• This is a rush transcript from "The Journal Editorial Report," October 2, 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," the GOP's Rust-Belt resurgence. Once down-and-out Republicans are charging back in states like Ohio, Pennsylvania, Michigan and Wisconsin.

    And as the fight over tax cuts drags on in Washington, voters in many parts of the country are already feeling the pinch, thanks to historic tax hikes by cash-strapped states. We'll tell you which are the worst offenders.

    Plus, the White House exodus. Rahm Emanuel is just the latest Obama aide to jump ship. What it means for the president's post-election agenda.

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

    Call it the Rust-Belt resurgence. After a decade of declining political fortunes, the Republican Party is poised to make big gains this November in a swath of upper-Midwest manufacturing states the Democrats have owned for years. Polls show Republicans have a good shot at taking back governor seats in Pennsylvania, Ohio, Illinois, Wisconsin and Michigan. And some key Senate races are leaning toward the GOP as well, including the seat of incumbent Democrat Russ Feingold in Wisconsin, as well as President Obama's old seat in Illinois.

    Fox News contributor, Michael Barone, is senior political analyst for the Washington Examiner and co-author of "The Almanac of American Politics." He joins me now from Washington.

    Michael, welcome back to the program.

    MICHAEL BARONE, AUTHOR, FOX NEWS CONTRIBUTOR & SENIOR POLITICAL ANALYST, WASHINGTON EXAMINER: It's very good to be with you, Paul.

    GIGOT: A lot of people are comparing this election to 1994, where the Republicans picked up a lot of seats. There's one difference I know, which is the Republicans picked up a lot of gains in the South. This year, a lot of the gains they expect to get, if they're going to take back the House and Senate, are across the upper Midwest. What's going on in that part of the country?

    BARONE: Well, I think something very important is going on, that the political commentariat generally hasn't figured out. When I was growing up in Michigan, when you were growing up in Wisconsin, Paul, the political rule was, in times of economic distress, the industrial heartland — the states you named, Pennsylvania, Ohio Michigan, Wisconsin, Illinois — in times of economic distress, they moved toward the Democrats. What they're seeing now is that, in a time of economic distress, they're moving heavily towards the Republicans in a way we haven't seen since '94. I don't mean 1994, I mean 1894.

    (LAUGHTER)

    GIGOT: Really, that significant? What explains the switch on the economy between the parties?

    BARONE: Voters in these states have seen the effect of heavy government spending, public employee unions dictating public policy and acting as, in the view of Republicans anyway, as parasites sucking the life out of the private-sector economy. They've seen the auto companies, General Motors and Chrysler, go into bankruptcy after long years of adversarial relationships with the United Auto Workers. And instead of rallying to the labor unions, the Democrats that gave the UAW favorable terms on those bankruptcies, they are rallying towards the Republicans. And they're saying, look, if you want a prosperous economy, you need to cut spending. You need to stop this pension burdens on the state.

    GIGOT: Well, you know — OK, I can understand that, this economic argument in state like Michigan where the unemployment rate it is 13 percent and you've had a two-term Democratic governor, Jennifer Granholm, who's leaving, not very popular. Let's take a state like Wisconsin where the jobless rate is under 8 percent, 7.9 percent. You don't have the same impact of the auto industry. They've had a two-term governor who is also not very popular, in Jim Doyle, but what about — how do you explain the fact that an incumbent Senator like Russ Feingold is trailing badly in Wisconsin.

    BARONE: You've got Russ Feingold, the incumbent Senator, who won three times and he's trailing badly. Tom Barrett, the mayor of Milwaukee, the Democratic —

    GIGOT: Right.

    BARONE: — nominee is trailing Republican Scott — Mr. Barrett is a very attractive candidate, a nice man.

    I think one of the things happening in Wisconsin, Paul, is its foreign policy is having some effect. Wisconsin is part of Germano-Scandanavian- America, settled in large part by Germans, Scandinavians, Norwegians, Swedes, et cetera. Historically, it's been the most dovish or isolationist, pacifist part of the economy. You had 30 member of the House voting against the declaration of war in World War I from the upper Midwest, from Germano-Scandanavian-America.

    And I think a lot of those dovish voters voted for Barack Obama. The Democrats in '08 thought he'd immediately withdraw from Iraq, take troops out of Afghanistan, abandon that effort, close Guantanamo and make loving, cooing noises with Ahmadinejad and so forth. It hasn't turned out that way. And I think some of those voters are either, you know, dropping out of the electorate or are voting on other issues where they're more inclined to support the Republicans.