• With: Collin Levy, William McGurn, Joe Rago, Mary Kissel, James Freeman

    This is a rush transcript from "Journal Editorial Report," May 26, 2012. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report," as the presidential campaign into high gear, can Republicans tap into voters' economic anxiety without attacking the president personally? We'll ask Karl Rove.

    Plus, Catholics in court. A look at the legal and political ramifications of this week's ObamaCare lawsuits.

    And the Facebook fiasco. Who is to blame for that botched IPO?

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

    Well, heading into the Memorial Day weekend and as the presidential campaign kicks into high gear, the Conservative Political Action Committee, Crossroads GPS, went up with an ad this week in 10 swing states, reportedly the center piece of a $25 million TV buy. The piece is not your typical attack on President Obama. Instead, tapping into voters' economic anxiety.

    Here is part of the ad.

    (BEGIN VIDEO CLIP)

    UNIDENTIFIED ACTRESS: I always loved watching the kids play basketball. I still do, even though things have changed. It's funny, they can't find jobs to get their careers started. And I can't afford to retire. And now we are all living together again.

    (END VIDEO CLIP)

    Earlier, I spoke to Crossroads co-founder and former George W. Bush adviser, Karl Rove, and asked him why the ad doesn't take on the president more directly?

    (BEGIN VIDEOTAPE)

    KARL ROVE, CO-FOUNDER, CROSSROADS & FORMER PRESIDENTIAL ADVISOR: Well, first of all, an effective ad is in part of an effective narrative. And an effective narrative is based on what people believe they know, and what the American people think they know, and it is accurate, is that their economic condition is not particularly good. We have fragile recovery, the worst since any recession since World War II. Unemployment at historically high and durably high levels. What we wanted to do with the ad was sort of resonate, if you will, with the feelings of the American people. Recent polls show that between 75 percent and 80 percent of the American people still think the economy is still in recession.

    GIGOT: Right.

    ROVE: And two-thirds of Americans think that President Obama's economic plans either have not helped the economy or made things worse.

    GIGOT: How much of it is related to the fact that President Obama is still very personally popular with the American public? They say they like him a lot more than they like his policies.

    ROVE: They don't like him that much better than they like his policies.

    (LAUGHTER)

    But they -- look, when running against an incumbent, you have to get people to vote for you, if you are the challenger, who voted for the incumbent when they elected him to office in the first place.

    GIGOT: And they don't like to admit they made a mistake.

    ROVE: And you don't want them to either. You want to give them permission to -- you want to give them permission for their doubts to rise to the surface. For them to say, I did the best thing but he's let me down. I'm disappointed. I'm regretful that he has done the things he has done. It's time to do something else.

    GIGOT: You wrote this week in your Wall Street Journal column that Mitt Romney, the challenger, is now the narrow -- that was your word, narrow -- favorite to win this election. Why?

    ROVE: Yes. President Obama was much better when he was on offense, attacking his predecessor and painting a vision for the future. Remember, his most powerful moments were things like, "I don't want to be the president of red states and blue states but the United States." Now, he is in trouble. He has got ratings in the 40s. The ballot is virtually, tied depending on what poll you look at. Critical battleground states are clearly leaning towards Romney or up for grabs. He is not good on defense, on sort of defending what he has done. He has turned out to be incredibly lousy on projecting a forward-looking vision. He's essentially squandered the prestige of the office over the last 14 to 16 months that could have given him a forward-looking vision. And I just think Romney is going to be better on offense. And it is easier to be fighting in a lot of different places, poking at the president's record as long as he shares his own vision, and for Romney to get where he needs to go.

    GIGOT: When you were trying to get President Bush elected, his May 2004 approval rating, 49 percent. President Obama's May 2012, 47 percent. George W. Bush won reelection.

    ROVE: Yes.

    GIGOT: That is not that --

    (CROSSTALK)

    ROVE: And if you look at where our ballot position was, it is roughly comparable. But there was a hidden strength that carried us. First of all, remember this thing. The 2004 election was more about what? Security. About terrorism, Iraq, the world, the place that we found ourselves.

    GIGOT: The president was -- the Iraq war was beginning to be quite unpopular.

    ROVE: Right. But the president was seen as strong on these issues. The greatest strength any president has is the vision of himself as a strong leader. President Bush, in April of 2004, 64 percent of the American people said they felt he was a strong leader. 36 percent said he was not. President Obama, 51-48. That is a big difference. At the end of the day, people will vote for an incumbent president, even if they don't necessarily agree with him, if they see him as a strong and effective leader. They give him the benefit of the doubt. You are strong and effective, you may know more than I do so, so you know what, because I believe in you as a leader, I will vote for you, even if I don't necessary agree with your polices. President Obama has the problem that he doesn't have that reserve of strong leadership to go on.

    GIGOT: Some people, who look historically at this, look at the 47 percent approval rating and look at the first six months of economic growth in the election year. And they say, because of the growth is going to be between 2 percent to 3 percent, most people figure that President Obama is going to win 51 percent. That projects to 51 percent of the two-party vote and a narrow election victory.

    ROVE: Yes. There is a big difference between two percent growth and three percent growth. It is 50 percent difference.

    (LAUGHTER)

    GIGOT: That's right.

    ROVE: So -- and we won't know what it is. But here is the problem.

    GIGOT: But is that the biggest factor, how much the economy grows between now and November?

    ROVE: Well, I think it's one. Look, we try and reduce this to one number, and it's not. It is a complex algorithm and the nature of the algorithm changes from election to election, and obviously, difference from individual to individual. But economic growth plays a part of it. Unemployment plays a part of it. Personal circumstances are a part of it.

    (CROSSTALK)

    GIGOT: How people feel about themselves.