This is a rush transcript from "Journal Editorial Report," November 17, 2012. This copy may not be in its final form and may be updated.
PAUL GIGOT, HOST: This week on the "Journal Editorial Report," President Obama's fuzzy math. He says closing loophole isn't enough and that the tax rates must go up for top earners. So does he really want to avoid the coming tax cliff?
Plus, the Petraeus scandal further muddies the Benghazi probe. Was the former CIA director's account of events in any way influenced by the investigation into his affair.
And Saudi America? The U.S. is on track to become the world's largest oil producer but will the Obama administration let it happen or turn an oil boom into a bust?
Welcome to the "Journal Editorial Report." I'm Paul Gigot.
Headed into Friday's fiscal cliff talks with congressional leaders, President Obama gave us a hit Wednesday of his negotiation strategy, repeating his intention to immediately raise tax rates on top earners.
(BEGIN VIDEO CLIP)
PRESIDENT BARACK OBAMA: When it comes to the top two percent, what I'm not going to do is to extend further a tax cut for folks who don't need it, which would cost close to a trillion dollars. And it's very difficult to see how you make up that trillion dollars, if we're serious about deficit reduction, just by closing loopholes and deductions. The math tends not to work.
(END VIDEO CLIP)
GIGOT: But does the president's math add up? Let's ask Wall Street Journal columnist, Bill McGurn; senior economics writer, Steve Moore; and Washington columnist, Kim Strassel.
So, Kim, the president won reelection. Was this the hand of magnanimity reaching out to the Republicans --
-- and saying, look, I want a deal here and let's all sit down and negotiate together?
KIM STRASSEL, WASHINGTON COLUMNIST: It's crazy. It's what the president says all the time. If you listen to the press conference, he seems to say the biggest wish list for his liberal partisans that has become gospel is letting these tax rates expire. So, while the Republicans have moved, they are offering revenue -- this is a change from their position -- while the frame work is potentially there for a deal, the president is saying no compromise, no compromise.
GIGOT: What's his strategy, Bill, here? What is he thinking? Obviously, if we don't get a deal, we do go off the tax cliff and with the consequential danger to the economy.
BILL MCGURN, COLUMNIST: Right. Well, you say -- Kim is absolutely right and you're right, the math doesn't add up. The politics adds up. I mean, I'm --
GIGOT: How so, Bill?
MCGURN: I'm afraid what's going to happen, we're not only going to get bad policy, because Republicans --
GIGOT: A tax increase.
MCGURN: -- a tax increase and so forth. But we're going to -- the Republican Party or the conservatives that oppose that bad policy, are also going to get the blame for the consequences. And this is why. Because if the economy goes into the tank because we get this stuff, the Republicans will -- because we don't get it, or whatever way, the Republicans are going to be blamed for being obstinate if they oppose some of the tax increases, or if they go along, their own base is going to revolt over the tax increases. So, it's a no-win situation.
And the reason is, as Kim sort of alluded to, this is a president who uses the word "compromise" as a substitute for actually compromising. And that's -- that's solidified by a press corps that doesn't ask him a single question, what are you willing to give. You know, when John Boehner appears, they are all saying, are you willing to accept higher rates. No one says, what are you going to do about entitlements or anything. There's no question of the president whether he will compromise and what that would look like.
GIGOT: Steve, what do you think the Republicans ought to do here? Is there a way out for them or are they going to be pushed back into a corner where they have no choice but to concede that they have to raise tax rates or else go over the cliff and get blamed for that?
STEPHEN MOORE, SENIOR ECONOMICS WRITER: Well, it's a tough situation for them. There's no question about it because, as you know, the default position, if we don't do anything, is for the taxes to go up on everybody on January 1st.
MOORE: That's something I think both sides want to avoid.
It's very interesting, the thing that happened this week to start the week, was, who was the first person that Barack Obama met with in the White House since his election -- the labor unions leaders, the labor bosses.
MOORE: That tells a lot about who is driving policy at least at the start of the second term. And the labor unions have basically said we want no compromise on this. We'll take it to the people. So, I believe, Paul, that this president is sporting for a fight on this. He wants to take this case to the people. And the Republicans -- Kim is right. The Republicans have moved a long way, saying, look, we'll negotiate this. But when I talked to the minority leader --
MOORE: -- this past weekend in the Senate, Mitch McConnell, he says we'll give anything, but one thing we're not going to do is raise these tax rates because they genuinely believe -- and I think they're right about this -- raising those tax rates could cause a double-dip recession.
GIGOT: Right. OK, fair enough. But then that means -- what's the alternative --
-- if the president insists on raising tax rates and the Republicans say no. All the president has to do is let the taxes go up on January 1st.
MOORE: That's true.
GIGOT: He gets the tax increase anyway and then he can beat the heck out of the Republicans for blaming whatever economic consequences happen. And then in two months, they're coming back to him and saying, OK, we give in. But he's already got the tax rate. So my question to you, Steve, is, what's the way out here? Is there a way out that if you see it for the Republicans?
MOORE: Well, the Republicans -- and we showed in our editorial this week, the numbers do add up. The Republicans should basically say, look, we will close the loopholes. By the way, if do you that, the people that get hit the hardest are the rich.
But I think the most important outcome is to make sure that Barack Obama does own this economy. I mean, you've seen what's happened to the stock market in the last week, since Obama was reelected. And he's been talking about raising the rates. We've lost over 650 points on the Dow Jones. So, I'm not so sure that the investment community or even the public really wants those rates to rise as much as Barack Obama does.
GIGOT: And just on the math, if you close -- if you put a cap on deductions of 50,000 a year per individual --
MCGURN: Right. Right.