ground. We can't enforce– militarily, a settlement there. What we can do– GEORGE STEPHANOPOULOS: But in the past, you said he had to go. PRESIDENT BARACK OBAMA: What we can do– what we can do is make sure that the worst weapons, the indiscriminate weapons that don't distinguish between a soldier and an infant, are not used. And if we get that accomplished, then we may also have a foundation to begin what has to be an international process– in which Assad's sponsors, primarily Iran and Russia, recognize that this is terrible for the Syrian people, and they are willing to come, in a serious way, to arrive at some sort of political settlement that would– deal with the underlying terrible conflict– GEORGE STEPHANOPOULOS: And you're– and President Putin has become your unlikely partner– PRESIDENT BARACK OBAMA: Yeah. GEORGE STEPHANOPOULOS: –in this. And, you know, even in this op-ed, which has stirred up a lot of controversy here in United States, he said, “There's every reason to believe that the rebels are the ones who used the chemical weapons.” So does that tell you he's willing to lie to protect Assad? PRESIDENT BARACK OBAMA: Well, nobody around the world takes seriously the idea that the rebels– were the perpetrators of this— GEORGE STEPHANOPOULOS: He wrote it in The New York Times. PRESIDENT BARACK OBAMA: Well, I understand. What I said is nobody around the world takes seriously the idea that the rebels perpetrated this attack. Now what is true is that there are radical elements in the opposition– including folks who are affiliated with al-Qaeda, who, if they got their hands on chemical weapons, would have no compunction using them in Syria or outside of Syria. And part of the reason why we've been so concerned about this chemical weapons– issue is because we don't want– those folks gettin' chemical weapons, anymore than we want Assad to have chemical weapons. And so the best solution is for us to get them out of there. But– with respect to Mr. Putin– I have said consistently that where the interest of the United States and Russia converge, we need to work together. And I had talked to Mr. Putin a year ago– saying to him– the United States and Russia should work together to deal with these chemical weapons stockpiles, and to work to try to bring about a political transition– GEORGE STEPHANOPOULOS: But do you trust– PRESIDENT BARACK OBAMA: –inside of Syria. GEORGE STEPHANOPOULOS: –he has the same goal? Do you really trust that? PRESIDENT BARACK OBAMA: Oh, I don't think that– Mr. Putin has the same– values that we do. And I think– obviously, by– protecting Mr. Assad– he has a different attitude about– the Assad regime. But what I've also said to him directly– is that we both have an interest in preventing chaos, we both have an interest in preventing terrorism, the situation in Syria right now is untenable, as long as Mr. Assad's in power, there is gonna be some sort of conflict there, and that we should work together to try to find a way in which the interests of all the parties inside of Syria, the Alawites, the Sunnis, the Christians, that everybody is represented and that there is a way of bringing the temperature down so that– that horrible things that are happening inside the country– GEORGE STEPHANOPOULOS: Are you– PRESIDENT BARACK OBAMA: –are continuing to happen. GEORGE STEPHANOPOULOS: Are you – PRESIDENT BARACK OBAMA: And I think there's a way for– Mr. Putin, despite– me and him having a whole lot of differences, to play an important role in that. And so I welcome him being involved. I welcome him saying, “I will take responsibility for pushing my client, the Assad regime– to deal with these chemical weapons.” Because– I think that if, in fact– not only Russia gets involved, but if– potentially Iran gets involved– as well in recognizing that what's happening there is a train wreck that hurts not just Syrians but destabilizing the entire region– GEORGE STEPHANOPOULOS: But aren't you worried at all that Putin is playing– PRESIDENT BARACK OBAMA: –we can do something like it. GEORGE STEPHANOPOULOS: –for time and playing you? PRESIDENT BARACK OBAMA: Well– you know, Ronald Reagan said, “Trust but verify.” And I think that that's always been the experience of– U.S. presidents when we're interacting with– first, Soviet leaders, and now Russian leaders. You know– Mr. Putin and I have strong disagreements on a whole range of issues. But– I can talk to him. We have worked together on important issues. The fact of the matter is– is that– we couldn't be supplying all of our troops in Afghanistan if he weren't helping us– in– in transporting– those supplies– through– the norther borden– northern borders of Afghanistan. So there are a whole range of areas where we currently work together. We've worked together on counterterrorism operations. And so– you know– this is not the Cold War. This is not a contest between the United States and Russia. I mean the fact of the matter is– is that– if Russia wants to have some– influence in Syria– post-Assad, that doesn't hurt our interests. I know that sometimes this gets framed or– or looked at through the lens of– the U.S. versus Russia. But that's not what this is about. What this is about is how do we make sure that we don't have the worst weapons in the hands, either of a murderous regime, or– in the alternative, some elements of– the opposition– that– are as opposed to the United States– as they are to Assad. GEORGE STEPHANOPOULOS: You said, “Post-Assad.” If, one year from now, Assad is in the process of surrendering his chemical weapons, but he's strengthened his hold on power, is that a victory? PRESIDENT BARACK OBAMA: Well– the chemical weapons issue is the issue I'm– concerned about first and foremost, simply because that speaks directly to U.S. interests. It speaks to the potential that other countries start producing more chemical weapons, that the ban on chemical weapons unravels, and it becomes more accessible to terrorists– which, in turn, could be used against us. GEORGE STEPHANOPOULOS: Is that the– PRESIDENT BARACK OBAMA: So I have a– so I have a– a primary concern there. I also believe that the U.S. has an interest in seeing a stable– Syria in which people aren't being slaughtered. And it is hard to envision how Mr. Assad regains any kind of legitimacy after he's ga**ed– or his military has ga**ed– innocent civilians and children. And so part of my argument here is that we will not intervene militarily to bring that transition about. But all the countries in the region, and I think the entire world and the United Nations, should have an interest in trying to bring about that stability. GEORGE STEPHANOPOULOS: How much time does he have to give up the weapons? PRESIDENT BARACK OBAMA: Well– I know John Kerry is talking right now to his counterpart, his Russian counterpart. Let's see how these negotiations– unfold. I– you know, there are a lot of technical issues about getting chemical weapons out, generally. It becomes even more complicated where you've got a live war going on. On the other hand– if we have a verifiable (VOICE) agreement with specific timelines, that the Russians have taken– responsibility for, along with Assad– that, in and of itself, is a very positive development. It becomes much less likely that chemical weapons are used again. And there's a mechanism whereby the world can potentially hold– hold– Syria accountable. GEORGE STEPHANOPOULOS: What do you think Iran makes of all this? You mentioned Iran. Do you think they can look at all this and say, “Maybe all options aren't on the table, you're not willing to use force?” PRESIDENT BARACK OBAMA: No, I think– I think the Iranians, who we communicate with– in– indirect ways– GEORGE STEPHANOPOULOS: Have you reached out personally to the new president? PRESIDENT BARACK OBAMA: I have. And– and he's reached out to me. We haven't spoken– directly. But– GEORGE STEPHANOPOULOS: Letters. PRESIDENT BARACK OBAMA: Yeah. And– I think what the Iranians understand is that– the nuclear issue– is a far larger issue for us than the chemical weapons issue, that– the threat against Iran– against Israel, that a nuclear Iran poses, is much closer to our core interests. That– a nuclear arms race in the region– is something that would be profoundly destabilizing. And so I– my suspicion is that the Iranians recognize they– they shouldn't draw a lesson that we haven't struck– to think we won't strike Iran. On the other hand, what is– what– they should draw from this lesson is that there is the potential of resolving these issues diplomatically. And– GEORGE STEPHANOPOULOS: You think they're there? You think they believe that? PRESIDENT BARACK OBAMA: I think they recognize, in part, because of the– the extraordinary sanctions that we placed on them, that the world community is united when it comes to wanting to prevent a nuclear arms race in the region. And– you know, negotiations with the Iranians is always difficult. I– I think this new president is not gonna suddenly make it easy. But– you know, my view is that if you have– both a credible threat of force, combined with a rigorous diplomatic effort, that, in fact– you can– you can strike a deal. GEORGE STEPHANOPOULOS: But– PRESIDENT BARACK OBAMA: And– and I– and I hold out– I hold out that hope. GEORGE STEPHANOPOULOS: Final foreign policy question. You've had some– a lot of armchair criticism. PRESIDENT BARACK OBAMA: Yeah. GEORGE STEPHANOPOULOS: I'm sure you're used to that. PRESIDENT BARACK OBAMA: I am. GEORGE STEPHANOPOULOS: Senator Corker, Foreign Relations Committee, said– you're not comfortable as Commander-In-Chief, it's like watching a person who's caged. The president of the Council on Foreign Relations, Richard Haas, “Words like ad-hoc, improvised, unsteady come to mind. This is probably the most undisciplined stretch of foreign policy in your presidency.” What do you make of that? PRESIDENT BARACK OBAMA: Well– you know, I– I– I think that– folks here in Washington– like to grade on style. And so had we rolled out something that was very smooth and disciplined and– linear– they would have graded it well, even if it was a disastrous policy. We know that, 'cause that's exactly how they graded the Iraq– War– until it ended up– GEORGE STEPHANOPOULOS: So this doesn't change your view– PRESIDENT BARACK OBAMA: –blowing in our face. GEORGE STEPHANOPOULOS: –of President Bush. PRESIDENT BARACK OBAMA: No– no. What it– what it– what it says is that I'm less concerned about– style points, I'm much more concerned about getting the policy right. And– what I've said consistently throughout is that– the chemical weapons issue is a problem. I want that problem dealt with. And as a consequence of the steps that we've taken over the last two weeks to three weeks, we now have a situation in which Syria has acknowledged it has chemical weapons, has said it's willing to join the convention on chemical weapons, and Russia, its primary sponsor, has– said that it will pressure Syria to reach that agreement. That's my goal. And if that goal– is achieved, then– it sounds to me like we did something right. GEORGE STEPHANOPOULOS: Let's talk about the economy. PRESIDENT BARACK OBAMA: You bet. GEORGE STEPHANOPOULOS: This– this weekend, fifth anniversary of the collapse of Lehman. A lot of people say that was the acceleration. PRESIDENT BARACK OBAMA: Yeah. GEORGE STEPHANOPOULOS: Accelerated the financial crisis. Five years out, let's take stock. You know, I'm lookin' at the cover of Time Magazine this week. It says, “How Wall Street Won.” And we've got polls showing that, you know, two thirds of the country still think we're going in the wrong direction, think the economy is no more secure. What do you say to those Americans who think Wall Street is winning but they're not? PRESIDENT BARACK OBAMA: Well, let's think about where we were five years ago. The economy was on the verge of a great depression. In some ways, actually, the economic data and– the collapse of the economy was worse than what happened– in the 1930s. And we came in, stabilized the situation. We've now had 42 straight months of growth, seven and a half million new jobs created, 500,000 jobs in manufacturing, 370,000 jobs in an auto industry that– had completely collapsed. The banking system works. It is giving loans to companies who can get credit. And so we have seen, I think undoubtedly, progress across the board. The housing market– has recovered. But what is also true is we're not near where we need to be. And– part of it has to do with a whole bunch of long term trends in the economy, where– the gains that we've made in– in productivity and people working harder have all accrued to the– people at the very top, will average– GEORGE STEPHANOPOULOS: 95% of the gains to the top 1%. That is so striking. PRESIDENT BARACK OBAMA: It– it is. And the folks– at– in the middle and at the bottom haven't seen– wage or– income growth, not just over the last three, four years, but over the last 15 years. And so everything that I've done has been designed to, number one, stabilize the economy, get it growing again, start producing jobs again, number two, trying to push against these trends that had been happening for decades now. That's why we made sure that we had a tax system that was a little bit fairer by asking people to– pay more at the top. That's what the Affordable Care Act– health care reform is about, is making sure that folks who– have been left out in the cold when it comes to health care are able to get health care. That's why we strengthened the entire banking system so that, you know, “too big to fail” is far less likely to be in place– if, heaven forbid, there's a crisis the next time. Because we've said, you know, “Banks, you've gotta double the amount of capital that you have so that you can absorb losses when you have ‘em, so taxpayers aren't bailin' you out. If you do– start goin' under– you've gotta have a plan– a living will, we call it, so that we don't have to come in and clean up after you. You're gonna be on your own.” GEORGE STEPHANOPOULOS: Okay, but you do all these things– PRESIDENT BARACK OBAMA: Yeah. GEORGE STEPHANOPOULOS: –and still, 95% of the gains go to the– PRESIDENT BARACK OBAMA: Right. GEORGE STEPHANOPOULOS: –top 1%. Do you look at that, four and a half years in, and say, “Maybe a president just can't stop this accelerating inequality?” PRESIDENT BARACK OBAMA: No, I think– I think the president can stop it. I– the problem is that– there– continues to be a major debate here in Washington. And that is: How do we respond to these underlying trends? If– if you look at– at– at the data– couple of things are– are– are creating these trends. Number one, globalization. Right? Capital, companies, they can move businesses and– and jobs– anywhere they want. And so they're lookin' for the lowest wages. That squeezes workers here in the United States, even if corporations are profitable. Technology. If you go to– a lot of companies now, they've eliminated entire occupations because they're now robotized. We don't have travel agents. We don't have bank tellers. GEORGE STEPHANOPOULOS: It's bigger than Washington. PRESIDENT BARACK OBAMA: Right. So– so there– there's a whole bunch of stuff that's happening in the marketplace. But if we have policies that make sure that– our kids are prepared for higher sk**ed jobs, if we have policies that make sure that we're rebuilding our infrastructure, 'cause a robot can't– build a road– and we need– you know, new ports and a smarter electricity grid, if we're making investments– to make sure that– research and development continues to happen here, if we have– tax breaks for companies that are investing here in the United States as opposed to overseas, all those things can make the situation better. It doesn't solve the problem entirely, but it pushes against these trends. And the problem that we've got right now is you've got a portion of– Congress who– whose policies don't just– wanna– you know, leave things alone, they actually wanna accelerate these trends. There's no serious economist out there that would suggest that, if you took the Republican agenda of slashing education further, slashing Medicare further, slashing research and development further, slashing investments in infrastructure further, that that would reverse some of these trends of inequality. GEORGE STEPHANOPOULOS: But the stalemate may lead to something– even more disastrous. It's deja vu all over again here in Washington. You're couple weeks away from a government shutdown, few weeks away from a possible default one more time. PRESIDENT BARACK OBAMA: Yeah. GEORGE STEPHANOPOULOS: Speaker Boehner says, “Listen, you just have to sit down and negotiate with me.” Are you still absolutely refusing to talk, in any way, shape or form? PRESIDENT BARACK OBAMA: No. No, no. Keep in mind– my position here, George. ‘Cause I've– I have been through this a couple times (CHUCKLE) with Speaker Boehner. What I'm– what I've said is, with respect to the budget, we've presented our budget. And now it's the job of Congress to come up with a budget that keeps our long-term trends down of– or– or– or our– our current trends of– of reducing the deficit moving forward, but also allows us to invest in the things that we need to grow. And I've told him, and I've told the country, what I think we need to do. I'm happy to have a conversation with him about how we can deal with the so-called sequester, which is making across-the-board cuts on stuff that we shouldn't be cutting, while continuing tax breaks, for example, for companies that are not helping to grow the economy. There are ways of doing this, it's just that they haven't been willing to negotiate in a serious way on that. What I haven't been willing to negotiate, and I will not negotiate, is on the debt ceiling. GEORGE STEPHANOPOULOS: But presidents have done– PRESIDENT BARACK OBAMA: This– GEORGE STEPHANOPOULOS: –that in the past, and you've done it in the past. PRESIDENT BARACK OBAMA: No, no, no, no. George, if you take a look, what has never happened in the past was the notion that– in exchange for– fulfilling the full faith and credit of the United States, that we– are wiping away– let's say major legislation, like the Health Care Bill. That– that– GEORGE STEPHANOPOULOS: So you're not open to any changes in– PRESIDENT BARACK OBAMA: That– GEORGE STEPHANOPOULOS: –Obamacare? PRESIDENT BARACK OBAMA: That's never happened before. And when it comes to budgets, we've never had the situation in which a party said that– you know, “Unless we get our way 100%, then– we're gonna let the United States default.” That's never happened, George. That didn't happen– when you were workin' here in the White House. GEORGE STEPHANOPOULOS: But there were reforms added to the debt limit legislation. PRESIDENT BARACK OBAMA: The– George– I think it's fair to say– you– that never in history have we used just making sure that the U.S. government is paying its bills as a lever to radically cut government at the kind of scale that they're talking about. It's never happened before. There've been negotiations around the corners, because nobody had ever presumed that you'd actually threaten the United States to default. GEORGE STEPHANOPOULOS: But how does this end, then? You know– they say they need changes in Obamacare. You say you're not gonna negotiate. Are you just betting they're gonna cave? PRESIDENT BARACK OBAMA: No, no– George, here's the problem. The– the– if we set– if we continue to set a precedent in which a president, any president, a Republican president– a Democratic president– where the opposing party controls the House of Representatives– if– if that president is in a situation in which each time the United States is called upon to pay its bills– the other party can simply sit there and say, “Well, we're not gonna put– pay the bills unless you give us what our– what we want,” that changes the constitutional structure of this government entirely. GEORGE STEPHANOPOULOS: So you're not gonna negotiate– are you– PRESIDENT BARACK OBAMA: So– so– so we can't negotiate around the debt ceiling. If Mr. Boehner has ideas about– how we can grow this economy, strengthen the middle cla**, put people back to work in a serious way– of course we're happy to– you know, support the negotiations that are takin' place between– the House and the Senate. But my orientation here is real simple. I wanna make sure that we've got an economy in which Main Street's winning. And what that requires is that we're investing in education, early childhood, that we're investing in transportation, that we're investing in the things that we need to grow. If we're gonna re– if we're gonna continue to reduce the deficit, and I think a lot of people aren't aware of the fact that the deficit's been cut in half since I came into office, it's continuing on a trend line of further reductions. If we wanna do more deficit reduction, I've already– put out a budget that says, “Let's do it.” I'm willing to reform entitlements. I'm willing to– you know, cut out additional waste that may be there. And I'm spending time, even without pressure from Congress, trying to figure out how we can cut out waste in the system. But– I– what I also think we should be doing is eliminating– corporate tax breaks that nobody can defend– but keep on– reappearing each year in the budget. If we are serious about it, there's no reason– that we can't do it, and do right by– GEORGE STEPHANOPOULOS: How 'bout– PRESIDENT BARACK OBAMA: –by the– by the country. GEORGE STEPHANOPOULOS: How 'bout beyond the deficit? You were, you know, reelected a little more than a year ago, 332 electoral votes. PRESIDENT BARACK OBAMA: Right. GEORGE STEPHANOPOULOS: 51% of the vote. PRESIDENT BARACK OBAMA: Yeah. GEORGE STEPHANOPOULOS: First president since Eisenhower to do it twice. You put gun control at the top of the agenda, immigration reform, climate change. All of it stalled or reversing. How do you answer the argument that– beyond the deficit, this has been a lost year? And how do you save it? PRESIDENT BARACK OBAMA: Well– on immigration reform– for example– we got an– terrific bipartisan vote out of the Senate– that showed that there is a recognition from all quarters, from business, from labor, from– the clergy, from farm interests, that– a sensible immigration policy will grow our economy, make us stronger. So you had Democrats and Republicans in the Senate come together, come up with a bill that wasn't perfect, it wasn't my bill, but got the job done. It's now sitting there in the House. GEORGE STEPHANOPOULOS: Not goin' anywhere. PRESIDENT BARACK OBAMA: Well– but what I will say is this: If Speaker Boehner put that bill on the floor of the House of Representatives right now, it would pa**. It would pa**. So the question then is not whether or not– the ideas that we've put forward can garner a majority of support certainly in the country. I mean gun control, we had 80-90% of the country that– that agreed with it. The problem we have is we have a– faction of the Republican Party– in the House of Representatives in particular, that view “compromise” as a dirty word, and anything that– is even remotely a**ociated with me, they feel obliged to oppose. And my argument to them is real simple. That's not why the people sent you here. The reason the people sent you here was to think about their lives, about their jobs, about their kids' college educations, about their retirement security. And– you know, all I can do when it comes to that group of– members of Congress is to continue to talk to ‘em and say, “Let's put aside our differences. Let's stay focused on the American people.” If we do that, we can get things done. GEORGE STEPHANOPOULOS: We're out of time. Final question. Your vice president is at Tom Harkin's Steak Fry in Iowa– PRESIDENT BARACK OBAMA: Yeah. GEORGE STEPHANOPOULOS: –this week. And clearly, Secretary Clinton positioning for a possible run for president, too. You chose both of them. What do you say to your fellow Democrats when they're thinking about that possible choice? And are you determined to stay neutral throughout this whole process? PRESIDENT BARACK OBAMA: What I would say to– folks out there is we are tremendously lucky to have– an incredible former Secretary of State– who couldn't have served me better, and an incredible vice president who couldn't– who couldn't be serving me better. And I suspect if you asked both of ‘em, they'd say, “It's way p– to– premature to start talkin' about– GEORGE STEPHANOPOULOS: Well, he's in Iowa. PRESIDENT BARACK OBAMA: –2016.” Well– you know, Iowa's– a big state, and he's an old friend of Tom Harkin's. GEORGE STEPHANOPOULOS: So you're staying completely neutral? PRESIDENT BARACK OBAMA: You– you know, (CHUCKLE) listen, I– I– I think– as you pointed out, I just got reelected last year. My focus is on the American people right now. I'll let you guys– worry about the politics. GEORGE STEPHANOPOULOS: Mr. President, thanks very much. PRESIDENT BARACK OBAMA: I enjoyed it. Thank you, George.