• This is a rush transcript from "The Journal Editorial Report," August 22, 2009. This copy may not be in its final form and may be updated.

    STUART VARNEY, GUEST HOST: Up next, more bad news for the economy. Retail sales sink. Troubled mortgages hit a record high. Could the wheels be coming off the administration's recovery plan?

    Is double talk sinking health care reform? We'll take a closer look at Obama Care's contradictions and the left's meltdown over the public option retreat.

    As millions of Afghans vote despite Taliban threat, a majority of Americans say the war there is not worth fighting.

    "The Journal Editorial Report" starts now.

    Welcome to "The Journal Editorial Report." I'm Stuart Varney, in this week for Paul Gigot.

    First off, could the wheels be coming off the administration's economic recovery plan? Well, the bad news keeps coming. Retail sales fell unexpectedly last month, raising fears that the key back-to-school shopping season will hit negative territory for the first time in years.

    News this week that the number of homeowners delinquent on their mortgages or in foreclosure rose to the highest level in four decades. More than 4 percent of all borrowers are in foreclosure. About 9 percent missed at least one payment. It is a triple whammy, if you add to that the continuing problems with unemployment.

    Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger, editorial board member, Jason Riley; and senior economics writer, Steve Moore.

    Steve, we start with you, if I may. The stock market, a terrific rally. We hear that the recession is winding down and may be over. Why is the president's recovery plan questioned so harshly?

    STEVE MOORE, SENIOR ECONOMIC WRITER: Well, the one piece of good news, Stuart, is the stock market has been on a soaring increase over the last three or four or five weeks. That's good news. I've always regarded the stock market as an important forward-looking indicator. But every time it looks like the economy is picking up a little bit of steam, you see the statistics that come out that suggest it's stumbling again. What is making Americans most nervous right now is these lousy unemployment numbers. We saw unemployment numbers climb a little bit last week. This suggests we might be in the throngs of a jobless recovery where we don't see the unemployment rate fall much. When you have 15 million Americans who are unemployed, it's hard for them to pay the rent, pay the mortgage and it's hard for them to go out and shop.

    VARNEY: Dan, I am looking at the creditability of the president's recovery plan, and I saw the credibility question by Warren Buffett in The New York Times where he said, look, you can't go on spending, borrowing and printing money like this. I saw it as a warning shot.

    DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: It is a warning shot. We've talk about that a lot on the program, Stuart, the threat of inflation. I think Buffett also suggested something about the value of the dollar.

    It's entirely possible they'll try to engage in an export-led recovery, which implies cheapening the dollar. A cheaper dollar implies feeding inflation into the system. As we said many times on the program, at some point the Federal Reserve will tighten the liquidity. But they may have to do that in advance of next year's off-year election. That will be politically unpopular. The Fed is under tremendous pressure not to tighten next year but it would feed inflation in the system.

    JASON RILEY, EDITORIAL BOARD MEMBER: It's not just Warren Buffett that's questioning the effectiveness of the stimulus package. USA Today put out a poll that said 57 percent of Americans don't think the stimulus package is working. So consumer confidence is down, which is feeding the retail numbers that you mentioned earlier. They look at unemployment, as Steve mentioned, nearly 9.5 percent. People don't feel confident to go out and spend money.

    It's hard to see where the economic growth will come from. That is the real problem here with everyone looking for it, whether it's the stock market or consumers. Typically, in our economy, it's upper-income Americans who are the job creators. And Obama made them enemy number one. He's going to go after them.

    (LAUGHTER)

    VARNEY: It seems like two distinct sides of the fence. Wall Street is rallying. Profitability and corporations looking pretty good. Main Street suffers from declining consumer spending and lower — continually higher unemployment, now this housing crisis.

    Tale of two realities, Steve?

    MOORE: Look, I think that Jason really put his finger on the problem. Where is the growth going to come from? The one lesson hopefully we've learned from the last six months is you don't create prosperity and you don't create jobs by massively increasing government spending and increasing debt.