• With: Kim Strassel, Jason Riley, Dan Henninger, Mary Anastasia O'Grady, Bret Stephens, Matt Kaminski

    This is a rush transcript from "Journal Editorial Report," October 29, 2011. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report," Rick Perry jumps on the tax reform band wagon. Can his plan save his struggling campaign?

    Plus, the controversy over the Keystone Oil Pipeline. It's championed by unions as a job creator, but attacked by environmentalists as a climate change disaster. What's a Democratic president to do?

    All of that, and the Islamist rise after the Arab Spring. Is democracy really possible in the Muslim world?

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

    Texas Governor Rick Perry jumped into the GOP debate over tax reform this week, introducing a sweeping plan to overhaul the federal system, the centerpiece which is an optional flat-rate income tax of 20 percent. Only the Fox News poll has Perry sliding to fourth place in the Republican primary field. So can his proposal put him back into the top tier?

    Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger; editorial board member, Jason Riley; and Washington columnist, Kim Strassel.

    Kim, start with you. Rick Perry offered this proposal that he called bold. Do you think it's bold enough?

    KIM STRASSEL, WASHINGTON COLUMNIST: Well, it's as good a shot as he's going to have. I mean, he just looked at Herman Cain and the success of Herman Cain, and what's very clear from Mr. Cain's 9-9-9 plan is that this is where some of the real enthusiasm is out there among the voting public. And so, he's making a bet that his flat tax is simpler, more concise, easier to explain. He can tap into some of that without some of the controversy that's surrounded 9-9-9, and make a go of this after not very great debates.

    GIGOT: Jason, is this a better plan politically -- let's just talk about politically for a second -- than Cain.

    JASON RILEY, EDITORIAL BOARD MEMBER: Well, A flatter code is definitely preferable to what we have. It will attract more investment and more economic growth. In that sense, sure.

    GIGOT: How?

    RILEY: He's making it optional. He's trying to get ahead of some of the push back that he's expecting about whether to raise enough revenue, and that will be the key question here. Of course, the critics who are going after it are saying, are using these sort of static analysis that the Congressional Budget Office uses, assumes that, for instance, that the Bush tax cuts will expire, which may not happen. And it also doesn't take into effect how a flatter code, a more efficient code will incentivize economic growth. So that's where the debate will be.

    (CROSSTALK)

    RILEY: Will it raise enough revenue.

    GIGOT: When you say static analysis, they assume there's no growth. They say you raise the rates, lower the rates and therefore adjust proportionally. and the argument for a flat tax, it will increase growth, because you'll increase -- but politically, one of the things it doesn't have, the Perry plan doesn't have is that sales tax that the 9-9-9 plan of Cain has, and that's a pretty deliberate proposal here to avoid that.

    DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yes, that's right. On the other hand, it keeps the mortgage deduction and a number of other deductions.

    GIGOT: Charitable deduction and state and local taxes, the big three, Dan.

    HENNINGER: Yes. GIGOT: Those are the big three.

    (LAUGHTER)

    HENNINGER: So it's criticized as not being simple enough and being a kind of jobs bill for accountants.

    (LAUGHTER)

    But I think -- you know, you've got to step back and see what's going on here. All of these presidential candidates, these Republican presidential candidates are proposing tax reforms that include lower rates, with perhaps the exception of Mitt Romney. This is really defining the Republican Party, I think, in a very productive way against the Democrats, who clearly want to raise taxes on upper income people. This is a clear distinction. And if you think of how far we've come from Ronald Reagan, supply-side economics, all the criticism it took over the years, we've got to the point where this is now conventional wisdom inside the Republican party. Pro-growth, lower taxes and, you know, these things will go through the legislative process, no matter who gets elected.

    (CROSSTALK)

    HENNINGER: They're going to be changed, right? But what's important is the core idea beneath them.

    GIGOT: What about this operational point. Newt Gingrich has a proposal that is a 15 percent top rate. That would be optional. What that means is you can stay with the current system and go with that or, if you choose the alternative system, the organizational flat tax system, you have to live with that and go with fewer deductions.

    RILEY: Right. And voters are going to be -- need to be persuaded that the flat tax is the way to go. And what we should also note is that Steve Forbes ran on the flat tax twice and this is a certainly hyper articulate, if anything, politician. Perry is not that. And he's going to need to sell this. And he's got his work cut out.

    GIGOT: Is the option a good choice? You give voters a choice. Some people say it actually complicates the system through because, voters, well, which one do I choose. I think they'll end up choosing the one at that works for them as an individual.

    HENNINGER: I do. I think it's a good idea. One of the big problems with all of these plans is you're locked in. it opens you to criticism. If you don't like the flat tax, go ahead and stay with the other system. We're all for choice. Milton Friedman was for choice. Let's try it for health care after we've done it for taxes.

    GIGOT: Rick Perry is running an ad in Iowa, a big buy. Let's look at it.

    (BEGIN VIDEO CLIP)

    PERRY: As president, I'll create at least 2.5 million new jobs. And I know something about this. In Texas, we've created over one million new jobs while the rest of the nation lost over two million. I'll start by opening American oil and gas fields. I'll eliminate President Obama's regulations that hurt other sources of domestic energy, like coal and natural gas. That will create jobs and reduce our reliance on oil on countries that hate America.

    I'm Rick Perry, and I approve this message.

    (END VIDEO CLIP)

    GIGOT: Kim, that's a jobs ad aimed right at Iowa. It that -- and he's got a lot of money to put behind those ads. Is that the Perry strategy? He floated this week, well, I don't maybe want to participate in all the future debates. But is he going to have a big TV campaign now?

    STRASSEL: He's got $17 million to throw into this. Yes, this is what he's going to do. He can't -- the debates have not been his strong point, so what you're seeing this week is him coming out with some big, bold ideas and then trying to define himself via his ads in key places like Iowa. And he's going to try to do that, telling the story he's wanted to tell since he got into the race, that is he's a job creator. That's going to inspire some criticism and pushback from the other candidates. There's going to be a lot of looking into the record in Texas. And there are some things he's going to have to explain. But that's going to be one of his strong points, yes.

    GIGOT: Can he dodge the debates, Kim, or is that going to hurt his campaign if he does?

    STRASSEL: I don't know if he can totally dodge them. He did make a good point. He pointed out what everybody feels, which is that the problem with a lot of the debates is that the only thing you can do is land punches on your opponent. It's not really a place where anyone can discuss big ideas. So, the candidates want -- I mean, the voters want to see the candidates out there. The question is if there isn't a better forum in some of these debates. And there are thousands coming up still.

    GIGOT: Jason, quickly.