• With: Kim Strassel, Dan Henninger, Mary Anastasia O'Grady, Bret Stephens

    This is a rush transcript from "Journal Editorial Report," December 1, 2012. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report," with the clock ticking, both sides dig in on fiscal negotiations. The president is taking his case to the public but he's mostly mum on spending cuts. How should Republicans respond?

    And ahead of January's big tax hikes, companies and investors are cashing out, including one of President Obama's biggest supporters.

    Plus, as Susan Rice makes the rounds on Capitol Hill, we'll look at who could make up the national security team in President Obama's second term.

    (BEGIN VIDEO CLIP)

    PRESIDENT BARACK OBAMA: I am ready and able and willing and excited to go ahead and get this issue resolved in a bipartisan fashion so that American families, American businesses have some certainty going into next year.

    REP. JOHN BOEHNER, R-OHIO, SPEAKER OF THE HOUSE: I'm disappointed in where we are and disappointed in what's happened over the last couple of weeks. The 'fiscal cliff' is a serious business. And I'm here seriously trying to resolve it. And I would hope the White House would get serious as well.

    (END VIDEO CLIP)

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

    Not exactly a meeting of the minds this week between President Obama and House Speaker John Boehner on just where talks to end the fiscal showdown stand. The president, for his part, took his case to the public and repeated his called for a tax hike on upper income America but made little mention of cuts to entitlement spending, something the speaker says must be part of any final deal.

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

    Kim, so you're stuck in Washington, having to talk to all of these sources. Is the mood -- and you've been working them this week. I know. Is he mood as dour as it sounds?

    KIM STRASSEL, WASHINGTON COLUMNIST: It is, by the end of this week, and here is why. The Republicans came out right after the election and said to the president, you want revenue here. You want revenue on the wealthy, we'll give it to you. Let's do this via limiting tax deductions for the wealthy. The president, instead of taking that and running with it, sealing a deal, has been campaigning for tax hikes. And to cap it off, sent Treasury Secretary Tim Geithner to Congress with this outrageous proposal. It's basically a compilation of everything that the president wanted in his budget. It's beyond what he even campaigned for. As a result, I think most Republicans wonder how serious he is about doing this.

    They feel things are going backward.

    GIGOT: Yes, that -- that's the way it sounds to me, too. I talked to some senior Republicans this week and they're increasingly of the belief that maybe the president wants to back them into a corner that could push them over the cliff and then be able to blame them if you have a recession or for taxes going up on everybody.

    DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Well, I don't doubt that's what he's trying to do. It's hard to see where the upside is for the president if the economy slips into recession.

    GIGOT: Yes, that's --

    HENNINGER: We're talking about 2013 having no growth.

    GIGOT: It would be horrible.

    HENNINGER: Yes. So, it's a little hard to see what the game is. As Kim was mentioning, the president wants these tax increases. It seems to me we're going to go through this sort of scorpion dance through the rest of the year. What did the president campaign on? What was the one thing I think most people would say he campaigned on? That was raising tax rates on the wealthiest, those two top rates.

    GIGOT: Right.

    HENNINGER: That's the thing I think is on the table. And the --

    GIGOT: But the Republicans put that on the table.

    HENNINGER: And the Republicans put that on the table.

    GIGOT: At least through deductions and the debate on whether rates were deductions.

    HENNINGER: Well, yes.

    GIGOT: But they're willing to put that on the table. The question is, what does the president then give Republicans in return, if anything?

    HENNINGER: Well, I think that's what the Republicans position should be, is to say we have committed what you campaigned on. If you're not willing to talk about reducing spending, then we are not going to be able to do a deal with you. And I think that puts the political onus, to some extent, back on the White House.

    GIGOT: Mary, the Republicans have been fighting among themselves over their no-new-taxes pledge. And Grover Norquist, the activist in Washington, has Republicans on record as saying, I won't vote for a tax increase. Are they really ending up here negotiating with themselves in a way that hurts their positions, vis-a-vis, the president?

    MARY ANASTASIA O'GRADY, EDITORIAL BOARD MEMBER: Certainly, they are.

    I think that the president is energized by the fact that he thinks, look, I ran a lousy economy for four years, I left unemployment high, I increased the size of the debt and the deficit, I got everything I wanted, the place is a mess and, look, I got reelected.

    (LAUGHTER)

    So, what's so hard about me continuing to doing that and blaming it on them? Obviously, I'm very good at that. And that's basically where he's going here. And the Republicans I think are not very good poker players. First of all, they've signaled that they're reluctant to go over the cliff. I think if you're in this showdown, you have to say, you know, bring it, come on.

    GIGOT: Do it.

    (LAUGHTER)

    They will get blamed for it, though, if that happens. No question. The president is already signaling that. So that wouldn't be a pleasant outcome for them. You're saying they should suggest to the president that we'd be willing to do that and then maybe he'll give at the end?

    O'GRADY: Yes, I think they have to show that they are in -- that he's in a negotiation and that he has to give, and that they're willing to give. And if they just say, look, we're so afraid of getting blamed for that, of course, he's going to roll right over them.

    GIGOT: Kim, where do you think the Republicans are? Where should they go here? Do they have real options, any other options other than maybe just giving the president, in the end, what he wants?

    STRASSEL: You know, talking to Republicans, there's a very firm feeling out there, a strong feeling that John Boehner should be given some more time to negotiate and see what he can get. Because, look, there is an honest belief in the Republican Party that there is a big problem here, and if there's an opportunity to do something about the real driver suspending