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CNBC Exclusive: CNBC Transcript: David Axelrod, Director of The Institute of Politics at The University of Chicago, Speaks with John Harwood Today on CNBC

When: Today, Monday, February 11, 2013

Where: CNBC's "Closing Bell"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with David Axelrod, Director of the Institute of Politics at the University of Chicago, today, Monday, February 11th on CNBC's "Closing Bell." Here is a link to embeddable from an excerpt of the interview: http://video.cnbc.com/gallery/?video=3000147329.

Additional excerpts of the interview will air on CNBC's "Squawk Box" (M-F, 6-9AM ET) tomorrow, Tuesday, February 12th.

All references must be sourced to CNBC.

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JOHN HARWOOD: David Axelrod, thanks so much for being with us.

DAVID AXELROD: Happy to be here.

JOHN HARWOOD: You-- have left the White House, of course. You were running this Institute of Politics--

DAVID AXELROD: Yes.

JOHN HARWOOD: --at the University of Chicago. How much do you still keep your hands in-- advising the president, talking to his team, as we approach big events like the State of the Union tomorrow?

DAVID AXELROD: Well, he's a friend, they are friends-- certainly when they call, I-- I pick up the phone. I'm not involved in the way I was-- during the campaign or before, obviously, when I was in the White House. But, you know-- friendship is friendship. And-- I keep in touch.

JOHN HARWOOD: State of the Union is tomorrow. Some of the research has shown that for all the attention we give the State of the Union, it doesn't really change the president's political standing or-- his approval rating, that sort of thing. So, as you think about it, as somebody who's done communications strategy, what kind of a tool is the State of the Union and how do you try to use it?

DAVID AXELROD: Well, I think it's an important speech. At this point, I think the concern should be less about the president's approval rating and his favorability, which are at-- high levels right now. But how you use that political currency-- to make the case you need to make.

Right now, we have a standoff on-- these fiscal issues-- and-- the impending sequester deadline. This is probably the largest audience he's going to have-- throughout that debate. So, it would be surprising to me if he didn't take that on in this-- speech. And he has another-- couple of-- agenda items that are very immediate. Immigration-- the-- gun safety laws. It'd be surprising if he didn't use this platform to make those-- to make his case on those points 'cause he'll never have-- an audience like this to make that case. So, it is an important speech.

JOHN HARWOOD: But big as it is-- how much of a difference can it make in moving the needle in terms of votes in Congress?

DAVID AXELROD: Well, I think it can-- move the needle of public opinion and that's what moves the needle in Congress. B-- and I don't think it's just one speech. I-- you have to build on that speech. He's hitting the road-- after the speech to-- accent some of the points that he's going to be making in the speech.

But the goal is to move public opinion because that's what moves Congress. And I think one of the reasons we now see some movement on issues like immigration reform, for example, has to do-- less with what the president said and more with what the American people have said.

JOHN HARWOOD: How does it change the dynamic of a speech like this-- to have it be in this circumstance, with the president just having been elected to a second term? Surely different from last year, when he was running for reelection, the first year when he was just new to the job. What's different about this one?

DAVID AXELROD: Well, obviously-- the focus is not on-- an impending election, as it was last time. And-- I think that-- the election result has cause some introspection on the part of different players-- in the political arena. Particularly in the Congress, you see, you know, Eric Cantor and others trying to redefine-- the Republican brand a little in the last few weeks.

I don't know-- I think obstructionism has lost its appeal-- to many. And certainly, the message on issues like immigration reform and even gun safety-- are beginning to permeate there. So, I think this is a feeling-out time-- for the-- certainly for the Republican Party. And it is a different kind of time for the president, who has just been reelected and isn't going to be running again.

JOHN HARWOOD: You talked about introspection-- as the result of the election. How did winning a second term, after all of the difficulty politically…in the first term, how did it change the president?

DAVID AXELROD: Well, you know, I think the president-- one thing I always say when people ask me about him-- and what his most saline qualities are, the first one I start with is consistency. The things that he's-- talking about are ones that I've heard him talk about as long as I've known him.

Now, many of them go to creating a viable middle class and ladders into the middle class-- opening up opportunities, probably-- for people who are willing to work for them. This has been a consuming passion of him. Right, so that hasn't changed. But certainly, he's older, he's wiser, he's-- you know, he's been through a few rodeos now-- knows where the bucking-- is going to come and how to--

JOHN HARWOOD: When you look--

DAVID AXELROD: --handle it.

JOHN HARWOOD: --in terms of his attitude, certainly the themes are consistent. He looks to me more confident.

DAVID AXELROD: Yeah.

JOHN HARWOOD: Some people would say even cocky, having defeated the people who've been trying to take him out.

DAVID AXELROD: Yeah, I don't think that the array of challenges that he-- wakes up to every day allows for cockiness, but certainly there's a confidence that comes with affirmation-- the affirmation of the American people. There's no denying that. Any president would take heart in-- achieving reelection and by a wider margin, I think, than people anticipated.

But I also think a wise president doesn't over-- react to that. He understands that these are tough-- problems that-- the politics are still difficult. And-- if you see the determination, it's a determination to try and push through that and get things done.

JOHN HARWOOD: There are some people who thought that in his inaugural, there was even a little bit of taunting of the Republicans using the "nation of takers" line and-- sort of directly confronting campaign themes now that the campaign…

DAVID AXELROD: Well, I think the campaign themes reflected governing themes. I don't think that the campaign themes were made simply for the campaign. One of the reasons the president feels-- confident-- as you suggest, is that he campaigned on-- these issues.

So-- if the theme sounded familiar, it's because he believes them. It's what he campaigned on. He-- it's not a bait and switch. And, so-- you know, in a sense, the campaign was a test of those themes and the American people made a judgment.

And a lot of them have to do with-- whether we can passive in the face of challenges or whether we have to-- together, use-- the leverage of government to help move our economy forward and empower people—to find opportunities for themselves in the future.

JOHN HARWOOD: To what degree do you think he is mindful of, and do you think he should be mindful of, the-- potential for overreach by a reelected president going to-- trying to push his advantage too far and complicating-- the ability to get things done?

DAVID AXELROD: I think it's always a danger, and history has shown that it's a danger-- for any-- newly elected president to go-- beyond what the-- intent of the voters-- was. But that's why it's so important that he campaigned on the very themes that you'll heard in the State of the Union speech, that he repeats wherever he goes, many of them having to do with the issue of the economy and how you build a strong economy in the 21st century that-- that-- that lifts the middle class. So-- I don't think he's straying far beyond the parameters of what-- people knew to be his positions. They understood what his positions were and they voted for him-- with that understanding.

JOHN HARWOOD: The-- there was a lot of commentary about the fact that the president has said-- it was not a red America, a blue America, we're one America. Was not able to overcome the … of Washington just as President Bush had been unable h-- having said he's a uniter, not a divider.

President Clinton, same thing. Do you see the kind of entrenched bitterness between the parties as something that is now a permanent feature of our politics beyond-- the term of any individual president? Or do you see signs that-- it's part of the cycle and the cycle will change?

DAVID AXELROD: I think the first instinct of politicians is survival. And if-- the-- Republicans in Congress-- make a judgment that they as a party-- can't succeed nationally-- with-- a steady diet of obstructionism as their mantra-- then I think things will change. And I-- and I sense that there is some of that going on.

The problem is you have-- as has been brooded over a lot, you have many members of Congress who will never face-- a serious general election challenge. They'll only face serious primary challenges. That tends to polarize-- the Congress. And, so, it's going to take the leaders of congress to say, "You know what? We've got-- bigger concerns and-- we've got to come to some compromise on some of these issues or we will forever define our party in a way that won't allow us to win a national election again."

JOHN HARWOOD: To the extent that you see things changing a little bit early in this-- 2013, do you see that as-- time-limited thing, that the window will close at some point over the next few months? And how long do you think potential window.

DAVID AXELROD: You mean in terms of the president's ability--

JOHN HARWOOD: To the extent that you see signs that-- there be-- may be more possibility of compromise from the Republican end, and therefore-- you could get some things done with Republicans on the Hill-- do you see that as a time-limited phenomenon? And if so, when does the window-- when would you think about the window closing?

DAVID AXELROD: Not at all. This is a question that people ask how much time does the president have to achieve-- his agenda before, you know, the lame duck syndrome sets in and the next election sets in. The real question is-- what are the judgments that the Republican Party is making-- about what they need to strengthen their own brand?

I would suggest that-- that cooperation, some progress, some-- demonstration of the ability to get things done-- after the last Congress, which was the least productive in-- in recent memory-- is important to them. And-- how long that will go on, I don't know. But-- you know-- I-- the rule of thumb is that the first two years are-- far more promising than the last. And, you know, he-- he'd be wise to proceed on that-- on that assumption.

JOHN HARWOOD: Let me ask you about relations with another-- constituency-- … but the business community. I had-- dinner with a Wall-Street type the other day who was talking about how-- he-- his perception was in the first term, you were responsible for a lot of the-- what he thought of as demonization of big business, of Wall Street, making them look like bad guys. Were you responsible for that? And what is your assessment of that charge?

DAVID AXELROD: No, I don't think I was responsible for that. What was responsible for that was irresponsible behavior that helped bring about the greatest financial crisis since the Great Depression. I don't think anybody-- was-- you know, as a strategy, demonizing-- the business community. We were too busy trying to save the country from the impacts of some irresponsible decisions that a handful of people on Wall Street-- made. So-- I don't think that's a valid-- concern.

But-- here's what I know. I saw the president make some very, very tough decisions, decisions to stand up the financial industry when it was on the verge of collapse-- decisions to save the American oil industry when it was on the verge of collapse, a decision to pass a recovery act when there was a huge hole in our GDP that-- threatened to cascade into a second Great Depression.

And none of those things were politically-- popular at the time that he did them. Some of them still aren't politically popular. But he did them. The economy began to heal. We still have a ways to go, but it began to heal. You can see that in the-- in the stock market today. It was 6,500 shortly before we arrived and now we're flirting-- above and below 1,400. So-- you know, it would be good to just-- join hands and see what we can do together to improve this economy.

I think immigration reform is a great example of that. The business community is strongly supportive. It has great economic consequences. Working together to-- to-- deal with this fiscal-- challenge in a balanced way so we don't ratchet down the recovery and we make investments we need to grow. That's a natural thing for the business community and the president to work together on.

So-- I-- you know, I understand that there are some-- raw feelings-- about some of the debate and discussion during that period after the-- Lehman Brothers collapse when the financial-- crisis began. But-- we all-- sort of look forward and not back. There's plenty to do together.

JOHN HARWOOD: Do you personally think at any point the president's rhetoric went too far?

DAVID AXELROD: I think that there are times when-- we could've chosen-- words more carefully. But I must say, you know, I know a lot of the-- leaders of the financial community. I've just met them through my work. I read about them. They seem like tough-- resilient people. And-- so-- you know-- I don't think we should be focusing on-- a word here and a word there. Let's focus on constructive ways to move the country forward.

JOHN HARWOOD: Just one-- visceral kind of values question... I had another person in the business say to me, "You know, the president just doesn't like people who are very financially successful because he thinks their values are wrong, they're pursuing the wrong thing." Is that true?

DAVID AXELROD: I don't think that's true at all. The president respects-- success and particularly-- the ingenuity behind that success. We're the most innovative-- country and economy in the world. And-- you know, when you look at-- the kinds of-- innovations that America has produced and the wealth associated with it-- that should be a source of pride.

And-- certainly the president admires people who-- have a good idea, see it through, and make something of value for the economy, for the world, for the country. You know, he may have a different view of people who game the system-- and who make great wealth-- simply by doing that. And, of course, we-- we've had that discussion. That's part of the reason why we needed financial reform. But-- he has great admiration for entrepreneurs, for-- you know, ingenious inventors-- for people who add value.

JOHN HARWOOD: Couple more-- other things and I'll let you go.

DAVID AXELROD: Go ahead.

JOHN HARWOOD: Okay. You mentioned-- the sequester. When you had the fiscal cliff, the president, of course, wanted more revenue-- for his long-term goals. And he had the advantage that if nothing happened, he would get … In this case, the Republicans want spending cuts and if nothing happens, they will get the spending cuts. How does that change the way-- the White House approaches this, and does it change the odds of who's got the upper hand?

DAVID AXELROD: Well, I agree with-- Speaker Boehner when he said that this is a meat-ax approach to the sequester and not the way-- to do business. He's right about that. I think most responsible people in Washington understand that. Most people at home should understand that when you have-- debt you have to pay-- you don't simply say, "We're going to just cut everything in our household budget by 10%."

You decide what's important and you make-- those adjustments. And that's what we, as a country, have to do. And-- we have to do it not just on the cuts side but on the revenue side. Everyone-- talks about the need for tax reform. There is a tax code that's 10,000 pages long, riddled with preferences that don't make sense other than that someone had a smart lobbyist or-- the clout to see them inserted in that tax code.

We can go-- at those and raise-- a great deal of revenue toward dealing with the deficits-- but also make the tax codes simpler, more rational, easier to understand, less advantageous to the-- to the well-connected-- and fairer for everyone else. And that's what we should do.

JOHN HARWOOD: Knowing the political dynamics as well as you do, you're less than three weeks away from March 1st, when the sequester will take effect. Do you personally think it will take effect? And if not, what signs do you see that's some sort of a combination between the two ...?

DAVID AXELROD: I don't know the answer to whether the sequester will take effect. It obviously was designed-- to be-- a self-impeaching-- device because the results of the sequester are so negative in many different ways. But-- and as you know, Washington tends to work on deadlines.

So, I think the next three weeks are going to be important. I know that there's a glum mood in Washington about that. But-- about getting something done before March 1st. But I'm still holding out hope that-- reason will prevail and people will come to table and do what the country wants them to do, which is compromise on a bal-- in a balanced way and move forward.

JOHN HARWOOD: You helped elect the first African American president, which was a barrier I never thought would be breached-- as quickly as it was. Is it your view going forward now that functionally, there are no identity barriers to winning the presidency? Or if there are-- people have talked about Hillary Clinton. Is the-- is the-- glass ceiling for a woman harder, less hard than it was for an African American?

DAVID AXELROD: I think the glass-- a glass ceiling-- is hard until you break it. And-- that glass ceiling hasn't been broken. But I think Hillary has the-- certainly the capacity to do that if she runs, there are others. We have 20 new-- women-- or 20 women in the United States Senate now, not all new.

And, you know, you see-- you see these things inexorably shifting. And I'm confident-- if not in 2016, then down the line that that barrier will fall and others will. You know, very little was made of the last election and I think it's a good sign that you had an African American man running against a Mormon. That would've been unthinkable-- in-- you know, not so long ago.

So, we're-- you know, we're-- the younger-- generation of Americans is a far more tolerant generation. And because of the media age in which we live and so on-- I think you're going to see these barriers-- fall, one by one. I think people are going to judge more on the basis of the person, lesson the basis of-- some of the more-- cosmetic differences between them.

JOHN HARWOOD: So, there's nothing that you see that anybody should regard as-- an unbreakable barrier? Basically, we are beginning to take down …?

DAVID AXELROD: I think so. You know, you see Marco Rubio heralded on the front of Time magazine as the Republican savior, not the-- not the appellation I would want-- four years before an election, but nonetheless. You know-- I think that these barriers are-- going to fall and probably in-- more quickly than anybody anticipates.

JOHN HARWOOD: And finally, talk about this Institute of Politics that you've created at the University of Chicago. What do you hope to accomplish with it nationally and in the city of Chicago?

DAVID AXELROD: Well, John, I think the best thing that I can do at this stage in my life is help encourage young people to get into the public arena, whatever their views, to get into the public arena. There are so many bright, young people on this campus, many of whom want to contribute-- to their country, to the world, to their communities.

S-- but many of whom are also suspicious of the political process because of what they've seen-- you know, over the course of their lifetime. And my goal is to expose them to the many good people that I've met along the way, Republicans and Democrats and people with different points of view, who have-- performed honorable service in the arena.

And-- I want them to become acquainted with how exciting and invigorating the work of-- moving your community or your state or your country or the world forward is. Because-- we need to get young people thinking of public service-- once again as a means of shaping their future.

And, so, you know, our goal is to expose them to a lot of-- practitioners in the field-- to put them internships-- to give them a chance to really see-- to see the inside of the whole public debate-- from various vantage points, and then-- encourage them to jump in.

JOHN HARWOOD: Moustache not coming back?

DAVID AXELROD: You know, I was ten steps away from getting my moustache-- removed on national television when my wife said to me, "I always hated that thing," my wife Susan. I said, "Well, we've been married 33 years. You could've said something." She said, "I just didn't think you'd do anything about it." But-- she's got most of the voting shares on this and, so-- she tells me it's coming back and I don't think it's coming back.

JOHN HARWOOD: David Axelrod, thanks so much.

DAVID AXELROD: Great to be with you.


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