SCHIEFFER: Today on "Face the Nation," is health care reform dead or alive? And what about the controversy over the Harvard scholar and the Cambridge cop? The Senate won't make the August deadline to pass health care reform as President Obama wanted. Now there are huge problems in the House, not just with Republicans, but now with conservative Democrats. What happens next? We will ask the top White House adviser David Axelrod and one of the leading conservative Democrats Jim Cooper of Tennessee. Then we'll turn to the issue that has consumed the headlines last week, the Gates controversy We will talk about that with Georgetown sociologist Michael Eric Dyson and columnist Kathleen Parker. I will have a final word on what the president calls a teachable peak moment. Health care and the Gates controversy on "Face the Nation."

And good morning again. We begin this morning in Chicago with White House senior adviser David Axelrod. Mr. Axelrod, thank you for coming. I want to go straight to this controversy of last week involving the Harvard scholar, Henry Louis Gates. I assume most people are generally aware of the situation. So I just want to ask you this -- the president said that he talked to both the Cambridge policeman Mr. Crowley and he talked with Gates on Friday. He wants them to both come to the White House. Is that in fact going to happen?

AXELROD: Well they have both expressed interest. I expect that it will happen, yes. I think the president sees this as an opportunity to get dialogue going on an issue that has had historic -- that has been historically troubling and one he has worked on and they both seem very eager to move forward, so I expect it will.

SCHIEFFER: When did the president realize that this thing was ballooning out of control? And basically as he said that what he had said had made it worse?

AXELROD: Well he was traveling on Thursday. When he came to the office on Friday, he expressed that view and said that he wanted to call Sergeant Crowley and Professor Gates. And once he made that decision and the question came up, how are you going to read this out, how are you going to tell people about the call, he said you know what, I'm just going to go out and say my peace on this. So he made those decisions on Friday morning.

SCHIEFFER: Well obviously when he said what he said in the news conference, he later came to realize that on reflection that maybe that was not the way to go but I was just wondering was with there any particular incident the next day that made him realize that I need to get this straightened out?

AXELROD: No, but I think that Bob, he certainly is, you know, he is aware of -- he reads widely, he, you know, gets summaries of coverage, he sees some coverage. I think he understood that the debate was veering off in the wrong direction and as he said, that his words may have contributed to that so he felt a responsibility to step forward and kind of cool the situation down and acknowledge the fact that he had, as he said, calibrated his words poorly and had contributed to that.

So that is what he did and I think it has had the desired effect. I think people are talking more constructively now and I think the steam has gone out of this and instead of heat being generated, maybe a little light will be generated off of this situation.

SCHIEFFER: And I want to go back. He did get assurances from both of them that they do want to meet and kind of talk this out?

AXELROD: They expressed an interest in coming to the White House and -- and, you know, I think that will likely happen.

SCHIEFFER: Well, there is no question it took attention away from one thing the president wanted to talk a lot about this week and that was health care reform. Let me ask you this, Mr. Axelrod. With conservative Democrats in the House now saying they just can't go along with what their leaders want to do, is the president ready to scale this whole operation back and bring it into line and more into line with what these conservative Democrats want to do? Because quite frankly, if you can't get this group of Democrats you can't pass this bill.

AXELROD: Well, Bob, first understand that there is agreement on probably 80 percent of these issues, and the reason there is an agreement is because we have seen health premiums double in the last 10 years, out-of-pocket costs go up by a third, health care is going up three times the rate of wages, and this is an unsustainable trend for families and businesses.

Everybody I think wants to get something done and now we are at that final 20 percent. We are trying to work through those details, but I think that we are going to get there because this is a situation that is untenable for the American people moving forward. And within the things that we are going to do is a vast array of insurance reforms that have been long overdue that will help people. I mean right now we have a system that works well for the insurance industry but not particularly well for consumers of health care and for the American people. We want to give them more security and I think that we will succeed in doing that.

SCHIEFFER: Well, obviously, the president and it has been a strategy by design, he has spoken mostly about principles, he has wanted to achieve. Isn't the president going to have to get down to some specifics here, Mr. Axelrod, tell the Congress exactly what he is for, how he wants to pay for this, how he wants to cut the costs that are going to have to be cut so that the Congress can know exactly what he is talking about? Because some of the time here where you are seeing some of these things, where they are trying to get the House Democrats to sign off on things that the president hasn't even signed off on yet.

AXELROD: Well, first of all, Bob, understand that we have been in almost daily, perhaps dialogue hourly in the last few months with members of the House and Senate on this. The president did lay out a very specific array of cuts and savings that will help finance most of this health reform and those have been largely embraced by everybody involved. So he is involved in the process and will continue to be in steering the right direction, so that it lowers costs and improves quality of care and get us out from under the yoke of this inexorable climb in health care costs.

SCHIEFFER: But just tell me, give me some specifics of how the president wants to pay for this. We heard him say at the news conference the other night, he is now ready to consider a surtax on people in the very upper income brackets those who make over half a million dollars. Is he ready as Mike Allen, "Politico's" crack reporter reports today ready to tax some of the most expensive, what he calls gold plated Cadillac insurance policies? Is he ready to do that?

AXELROD: Well, Mike is a crack reporter but the president actually was asked this the other day by Jim Lehrer and what he said was that this was, you know, that this was an intriguing idea to put an excise tax on high end health care policies like the ones that the executives at Goldman Sachs have the $40,000 policies. His big interest is in keeping the yoke of this, the burden of this off of the middle class who are struggling in this the economy. If it meets that test, then he will certainly give it consideration. So I think that is certainly a possibility. There are other possibilities out there as well.

SCHIEFFER: I just want to go back to my previous --

AXELROD: And by the way, but I want to respond to your previous question by saying, the president laid out a specific proposal on this which was after all of the cuts that he proposed that will pay for most of this, cuts in unwarranted subsidies to the insurance industry and so on, he said that we ought to cap the deductions for the very wealthiest Americans on their taxes and that is a proposal that he believed in. Others in Congress had a different view. So we are having a dialogue about that.

SCHIEFFER: But just one question. How can you get House Democrats to sign off on something that, oh, all you will say about it is well that is an intriguing idea. Isn't he going to have to say, look, fellows if you will do this, I am ready to do this, because --

AXELROD: If there's --

SCHIEFFER: Go ahead.

AXELROD: If there is a consensus for an idea and people are looking for his view on it, he will give them that view. That consensus hasn't emerged yet. That is why people have been working all weekend long, day and night on this and will into this week and next, so, you know, I am sure that this process will move along. The fact is everyone is focused on the fact that we have some issues left to resolve. We have made enormous progress on this and I think we will continue to do that and it will be a target to get something done in the fall on this, which has always been, you know, our goal.

SCHIEFFER: Why not say to the Congress, look, this is so important, I think you fellows ought to cancel your August vacation and if you will cancel yours I will cancel mine?

AXELROD: Well, I think if the view was that that would improve our chances of getting something done, I am sure the president would be willing to do that. That is a calculation that has to be made. The important thing is that --

SCHIEFFER: Is that a possibility?

AXELROD: We continue to move forward.

SCHIEFFER: Is that a possibility?

AXELROD: I think it is unlikely that that will happen. But, you know, I am not going to prejudge this. This is also a question for the leaders. I think that we are making good progress. I think we are on track to get something done. These are complex issues. We are having a good thorough discussion about them, because we don't want to put speed ahead of doing this right. And everybody I think agrees on that.

SCHIEFFER: All right. Thank you so much, Mr. Axelrod.