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

    GIGOT: -- this week, said raise the prospect of an energy tax in addition to this. And this reflects part of the point that Mary made, you can go after the rich under the current tax, but you can't begin to finance the government we have. So ultimately, you've got to find new ways to get the revenue. Is this energy tax actually going to be a live prospect in the next couple of years?

    STRASSEL: Oh, they're going to try it. And I think we all owe Dick Durbin a degree of thanks for being so honest about what they want to do.

    GIGOT: Yes, I agree.

    STRASSEL: As Mary said, you can go after everybody that is rich, you can't get it. So you will have to go up through the middle class. The problem for Democrats is they have vowed they're not going to raise income taxes on the middle class. Instead, what you have to do, you have to go after a product that everybody uses, that's essential to everyone's life.

    You do it with energy. You tax electricity. You tax gas. You tax oil for your heating in your home. This would be a huge hit to the economy. But they are going to try to do it. They may try to do it as a guise, for instance, of a carbon tax, so they look as thought they're being environmental in this process as well, too. But it's going to be the quickest and easiest for them, they think, way to try to slip a broader tax on the middle class into the discussion.

    GIGOT: Mary, how should Republicans respond to this?

    O'GRADY: This is what happens when you have politicians who never think about growth, as Dan was saying.

    I mean, I think the way they should respond to it is a larger economy needs more revenue for the government and more jobs for people and more prosperity and a happier society. And --


    GIGOT: What about trading an energy tax for lower income taxes, Dan?

    HENNINGER: I think that's probably -- they'll do something like that. A carbon tax, I would think maybe, in return for lowering payroll taxes.


    GIGOT: You're saying the Democrats will propose this or --

    HENNINGER: I think the Democrats would propose it.

    GIGOT: Oh, I see.

    HENNINGER: Carbon taxes are extremely unpopular politically. Remember Bill Clinton's 1993 BTU tax?

    GIGOT: Right.

    HENNINGER: Some Democrats say he lost the House in 1994 because of that.

    GIGOT: All right.

    When we come back, President Obama unfettered. From his new national security team to his pick of Jack Lew as treasury secretary, what the president's cabinet makeover says about his plans for the next four years.



    PRESIDENT BARACK OBAMA: Jack knows that every number on the page, every dollar we budget, every decision we make has to be an expression of who we wish to be as a nation, our values.


    GIGOT: That was President Obama Thursday, nominating White House chief of staff, Jack Lew, as his next treasury secretary, replacing Tim Geithner, who is set to step down at the end of the month.

    So, Kim, tell us about Jack Lew. Who is he, what does he believes?

    STRASSEL: Well, he's mostly -- I think, this is important -- a creature of Washington. He had a brief interlude out at Citigroup, but he's spent a lot of time working in a political capacity. And that does, in fact, make him a much different creature for a position like the treasury secretary than we have in the past. Folks who have come from that often out of the business world, established economists, might come from the Fed. This is a person viewed by Congress and many -- by many people here in Washington a more of an ideologue and a political guy. And he's now been put in that post.

    GIGOT: His reputation, Kin, has changed over the years. When he was with the Clinton administration, I know Republicans thought he was an honest liberal, somebody they could do business with. But he's really emerged under this president as much more partisan and implacable. Bob Woodward records this in his book about the budget fight. Tell us about that.

    STRASSEL: Yes, it is very notable. Mr. Lew makes a lot of appearances, and almost always in the role as the guy as, just when you see Mr. Obama and Boehner making some progress during that debt limit fight, he's the guy who comes and throws the monkey wrench and screaming that the president needs to get more, and pretty much tanking the negotiations.

    That makes him poison for a lot of Republicans. And that's a problem in his capacity as treasury secretary, which sometimes does need to work with Congress.

    GIGOT: Very different choice, Mary, than most treasury secretaries.

    I remember Reagan had Don Regan first and Jim Baker. Bill Clinton had Lloyd Bentsen and then Bob Reuben of Goldman Sachs. This is a very political Washington-oriented pick.

    O'GRADY: Yes. One of the things I find troubling about Jack Lew is not so much -- I mean, his ideological leanings are obviously going to reflect those of the president. But the treasury secretary should have a vision of what the largest economy in the world wants to do --

    GIGOT: Still.

    O'GRADY: -- wants to do in terms --



    O'GRADY: But wants to do in terms of a vision, an international vision. And Jack Lew has a -- basically experience keeping the books. Even when he was at Citibank, you know, his job was sort of an operations manager, even though he got a huge bonus right on the heels of the big bailout. But he doesn't have the experience of someone who could lead in terms of the U.S. economy, its role in the world, on the international stage. I find that troubling.

    HENNINGER: But Barack Obama is not thinking in any sense in traditional ways about the treasury secretary or these ideas about the economy. To them, the economy is a veil, a kind of concede. Its job is to send revenue to Washington. And they have argued that Lew's expertise in fiscal matters is what we need right now, not expertise in marketing.

    GIGOT: Because he was a budget director --