• This is a rush transcript from "The Journal Editorial Report," May 17, 2008.

    PAUL GIGOT, FOX HOST: Up next on the "Journal Editorial Report," forget West Virginia. The big election story was in Mississippi this week.

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    GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

    Hillary Clinton's lopsided victory over Barack Obama in West Virginia on Tuesday isn't the only election outcome making headlines. In a major blow to the GOP, Democrats in Mississippi picked up a seat in a congressional district that president Bush won by 25 points in 2004. It was the third time this year Republicans lost at so-called safe house seat in a special election. Earlier in month they Democrats won a seat in Louisiana the GOP held since 1974. Back in March, Democrats in Illinois took the seat long held by former Republican House Speaker Dennis Hastert.

    Joining us the panel this week, Wall Street Journal columnist and deputy editor Dan Henninger, Washington columnist Kim Strassel, and editorial board member Steve Moore.

    Kim, I will start with you. I talked to a Republican on Capitol Hill this week and asked him to describe the mood after Tuesday and his word was "cataclysmic." Is it that bad?

    KIM STRASSEL, WASHINGTON COLUMNIST: You know I think it is. The thing about this Mississippi race is that it highlighted everything the Republicans are up against this fall. You know they have not redefined themselves. They are not addressing the issues most Americans see as the main day-to-day problems. They are not getting as much traction as they would like to lead Democrats to a liberal national candidate like Barack Obama. And the Democrats are being smart and running smart candidates in these areas. This particular Democrat, pro-life, pro gun.

    GIGOT: Steve, the point about the strategy is an important one because the Democrats tried to link this candidate to Barack Obama. Just like Republicans in 2006 tried to link their Democrats that year to Nancy Pelosi. You can't scare people in this environment anymore. Particularly if you are running against somebody who says he is pro gun and pro — and against abortion rights.

    STEVE MOORE, EDITORIAL BOARD MEMBER: Yes, Democrats have a new strategy, Paul, causing Republicans a lot of trouble and that is in these kind of battle ground conservative districts, the Democrats are running as social conservatives and economic populist. Republicans don't have a really good response to that.

    If you look at this district in Mississippi, this was about as Republican a district as you can find in America. It was a 60 to 2 percent district. George Bush won it by 25 points.

    The problem, as Kim said, if Republicans don't start coming through with a very positive message on things like health care, and things like taxes and food prices, I think this is just the start of a really bad run for Republicans in November.

    GIGOT: Dan, Tom Davis, a Virginia Republican who has run their congressional campaign committee in the past, issued a memo to Republicans in which he laid out the dire scenario including talking about money and the way Democrats are dominating money raising race this year for congressional seats. Business which used to split its money now is leaning toward Democrats as a kind of protection money because they think they will be in the majority again. And of course labor always gives to Democrats.

    DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yes, the Davis memo was really I believe quite honest. I think that the Republicans have found themselves in a kind of vicious circle here. Take the money. The base is the depressed, right? The Republicans don't seem to be doing well. If you are a Republican contributor, why give money if you are going to lose? There is no incentive to give money to a party who is losing.

    There's another thing Davis noted that was bleak, which was registrations for the two parties. Democratic registration is up. Republican registration is flat or down in many places. He mentioned California. Ventura County and Stanislaus County have both flipped from Republican to Democratic now. You are talking about turnout in the election and money. If you can't compete on those two bases, you are really going to have a hard time winning congressional seats.

    MOORE: But, Dan, the Republicans have an especially big problem, Paul, because not just the unions but the business community is giving their money now, not all of it but a big share of it, to the Democrats. The Republicans I talk to say, well, we are going to be OK in November because we will have John McCain at the top of the ticket and we'll be running against Barack Obama. But as you showed, Paul, the forecasts against Barack Obama so far are not working. And I don't see that tactic being very effective.

    GIGOT: Kim, a lot of Republicans would say on Capitol Hill look. The main problem is brand identity. That's because President Bush is the head of the party. He is a Republican. The strategy we should pursue is to separate ourselves from George Bush on issues like the housing bail out, for example, or oil prices or taxes or something else and try — and vote with the Democrats to get cover. Is that a sensible strategy?