• With: Dan Henninger, Jason Riley, Kim Strassel, Stephen Moore, Mary Anastasia O'Grady, Joe Rago, Matt Kaminski, Bret Stephens

    GIGOT: Which might grade on a curve.


    RILEY: It's hard to defend those kinds of results. And that's why I think the momentum is really with reformers.

    GIGOT: So liberals mugged by reality.


    GIGOT: Not just liberals, but parents, too. You even have seen -- and this is interesting to me, Jason. You've even seen Hollywood change.

    RILEY: Yes.

    GIGOT: Where, culturally, they tend to be opposed to this kind of thing, but they've turned and said, maybe parents -- they have the parent trigger movie this year. So maybe they are seeing a change in direction that is a tipping point in this debate.

    RILEY: I hope so.

    GIGOT: Dan, can you match those two?

    HENNINGER: I think I can, at least with one example. In the world of technology, here's a pure good news story. There's a company named Myomo, who this year came up with a robotic arm which attaches to the arms of people who have had strokes and they're paralyzed. It allows the brain to transmit nerve signals to the muscles in the arms and the robot picks it up, the robotic arm, and allows those arms to move. This is the most extraordinary thing. But we're able to do that sort of thing.

    Another example is 3-D printers, which I think I can explain. You take liquid plastic, you design something, like say, a plastic pen. You pour the liquid plastic in and the 3-D printer outputs an object. This could revolutionize manufacturing. It's just beginning to come out in productivity right now. But these are the sorts of ideas that are based on the kind of knowledge that you produce in the United States. And as we know, knowledge, since the industrial revolution, is what's driven economies forward. And it's still possible in the United States.

    GIGOT: You know, Dan, we had visits this year from a lot of CEO's. But I was struck by Paul Otellini, of Intel, and Jeff Bezos, of Amazon. And what they described is a world in which Moore's Law, which says that computer power is going to double -- I forget -- it's every couple of years, is going to continue and roll through our economy, so you're going to have this digital revolution, producing things like artificial intelligence, voice recognition, things that will transform the way we live our lives.

    No matter -- even if the economy keeps growing at one percent or two percent, one big question is, is that growth and innovation going to happen here in the United States, or more of it overseas in places like China?

    HENNINGER: Yes, well, take this robotic device I just -- this is a medical device. And under the Obama-care law, medical devices will be subject to a tax because they have to pay for Obama-care.

    GIGOT: Yes.

    HENNINGER: This is the sort of thing that if we keep doing, will suppress the growth of technology in this country. And then again, there's the issue of immigration policies. A lot of this technology, driven by engineers who come from Asia. Silicon Valley, in great part, has been the result of immigration into the United States. So if we don't stand in the front of these things, we can grow.

    GIGOT: OK, Dan, thank you.

    Coming up in our second half hour, a look ahead to 2013. Is the economy poised for a comeback or will slow growth and high unemployment continue to drag us down?

    And get ready for ObamaCare. What you need know as some key provisions kick in.


    GIGOT: Welcome back to this special edition of the "Journal Editorial Report." I'm Paul Gigot.

    Well, if you haven't checked your 401(k) lately, you may be pleasantly surprised. 2012, it turns out, was a pretty good year for the markets, despite continued high unemployment and slow economic growth. So what can we expect in 2013?

    We're back with Dan Henninger, Mary Anastasia O'Grady and Steve Moore.

    So, Mary explain us seeming contradiction between slow growth and bull markets.

    O'GRADY: Well, first of all, with respect to the markets, I would say that if you look at a chart of, for example, the S&P 500, if you go back to say, 2000 - April of 2011 until October of 2012. You're basically flat. There's been a lot of churning up and down, but the S&P 500 index was not any higher. Now, in the last couple of months we have seen a little bit of a pickup there and certainly, from the end of -- from the beginning of this year you saw a run in the market, but you don't have a great return if you're a long-term investor.

    GIGOT: Right, so, OK, but if you -- if growth is still slow, OK, why are -- and some people are still investing in companies and the corporate balance sheets earnings have been pretty good, you know, they've cleaned out a lot of the debt from the crisis. Could we be poised here for faster growth going forward?

    O'GRADY: Well, I think one of the things that explains why the corporate sector is doing well is because they basically have access to money at zero interest rates. That's not true for the broader population and it's not true for a lot of small businesses. It's just true for, you know, large corporations who can borrow very cheap money. You have high unemployment, which means that employers can ring more productivity out of their workers.

    GIGOT: Right.

    O'GRADY: Because, you know, workers need jobs. So, I think if you take all of those factors into account, you know, you're not looking at an environment that is as bullish for the broad American public as it might seem, looking at the stock market.

    GIGOT: Dan, one of the, kind of a side follow, Ed Hyman of ISI Group points out that there have been 312 stimulative easings of one policy stimulus and Central Bank easings over the last 16 months around the world. That's extraordinary. 312. So one's answer to this question may be that there's just an awful lot of money sloshing around from Central Banks around the world who are just saying, look, we've got to drive this economy and they're opening the spigots.

    HENNINGER: They are opening the spigots, but the question is, what is happening to that capital. Is it being deployed for productive uses? And I think in the case of the United States what we've seen, what has been written about is that many companies have spent hundreds of billions of dollars buying back their own stock. They've been borrowing this money cheaply and using it to buy back their own stock, rather than investing it in productive capital projects. And there's a cool of thought that says most of the growth in the stock market has been because companies have been net buyers of stock, whereas retail investors or even the mutual funds have been net sellers of stock. So we're not in a very productive economy right now.

    GIGOT: Well, we have seen investment in energy, there is no question about that across the country, so what about our favorite bull, Steve Moore here, is you -- what is -- what do you think? Is 2013 going to turn the corner in a better direction like Ben Bernanke, the Fed chairman and others are saying?

    MOORE: I never like to bet against the American economy and, you know, there are just so many (inaudible). And Paul, we haven't had a real recovery in four years. You know, we really haven't. And so ...

    GIGOT: Right.

    MOORE: You just get the feeling that the economy is ready to pop, but the countervailing argument, though, Paul, is everything Washington is doing is holding back this extension. And that's the frustration I think investors and businesses feel. So, on the positive side, you've got the energy -- I entirely agree with your previous conversation that energy and technology are just drivers of high powered growth, but the countervailing force I think follows those higher tax rates that are coming in 2013 and some of these regulations and ObamaCare are holding back businesses willingness to expand and hire more workers.

    GIGOT: Well, it's just not the regulatory wave on health care ...

    MOORE: Of course.

    GIGOT: ... there's going to be a huge regulatory wave to finish out the Dodd Frank financial reform, you will be seeing a huge pent up regulatory wave hit on energy. All kinds of rules hitting utilities and energy companies. So who wins? Washington or the private economy?