Obama's economic reboot: Will his new campaign pitch work?

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This is a rush transcript from "Journal Editorial Report," June 16, 2012. This copy may not be in its final form and may be updated.

STUART VARNEY, GUEST HOST: This week on the "Journal Editorial Report," with news that middle class families have lost 40 percent of their net worth, President Obama tried to reboot his campaign and retool his economic message. Will it work?

Plus, Eric Holder on the hot seat. With resignation calls growing, is it time for the attorney general to go?

And Europe right at the brink as Greek decides its Eurozone future and Spain and Italy creep closer to the economic abyss. Central banks prepare the mother of all bailouts. Will that work?

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: This election presents a choice between two fundamentally different visions of how to create strong, sustained growth, how to pay down a long-term debt, and most of all, how to generate good, middle class jobs.

(END VIDEO CLIP)

VARNEY: Welcome to the "Journal Editorial Report." I'm Stuart Varney, in for Paul Gigot.

It's a choice all right. And this week, President Obama tried to sell Americans on four more years of his economic policies, calling a vote for Mitt Romney a return to the failed approaches of the past, his retooled campaign pitch come just days after the Federal Reserve reported an almost 40 percent drop in the net worth of middle class families, putting most back where they were in 1992.

Joining the panel this week, Wall Street Journal columnist and deputy editor, Dan Henninger, columnist, Mary Anastasia O'Grady; and Washington columnist, Kim Strassel.

Kim, the big speech on the economy, was it really a policy reset?

KIM STRASSEL, WASHINGTON COLUMNIST: Yes, I think you could call it Obama campaign 8.0 or 9.0. Stuart, there is a lot of concern among Democrats that this campaign is faltering, that it's been running hither and dither, trying to find something that sticks and resonates with the American people. They've gone after Mitt Romney on Bain and his Massachusetts record. They've said the economy is getting better. They've said it could have been worse. So this was an attempt to reset. And the argument is now, as you've heard, there is a choice. implicit in this is the president's argument -- he decided he was going to retell history, argue that everything that's wrong in the economy today is the -- the Bush policies and Republican philosophy, and make the case that Mitt Romney, if he were elected, would take us back to that point. So it's yet another attack on Mitt Romney, but framed in a way the president hopes will be more positive.

VARNEY: It may have been a reset, Dan, but can he just change course, was it? But can he change course? Can he repudiate three years of policy and change direction?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: In theory, he certainly could, but he won't.

(LAUGHTER)

What Democrats are saying is that, like Corey Booker, the mayor of Newark, New Jersey, he should run on his record. Let's run through the record. The first thing he did was passed an $800 billion stimulus to stimulate the economy. We still have 8 percent employment. Then he passed the Obama health care law, the greatest thing the Democrats have wanted since the New Deal. He won't talk about that. Then he passed Dodd-Frank, which is too complex to talk about. He raised spending to 24 to 25 percent of GDP, which is not what the American people want to hear. That's the Obama record. And he won't talk about that. And there's nothing grand beyond that for him to talk about. He's locked into what he's done the last three years. And he's there in Cleveland trying to sell it any way he can.

VARNEY: How did the speech go? Did it fall flat?

HENNINGER: It fell flat. It got panned broadly by Democrats who think there's some magic new policy that Obama should announce to win the election. It isn't there.

VARNEY: Mary, how about the housing problem? Let's go back to that 40 percent drop in the net worth of middle class families reported by the Fed. That was largely due to the housing bust. What about housing with President Obama and the Federal Reserve.

MARY ANASTASIA O'GRADY, COLUMNIST: It's more, Stuart, as if we needed it, that the Federal Reserve cannot reflate the housing market. It's tried and basically, the market has not repaired, even though Ben Bernanke has been putting out all this money.

And I think, beyond that, what's interesting this week is the increasing sense that we are either headed for another recession, or perhaps even in another recession. And you know, when you -- it tells you something, when the market rallies because you have bad economic news, and we had some discouraging news on the unemployment front this week. And why is the market rallying? Because it thinks, well, perhaps the Fed will get out there and print more money. And basically, I think, markets are saying, look, we want a change in fiscal policy and structural policy, and this is something that President Obama is not willing to do.

VARNEY: Are we headed for recession, Dan? Does it look like it?

HENNINGER: Yes, it looks like the economy is not growing. It's been -- both employment and economic growth have been going in a downward direction for the last two quarters. And that is part of his problem. There doesn't seem to be any lift out there at all for the president either in policy or in the economy itself.

STUART: OK --

(CROSSTALK)

O'GRADY: The real problem is that the president doesn't understand the relationship between risk taking and wealth creation. And investors are not going to take risks when they're in an environment where the government is so hostile to profits.

VARNEY: Are you saying he does not understand private enterprise?

(LAUGHTER)

O'GRADY: I have a hunch.

(LAUGHTER)

VARNEY: Kim, what's the politics of that speech. If he came across as a pure government man, a man who wants more government spending, not the rejuvenation of private enterprise, does that sell politically in 2012?

STRASSEL: Again, you know, this was -- make no mistake, this was another attack on Mitt Romney. Just done in a different form. One of the things that the president has struggled with, and you heard Dan say this, is that Democrats, a lot of people in this party, and even some of the polling suggests that his big problem is that he has spent so much time focusing on his opponent, that nobody has a sense of what he would do next. But this is where the president's in a bind. What can he do? If you're a Keynesian, they have spent all of their ammunition. The president was reduced in that speech to talking about a bill he had sent to Congress last year, which is says is a jobs bill. It's actually a stimulus by another name. So he doesn't have a lot out there to offer. You saw that failing in the speech, in the part of it where he talked about his own vision. It's a rehash what he's done the past three years.

VARNEY: Kim, could he not have compromised, offered a compromise to his Republican opponents and said, all right, maybe we won't tax the rich, but I want to spend more money. He put no sign of compromise at all. Why not?

STRASSEL: No, there isn't. I think the time for that, Stuart, was long ago. If this guy were Bill Clinton, going back to the 1990's, over the past year, he would have sat down with Republicans to have done some sort of big thing, whether it's corporate tax reform, looking at Bowles- Simpson, something to suggest he had gone to the middle and he was willing to work with the other side. He just isn't willing to work with the other side. That's another problem he's facing, that the whole hope-and-change thing, it hasn't proven out the last two years. and he can't run on that again either.

VARNEY: All right.

When we come back, new calls for Eric Holder to resign amid growing outrage over the intelligence leaks investigation, and allegations of Fast and Furious stonewalling. Can the attorney general survive?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN CORNYN, R-TEXAS: Mr. Attorney General, it's more with sorrow than regret, than anger that I would say that you leave me no alternative but to join those that call upon you to resign your office.

(END VIDEO CLIP)

VARNEY: That was Republican Senator John Cornyn of Texas joining a growing chorus of GOP lawmakers, calling on attorney general, Eric Holder, to resign. Holder was back on the hot seat Tuesday, rejecting accusations that he was stonewalling Congress on the botched Fast and Furious gun running operation and failing to properly investigate leaks of classified information.

We're back with Dan Henninger and Kim Strassel. Wall Street Journal senior editorial page writer, Collin Levy, also joins the panel.

Collin, why don't you bring us up-to-date on Fast and Furious? Where are we?

COLLIN LEVY, SENIOR EDITORIAL PAGE EDITOR: Stuart, this week, Eric Holder said, hey, I'm willing to partially comply with some of these requests for documents, some of these subpoenas from Congress. So he said he's going to meet with congressional investigators on Monday to hash that out.

I think the real question here is exactly what his definition of compliance is. What we've seen so far, and what a lot of congressional Republicans have been objecting is that Justice is running an internal investigation in which they've produced about 80,000 documents, but they've actually only turned over about 7,600 to Congress. So that's just an enormous gap. And I think that that's what people are going to be looking for, what he's actually willing to show now.

VARNEY: Is the expression stonewalling legit, Collin?

LEVY: I think it's certainly legitimate. There's no question this has been an incredibly political operation, and one that's not willing to participate and what is a perfectly appropriate constitutional exercise.

VARNEY: Kim, there's a contempt vote scheduled, I believe, for June 20th. What's your judgment on the wisdom of that and whether it will go forward?

STRASSEL: I think the Republicans are in an awkward position here. Because, you know, they were very critical, and rightly so, when Nancy Pelosi was running the Congress of her oversight and what they felt were nakedly political, overtly partisan efforts to go after Bush officials, which were abuse of power and wasted a lot of time. And they promised when they came to power that they were not going to run the shop this way and they don't like being involved in the situation. At the same time, as Collin said, Eric Holder has not given them a great deal of choice in that basically -- one of the problems here is that the Justice Department -- the one thing that we know about Fast and Furious is that the Justice Department was not honest with Congress about the very existence of this problem. And that's a provocation that Congress had to therefore investigate. And now that he's not handing over the documents, they don't really know what else to do but to go on towards these contempt proceedings.

HENNINGER: You know, Stuart, there's a couple of things we should understand about these contempt proceedings. It's a big deal. In the last 40 years, there's only been four contempt citations by Congress against the executive branch -- EPA administrator, Ann Burford, during the Carter administration; Janet Reno during the Clinton administration; and most interestingly, they issued one against Harriet Miers and John Bolton during the Bush administration over the firing of federal attorneys. So I'm not sure that the -- this is a serious issue between Congress and Eric Holder, but in the political season right now, there are political liabilities for both of them going down this path. The Republicans might not win that contempt vote. On the other hand, the Democrats don't necessarily want Eric Holder's role elevated in the public mind, because then people will start asking about the other political things he's done and make him an issue in the campaign. But this is a very serious battle between these two. And I think that both have reason to think they might come out on the down side if they push this contempt vote.

VARNEY: Eric Holder is a personal friend of the president, Dan. That counts for a lot I believe.

HENNINGER: I am not sure there's all that much loyalty there. But I think Eric Holder has been carrying water for the president. This offensive against voter I.D. laws was meant to sort inflame the African- American base, and give them the idea that somehow these white states that are opposing them or pushing them -- it was a pretty rank thing for the attorney general to do, but it was pointed towards the president's reelection campaign.

VARNEY: Collin, can you bring us up-to-date on the latest of the leaks investigation?

LEVY: Well, the leaks investigation has been another situation where, you know, Eric Holder could have taken a much more -- much less political -- political stance here. But what he basically did was say, hey, my Justice Department guys are perfectly capable of doing this, instead of appointing an independent prosecutor. So people are looking at this and saying, you know what, he's covering for the administration. He's not taking this seriously. And this is a -- you know, another example of where he's just carrying water during, you know, a prime time political season. That's the real concern.

VARNEY: Kim, where is the greatest vulnerability for the attorney general, Fast and Furious, leaks investigation?

STRASSEL: I think it's all of the above. And I think the worry for the Obama administration is that Mitt Romney gets a hold of this and he ties it in. This has been a growing theme about the Obama administration is that, when it comes to sort of rule of law, they sometimes play very fast and loose. And you've seen this in everything going back to their handling of the oil spill and they're sort of pushing of BP to pay into a fund, to all of these things, and the leaks as well. And what they should worry about is that Mitt Romney gets out there, a Republican, and starts to make the case that the Justice Department is far more political than it is about doing its job. And that's a knock on the president.

VARNEY: All right.

All right, when we come back, as Greece decides its future in the Eurozone and the crisis in Spain and Italy grows, is Europe planning to print money, lots of it? And will the U.S. be a part of that?

(COMMERCIAL BREAK)

VARNEY: There is no doubt Europe is on the edge. And with the debt crisis threatening to sink Italy and Spain and voters in Greece this weekend deciding their Eurozone future, news now that European central banks are prepared to step in with the biggest bailout yet. Will it work? And will the U.S. get sucked in as well?

We're back with Dan Henninger and Mary O'Grady. Also joining the panel is Wall Street Journal foreign affairs columnist, Bret Stephens.

I want to start with you, Bret. Am I right in saying that you say just let them crash, don't bail them? Are you saying that?

BRET STEPHENS, FOREIGN AFFAIRS COLUMNIST: Well, we've been -- the Europeans have been bailing out successive governments, hundreds of billions of dollars for Greece, and all the countries that have been bailed out are on the verge of total catastrophe. You saw a bailout going to Spain, $125 billion in the last week, and immediately yields on Spanish funds went up. It actually became a riskier proposition. It didn't calm the markets. So the bailout strategy is a failure.

VARNEY: So you're saying let them crash, really?

STEPHENS: Look, in the case of Greece, Greece is essentially -- it's in debt. We shouldn't even be having a conversation about Greece. There are things that might be done to prevent a run on the banks in Spain and Italy. And it is important to prevent a -- a panic -- a panic in Europe. On the other hand, the only thing that's going to save the European countries is returning to a real growth strategy, which is not government- led. Private sector led, which means low taxes and less regulation, and that's what has to be on the table.

VARNEY: I know you disagree. Go.

O'GRADY: No, I actually don't disagree entirely. The only thing I would say is that Spain is very important to Europe. So if you let Spain go, you have a real serious crisis with the Euro. Whereas, with Greece, I think probably the only problem with Greece is that it provokes more challenges for Spain. But I think with Spain, it's very important to remember that this is not a run-of-the-mill sovereign debt crisis. What's Spain's problem is a financial crisis, a problem in the banking sector, and a competitiveness crisis, and both of those things can be dealt with. You know, there's a think tank in Spain this week, created quite a buzz with the suggestion that what they should do with the banking sector is actually bail in the creditors. In other words, make them equity owners of the banks, as opposed to bailing out the banks. That requires leadership, but that would be a much better solution. It would be more -- I think, the population in general would appreciate that more than, you know, putting this off on the taxpayers. And you won't have problem with the labor market. You have to make the labor market competitive in Spain. Again, requires leadership.

VARNEY: OK. I've got it.

Now, I'm sitting here in America, we're all sitting here in America, looking at the chaos over there.

Dan, I want you to tell me, why should I care? Why is it such a big deal to us here? Tell me.

HENNINGER: Well, if the nightmare scenario or the dark scenario that Bret was suggesting happening, again, having depositors pulling their money out of European banks, if both Spain -- first Spain, then Italy get into deep trouble, the Eurozone economies will decline. You're talking about a major part of the global economy. There's no way that would not affect the American economy, if the Europeans goes into a deep recession. And it would probably affect the Asian economies as well.

VARNEY: So should the Federal Reserve, should America's Federal Reserve be part of this mother of all bailouts, if it came to pass. Should it?

STEPHENS: No.

VARNEY: You don't think so?

STEPHENS: We are ultimately going to court inflation and massive inflation the moment that growth starts to pick up. And you have all of this --mountains of free money lying around.

Look, I would differ with Dan in one respect. Remember in 1997, there was an Asian -- the Asian contagion, the Asian currency crises. The United States sailed through that, even though numerous Asian economies collapsed in the space of a summer. A foreign crisis is survivable. But what we need to do is look at Europe and understand what it means when you run an entitlement state decades after decade --

(CROSSTALK)

VARNEY: For sure, that's long term, Bret. What about the absolute now? Remember September of '08, in the United States? If we'd have let everybody crash, if we had not had TARP, what would have happened?

STEPHENS: Our problems cannot be attributed now to Europe. Our exposure to Europe is relatively limited. Commerce with Europe, trade with Europe is has been growing. Europe is an object lesson in the failure of a welfare state.

O'GRADY: If we're going to let Europe go on its own, maybe we should stop giving them bad advice at the same time. Spain, right now, has a Value-Added Tax of 18 percent. What's the advice that Spain's getting to solve this problem? Raise the Value-Added Tax. Income taxes in Spain right now are among the highest in Europe. Capital gains taxes went up under the socialist government, and went up further under this conservative government. Let's give Spain some good advice.

VARNEY: As a former European, I could talk about this for hours.

(LAUGHTER)

But I haven't the time.

Thanks, everybody.

We have to take one more break. And when we come back, our "Hits and Misses" of the week.

(COMMERCIAL BREAK)

VARNEY: Time now for "Hits and Misses" of the week.

Collin, you're first.

LEVY: Stuart, a big hit to Chicago Mayor Rahm Emanuel, who, this week, is standing up to the Chicago teacher's union despite their threat to strike. The teachers unions are annoyed because the mayor has basically said he's not going to agree to demands for a 29 percent pay raise over two years and a lengthening of the school day, which was previously the shortest of the nation. So like school reformers in New York and in Washington, he's learning that the teachers unions are a formidable challenge to improving education in his city.

(LAUGHTER)

VARNEY: Oh, yes, he is.

LEVY: So we wish him well.

VARNEY: Yes, he is.

All right, Bret, you're next.

STEPHENS: This is a big hit to JPMorgan CEO Jamie Dimon, testifying before Congress this week. He said, about the infamous trades, the buck stops with me. He cast doubt on whether all those regulators, who have been added thanks to Dodd-Frank, are doing a lick of good. Maybe if Jamie Dimon, a Democrat, by the way, were secretary of the Treasury, this economy wouldn't be in the shape it's in, and we wouldn't be blaming somebody else.

VARNEY: Dan?

HENNINGER: A miss for professional sports. Lance Armstrong, seven- time winner of the Tour de France, this week, has been accused of multiple abuses of performance-enhancing drugs by the Anti-Doping Agency. Do you believe we've got an agency called the Anti-Doping Agency?

(LAUGHTER)

Of course, you can. And it shows that even a pristine and beautiful sport like cycling is filled with athletes willing to turn themselves into drug-filled robots. It is a sad day for professional sports.

VARNEY: That's it for this edition of the Journal Editorial Report. I'm Stuart Varney. Catch me weekday mornings on "Varney & Co." on the Fox Business Network. Paul is back next week. We hope to see you all then.

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