• This is a rush transcript from "The Journal Editorial Report," June 12, 2010. This copy may not be in its final form and may be updated.

    PAUL GIGOT, FOX HOST: This week on the "Journal Editorial Report," record deficits, high unemployment, a rollercoaster stock market, economist Art Laffer says we ain't seen nothing yet. Will 2011 bring with it a second recession?

    Plus, a bailout for big labor? A scheme to save some poorly managed union pension plans may put you on the hook for tens of billions.

    All that, and Dorothy Rabinowitz on America's growing disenchantment with President Obama and why we shouldn't be surprised.

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

    Record deficits, near double digit-unemployment and a rollercoaster ride on Wall Street. If you think things have been bad lately, my guests this week say they could get worse next year.

    Economist Art Laffer says the threat of a double-dip recession is real. He joins me now from Nashville.

    Art Laffer, good to have you back on the program.

    ART LAFFER, ECONOMIST: Thank you, Paul. It's a pleasure.

    GIGOT: You're typically an optimist.

    LAFFER: Yes, I am.

    GIGOT: So why the doom and gloom now?

    LAFFER: Well, President Obama has, you know, when he took office, did not repeal Bush's tax cuts, but let them expire, which means on January 1, 2011, Paul, you're going to get very major tax rate increases in personal income, capital gains, dividends, estate taxes, personal income, off-shore investing, alternative minimum tax, Cadillac plans. I could go on and on. And people know tax rates are going up next year, what they will do is they will shift income into this year obviously to take advantage of lower tax rates now. And if they do that, that will make this year look a lot better than it otherwise should and make next year look a lot worse.

    GIGOT: Right.

    LAFFER: And you know, we did the same mistake, only in reverse in 1981. We deferred tax cuts and we caused, I think, the recession of '81- '82 and then we had the huge boom in '83-'84 when the tax cuts took effect. And I think Obama is going to get the mirror image of that. And unfortunately, I think we're going to have a setback in 2011.

    GIGOT: But if you look at the underlying economy though, the fundamentals, you've got a healthier housing market than a year ago.

    LAFFER: Sure. Yes.

    GIGOT: You've got a much healthier financial system that you had a year ago. You've got some private-sector job growth finally.

    LAFFER: Sure do.

    GIGOT: And corporate profits have been really quite good.