• With: Kim Strassel, Dan Henninger, Jason Riley, James Freeman, Matt Kaminski

    This is a rush transcript from "Journal Editorial Report," December 31, 2011. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report," the Republican contenders make their closing arguments in Iowa. Whose message is catching on, whose isn't, and where do the candidates go from here?

    Plus, with his poll numbers sliding, Newt Gingrich pivots to a new jobs and growth message. How does his economic plan stack up against his competitors? We'll take a closer look.

    And a new year means new challenges across the globe. So what will the world hand us in 2012?

    And could foreign policy be the sleeper issue of the presidential campaign?

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

    As the Republican presidential hopefuls make their final cases to Iowa voters ahead of Tuesday's caucuses, new polls shows former Pennsylvania Senator Rick Santorum surging to third place, behind Mitt Romney and Ron Paul, with Newt Gingrich falling to fourth.

    Wall Street Journal Washington columnist, Kim Strassel, is just back from Iowa. She joins me along with columnist and deputy editor, Dan Henninger; editorial board member, Jason Riley; and assistant editorial page editor, James Freeman.

    So, Kim, out in Iowa is this Santorum boom real and what's behind it?

    KIM STRASSEL, WASHINGTON COLUMNIST: Well, he's certainly in third place. And I think there's two reasons for that. The big one, he's been making a pitch all along to cultural conservatives. As we've gotten closer to the voting day and they have had to make a choice, that small part of he electorate that is voting purely on social issues is gravitating to him.

    And the second thing happening to Rick Santorum, he's being rewarded for running an old-fashioned, traditional Iowa campaign. And you've heard this a lot from voters out there. Appreciated that he was out there knocking on doors, doing phone banks and visiting the counties and lots of events. And this has been in contrast to some of the other candidates who have relied more on national media and not necessarily got on the ground.

    GIGOT: All right, James, yet, still only third, and we don't know how well he can carry this, if he just finishes third in Iowa, past in New Hampshire and elsewhere. He's got no money. And his message, as Kim suggests, has been geared to Iowa cultural voters.

    JAMES FREEMAN, ASSOCIATE EDITORIAL PAGE EDITOR: Right. You wouldn't call him a favorite, but he has a chance to break out behind Iowa in a way that Mike Huckabee could not in 2008.

    GIGOT: Why is that?

    FREEMAN: That is because although what's working for Santorum in Iowa and in these debates is pressing the social issues and national defense.

    But the fact is he actually can speak and speak very well to economic conservatives.

    GIGOT: Why hasn't he?

    FREEMAN: Well, I think this is going to be -- well, one is, hey, it's working in Iowa. He seems to be consolidating the evangelical vote. but the second part is he now has the opportunity to pivot as they head towards New Hampshire and some of these other states, and I think his economic message is going to sound better to Republicans the more they learn about it. We've only heard in the debate saying I only want to stop taxes manufacturers. But the fact is he's got a plan to cut the corporate rate in half for all companies. He also has a lower capital gains --


    GIGOT: All right, we'll talk -- I want to get into -- OK, you think the economic message can carry.

    FREEMAN: Yes.

    GIGOT: Now, Jason, Newt Gingrich is hitting that economic theme hard in Iowa right now. Is that the right message for him?

    JASON RILEY, EDITORIAL BOARD MEMBER: I think it is the right message. I think what Gingrich -- Gingrich has been under assault in the negative ads that have come in, via the Romney campaign and the Ron Paul campaign, and he's sort of trying to change the subject. He says I want to stay positive and so I want to talk about jobs and growth. We'll see if that resonates. But the reality is that he hasn't been able to respond to this ad because he doesn't have the resources.

    GIGOT: By one count, one out of every two ads in Iowa has been a negative attack ad on Newt Gingrich. So, in that sense, Mitt Romney, through that super PAC, has really, really zeroed in on Gingrich and piled him, probably as the candidate who he thinks would pose the biggest threat down the road if he could somehow consolidate the conservative support.

    DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yes, I think Romney has run a very effective campaign. It's kind of interesting the way that everyone is talking now about who might come in second. Santorum has 14 percent of the vote.

    GIGOT: Yes.

    HENNINGER: And this is like a gulf tournament. If you come in one stroke behind the leader, you lose. There's only one winner here. And it looks like Mitt Romney may well end up winning Iowa. If he wins Iowa, it could be a knockout blow because he's going to win New Hampshire.

    GIGOT: Kim that's the fascinating story. No -- in the modern era, no Republican candidate has won both Iowa and New Hampshire. And no candidate who has hasn't won one or the other has ever gone on to win the nomination. So Romney would be in a commanding position if he would win both of them?

    STRASSEL: It could well be over. And I think give him credit for very astute strategizing here. As Dan and you said, he has gone after his opponents very effectively. But the other thing that he has done is he has just drilled again and again these messages to voters that he is the most competent. He has business experience. He can turn around the economy.

    And that he's also the most electable against Mr. Obama. And what you saw on the ground out in Iowa is people are forced to make their choices and this message is resonating with them.


    STRASSEL: And this is why you see it going for him.

    GIGOT: Let me disagree a little bit, Kim. Because I think it's not so much the astute campaign, but it's also a lot of luck. I mean, the top -- the A-team stayed out, for the most part, Jeb Bush and the rest of them. Then Tim Pawlenty decides that he's going to stake everything on a silly straw poll and drops out after losing to Michele Bachmann. And then you have these implausible nominees who pop up, Herman Cain -- Mitt Romney loves Ron Paul --


    Because he knows he can't be president. He wants Ron Paul --


    STRASSEL: I agree with you on that. Lots of luck.

    RILEY: But Romney has also -- let's give him credit -- maintained 25, 22, over 20 percent for a long time. That's not nothing. He's going to have Chris Christie campaigning with him in Iowa. One of the people, people we're hoping would run as an alternative to Romney. He's bringing in -- and you look at the poll that came out this week that put Ron Paul and Romney up top. If you dig into those numbers a lot, what you find is that Romney is starting to do better with some of these groups he's struggled with, namely evangelicals and Tea Party supporters --

    GIGOT: Yes, but he's --